Diravia Nadar v. Shanmughasundaram — 1998 DIGILAW 579 (MAD)

Judgment :- 1. The order, dated 9.3.1990 in O.P. No. 185 of 1987, Sub Court, Tuticorin is challenged in this Civil Revision Petition by respondents 1 and 2 in that proceedings. Respondents 1 to 12 in this Civil Revision Petition are petitioners 2 to 13 therein. Respondents 3 to 8 in that proceedings are respondents 13 to 18 in this Civil Revision Petition. The order under challenge substitutes one Arumuga Nadar as an arbitrator in the place of one Palani Nadar, since deceased who was one of the appointed arbitrators. 2. I heard Mr. S. Gopalaratnam, learned senior counsel appearing for Mr. R. Ganesan, learned counsel on record for the petitioners and Mr. D. Saravanan, learned counsel appearing for respondents 1 to 12 in this Civil Revision Petition. A few facts have to be necessarily stated before the dispute between the parties could be properly understood. There is an arbitration agreement, dated 6.7.1977. One Palpandia Nadar, who is no more and whose legal representatives are petitioners 2 to 13 in O.P. No. 185 of 1987 and respondents 1 and 2 in that proceeding are parties to that agreement. Seven named individuals were appointed as arbitrators to arbitrate on the dispute between the parties, above referred to. I am not entering into the details of the dispute, which was referred to the arbitrators, because it may not be necessary for this Court to decide the issue, arising in this Civil Revision Petition. 3. The said arbitrators passed an award on 27.7.1977. Respondents 1 and 2 in O.P. No. 185 of 1987, filed O.P. No. 236 of 1977 before the Sub-Court, Tuticorin to set aside that award on various grounds stated by them. Paulpandian, since deceased, also filed O.P. No. 217 of 1977, on the file of the very same Court to pass a decree in terms of the said award. By a common Judgment, dated 29.12.1980, the learned Subordinate Judge, Tuticorin dismissed Original petition No. 217 of 1977 and allowed Original Petition No. 236 of 1977. There were two Appeals before this Court viz., C.M.A. No. 168 of 1982 against the order in O.P. No. 236 of 1977 and C.M.A. No. 169 of 1982 against the order in O.P. No. 217 of 1977. A learned single Judge of this Court by a common Judgment, dated 21.8.1987 dismissed both the Appeals. There were two Appeals before this Court viz., C.M.A. No. 168 of 1982 against the order in O.P. No. 236 of 1977 and C.M.A. No. 169 of 1982 against the order in O.P. No. 217 of 1977. A learned single Judge of this Court by a common Judgment, dated 21.8.1987 dismissed both the Appeals. It may be remembered that the appellant in both the Appeals was Paulpandian Nadar, who was then alive. However, neither the Judgment of the Sub Court. Tuticorin referred to earlier in O.P. No. 217 and 236 of 1977 nor the common Judgment of this Court in C.M.A. Nos. 168 and 169 of 1982 superseded the arbitration agreement, dated 6.7.1977. It appears that one of the seven arbitrators viz. , Palani Nadar died on 25.8.1985. Proceeding on the basis that the parties could continue the reference referred to above and since it cannot be done in the absence of one of the arbitrators, who is no longer alive, the legal representatives of Paulpandian filed O.P. No. 185 of 1987 before the Sub Court, Tuticorin for substituting Arumugam Nadar in the place of Palani Nadar, so that the reference could be continued. Though this request was objected to, it appears that the learned trial Judge substituted the said Arumuga Nadar in the place of the deceased Palani Nadar. It also appears, as brought to my notice by Mr. D. Saravanan, learned counsel for the respondents in this Civil Revision Petition that subsequent to the order in O.P. No. 185 of 1987, the arbitrators arbitrated the matter and passed an award on 25.6.1990 and to have a decree in terms of the award, the legal representatives of the deceased Paulpandian filed A.R.O.P. No. 68 of 1990, before the Sub Court, Tuticorin and it is now pending. 4. I am once again not going into the details of the award, dated 25.6.1990, in the view, which I am going to take in this case. The contention of the learned senior counsel for the petitioners is mainly on the following angle. It is no doubt true that in the judgment of neither the Sub Court, which set aside the award at the earliest instance nor this Court which confirmed the order of the Sub Court in O.P. No. 217 of 1977 and O.P. No. 236 of 1977, there is no explicit order, superseding the arbitration agreement, dated 6.7.1977. It is no doubt true that in the judgment of neither the Sub Court, which set aside the award at the earliest instance nor this Court which confirmed the order of the Sub Court in O.P. No. 217 of 1977 and O.P. No. 236 of 1977, there is no explicit order, superseding the arbitration agreement, dated 6.7.1977. But, however, that does not mean that though the arbitration agreement itself may survive, yet the reference can be continued. The defence of the revision petitioners before the lower court in the earlier round was that the property in respect of which there is an arbitration agreement did not belong to them exclusively and they succeeded to the same along with their other three sisters as the legal heirs of their father. This point was taken note of by the Sub-Court, Tuticorin, when Original Petition Nos. 217 and 236 of 1977 came to be disposed of. That point was one of the points that went into the mind of the learned Subordinate Judge, Tuticorin to set aside the award. Not only that. The Judgment of the Sub-Court in O.P. Nos. 