Abdul Rahman v. Abdul Khalil — 1983 DIGILAW 280 (ALL)

ORDER P.N. Bakshi, J. - The respondent filed an application under S.8, Arbitration Act, for the appointment of an arbitrator to solve the dispute arising between the parties which was registered as case 273 of 1981 in the court of Civil Judge, Moradabad. On 15-9-1981, he also filed an application under S. 41, Arbitration Act read with O. XL R. I. C.P.C., for the appointment of receiver to take 'Against order of Dhani Ram, Addl. Civil Judge. Moradabad, D/- 12-11-1981. possession, custody and management of the property of the Firm. On 17-9-1981, an application was filed by the respondent for an ad interim injunction restraining the applicants from disposing of the property etc. of the Firm M/s. Abdul Rahman Abdul Qadir, Thakurdwara, district Moradabad. Both these applications were contested by the applicants on questions of facts as well as questions of law. 2. I have deliberately refrained from giving the detailed facts of the case as pleaded by the parties and have heard them only on the question of law. The sole legal point which has been canvassed is that under S. 8, Arbitration Act, the only jurisdiction which has been conferred upon a court, is the power to appoint an arbitrator or umpire. He has no jurisdiction to appoint a receiver or to issue an injunction order. I have informed the counsel for the parties that if necessary I shall hear them on the facts after the decision of this legal question. 3. Elaborate arguments have been urged on both sides and in order to deal with them, it will be necessary for me to analyse some of the relevant sections of the Arbitration Act, 1940. The scheme of arbitration envisaged in the Act contemplates three contingencies. Chapter II deals with arbitration without intervention of the court. Sections 3 to 19 are covered in this Chapter; Chapter III deals with arbitration with the intervention of the Court, where there is no suit pending. Section 20 deals with this situation, Chap. IV deals with arbitration in suits. Sections 21 to 25 pertain to this aspect. 4. Chap. V deals with certain general provisions. Chap. VI deals with appeals and Chap. VII deals with miscellaneous provisions. Section 41 of Chapter VII, and Sch. 2, framed thereunder would be be relevant for the purposes of the decision of the present question of law. 5. Sections 21 to 25 pertain to this aspect. 4. Chap. V deals with certain general provisions. Chap. VI deals with appeals and Chap. VII deals with miscellaneous provisions. Section 41 of Chapter VII, and Sch. 2, framed thereunder would be be relevant for the purposes of the decision of the present question of law. 5. Section 8, Arbitration Act, relating to the arbitration out of court defines the power of the Court to appoint an arbitrator or Umpire. It runs as follows : S. 8: Dower of Court to appoint Arbitrator or Umpire-11) In any of the following cases: a) Where an arbitration agreement provides that the reference shall be to one or more arbitrators to be appointed by consent of the parties, and all the parties do not, after differences have arisen. concur in the appointment or appointments: or (b) if any appointed arbitrator or umpire neglects or refuses to act, or is incapable of acting, or dies, and the arbitration agreement does not show that it was intended that the vacancy should not be supplied and the parties or the arbitrators as the case may he do not supply the vacancy: or (c) where the parties or the arbitrators are required to appoint an umpire and do not appoint him. any party may serve the other parties or the arbitrators, as the case may he with a written notice to concur in the appointment or appointments or in supplying the vacancy. (2) If the appointment is not made within fifteen clear days after service of the said notice, the court may on the application of the party who have the notice and after giving the other parties an opportunity of being heard, appoint an arbitrator or arbitrators or umpire, as the case may be, who shall have like power to act in the reference and to make an award as he or they had been appointed by consent of all parties." 6. A reading of this section indicates that where an arbitration agreement provides for a reference but the private parties cannot agree to the appointment of arbitrator or if any appointed arbitrator is incapable of acting or dies, etc. A reading of this section indicates that where an arbitration agreement provides for a reference but the private parties cannot agree to the appointment of arbitrator or if any appointed arbitrator is incapable of acting or dies, etc. and the parties do not supply the vacancy or the parties do not appoint an Umpire, then one of such parties may serve a written notice to the others to concur in the appointment of an arbitrator or to supply the vacancy. If the other parties do not agree within a period of 15 days, then it is open to such party to make an application to the court for this purpose and the court after giving opportunity to the parties shall appoint an arbitrator or Umpire, as the case may be. Such an arbitrator shall have the power to act in the reference and make an award as if he was appointed with the consent of all the parties. It has been urged by the applicants' counsel