Case: M.P. RAJYA TILHAN UTPADAK SAHAKARI SANGH MARYADIT, PACHAMA, DISTRICT SEHORE AND OTHERS Vs. M/S. MODI TRANSPORT SERVICE

examination or adjustment) of the Code. For submission to arbitration, there must be an arbitration agreement or an agreement in terms of Section 21 of the Act that the difference or dispute between the parties for which they intend to be determined in a quasi-judicial manner. Commissioners are appointed by the court. Appointment may be with consent of the parties, or even when there is objection to the appointment. Preexisting agreement or the requirement that the parties agree before the court, as is mandatory in case of arbitration, is not necessary when a court directs appointment of a commissioner. In the case of a reference to a commissioner, all that the parties expect from the commissioner is a valuation/ examination of the subject matter referred, which he would do according to his skill, knowledge and experience, which may be without taking any evidence or hearing argument (Halsbury, Vol.1, Edn. 2 at Pg. 622). In light of the aforesaid decisions, we would like to introduce the principle of a facilitator which a court may appoint, be it a commissioner or an expert, for a specific purpose and cause for ascertainment of a fact which may be even disputed. In some cases, the commissioner may even hear the parties and give his expert opinion based on the material or evidence produced by the parties before the commissioner, as in this case when the court appointed a Chartered Account who as an expert was required to give his opinion on the statement on accounts to facilitate and help the court arrive at a fair and just decision. It was to save the courts time and cut delay in the decision by the court. 33. Order XXVI Rule 9 of the Code gives wide powers to the court to appoint a commissioner to make local investigations which may be requisite or proper for elucidating any matter in dispute, ascertaining the market value of any property, account of mesne profit or damages or annual net profits. Under Order XXVI Rule 11, the court has the power to issue a commission in a suit, in which examination of adjustment of accounts is necessary, to a person as it thinks fit directing him to make such examination or adjustment. When a court issues such a commission to such a person, it can direct the commissioner to make such an investigation, examination and adjustment and submit a report thereon to the court. The commissioner so appointed does not strictly perform a judicial act which is binding but only a ministerial act. Nothing is left to the commissioners discretion, and there is no occasion to use his judgment or permitting the commissioner to adjudicate and decide the issue involved; the commissioners report is only an opinion or noting, as the case may be with the details and/or statement to the court the actual state of affairs. Such a report does not automatically form part of the courts opinion, as the court has the power to confirm, vary or set aside the report or in a given case issue a new commission. Hence, there is neither abdication nor delegation of the powers of functions of the court to decide the issue. Sometimes, on examination of the commissioner, the report forms part of the record and evidence A. Nagarajan v. A. Madhanakumar 1996 SCC OnLine Mad 17. The parties can contest an expert opinion/commissioners report, and the court, after hearing objections, can determine whether or not it should rely upon such an expert opinion/commissioners report. Even if the court relies upon the same, it will merely aid and not bind the court. In strict sense, the commissioners reports are non-adjudicatory in nature, and the courts adjudicate upon the rights of the parties. 34. By Act 18 of 2018, Section14A [14A. Power of court to engage experts.—(1) Without ..... and at such time, as the court may direct.] has been inserted in the Specific Relief Act, 1963. The provision states that without prejudice to the provisions of the Code in any suit under the Act in question where a court considers it necessary to get expert opinion to assess it on a specific issue involved in the suit, it may engage one or more experts and direct to report to it on such issue. The court may secure the experts attendance for providing evidence, including the production of documents on the issue. The opinion or report of the expert would form part of the record of the suit as is the case with the commissioners report. With the courts permission, the parties to the suit may examine the expert personally in the open court on any of the matters referred to him or as to his opinion or report or as to the manner in which he has made the inspection. 35. The matter referred to S.K. Mantri was limited to examination of the accounts. The issues and questions of dispute in the suit were far broader and wider. These included questions as to the agreed price or the rate of transportation in view of the letter dated 05th June 1992, which was withdrawn by letter dated 30th September 1992, computation of the transportation costs payable to the plaintiff under the contract in case the coal delivered was within or beyond the 1% stipulation, whether or not the defendants were right in making deductions on account of bad quality coal, higher moisture content etc. whereby the weight of the coal had increased, delay in delivery on the part of the plaintiff, whether the defendants are entitled to charge interest while making recoveries, etc. It is interesting to note that the S.K. Mantri himself did not decide whether or not the plaintiff is entitled to rent of the plot or security charges observing that this was an aspect for the court to decide. However, he forgot that his jurisdiction was limited to checking and verifying accounts and not deciding any issue or questions beyond the accounts on issues and questions referred to above.

