KRISHNAGOUDA v. BHIMANGOUDA VENKANAGOUDA — 1971 DIGILAW 77 (KAR)

( 1 ) THIS is a second appeal by the plaintiffs against the decree passed by the District Judge, Belgaum, in CA. No. 34 of 1965 confirming the decree passed by the Civil Judge, Sr. Dn , Belgaum, in Spl. S. No1/1956. ( 2 ) THE plaintiffs biought the suit for setting aside the decree dated 28th of June 1948 passed m Sol. S. No. 56/1947 on the Arbitration award dated 29th of December 1946. ( 3 ) THE case of the plaintiffs is that when they were minors, a dispute was referred to the arbitrators in regard to matters pertaining to the partition of the joint family properties of the family and adoption of Krishnagouda, defendant-6, by Chinnawwa, defendant-7. As the plaintiffs were minors, their fathei Bhimangouda, defendant-2 acting as their guardian executed the deed of reference, Ext. 63, on 29th of December 1945. The arbitrators accepted the same and entered on the reference on the same day. They were not able to make an award within the prescribed period of four months. They actually made the award on 29th of December 1946 and gave notice of the same to all the parties. On 30th of December 1946 all the parties who had signed the deed of reference filed a joint purshis, Ext. 71, giving their consent to the award. The award was duly registered. On the 6th of February 1947, Ramangouda Hulkoti, one of the arbitrators, filed the award in the Court of the Civil Judge, Sr. Dn. , Belgaum, praying for a decree being passed in terms of the award. The said proceeding was registered as Spl. S. No. 56/1947. Krishnagouda and Chinnawwa referred to above were shown in the position of plaintiffs in that suit and the present appellants and others were shown as defendants. The notice of the filing of the award was issued to all the parties. Bhimanagouda, the father of the appellants, on his behalf as well as on behalf of his minor sons, the appellants, filed his objections as per Ext. 62. The others had no objections for decree being passed in terms of the award. One of the objections raised by the appellants' father was that no decree could be passed in terms of the award as the same was not made within the time allowed by law. He, however, remained absent and was placed ex-parte. 62. The others had no objections for decree being passed in terms of the award. One of the objections raised by the appellants' father was that no decree could be passed in terms of the award as the same was not made within the time allowed by law. He, however, remained absent and was placed ex-parte. On 28th of June 1948, the Court directed that the award be filed and a decree be drawn in accordance with the award. A decree was accordingly drawn. Thereafter, the appellants and another filed Spl. S. No. 90 of 1951 against Bhimanagouda, the father of the appellants and others for partition and possession of their share in the family properties. That suit was withdrawn on the 21st of August 1952 with liberty to file a fresh suit on the same cause of action on condition that 1 4th costs are paid by the plaintiffs to defendants 2 to 5 in separate sets. It is thereafter that the present suit out of which this second appeal arises was instituted by the plaintiffs. ( 4 ) THE case of the plaintiffs in the present suit is that the arbitrators had no jurisdiction to make the award after expiry of four months, inasmuch as the time for making the award was not extended by the Court under S. 28 of the Arbitration Act (hereinafter called the 'act' ). They, therefore, contended, that the award is illegal and void and that consequently, the decree made on the basis of such a non-existent award is liable to be set aside. They also pleaded that the decree passed without the sanction of the Court under Order 32, Rule 7 of the CPC. is bad. The appellants' father and their brother defendants 2 and 8, supported the plaintiff's case. The other defendants resisted the suit on various grounds. They contended that the award passed is legal and valid and binding on the appellants. They contended that the present suit is barred under Ss. 32 and 33 of the Indian Arbitration Act. They also pleaded that the decision in spl. S. No. 56/1947 operates as res judicata. It was also asserted that as the costs were not paid by the plaintiff?; before the institution of the present suit which was imposed as a condition at the time of withdrawing the previous suit, Spl. 32 and 33 of the Indian Arbitration Act. They also pleaded that the decision in spl. S. No. 56/1947 operates as res judicata. It was also asserted that as the costs were not paid by the plaintiff?; before the institution of the present suit which was imposed as a condition at the time of withdrawing the previous suit, Spl. S. No. 90/1951, the present suit is barred under order 23, Rule 1 of the CPC. They also raised the plea of limitation and estoppel. ( 5 ) THE parties did not lead any oral evidence in the case. On the basis of the material placed and the arguments advanced, the trial Court dismissed the plaintiffs' suit. The trial Court held that the suit is not barred by S. 32 of the Act. It held that the suit