R. Mc
Dill and Company Pvt. Ltd. Vs. Gouri Shankar Sarda & Ors [1991] INSC 73 (13 March 1991)
Kasliwal, N.M. (J) Kasliwal, N.M. (J) Ramaswamy, K.
CITATION:
1991 SCR (1) 809 1991 SCC (2) 548 JT 1991 (1) 645 1991 SCALE (1)431
ACT:
Arbitration
Act, 1940: ss. 34, 41--Application for stay in a suit--Provisions of Code of
Civil Procedure--Whether applicable.
Code
of Civil Procedure, 1908: Order XXIII--Suit pending before High Court--Joint
application by two defendants under s. 34 of Arbitration Act--Permission to
withdraw with liberty to make a fresh application--Two separate stay
applications moved--Maintainability of.
HEAD NOTE:
In a
suit filed by plaintiff-respondent no.1 before the High Court
defendant-appellants filed a joint application under s. 34 of the Arbitration
Act for staying proceedings of the suit and referring the matter to
arbitration. In view of some formal defects in the said application, the High
Court on 25.2.1966 without mentioning the defects ordered.
"Application
withdrawn with liberty to make a fresh application". on 21.3.1966 the
appellants submitted two separate applications for staying the suit in so far
as it related to them or in the alternative for stay of the entire suit. The
plaintiff-respondent resisted the applications as not being in terms of the
order dated 25.2.1966. Upholding the objection, Learned Single Judge refused to
stay the suit.
On
appeal, the Division bench of the High Court held that the liberty was granted
to 'make a fresh application' and as such, under the provisions or Order XXIII,
C.P.C., the appellants had no right to move two separate applications to stay
the suit.
In
appeal by special leave to this Court it was contended that provisions or Order
XXIII, C.P.C. were not applicable to applications filed under s. 34 of the
Arbitration Act; and that the High Court committed an error in taking a
technical view that as liberty was given to withdraw the application in order
to make a fresh application, the appellants were not entitled to make separate
stay applications. Respondent no. 1 supported the impugned judgment.
Allowing
the appeals, this Court, 810
HELD:
1. In view of s. 41 of the Arbitration Act, 1940, subject to provisions of the
Act, Code of Civil Procedure, 1908 apply to all proceedings before the Court
No. provision in the Arbitration Act takes away the provisions of Order XIII,
C.P.C. from being applied to applications filed under s. 34 of the Arbitration
Act in a suit. [814F, 816B] Hakam Singh v. M/S Gammon (India) Ltd, [1971] 3 SCR 314 relied on.
Nawab Usman
Ali Khan v. Sagarmal, [1965] 3 SCR 201, held inapplicable.
Munshi
Ram v. Banwari Lal [1962] Supp; (2) SCR 477; Hansraj Gupta v. Officlal
Liquidator Dehradun-Musoorie Electric Tramway Co, [1932] L.R. 60 I.A. 13; Union
of India v. Mohinder Singh & Co., AIR 1971 JK 10; Union of India v. Rup Kishore,
[1957] All. 504; Executive Engineer v. Thingom Iboyaima Singh, AIR 1970 Bom. 250;
Ram bharosey v. Peary Lal, AIR 1957 All. 265; Shrinath Bros. v. Century
Spinning & Wvg. Co. AIR 1968 Bom 443; India Minerals Co. v. Northern India
Lime Making Association, AIR 1958 All. 69; Ganeshmal v. Keshoram Cotton Mills,
AIR 1952 Cal. 10; Governor-General in Council v. Associated Live Stock Farm
(India) Ltd., AIr 948 Cal. 230; Soorajmull Nagarmull v. Sagar Mal, AIR 1978
Cal. 239; Ramchand v. Governor General in Council, AIR 9147 Sind. 147 and Scotish
Union of National Insurance Co. v. Saraswati Sajnani, Air 1960 Cal. 22,
referred to.
