HATHISING KALYANSANG v. JASUBHA DANSANGJI — 1972 DIGILAW 14 (GUJ)

S. N. PATEL, J. ( 1 ) THIS Civil Revision Application No. 802 of 1970 is Sled against the order dated 13th February 1970 rejecting the application dated 13 January 1970 filed by the defendant requesting the learned Civil Judge to refer the subject-matter of Civil Suit No. 19 of 1968 to arbitration in view of arbitration agreement dated 4th January 1970 entered into between the parties pending the suit. ( 2 ) CIVIL Suit No. 90 of 1968 was filed on 5th April 1968. Pending the suit the plaintiff and the defendant entered into arbitration agreement with regard to subject-matter of the suit on 4th January 1970. On 13th January 1970 the plaintiff filed application Exh. 25 along with arbitration agreement dated 4th January 1970 and requested the learned Judge to pass an order of reference according to the agreement. The defendant resisted the said application and inter alia contended that he did not agree to refer the matter to arbitration and therefore the order of reference should not be passed. The learned Civil Judge observed that in view of provisions of sec. 21 of the Arbitration Act 1940 in a pending suit the court can pass an order of reference only if all the parties interested agree to refer the subject-matter of the suit to arbitration and they apply in writing to the court for an order of reference. In the present case there was an arbitration agreement with regard to the subject-matter of the suit between the parties. But the application for passing order of reference was made by the plaintiff alone and the defendant opposed the said application. The defendant did not consent for passing order of reference. Therefore no order could be passed. The learned Civil Judge rejected the application by order dated 13th February 1970. ( 3 ) THE present revision application Is filed by the original plaintiff against the aforesaid order dated 13th February 1970 rejecting application filed by the plaintiff for passing order of reference for arbitration with regard to subject-matter of the suit. In the present case the suit was filed on 5th April 1968. The plaintiff and the defendant entered into arbitration agreement on 4th January 1970 with regard to subject-matter of the suit pending the hearing of the suit. Chapter II of the Arbitration Act deals with arbitration without intervention of a court. In the present case the suit was filed on 5th April 1968. The plaintiff and the defendant entered into arbitration agreement on 4th January 1970 with regard to subject-matter of the suit pending the hearing of the suit. Chapter II of the Arbitration Act deals with arbitration without intervention of a court. Chapter III deals with arbitration with intervention of a court where there is no suit pending. Sec. 20 of the Arbitration Act provides where any persons have entered into an arbitration agreement before the institution of any suit with respect to the subject-matter of the agreement or any part of it and where a difference has arisen to which the agreement applies they or any of them instead of proceeding under Chapter II may apply to a court having jurisdiction in the matter to which the agreement relates that the agreement be filed in court. Sub-sec. (2) of sec. 20 of the Act provides that the application shall be in writing and shall be numbered and registered as a suit between one or more of the parties interested or claiming to be interested as plaintiff or plaintiffs and the remainder as defendant or defendants if the application has been presented by all the parties or if otherwise between the applicant as plaintiff and the other parties as defendants. Sub-sec. (3) of sec. 20 provides that the court shall direct notice of such application to be given to all the parties to the agreement other than the applicants requiring them to show cause within the time specified in the notice why the agreement should not be filed. Sub-sec. (4) of sec. 20 provides that where no sufficient cause is shown the court shall order the agreement to be filed and shall make an order of reference to the arbitrator appointed by the parties whether in the agreement or otherwise or where the parties cannot agree upon an arbitrator to an arbitrator appointed by the court. Sub-sec. (5) of sec. 20 provides that the arbitration shall proceed in accordance with and shall be governed by the other provisions of the Act so far as they can be made applicable. Sub-sec. (5) of sec. 20 provides that the arbitration shall proceed in accordance with and shall be governed by the other provisions of the Act so far as they can be made applicable. From the provisions of Chapters II and III of the Arbitration Act it is seen that where any persons have entered into an arbitration agreement before the institution of any suit with respect to the subject-matter of the agreement or any part of it and where a difference has arisen to which the agreement applies it is open to the parties or any party to the agreement to proceed under Chapter II of the Act or to make an application under sec. 20 of Chapter III of the Act. However if any legal proceedings are commenced by any party to an arbitration agreement against any other party to the agreement any party to such