SARJOO PROSAD, C. J. : This appeal is directed against an order, dated 8-3-54, passed by the learned District Judge, Lower Assam Districts, setting aside an award which was, made on a reference by the Court. The appellant-instituted a suit in the Court of the Subordinate-Judge, Lower Assam Districts, against the defendant for recovery of a sum of Rs. 75,309/7/9 pies,. alleged to be due on books of account. Shortly put, his case was that the defendant, who carried on the business of purchasing jute, was, financed by the plaintiff in his business on condition that the defendant would pay interest on the amount advanced and also pay half the share of the profits earned in the business, to the plaintiff,. It was in pursuance of this agreement between the parties that the plaintiff is said to have advanced different sums of money to the defendant from time to time, and that, after adjustment of accounts the amount in claim was found to be due from the defendant. (2) It is important to notice that there were two, distinct reservations made in the plaint of the suit. The plaintiff expressly reserved his right to bring a fresh suit in respect of the amount of profits to which he claimed to be entitled on account of the business in question. The plaintiff further stated that the defendant had drawn a hundi for a sum of Rs. 10,000/- in favour of the plaintiff, which amount had been adjusted towards the amount payable by way of interest. The plaintiff, therefore, reserved the right to faring a fresh suit in respect of the aforesaid amount of Rs. 10,000/- in case the hundi was dishonoured. Thus the above claims, one in regard to the amount payable on the hundi executed by the defendant, and the other in regard to profits recoverable by the plaintiff from the business in question - were expressly, on the recitals in the plaint, excluded from the subject-matter of the suit. (3) The substantial plea in defence in the writ-ten-statement was that the defendant had been merely working as a 'gomastha' of the plaintiff's firm on receipt of a salary, and that he was not liable to the plaintiff for any amount at all. (4) On the pleadings aforesaid, a number of issues appear to have been framed by the trial Court, the most important of them being issues Nos.
(4) On the pleadings aforesaid, a number of issues appear to have been framed by the trial Court, the most important of them being issues Nos. 3 and 5, which respectively run as follows : 3. Whether the defendant took money from the plaintiff on condition to supply jute, as alleged in the plaint, or whether the defendant was only a paid gomostha of the plaintiff's firm at Kharupatia, and subsequently removed, as alleged in the written statement? 5. Whether the plaintiff is entitled to get Rs. 75,309-7-9 p., or any amount, as alleged in the plaint? (5) The suit itself was filed on 2-12-49 but it dragged on for a considerable length of time when, on 14-3-52, over two years after its institution, the parties filed a joint petition praying to the Court that the dispute may be referred to the arbitration of three persons named therein. The petition shows that the plaintiff and the defendant had appointed the three persons as arbitrators to settle matters involved in the aforesaid suit, and also matters involved in another criminal case then pending between them; and they agreed to abide by the unanimous decision of the arbitrators; and, in case of difference of opinion, by the decision of the majority. It is obvious that by virtue of this petition they wanted a reference to arbitration in respect of matters involved in the suit itself, as also matters in •connection, with the criminal case which was not the subject-matter of the suit. The Court, on receipt of the petition, by its order of even date, directed that the suit be referred to the arbitration •of the gentlemen named therein. As the order sheet shows, even after this reference the litigation suffered many vicissitudes. It appears that one of the arbitrators, Surajmal Surana, refused to act as an arbitrator and in his place the parties substituted another person Sri Santok Chand Bararia, and the Court, by its order dated 16-9-52 appointed this gentleman to act as an arbitrator along with the other two already there. This gentleman again resigned and on 5-12-52, the Court, at the instance of the defendant, appointed Sri Aridaman Singh Kuthari of Gauhati as an arbitrator in his place, to which the plaintiff also agreed.