2. In
the instant case, apart from s. 41 of the Arbitration Act providing for application
of Code of Civil Procedure and there being no provision taking away provisions
of order XXIII, C.P.C. from being applied to the applications for stay filed
under s. 34 of the Arbitration Act, the proceeding started on a plaint filed by
the plaintiff and in such a suit if any application was filed under the
Arbitration Act, the same ought to be governed by the provisions of the Code of
Civil Procedure. [816A-c]
3.1
The High Court was not right in dismissing the applications on the ground that
two applications were not maintainable as the same were not covered within its
order dated 25.2.1966. [820E-F]
3.2
The term 'a fresh application' in the order dated 25.2.1966 used in singular
had no more significance than the fact that as both the 811 appellants had
submitted one joint application, liberty was given to make a fresh application,
The main purpose of moving the applications under s. 34 of the Arbitration Act
was to stay the suit proceeding. The intention and purpose of moving two such
separate applications was also the same.
The
explanation given by the appellants was that they were given a legal advice to
move two separate applications as there were two different agreements between
appellants no. 1 and 2 and the respondent no. 1 There being no element of mala
fide in the two applications having been submitted within 30 days of the order
dated 25.2.1966, the same were maintainable . [820A-c]
CIVIL
APPELLATE JURISDICTION: Civil Appeal Nos. 2012- 2013 of 1974.
From
the Judgement and Order dated 2.2.1973 of the Calcutta High Court in Appeal No.
211 of 1966.
B. Sen,
Mrs. Geetanjali Mohan and Bishan Lal for the Appellant.
Dr. Shanker
Ghosh, Darshan Singh, Praveen Kumar, I.B.
Gaur
and Ms. Shaifali Khanna (NP) for the Respondents.
The Judgement
of the Court was delivered by KASLIWAL, J. These appeals by special leave are
directed against the order of the Calcutta High Court dated February 2, 1973. Brief facts necessary for the
determination of these appeals are that Shri Gouri Sankar Sarda (hereinafter
referred to as Respondent No. 1) filed a Suit No. 1783 of 1965 in the Calcutta
High Court against R. McDill and Company Pvt. Ltd. (in short Appellant No. 1), Mirilal
Dharamchand (Pvt.) Ltd. (in short Appellant No.2 ) and Shri Misrilal Jain for
the recovery of some amounts as well as for some other reliefs. On or about
15th December, 1965 both the appellant Nos. 1 and 2 who were also defendants in
the suit submitted a joint application in the High Court for staying
proceedings of the aforesaid suit, under Section 34 of the Arbitration Act,
1940 (hereinafter referred to as 'the Act'). In view of some formal defect in
the application the High Court by order dated 25th February 1966 gave permission to withdraw the said application with
liberty to file a fresh application. As the entire case hinges on the above
order dated 25th Feb.
1966, relevant portion
of the said order is reproduced as under:
812
:Application withdrawn with liberty to make a fresh application. Cost to be
paid by the applicant." Though the above order does not make a mention of
the formal defect, but according to the appellants the permission to withdraw
was sought as no copy of the plaint was annexed with such application.
Thereafter, on March
21, 1966 the appellant
Nos. 1 and 2 instead of making a joint application submitted two separate
applications for staying the suit against the respective appellants and in the
alternative for stay of the suit as a whole. These applications were resisted
by the plaintiff-respondent No. 1 on the ground that separate applications were
not in terms of the order dated 25.2.1966 and hence no stay should be granted.
Learned Single judge upheld the objection raised by the plaintiff and refused
to stay the suit. On appeal the Division bench of the Calcutta High Court by
order dated 2nd
February, 1973
dismissed the appeal. The Division Bench took the view that liberty was granted
to make a fresh application and as such under the provision of Order XXIII of
the Code of Civil Procedure, the appellants had no right to move two separate
applications for staying the suit.
Aggrieved
against the aforesaid Order of the High Court dated 2nd February, 1973 the appellants have filed these appeals by the grant of
special leave. order XXIII C.P.C. as it existed at the relevant time is
reproduced as under:
ORDER
XIII: WITHDRAWAL AND ADJUSTMENT OF SUITS
1.
Withdrawal of suit or abandonment of part of claim:
(1) At
any time after the institution of a suit, the plaintiff may as against all or
any of the defendants abandon his suit or abandon a part of his claim.
(2)
Where the Court is satisfied- (a) That a suit must fail by reason for some
formal defect or (b) That there are other sufficient grounds for allowing the
plaintiff to institute a fresh suit for the subject matter of a suit or part of
claim.
