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1961 DIGILAW 55 (ALL)

Deoki Nandan Garg v. Jagdish Prasad

1961-03-20

A.P.SRIVASTAVA, N.U.BEG

body1961
JUDGMENT A.P. Srivastava, J. - The circumstances in which this first appeal from order has arisen are these. Sri Jagdish Prasad, respondent No. 1 claimed to be the manager of a joint Hindu family carrying on commission agency business in the name and style of M/s Ravendra Lal Ram Naresh. The appellant and the other respondents nos. 2 to 7 were alleged to be members of another joint Hindu family carrying on business in the name and style of "the Hindustan Cotton Waste Traders Cotton Waste Merchants" and Deokinandan the appellant was alleged to be the manager of that family. On the 4th of September 1954 an agreement was arrived at, according to respondent No. 1 between the parties which provided that the family of that respondent would provide finance for some business which the appellant and the other respondents were to carry on. The case of the respondent is that that agreement contained an arbitration clause also. The agreement was followed by dealings between the parties and a large amount became due to the respondent No. 1 from the, appellant and the other respondents, The respondent No. 1 further alleged that on the 6th of July 1955 the appellant and the other respondents through the appellant acknowledged their liability in respect of a sum of Rs. 29,900. Thereafter the respondent No. 1 demanded the amount by notice but no heed was paid to that demand. He then served a notice requiring the appellant and the other respondents to agree to the appointment of one Sri Ram Bilas Agarwal as sole Arbitrator for deciding the dispute which had arisen under the contract. No response, was, however, made to the notice. The respondent No. 1 then filed the application under Section 20 of the Indian Arbitration Act out of which the present appeal has arisen praying that the agreement of arbitration between the parties be filed and a reference made to Sri Ram Bilas Agarwal the agreed Arbitrator for the decision of the dispute that had arisen. The respondent No. 1 contended that the appellant and the other respondents could be deemed to have consented to the appointment of Sri Ram Bilas Agarwal as Arbitrator. 2. Two sets of written statements were filed one by the respondents 2 to 7 and the other was by the appellant. The respondents nos. The respondent No. 1 contended that the appellant and the other respondents could be deemed to have consented to the appointment of Sri Ram Bilas Agarwal as Arbitrator. 2. Two sets of written statements were filed one by the respondents 2 to 7 and the other was by the appellant. The respondents nos. 2 and 4 to 7 denied all the allegations made by the respondent no. 1. They said that they never had any dealings with respondents or their firm and that they had never agreed to any arbitration at any time. They also denied that the appellant represented them or had entered into any agreement on their behalf. 3. The appellant filed another written statement in which he admitted that he had approached the firm of respondent No. 1 for some financial facility and that an agreement dated the 4th of September, 1954 had been executed. He too, however, said that the other respondents had no concern with that agreement. According to him no dispute had arisen under that contract and the application was not maintainable on that account. He also said that the arbitration clause in the agreement contemplated the appointment of an agreed arbitrator only and no agreement having been arrived at about the person who had to be appointed as arbitrator, no arbitrator could be appointed. He said that if it was held that a dispute had arisen the only way in which the respondent No. 1 could proceed was to have the case decided by a regular suit. 4. After the respondent appellant had filed a written statement, he wanted to have the written statement amended and prayed for permission to take a plea that the original contract of the 4th of September 1954 had been superseded by a later contract dated the 6th of July 1955 which had the effect of novation. No dispute having arisen under the later contract no reference to arbitration could be made under the original contract which no longer subsisted. This amendment was, however, refused. 5. The case was heard by the First Civil Judge of Kanpur who recorded the findings that so far as the other respondents were concerned, they were no parties to the agreement relied on by the respondent No. 1 and the application was, therefore, not maintainable against them. This amendment was, however, refused. 