Nanjappa vs Nanjappa Rao

These are thres connected appeals. The Appeals Nos. 10 and 75 of 1911 have been fully argued before us. The decision in C.M.A. No. 228

of 1910 naturally follows from the conclusions, we have arrived at in the two former Appeals Nos. 10 and 75 of 1911.

The facts are somewhat complicated; but for the purpose of our decision, might be shortly stated thus.

Nanja Rao as plaintiff brought Suit No. 9 of 1907 in the Salem Sub-Court for recovery of the impartible Palayapet of Berikai and its

appurtenant moveable and Immovable properties against the rival claimant Puttusawmi and the Court of Wards who supported Puttusawmi. That

suit afterwards became O.S. No. 2 of 1908 on the file of the District Court of Salem. Puttusawmi (the 1st defendant) was himself appointed as

Receiver pending the disposal of this Suit No. 2 of 1908 Two sureties deposited Rs. 30,000 in Court as security for Puttusawmi''s proper

management as Receiver.

During the pendency of the suit, the plaintiff (Nanja Rao) the 1st defendant Puttusawmi and the plaintiff''s 4 sons executed a Muchilika Exhhibit

I, dated the 10th July 1908, in favour of thethen Tahsildar of Hosur and of four members of the Taluq Board Office in order tb enable them to

settle all kinds of disputes "" between the parties with referenee to "" the Palayapet and properties which were the subject matter of the Suit No. 2 of

1908 then "" pending in the Civil Court."" The five arbitrators met in the house of the Deputy Collector (Mr. Bower) and gave their award Exhibit II

on the 11th July 1908.

On the 1st September 1908 (within two months of the award) the 1st defendant Puttusawmi presented a petition u/s 375 of the CPC in Suit

No. 2 of 1908, representing that by reason of the private reference to arbitration in July 1908 and the award thereon. The Suit No. 2 of 1908 had

been adjusted or compromised. The 1st defendant prayed the Court to pass a decree in accordance with the adjustment or compromise

evidenced by the reference and award (Exhibits I and II) so far as it related to the suit No. 2 of 1908 between the plaintiffs and the 1st defendant.

This petition u/s 375 of the CPC was numbered as I.A. No. 71 of 1908.

As another string to his bow and simultaneously with the petition u/s 375, the 1st defendant (Puttusawmi) filed a petition against the plaintiff

(Nanja Row) and his four sons u/s 525 of the Civil Procedure Cods praying that the award (Exhibit II) might be filed in Court. This application

was registered as an Independent Suit No. 23 of 1908 (between the first defendant in Suit No. 2 of 1908 as plaintiffs and the plaintiff in Suit No. 2

of 1908 Nanja Row and his sons as defendants). To avoid confusion, we might continue to style Puttusawmi as 1st defendant and Nanja Row as

plaintiff though in Suit No. 23 of 1938 their positions are reversed and though Puttusawmi died after Suit No. 23 of 1908 was filed his legal

representatives having been allowed to continue the litigations.

While the petition I.A. No. 71 of 1908 (under Section 375) was pending, sureties of the 1st defendant put in Petitions Nos. 45 and 77 of 1909

in March and April 1909 to be relieved of their obligations and for return of their deposit of Rs. 30,000

The learned District Judge dismissed the 1st defendant''s Petition No. 71 of 1908 (filed u/s 375) on the ground that the award did not constitute

an ""adjustment by legal agreement or compromise."" He dismissed the 1st defendant''s suit No. 23 of 1908 and refused to file the award Exhibit II

on the grounds:

That the award Exhibit II was not a reasoned judicial decision.

That the five arbitrators allowed the Deputy Collector (Mr. Bower) to be ""the real President of the whole (arbitration) proceedings ""and the

co-operation of (Mr. Bower) without authority ""is a material irregularity which nullified the award.

That the decision of the question of the allowances to be made to Nanja Row (plaintiff) in O.S. No. 2 of 1908 was based on material supplied by

Puttusawmi''s (1st defendant''s) clerk to which the other side was not allowed access.

That the arbitraton having been guilty of these irregularities, (they were guilty of ""nisconduct ""though there was ""no reason to impute bad faith

to them and hence the award was not legally enforceable and that the avard is further illegal because ""when once a dispute has been brought

before a Court of justice by suit ""(in this cage Suit No. 2 of 1908) it cannot be referred to arbitrators except by order of the Court u/s 506; and a

private reference in a pending suit is illegal and the award made on such a private reference cannot be filed in Court u/s 525.

