Case: Ct. A. Ct. Nachiappa Chettiar And Others Vs. Ct. A. Ct. Subramaniam Chettiar

Chunder Banerjee v. Ambica Churn Mookerjee, ILR 18 Cal 507 . As we have already observed, prior to the enactment of the Act there has been a longstanding judicial practice under has been a longstanding judicial practice under which orders of reference have been passed by appellate courts in respect of matters is dispute between the parties in appeals pending before them.42. The construction of S. 21 has led to a divergence of judicial opinion. In Abani Bhusan Chakravarty v. Hem Chandra Chakravarty. AIR 1947 Cal 93, the Calcutta High Court has taken the view that the court as defined in the Arbitration Act does not include an appellate court and consequently there is nothing in the Act which enables an appellate court to refer to arbitration matters in dispute between the parties. This decision proceeds on the erroneous view that the "court" in S., 21 means only the court as defined in S. 2 (c) and that the considerations based on the powers of the appellate court prescribed by S. 107 are foreign to the Act. It also appears that the learned judges were disposed to think that if the matter in dispute between the parties at the appellate stage was referred to arbitration it might tend to bring the lower courts into contempt. There is no doubt that a court cannot claim an inherent right to refer a matter in dispute between the parties to arbitration. Before a matter can be thus referred to arbitration it must be shown that the court in question has been statutorily clothed with the power to make such an order; and that would depend on the construction of S. 21 of the Act. The Calcutta High Court has construed the said section in substance consistently with the view taken by it in the case of Jugeshur Dey, 12 Beng LR 266.43. On the other hand the Patna High Court has taken a contrary view in Thakur Prasad v. Baleshwar Ahir, AIR 1954 Pat 106 . Jamuar J., who delivered the judgment of the court, has considered the decision of the Calcutta High Court in the case of Jugeshur Dey, 12 Beng LR 266, and has dissented from it. In the Allahabad High Court somewhat conflicting views had been expressed on different occasions; but, on the question as to whether the appellate court can refer a matter in dispute between the parties to arbitration or not, and whether the suit includes an appeal, the decision of the Full Bench of the Allahabad High Court in Moradhwaj v. Bhudar Das, (S) AIR 1955 All 353 , seems to be on the same lines as that of the Patna High Court. This Full Bench also considered the question about the applicability of S. 21 to execution proceedings but with that aspect of the matter we are not concerned in the preset appeal. The Madras High Court has taken the same view in Subramannaya Bhatta v. Devadas Nayak, (S) AIR 1955 Mad 693 . However, none of these decisions had occasion to consider the question about the competence of both the trial court and the appellate court in cases where a preliminary decree has been passed and an appeal has been filed against the said decree. It would thus appear that the majority of the Indian High Courts have construed the words "suit" and "court" used in S. 21 liberally as including appellate proceedings and the appellate court respectively. In the result we hold that the trial court was competent to make the reference and its validity is not open to any objection.44. That leaves only one point to be considered. It is urged by the appellants that the arbitrators acted illegally and without jurisdiction in directing the appellants to pay to the respondent Rs. 2,682-60 by way of interest on the amounts specified in the award up to December 5, 1944, and from that date at the rate of 5 as. per cent, per mensem, thus, imposing on the appellants a total liability of Rs. 2,36,782-11-9. The appellants have also been directed to pay future interest on the same amount at 8 as percent per mensem from the said date until the date of payment. This argument is based solely on the observations made by Bose J., who delivered the judgment of this Court, in Thawardas Pherumal v. Union India, (S) AIR 1955 SC 468 . It appears that in that case the claim awarded by the arbitrators was a claim for an unliquidated sum to which Interest Act of 1839 applied as interest was otherwise not payable by law in that kind of case. Dealing with the contention that the arbitrators could not have awarded interest in such a case Bose J., set out four conditions which must be satisfied before interest can be awarded under the Interest Act, and observed that none of them was present in the case; and so he concluded that the arbitrator had no power to allow interest simply because he thought that the payment was reasonable. The alternative argument urged before this Court that interest could be awarded under S. 34 of the Code of Civil Procedure, 1908, was also repelled on the ground that the arbitrator is not a court within the meaning of the Code nor does not Code apply to arbitrators. Mr. Viswanatha Sastri relies upon these observations and contends that in no case can be arbitrators award interest. It is open to doubt whether the observations on which Mr. Viswanatha Sastri relies support or were intended to lay down such a broad and unqualified proposition. However we do not propose to pursue this matter any further because the present contention was not urged before the High Court. It was no doubt taken as a ground of appeal but from the judgment it is clear that it was not urged at the time of hearing. Under these circumstances we do not think we would be justified in allowing this point to be raised before us.