that under S. 8, the only power vested in the court in cases of private arbitration is to appoint an arbitrator. The proceedings that follow are all conducted outside court in the presence of the private parties. Section 13 gives the details of the power of the arbitrator. These powers are as follows : Section 13. Power to arbitrator : The arbitrators or Umpire shall, unless a different intention is expressed in agreement have power to (a) administer oath to the parties and witnesses appearing: (b) state a special case for the opinion of the Court on any question of law involved, or state the award wholly or in part, in the form of a special case of such question for the opinion of the Court: (c) make the award conditional or in the alternative: (d) correct in an award any clerical mistake or error arising from any accidental slip or omission: (e) administer to any party to arbitration such interrogatories as may, in the opinion of the arbitrators or umpire he necessary. In other words while conducting the arbitration proceedings, the arbitrator authorised to act in the manner prescribed therein. In other words while conducting the arbitration proceedings, the arbitrator authorised to act in the manner prescribed therein. After these proceedings are completed by the arbitrator, he has to sip the award under S. 14 of the Act and give notice to the parties of the making and signing thereof, the amount of fees, a charges payable in respect of the arbitration. At this stage S. 14 of the may be quoted. S. 14 : Award to be signed and filed - (1) When the arbitrators or umpire have made their award, they shall sign it and shall give notice in writing to the parties of the making and signing thereof and of the amount of fees and charges payable in respect of the arbitration and award. (2) The arbitrators or umpire shall, at the request of any party to the arbitration agreement or any person claiming under such party or it so directed by the court and upon payment of the fees and charges due in respect of the arbitration and award and of the costs and charges of filing the award, cause the award or it singed copy of it together with any depositions and documents which may haze been taken and prosed before them, to be filed in coon and the Court shall thereupon give notice to the parties of the filing of the award. (3) Where the arbitrator or umpire state a special case under cl. (b) of S. 13. the Court after giving notice to the parties and hearing them shall pronounce its opinion thereon and such opinion shall be added to, and shall form part of the award. Under sub-s. 121 of S. 14 quoted above, a party to the arbitration agreement has to apply to the court again for a direction to the arbitrator to file the award in court along with the depositions and documents. etc. and the court shall then give notice to the parties of the filing of the award. Section 15 then deals with the powers of the court to modify the award. Section Ifs deals with the power of the court to remit an award from time to time to the arbitrator for reconsideration. Section 17 authorises the court to proceed to pronounce judgments in accordance with award. A decree follows the judgment so pronounced. Section 15 then deals with the powers of the court to modify the award. Section Ifs deals with the power of the court to remit an award from time to time to the arbitrator for reconsideration. Section 17 authorises the court to proceed to pronounce judgments in accordance with award. A decree follows the judgment so pronounced. It is significant to note that after the filing of the award in court, under S. 14, Arbitration Act if the court is of the opinion that a party is taking steps to delay or to obstruct the execution of any decree, then such court has been empowered to pass interim orders under the provisions of S. 18, Arbitration Act. This provision lends support to the view that the power to pass interim order has been vested in the court only after the award of the arbitrator has been filed before it on the completion of the private arbitration. 7. A consideration of the aforesaid provisions makes it clear that in arbitration's out of court, the private parties play the leading role. The court only comes into the picture twice viz., once when it appoints an arbitrator and for the second and last time when it makes the arbitration award given by the arbitrator a rule of the court. All the intermediate proceedings between these two stages are conducted independent of the court. As a matter of fact the arbitrator appointed by the court it is significant to note, is deemed to be an arbitrator appointed by the consent of all parties under sub-s. (2) of S. 8. It is thus clear that in private arbitration, interference of the court was not intended by the legislature during the course of these proceedings which was left completely to the parties to the dispute in pursuance of their arbitration agreement except in the manner mentioned above. 