813 It
may, on such terms as it thinks fit, grant the plaintiff permission to withdraw
from such suit or abandon such part of a claim with liberty to institute a
fresh suit in respect of the subject matter of such suit or such part of claim.
(3)
Where the plaintiff withdraws from a suit, or abandon part of a claim, without
the permission referred to in sub-rule he shall be liable for such costs as the
Court may award and shall be precluded from instituting any fresh suit in
respect of such subject matter or such part of the claim.
(4)
Nothing in this rule shall be deemed to authorise the Court to permit one of
several plaintiffs to withdraw the consent of the others".
It was
contended on behalf of the appellants that the provisions or Order XXIII were
not applicable in the matter of applications filed under Section 34 of the
Arbitration Act. It was contended that the provisions of Order XXIII could only
apply to the proceedings of a suit and not in respect of any applications filed
under the Act. It was submitted that the High Court committed an error in
taking a highly technical view of the matter that initially a joint application
was submitted for stating the suit and liberty was given to withdraw the same
and to make a fresh application and as such the appellants were not entitled to
submit two separate applications though for the same purpose. It was contended
in this regard that there were two separate agreements between the plaintiffs
and appellants Nos. 1 or 2 containing an arbitration clause and as such the
appellants were given a legal advice to submit two separate applications for
staying the suit and the High Court should not have dismissed the applications
on the ground that liberty to file fresh application was given in respect of
one application only. Learned counsel for the appellants in support of this
contention placed reliance on Nawab Usmanli Khan v. Sagarmal, [1965] 93) SCR
201.
On the
other hand it was argued on behalf of the respondent No. 1 that provisions or
Order XXIII C.P.C. were applicable in respect of an application under the Act.
It was contended that basically the proceeding had arisen on account of a suit
filed by the plaintiff-respondent and in that suit an application was submitted
for staying the suit and referring the matter to Arbitrator under Section 34 of
the Act. The Order as such passed by the High Court on 25th February, 1966
would be governed by the provisions of order XXIII of the Code of Civil 814
Procedure and fresh application could only lie in accordance with the terms and
conditions imposed at the time of permitting the withdrawal of the first
application. It was contended that it was an admitted position that a joint
application was filed for staying the suit and the permission was granted to
withdraw the same with liberty to make a fresh application and the
defendants-appellants had no right to submit two separate applications in
violation of the order of the Court dated 25th February, 1966. Reliance in support of the above
contention was placed on Munshi Ram v. Banwari Lal, [1962] Supp. (2) SCR 477
and Hakam Singh v. M/s Gammon (India) Ltd., [1971] 3 SCR 314.
We
would first deal with the question whether the provisions of Order XXIII C.P.C.
apply or not to an application for stay of suit filed under Section 34 of the
Act. Section 41 of the Act reads as under:
41
Procedure and powers of Court.
"Subject
to the provisions of this Act and of rules made there under- (a) The provisions
of the Code of Civil Procedure, 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 proceeding 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".
According
to the above provision the provisions of the Code of Civil Procedure, 1908
shall apply to all proceedings before the Court subject course to the provisions
of The Arbitration Act and of any rules made thereunder. it has been laid down
in various decisions from time to time that the following provisions of the
Code of Civil Procedure shall apply to proceedings under the Act. In the 'Law
of Arbitration' by R.S. Bachawat (2nd 1987 Ed., 585) under the Heading
'Applicability of Code of Civil Procedure to court proceeding' it has been
mentioned as under:
815
Subject to the provisions of the Act and the Rules made thereunder the
provisions of the code of civil procedure aplply to all proceddings before the
Court and to all appeals under the Act, Section 41(a).
The
following provisions of the Code of Civil Procedure have been held to apply to
certain proceedings under the Act:
(1)
Section 20 Hakam Singh v. Gammon (India) ltd., AIR 1971 SC 740: (1971) 1 SCC
286.
(2)
Section 96(3) Union of India v. Mohinder Singh & Co., AIR 1971 JK 10.
(3)
Section 24 Union of India v. Rup Kishore, AIR 1957 All 504.
