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1960 DIGILAW 76 (ALL)

S. P. Bhatnagar v. Balmakund Balla

1960-03-09

R.N.GURTU, S.N.DWIVEDI

body1960
JUDGMENT S.N. Dwivedi, J. - Consumers Cooperative Stores, Ltd., Agra, (hereinafter called the Stores), a Cooperative Society registered under the Cooperative Societies Act, 1912, (hereinafter called the Act of 1912) consists of 1500 members. At the relevant time one Gyan Chand was its Accountant and Balmukund Balla, a party to the revision its Manager. A criminal case was started against the Accountant for the misappropriation of the Stores' funds and during the pendency of the case, on an application by 29 members for appointing an arbitrator to decide certain matters relating to Gyan Chand's misconduct, which allegedly constituted the dispute between the Stores on the one side and its Governing Body and the Manager on the other side, the Registrar, Cooperative Societies, U.P. appointed Sri S.P. Bhatnagar, Deputy Registrar, Cooperative Societies, U.P. as the arbitrator. Thereupon the Manager asked the trial court to proceed u/s 33 of the Arbitration Act, 1940 (hereinafter called the Act of 1940) against the arbitrator. The trial court held that the reference of the dispute to the arbitrator was invalid because the subject-matter of the dispute went outside the scope of Rule 115 of the Cooperative Societies Rules (herein below called the Rules) and that order of the court is challenged in this revision u/s 116 Code of Criminal Procedure. 2. Sri T.N. Sapro, in his able arguments, vigorously maintained that Section 33 of the 1 Act of 1940 did not apply to the arbitrations under the Act of 1912 and the trial court had exercised a jurisdiction not vested in it by law. He sought to support his argument by the Rules and some specific cases. 3. At this stage it would be necessary to set out the pertinent provisions of the Act of 1940: Section 32--Notwithstanding any law for the time being in force, no suit shall lie on any ground whatsoever for a decision upon the existence effect or validity of an arbitration agreement or award, nor shall any arbitration agreement or award be set aside, amended, modified or in any way affected otherwise than as provided in this Act. Section 33--Any party to an arbitration agreement or any person claiming under him desiring to challenge the existence or validity of an arbitration agreement or an award or to have the effect of either determined shall apply to the court and the Court shall decide the question on affidavit. Section 33--Any party to an arbitration agreement or any person claiming under him desiring to challenge the existence or validity of an arbitration agreement or an award or to have the effect of either determined shall apply to the court and the Court shall decide the question on affidavit. Section 46--The provisions of this Act except Sub-section (1) of Section 6 and Sections 7, 12 and 37, shall apply to every arbitration under any other enactment for the time being in force, as if the arbitration were pursuant to an arbitration agreement and as if that other enactment were an arbitration agreement, except in so far as this Act is inconsistent with that other enactment or with any rules made thereunder. Section 47--Subject to the provisions of Section 46 and save in so far as is otherwise provided by any law for the time being in force, the provisions of this Act shall apply to all arbitrations and to all proceedings thereunder: The conjoint effect of Sections 32 and 33 is to substitute for the ordinary remedy by a suit the cheaper and speedier remedy by an application for determining the existence, effect or validity of an arbitration agreement or award. The word 'effect' in those sections means scope, tenor or drift see Bajrang Lal Laduram Vs. Agarwal Brothers, AIR 1950 Cal 267 and Gordhandas Pursottam Sonawala Vs. Natvarlal Chandulal and Co., AIR 1952 Bom 349 and the trial court could have jurisdiction to determine the scope of the arbitration agreement embodied in Rule 115 if Section 33 is not inconsistent with the Act of 1912 and its Rules. In our view the true test for determining that they are mutually inconsistent is whether they cannot co-exist and co-operate in the domain of co operative arbitration. In our view the true test for determining that they are mutually inconsistent is whether they cannot co-exist and co-operate in the domain of co operative arbitration. In Tabernacle Permanent Building Society v. John Knight 1892 AC 298 during the arbitration proceeding between the Appellant Building Society and the Respondent, one of its members, before the arbitrator appointed u/s 34, Building Societies Act, 1874, the Respondent, on the arbitrator's refusal to state a special case for the opinion of the Court on a point of law, obtained from the Court u/s 19, Arbitration Act, 1899, a direction to him to do so on appeal the Court's order was set aside on the view that Section 19 was inconsistent with the former Act and the Court had no power to issue the direction. The matter eventually reached the House of Lords, who affirming the Court's order, held that Section 19 was not inconsistent with the Building Societies Act. Lord Watson said, The Appellants were accordingly constrained to argue that, whenever the provisions of the Arbitration Act are found to add to the enactments of any other statute regulating arbitrations, they are in the sense of the exception inconsistent with it. To hold that the Legislature intended to attach that meaning to the word 'inconsistent' would be to defeat the object of the leading enactment in Section 24. In my opinion the object of the Legislature was to add to the remedies open to the parties under a statutory arbitration and the sole purpose of the exception was to prevent the application of the powers conferred upon the Court by the Act of 1889 to arbitrations under any statute whose provisions either expressly or by reasonable implication, excluded the exercise of such powers. 