5. The case was heard by the First Civil Judge of Kanpur who recorded the findings that so far as the other respondents were concerned, they were no parties to the agreement relied on by the respondent No. 1 and the application was, therefore, not maintainable against them. He did not accept the contention of the respondent No. 1 that the appellant represented those other respondents also in connection with the agreement. He further held that there was a subsisting agreement of arbitration so far as the appellant and the respondent No. 1 were concerned and a dispute having arisen it could be referred to arbitration. He was also of opinion that because Sri Ram Bilas Agarwal had been nominated as an arbitrator by the respondent No. 1 and the appellant had not objected to that nomination in response to the notice served on him, Sri Ram Bilas Agarwal could be held to have been appointed as arbitrator by common consent and the disputes could, therefore, be referred to him for arbitration. As a result of these findings he allowed the application filed by respondent No. 1 against the appellant' and directed that the matter in dispute be referred to Sri Ram Bilas Agarwal arbitrator who was to make his award after hearing the parties. 6. Against this order the appellant has come up in appeal. The appellant No. 1 has filed a cross-objection in which he contends that the application should have been allowed against the other respondents also. So far as the cross-objection is concerned, it can be disposed of shortly. It cannot, in our opinion, succeed because it is not directed against the appellant. It is directed against the other respondents. As was laid down by a Division Bench of this Court in Mohammad Hasan v. Mohammad Hamid Hasan, 1946 ALJR 44. "So far as this Court is concerned, the law is now well-settled that as a general rule a respondent can file a cross objection only against an appellant and it is only in exceptional cases where the decree proceeds on a common ground or the interest of the appellant is intermixed with that of the respondent that a respondent is allowed to urge a cross-objection against a co-respondent. 7. 7. In the present case no exceptional circumstances exist and the case of the appellant is in no way intermixed with that of the other respondents. If, therefore, respondent No. 1 wanted to challenge the order passed by the learned Civil Judge so far as other respondents were concerned, the proper course for him was to file an appeal and not a cross-objection. It also appears to be doubtful whether a cross-objection can lie against an order passed under Section 20 of the Indian Arbitration Act. According to the terms of Or. 41, R. 22, a cross-objection can be filed only against a decree. The cross-objection must, therefore, fail. 8. So far as the appeal is concerned, three points were pressed on behalf of the appellant. They were (1) that the appellants application for amendment should have been allowed and was wrongly rejected; (2) that no dispute having arisen, no reference to arbitration could be made and (3) that, in any case, under the agreement as it stood if the parties did not agree to the appointment of Sri Ram Bilas Agarwal as arbitrator no reference could be made to him or to anyone else. 9. The first contention does not appear to be acceptable at all. What the appellant wanted to raise at a very late stage of the case was essentially a question of fact. The plea had not been raised in the written statement when it was filed and no satisfactory explanation was offered as to why it had not been raised at that stage. The only ground mentioned in the application for amendment was that the appellant bad forgotten to take that plea. That ground was clearly unsatisfactory. No sufficient explanation having been offered, the learned Civil Judge was, in our opinion, justified in not permitting the appellant to raise that new point of fact at the stage of argument after the evidence of the parties had been closed. The application for amendment was, therefore, rightly rejected and it is not possible now to allow the appellant to raise that plea and to get the whole case re-heard. 10. The second contention too does not appear to be well-founded. The application for amendment was, therefore, rightly rejected and it is not possible now to allow the appellant to raise that plea and to get the whole case re-heard. 10. The second contention too does not appear to be well-founded. Under the agreement, which was executed on the 4th of September 1954, between the appellant and the respondent No. 1 it had been expressly stipulated that the respondent No. 1 would provide finance to the appellant under the conditions mentioned in the agreement and that by the 31st of December 1954 all the amount advanced by the respondent No. 1 would be paid back to him in full satisfaction and a receipt obtained. It is common ground that the entire amount payable to the respondent No. 1 by the appellant in pursuance of the agreement has not been repaid to him and no receipt had been taken. Respondent No. 1 did allege that on the 6th of July, 1955 there was an accounting in which the appellant acknowledged liability for Rs. 29,900 and that even that amount had not been paid. This allegation was not admitted by the appellant. It cannot be said with any justification in the circumstances that no dispute had arisen or subsisted between the parties so far as the original agreement was concerned. 