is barred by res judicata in view of the decision in Spl. S. No. 56/1947. It further held that the present suit is not maintainable as the costs which were imposed as a condition precedent at the time of withdrawing the previous suit were not paid before the institution of the present suit. It also held that there is no force in the contention of the plaintiffs that the decree passed in Spl. S. No. 56/ 1947 is bad for want of sanction under Order 32, Rule 7 of the CPC. ( 6 ) BEING aggrieved by the decree passed by the Civil Judge, Sr. Dn. , belgaum, the plaintiffs preferred CA. No. 34 1965 in the Court of the Principal district Judge, Belgaum. The learned District Judge dismissed the appeal. Disagreeing with the trial Court, the learned District Judge held that the suit is barred under S. 32 of the Act. Hence, this second appeal by the plaintiffs. ( 7 ) SRI K. I. Bhatta, the learned Counsel for the appellants contended that the finding recorded by the learned District Judge that the suit is barred under S. 32 of the Act is not in accordance with law. He firstly contended that S. 32 has no application to the present case, inasmuch as the plaintiffs do not seek in the present suit any decision upon the existence, effect or validity of the award or to set aside, amend, modify or in any way to affect the award. I do not find any substance in this contention. He firstly contended that S. 32 has no application to the present case, inasmuch as the plaintiffs do not seek in the present suit any decision upon the existence, effect or validity of the award or to set aside, amend, modify or in any way to affect the award. I do not find any substance in this contention. The plaintiffs have prayed for the setting aside of the decree on the ground that there was no valid award in existence on the basis of which a decree could have been passed. Therefore, without affecting the award, which is the basis for the decree, no relief can be granted to the appellants in this case. In paragraph 5 of the plaint, the plaintiffs have enumerated all the grounds on the basis of which the plaintiffs claim relief in the suit paragraph 5 reads as follows : " The plaintiffs submit that the award dated 29-12-1946 and the decree in Special Suit No. 56 of 1947 passed in pursuance of the award may kindly be set aside for the following among other grounds:. . . " it is therefore clear from the plaint that what the plaintiffs really seek is the setting aside of the award dt 29-12-1946 and the decree passed on the basis of the said award. There is therefore no substance in the contention of Sri K. I. Bhatta that the plaintiffs are not seeking any relief which affects the award. In substance the plaintiffs are claiming that the award as well as the decree passed on such award be set aside. ( 8 ) SRI Bhatta, the learned Counsel for the appellants next contended that the bar contained in S. 32 of the Act does not apply to the present case as the contention of the plaintiffs is that in law no award came into existence which could afford a basis for making a decree. Sri Bhatta submitted that the award was not made by the arbitrators within a period of four months prescribed in Sch. I, Rule 3 of the Act. Sri Bhatta submitted that the award was not made by the arbitrators within a period of four months prescribed in Sch. I, Rule 3 of the Act. As the time for the making of the award was not extended by S. 28, he contended that the arbitrators became functus officio after the expiry of the period of four months and thai therefore what was produced in the Court by the arbitrators as an award was not in law an award at all but a trash of paper which in law is not an award. The document produced by the arbitrator purporting to be an award, the same having been made after the prescribed period of four months without there being an extension of time under S. 28, according to Sri Bhatta, is a nullity Sri Bhatta further submitted that the Court functioning under the Arbirtaticn Act had therefore no jurisdiction to pass the decree. In other words, Sri Bhatta submitted that as no award in law came into existence, the bar contained in S. 32 is not at all attracted. The expression 'award' has been denned in S. 2 (b) of the Act as meaning an arbitration award Rule 3 of Sch I provides that the arbitrators shall make the award within a period of four months after entering on the reference or after haying been called upon to act by notice in writing from any party to the arbitration agreement or within such extended time as the Court may allow. S. 28 of the Act empowers the Court to enlarge the time for making the award whether the time for making the award has expired or not and whether the award has been made or not. ( 9 ) IT is therefore clear that even if an award is made after the prescribed period of four months, the Court can exercise the power of enlarging the time for making the award under S. 28. If the time is thus extended after the award is made beyond the prescribed period of four months, it cannot be disputed that such an award is a valid award and can be enforced and given effect to as such. S. 14 provides