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]30. It is these portions of the award on which the appellants based their contention that immoveable properties in Pudukottai and Burma have been dealt with by the arbitrators. In our opinion this contention is not well-founded. What the arbitrators have done is to divide the properties which were then the subject-matter of the dispute between the parties and having done so they have indicated what the legal position of the parties would be in respect of the properties outside the dispute. In appreciating the effect of the words used in the award we must bear in mind that the arbitrators were laymen not familiar with the technical significance of legal expression, and so we must read the relevant clauses as a whole with a view to determine what in effect and substance they intended to decide. Now take the recitals in the award to the Pudukottai properties. The award expressly states that the properties had not been divided by them and that the plaintiff and the defendants shall have them divided when so required. All that the award says is that since the parties had separated and the properties in suit before the arbitrators had been actually divided by metes and bounds, the two branches shall enjoy the Pudukottai properties in equal halves. This clause in the award cannot be said to divide the said properties or even to determine their shares in them. The shares of the parties in the said properties were admitted and so the award merely says that as divided members they will hold and enjoy the properties half and half.31. Similarly in regard to the properties in Burma the award expressly states that the said properties had not been divided and it merely refers to the true legal position that they would be enjoyed by the two branches half and half. The arrangement proposed by the arbitrators in respect of the immoveable properties in Burma is very significant. They merely asked the parties to hold the documents of title half and half for safe custody and they have added that when the parties decide to divide the properties all the documents would have to be brought together and a partition made according to law. That again is an arrangement dictated by commonsense and cannot be said to amount to a decision in any way. It is not as if the award declares the shares of the parties in respect of the properties. What is does is no more than to state the true and admitted legal position of the parties rights in respect of the said properties.32. In this connection it would be useful to refer to the observations made by Viscount Dunedin in Bageshwari Charan Singh v. Jagarnath Kuari, ILR 11 Pat 272 : (AIR 298 PC 55). In that case the Privy Council was called upon to consider the question about the admissibility of a petition which relied upon as an acknowledgment of liability under S. 19 sub-s. (1) of the Limitation Act, and it was urged that the said petition was inadmissible because it purported operated to create or declare a right to immoveable property and as such was compulsorily registrable under S. 17(1)(b) of the Registration Act, 1908. In urging the objection to the admissibility of the petition a large number of Indian decisions were cited before the Privy Council dealing with the word "declare" used in S. 17 (1) (b) of the Registration Act, 1908; and it was apparent that there was a sharp conflict of views. In Sakharam Krishnaji v. Madan Krishnaji, ILR 5 Bom 232. West J, had observed that the word "declare" in S. 17(1)(b) is placed along with create, assign, limit or extinguish a right title or interest, and these words imply definite change of legal relation to the property by an expression of will embodied in the document referred to, and had added that he thought that is equally the case with the word "declare". On the other hand certain other decisions had construed the word declare liberally in a very wide sense and it was on those decisions that the objection against admissibility of the petition was founded. In repealling the objection Lord Dunedin observed that "though the word declare" might be given a wider meaning they are satisfied that the view originally taken by West J., is right. The distinction is between a mere recital of fact and something which in itself creates a title." These observations assist us in deciding the