11. It was, however, urged on behalf of the appellant that what the respondent No. 1 described as an acknowledgement dated the 6th of July, 1955 really amounted to a new contract which had superseded the original contract and if there was any dispute subsisting between the parties, it was not under the original contract but was to be deemed to have arisen under the new contract. There is a two-fold answer to this contention. In the first place, the appellants plea of novation of contract was never raised in the written statement and had not been allowed to be raised subsequently. This plea cannot, therefore, be accepted. Secondly, the liability for the amount claimed by the respondent No. 1 really arose under the original contract of 1954. What was done in July 1955 was only this: An accounting was done and the amount due under the original contract was ascertained. That ascertained amount not having been paid, the dispute really arose not under any new contract but under the old contract. What was done in July 1955 was only this: An accounting was done and the amount due under the original contract was ascertained. That ascertained amount not having been paid, the dispute really arose not under any new contract but under the old contract. We can also not fail to notice in this connection that the acknowledgement said to have been made on the 6th of July 1955 was not admitted by the appellant and a dispute had been raised in respect of it also. It is, therefore, not possible to accept the contention that there was no subsisting dispute between the parties arising under the agreement of 1954 which could not be referred to arbitration. 12. The third contention of the appellant is based on the terms of the arbitration clause contained in the agreement of the 4th of September 1955. The exact words used in that agreement were "Agar ismen kisi tarah ka koi bhi jhagara wa badha howe to usaka faisala ya to ek panch donon ki raza-mandi se karega athwa usaka faisala Kanpur Court men Howega." Freely translated in English these words mean: "If there is any kind of dispute or obstruction in this connection, it will be decided by an arbitrator appointed with the consent of both the parties otherwise it will be decided by the Kanpur Court." 13. This agreement was admittedly executed at Ajmer and the business in respect of which the respondent No. 1 supplied finance to the appellant was being carried on at that place. The parties, however, resided at Kanpur and that is why it was agreed that if an occasion arose to file a suit, the Kanpur Court alone would have jurisdiction. The arbitration clause, however, clearly provided that if a dispute arose between the parties it could be settled in two alternative ways either it would be decided by an arbitrator appointed jointly by the parties or it would be decided in the Kanpur Court. 14. In this connection the learned counsel for the appellant raised two contentions. The first was that the agreement clearly excluded the appointment of any person to act as an arbitrator who did not command the confidence of both the parties and who had not been appointed by both of them. 14. In this connection the learned counsel for the appellant raised two contentions. The first was that the agreement clearly excluded the appointment of any person to act as an arbitrator who did not command the confidence of both the parties and who had not been appointed by both of them. In other words, if there was to be a reference to arbitration at all it could only be to a person in respect of whom both the parties agreed. If there was no such agreement in respect of any person the arbitration clause was to fall through and the other course of filing a suit at Kanpur was to be adopted. In other words, what the learned counsel urged was that if the parties did not agree to the appointment of any arbitrator the court was to have no jurisdiction or power to appoint any such arbitrator. 15. The other contention raised was that, in any case, as the arbitrator was to be appointed with the consent of the parties and the appellant was not agreeing to the person nominated by the respondent No. 1, the proper course for that respondent was to apply under Section 8 of the Indian Arbitration Act and to have an arbitrator appointed. By filing an application under Section 20 of the Indian Arbitration Act the respondent No. 1 could not get an arbitrator appointed if the parties were not agreed to the appointment of any such arbitrator. The remedy available under Section 8 could not be prayed for in an application filed under Section 20. 