for the filing of the award in the Court. If the time is thus extended after the award is made beyond the prescribed period of four months, it cannot be disputed that such an award is a valid award and can be enforced and given effect to as such. S. 14 provides for the filing of the award in the Court. After the award is filed under S. 14, the Court is required to give notice to the parties of the filing of the award. Sec. 17 provides that where the Court sees no cause to remit the award or any of the matters referred to the arbitration for re-consideration or to set aside the award, the Court shall after time for making an application to set aside the award has expired, or such application having made, after refusing it, proceed to pronounce judgment according to the award, and upon judgment so pronounced a decree shall follow, and no appeal shall lie from such decree except on the ground that it is in excess of, or not otherwise in accordance with, the award. Art. 158 of the Limitation Act, 1908, provided a period of 30 days for making the application for seating aside the award. It is therefore clear that once on award is filed in Court and notice of the filing of the award is given to the parties, the Court is required to pass a decree on the basis of the said award, unless the Court finds good reasons to remit the award or anv of the matters referred to arbitration for re-consideration or to set aside the award The party to whom notice is given of the filing of the award can make an application, within the prescribed period to the same Court where the award is filed. 1o set aside the award. If such an application tor setting aside the award is refused and the Court does not second reasons to remit the award or any of the matters referred to arbitration for reconsideration or to set aside the award, the Court has to pronounce the judgment according to the award. Upon such judgment a derree has to follow. S. 17 of the Act therefore contemplates the consideration of all matters specified in that section and the applications that have to be made within the prescribed time for setting aside the award. Upon such judgment a derree has to follow. S. 17 of the Act therefore contemplates the consideration of all matters specified in that section and the applications that have to be made within the prescribed time for setting aside the award. ( 10 ) WHILE S. 30 enumerates the ground for setting aside the award, S. 33 provides for application being made challenging the existance or validity of arbitrattion agreement or an award or to have the effect of either determined. Sub-sec. (3) of S. 31 provides that application regarding the conduct of arbitration proceedings or otherwise arising out of such proceedings shall be made to the Court where the award has been or may be, filed, and to no other Court S. 32 bars suits on anv ground whatsoever for a decision upon the existence, offset or validity of an arbitration agreement or award; nor shall any arbitration agreement or award be enforced set aside. Amended, modified or in any way affected otherwise than as provided in thp Art It is clear from these provisions that the Act is a self-contained code and provides for a complete machinery for adjudication on the questions relation to existance validity and effect of an arbitration agreement or award. All the disputes in regard to the existence, validity and effect of an arbitration agreement or award have to be adjudicated upon under the Arbitration Act by following the procedure prescribed therein. If a party to the award desires to challenge the award, he his to resort to the procedure prescribed under the Act and his remedy to institute a suit in that behalf is clearly barred by S. 32 of the Act. The Supreme court which had an occasion to consider the scope and effect of Ss. 31, 32 and 33 of the Act, in Jawhar Lal Barman v. Unon of India, AIR 1962 SC 378 has laid down in paragraphs (5), (6) and (7)of its judgment as follows :" (5) The question of jurisdiction raised by the appellant has to be answered in the light of the contruction which can be reasonably placed on the material provisions of Ss. 32 and 33 of the Act. It may be conceded at the outset that the question thus raised presents some difficulty. Ss. 32 and 33 of the Act. It may be conceded at the outset that the question thus raised presents some difficulty. Ss. 32 and 33 read thus: (6) In appreciating the effect of these two provisions it would be relevant to remember that the object of the Legislature in enacting the two sections quite clearly was to prevent the abuse of the process of the Court. Before the present Act was passed experience showed that unscrupulous and dishonest parties to the arbitration agreements frequently chose to deny the existence of the said agreements even after the arbitration proceedings had concluded and ended in awards and that tended to make all arbitration proceedings futile. More often than not these pleas ultimately failed but it meant considerable delay and waste of time and substantial expense. That is why Ss. 32 and 33 have been enacted with the object of bringing the