Arya Vidya Sabha v. Shri Harish Chandra Arora — 1956 DIGILAW 317 (ALL)

JUDGMENT Roy, J. - This is a Defendant's appeal from an order of remand passed by the lower appellate court. 2. The facts relevant for the disposal of this appeal are these. The Plaintiff-Respondent is a lecturer in the D.A.V. College, Bulandshahr run by the Arya Vidya Sabha, a registered society. He was appointed a lecturer in Chemistry on an initial salary of Rs. 150 per month in the scale of Rs. 150-10-190-15-250 on probation for one year with effect from 5-8-1948. He was confirmed on Rs. 170 per mouth with effect from 5-9-1949. An agreement was executed between him and the management. Thereafter with effect from 8-7-1950 his salary was enhanced and fixed at Rs. 205 per month in the same scale. He was given two increments of Rs. 15 each in July, 1951 and July 1952. According to him he was entitled to get a monthly salary of Rs. 250 with effect from 8-7-1953 in terms of the agreement. On 8-7-1953 he went on a year's study leave and rejoined the College on 8-7-1954. The auditor of Local Funds Account after making an audit objected to the enhancement of the Plaintiff's pay and of some other teachers and asked the management to regularise their pay in accordance with the mandatory scales prescribed by this Educational Department. In the year 1953 the management reduced the salary of the Plaintiff by an amount of Rs. 45 bringing it down to Rs. 205 per month. Thereupon the Plaintiff instituted the suit out of which this appeal has arisen claiming a sum of Rs. 315 as arrears reckoned at the rate of Rs. 45 per month from 8-7-1954 to 7-2-1955. He also claimed a declaration that he was holding the post of lecturer on a salary of Rs. 250 from 8-7-1950 and was entitled to get pay at that rate from the management. The Defendants inter alia pleaded that having regard to the terms of the agreement and to the provisions of paragraph 151-B of the U.P. Educational Code no suit lay in civil court and the matter lay within the exclusive jurisdiction of the arbitration Board. The trial court gave effict to the Defendant's contention and dismissed the suit with costs. The Defendants inter alia pleaded that having regard to the terms of the agreement and to the provisions of paragraph 151-B of the U.P. Educational Code no suit lay in civil court and the matter lay within the exclusive jurisdiction of the arbitration Board. The trial court gave effict to the Defendant's contention and dismissed the suit with costs. The lower appellate court upon a consideration of the terms of paragraph 15 of tne agreement and paragraph 151-B of the U.P. Educational Code and relying upon a decision of a Full Bench of this Court in Raghunath Prasad v. Gurdayal 1955 AWR (H.C.) 644 came to the conclusion that the jurisdiction of the civil court was not barred and that since the Defendants did not avail of the provisions of Section 34 of the Arbitration Act, the contention that the suit should fail cannot be upheld in the present state of law. The lower appellate court accordingly allowed the appeal, set aside the decision of the trial court and remanded the suit to that court with directions to readmit it to its original number and then dispose of it according to law. As against that decision the present appeal has been filed. 3. Learned Counsel has urged that the lower appellate court has taken a wrong view of the provisions of paragraph 15 of the agreement read with para. 151-B of the U.P. Educational Code. It would, therefore, be necessary to reproduce these provisions. Paragraph 15 of the agreement runs as follows: 15. The committee and the teacher agree that any dispute on a question of dismissal, discharge, on reduction or withholding of salary shall be referred to a committee of arbitrators which shall consist of-- (1) A representative of teachers nominated by the teacher's representative body recognised as such. (2) A representative of the managers nomininated by the Managers' recognised representative body. (3) The Inspector/Inspectress of Schools or a person specially nominated by the DPI, in case of an appeal against the Inspector's/Inspectress's decision (Chairman). The decision of this arbitration committee shall be final and no suit shall be in any civil court in respect of the matters decided by it. (3) The Inspector/Inspectress of Schools or a person specially nominated by the DPI, in case of an appeal against the Inspector's/Inspectress's decision (Chairman). The decision of this arbitration committee shall be final and no suit shall be in any civil court in respect of the matters decided by it. Further, neither of the parties shall sue the other for any breach not referable to arbitration of this agreement without having first referred the question or questions in dispute to the Divisional Inspector/Circle Inspectress and allowed him/her reasonable time not exceeding two months to settle the dispute. 