This gentleman again resigned and on 5-12-52, the Court, at the instance of the defendant, appointed Sri Aridaman Singh Kuthari of Gauhati as an arbitrator in his place, to which the plaintiff also agreed. Sri Aridaman Singh Kuthari again in his turn declined to act as an arbitrator, and eventually on 20-3-53, one Sri Nauratmal Bodera was appointed an arbitrator, as suggested by the defendant. The Board of arbitrators, as now constituted, proceeded to deal with the reference, and on 17-7-53 filed their award. One of the arbitrators did not agree to the decision of the majority and wanted that the claim of the plaintiff should be dismissed, but the other two arbitrators gave their award in favour of the plaintiff; and since the parties had agreed to abide by the majority award it is the majority award which is now in question before us. Under the terms of the award, these arbitrators were of opinion that the plaintiff should get a decree in the suit for a sum of Rs. 41.000/- against the defendant. They also directed that the parties should bear their own costs, and stated further that the plaintiff would not be entitled to get any other amount from the defendant-not even on the basis of the criminal case filed against the latter, which they also wanted to be withdrawn. These last directions were all to the advantage of the defendant. The defendant, however, has challenged the award and prays that it should be set aside. His objections, inter alia, are that the arbitrators who gave the majority award misconducted themselves in the proceeding in deciding matters not referred to them, and that they had exceeded their jurisdiction in so doing. It was further contended that the award was coloured by the opinion of the arbitrators in respect of the criminal case pending between the parties, involving a hundi for a sum of Rs. 10,000/-. There were also allegations made that there was no joint sitting of the arbitrators before making the award in question. This last objection, for obvious reasons, could not be seriously pressed and can be at once eliminated from consideration. The defendant prayed for an adjournment with a view to examine Mr.
10,000/-. There were also allegations made that there was no joint sitting of the arbitrators before making the award in question. This last objection, for obvious reasons, could not be seriously pressed and can be at once eliminated from consideration. The defendant prayed for an adjournment with a view to examine Mr. J. C. Sen, Advocate, one of the arbitrators, as a witness in the case, and also some other witnesses; but ultimately on 15-2-54 the learned advocate for the defendant represented that he would not examine any witness, nor adduce any other evidence, and that he would only canvass the question of the validity of die award and the jurisdiction of the arbitrators on the materials on record. The case thus proceeded to a hearing on the basis of the pleadings of the parties and the documents in the file. The learned District Judge who decided the case, upheld the objections of the defendant and pronounced against the award. He held that the arbitrators had exceeded their authority in taking into consideration matters which were outside the scope of the suit in coining to their decision, and that their award with respect to the subject-matter of the suit was coloured by those extraneous matters. It is against this order of the learned District Judge that the plaintiff has preferred this appeal. (6) One of the questions argued before the learned District Judge was that the reference to arbitration itself was illegal, inasmuch as it contained matters which were beyond the scope of the suit. This point was rightly answered by the learned District Judge in favour of the plaintiff. We have already referred to the petition for reference to arbitration. It shows that the parties wanted the arbitrators to decide and settle amicably not only the matters involved in the suit, but also matters involved in a criminal case pending between them. So far as the settlement of the dispute in the criminal case is concerned, it was obviously beyond the scope of the suit; but the order passed by the Court on the said petition, referred only the matter in dispute in the suit to the arbitrators and directed them to decide the matter on the basis of the pleading of the parties.
The Court had jurisdiction to refer to arbitration matters which were in dispute in the suit itself, and the mere fact that initially in the petition for reference the parties also wanted some other dispute to be settled, did not affect the validity of the reference. In this connection, the learned District Judge has relied upon the decision of the Privy Council in Ram Protap Chamaria v. Durga Prasad Chamaria, AIR 1925 PC 293 (A). It was held there that though the initial agreement to refer the dispute to arbitration may not be confined exclusively to matter in the suit, yet the reference should be valid provided the Court making the reference did not travel beyond the scope of the suit and confined the reference to matters actually in dispute between the parties in the suit. The point, therefore, to my mind, could not be reagitated in this Court, and the learned advocate for the respondent was well advised in not pressing that question. (7) The only point, however, which now falls to be decided is whether the arbitrators exceeded their authority in deciding matters which were beyond the scope of tire suit; and whether the decision of those matters has, in fact, affected their decision of the subject-matter of the suit itself. The principle of severability in cases of awards is very well known. If an award is given in regard to the subject-matter of the suit itself, which is clearly separate and severable from the other matters decided in the award, • then there is no reason why the award should not be upheld to the extent that it relates to the subject-matter of the suit. The Court, of course, has no power to' deal with matters which lay beyond the ambit of the suit and as such beyond its jurisdiction, but it has certainly power to accept the award in regard to matters in dispute between the parties, which are involved in the litigation itself.