relevant disputes for decision before the specified Courts in the form of petitions. It is significant that under S. 31 (2) of the Act all questions regarding the validity, effect or existence of an award or an arbitration agreement between the parties to the agreement or persons claiming under them shall be decided by the Court in which the award under the agreement has been, or may be, filed, and by no other Court. Indeed, S. 2 (c) defines a Court as meaning a Civil Court having jurisdiction to decide the questions forming the subject-matter of the reference if the same had been the subject-matter of a suit, but does not, except for the purpose of arbitration proceedings under S. 21, include a Small Cause court. Therefore, seated broadly, it would be correct to assume that the main object of introducing the new provisions of Ss 31, 32 and 33 was to entrust the decision of the relevant disputes to the specified Court and to require the parties to bring the said disputes for the decision of the said Court in the form of petitions Remedy by a regular suit is intended to be excluded. (7) S. 32 creates a bar against the institution of suits, and it provides that if the existence, effect or validity of an arbitration agreement or award is in dispute on any ground whatsoever no suit shall lie for the adjudication of the said dispute. (7) S. 32 creates a bar against the institution of suits, and it provides that if the existence, effect or validity of an arbitration agreement or award is in dispute on any ground whatsoever no suit shall lie for the adjudication of the said dispute. It also provides that no suit shall lie to set aside, amend or modify or in any way affect an arbitration agreement or an award. It would be noticed that the clause "on any ground whatsoever " is very wide and it denotes, inter alia, that if the existence or validity of an arbitration agreement is questioned on any ground whatever it cannot be the subject-matter of a suit; the said dispute shall be tried as provided in this Act. Thus, there can be no doubt that if 'a party affirms the existence of an arbitration agreement or its validity it is not open to the party to file a suit for the purpose of obtaining a declaration about the existence of the said agreement or its validity. Such a suit in terms is barred by s. 32. This position is not disputed. The bar to the suit thus created by S. 32 inevitably raises the question as to what remedy it is open to a party to adopt in order to obtain an appropriate declaration about the existence or validity of an arbitration agreement and it is on the decision of this question that the parties are at issue before us. " ( 11 ) WHAT has been stated by their Lordships specifically in regard to the case of an arbitration agreement applies with equal force to the award, inasmuch as S. 32 applles both to arbitration agreements as well as to awards. In view of the authoritative pronouncement of the Supreme Court, it is clear that no suit shall lie on any ground whatsoever for a decision upon the existence, effect or validity of an award nor shall such award be affected otherwise than as provided in the Act. In view of the authoritative pronouncement of the Supreme Court, it is clear that no suit shall lie on any ground whatsoever for a decision upon the existence, effect or validity of an award nor shall such award be affected otherwise than as provided in the Act. But Sri Bhatta contended, relying upon another decision of the Supreme Court in Hari Shankare Lal v. Shambu Nath, AIR 1962 SC 78 that a suit in which it is asserted that the alleged award is a nullity, the same having been made after the prescribed period of four months without there being any extension of time for making the same under S. 28, is not barred by S. 32 of the Act. In support of his submission, sri Bhatta relied upon the following observation in the judgment of Justice Subba Rao (as he then was) in paragraph ii:"in that event, after the expiry of the said 4 months the arbitrators become functus officio, unless the period is extended by Court under S. 28 of the Act ; such period may also be extended by the Court, though the award has been factually made. " ( 12 ) THOUGH their Lordships of the Supreme Court have observed that the arbitrators become functus offtcio unless the period is extended by the Court under S. 28 of the Act, their Lordships have not stated that such an award made by the arbitrators is without jurisdiction and therefore a nullity. In the separate concurring judgment of Justice Raghubar Dayal, hit, Lordship has observed as follows in paragraph 10 :"in this view, it is not necessary to consider whether the notice to act served niter the period of four months had expired is a good notice or not or whether the arbitrators are competent to act in expectation or getting the time extended by the Court or not. I am, however, inclined to the view that in view of the provisions of S. 28, it is not possible to say that the arbitrators are not competent to act after the expiry of the period of four months from the date of their entering on the reference. The provisions of this