Case: Ramvallabh Tibrewalla Vs. Dwarkadas &amp; Co

words "instead of proceeding under Chapter II" in S. 20 suggest that the parties may proceed under Chap. III where they could proceed under Chap. II. Reading Chap. II with S. 2(a), it is plain that an arbitration agreement entered into while no suit with respect to its subject-matter is pending may be enforced under Chap II. Since such an agreement is enforceable under Chap. II, prima facie it is also enforceable under Chap. III. 10. The opening words of S. 20 contemplate that a suit with respect to the subject-matter of the arbitration agreement may or may not be filed. In order to attract S. 20, it is not, therefore, necessary that the arbitration agreement should be followed by a suit with respect to its subject-matter. The word "before is not used in the strict grammatical sense of priority in order of time. In the light of the other parts of S. 20, its heading and the general scheme of the Act, we think that the legislature used the words "before the institution of any suit" in the sense of "while no suit is pending" and not in the sense of "where no suit has been instituted. The former meaning is more in harmony with the real intention of the legislature. If the agreement is entered into while no suit with respect to its subject-matter is pending, the fact that its subject-matter was the subject-matter of a previously instituted suit would not preclude its enforcement under Chaps. II and III. We think, therefore, that the words "before the institution of any suit with respect to the subject-matter of the agreement or any part of it" mean "while no suit with respect to the subject-matter of the agreement or any part of it is pending". These words qualify the preceding words "an arbitration agreement" and not the succeeding words "may apply". In other words S. 20 is attracted to an arbitration agreement entered into while no suit with respect to its subject-matter is pending. If it is entered into while such a suit is pending, it cannot be enforced by an application under S. 20, though the application is made when the suit is no longer pending. 11. Learned counsel for the parties cited before us the following cases decided under paragraph 17 of Sch. II of the Code of 1908, viz., Kokil Singh v. Ramasray Prasad Chaoudhary, ILR 3 pat 443: (AIR 1924 Pat 488 ), Lal Chand v. Sri Ram, AIR 1930 Lah 1066, Hira ram v. Ram Ditta, AIR 1935 Lah 59, and Dinkarrai Lakshmiprasad v. Yeshwantrial Hariprasad, ILR 54 Bom 197: (AIR 1930 Bom 98 , It is to be noticed that the heading of Chap. III "Arbitration with intervention of a Court where there is no suit pending" and the words in S. 20 "before the institution of any suit with respect to the subject-matter of the agreement or any part of it" and "instead of proceeding under Chapter II" do not find any counterpart in the corresponding provision of Sch. II of the Code of Civil Procedure, 1908. In the circumstances, we think that the cases decided under paragraph 17 of Sch. II of the Code of 1908 are not decisive on the question of construction of S. 20 of the present Act, and that section must be construed in the light of its own language and the scheme of the present Act. 12. Now, the question is whether the agreement dated February 18, 1954 is an agreement, to which S. 20 is attracted. The relevant operative portion of the agreement reads:"All matters in disputes in suit No. 1712 of 1949 (Ramvallabh Tibrewalla v. Messers. Dwarkadas and Co.) in Bombay High Court including the question of whether the accounts were made up and adjusted and/or settled between the parties as pleaded in the written statement of the Defendants and the costs of the suit be referred to the sole arbitration of Ramrikhdas Parasrampuria...... . The intention of the parties is that the said matters in dispute between them be decided by arbitration and it is agreed that the said suit will therefore be withdrawn." The agreement was signed on February 18, 1954, while the suit was pending. Before us, it is admitted by counsel for both parties that the suit was withdrawn on or about the same date. The parties obviously intended that the pending suit would be withdrawn immediately so that the disputes might be resolved by arbitration without recourse to litigation. On a proper interpretation of the agreement, the withdrawal of the suit was the essential condition, upon the fulfilment of which the agreement would become operative. Thus, the effective arbitration agreement came into existence when the suit was withdrawn and may property be said to have been entered into while no suit with respect to its subject-matter was pending. The agreement can therefore, be filed under S. 20. 13. The ground upon which the Courts below dismissed the application for filing the arbitration agreement under S. 20 cannot, therefore, be upheld. A technical objection as to the frame of the application based on Rule 391 of the High Court Rules is no longer pressed. But the respondent also contends that (1) the appellant elected to proceed with the arbitration under Chap. II, and having so elected, he cannot now claim arbitration under Chap. III; (2) the application is barred by limitation, and the prayer for exclusion of time under S. 37 ought not to be allowed; and (3) the parties intended that the arbitration would be by Ramrikhdas Parasrampuria only, and as he is not willing to act and/or has been removed, there can be no further arbitration. The Courts below have not considered these contentions of the respondent. Having heard learned counsel on both sides, we think that the respondent is entitled to ask for the final disposal of the application after consideration of these points by the lower appellate Court, and for that purpose, this case should be remanded.

Court's decision (1 = petition accepted / positive for appellant, 0 = rejected / negative): 1

Reasoning from the judgment:
1[ds]13. The ground upon which the Courts below dismissed the application for filing the arbitration agreement under S. 20 cannot, therefore, be upheld. A technical objection as to the frame of the application based on Rule 391 of the High Court Rules is no longer pressed. But the respondent also contends that (1) the appellant elected to proceed with the arbitration under Chap. II, and having so elected, he cannot now claim arbitration under Chap. III; (2) the application is barred by limitation, and the prayer for exclusion of time under S. 37 ought not to be allowed; and (3) the parties intended that the arbitration would be by Ramrikhdas Parasrampuria only, and as he is not willing to act and/or has been removed, there can be no further arbitration. The Courts below have not considered these contentions of the respondent. Having heard learned counsel on both sides, we think that the respondent is entitled to ask for the final disposal of the application after consideration of these points by the lower appellate Court, and for that purpose, this case should be remanded.