R.M. Lodha, J.
1. This appeal is directed against the order dated 16th October 1997 whereby the learned Single Judge dismissed the arbitration petition filed by the appellants herein under Sections 30 and 33 of the Arbitration Act, 1940 for setting aside the Award dated 16th June 1997.
2. The controversy arises from the facts and circumstances that we briefly narrate first. One Vinayakrao Vyankatesh Wagh was allotted a plot of land being No. 35, situate at 60, Saraswati Baug, Jogeshwari (East), Bombay. He held 5 shares in Kanara Goud Saraswat Co-operative Housing Society Ltd. (for short the Society), Vinayakrao died on 11-11-1958 leaving behind his legal heirs viz. Brahmesh, Venkatesh, Raghvendra, Mangala, Mahabaleshwar and Radhika. After his death, the said plot was transferred in the name of legal heirs of Vinayakrao in the revenue record. By writing dated 1-2-1976. Raghvendra, one of the legal heirs of Vinayakrao addressed to the Chairman of the Society requested for transfer of shares in his favour. The said writing at its foot had the signatures of other heirs of deceased Vinayakrao purporting to be waiving their rights in respect of those shares and property. The society acted on the said writing and on 15-4-1976 effected transfer of the said shares in favour of Raghvendra. By letter dated 12-8-1981 written by Raghvendra to his brother Brahmesh, he wanted to know from him and other legal heirs of Vinayakrao, whether by the writing dated 1-2-1976 they gifted away the property to him (Raghvendra) or they wanted part of sale proceeds. Raghvendra is said to have constructed buildinotjierthe said plot in the year 1981 and transferred some of the flats in the said building in the years 1983 and 1984. A suit was filed on 5-4-1984 by Brahmesh and Vyankatesh against Raghvendra and other legal heirs of deceased Vinayakrao and the Society seeking declaration that the writing dated 1-2-1976 (annexed as Exhibit 'B' to the plaint) be declared void; that the defendants have no right to act upon the said writing; that the decision of the society dated 15-4-1976 effecting transfer of shares in favour of Raghvendra be declared illegal and without jurisdiction and that the plaintiff and original defendants 1 to 6 have equal share in the said property left by deceased Vinayakrao. Later on the suit was amended and the flat purchasers were impleaded as defendants 9 to 14. As against newly added defendants 9 to 14, prayer was made that they be directed to quit from the flats and hand over quiet and vacant possession to the plaintiffs and original defendants 1 to 4. It appears that in the suit, an ad interim order came to be passed restraining Raghvendra from transferring, alienating or creating any third party right or interest in the suit property including construction put up thereon. The said ad interim order was later on confirmed to remain operative until disposal of the suit. Later on the original plaintiffs and defendants 1 to 6 decided to have their dispute concerning writing dated 1-2-1976 referred to Arbitrator for adjudication and, accordingly, Consent Terms were filed for and on behalf of plaintiffs and defendants 1 to 6 on 15-3-1991 in the pending suit. The learned judge on 15-3-1991 took the Consent Terms on record and passed an order in terms of the Consent Terms and referred the dispute between these parties to arbitration in terms of Consent Terms. The Arbitrator Shri. S.H. Doctor entered into Reference and passed an Award on 16-6-1997. The Arbitrator held that the writing dated 1-2-1976 (Exh-B annexed to the plaint) was valid and binding on plaintiff No. 2, legal heirs of original plaintiff No. 1, original defendant Nos. 1 and 2 to 6 and that the said writing was not liable to be cancelled or rescinded. The Arbitrator also declared that original defendant No. 1 - Raghvendra and after his death, his legal heirs were entitled to the suit property more particularly described in Exhibit A to the plaint and the building constructed thereon and that none of the other parties to the arbitration were entitled to any right, title or interest therein of any nature whatsoever. Dissatisfied with the Award passed by the Arbitrator on 16-6-1997, the Arbitration petition came to be filed by the legal heirs of original plaintiff No. 1 and plaintiff No. 2. The arbitration petition was purportedly filed under Sections 30 and 33 of the Arbitration Act, 1940 for setting aside the Award dated 16-6-1997. The learned Single Judge summarily dismissed the arbitration petition by his order dated 16-10-1997. Upon dismissal of the arbitration petition, the learned Judge made the Award rule of the Court and passed the decree in terms of the Award. Aggrieved thereby, the present appeal has been filed.