legal proceedings may at any time before filing the written statement or taking any other steps in the proceedings apply to the judicial authority before which he proceedings are pending to stay the proceedings and if satisfied that there is no sufficient reason why the matter should not be referred to in accordance with the arbitration agreement and that the applicant was at the time when the proceedings were commenced and still remains ready and willing to do all the things necessary to the proper conduct of the arbitration. Such authority may make an order staying the proceedings. Chapter IV provides for arbitration in pending suit. Sec. 21 provides that where in any suit all the parties interested agree that any matter in difference between them in the suit shall be referred to arbitration they may at any time before judgment is pronounced apply in writing to the court for an order of reference. Sec. 22 provides for appointment of an arbitrator. Sec. 23 provides for passing order of reference. Sec. 24 provides that where some one of the parties to a suit apply to have the matters in difference between them referred to arbitration in accordance with and in the manners provided by sec. Sec. 22 provides for appointment of an arbitrator. Sec. 23 provides for passing order of reference. Sec. 24 provides that where some one of the parties to a suit apply to have the matters in difference between them referred to arbitration in accordance with and in the manners provided by sec. 21 the court may if it thinks fit so refer such matters to arbitration (provided that the same can be separated from the rest of the subject-matter of the suit) in the manner provided in that section but the suit shall continue so far as it relates to the parties who have not joined in the said application and to matters not contained in the said reference as if no such application had been madesec. 25 provides that the provisions of the other Chapters shall so far as they can be made applicable apply to arbitrations under Chapter IV. Looking to the provisions of Chapter IV it is clear that Chapter IV provides for arbitration in pending suits. Under sec. 24 before the court can pass order of reference to arbitrations all the parties interested should have agreed that any matter in difference between them in a suit should be referred to arbitration and they all must apply in writing to the court for an order of reference. Looking to the scheme of sec. 21 it appears that in a pending suit the court can pass an order of reference only if all the parties interested agree with any matter in difference between them in the suit should be referred to arbitration and they apply in writing to the court for an order of reference. Two conditions must be satisfied before passing an order of reference in a pending suit in the court. (1) There must be an agreement between the parties interested that any matter in difference between them in the suit should be referred to arbitration and (2) All the parties must apply in writing to the court for an order of reference. IN the present case the agreement dated 4th January 1970 between the plaintiff and the defendant refers the subject-matter of the suit to the arbitration and therefore the first condition is satisfied. However the plaintiff alone has applied to the court for an order of reference. The defendant resisted the application and did not consent for an order of reference. IN the present case the agreement dated 4th January 1970 between the plaintiff and the defendant refers the subject-matter of the suit to the arbitration and therefore the first condition is satisfied. However the plaintiff alone has applied to the court for an order of reference. The defendant resisted the application and did not consent for an order of reference. Therefore the second condition is not satisfied. Therefore the court cannot pass an order of reference as requested by the plaintiff. Therefore the learned Civil Judge was right in not passing order of reference and rejecting the application filed by the plaintiff on the ground that the defendant did not consent for order of reference. In I. L. R. 29 Calcutta 167 Gulam Khan v. Muhammad Hasan the Privy Council considered the provisions with regard to arbitration in Civil Procedure Code (Act XIV of 1882 ). Their Lordships observed that the chapter in the Code of Civil Procedure on Reference to Arbitration (Chapter XXXVII) deals with arbitrations under three heads:-1 Where the parties to litigation desire to refer to arbitration any matter in difference between them in the suit. In that case all proceedings from first to last are under the supervision of the court2 Where parties without having recourse to litigation agree to refer their differences to arbitration and it is desired that the agreement of reference should have the sanction of the court. In that case all further proceedings are under the supervision of the court3 Where the agreement of reference is made and the arbitration itself takes place without the intervention of the court and the assistance of the court is only sought in order to give effect to the award. Thereaftertheir Lordships observed:- in cases falling under Head 1 the agreement to refer and the application to the