(4)
Section 114 read with Order 47 Executive Engineer v. Thingom Iboyaima Singh,
AIR 1970 Manipur 76.
(5)
Order 1 Rule 8 Abdul Gani v. Reception Committee, AIR 1936 Bom. 250: ILR 60 Bom.
645: 39 Bom. LR 380.
(6)
Order 3 Rule 5 Ram Bharosey v. Peary Lal, AIR 1957 All 265.
(7)
Order 5 Shrinath Bros. v. Century Spinning & Wvg. Co., AIr 1968 Bom. 443.
(8)
Order 6 Rule 17 Indian Minerals Co. v. Northern India Uime Marketing
Association, AIR 1958 All 69.
(9)
Order 9 Rule 13 Ganeshmal v. Keshoram Cotton Mills, AIR 1952 Cal 10: ILR (1951)
Cal. 196.
(10)
Order 23 Rule, 3 Munshi Ram v. Banwari Lal, AIR 1962 SC 903.
(11)
Order 30 Rule 3 Governor-General in Council v. Associated Live Stock Farm (India) Ltd., AIR 1948 Cal. 230: 52 CWN 288.
(12)
Order 30 Rule 4 Soorajmull Nagarmull v. Sagar Mal, AIR 1978 Cal. 239.
A
proceeding under Section 14 Section 17 under the Act is not a suit and the
provisions of Section 86(1) C.P.C. read with Section 87 C.P.C. does not apply
to such a proceeding (Usman Ali Khan) v. (Sagar Mal,) AIR 1965 SC 1798. Nor
does the provision of Section 80 C.P.C. apply to a proceeding under Section 20
(Ramchand) v. (Governor-General in Council,) AIR 1947 sind 147. The following
provisions of the Code Civil Procedure apply to appeals under the Act:
816
(1) Section 96(3) (Union of India) v. (Mohinder Singh & Co.,) AIR 1971 JK
10; (2) Order 41 Rule 5 (Scottish Union of National Insurance Co.) v. (Saraswati
Sajnani,) AIR 1960 Cal. 22:63 CWN 800.
Apart
from the above cases Section 41 of the Act itself provides that the provisions
of the Code of Civil Procedure shall apply to all proceedings before the Court.
We do not find any provision in the Act so as to take away the provisions or
Order XXIII C.P.C. from being applied to applications filed under Section 34 of
the Act, in a suit.
That
apart the case before us has started on a plaint filed by the plaintiff and in
such a suit if any application is filed under the Act, the same ought to be
governed by the provisions of the Code of Civil Procedure.
In (Munshi
Ram) v. (Banwari Lal,) (supra) the facts were that the Arbitrator gave an
award. The award was filed in the court by the Arbitrator. The appellants made
application for setting aside the award and the respondents filed their replies
to the application. Thereafter, the parties came to terms and asked for a decree
to be passed in accordance therewith. The court passed a decree on the award
modified by the compromise. In execution, the appellant contended that the
decree was nullity as the Court had no jurisdiction to modify the award by
compromise. It was argued that after a dispute is referred to arbitration and
an award has been obtained and filed in Court, it is not open to the Court to
record the compromise under Order XXIII Rule 3 of the Code of Civil Procedure,
because an award can be set aside or modified as laid down in the Arbitration
Act, there is no provision in the Arbitration Act for recording the compromise,
the above contention was not accepted and it was held as under:
"When
an award is given, the parties cannot, under the Act challenge it except as
laid down there. The powers of the Court are indicated by the Act. They are
limited to accepting the award, if there be no objection and passing a decree
in accordance therewith, or superseding the reference or revoking or modifying
the award or remitting it for further consideration, as laid down in the Act.
But, the Act does not disable the parties from terminating their dispute in a
different way, and if they do it could not be intended by law that a dispute,
which had been successfully terminated, should again become the subject of
litigation. If the parties are dissatisfied with the award and want to
substitute it by a compromise involving matters alien to the original dispute
817 which are inseparable, the Court may supersede the submission, and leave
the parties to work out their agreement in accordance with the law outside the
Arbitration Act".