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

Explanation:
1[ds]16. Interpreting Section 21 of the Act, a Full Bench of the Punjab and Haryana High Court in Firm Khetu Ram Bashamber Dass v. Kashmiri Lal 1959 SCC OnLine Punj 102 has held:Thus, before any matter involved in a suit pending in a Court can be referred to arbitration (a) there must be an agreement amongst all the parties interested that any matter in dispute between them in the suit shall be referred to arbitration; (b) if they come to such an agreement, then they have to make an application in writing to the Court concerned; and (c) thereafter, the Court has to pass an order referring the dispute to the arbitrator agreed upon between the parties.There can be no manner of doubt that if there is no agreement between all the parties who are interested in the case and if the application is not made on behalf of them all, the reference made by the Court is bad and the award based on such a reference is invalid in law. This view has been consistently taken by all the High Courts. In Negi Puran Singh v. Hira Singh and others, while dealing with provisions of Civil Procedure Code, 1882, similar to sections 21 and 23 of the Arbitration Act, Stanley, C.J. and Banerji, J., of the Allahabad High Court held that if there was no application signed by all the parties who were interested in the settlement of the suit, the reference and the award given, thereafter, would be invalid. The same view was taken in Haswa v. Mahbub and another, by another Division Bench of the same Court. In Gopal Das v. Baij Nath, Sulaiman, J., (as he then was), referred to a number of decisions of Allahabad and Calcutta High Courts and observed as follows:—*** it is necessary that all persons who are interested in the matter which is in difference between the parties and which is going to be referred to arbitration, should join. Although it is not absolutely necessary that they should all sign the application made to the Court, it is necessary that they should agree to the reference.See also Tej Singh and another v. Ghase Ram and others , In Ram Harakh Singh v. Mumtaz Hasain, the question of acquiescence and ratification was also considered.Following Gopal Das v. Baij Nath and Subba Rao v. Appadurai , Ghulam Hasan, J., held that the foundation of the jurisdiction of the Court is the consent of the parties and the subsequent ratification does not validate the reference which was void ab initio. Calcutta and Madras High Courts have also taken a similar view. The question was considered by a Full Bench of the Calcutta High Court in Laduram v. Nandlal, Mookerjee, J., at page 114 of the report observed as follows:—The foundation of jurisdiction here is the agreement amongst all the parties interested that the matters in difference between them shall be referred to arbitration. If all the parties interested do not apply and yet an order of reference is made, the order is illegal because made without jurisdiction. If an award follows on the basis of that reference, it is equally illegal, because it is founded upon a reference made without jurisdiction.See also Seth Dooly Chand v. Munuji and others and Khan Mohmed v. Chella Ram and another and Subha Rao v. Appadurai.In Subha Rao v. Appadurai, Devadoss, J., while considering the provisions of para 1 of Schedule II, Civil Procedure Code,—which in substance is the same as section 21 of the Arbitration Act—observed as follows:—What gives the Court jurisdiction to refer the matter to arbitration is consent of all the parties. Consent subsequently given cannot give jurisdiction to the Court which it did not possess at the time when it referred the matter to arbitration.17. In our opinion, the aforesaid ratio expresses the correct position in law. Arbitration is an alternative to the court adjudication process by a private forum chosen by the parties. Normally reference can be made or even directed to the arbitrator only if a preexisting arbitration agreement subsists between the parties. In the absence of a preexisting arbitration agreement, the court has no power, authority or jurisdiction to refer unwilling parties to arbitration. Therefore, the word agree in Section 21 of the Act refers to consensus ad idem between the parties who take a considered decision to forego their right of adjudication before a court where the suit is pending, and mutually agree to have the subject matter of the suit or part thereof adjudicated and decided by an arbitrator.18. In the present case, the application dated 23rd December 1994 was moved by the plaintiff and it was not signed by the defendant. As per the heading, the application was for the appointment of a commissioner/arbitrator to conduct an enquiry in respect of the accounts by a competent Chartered Accountant who shall act as a panch/Commissioner and submit a report after conducting an audit of the accounts. It was stated that the transactions between the parties are fairly large in number and, therefore, it is necessary to handover the aforesaid task to a Chartered Accountant. The application also states that for the enquiry regarding accounts an opportunity of hearing should be given to both the parties. Name of S.K. Mantri, Chartered Accountant, to act as panch/commissioner was proposed. The prayer in the application was that the panch/ commissioner would submit the report to the court after conducting an audit of the accounts. The application cannot be read as an application moved on a prior agreement or consensus for reference to arbitration.19. In view of the aforesaid discussion, we cannot read the application dated 23rd December 1994 as an application by the parties under Section 21 of the Arbitration Act. First, it is not an application for reference of disputes to an arbitrator for adjudication but a request for the appointment of an expert, that is, a Chartered Accountant, who would examine the accounts and papers and submit the report to facilitate the court. The role assigned to S.K. Mantri is also clear from the letter of appointment dated 23rd January 1995 which states that S.K. Mantri has been appointed as a panch and would be conducting an audit of all disputed accounts of both sides, and