court founded upon it must have the concurrence of all parties concerned and the actual reference is the order of the Court. FROM the above observations in the aforesaid judgment it is clear that in a pending suit before a court can pass an order of reference the agreement to refer and the application to the court founded upon it must have the concurrence of all parties concerned. Thus it is seen that without consent of the parties the court cannot pass order of reference even though the parties might have entered into an agreement for arbitration. Thus it is seen that without consent of the parties the court cannot pass order of reference even though the parties might have entered into an agreement for arbitration. In I. L. R. 54 Bombay 197 Dinkarrai Lakshmi Prasad v. Yeshvantrai Hariprasad the facts were that in August 1923 the applicant filed a suit being suit No. 3579 of 1923 against the respondent for winding up of the partnership business and for other consequential reliefs. The respondent took out a chamber summons under sec. 19 of the Indian Arbitration Act for stay of the suit in view of a clause of arbitration contained in the partnership agreement dated September 28 1917 In view of clause in the partnership agreement dated September 28 1917 the court made an order staying the suit on September 19 1923 Thereafter the parties did nothing and nothing happened until August 2 1927 when the parties entered into another agreement whereby all the matters in dispute and difference in suit No. 3579 of 1923 were referred to arbitration of two arbitrators. On August 5 1927 the suit came before the court. The parties appeared and it was stated to the court that all the matters in dispute and difference in the suit were referred to arbitration. Thereupon the court dismissed the suit. Thereafter the applicant filed application and requested that the agreement in writing dated August 2 1927 between him and the respondent referring the matters in dispute between them to arbitration be filed in the court and that an order of reference to the arbitrators be made. The application was made under paragraph 17 of seconds schedule of Code of Civil Procedure (Act V of 1908 ). Paragraph 17 is similar to sec. 20 of the Arbitration Act. The court considered the question whether the agreement of reference pending the suit between the parties made without the intervention of the court could be allowed to be filed in accordance with provisions of paragraph 17 of second schedule of Code of Civil Procedure. In the aforesaid case it is held that an agreement to refer to arbitration matters in difference between the parties in a pending suit without the order of the court under paragraphs 1 to 3 of the second schedule is illegal and cannot be filed in the court under paragraph 17 of that schedule. In the aforesaid case it is held that an agreement to refer to arbitration matters in difference between the parties in a pending suit without the order of the court under paragraphs 1 to 3 of the second schedule is illegal and cannot be filed in the court under paragraph 17 of that schedule. If in a pending suit the parties have entered into an agreement to refer the difference between them to arbitration and thereby attempt to oust the jurisdiction of the court they could only proceed about it in the manner laid-down by the II Schedule of the Civil Procedure Code and not otherwise. Mere agreement to refer disputes in a pending suit to arbitration cannot be treated as an adjustment of the suit. Provisions of Chapter IV of the Arbitration Act 1940 are similar to paragraphs 1 to 3 and sec. 20 is similar to the II Schedule to Civil Procedure Code (Act V of 1908) and sec. 20 of the Arbitration Act is similar to paragraph 17 of that schedule. Applying the observations in the aforesaid decision it will be clear that the agreement in the present case to refer to arbitration matters in difference between the parties in the pending suit without order of the court under sec. 21 in Chapter IV of the Act is illegal and cannot be filed in the court under sec. 21 of the Act. If the parties in the pending suit have entered into an agreement to refer the difference between them to arbitration and thereby attempt to oust the jurisdiction of the court they could only proceed about it in the manner laid-down by the provisions of the Arbitration Act and not otherwise. In the aforesaid decision while considering the question of hardship the learned Judge has observed that if one of the parties to an arbitration agreement made in a pending suit backed out the suit would go on. The suit is pending before the court and therefore there is no hardship. In 43 Indian Appeal 1 Thakur Umed Singh and another v. Sobhag Mal Dhadha and another the facts were that all the parties to a pending suit including a minor party by his guardian ad litem signed an agreement to refer the matters in difference to arbitrators. An application to the court for an order of reference was filed under sec. 1. An application to the court for an order of reference was filed under sec. 1. of Schedule II of the Code of Civil Procedure 1908 The parties including the guardian appeared before the Judge and produced the agreement. Thereafter an order was made by