3. We heard Dr. Virendra V. Tulzapurkar, the learned senior counsel for the appellants at quite some length and Ms. Bina R. Pai, the learned counsel for the respondents.
4. Dr. Virendra Tulzapurkar, the learned senior counsel reiterated the contentions that were raised on behalf of the appellants in support of the arbitration petition before the learned Single Judge. The learned senior counsel contended : (i) that the Arbitrator had no jurisdiction to entertain the Reference as the Reference was not validly made because all the parties interested had not joined in the Reference and (ii) that the Award was bad from error apparent on the face of the record and legal misconduct inasmuch as the writing dated 1-2-1976 required registration and since the said document was not registered under the provisions of the Indian Registration Act, the Award was ex-facie bad. Elaborating the first contention, the learned senior counsel urged that the reference to the Arbitrator was in pursuance of the Consent Terms which were admittedly not signed by all the defendants in the suit, particularly the defendants 9 to 14 - the flat purchasers. It was submitted that the defendants 9 to 14 were interested in the dispute inasmuch as the Arbitrator was called upon to give decision on the claims made in the suit inter alia that the agreements with the flat purchasers were illegal, ineffective, inoperative and not binding on the plaintiffs. It is submitted that the flat purchasers were interested in the dispute concerning the binding nature of writing dated 1-2-1976 since on the basis of that writing, the flat purchasers purchased the flats. The learned senior counsel submitted that the reference in the absence of some of the parties was invalid and such a reference is invalid even against the parties who signed the Consent Terms. In support of this submission, the learned senior counsel relied upon Girijanath Roy Chowdhari and Ors. v. Kanai Lal Mitra AIR 1918 Cal. 336; Laduram Nathmull v. Nandlal Kasuri and Ors. AIR 1920 Cal. 113; Gopaldas v. Baijnath and Ors. : AIR1926All238 ; Tej Singh and Anr. v. Ghasi Ram and Anr. : AIR1927All563 ; P. Venkata Subbayya v. B. Venkataramayya : AIR1930Mad646 ; Ram Harekh Singh v. S. Mumtaz Husain and Anr., : AIR1949All679 ; Nar Singh Das v. Firm Joint Hindu Family known as Goga Ram Lachmi Narain, ; Firm Khetu Ram Bachamber Dass v. Kashmiri Lal Rattan Lal, ; Ct.A.Ct. Nachiappa Chettiar v. Ct.A.Ct. Subramaniam Chettiar, : [1960]2SCR209 ; Deep Narain Singh v. Mt. Dhaneshwari and Ors., : AIR1960Pat201 and T.S. Subba Rao v. Appadurai Aiyar and Ors. : AIR1925Mad621 . The learned senior counsel submitted that the factum of participation of the appellants before the Arbitrator or they having not raised the issue about the invalidity of the reference cannot come in their way in challenging the Award under Sections 30 and 33 of the Arbitration Act, 1940. He submitted that the appellants or for that matter the original plaintiffs who were parties to the Consent Terms were not estopped from challenging the award on the ground that the reference was invalid. The learned senior counsel, in this connection, placed reliance in Khardh Company Ltd. v. Raymon and Co. (I) Pvt. Ltd., ; Waverly Jute Mills Co. Ltd. v. Raymon and Co. (1) Pvt. Ltd., : [1963]3SCR209 and Sakalu Ram Gond v. State of MP and Ors., : (1994)5SCC570 . In support of his contention that the flat purchasers - defendants 9 to 14 had direct interest in the subject matter of dispute and they were interested in defending the validity of the writing dated 1-2-1976, the learned senior counsel sought to place reliance on Seth Fida Hussain v. Fazal Hussain and Ors., : AIR1963MP232 ; Canara Bank v. Metalica Industries Ltd. : AIR1997Bom296 and Aaliji Monoji and Co. v. Lalji Mavji and Ors., : AIR1997SC64