The learned District Judge decided on the petitions Nos. 45 and 77 of 1909 filed by the sureties of 1st defendant and that they should forefeit

Rs. 15,000'' of the Rs. 30,000 deposit because 1st defendant had caused loss to the estate to the extent of about Rs. 14,000 by his management

as Receiver.

Civil Miscellaneous Appeal No. 75 of 1911 before us is against the dismissal of I.A. 71 of 1908 filed by 1st defendant (under Section 375)

C.M.A. 10 of 1911 is against the order refusing to file the award Exhibit II the order having been made in O.S. 23 of 1908 brought by 1st

defendant u/s 525, C.M.A. 228 of 1910 is by the two sureties of 1st defendant against the order making them forefeit Rs. 15,000.

We think (differing from the learned District Judge) that the award Exhibit. II, is a legally valid award. Taking first for consideration the

objection to the award marked above as (5) that there is no provision of law which prevents parties from agreeing to refer the disputes pending in

a suit between them to private arbitration without making an application to the Court u/s 506, just as there is nothing to prevent them from making

any other agreement or adjustment or compromise pending the suit. Especially (as in this case) where the parties to the private reference to

arbitration include not only the parties to the suit but include also persons other than the parties to the suit, should such a reference not be

prohibited, for, it would be inequitable to prevent third persons from settling their disputed claims by arbitration, simply because the parties in a

pending suit are also interested in such claim and have to join in the reference. They (the third parties) cannot join in an application u/s 506, as they

are not parties to the suit. An involved argument has been addressed to us by the respondent''s (plaintiff''s) learned vakil based on some passage in

the judgments in Gulam Khan v. Muhamad Hussain and Tincowrie Dey v. Fakir Ghand Dey. ILR (1902) C. 218. In Gulam Khan v. Muhamad

Hussain 16 C.W.N. 35 their Lordships of the Privy Council classify the provisions in Sections 506 to 528 of the old CPC under three heads.

Where the parties to a litigation desire to refer to arbitration any matter in difference between them in the suit, in which case all proceedings are

under the supervision of the court.

Where parties without havinq recourse to litigation agree to refer their differences to arbitration and it is desired that the agreement of

reference, should have the sanction of the court, in which case all further proceedings are under the supervision of the court and (3) where the

agreement of reference is made and the arbitration itself takes place without the intervention of the court and the assistance of the court is only

sought in order to give effect to the award.

In class (2) the words ""without having recourse to the litiga-tion"" are not italicised by their Lordships of the Privy Council but we have italicised

them because the learned Chief Justice of the Calcutta High Court seems to have laid stress on these words in coming to the conclusion in

Tincowrie Dey v. Fakir Chand Dey ILR (1902) C. 218 that ""Section 523 (of the old Procedure Code) does not apply to the case of an agreement

to refer, when there is a pending litigation.

We do not think that their Lordships of the Privy Council intended by their classification (2) which included some references u/s 523 to lay

down that all references, coining u/s 523 could be made only by persons who were not then parties to a pending litigation probably, the phrase

without having recourse to litigation"" was intended to cover all cases where parties agree to refer their disputes to arbitrators ""without the

intervention of the court"" which latter is the phrase used in the third classification.

The Allahabad High Court in Sheo Dutt v. Sheo Shankar Singh ILR (1900) M. 326 held that Section 523 could be applied even in respect of

a reference pending suit, but it is unnecessary to express a final opinion on this question as we have to deal at present with a state of facts coming

not. under classification (2) of the Privy Council but under classification, (3)(that is a state of facts where there has been not only a reference but of

court but also an award made out of court and the assistance of the court is sought only in order to give effect to the award). Hence the obiter

dictum of Maclean C.J. that Section 523 does not apply to a reference of disputes in a pending litigation is not useful for the decision of this case.

On the other hand there is a passage in lines 2 to 4 of the Judgment of Maclean, C.J. himself in Tincowrie Dey v. Fakir Chana Dey ILR (1902) C.