8. A question has been raised by the counsel for the respondent that one of the parties may not co-operate with the arbitrator: with the result that the proceedings in private arbitration will he protracted and it might afford a lever to the said party to dissipate the property in dispute to the disadvantage of his contestant. To my mind the arbitration Act has made adequate provision for such a contingency. In these circumstances. the aggrieved party can always approach the court for its intervention under Chap. To my mind the arbitration Act has made adequate provision for such a contingency. In these circumstances. the aggrieved party can always approach the court for its intervention under Chap. 3 R. 20. instead of proceeding under Chap. 11 of the Act. The said party can apply to the court having jurisdiction in the matter to which the agreement relates; that the agreement be filed in court. Such an application would be registered as suit between the parties and then the arbitration proceedings will continue with the intervention of the court. When the intervention of the court is resorted to then S. 41, Arbitration Act would also be operative. Section 41 lays down the procedure and the power of the court and may he quoted thus : Section 41 : Procedure and power of court : Subject to the provisions of this Act and of rules made thereunder : (a) the provisions of the Civil P. C.. VMS shall apply to all proceedings before the court and to all appeals under this Act: and (b) the Court shall have, for the purpose of, and in relation to, arbitration proceedings, the same power of making orders in respect of any of the matters set out in the Second Sch. as it has for the purpose of, in relation to, proceedings before the court. Provided that nothing in cl. (b) shall be taken to prejudice any power which may be vested in an arbitrator or umpire for making orders with respect to any of such matters." 9. The aforesaid Section shows that the court while continuing the arbitration proceedings shall also have power to make orders with respect to the matters set out in the second schedule. The II Sch. under S. 41 reads thus :- (1) "The preservation, interim custody or sale of any goods which are the subject matter of the reference. (2) Securing the amount in difference in the reference. The II Sch. under S. 41 reads thus :- (1) "The preservation, interim custody or sale of any goods which are the subject matter of the reference. (2) Securing the amount in difference in the reference. (3) The detention, preservation or inspection of any property or thing which is the subject of the reference or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon, or into any land or building in the possession of any party to the reference, or authorising any samples to be taken, or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence. (4) Interim injunction or the appointment of a receiver. (5) The appointment of a guardian for a minor or person of unsound mind for the purposes of arbitration proceedings." Clause (4) of the Schedule authorises the Court to issue interim injunction or to appoint a receiver. It is thus apparent that when court's intervention is sought for under Chap. III of the Arbitration Act, then in the arbitration proceedings conducted by the court, the aforesaid incidental powers are vested therein. 10. The appointment of an arbitrator under S. 8, Arbitration Act, in cases of private arbitration by the court may be a proceeding in arbitration, i.e. by the appointment of an arbitrator by the court, a forum is provided before which the parties can agitate their grievances concerning the dispute before him, but the appointment of the arbitrator by itself cannot be said to constitute an arbitration proceeding. 11. The distinction between S. 8 and S. 20, Arbitration Act, has been very explicitly brought about in Union of India v. Om Prakash AIR 1976 SC 1745 (at p. 1748) : "It is clear from the provisions of Chap. II that after the appointment of arbitrator, the proceedings are to be outside court and up to the stage of filling the award intervention of court is not contemplated unless any occasion arises requiring the court to remove the arbitrator under S. 11. An agreement to submit differences to arbitration implies an agreement to refer the differences to the arbitrator. S. 8 only empowers the court to appoint an arbitrator where the parties do not concur in the appointment. Section 20 occurring in Chap. An agreement to submit differences to arbitration implies an agreement to refer the differences to the arbitrator. S. 8 only empowers the court to appoint an arbitrator where the parties do not concur in the appointment. Section 20 occurring in Chap. III contains provisions for arbitration with the intervention of the court where there is no suit pending." 12. In the Supreme Court case it was held "that S. 8 does not contain any provisions empowering the court to make an order of reference to the arbitrator, as we find in sub-s. (4) of S. 20. Thus it seems clear that the court in the instant cases had no jurisdiction after appointing an arbitrator under S. 8 (2), to proceed further to make an order referring the dispute to the arbitrator." 