Pannalal Kishanlal vs Lachmichand Swaika

Banerjee, J.—In this appeal we are invited to consider the propriety of an order made by Sinha, J. By that order the learned Judge gave leave to the petitioner who is the respondent in this appeal, to revoke the authority of an appointed arbitrator, and ordered that the arbitration agreement should cease to have effect with respect to the difference referred. The parties had agreed in writing to refer certain disputes arising out of the contract between them to the Bengal Chamber of Commerce. Such disputes arose and the reference was made.

On August 30, 1950, the notice of motion of the application out of which this appeal arises was taken out on behalf of the petitioner. In this application he asked for leave of the Court to revoke the authority of the Bengal Chamber of Commerce. He further asked that the submission and/or the arbitration agreement be revoked.

Sinha, J., thought that it was a lit case where the leave should be granted and made the order from which this appeal has been taken.

It was contended before the learned Judge that the petitioner was not entitled to the order as he was guilty of delay. A judgment of mine was cited to the learned Judge against the petitioner. Sinha, J., held that the facts of the case before him was different from the facts of the case which was before me and held against the contention.

Before us a preliminary point has been taken on behalf of the respondent that no appeal lies from the learned Judge''s order. That there is no appeal from an order giving leave to revoke the authority of an arbitrator is conceded by the appellant''s counsel Mr. R. C. Deb. But he contends that an appeal lies from the other order, namely, the order that the arbitration agreement shall cease to have effect with respect to the difference referred. Counsel has limited this appeal to this order only.

The first question that we have to decide is whether there is an appeal from such an order.

Section 39 of the Arbitration Act gives the right to appeal. It specifies the orders from which an appeal shall lie. That section says that an appeal shall lie from the orders specified in that section and from no other. One of the orders specified in the section is an order superseding an arbitration. Mr. Deb contends that what the learned Judge has ordered is really tantamount to an order superseding the arbitration.

The learned Judge has made the order under sec. 5 and sec. 12 of the Arbitration Act. Sec. 5 empowers the Court to give leave to revoke the authority of the arbitrator. Sec. 12 empowers the Court to make the other order. That section, so far as material, is in these terms : "Where the authority of an arbitrator or arbitrators.........is revoked by leave of the Court,........the Court may, on the application of any party to the arbitration agreement, either--(a) appoint a person to act as sole arbitrator in the place of the person or persons displaced, or (b) order that the arbitration agreement shall cease to have effect with respect to the difference referred."

The Arbitration Act uses the word ''supersede'' in four sections, sec. 19, sec. 25, sec. 30 and sec. 39. Section 19 reads thus : "where an award has become void under sub-section (3) of sec. 16 or has been set aside, the Court may by order supersede the reference and shall thereupon order that the arbitration agreement shall cease to have effect with respect to the difference referred."

Sec. 25, sub-sec. 3 provides that an award remitted under sub-sec. 1 of that section shall become void on the failure of the arbitrator or umpire to, reconsider it and submit his decision within the time fixed. Sec. 30 sets out the grounds on which the Court may set aside an award. Sec. 19 provides that when an award has become void under sec. 16 (3) or has been set aside, the Court may supersede the reference. But the section does not stop there. It goes on to say that the Court ''shall thereupon''--that is to say, upon superseding the reference,--make an order that the arbitration agreement shall cease to have effect with respect to the difference referred. Sec. 19 contemplates the making of two orders--(i) superseding the reference, and (ii) making an order that the arbitration agreement shall cease to have effect with respect to the difference referred. As to (i), it is a matter of discretion with the Court; the Court may or may not supersede the reference. The word is ''may''. But if the Court in its discretion supersedes the reference, it ''shall'' make a further order that the arbitration agreement shall cease to have effect with respect to the difference referred. It is incumbent on the Court to do so. The word is ''shall''.

It should be noticed that the words in sub-sec. 2(b) of sec. 12 are exactly the same as the words in the last portion of sec. 19. The word ''supersede'' does not occur in sec. 12. Sub-sec. 2(b) of that section contemplates the making of an Order that the arbitration agreement shall cease to have effect with respect to the difference referred--an order of the kind contemplated in the last portion of sec. 19.

It appears to us that the Act itself makes a clear distinction between the two orders : (i) superseding the reference, and (ii) an order that the arbitration agreement shall cease to have effect with respect to the difference referred.

Sec. 39 gives the right of appeal from (i), namely, an order superseding the arbitration and not from the other, namely, (ii).

It should be noticed that in sec. 19 the expression is ''superseding the reference'', whereas in secs. 25, 30 and 39 the expression is ''superseding the arbitration''. We do not think that the Legislature has made any difference between ''superseding the reference'' and ''superseding the arbitration''.

Reference in the Act means "a reference to arbitration".

If, however, it is assumed that there is a difference between ''superseding an arbitration'' and ''superseding a reference'', which we do not think there is, it is quite clear that the order made by the learned Judge against which this appeal has been directed does not come within either expression. In any event, it is not, for the reasons I have given, tantamount to ''superseding the arbitration''.

Mr. Deb has suggested various grounds for his contention that an order superseding the arbitration should be taken as included in the order made under sec. 12, sub-sec. 2(b). It is not necessary for us to go into the reasons. Suffice it to say that the Legislature has provided for an appeal for one kind of order and not the other. The words in sec. 39 are clear--''superseding the arbitration''. Why the Legislature has made the difference, we do not know. But we do know that the Legislature has made the difference and sec. 39 gives no appeal from an order made under sec. 12, sub-sec. 2 (b).

On these considerations we hold that no, appeal lies. However, as the merits of the case were also discussed before us, we express cur opinion on the merits. Where the authority of an arbitrator is revoked, the Court may either (a) appoint another arbitrator, or (b) order that the arbitration agreement shall cease to have effect. The learned Judge did not make the order (a) : he thought fit to make the order (b). Nothing has been said to convince us that the learned Judge improperly exercised his discretion. The learned Judge has given reasons as to why he did not think it fit to appoint another arbitrator. He says, "I am aware that there is a difference between revocation of the authority of the arbitrator and the arbitration agreement. Here, however, regard being had to, the fact that I have decided that there exists the possibility of a bias in the arbitrators, no point will be served by keeping the arbitration agreement alive, inasmuch as disability would attach to any arbitrator appointed by the Tribunal from the panel of the Bengal Chamber of Commerce out of which arbitrators are appointed."

It has been suggested by Mr. Deb that the learned Judge was wrong there; that at is not necessary to select the arbitrators from the Bengal Chamber of Commerce and a person who is not a member of that Chamber can be appointed arbitrator. We do not think that that submission is right. The parties had agreed that the reference should be to the Bengal Chamber of Commerce, that is to say, to a Court which is appointed by the Registrar of the Bengal Chamber of Commerce under the rules of that Chamber. An outside person cannot possibly be appointed to decide the disputes between the parties except under the conditions provided in the Arbitration Act, 1940, none of which conditions exists in this case. On the merits, therefore, this appeal fails. The learned Judge''s order is right and the appeal is dismissed with costs.

Harries, C.J.

I agree.