16. The second contention-may be considered first. There is no doubt that Sections 8 and 20 of the Indian Arbitration Act provide for alternative remedies. Section 8 is to be found in Chap. 2 of the Act which relates to arbitration without the intervention of the Court while Section 20 is to be found in Chap. III and relates to arbitration with the intervention of a Court where there is no suit pending. Ch. IV of the Act provides for arbitration with the intervention of the Court where there is a suit pending. Originally, therefore, the occasion for invoking Section 8 would arise if the arbitration is to be done outside the Court and any of the contingencies mentioned in that section come into existence. Ch. IV of the Act provides for arbitration with the intervention of the Court where there is a suit pending. Originally, therefore, the occasion for invoking Section 8 would arise if the arbitration is to be done outside the Court and any of the contingencies mentioned in that section come into existence. Section 20 of the Act has, however, to be resorted to when the entire arbitration proceedings are intended to be done through the intervention of the Court. Cl. 4 of Section 20 provides that "If no sufficient cause has been shown, the Court shall order t the agreement to be filed and shall itself appoint an arbitrator." The arbitrator who is to be appointed under this clause must be one whom the parties themselves have appointed either under the agreement itself or otherwise. If, however, that is not possible because the parties cannot agree upon any particular arbitrator, the reference has to be made to an arbitrator appointed by the Court. The clause thus provides for a case in which an agreement of reference has been filed but the parties have neither appointed an arbitrator not are agreeable to any particular person for acting as an arbitrator. This is exactly the situation at present. Here there was admittedly an agreement of reference to arbitration. We have held that a dispute has arisen which is to be referred to arbitration. It is also common ground that the parties here have not appointed an arbitrator either in the agreement itself or otherwise. They are not agreeing to the appointment of any particular person. Under Cl. 4 of Section 20, therefore, the reference can be made after the agreement has been filed to an arbitrator appointed by the Court. 17. Cl. (5) of Section 20 also leads to the same conclusion. According to it the proceedings under Section 20 are to be in accordance with and to be governed by the other provisions of the Act so far as they can be made applicable. This attracts Section 8 of the Indian Arbitration Act also and so far as it can be made applicable it can be utilised even in proceedings under Section 20. Thus reading Cls. This attracts Section 8 of the Indian Arbitration Act also and so far as it can be made applicable it can be utilised even in proceedings under Section 20. Thus reading Cls. (4) and (5) of Section 20 along with Section 8 the result that emerges is that after an agreement has been filed and the question of appointing an arbitrator arises, even if the agreement provides that the arbitrator is to be appointed with the consent of both the parties, if that consent is not forthcoming, it is open to the Court to appoint an arbitrator. 18. The argument that because in the agreement it was provided that the arbitrator will be appointed with common consent it is not permissible for the Court to appoint another arbitrator must, in our opinion, be rejected. Two things are to be borne in mind in this connection. In the first place the appellants interpretation of the agreement that it definitely excluded the appointment of an arbitrator in respect of whom both the parties did not agree does not appear to be correct. It is not possible to infer from the words of the clause relating to the filing of the suit in Kanpur Court that the parties intended that there was to be no reference to arbitration at all in case one of the parties did not agree to the arbitrator nominated by the other. This interpretation is also likely to render the agreement of arbitration practically nugatory because it will in that case be left entirely at the mercy of one party who can defeat it simply by refusing to consent to the appointment of an arbitrator nominated by the other party. As we read the agreement the primary intention of the party appears to be to first try to get the dispute decided by an arbitrator and to resort to the court at Kanpur only if the other course was not possible. It cannot be said that the intention was to have the matter decided only by a particular arbitrator and that the reference was to fall through if no agreement was arrived at about the personnel of the arbitrator. We are, therefore unable to accept the argument that because the parties could not agree to any particular arbitrator, the arbitration clause ceased to come into force and it was not open to the court to appoint any other arbitrator. We are, therefore unable to accept the argument that because the parties could not agree to any particular arbitrator, the arbitration clause ceased to come into force and it was not open to the court to appoint any other arbitrator. 