217 and 236 of 1977 was confirmed by this Court in C.M.A. Nos. 168 and 169 of 1982. Threfore, the position is concluded that the other legal representatives of the deceased Paulpandian Nadar i.e. the three sisters of the revision petitioners herein are also necessary parties to the arbitration agreement and it is not shown in any manner known to law that they are made as parties to the agreement so that the arbitration agreement will be binding on them. 5. According to the learned senior counsel for the petitioners if the reference is allowed to continue even after the Judgment of the learned single Judge of this Court referred to above, it would be an exercise in futility because no award passed by the arbitrators can be made binding on the sisters of the revision petitioners, who admittedly have a share in the property and therefore the enforceability of any award would be of practical difficulty and not supported by any provision of law. Learned senior counsel also relied upon Section 19 of the Arbitration Act, 1940 to contend that it is not mandatory, on the part of the Court to supersede the agreement since the section says that the Court ‘may’ by order supersede the reference etc. Learned senior counsel also relied upon Section 19 of the Arbitration Act, 1940 to contend that it is not mandatory, on the part of the Court to supersede the agreement since the section says that the Court ‘may’ by order supersede the reference etc. and therefore, the Court under Section 19 of the Arbitration Act, 1940 is not under any legal obligation to supersede the reference in each and every case. For this argument, the learned senior counsel also draws support from paragraph 15 of the II Schedule to the Code of Civil Procedure 1908 since the operation and scope of Indian Arbitration Act. 1899 were dealt with in that Second schedule. The words used in Section 19 of the Arbitration Act, 1940 are ‘may supersede”, whereas the words used in paragraph 15 of II Schedule to Code of Civil Procedure are “the Court shall make an order superseding etc.” 6. As against these legal submissions made by the learned senior counsel for the revision petitioners, Mr. D. Saravanan, learned counsel for the respondents would argue that whatever may be the position prior to the order, dated 9.3.1990 in O.P. No. 185 of 1987, yet it will not be of any use as on date, in view of the fact that the award itself having been passed on 25.6.1990 by the arbitrators, containing the substituted arbitrator and since the said award itself being before the Court of competence there has to be a decree in terms thereof or it must be set aside only in a manner to law learned counsel would also argue that since there is no superseding of the reference in any of the orders referred to earlier viz. , on the file of the Sub Court. Tuticorin or on the file of this Court, it has to be held that the arbitration agreement survives and the continuing of the reference would be in accordance with law. 7. Learned counsel for the respondents 1 to 12 also contended that the non-joining of the other sharers of the property will not in any way invalidate the arbitration agreement itself and that therefore there would be no difficulty in continuing the reference even in the second round. 7. Learned counsel for the respondents 1 to 12 also contended that the non-joining of the other sharers of the property will not in any way invalidate the arbitration agreement itself and that therefore there would be no difficulty in continuing the reference even in the second round. In this context, learned counsel argued that all parties need not sign the arbitration agreement for a valid reference and that therefore even in the absence of the other sharers, the reference in this case under the arbitration agreement has to be declared as valid. 8. In the light of the submissions made by the learned senior counsel for the revision petitioners and the learned counsel for the respondents, I applied my mind very carefully to the records available as well as perused the order under challenge. As argued by the learned senior counsel for the revision petitioners, there appears to be a lot of difference between Section 19 of the Arbitration Act, 1940 and paragraph 15 of II Schedule to Code of Civil Procedure, 1908. In paragraph 15(2) of II Schedule, the word used is ‘shall’, whereas the word used in paragraph 19 of the Arbitration Act, 1940 is ‘may’. It is brought to my notice by the learned senior counsel from the statement of objects and Reasons in the Bill No. 134 of 1939, which preceded 1940 Arbitration Act that the present Section 19 of the Act only channalises the provisions of paragraph 15(2) of II Schedule to the Code of Civil Procedure, 1908. The word ‘shall’, as found in paragraph 15(2) of II Schedule admits of no doubt and the Court is under a legal obligation to supersede the arbitration whenever the award becomes final or is set aside. Paragraph 15(1) of II Schedule corresponds to Section 13(a) and 13(b) of the Arbitration Act, 1940, However, in Section 19 of the Arbitration Act, 1940, the Legislature had used the word ‘may’. It is clear that the legislature, while drafting Section 19 of the 1940 Arbitration Act made a marked departure, when compared to paragraph 15(2) of the II Schedule to the Code of Civil Procedure, 1908. As Section 19 stand in the Arbitration Act, 1940, I find that the Court is not under a mandatory obligation to supersede the reference. 