218 in favour of the view that the assistance of the court could be validly invoked u/s 525 in such a case. In none of the cases quoted to us on the

respondent''s side has it been decided( that Section 525 cannot apply to an award made on a reference jpending suit and we are unable to follow

the respondent''s vakil''s argument that because Section 523 has been considered in some; obiter dicta as inapplicable to a reference by agreement

to arbitration out of court of a pending. sujt, Section 525 is likewise inapplicable to an award made on such reference. An award is always binding

on the parties who made the reference provided the arbitrators were not guilty of misconduct. Jadunath Choudhry v. Kailas Chandra Bhatta

Chatter jee. 16 C.W.N. 35.

Coining to the objections (1) to (14) to the award, arbitrators are not bound to give ""a reasoned judicial decision"" and are merely bound to

give an intelligible decision which determines the rights of toe parties in relation to the subject matter of the reference (Redman on Arbitration IV

Ed. p. 163). They are not bound to give reasons at all and there are cases (which we think it unnecessary to quote) which have held that they

should not even be asked for the reasons which have led to their decision (see Redman on Arbitration, p. 140).

Having heard the evidence read and commented on by both sides we do not thnk that the five arbitrators surrendered their judgments to Mr.

Bower in such a manner that, against their own view of the rights of the parties, they adopted Mr. Bower''s view and acted merely as his

mouthpiece. When he suggested Rs 14,000 as the reasonable sum payable to the plaintiff (Nanja Rao) the arbitrators increased it to Rs. 15,000.

Mr. Bower says as court witness No..1. '''' I understood that the arbitrators had full discretion and were quite unfettered that the award was to be

the work of the arbitrators but that I was to represent to the arbitrators any points that would tell for or against either side."" The Tahsildar (D.W.

No. 1)(who was the principal arbitrator and who afterwards became a Special Deputy Collector) says that Mr. Bower helped the arbitrators by

his opinion in arriving at a decision. The evidence of the Tahsildar and of plaintiff''s witnesses Nos. 1 and 2 (two of the arbitrators) clearly shows

that they and the other arbitrators made inquiries of and obtained statements, from the parties and checked account state merits, discussed with the

parties as to income and expenditure, of the estates and the debts and expenses of Nanja Row''s side (family) another proper amount to be

allowed for Nanja Row''s maintenance, took into consideration the previous history of the litigation, consulted Mr. Bower and finally came to their

own conclusions and made their award. In Redman on Arbitration IV Ed. (pages 124 and 125) it is said that while ""arbitrators can not without the

consent of the parties, agree beforehand to be bound by the opinion of a third person without exercising their own judgment upon the point"",

arbitrators are at liberty to consult others and adopt their opinions as evidence"" which satisfied their minds upon the point"" and that arbitrators ""can

adopt the opinion of another person"" as their own. They cannot delegate or surrender their own judgments and conscience, but if they do not act

contrary to their own judgment"" they can get the help of other''s opinions in order to arrive at their own opinions.

We hold that the award was the work of the arbitrators and the mere fact that Mr. Bower gave help to the arbitrators to enable them to arrive

at their decision does not vitiate the award. As regards the last objection that some ""material"" was supplied to the arbitrators by Puttusawmi''s clerk

to which the other side was not allowed access"", we are satisfied from the evidence that the plaintiff and his sons had notice of the ""material"" so

supplied and there is no proof that they were refused access to that material. In Buta v. Municipal Committee of Lahore ILR (1902) C. 218, the

Privy Council held that where the arbitrators innocently applied for and accepted the advice of the defendant''s Counsel without notice to or

knowledge of the plaintiff in respect of the construction of the agreement to refer, the arbitrators were not guilty of misconduct (see also Rolland v.

Cassendy. 16 C.W.N. 35

Lastly we might state, that there is clear evidence to show that all objections to any irregularities in the. arbitrator''s procedure were completely

waived by the plaintiff and his sons.. Mr. Bower says that all parties were present when the award was read out, that Nanja Row was satisfied

with the award and made Namaskarams to Mr. Bower and that Nanja Rao and one of his sons thanked Mr. Bower for the part he had taken in

the arbitration proceedings (D.W. No. 1). The Tahsildar says that the plaintiff and his elder son expressed satisfaction when the award was read

out (in the presence of 100 people according to (P.W. No. 1) and made Natnaskarams to Mr. Bower. (P.W. No. 2) also says that the parties

were quite satisfied with the award when it was read out. Under these circumstances the award could not now be impeached on account of alleged

irregularity in the procedure of arbitration (see Redman on Arbitration, page 155), where it is said that not Only irregularities but even ""improper

conduct"" on the part of arbitrators might be waived and that all objections as to irregularities kno\�n to the parties before the pronouncement of

the award must be made before delivery of such award.