that he should send a report to the court (Distinction between an arbitrator and expert; and an arbitrator and a commissioner has been examined and discussed below). The letter also mentions that on receiving your remuneration report, payment would be made to you in the court. Secondly, the courts jurisdiction to finally decide was not questioned or annihilated. In fact, the court always remained in the picture, exercised parley as an adjudicator having dominion over the subject matter of the suit.It is, therefore, necessary for us examine the contents of the order. The first portion of the order records that the plaintiff has made an application for settlement of accounts and that the accounts can be examined only by a well-educated Chartered Accountant. A copy of the application had been handed over to the counsel for the defendant who had no objection to being appointed as Panch in this case. This statement is somewhat vague, but we do not read the statement as an indication or affirmation that the defendant had agreed to the appointment of an arbitrator as an alternative and substitute to court adjudication. If it was so, this should have been clearly stated to enable the parties to respond and make statement. At best it was restricted to the appointment of an expert/commissioner who would examine the accounts and submit his report.21. The second portion of the order dated 23rd December 1994 states that in the application name of Sushil Kumar, Chartered Account, as panch has been proposed to which no party had any objection. Thereafter, the order records the direction of the court that the fee of the arbitrator shall be as prescribed in the schedule of the Arbitration Council of India and if the arbitrator demands a fee the same should be equally shared by both the parties. The last portion does not incorporate and does not refer to any agreement or even concession given by the defendant agreeing to arbitration as an alternative to court adjudication and decision. The court had not disposed of the suit by referring the subject matter or a part of the subject matter of the suit to arbitration. In our opinion the said order is for issuing a commission as the court had accepted an application filed by the plaintiff for verification of the accounts. The commissioner was to act as an expert or facilitator for the court and submit a report to the court to help the court adjudicate and finally decide the suit.23. This Court in Kerala State Electricity Board and Another v. Kurien E. Kalathil and Another (2018) 4 SCC 793,  had examined the question of reference to arbitration in a case where there was no arbitration agreement between the parties. The question that fell for consideration was whether the High Court was right to refer the parties to arbitration on oral consent given by the counsel without the written consent of the party whom he represents. In this context, reference was made to Section 89 of the Code and the decision of this Court in Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. (P) Ltd. (2010) 8 SCC 24,  which is to the following effect:33. Even if there was no pre-existing arbitration agreement, the parties to the suit can agree for arbitration when the choice of ADR processes is offered to them by the court under Section 89 of the Code. Such agreement can be by means of a joint memo or joint application or a joint affidavit before the court, or by record of the agreement by the court in the order-sheet signed by the parties. Once there is such an agreement in writing signed by parties, the matter can be referred to arbitration under Section 89 of the Code; and on such reference, the provisions of the AC Act will apply to the arbitration, and as noticed in Salem Bar (I), the case will go outside the stream of the court permanently and will not come back to the court.25. On the question whether a counsel can give consent for arbitration on behalf of the parties, Kerala State Electricity Board (supra) referred to the decision in Byram Pestonji Gariwala v. Union Bank of India, (1992) 1 SCC 31  which has settled the law that a counsel should not act on implied authority unless there is an exigency of circumstances demanding immediate adjustment of the suit by agreement or compromise and the signature of the party cannot be obtained without delay. Reference was made to paragraph 37 in Gariwala case (supra), which reads as under:37. We may, however, hasten to add that it will be prudent for counsel not to act on implied authority except when warranted by the exigency of circumstances demanding immediate adjustment of suit by agreement or compromise and the signature of the party cannot be obtained without undue delay. In these days of easier and quicker communication, such contingency may seldom arise. A wise and careful counsel will no doubt arm himself in advance with the necessary authority expressed in writing to meet all such contingencies in order that neither his authority nor integrity is ever doubted. This essential precaution willsafeguard the personal reputation of counsel as well as uphold the prestige and dignity of the legal profession.26. The Kerala State Electricity Board (supra) decision rightly records that referring the parties to arbitration has serious civil consequences, substantial and procedural. Once an award is passed, it can be only challenged on limited grounds. When there was no arbitration agreement between the parties, without joint application the High Court ought not to have referred the matter to arbitration. This Court in Bihar State Mineral Development Corpn. v. Encon Builders (I) (P) Ltd. (2003) 7 SCC 418  emphasised that the arbitration agreement must contain a broad consensus between the parties that the disputes and differences should be referred to a private tribunal. Further, such a tribunal must be an impartial one.27. In ITC Ltd. v. George Joseph Fernadez and Another, (1989) 2 SCC 1  this Court had interpreted Section 20 (20. Agreement void where both parties ..... deemed a mistake as to a matter of fact.) of the Contract Act, which provides that where both the parties to an agreement are under a mistake as to a matter of fact essential and integral to the agreement, the