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

1. These five appeals arise from a partition suit (O. S. No. 91 of 1941) filed by the respondent Subramaniam Chettiar against his brother Ct. A. Ct. Nachiyappa Chettiar and his four sons, appellants 1 to 5 respectively. in the court of the Subordinate Judge of Devakottai, and they have been brought to this Court with a certificate granted by the High Court of Madras under Art. 133 of the Constitution. The principal appeal in this group is Civil Appeal No. 112 of 1955 and the questions which it raises for our decision relate to the validity of the award made by the arbitrators to whom the matters in dispute between the parties were referred pending the present litigation. It would, however, be convenient at the outset to state broadly the material facts leading to the suit and indicate the genesis and nature of the five respective appeals.2. The appellants and the respondent belong to the Nattukottai Chettiar community and their family which is affluent had extensive money-lending business in Burma. Chidambaram Chettiar, the father of appellant 1 and the respondent, died on August 20, 1926. At the time to his death the respondent was an infant 6 years of age. Appellant 1 had already been associated with his father in the management of the business and on his fathers death he became the manager of the family and took charge of its affairs and business. On September 6, 1941, the respondent gave notice to appellant 1 calling upon him to effect a partition and to render accounts of his management and the properties of the family. This demand was not complied with and so the respondent instituted the present suit on September 24, 1941.3. According to the plaint the assets of the family consisted of immoveable properties in India which was then described as British India and in Pudukottai, an Indian State. These consisted of Items Nos. 1 to 12 and Item No. 13 respectively in Sch. A. The jewels and moveables belonging to the family were set out in Sch. B. whereas two money-lending firms which the family owned and conducted at Minhla and Sitkwin in Burma were set out in Schs. D and E respectively. The plaint further alleged that Chidambaram Chettiar had entered large amounts belonging to the family in the names of the members of the family in what are called. Thanathu maral accounts and these amounts were invested in various firms or lent to several individuals. The total of these investments came to about Rs. 15,00,000 described in Sch. C. The assets thus described in Schs. C, D and E included immovable properties in Burma and the respondent claimed a half-share in all of them. It appears that the family had endowed several properties in favour of charities and they were described in favour of charities and they were described in Sch. F. The respondent claimed that in effecting partition between the parties a scheme should be framed for the management of the said respective charities. According to the respondent appellant 1 had in the course of his management manipulated accounts and had in fact misappropriated large amounts, and so he claimed an account fromThat in brief is the nature of the claim made by the respondent in his plaint.4. At the date of the suit appellants 3 to 5 were minors and they were represented byIt appears that a witten statement was filed by appellant 1 for himself and as guardian of his minor sons in which the relationship of the respondent and his half-share to the family properties were admitted. Several contentions were, however, raised with reference to the properties available for partition. It was alleged that Items Nos. 10 and 11 in Sch. A were dedicated to charity and as such not divisible and that Item No. 3 was being used as a school. The written statement referred to some more properties which had not been included in the plaint though they were liable to partition. In regard to the jewels and moveables it was contended that several items not belonging to the family, and some not even in existence, had been shown in the said schedule. It was also alleged that some of the jewels shown in the said schedule belonged to the several appellants as their separate property. Then as regards the Thanathu maral accounts the appellants gave a detailed history of the amounts and their investments. It was admitted that the said amounts belonged to the family though the investments had been made in the names of the different members of the family. It was, however, urged that the total value of the assets enumerated in Sch .C would be only Rs. 9,00,000 and not Rs. 15,00,000 as alleged by the respondent. The respondents case that appellant I had manipulated accounts and misappropriated family funds was denied, and it was urged that for the purpose of partition the assets of the family as they stood on the date of the partition should be taken into account. The appellants also pleaded that the court had no jurisdiction to divide the immoveable properties situated in Burma. According to them there was a special practice obtaining among the families of the Nattukottai Chettiar community according to which appellant 1 was entitled to a decent remuneration for the management of the joint family business and properties. According to another custom pleaded by the appellants it was alleged that provision had to be made for future Seermurais for the unmarried daughters of the family. Broadly stated these were the pleas raised by appellants 1 and 3 to 5. Appellant 2 who was a major filed a separate written statement generally adopting the written statement filed by appellant 1; nevertheless he put the respondent to the strict proof of the allegations made by him in the plaint in support of his claim.5. In reply to the contentions thus raised by the appellants the respondent filed a reply. In this statement he pleaded inter alia that there was a custom amongst the community for a member of the joint family to set up a separate family after marriage and that monies drawn by him thereafter would be entered in a separate account called Pathuvazhi and that at the time of the partition the amounts appearing in the said account would be debited to the said member. The respondent claimed that account should be made in accordance with this custom in effecting the partition of the family. On these pleadings the learned trial judge framed fifteen issues.6. It appears that an attempt was made by the parties to have their disputes referred to arbitration, and in fact a reference was made on April 6, 1943, but this attempt proved abortive and the suit was set down for hearing before the court, and the hearing actually commenced on December 11, 1943. Meanwhile, on December 6, 1943, appellant 2 filed an application under O. 8, R. 9 of the Code of Civil Procedure for permission to file an additional written statement. This application was numbered as I. A No. 988 of 1943. It would be relevant to refer to the plea which appellant 2 sought to raise by this application. He alleged that the deceased Chidambaram Chettiar had set apart on March 25, 1925, two sums of money of Rs. 2,10,251-4-0 each separately in the name of the respondent and appellant 