the court. It was contended that sec. 1 of Schedule II of the Civil Procedure Code required application in writing by the parties and there was no such application in writing and therefore order of reference was bad. In the aforesaid decision in the context of those facts it is observed that the II Schedule to the Code of Civil Procedure which provides by sec. 1 that where the parties to a suit have agreed that the matter in difference shall be referred to arbitration they may apply in writing to the court for an order of reference does not require that the writing should be of necessity be signed. The guardian was in court and assented to the application. The requirements of sec. 1 of Schedule II to the Civil Procedure Code are complied with. In the aforesaid decision it is clear that the time when court passed the order of reference all the parties were present before the court and they assented to the order of reference. From the aforesaid decision it is clear that the parties must assent to the passing of order of reference and it is not necessary that the application for making the reference should be signed by all the parties. In I. L. R. 27 Calcutta 61 Shama Sundaram Iyer v. Abdul Latif and others the facts were that the parties had assented to passing of an order of reference to arbitration and only objection raised was that the application to the court for referring the case to arbitration was not made in writing. It was contended that the court acquired jurisdiction to refer a case to arbitration only upon the application being made to it In writing and not otherwise. It was held that the objection was not sound. The court acquired jurisdiction to refer the case to arbitration upon an application whether in writing or oral being made to it by parties or their duly authorised pleaders or advocates. In A. I. R. 1959 Punjab 617 Firm Khetu Ram Bashamber Dass v. Kashmiri Lal Rattan Lal Secs. It was held that the objection was not sound. The court acquired jurisdiction to refer the case to arbitration upon an application whether in writing or oral being made to it by parties or their duly authorised pleaders or advocates. In A. I. R. 1959 Punjab 617 Firm Khetu Ram Bashamber Dass v. Kashmiri Lal Rattan Lal Secs. 21 and 23 of the Arbitration Act were considered by the Full Bench of the Punjab High Court. It is observed Thus before any matter involved in a suit pending in a court can be referred to arbitration (a) there must be an agreement amongst all the parties interested that any matter in dispute between them in the suit shall be referred to arbitration; (b) if they come to such an agreement then they have to make an application in writing to the court concerned; and (c) thereafter the court has to pass an order referring the dispute to the arbitrator agreed upon between the parties. From these observations of the Full Bench of the Punjab High Court it is therefore clear that there must be agreement of arbitration between all the parties who are interested in the case and application for reference to the court must be made on behalf of the parties. If all the parties interested in the case do not consent to the passing of the order of reference by the court the reference made by the court is bad. In A. I. R. 1924 Allahabad 540 Mahabir v. Manohar Singh the facts were that in a pending suit on the date of hearing of the suit the pleaders for the parties stated that they were agreed to arbitration and wanted to refer the matter to a certain pleader. Their statements were recorded by the court and the reference was made in accordance with their agreement. The arbitrator made an award to which objection was thereafter taken that under paragraph 1 of II Schedule to the Code of Civil Procedure the agreement ought to have been made in writing. Their statements were recorded by the court and the reference was made in accordance with their agreement. The arbitrator made an award to which objection was thereafter taken that under paragraph 1 of II Schedule to the Code of Civil Procedure the agreement ought to have been made in writing. The contention was negatived and it was observed that record taken down of an oral agreement made by the parties or their pleaders was as much as a written application made by the parties or their pleaders themselves and the decisions in I. L. R. 27 Calcutta 61 (supra) and 43 Indian Appeal I. P. C. (supra) were relied upon. From the aforesaid discussion of the authorities cited at the 6ar it is clear that where in a pending suit there is an agreement of arbitration between the parties interested with regard to subject-matter of the suit all the parties must apply to the court for an order of reference. The court can pass an order of reference only after the aforesaid two conditions are satisfied. In the present case as pointed out hereinbefore the defendant had not applied to the court for passing an order of reference but has opposed the application for making the order of reference. The second condition required under sec. 21 of the Arbitration Act is not satisfied. Therefore the learned Judge was right in rejecting the application for passing order of reference. ( 4 ) IN the result the revision application fails and Rule is discharged with costs. .