agreement is void. However, this does not apply if the mistake relates to an erroneous opinion as to the valuation of the thing that forms the subject matter of the agreement. A mistake as to the quality of an article or attributes on the other hand is a debatable question as it may not always lead to the conclusion that the contract is void. Further, this provision relating to the voidness of the contract does not apply to cases of a common mistake of fact, as distinguished from a mutual mistake made or entertained by each of the persons towards or with regard to each other. Where a party is mistaken as to the others intention, though neither realises that the respective promises have been misunderstood, there is a mutual mistake. The ascertainment of whether or not there was a mutual mistake is to be ascertained by applying what reasonable third parties would infer from their words or conduct. The mistake or error must be such that it either appears on the face of the contract that the matter as to which the mistake existed was an essential and integral element of the subject matter of the contract or was an inevitable inference from the nature of the contract that all parties so regarded it. A contract is void at law only if some term can be implied in both offer and acceptance, which prevents the contract from coming into force. These principles are relevant when the dispute arises as to the existence of a pre-existing arbitration agreement. Albeit in the case of Section 21, the requirement is even stricter – the parties interested agree…in writing before the court, which is an inflexible mandate which requires that the parties must agree, or affirm an agreement before the court to refer the subject matter as agreed to arbitration.28. This Court in K.K. Modi v. K.N. Modi and Others, (1998) 3 SCC 573  after referring to Mustill and Boyd in their book on Commercial Arbitration, pointed out that there is an immense variety of tribunals differing fundamentally as regards their composition, their functions and sources from which their powers are derived. Tribunals, including those which derive their jurisdiction from the consent of the parties, apart from the arbitration tribunal, may be persons who are not properly called tribunals, but by mutual consent entrusted with the power to affect the legal rights of two parties inter se in a manner creating legally enforceable rights to do so by a procedure of a ministerial but not judicial in nature, such as persons appointed by contract to value property or certify compliance of building works with the specification. Other examples given are of conciliation tribunals of local religious bodies or privately appointed persons to act as mediators. Such consent terms lack some of the attributes necessary for an arbitration agreement. The judgment enlists some of the attributes which must be present in an agreement to be considered as an arbitration agreement as:17... (1) The arbitration agreement must contemplate that the decision of the tribunal will be binding on the parties to the agreement,(2) that the jurisdiction of the tribunal to decide the rights of parties must derive either from the consent of the parties or from an order of the court or from a statute, the terms of which make it clear that the process is to be an arbitration,(3) the agreement must contemplate that substantive rights of parties will be determined by the agreed tribunal,(4) that the tribunal will determine the rights of the parties in an impartial and judicial manner with the tribunal owing an equal obligation of fairness towards both sides,(5) that the agreement of the parties to refer their disputes to the decision of the tribunal must be intended to be enforceable in law and lastly,(6) the agreement must contemplate that the tribunal will make a decision upon a dispute which is already formulated at the time when a reference is made to the tribunal.31. With regard to the significance and effect of the report submitted by an expert, this Court in Dayal Singh and Others v. State of Uttaranchal (2012) 8 SCC 263  states that the purpose of an expert opinion is primarily to assist the court in arriving at a final conclusion. Such report is not binding upon the court. The court is expected to analyse the report, read it in conjunction with the other evidence on record and then form its final opinion as to whether such report is worthy of reliance or not. An expert report, duly proved, has its evidentiary value but such appreciation has to be within the limitations prescribed and with careful examination by the court. Simply put, an expert deposes and does not decide Murari Lal v. State of M.P. (1980) 1 SCC 704,  his duty is to furnish the court with necessary scientific/technical criteria so as to enable the judge to form his own independent judgment by the application of these criteria to the facts proved in evidence (Vide Lord President Cooper in Davis v. Edinburgh Magistrate, 1953 SC 34 quoted by Professor Cross in his Evidence).35. The matter referred to S.K. Mantri was limited to examination of the accounts. The issues and questions of dispute in the suit were far broader and wider. These included questions as to the agreed price or the rate of transportation in view of the letter dated 05th June 1992, which was withdrawn by letter dated 30th September 1992, computation of the transportation costs payable to the plaintiff under the contract in case the coal delivered was within or beyond the 1% stipulation, whether or not the defendants were right in making deductions on account of bad quality coal, higher moisture content etc. whereby the weight of the coal had increased, delay in delivery on the part of the plaintiff, whether the defendants are entitled to charge interest while making recoveries, etc. It is interesting to note that the S.K. Mantri himself did not decide whether or not the plaintiff is entitled to rent of the plot or security charges observing that this was an aspect for the court to decide. However, he forgot that his jurisdiction was limited to checking and verifying accounts and not deciding any issue or questions beyond the accounts on issues and questions referred to above.