13. Following the Supreme Court easel the Orissa High Court also very clearly laid down the distinction between S. 8 and S.20. Arbitration Act, in Fertiliser Corporation of India Ltd. v. Ravi Kumar Ohri. AIR 1979. Orissa 19 (at Pp. 21-22). "Under S. 8 the court does not make any reference to any dispute. Its powers are limited only to the appointment of arbitrator or an umpire, as the case ma% he, if there is an arbitration agreement between the parties and there is no appointment or concurrence despite notice under S. 8 (1) of the Act. After the appointment is made, it is for the parties to file their claims before the arbitrator who is to decide the same on merits. There is a clear distinction between the provisions of S. 8 and S. 20. Under S. 20, the court has to decide where disputes or differences have arisen and after directing the parties to file the agreement, the court has to make a reference of the disputes to the arbitrator. Section 8 only empowers the court to appoint an arbitrator where the parties do not concur in the appointment. Section 20 confers power on the court to order the agreement to be filed and, further, to make an order of reference to the arbitrator appointed by the parties, or, where the parties cannot agree upon an appointment, to an arbitrator appointed by the court." In an earlier decision of the M. P. High Court, in Union of India v. S. V. Krishna Rao, AIR 1970 Madh. Pra. 49. Pra. 49. It has been observed as follows at p. 53) : "When a reference is made under S. 20, Arbitration Act, 1940, the court is not entitled to rely on the provisions of S. 8 of the Act. The purposes of S. 8 and S. 20 are altogether different. In those cases where the parties have agreed at the , time of entering into a contract that any dispute arising out of it shall be settled by arbitration and where no arbitrators have been named and where the parties do not agree on the choice of the arbitrator, S. 8 comes into operation. It gives power to the court to appoint an arbitrator. Once the arbitrator is so appointed, the function of the court comes to an end. The reference is not made by the court but it is left to the parties to make the reference to the arbitrator nominated by the Court." 14. Before, however, concluding my judgment, it is but fair that should refer to two citations made by learned counsel for the respondent, in Maheshwari and C. and Pvt. Ltd. v. Corporation of Calcutta, AIR 1975 Cal 165 . A single Judge of that Court has observed as follow l at p. 1681 : "There is furthermore, another aspect of the matter. Under S. 41, Arbitration Act, the Court has power to make order for interim protection even in a case where there is no application under S. 20, Arbitration Act, or where proceedings under Chap. III of the Arbitration Act, 1940, have not been taken. Clause (b) of S. 41 of the Act indicates that. In that view of the matter, even if it be assumed, which I do not hold as I indicated before, that the application under S. 20 was misconceived in this case under S. 41 the court has right to pass orders if the facts and circumstances of the case so justify." It is noticeable that in this case the above observation made by the learned Single Judge are merely obiter. They did not arise for decision. As a matter of fact, the application which was being considered by him had been filed under S. 20 read with S. 41, Arbitration Act, and he appeared to be of the opinion that the application under S. 20 of the Act was maintainable. Thereafter the above observations were made. They did not arise for decision. As a matter of fact, the application which was being considered by him had been filed under S. 20 read with S. 41, Arbitration Act, and he appeared to be of the opinion that the application under S. 20 of the Act was maintainable. Thereafter the above observations were made. In my opinion after the decision of the Supreme Court referred to above, there does not appear to be .any justification for this obiter dicta. 15. In Daulat Ram Phool Chand v. Shri Ram, AIR 1964 Madh Pra 219, the position was that application under S. 20/41 of the Arbitration Act had been filed and dismissed by the trial court. On an appeal having been preferred, it was held by a Division Bench that since no difference had arisen between the parties with regard to any of the matter to which the arbitration agreement applies, S. 20 of the Act could not be invoked by the present petitioner. Thereafter the petitioner filed a fresh application under S.41, Arbitration Act, praying for the appointment of a receiver. The court dismissed the application on the short ground that an application under S. 20 of the Act must be filed in order to enable the court to-take action under S. 41 of the Act. A perusal of the judgment indicates that arbitration proceedings were actually pending, as such its facts are distinguishable. Further as I have said above the Supreme Court decision of 1976 holds the ground and the observation made by the Single Judge in this case cannot be accepted. 16. In the instant case proceedings under S. H Arbitration Act, are still pending. The court has been empowered under the aforesaid Section to appoint an arbitrator. That matter has yet to he finalised. Except for the appointment of the arbitrator no other question can be raised before him in proceedings under S. 8 of the Act. In view of the above discussion the instant application for the appointment of receiver and an interim injunction are not legally maintainable. 17. This revision application is accordingly allowed and the impugned order of the court below dated 12-11-1981 is hereby set aside. The applicants are entitled to costs.