9. It is clear that the legislature, while drafting Section 19 of the 1940 Arbitration Act made a marked departure, when compared to paragraph 15(2) of the II Schedule to the Code of Civil Procedure, 1908. As Section 19 stand in the Arbitration Act, 1940, I find that the Court is not under a mandatory obligation to supersede the reference. 9. The question that follows for consideration is whether in the absence of the Court superseding the reference, can it be said that the arbitration agreement survives and the reference can be continued or the mere setting aside of the award would terminate the arbitration agreement itself. My answer would be that the decision would depend upon the facts of each and every case. In Juggilal v. General Fibre Dealers ( AIR 1962 SC 1123 ), it has been held as follows: “The scheme of the Arbitration Act as disclosed from Ss. 8, 10, 12, 19, 20(5) and 25 is, whether the arbitration is under Chap. II, Chap. III or Chap. IV, to give discretion to the Court to decide whether to supersede the reference or not when it sets aside an award. Where it decides to supersede the reference it has to order that the arbitration agreement shall cease to have effect with respect to the difference referred; but where it decides not to supersede the reference and the reference and the arbitration agreement subsist and if there is machinery provided in the arbitration agreement for making a further reference or for continuing the same reference, further arbitration can take place. The contention therefore that once the award is set aside the arbitrator becomes functus officio, consequently there can be no further reference with respect to the dispute decided by the award which is set aside, must fall in view of the specific provisions of S. 19 of the Act” Therefore there can be no doubt that there is an element of discretion vested with the Court to decide whether to supersede the reference or not to supersede the reference, when it sets aside an award. However, the Judgment also makes it clear that when the Court decides not to supersede the reference on the arbitration agreement it subsists and if there is machinery provided in the arbitration agreement for making a further reference or for continuing the same reference, further arbitration can take place. 10. However, the Judgment also makes it clear that when the Court decides not to supersede the reference on the arbitration agreement it subsists and if there is machinery provided in the arbitration agreement for making a further reference or for continuing the same reference, further arbitration can take place. 10. In this Case, admittedly, the Court on the earlier occasions did not supersede the reference, when the earlier award was set aside. Therefore, the reference and the arbitration agreement subsists. The mere survival of the reference and the arbitration agreement alone is not sufficient to continue the arbitration agreement, unless there is a vital and effective machinery in the arbitration agreement itself for continuing the reference. Therefore, the question whether the reference can be continued in this case resulting in the award, dated 25.6.1990, which is the subject matter of the proceedings in O.P. No. 62 of 1990 on the file of the Sub Court, Tuticorin, will necessarily depend upon the terms of the arbitration agreement, dated 6.7.1977, read in the context of the Judgment in O.P. No. 217 and 236 of 1977 along with the common Judgment of this Court, dated 21.8.1987 in C.M.A. Nos. 168 and 169 of 1982. Under the circumstances, I perused the Arbitration Agreement, dated 6.7.1977 very carefully. The Agreement, on a perusal, appears to my mind to be as vague as possible. Except Paulpandia Nadar and Diravia Nadar and Duraisamy Nadar, no other person is a party to this Agreement. What I mean is that the other sharers of the property, who have a share along with Diravia Nadar are not parties to this Agreement. They are also not shown even by name at least as parties to this Agreement. Therefore can it be said that though they have not signed the reference it can be held to be valid. The argument of Mr. Saravanan, learned counsel for the respondents relying upon the Judgments reported in Gurumurty v. Narasimha (AIR 1954 Orissa 234). U Po Hoaing v. Dawngwe (AIR 1941 Rangoon 22), Jugal Kishore v. Goolbai ( AIR 1955 SC 812 ) and Abdul Aziz v. State of Maharashtra ( AIR 1963 SC 1470 ) that though the sisters of Diravia Nadar and Duraisamy Nadar have not signed the Agreement, yet the reference is valid, cannot be sustained because that argument is not available to his client at this stage. Why I say this is because that question was raised and considered earlier in O.P. Nos. 217 and 236 of 1977, which were disposed of by 29.12.1980 by the learned Subordinate Judge, Tuticorin. The award passed earlier was set aside on various grounds. One of the grounds which entered into the mind of learned Subordinate Judge for setting aside the award is reflected in the following words: “11. Another point put forward by the respondents is also that the property does not belong to the respondents only but also to two of their sisters and the heirs of the other deceased sister. They claim that they (respondent) are entitled only to 2/5 share in the properties, while the remaining 3/5 share belongs to their two sisters and the heirs of the other deceased. But the contention of the petitioner is that the property was purchased by the grand father of the respondent and therefore, on the death of their (respondents) father Arunachala the respondent got it by survivership. But the death Register Extract in respect of Arunachala