In (Nawab
Usmanali Khan) v. (Sagarmal,) (supra) on which reliance has been placed by
learned counsel for the appellant it was held that a proceeding under Section
14 read with Section 17 of the Act for the passing of a Judgement and decree on
an award does not commence with a plaint or a petition in the nature of a
plaint, and cannot be regarded as a suit and the parties to whom the notice of
the filing of the award is given under Section 14(2) cannot be regarded as
"suit in any Court otherwise competent to try the suit" within the
meaning of Section 86(1) read with section 87B, Civil Procedure Code. In the
above case the appellant was the Ruler, or the former Indian State of Jaora. The had money dealing with the respondent.
The
respondent after obtaining a decree in terms of the award started execution
proceedings against the appellant.
The
Central Government gave a certificate under Section 86(3) read with Section 87B
of the Code Civil Procedure, 1908 consenting to the execution of the decree
against the properties of the appellant. The Executing Court passed the prohibitory order under Order XXI Rule 46 of the
Code of Civil Procedure in respect of sums payable to the appellant on account
of the privy purse. On an objection raised by the appellant by order dated March 15, 1958, the Court recalled the decree and
cancelled the certificate as prayed for, on the ground that the amount
receivable by the appellant on account of his privy purse was not attachable.
The respondent preferred appeal before the High Court. The High Court allowed
the Appeal No. 33 of 1958. Usmanali Khan (appellant) filed an appeal before
this Court. This Court held as under:
"Section
86(1) read with s. 87B confers upon the Rulers of former Indian State substantive rights of immunity from suits. Section 141
makes applicable to other proceedings only those provisions of the Code which
deal with procedure and not those which deal with substantive rights.
Nor
does s. 41(a) of the Indian Arbitration Act, 1940 carry the matter any further.
By that section, the provisions of the Code of Civil Procedure, 1908 are made
applicable to all proceedings before the Court under the Act. Now, by its own language
s. 86(1) applies to suits only, and s. 141, Code of Civil procedure does not
attract the provisions of s. 86(1) to proceedings other than suits.
Accordingly, by the conjoint application of s. 41(a) of the Indian Arbitration
818 Act and ss. 86(1) and 141 of the Code of Civil Procedure, the provisions of
s. 8691) are not attracted to a proceeding under s.14 of the Indian Arbitration
Act, 1940. It follows that the Court was competent to entertain the proceedings
under s. 14 of the Indian Arbitration Act, 1940 and to pass a decree against
the appellant in those proceedings, though no consent to the institution of
those proceedings had been given by the Central Government".
The
following observations in (Hansraj Gupta) v. (Official Liquidator, Dehra Dun--Mussorrie Electric Tramway Co.)
[1932] L.R. 60 I.A. 13, 19 made by Lord Russell of Killowen were quoted.
"The
word 'suit' ordinarily means, and apart from some context must be taken to mean
a civil proceeding instituted by the presentation of a plaint".
The
following observations made by Shah, J. in (Bhagwat Singh) v. (State of
Rajasthan,) AIR 1964 SC 444 were also quoted with approval:
"The
appellant is recognised under Art. 366(22) of the Constitution as a Rule of an
Indian State, but s. 86 in terms protects a Ruler from being 'sued' and not
against the institution of any other proceeding which is not in the nature of a
suit. A proceeding which does not commence with a plaint or petition in the
nature of plaint, or where the claim is not in respect of dispute ordinarily triable
in a Civil Court, would prima facie not be regarded as falling within s. 86
Code of Civil Procedure".
The
above observation made by Lord Russell of Killowen and Shah, J. go to show that
for a suit the civil proceedings is instituted by the presentation of a plaint.
In the
aforesaid background it was held that a proceeding which does not commence with
a plaint or petition in the nature of plaint, or where the claim is not in
respect of dispute ordinarily triable in a civil court, would prima facie not
be regarded as falling with Section 86, Code of Civil procedure. In the case
before us as already mentioned above a suit by presenting a plaint was
instituted by the respondent No. 1 and thereafter it was sought to be stayed by
submitting application under s. 34 of the Act. Thus we are clearly of the view
that the above case of (Usmanali Khan) v. (Sagarmal,) (supra) is clearly
distinguishable and does not help the appellants in the case before us. It may
be noted that Bachawat, J. who delivered the Judgment in (Usmanali Khan) v. (Sagarmal,)
(supra) has himself in his 819 book on the 'law of Arbitration' under the
heading 'Applicability of Code of Civil Procedure to Court Proceeding' has
mentioned a number of decisions wherein the provisions of Code of Civil
Procedure have been held to apply to proceedings under the Act. We have already
extracted the above passage from the book of Bachawat, j.