question as to whether the impugned portions of the award declare the parties rights in immoveable properties in the sense of deciding them as points or matters referred to arbitration in our opinion, the High Court was right in answering this question against the appellants. Therefore the award is not open to the attack that it deals with immoveable properties out of the jurisdiction of the court.33. That takes us to the next ground to attack against the validity of the award. It is urged that the award contravenes the order passed by the High Court on the stay petition filed before it by appellant 2. There is, however, no substance in this contention. All that the High Court directed was that pending the final decision of the appeals before it a final decree should not be drawn. In fact the High Court clearly observed that there was no reason for staying all the proceedings pending before the Commissioner. That is the usual order made in such cases, and it is difficult to appreciate how this order has been contravened by reference to arbitration or by the award that followed it. The award is not and does not purport to be a final decree in the proceedings and the proceedings before the arbitrators substantially correspond to the proceedings of the enquiry which the Commissioner would have held even under the order of the High Court. Therefore this contention must also fail.We may now briefly refer to some of the decisions to which our attention was invited. Before the Act was passed in 1940 the procedure for referring matters in dispute between the parties in pending suits was governed by the provisions of Sch. II to the Code of Civil Procedure. There appears to have been a consensus of judicial opinion in favour of the view that under Sch., II paragraph 1, the appellate court could make an order of reference in respect of matters in dispute between the parties in an appeal pending before it. A note of dissent had, however, been struck by a Full Bench of the Calcutta High Court in Juge shur Dey v. Kritartha Moyee Dossee, 12 Beng LR 266. In that case the question for decision arose under the provisions of the Code of 1859 and the Full Bench held that an appellate court had no power even by consent of parties to refer a case for arbitration under the arbitration sections of Act VIII of 1859 which applied only to courts of original jurisdiction nor was such power conferred on an appellate court by S. 37 of Act XXIII ofOne of the reasons which weighed with Couch C. J. who delivered the principal judgment of the Full Bench was that according to him neither reasons nor convenience required that the appellate court should refer a suit to arbitration after the matter had been decided by the trial court. Kemp J., who concurred with the decision, apprehended that "if the parties are allowed to refer matters to arbitration after a case has been finally disposed of by a court of justice such a proceeding might tend to bring lower courts into contempt". In our opinion this apprehension is not well-founded. Besides it is well-known that when parties agree to refer the matters in dispute between them in suit to arbitration they desire that their disputes should be disposed of untrammelled by the rigid technicalities of the court procedure. A search for a short-cut by means of such arbitration sometimes takes the parties on a very long route of litigation but that is another matter.The Calcutta view was dissented from by the Madras High Court in Sankaralingam Pillai In re, ILR 3 Mad 78  , in somewhat emphaticall respect for the opinions of the learned judges of the High Court of Calcutta by whom the case of Jugeshur Dey, 12 Beng LR 266, was decided", observed the judgment, "we are not convinced by the reason given in the judgment for holding that an appellate court might not, with consent of the parties, refer the matters in dispute in the appeal tothus expressed their disapproval of the Calcutta view, the learned judges proceeded to add that in the case before them an order of reference was sought for under S. 582 of the Code of 1877 and they held that under the said provision the appellate court is given the same powers and is required to perform the same functions as nearly as may be as the trial court. The view thus expressed by the Madras High Court was subsequently accepted and approved by the Calcutta High Court in Bhugwan Das Marwari v. Nund Lall Sein, ILR 12 Cal 173  , and Suresh Chunder Banerjee v. Ambica Churn Mookerjee, ILR 18 Cal 507  . As we have already observed, prior to the enactment of the Act there has been a longstanding judicial practice under has been a longstanding judicial practice under which orders of reference have been passed by appellate courts in respect of matters is dispute between the parties in appeals pending before them.42. The construction of S. 21 has led to a divergence of judicial opinion. In Abani Bhusan Chakravarty v. Hem Chandra Chakravarty. AIR 1947 Cal 93, the Calcutta High Court has taken the view that the court