Subramannaya Bhatta vs Devadas Nayak and Others

Ramaswami Gounder, J.—In this appeal, the learned counsel for the appellant, raised a question of law, not covered by any decision of our

High Court, as to the powers of an appellate Court to refer the disputes between the parties to arbitration. During the pendency of the appeal, A.

S. No. 29 of 1950, the District Judge of South Kanara, on the joint application of both the parties to the appeal, referred the matter to arbitration;

and on receipt of the a ward which went against respondent 3, he filed a petition, R. I. A. No. 228 of 1952, to set aside the award and to hear the

appeal on the merits.

Before the learned District Judge, two grounds were taken by the petitioner"": (1) that the notices required by S. 14 were not given, and (2) that the

appellate Court cannot refer a dispute to arbitration and that the reference itself was therefore bad. The learned District Judge negatived both the

contentions and held that the reference to arbitration was proper and within the powers of the appellate ''Court, and accordingly dismissed the

petition.

As against that order, the present appeal has been preferred. In this appeal, the only contention that was advanced for the appellant was the same

as ground No. 2 raised before the learned District Judge, namely, that an appellate Court has no powers to refer the matter to arbitration under S.

21, Arbitration Act.

The provisions relating to arbitration were originally embodied in Schedule 2, Civil P. C. But those provisions were repealed and re-enacted into

a separate Code by Arbitration Act 10 of 1940. We have therefore to look to the provisions of that enactment to answer the contention advanced

for the appellant. Prior to the enactment of Act; 10 of 1940, there was no difficulty, in holding that an appellate Court had powers to refer the

disputes between the parties to the appeal to arbitration under Schedule 2, C. P. C., by reason of the provisions of S. 107 of the Code, under

which an appellate Court is given the same powers and authorised to perform the same duties as are conferred and imposed by the Code oh

Courts of original jurisdiction in respect of suits instituted therein.

Reference may be made to an old decision of our High Court reported in -- ''Sankaralingam Pillai'', 3 Mad 78 (A). It is contended for the

appellant that after the repeal of Schedule 2 and the re-enactment of those provisions into a separate Code, it is not open to resort to Section 107

of the Code, and emphasis is placed on the words ""by this Code"", occurring in Clause (2) of that section. But that contention has been answered

by a Full Bench decision of the Allahabad High Court reported in -- Moradhwaj Vs. Bhudar Das, .

The learned Judges held that by reason of S. 8, General Clauses Act, the provisions of S. 107(2) of the Code would still empower an appellate

Court to refer the disputes to arbitration. At p. 358, their Lordships have observed:

The Arbitration Act repeals and re-enacts the provisions of Schedule II, C. P. C. S. 107, C. P. C., conferred upon the appellate Court the same

powers and the same duties as nearly as may be conferred and imposed by the Code on the Courts of original jurisdiction in respect of suits

instituted therein. The word ""Code"" included Schedule II also and therefore, it was held that under Schedule II an appellate Court has, in exercise

of the powers conferred upon it u/s 107, the power to refer matters to arbitration.

The words ''any other enactment'' in S. 8 must, in our opinion, include the non-repealed part of the former enactment. The word ''Code'' in Section

107 would, therefore, include a reference to the Arbitration Act which has incorporated the provisions of Schedule II, C, P. C. This would

become apparent if the word ''Code'' in Section 107 was amplified and in its place the following words were written ''The Sections and Schedules

of the Code.''

The repeal of Schedule 2 and its re-enactment in the Arbitration Act, therefore, does not make any difference so far as the powers of the appellate

Court u/s 107 are concerned, because those powers will still refer to the provisions of the Arbitration Act which have taken the place of Schedule

2.

Even apart from that view, it seems to me that there is no Insuperable difficulty !n reaching the same conclusion by interpreting the word ""Court

occurring in Section 21 of Chap. IV, Arbitration Act, as including an appellate Court. Chapters II and III of the Act deal with cases of arbitration

where there is no suit pending, and Chap. IV deals with arbitration in pending suits.

Section 21 occurring in Chap. IV provides that in any suit, if all the parties interested agree that any matter in difference between them in the suit

shall be referred to arbitration, they may apply in writing to the Court for an order of reference. The question is whether the word ""Court"" in that

section means only the Court of original jurisdiction and does not include an appellate Court. That word has been denned in Clause (c) of Section

2 as meaning

a civil Court having jurisdiction to decide the questions forming the subject-matter of the reference if the same had been the subject-matter of a

suit, but doss not, except for the purpose of arbitration proceedings u/s 21, include a small cause Court.