4. Paragraph 151-B of the Educational Code is as follows: 151-B There shall be two Standing Regional Arbitration Boards in each region (one for the teachers and the other for headmasters and principals) to which all questions of dispute between the teachers of Headmasters or Principals and the Managing Committees regarding dismissal, discharge or reduction or with-holding of salary shall be referred. The boards shall be constituted as follows: (i) Regional Deputy Director of Education (President). (ii) One representative of the managers nominated by the Provincial Managers' Association. (iii One representative of the teachers, headmasters or principals nominated by U.P. S.F.A. The Deputy Director, Region shall ask the Associations concerned to nominate their representatives who shall belong to the same region, for every calendar year in good time. The Boards shall meet once every quarter and if necessary often dispose of pending cases as speedily as possible. The Regional Inspectress may be present at the meetings to advice the Boards in respect of the cases of women teachers only. The decision of the Boards shall be final and not open to challenge in any court of law. 5. It is contended by learned Counsel for the Appellants that a dispute had arisen within the meaning or paragraph 15 of the agreement and paragraph 151-B of the U.P. Educational Code and that under the agreement and the U.P. Educational Code that dispute was referable only to the committee of arbitrators and not to any other authority and consequently the jurisdiction of the civil court was barred. I would assume for purposes of this case that there was a dispute between the parties within the meaning of paragragh (sic) of the agreement. I would assume for purposes of this case that there was a dispute between the parties within the meaning of paragragh (sic) of the agreement. The question that arises for decision is whether the Appellant's remedy was to claim the stay of the suit u/s 34 of the Arbitration Act or whether they could legitimately contend that the suit should be dismissed with costs. 6. Section 28 of the Contract Act mikes every agreement, by which any party there is to restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunal, void to that extent. There is, however, an exception which runs as follows: Savings of contract to refer to arbitration disputes that may arise--This section shall not render illegal a contract by which two or more persons agree that any dispute which may arise between them in respect of any subject or class of subjects shall be referred to arbitration, and that only the amount awarded in such arbitration shall be recoverable in respect of the dispute so referred". When the Act was originally passed in 1872, there was another clause in this exception which ran as follows: Suits Barred by Such Contracts,--When such a contract has been made, a suit may be brought for its specific performance, and if a suit, other than for such specific performance, or for the recovery of the amount so awarded, is brought by one party to such contract against any other such party in respect of any subject which they have so agreed to refer, the existence of such contract shall be a bar to the suit. 7. As the law then stood, the existence of an arbitration agreement, such as, that exists in the present case, was a complete bar to the maintainability of the suit. In 1877, however, the Specific Relief Act was passed and at that time this second clause of the exception was made inapplicable to areas to which the Specific Relief Act was extended. In 1877, however, the Specific Relief Act was passed and at that time this second clause of the exception was made inapplicable to areas to which the Specific Relief Act was extended. But a provision was made in Section 21 of the Specific Relief Act to the effect that an agreement to refer a dispute to arbitration could not be specifically enforced; but if any person who had made such a contract and refused to perform it sued in respect of any subject which he had contracted to refer, the existence of such contract would bar the suit. In other words, the change introduced in law was that whereas formerly an agreement to refer the dispute to arbitration could be specifically enforced, such an agreement ceased to be specifically enforceable after the passing of the Specific Relief Act. But the old law which barred the suit at the instance of a person who had been party to an arbitration agreement continued to be in force as before. 