The Court, of course, has no power to' deal with matters which lay beyond the ambit of the suit and as such beyond its jurisdiction, but it has certainly power to accept the award in regard to matters in dispute between the parties, which are involved in the litigation itself. If however, the pronouncement of the arbitrators is such that matters beyond the scope of the suit are inextricably bound up with matters tailing within the purview of the litigation, in that case, the Court would be unable to give effect to the award because of the difficulty that it cannot determine to what extent the decision of the subject-matter of the litigation has been affected and coloured by the decision of the arbitrators in regard to matters beyond the ambit of the suit. In the latter class of cases, the doctrine of severability cannot operate to save the award even for the purpose at disposing of the pending litigation. (8) In this case, it has therefore to be examined whether the award can be given effect to in regard to matters which fall within the scope of the suit. The award of the arbitrators is in the following words : "We have heard both the plaintiff Mirzamall Agarwalla and the defendant Balchand Surana. We have also heard the witnesses examined by them and seen all the papers and khatas produced by them. According to our' opinion, the plaintiff is entitled to get a decree for the sum of Rs. 41,000/- (Rupees forty-one thousand) only, against the defendant, and accordingly we submit our award decreeing the suit for Rs. 41,000/- (Rupees forty-one thousand) only against the defendant. Parties will bear their own costs, and the plaintiff will not be entitled to get any other amount from the defendant, and not even on the basis of the criminal case filed against the defendant, that criminal case also will be withdrawn by the plantiff." The first part of the award is absolutely clear and categorical. The words "we submit the award decreeing the suit for Rs. 41,000/- only against the Defendant" are quite significant. The arbitrators clearly state that, in their opinion, the plaintiff was entitled to get a decree for a sum of Rs. 41,000/- against the defendant, and accordingly they submitted their award decreeing the suit for that sum only.
The words "we submit the award decreeing the suit for Rs. 41,000/- only against the Defendant" are quite significant. The arbitrators clearly state that, in their opinion, the plaintiff was entitled to get a decree for a sum of Rs. 41,000/- against the defendant, and accordingly they submitted their award decreeing the suit for that sum only. That they did so, is beyond any doubt; but they proceeded further to say in the award that the parties would bear their own costs and incidentally they also observed that the plaintiff would not be entitled to get any other amount from the defendant, not even on the basis of the criminal case. Mr. Medhi on behalf of the respondent has urged that the latter part of the award has vitiated the whole because it shows that the arbitrators could not have given a decree for Rs. 41,000/- in favour of the plaintiff but for the fact that they were reluctant to allow him any amount on any other basis. In other words, his case is that the arbitrators, in giving their award for Rs. 41,000/-, were clearly conscious of the claim of the plaintiff in respect of the hundi or in respect of the business profits, which claims he had clearly reserved on the face of the plaint, and about which he had not filed any suit at all. There is no doubt that the claim on the hundi or the claim for business profits was not the subject-matter of the suit; but reading the document as a whole, it is quite clear that the arbitrators intended to decree the suit for a sum of Rs. 41,000/- only in favour of the plaintiff, in modification of the claim embodied in the plaint, though at the same time they made certain observations about disallowing other claims. The argument seems to have found favour with the learned District Judge that the latter part of the award, which referred to matters beyond the scope of the suit, did seriously affect the earlier part thereof. We do not think so. As a matter of fact, so far as the first part of the award is concerned, there seems to be no doubt in the minds of the arbitrators.
We do not think so. As a matter of fact, so far as the first part of the award is concerned, there seems to be no doubt in the minds of the arbitrators. This part of the award is clearly separable from any other direction which the arbitrators gave in regard to the other claims of the plaintiff against the defendant which had nothing to do with the suit. (9) The doctrine of separability does apply to awards of this nature, and the law on the subject has been summarised in "Russel on Arbitration", Fourteenth Edition, at page 178. The learned author says '"The bad portion, however, must be clearly separable in its nature in order that the award may be good for the residue Tandy v. Tandy, (1841) 9 Dowl 1044 (B); Auriol v. Smith, (1823) I Turn & R 121 (C). When it is so divisible, the faulty direction will alone be set aside or treated as null (Caledonian Rail Co. v. Lockhart, (1860) 3 Macq 808 (D). See Barton v. Ranson, (1838) 3 M & W 322 (E); Doe d. Body v. Cox, (1846) 4 D and L 75: 18 LJ QB 317 (F)." The learned author also refers to various illustrations on the point. For instance, reference is made to a case in the House of Lords where an arbitrator appointed to decide upon the method of draining certain lands, after ordering certain works, exceeded his authority by giving a direction respecting future repairs. The House of Lords held the award bad only as regards the excess, since, by striking out that direction, the rest of the award was not affected. Johnston v. Cheape, (1817) 5 Dow 247 (G); see Winter v. Leth-bridge, (1824) 13 Price 533 (H); Manser v. Heaver, (1832) 3 B & Ad 295 (I). The whole point is-whether that principle is applicable to the award in the present instance. If we accept the contention of the learned counsel for the respondent, the result will be that in no case the doctrine of separability can hold good. As we have pointed out earlier in this case, the directions in the award were specific and the arbitrators unequivocally stated that the suit should be decreed for Rs. 41,000/- and that the plaintiff would not be entitled to any costs.