section contemplate the arbitrators having made the award beyond the period of limitation without having previously obtained the order of the Court extending the time for making the award. The provisions of this section contemplate the arbitrators having made the award beyond the period of limitation without having previously obtained the order of the Court extending the time for making the award. This implies that the arbitrators would have carried on their proceedings and would have made the award subsequent to the expiry of the period during which they should have made the award. The competency of the arbitrators to art in pursuance of the reference arises out of the reference made by the parties and is not dependent on the period during which they ought to make the award. So long as the power vested in them to decide the dispute between the parties is not withdrawn, thev continue to be competent to act on the reference in expectation that the rperiod for making the award would be extended by the Court. " ( 13 ) IN view of these observations contained in the judgment of the Supreme court relied upon by Sri Bhatta, his contention that the Supreme Court has laid down that an award made after the prescribed period of four months in the absence of an extension of time under S 28 is a nullity and therefore, void, cannot be accepted. After the plaintiffs were served with the notice of the filing of the award, they were entitled to make an application for setting aside the award filed in the Court on the ground that the award has not been made bv the arbitrators within the prescribed period of four months. It is onlv by resorting to the procedure prescribed for making an application in this manner that the plaintiff were entitled to secure appropriate relief and not by filing a suit as they have done in the present case. It is necessary to note that in Hari Shankar lal's case (2) relied upon by Sri Bhatta, an application was filed under ss. 14 (2) and 17 of the Act praying that the award be filed and be made a rule of the Court After notices were served on the parties, the parties affected challenged the award in those very proceedings on the ground that the award has been made long ai'ter the prescribed period of four months. It is on that ground that they prayed that no decree should be passed on the basis of the award. It is on that ground that they prayed that no decree should be passed on the basis of the award. The objections were overruled by the court of first instance, and a decree in terms of the award was made. On appeal, the High Court came to the conclusion that the award was made after the expiry of the prescribed period and on that finding set aside the decree passed by the Court of first instance and dismissed the suit. Their lordships of the Supreme Court upheld the said decision of the High court. It is therefore clear that the case dealt with by their Lordships of the Supreme Court did not arise out of a suit, but arose out of the proceedings under the Act. If the challenge to the award, on the ground that the same is a nullity, the same having been made after the prescribed period of four months, could be made by way of a suit, their Lordships of the supreme Court would not have affirmed the decision of the High Court which dismissed the suit after setting aside the decree made under S. 17 of the Act. The decision of the Supreme Court in Han Shankar Lal's case (2) relied upon by Sri Bhatta clearly establishes that a challenge to the award on the ground that the same has been made beyond the prescribed period of four months has also to be made by means of an application under the arbitration Act and not by means of a separate suit. S. 32 clearly provides that no suit shall lie on any ground whatsoever for a decision upon the existence of the award among other matters. When Sri Bhatta contends that the arbitrators had no jurisdiction to make an award after the period of four months, he really contends that no award in the eye of law came into existence though a document purporting to be an award was factually made by the arbitrators. He therefore submits that the decree made by the Court on the basis that there really existed an award in the eye of law is invalid and therefore liable to be set aside. A dispute of this type, in my opinion, is really in regard to the existence of the award. He therefore submits that the decree made by the Court on the basis that there really existed an award in the eye of law is invalid and therefore liable to be set aside. A dispute of this type, in my opinion, is really in regard to the existence of the award. As the suit is for a decision upon the existence of the award, the suit, in my opinion, is clearly barred by S. 32 of the Act. ( 14 ) AS I am agreeing with the finding of the learned District Judge that the suit is barred under S. 32 of the Act, this appeal is liable to be dismissed. It is therefore unnecessary to consider the correctness of the other findings recorded by the learned District Judge. ( 15 ) FOR the reasons stated above, this appeal fails and the same is dismissed with costs. --- *** --- .