As regards the other objections to the award (except one to be mentioned presently) put forward by Nanja Rao and his sons in the lower

court and repeated before us, we entirely agree with the learned District Judge that they are unsustainable. One objection, however, to the award,

namely, that it determines some matters not referred to arbitration seems to us to be sustainable. Nanja Row''s third son, Choka Row seems not to

have been a party to the arbitration as supposed by the learned District Judge. The 6th paragraph of the award, so far as it declares that he has no

right in the property in dispute in Suit No. 2 of 1908 cannot be supported. But it could be separated without ""affecting"" the other portions of the

award (see Article 14 (a) Scheduel II, Act V of 1908 and Redman on''Arbitration IV. Ed. 205 and Kurshed Ali v. Wazirunnissa ILR (1902) C.

218 and does not affect the validity of the remaining portions. The sixth para of the award will, therefore, be made so as to read ""that in future

neither Nos. 2 to 6 nor their heirs claiming under them in their rights shall have any right and interest, etc.

In the result we set aside the order of the District Judge in C.S. No. 23 of 1908 refusing to file the award, Exhibit. II and we direct that it be

filed subject to the amendment above set out and that judgment and decree shall follow in terms of the amended award. The respondents will pay

the plaintiff''s costs in C.M.A. 10 of 1911 in both Courts.

As regards C.M.A. 75 of 1911 the case in Pragdas v. Girdhardas 16 C.W.N. 35 Brojadurha Singh Ramunath Ghose ILR (1900) M. 326

Lakshmana Chetty v. Chinnathambi Chetty (1906) 8 B.L.R. 777 are clear authorities for the proposition that a private reference to arbitration in a

pending suit followed by a lawful award is a lawful agreement, compromise and adjustment u/s 375 and effect ought to be given to such an adjus-

ment in the suit so far as the award relates to the suit. There are certain remarks in the nature of obiter dicta by Beaman J. in Rukhmabai v. Adatn ji

ILR (1908) B. 69 tending to throw doubts on the validity of the reasoning in the above 3 decisions, but we need only remark that we are unable to

take the view that the reasoning of the learned Judge has displaced their authority. Whether a mere agreement to refer to arbitration will itself been

adjustment u/s 375 so that a decree might be passed u/s referring the suit to arbitration as per the agreement (as distinguished from a mere order of

reference u/s 506 on application of the party) is a doubtful question though the Privy Council has accepted such a decree as a proper decree and

as putting an end to the suit (see Sadiq Hussain v. Fargir Be gam (1890) 15 App. C. 371 and also the observations of Hill J. in Tincoewrie Dey v.

Fakir Chand (1898) 9 M.L.J. 34 but it is unnecessary to go into that point in this case where an award has followed the reference.

In the result C.M.A. No. 75 of 1911 will also be allowed with costs (the question of the validity of the award being res judicata by our

decision in C.M.A. 10 of 1911).

The award Exhibit II and the reference Exhibit I shall be recorded as the agreement effecting a compromise and adjustment of the suit No. 2 of

1908 as between the plaintiff and the 1st defendant''s representative so far as the terms of the award apply to the disputes in the suit. The plaintiff

must pay the costs of this appeal and of the enquiry into petition No. 71 of 1908 in the lower Court to the first defendant''s representatives.

We now come to C.M.A. No. 228 of 1910 under the decisions given as above suits Nos. 2 and 23 of 1908. following the award Exhibit II

the plaintiff (Nanja Rao) is adjudged to have no interest in the suit Palayapet and its appurtenant properties.

The 1st defendant''s mismanagement of the estate,- even if proved could not have prejudiced the plaintiff in suit No. 2 of 1908 in any degree

and the sureties who gave security for the manage-ment of the estate by the receiver (1st defendant) have a right to be reimbursed by the receiver

(1st defendant) who is under the decree in the suit, declared entitled to the Palayapet and its appurtenances (except the two villages mentioned in

the award which the plaintiff enjoys and which did not go into the hands of the Receiver). Hence the petitions of the sureties for repayment of the

sums deposited as security ought to be allowed wholly. The appeal No. 228 of 1910 is therefore allowed but without costs.