As we have pointed out earlier in this case, the directions in the award were specific and the arbitrators unequivocally stated that the suit should be decreed for Rs. 41,000/- and that the plaintiff would not be entitled to any costs. There is no reason why this part of the award should not be given effect to. The learned Advocate General appearing on behalf of the appellant submits that so far as his client is concerned, he has no objection even to abide by those portions of the award which are manifestly to the advantage of the defendant, and not to the advantage of the plaintiff. The principle of separability has also been recognised by the Privy Council in Mt. Amir Begam v. Badr-ud-din Hussain, AIR 1914 PC 105 (J), where it was held that "it is well recognised law that when a separable portion of an award is bad, as, for instance, for being a matter clearly outside the power of the arbitrator, the remainder of the award, if good, can be maintained." (10) Mr. Medhi for the respondent has placed great reliance upon some observations of the Judicial Committee in AIR ,1925 PC 293 (A), where their Lordships found it impossible to uphold an award in relation to a suit inasmuch as the conclusions therein were plainly coloured, if not dictated, by the view taken by the arbitrators of other questions between the parties or some of them to which the suit had no reference. At the outset I may point out that a careful perusal of the decision shows that in appropriate cases the doctrine of severability should hold good, and that it is only where one finds it impossible to segregate the findings with reference to the matters in question in the suit from those not so in question, that the award should not be given effect to. The case before their Lordships was of the character where the award could not be upheld at all in view of the fact that the findings which related to the subject-matter of the suit could not be so segregated. Let me recapitulate the relevant facts to illustrate the point. The arbitration proceeding in that case arose out of a suit for dissolution of partnership and certain other claims which need not be mentioned at present.
Let me recapitulate the relevant facts to illustrate the point. The arbitration proceeding in that case arose out of a suit for dissolution of partnership and certain other claims which need not be mentioned at present. Some of the questions consensually submitted to the arbitrators for their arbitration were already the subject-matter of the pending suit to which one of the persons appointing them was not even a party; and the arbitrators by the award dealt with all the disputes between all the parties. It was clear on the face of it that they in no way discriminated between those disputes which were at issue in the suit and those which were not. They held that certain agreements constituting the partnership were valid and binding on the parties to the suit, yet they directed that the said partnership should be dissolved and a new partnership substituted which apparently had no counterpart in the shares taken in the dissolved partnership. What was more serious is that the findings in the award in which the stranger to the suit was interested could not be segregated from those in question in the suit itself. On the facts, therefore, it was impossible to sever any part of the award which related to the suit from matters which were outside the suit. The case is therefore of no assistance to the learned counsel. (11) The other case on which Mr. Medhi placed reliance is the decision of the Supreme Court in Gobardhan Dass v. Lachmi Ram, AIR 1954 SC 689 (K). This case again is clearly distinguishable. In that case, the agreement for reference to arbitration provided that the parties would be bound by any decision given by the arbitrators, which meant that the arbitrators were to put an end to the dispute by deciding the question of liability once for all; but that, of course, did not imply that the arbitrators were to travel outside the powers conferred upon them by the reference, and were to decide the dispute on considerations wholly extraneous to it.
In the case in question, though the arbitrators found that both the respondents were liable upon the bhai khata account, they did not determine the exact amount by the award which they gave, and while a certain portion out of a large sum found due was awarded against one of the respondents, the liability of the other respondent was remitted in toto. It was held that the arbitrators had acted in excess of their authority and the award was, therefore, set aside. These decisions have no application to the facts of the present case. (12) Here, as we have found, the award is clearly severable and as such valid so far as the decree for Rs. 41,000/- is concerned; and the learned District Judge was in error in not accepting the award to the extent indicated above. The objections preferred by the defendant as to the validity of the award cannot prevail, and the suit must be decreed for Rs. 41,000/-, as directed in the award without costs (13) The appeal accordingly succeeds and must be decreed with costs. (14) DEKA J. : I agree. V.B.B. Appeal allowed.