show that he dies in the year 1971. Therefore, the respondents only could not have become entitled to the property by survivership. Each of the respondents would have been entitled to an 1/3 share as co-parceners and the remaining 1/3 belonging to his father would have devolved upon his heirs including his daughters. Therefore, it is evident that the respondents 1 and 2 only are not the owners of the entirety of the property in question. Therefore, how far the award can be enforced as against the other owners is also open to question. The other owners are also not before Court. They are not parties to the Agreement, Ex.A4 or the arbitration proceedings. Therefore, in these circumstances, I find that the award has to be set aside and that it cannot be made the rule of the Court” This Judgment had been confirmed in Appeals by this Court. Therefore, the question whether the reference would be valid or not in the absence of the sisters of Diravia Nadar and Duraisamy Nadar no longer survives for consideration and so, it is not possible for the at this stage to re-open the issue, which was already taken up for consideration and decided against Paulpandian Nadar, since deceased. Therefore, this contention of the learned counsel for the respondents is rejected. 11. Therefore, this contention of the learned counsel for the respondents is rejected. 11. I have already found in this case that the issue whether the sisters of Diravia Nadar and Duraisamy Nadar are necessary parties to the arbitration agreement, so that a valid reference can be made in the eye of law had already been decided against Paulpandian Nadar in the earlier proceedings. However, the learned senior counsel appearing for the revision petitioners brought to my notice a Judgment of the Patna High Court in Deep Narain Singh v. Dhaneshwari (AIR 1960 Patna 201)., wherein it has been held as follows: “Where all the persons interested in the matter of dispute were not parties to the arbitration agreement, and when an agreement is not consented to by all, such an agreement is invalid and cannot give the arbitrators jurisdiction to decide the dispute, and the award given on the strength of such void reference is not valid. The award passed upon such invalid reference does not bind even the consenting parties. It is void altogether. AIR 1946 PC 72 Foll.,” The submission of the learned counsel for the respondents is that since admittedly pursuant to the order under challenge an arbitrator had been substituted in the place of the deceased arbitrator and those arbitrators have passed an award on 25.6.1990 that award is binding on all the parties concerned and that therefore, this Civil Revision Petition has become infructuous. To state that once an award is passed it is not a mere waste paper, but has some legal sanctity and that it is final and binding on the parties concerned, unless it is made a rule of the Court, learned senior counsel for the respondents relied upon the Judgment of the Supreme Court in Satish Kumar v. Surinder Kumar ( AIR 1970 SC 833 ). On this submission, learned senior counsel for the revision petitioners brought to my notice a Judgment of this Court in Kanakayya v. Lakshmayya (1950 II MLJ 379 = 63 L.W. 789) wherein it has been held as follows: “A litigant has a right of appeal against an order of remand; he has a right also to contest the proceedings taken in a trial Court pursuant to the order of remand; these are independent legal rights and the exercise of one such right is no bar to the exercise of the other. The aggrieved party is not faced with alternative rights; it is the same right that he wishes to agitate both in the appeal against the order of remand and at the further stages of the trial after the remand. He has not lost the right to have an appeal against the order of remand merely because has contested the litigation in the lower Court after the remand. Where in a suit an order of remand was passed and it was carried out and the suit decided the remedy can be also by appeal against the order of remand and not merely by way of Appeal against the final decision in the suit. The wide language of Order 41, Rule 23, Civil Procedure Code as amended in Madras gives ample rights to the aggrieved party to file an appeal against an order of remand even after the final decision in the suit has been given.,” 12. In view of this Judgment of this Court, referred to above, I am in full agreement with learned senior counsel for the revision petitioners that simply because the order under challenge has been implemented, resulting in the subsequent award, that by itself cannot take away the legal right of the revision petitioners to challenge the order, dated 9.3.1990 made in O.P. No. 185 of 1987. On going through the arbitration agreement, dated 6.7.1977, I find that it contains no provision or effective machinery enabling the parties to it to have the reference of the dispute continued any more and it is all the more because the other persons, who have shares in the property are not parties to the said agreement. Since the substitution of the arbitrator in the place of the deceased arbitrator as prayed for in O.P. No. 185 of 1987 itself depends upon the validity of continuing the reference, which I hold, is bad in law, I am of the opinion that the passing of the award, dated 25.6.1990 cannot stand in the way of this Court in awarding the necessary reliefs. 13. Accordingly, this Civil Revision Petition is allowed as prayed for However, there will be no order as to costs. C.M.P. No. 10057 of 1991 is dismissed.