1 so as to vest the same in them forthwith, and he urged that these amounts and their accretions were not the properties of the family liable to partition in the suit. This application was opposed by the respondent. On December 14, 1943, the trial judge dismissed the said application on the ground that it sought to raise a new and inconsistent plea and that had been really inspired by appellant 1.7. Against this decision three appeals were preferred before the High Court of Madras. A. S. No. 115 of 1944 was filed by appellant 2 and No. 199 of 1944 by appellants 1, 3 to 5, whereas A. S. No. 499 of 1944 was filed by the respondent. It appears that under his appeal No. 115 of 1944 appellant 2 made an application for stay of further proceedings before the Commissioner (C. M. P. No. 1402 of 1944). On this petition the High Court ordered that there was no need to stay all proceedings before the Commissioner and that it would be enough if the passing of the final decree alone was stayed. As a result of this order interim stay which had been granted ex parte was vacated. After the final order on this application was passed the Commissioner commenced his enquiry, but before the enquiry could make any progress the parties decided to refer their disputes for arbitration.8. Accordingly on July 18, 1944, a joint application was filed by the parties before the trial judge requesting him to refer to the arbitration of Mr. VE. RM. AR. Ramamathan Chettiar of Kandanoor and RM. AN. S. RM. Chellappa Chettiar of Kothamangalam "all matters in dispute in the suit and all matters and proceedings connected therewith". An application under O. 32 R. 7 was also filed since three of the parties to the dispute were minors. On July 21, 1944, the trial court allowed the said application and certified that the proposed reference was for the benefit of the minors and so referred "the matters in dispute in the suit and all matters and proceedings connected therewith" for determination by the two arbitrators named by the parties.9. The arbitrators then began their proceedings and made an interim award on August 1,It was followed by their final award on December 6,This award was filed in the trial court.10. On January 3, 1945, the appellants filed a petition (I. A. No. 18 of 1945) under Ss. 30 and 31 of the Indian Arbitration Act (hereinafter called the Act). By this petition the appellants urged that the award should be set aside on the grounds enumerated by them in the petition. Their case was that the reference to arbitration had been brought about by coercion and undue influence, that the arbitrators had not held any proper enquiry and that they were partial and biased. Thus the award was sought to be set aside on the ground that the reference was bad and that the arbitrators were guilty of misconduct. The validity of the award was also challenged on the ground that both the reference and the award were invalid because they contravened the principle of private international law that courts in one country would have no jurisdiction to adjudicate on title to immoveable property situated in a foreign country or to direct its division; the reference and the award dealt with immovable properties in Burma and so they were invalid. The appellants further contended that the reference to arbitration was opposed to the orders passed by the High Court in C.M.P. No. 1402 of 1944, and as such it was invalid.This application was resisted by the respondent. He traversed all the allegations made by the appellants and claimed that a decree in terms of the award should be passed. At the hearing of this petition no oral evidence was led by the parties; they were content to base their case on the documents produced on the record and on points of law raised by them.12. The trial judge rejected the appellants case about the alleged misconduct of the arbitrators. He also found that there was no substance in the contention that the reference was the result of undue influence or coercion. He was satisfied that the arbitrators had made a proper enquiry and that the award was not open to any objection on the merits. He, however, held that the reference to the arbitrators which included matters in dispute in the suit comprised questions of title in relation to immoveable properties in Burma, and so it was without jurisdiction and invalid. In his opinion the reference also included the dispute relating to the sums of Rs. 2,10,251-4-0 which had been entered in the Thanathu maral accounts of appellant 1 and the respondent and that this part of the reference contravened the order passed by the High Court in C.M.P. No. 1402 ofHe thus upheld these two contentions raised by the appellants and set aside the reference and the award. It was against this order that the respondent preferred C.M.A. No. 210 of 1946.13. The High Court has allowed the respondents appeal. It has confirmed the findings of the trial court in respect of the pleas raised by the appellants as to the misconduct of the arbitrators and as to the invalidity of the reference on the ground that it was the result of coercion and undue influence. It has, however, reversed the conclusions of the trial court that the reference and the award were invalid inasmuch as they related to immovable properties in Burma and contravened the stay order passed by the High Court. The High Court has construed the order by which reference was made to the arbitrators in the present proceedings as well as the award and has held that they are not open to be challenged on either of the two grounds urged by the appellants. It was also urged before the High Court that the order of reference was invalid because under S. 21 of the Act the trial court was not competent to make the reference : this contention has been negatived by the High Court. In the result the High Court has found that the reference and the award were valid and it has directed that a decree should be passed in terms of the award. It is against this decision that Civil Appeal No. 112 of 1955 arises; and, as we have already mentioned the questions which it raises relate to the validity of the award on which the two courts have differed. Before we deal with the merits of these points, however, we may indicate how the other appeals arise.14. In A. S. No. 115 of 1944 filed by appellant 2 before the High Court the appellant presented Miscellaneous Application C.M.P. No. 2374 of 1946 under O. 23, R. 3 for an order that the interim award (Ex. P. 15) passed by the arbitrators which had been signed by all the parties in token of their consent should be treated as a compromise and a decree passed in accordance with it under O. 23, R. 4. The High Court has observed that in view of its decision in C.M.A. No. 210 of 1946 it was really unnecessary to pass any order in this appeal; but it thought that since the matter was likely to go in appeal to this Court it would be better to make a formal order and direct that a decree in terms of the interim award should be drawn under O. 23, R. 3. Against this decision the appellants have preferred Civil Appeal No. 116 of 1955 in this Court.

Court's reasoning:
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.