19. It is, conceded that the case of a named arbitrator stands on a stronger footing. If there is an agreement naming a particular arbitrator and for any reason that arbitrator ceases to be available the question is if the court can appoint an arbitrator in his stead. Formerly Sch. 2 C. P. C. in para. 17 contained a provision similar to that of Section 20 of the present Arbitration Act. Under that provision it was held in Bhagwan Das v. Gurdayal, 1921 ALJ 823 that the Court could appoint a new arbitrator instead of the one named by the parties. This case was followed with approval in Fazal Ilahi v. Munshi Prag Narair, ILR 44 All. 523: 20 ALJ 327 and the same opinion appears to have been taken by a Full Bench of the Madras High Court in Satyanarayanmurthi v. Venkataramanamurthi, ILR 1948 Mad. 837 : 1948 ALR Mad. 312. It is true that the Patna High Court in Tara Prasad Baliasey v. Baijnath Prasad Baliasey, ILR 19 Pat. 927 and the Calcutta High Court in Rajani Kanta Karati v. Panchanan Karati, AIR 1937 Calcutta 388 took a different view, but we are bound by the two earlier decision of our own Court. In view, of those decisions it is not possible to accept the contention of the learned counsel for the appellant that the court acting under Cl. (4) of Section 20 had no power of appointing an arbitrator because the appellant did not agree to an arbitrator nominated by the respondent No. 1 and both the parties could not agree to the appointment of a particular person as arbitrator. The words of Cl. (4) of Section 20 appear to us to be wide enough to cover the present case. If, therefore, the parties cannot agree to any arbitrator, we think the court has power to refer the case to an arbitrator appointed by it. 20. The words of Cl. (4) of Section 20 appear to us to be wide enough to cover the present case. If, therefore, the parties cannot agree to any arbitrator, we think the court has power to refer the case to an arbitrator appointed by it. 20. In view of what has been said above, it appears to us that there being agreement of reference to arbitration and there also being a dispute arising out of a contract which was to be referred to arbitration, the learned Civil Judge was justified in directing the agreement of reference between the appellant and the respondent No. 1 to be filed. His further direction that the ease be referred to Sri Ram Bilas Agarwal as arbitrator is, however, based on his view that because the respondent No. 1 at one stage nominated Sri Ram Bilas Agarwal and required the appellant to consent to his appointment within a period of three days, as the appellant did not sent any reply within the limited period he could be presumed to have consented to the appointment of Sri Ram Bilas Agarwal. In our opinion this inference about the presumed consent was not justified. We are doubtful whether the notice by which the nomination of Ram Bilas Agarwal had been made was actually served on the appellant. The one notice the Civil Judge has relied on is a notice dated the 28th of August 1957 which was not addressed to the appellant but was addressed to one of the other respondents, namely, Yasodanandan. In any case if action had been taken under Section 8 of the Arbitration Act at least fifteen days notice would have been required. The respondent No, 1 could not force the appellant to give his consent within a period fixed by him and could not urge with any justification that if no reply was sent to that notice, the consent of the appellant was to be presumed. We think that the proper course in the present case would be that after the filing of the agreement of reference to arbitration the parties must be required to agree to a particular arbitrator. If such agreement is arrived at, the dispute will be referred to that arbitrator for decision. If no such agreement is possible the court should appoint an arbitrator and refer the dispute to him. 21. The appeal is, therefore, allowed in part. If such agreement is arrived at, the dispute will be referred to that arbitrator for decision. If no such agreement is possible the court should appoint an arbitrator and refer the dispute to him. 21. The appeal is, therefore, allowed in part. The portion of the impugned order directing the reference to be filed in court is affirmed, but the direction that the reference be made to Sri Ram Bilas Agarwal as arbitrator is set aside. The case will go back to the learned Civil Judge for proceedings in the manner indicated in this judgment. 22. In the circumstances of the case the parties to this appeal will bear their own costs. 23. The cross-objection is dismissed with costs.