It is appropriate to make two observations in regard to that definition. One is that the definition refers to a civil Court having jurisdiction and not

original jurisdiction. Secondly, the definition excludes only a small cause Court (except u/s 21) and not an appellate Court. If the intention of the

Legislature were to exclude an appellate Court and deprive the parties to in appeal of a very important right of referring their disputes to arbitration

even at that stage it would have bean quite easy for the Legislature to put into the definition appropriate words which convey that idea.

It is obvious that the civil Court having jurisdiction to decide the questions forming the subject-matter of reference, if the same had been the

subject-matter of a suit, would include both the classes of Courts, namely, Courts of original jurisdiction as well as appellate Courts, for, both the

Courts have jurisdiction to decide those questions. That was the view adopted in --Thakur Prasad v. Baleshwar Ahir'', AIR 195-1 Pat 103 (C),

Where their Lordships observed at p. 107 thus:

Examining the definition of the term ''Court'' as given in Section 2(c), Arbitration Act, quoted above, there seems no valid ground for holding that

it excludes an appellate Court. Just as a Court of first instance has ''jurisdiction to decide the questions forming the subject-matter of the reference,

if the same had been the subject-matter of a, suit'', so also an appellate Court has the same ''jurisdiction to decide the questions forming the

subjdct-matter of the reference if the same had been the subject-matter of a suit''. This is the function of an appellate Court as well.

I respectfully agree with the above view. How- -ever, that interpretation was not adopted by the Calcutta High Court in a decision reported in --''

Abani Bhusan Chakravarty and Others Vs. Hem Chandra Chakravarty and Others, . Their Lordships gave two reasons. The first was to quote

their own words:

The lower appellate Court has of course the power to enter into and to decide questions of fact, and to that extent, it may be said that they have

jurisdiction to decide questions forming the subject-matter of the reference, but this jurisdiction is the special jurisdiction of an appellate Court and

in that capacity they would have no jurisdiction to decide those questions if they had been the subject-matter of a suit.

In this view of the matter, we do not think that a ''Court'' as defined in the Arbitration Act, will include an appellate Court.

The second reason was:

And we cannot think that it was ever intended that the question whether an appellate Court was empowered to refer matters to arbitration should

depend on any such question as whether that Court had pecuniary jurisdiction to decide the Questions at issue if they had formed the subject-

matter of a suit.

With great respect, I do not feel impressed with those reasons; and I definitely prefer to follow the view expressed in Thakur Prasad Vs.

Baleshwar Ahir and Others, , referred to above. It is also true that in the Allahabad Pull Bench case referred to above, the view was taken that

according to the definition of ""the word ""Court"" in Section 2(c), Arbitration Act, it must mean Court of original jurisdiction and cannot include an

appeal or execution proceedings.

That view appears to have been taken on the ground that for the purpose of Chaps. II and III of the Arbitration Act, the Court that is called upon

to function is the Court of original jurisdiction and so, the word ""Court"" occurring in Section 21 of Chap. IV, which must convey the same meaning,

necessarily excluded an appellate Court. But it seems to me that under Chaps. II and III, an appellate Court will not be called upon to function,

because there is the Court of original jurisdiction to exercise those functions on the principle embodied in Section 15, C. P. C., and not because

there is anything in the definition itself necessarily excluding an appellate Court.

For these reasons, I am of the view that the definition of ""Court"" in Section 2(c), Arbitration Act includes an appellate Court, and so, u/s 21 an

appellate Court can refer disputes between litigants for the decision of arbitrators. The word ""suit"" in that section can present no difficulty, because

an appeal has always been held to be a continuation of the original suit. In the Patna case referred to above, it was observed:

I see, therefore, no reason why a restricted meaning should be given to the word ''suit'' as used in Section 21, Arbitration Act, In my opinion, the

term ''suit'' in that section ought not to be taken to exclude an appeal. I, for myself, find no good ground for the Legislature, while giving power to

the Court of original jurisdiction to make an order of reference u/s 21, Arbitration Act, io exclude an appellate Court from making such an order.

As no other point was argued in this appeal, it will stand dismissed with costs.