4. Lord Herschell express himself thus: The Arbitration Act which confers upon the Court the power to order a case to be stated, if it applies, adds, no doubt, to the provisions which are to govern an arbitration under the Building Societies Act; but it is clear that the fact that the provision is an additional one does not of itself show that there is any inconsistency in the two Acts, for if so, the 24th section would never have any operation. I think the test is, whether you can read the provisions of the latter Act into the earlier without any conflict between the two. I think the test is, whether you can read the provisions of the latter Act into the earlier without any conflict between the two. This you can clearly do as regards the enactment under consideration. 5. We think it clearly follows from those observations that the Court's pre-award determination of the true scope of the arbitration agreement embodied in Rule 115 by virtue of Section 33 of the Act of 1940 is not in disaccord with the arbitral scheme and procedure under the Act of 1912 and the Rules, Section 33 does no more than add to the remedies open to the parties under the Act of 1912 and the Rules. 6. The purpose and vision of the two enactments also does not appear to be similar and overlapping Section 33 is concerned with the existence, scope and validity of the arbitration agreement and the award while the Act of 1912 and the Rules provide a machinery for arbitration over the dispute. The former is directed broadly to matters of vires and other similar questions, while the latter are in our opinion concerned with the merits of the controversy. Our attention has not been drawn to any provision in the Act of 1912 and the Rules which confers plenary authority on the arbitrator to conclusively determine the range of his own jurisdiction. Rule 134 seems to us to assume that the arbitrator's decision is within his authority and it then extends immunity of his award from any challenge on merits in the Court. Again neither this rule nor Rule 137 is concerned with the stage prior to the actual decision. We are, therefore, unable to agree that Section 33 is incompatible with the machinery and procedure of co-operative arbitration. The expeditious intervention of the Court u/s 33 before the giving of the award, as in this case, would neither rob the award of its finality nor make the arbitration machinery unworkable. 7. We shall now advert to the cases relied on by Sri T.N. Sapru. In the AIR 1924 418 (Lahore) a suit for a declaration that certain bonds were not executed by the Plaintiff in favour of the Defendant and were forgeries was held not to be maintainable. It should be observed that the suit questioned the merits of the dispute and not the scope of the arbitration agreement, as here and the case is accordingly distinguishable. It should be observed that the suit questioned the merits of the dispute and not the scope of the arbitration agreement, as here and the case is accordingly distinguishable. The above remarks also apply to Gopi Nath and Another Vs. Ram Nath, AIR 1925 All 356 . In Nanda Kishore Goswami and Another Vs. Bally Co-operative Credit Society, Ltd. and Others, AIR 1943 Cal 255 where it was held that Section 17 and Schedule I of the Act of 1940 were inconsistent with the machinery of arbitration under the Act of 1912. These provisions appertain to awards which emerge from the intervention of the Court and are manifestly unsuited to the arbitration under the Act of 1912, which do not owe their origin to the intervention of the Court. Our remarks regarding the Calcutta case are equally applicable to S. Ranganathan and Others Vs. A. Krishnayya, Arbitrator, Lloyds Road Area Town Planning Scheme and Another, AIR 1946 Mad 504 . The case of Matam Lingayya Vs. Anumala Venkatapathy and Others, AIR 1935 Mad 694 where the Court held that Section 34 of the Act of 1940 was inconsistent with the scheme of arbitration under the Act of 1912 is also not helpful to us. In B. Balreddy v. Joint Registrar Cooperative Society AIR 1955 Had. 238 Section 5 of the Act of 1940 was held to be disaccordant with the scheme of arbitration under the Hyderabad Cooperative Societies Act and it is of little help in this case. In Savitra Khandu Beradi Vs. Nagar Agricultural Sale and Purchase Co-operative Society Ltd. and Others, AIR 1957 Bom 178 Section 37 of the Act of 1940 was held to be in applicable to statutory arbitrations. Section 