8. In 1908 the CPC (Act V of 1908) was enacted and a further change was introduced in law. Paragraph 22 of the Second Schedule of the said Code ran as follows: The last thirty-seven words of Section 21 of the Specific Relief, Act, 1877, shall not apply to any agreement to refer to arbitration or to any award, to which the provisions of this schedule apply." The last thirty-seven words of Section 21 of the Specific Relief Act, 1877 referred to therein related to that portion of the section which contained a clause to the effect that a suit instituted by a person who had been a party to an arbitration agreement would be barred. This meant that the old rule barring such suits was repealed. But while repealing this rule the legislature did not, as will appear from paragraph 18 to be presently quoted, give a free hand to persons who had been parties to arbitration to proceed with suits in law courts and to ignore their own agreements. 9. This meant that the old rule barring such suits was repealed. But while repealing this rule the legislature did not, as will appear from paragraph 18 to be presently quoted, give a free hand to persons who had been parties to arbitration to proceed with suits in law courts and to ignore their own agreements. 9. Paragraph 18 of the Second Schedule of the said Code ran as follows: Where any party to any agreement to refer to arbitration or any person claiming under him, institutes any suit against any other party to the agreement, or any person claiming under him, in respect of any matter agreed to be referred any party to such suit may, at the earliest possible opportunity and in all cases where issues are settled at or before such settlement, apply to the Court to say the suit; and the Court if satisfied that there is no sufficient reason why the matter should not be referred to in accordance with the agreement to refer to arbitration, and that the applicant was, at the time when the suit was instituted and still remains, ready and willing to do all things necessary to the proper conduct of the arbitration, may make an order staying the suit. 10. In other words, the legislature altered the Jaw to this extent that, while the Plaintiff could institute a suit, it was left to the discretion of the Defendant to either submit to the jurisdiction of the court and to go on with the suit or to bring about the stay of the Plaintiff's suit. While, on the one hand, he could neither seek specific performance of the agreement to refer the suit to arbitration nor claim the dismissal of the Plaintiff's suit, he could, on the other hand, prevent the Plaintiff from proceeding with the suit and thus could bring about a stalemate. This state of affairs was brought about with the possible object of thereby inducing the Plaintiff to reconsider his position and to agree to submit the dispute to arbitration. 11. In 1940 the Arbitration Act was passed and Schedule II of the Code of Civil Procedure, including paragraphs 18 and 22, was repealed. But the legislature re-enacted the rule of law contained in paragraph 18 of the Second Schedule of the CPC in Section 34 of the Arbitration Act. 12. 11. In 1940 the Arbitration Act was passed and Schedule II of the Code of Civil Procedure, including paragraphs 18 and 22, was repealed. But the legislature re-enacted the rule of law contained in paragraph 18 of the Second Schedule of the CPC in Section 34 of the Arbitration Act. 12. Consequent on the repeal of paragraph 22 of the Second Schedule of the Code of Civil Procedure, the legislature amended Section 21 of the Specific Relief Act and the relevant portion thereof now runs as follows: And, save as provided by the Arbitration Act, 1940 (X of 1940), no contract to refer present or future differences to arbitration shall be specifically enforced; but if any person who has made such a contract other than an arbitration agreement to which the provisions of the said Act apply and has refused to perform it sues in respect of any subject which he had contracted to refer, the existence of such contract shall bar the suit. 13. The position, therefore, is that an agreement to refer a dispute to arbitration, if it fails under the Arbitration Act, is taken out altogether from the purview of the Specific Relief Act. The present case is one which is governed by the Arbitration Act. Therefore Section 21 of the Specific Relief Act does not govern this case. I am, therefore, now left with Section 34 of the Arbitration Act alone and I have to see what are the rights available to the Appellant. As already stated, he did not avail of the remedy provided by that section but filed a written statement and went to trial. Since the Appellant did not claim stay there is no provision which in the present circumstances bars the suit. As already said, the Second clause of the exception to Section 28 of the Contract Act has been deleted. The court had, therefore, no option but to entertain the suit. In the circumstances I have come to conclusion after hearing learned Counsel for the Appellant that the view taken by the lower appellate Court was correct. 14. There is no force in this appeal and it is dismissed Under Order 41, Rule 11, Code of Civil Procedure.