Tilak Raj Kumra and Others vs Smt. Ram Pyari and Others

G.D. Dube, J.—A preliminary objection about the maintain ability of this appeal has been raised by learned Counsel for the Respondents. In a suit filed by the Respondents for accounting etc. before the lower court, an application u/s 34 of Arbitration Act (here in after referred to as the Act) was moved by the Respondent for referring the dispute to arbitration and staying the proceedings of the suit. An application was moved by the Respondents for appointment of a receiver. The trial court allowed both the applications. Aggrieved by the order relating to appointment of receiver, this appeal has been filed under Order 43(1)(d) of the Code of Civil Procedure.

Learned Counsel for the Respondents drew our attention to Section 41 of the Act which reads as under:

Procedure and powers of Court: Subject to provisions of this Act and of Rules made there under-

(a) the provisions of the CPC 1908, shall apply to all proceedings before the Court, and to all appeals, under this Act, and

(b) the Court shall have, for the purpose of, and in relation to arbitration proceedings, the same power of making orders in respect of any of the matters set out in the Second Schedule as it has for the purpose of, and in relation to, any proceedings before the Court:

Provided that nothing in Clause (b) shall be taken to prejudice any power which may be vested in an arbitrator or umpire for making orders with respect to any of such matters.

Elaborating his arguments, learned Counsel urged that, according to Sub-section (b), the courts in relation to arbitration proceedings have the same powers of making orders in respect of any of the matters set out in the second schedule of the Act as it has in relation to proceedings of the Court. The Court has under Clause 4 of second schedule the powers to appoint a receiver. It was, therefore, contended that the exercise of such a power of appointment of a receiver is not appealable u/s 39 of the Act. Learned Counsel cited some case laws in support of his contention.

Learned Counsel for the Appellant urged that the impugned order was passed in a proceeding before the court in a regular suit. The dispute has yet not been referred to arbitration. The lower court has only exercised the powers u/s 34 of the Act and directed that the suit be stayed. The trial court has directed the parties to name their arbitrators. The impugned order was passed in a regular suit, and not during the pendency of any arbitration proceedings and in exercise of the powers u/s 41 read with Clause 4 second schedule of the Act. Hence as the court has exercised its power Under Order 40 for appointment of receiver the general provision of Order 43 of the CPC shall apply.

Learned Counsel for the Respondents laid his special emphasis on the words "for the purpose of and in relation to arbitration proceedings" occurring in Clause (b) of Section 41 quoted above. It was urged that by moving an application u/s 34 of the Act the proceedings should be deemed to have started.

We do not agree with the above contention. The purpose of Section 34 of the Act is only to stay legal proceedings in a court where there is a subsisting arbitration agreement between the litigating parties. The arbitration proceedings have not started by moving of an application u/s 34 of the Act. After the court stays the proceedings on acceptance of the application u/s 34 of the Act the matter is to be referred to the arbitrator. The proceedings of the court while disposing of application u/s 34 of the Act cannot be deemed to be a proceeding for the purpose of and in relation to arbitration.

The case laws cited by learned Counsel for the Respondents are based on different facts. The earliest case cited by learned Counsel is Daulat Ram Phoolchand Vs. Shriram and Others, . In this case, the parties to the dispute had appointed arbitrators on 23-9-1960 for the purpose of their partition of joint property. By the time of the order passed in the reported case the arbitrators had not effected the partition. The Petitioner in the revision filed before the High Court had submitted the applications u/s 20 and 41 of the Act. These applications have been rejected by the trial court and on appeal this order was confirmed by a Division Bench of Madhya Pradesh High Court. There after, the Petitioner in the revision filed a fresh application u/s 41 of the Act praying for the appointment of a receiver. The trial court dismissed the application on the short ground that an application u/s 20 of the Act ought to have been filed. In this case, the Madhya Pradesh High Court had considered the above quoted words from Section 41 of the Act as under:

The question which falls for consideration in this case is whether the powers of the Court under the Second schedule could be exercised even in a case where the reference to arbitration has been made without the intervention of the Court, and no proceedings are pending in connection there with in any Court. The answer to this question depends on the interpretation of the words "for the purpose of and in relation to arbitration proceedings" used in Clause (b) of Section 41...The word "proceedings" has been used in relation to the proceedings held by arbitrators in Section 11 of the Act. The conduct of proceedings before the arbitrators is comprehensively provided for in Section 12 of the English Arbitration Act, 1950. There is, in my opinion, no reason to suppose that the words "arbitration proceedings" in Section 41 of the Indian Arbitration Act refer to only such proceedings as are held by the Court of competent jurisdiction in pursuance of an arbitration agreement.

The above case law does not lay down that in the proceedings of the nature from which this present appeal arises the power could be exercised by the Court u/s 41 read with Schedule 2 Clause (4) of the Act. This case law does not help the Respondent.

Smt. Krishnawati Devi and Another Vs. Lala Harjas Mal Misra and Others, , cited by learned Counsel for Respondent is also based on different facts. In this case a reference for arbitration was pending when an application u/s 41 of the Act was moved before the 1st Additional District Judge, Varanasi for appointment of receiver. On these facts it was held by a Division Bench of this Court that CPC is not applicable and the order is not appealable u/s 39 of the Act.

In the present case no reference has been made, as yet, to the arbitrator. The impugned order has been passed by the court below in exercise of its powers under Order 40 Rule 1 of the Code. In a regular suit. Such an order is appealable under Order 43 Rule (1)(d) of the Code.

Jammu Forest Co. v. State of Jammu and Kashmir AIR 1968 J&K 86 , is such a case where an application u/s 20 of the Act had been moved before Jammu and Kashmir High Court. In this case an application had been moved for issuing a temporary injunction. One of the points raised in this case was whether the court could issue an injunction. Relying on Daulat Ram Phoolchand Vs. Shriram and Others, the court held that it had power to issue an injunction. The case does not canvass any point regarding maintain ability of an appeal against an order of trial court, where an order of appointment of receiver was passed in a pending suit where an application u/s 34 of the Act had been moved.

The last case cited is M/s. Raj Builders v. Indore Development Authority AIR 1985 MP 146. In this case the Petitioner firm had entered into a contract with Indore Development Authority for execution of some work. A dispute arose between the parties about the execution of work. The Petitioner served a notice on the Respondents for appointment of an arbitrator in pursuance of an arbitration clause in agreement executed between the parties. The Respondent appoint two arbitrators to which the Petitioner consented. In the meantime the Respondent issued a notice calling for fresh tenders. The Petitioner moved an application u/s 41 of the Act before II Additional District Judge for injunction to restrain the Respondent from opening and accepting fresh tenders. This application was rejected. Aggrived by this order a revision was filed before Madhya Pradesh High Court. In this case there was no question as to whether any appeal or revision was maintainable against the order of the lower court. It was held by M.P. High Court that even in proceedings of arbitration started outside the court, the provision of Section 41 of the Act are applicable. This case is therefore, not applicable to this matter.

From the above discussions we are of the opinion that in the instant case the trial court has only asked the parties to name their arbitrator. The arbitration proceedings has not yet started. The impugned order can not be said to have been passed in exercise of the powers of the trial court u/s 41 Sub-clause (b) of the Act for the purpose of and in relation to arbitration proceedings. It was purely an order passed under Order 40 of the CPC which is appellable under Order 43 Rule 1(s) of the Code. The preliminary objection is therefore, rejected.