as defined in the Arbitration Act does not include an appellate court and consequently there is nothing in the Act which enables an appellate court to refer to arbitration matters in dispute between the parties. This decision proceeds on the erroneous view that the "court" in S., 21 means only the court as defined in S. 2 (c) and that the considerations based on the powers of the appellate court prescribed by S. 107 are foreign to the Act. It also appears that the learned judges were disposed to think that if the matter in dispute between the parties at the appellate stage was referred to arbitration it might tend to bring the lower courts into contempt. There is no doubt that a court cannot claim an inherent right to refer a matter in dispute between the parties to arbitration. Before a matter can be thus referred to arbitration it must be shown that the court in question has been statutorily clothed with the power to make such an order; and that would depend on the construction of S. 21 of the Act. The Calcutta High Court has construed the said section in substance consistently with the view taken by it in the case of Jugeshur Dey, 12 Beng LR 266.43. On the other hand the Patna High Court has taken a contrary view in Thakur Prasad v. Baleshwar Ahir, AIR 1954 Pat 106  . Jamuar J., who delivered the judgment of the court, has considered the decision of the Calcutta High Court in the case of Jugeshur Dey, 12 Beng LR 266, and has dissented from it. In the Allahabad High Court somewhat conflicting views had been expressed on different occasions; but, on the question as to whether the appellate court can refer a matter in dispute between the parties to arbitration or not, and whether the suit includes an appeal, the decision of the Full Bench of the Allahabad High Court in Moradhwaj v. Bhudar Das, (S) AIR 1955 All 353  , seems to be on the same lines as that of the Patna High Court. This Full Bench also considered the question about the applicability of S. 21 to execution proceedings but with that aspect of the matter we are not concerned in the preset appeal. The Madras High Court has taken the same view in Subramannaya Bhatta v. Devadas Nayak, (S) AIR 1955 Mad 693  . However, none of these decisions had occasion to consider the question about the competence of both the trial court and the appellate court in cases where a preliminary decree has been passed and an appeal has been filed against the said decree. It would thus appear that the majority of the Indian High Courts have construed the words "suit" and "court" used in S. 21 liberally as including appellate proceedings and the appellate court respectively. In the result we hold that the trial court was competent to make the reference and its validity is not open to any objection.That leaves only one point to be considered. It is urged by the appellants that the arbitrators acted illegally and without jurisdiction in directing the appellants to pay to the respondent Rs. 2,682-60 by way of interest on the amounts specified in the award up to December 5, 1944, and from that date at the rate of 5 as. per cent, per mensem, thus, imposing on the appellants a total liability of Rs. 2,36,782-11-9. The appellants have also been directed to pay future interest on the same amount at 8 as percent per mensem from the said date until the date of payment. This argument is based solely on the observations made by Bose J., who delivered the judgment of this Court, in Thawardas Pherumal v. Union India, (S) AIR 1955 SC 468  . It appears that in that case the claim awarded by the arbitrators was a claim for an unliquidated sum to which Interest Act of 1839 applied as interest was otherwise not payable by law in that kind of case. Dealing with the contention that the arbitrators could not have awarded interest in such a case Bose J., set out four conditions which must be satisfied before interest can be awarded under the Interest Act, and observed that none of them was present in the case; and so he concluded that the arbitrator had no power to allow interest simply because he thought that the payment was reasonable. The alternative argument urged before this Court that interest could be awarded under S. 34 of the Code of Civil Procedure, 1908, was also repelled on the ground that the arbitrator is not a court within the meaning of the Code nor does not Code apply to arbitrators. Mr. Viswanatha Sastri relies upon these observations and contends that in no case can be arbitrators award interest. It is open to doubt whether the observations on which Mr. Viswanatha Sastri relies support or were intended to lay down such a broad and unqualified proposition. However we do not propose to pursue this matter any further because the present contention was not urged before the High Court. It was no doubt taken as a ground of appeal but from the judgment it is clear that it was not urged at the time of hearing. Under these circumstances we do not think we would be justified in allowing this point to be raised before us.