In (Hakam
Singh) v (M/s Gammon (India) Ltd.,) (supra) it was held that
the Code of Civil Procedure in its entirety applies to proceedings under the
Arbitration Act by Virtue of Section 41 of the later Act. The jurisdiction of
the Courts under the Arbitration Act to entertain a proceeding for filing an
award is accordingly governed by the provisions of the Code of Civil Procedure
read with Explanation (II) thereto, the respondent company which had its
principal place of business at Bombay, was
liable to be sued at Bombay. Thus in the above case dispute
arose between the parties and the appellant submitted a petition to the Court
of the Subordinate Judge at Varanasi for an order under Section 20 of the
Indian Arbitration Act, 10 of 1940 that the agreement be filed and an order of
reference be made to an Arbitrator or Arbitrators appointed by the Court to
settle the dispute between the parties in respect of the construction works
done by him. In order to determine the place of suing, it was held that Section
20 of the Code of Civil Procedure would govern the case.
Thus
we do not find any force in the submission made by learned counsel for the
appellants before us that the provisions or Order XXIII of the Code of Civil
Procedure will not apply to the Order passed by the High Court on 25th
February, 1966.
We
would, now, consider the scope and effect of the order dated 25th February,
1966 considering that the said order would be governed by the provisions of
Order XXIII of the Code of Civil Procedure. Admittedly, appellant Nos. 1 and 2
were defendants in the suit filed by respondent No. 1.
A
joint application was submitted on their behalf for staying the proceedings of
the suit, under Section 34 of the Act, Though the order dated 25th February,
1966 does not make a mention of the formal defect on account of which the said
application was withdrawn, but the appellants have categorically stated that
the same was withdrawn on account of the fact that copy of the plaint was not
annexed with such application and in the absence of any counter made by the
respondent, we take that the reason for withdrawing the application was that
copy of the plaint was not annexed with such application. The said application
was allowed to be withdrawn with liberty to 820 make a fresh application. To
our mind, the term 'a fresh application' used in singular had no more
significance than the fact that as both the appellants had submitted one joint
application as such the liberty was given to make a fresh application. The main
purpose of moving the application by the appellant was to stay the proceedings
of the suit under Section 34 of the Act the intention and the purpose of moving
two separate applications is also to stay the proceedings of the suit under
Section 34 of the Act. The explanation given by the appellants for moving two
separate applications is that they were given a legal advice to move two seperate
applications as there were two different agreements between the appellant Nos.
1 and 2 and the respondent No. 1. There was no element of mala fide in doing so
and the two applications were also submitted on March 21, 1966 i.e. within 30
days of the order dated 25.2.66. Learned counsel for the respondent No. 1
submitted that there was no merit in the applications submitted by the
appellants under Section 34 of the Act and the proceedings of the suit have
already remained stayed for nearly 15 years in this Court and now there is no
justification for further staying the suit. So far as the pendency of this
appeal in this Court is concerned, no party is at fault and it would have been
proper if the respondent had been advised not to take such objection of non
maintainability of two applications before the High Court and would have
contested the applications on merits. We are not deciding the question of
maintainability of the applications under Section 34 of the Act on merits and
we make it clear that respondent No. 1 would be free to take all objections as
he likes against the grant of such application and the same would be decided by
the High Court on merits in accordance with law. We are, however, clearly of
the view that the High Court was not correct in dismissing the applications on
the ground that two applications were not maintainable as the same were not
covered within the order passed by the High Court dated 25th February, 1966. In
view of the fact that it is an old matter, we request the High Court to dispose
of the applications filed by the appellants Nos. 1 and 2 under Section 34 of
the Act. At the earliest.
In the
result, these appeals are allowed, the order of the High Court dated 2nd
February, 1973 is set aside and the case would now be decided by the High court
in the manner indicated above. The parties are left to bear their own costs.
R.P.
Appeals Allowed.
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