46 of that Act expressly says so and that case also is accordingly of no assistance to us. The case of G.I.P. Railway Employees Co-operative Bank Ltd. Vs. Bhikhaji Merwanji Karanjia, AIR 1943 Bom 341 no doubt, supports Sri T.N. Sapru's contention. In that case the dispute of a dismissed employee of a Cooperative Society was referred to an arbitrator u/s 54 of the Bombay Cooperative Societies Act, whereupon the Cooperative Society moved an application u/s 33 of the Act of 1940 for a declaration that there was no valid arbitration agreement between the Society and the discharged employee. In that case the dispute of a dismissed employee of a Cooperative Society was referred to an arbitrator u/s 54 of the Bombay Cooperative Societies Act, whereupon the Cooperative Society moved an application u/s 33 of the Act of 1940 for a declaration that there was no valid arbitration agreement between the Society and the discharged employee. The objection to the application on the ground of inconsistency between Section 33 and S 54 was upheld by Chagla, J. (as he then was) for two reasons, namely, (1) The Bombay Act set up a "Special Court with a special jurisdiction and with special powers to try matters referred to in Section 54" and (2) looking to the scheme of the Act it was clear that "the question of the validity of the arbitration agreement" referred to in Section 33 was to be specific by the 'Special Court' and not by the Civil Court. We have not been shown the Bombay Act and with profound respect to the learned Judge we feel great difficulty in applying his dicta to the arbitrations under the Act of 1912 and the Rules, whereunder the arbitrator, although he may have some of the 'trappings of a court,' can hardly be called a 'special court'. In our view his position resembles that of a statutory arbitrator who may undoubtedly be controlled by the Civil Court, who is the ultimate guardian of the rule of law, if he were to abuse or exceed his powers. In Chatra Serampore Cooperative Credit Society Ltd. v. Gopal Chandra Mitra AIR 1940 Cal. 1984, B.K. Mukherjea, J. (as he then was) observed at p. 201 thus: The next question is whether, taking Sub-rule (6) to be intra vires, the Civil Court could still entertain a suit for declaring the award to be invalid and inoperative? In my opinion, if the award is without jurisdiction the civil court could certainly declare it to be a nullity. 8. That case was followed in Belhari Cooperative Society v. Puttu Lal AIR 1941 Oud 315. After examining various authorities the learned Judges, at page 321, said. In my opinion, if the award is without jurisdiction the civil court could certainly declare it to be a nullity. 8. That case was followed in Belhari Cooperative Society v. Puttu Lal AIR 1941 Oud 315. After examining various authorities the learned Judges, at page 321, said. Having regard to the trend of authorities cited above we are of opinion that a Civil Court is perfectly competent to entertain a suit in all cases where it can be shown that the Act of the authorities of the Cooperative Societies is not within the scope of the Act or is otherwise without jurisdiction. 9. The words 'not within the scope of the Act' are significant and suggest that a suit (now barred by Section 32 of the Act of 1940 and substituted by an application u/s 33) could then be filed to declare an award ultra vires if the subject matter of the award was not embraced by the arbitration agreement embodied in Rule 115. This case is an authority against Sri Sapru. 10. We are also unable to discover anything in the Act of 1912 and the Rules suggesting the conferral of unquestionable power on die arbitrator to conclusively determine the width of his own authority and the exclusion of the Civil court's jurisdiction for the purposes indicated by Section 33 of the Act of 1940; neither the nature of his function nor the policy of the Act and the Rules nor the procedure of arbitration points to such ouster which, on high authority, should not readily be inferred. It cannot be said that the court's pre-award intervention for the limited purpose of determining the scope of the arbitration agreement would choke and clog the arbitral machinery and procedure indicated by the Act of 1912 and its Rules and render it unworkable. The court's intervention would be only sporadic and peripheral, leaving the arbitrator complete freedom to adjudicate on the merits of the controversy before him. 11. On a review of the relevant provisions and decisions we are of opinion that Section 33 of the Act of 1940 is not inconsistent with the Act of 1912 and the Rules and that the lower court has not acted without jurisdiction. 12. 11. On a review of the relevant provisions and decisions we are of opinion that Section 33 of the Act of 1940 is not inconsistent with the Act of 1912 and the Rules and that the lower court has not acted without jurisdiction. 12. Sri T.N. Sapru, in the end, urged, that the lower court has misconstrued and misapplied Rule 115 to the facts of the instant case, but this question does not affect the jurisdiction of the lower court and cannot be gone into in the revision u/s 115 Code of Criminal Procedure. 13. We, therefore, dismiss the revision with costs.