5. In elaborating the second contention, the learned senior counsel submitted that the Arbitrator failed to apply his mind regarding the invalidity of the document dated 1-2-1976 on the ground of want of registration though such plea was specifically raised before him. The learned senior counsel submitted that the said writing in effect results in giving up rights in relation to the subject plot. The document related to the plot as well as shares and to the extent the document related giving up of rights in relation to the plot, Section 41 of the Maharashtra Co-operative Societies Act, 1960 did not apply and the document required registration under the Indian Registration Act. The learned senior counsel submitted that even if the award is a non-reasoned award, the declaration given by the Arbitrator that the purported writing is binding on the parties shows non-application of mind and/or legal misconduct and can be challenged in a petition under Section 30 of the Act of 1940. He relied upon Dandasi Sahu v. State of Orissa, : 1970CriLJ1369 ; Union of India v. Jain Associates and Anr., : [1994]3SCR551 ; Basant Lal Banarasi Lal v. Bansi Lal, : [1961]2SCR780 and Indian Oil Corporation Limited v. Amritsar Gas Service and Ors. (1999)1 SCC 533
6. On the other hand, Ms. Bina R. Pai, the learned counsel appearing for the respondents 1 to 4 supported the impugned order. She submitted that in the present case the reference by the Court in a pending suit was obviously a reference made under Section 21 read with Section 24 and, therefore, in the subject matter of arbitration, dispute between the concerned parties to the reference was to be adjudicated and defendants 9 to 14 cannot be said to be interested in the dispute under reference. The learned counsel on behalf of respondents 1 to 4 submitted that in the facts and circumstances of the present case, the dispute between the parties to the reference pertained to the writing dated 1-2-1976 which was a transfer of shares in a co-operative society and the flat purchasers were neither the parties to the said dispute nor they had any interest in the said plot of land. The flat purchasers were not even on the scene or in the picture the writing dated 1-2-1976 was executed. She argued that the flat purchasers may have been necessary parties to the Suit, but surely they were not parties interested in the dispute between the parties to the reference. The suit has not come to an end as against the flat purchasers and there is no question of any conflict in the award passed by the Arbitrator in relation to the dispute between the plaintiffs and defendants 1 to 4 and the suit which is still pending between the plaintiff and flat purchasers viz. the defendants 9 to 14. According to her, the dispute referred to arbitration between the parties to reference was apparently separate from the subject matter of dispute between the plaintiffs and the flat purchasers. She also submitted that no prejudice has been caused or claim to have caused to the appellants in the absence of the flat purchasers before the Arbitrator. As regards second contention, the learned counsel for respondents 1 to 4 replied that by the writing dated 1-2-1976 transfer of shares in the cooperative society was sought and such document did not require registration under Section 41 of the Maharashtra Co-operative Societies Act. According to her, the writing dated 1-2-1976 was not hit by the provisions of Section 17 of the Registration Act. In support of her contention, the learned counsel for respondents 1 to 4 cited Mulshanker v. Juvansinhi, : AIR1980Guj62 and Usha A. Dongre v. Suresh R. Kotwal. 1990 Mh.L.J. 306.
7. We considered the rival contentions thoughtfully. The question before us is; whether the defendants 9 to 14 (flat purchasers) can be said to be parties interested in the dispute referred for adjudication to the Arbitrator. Shall we clarify that the question before us is not whether the defendants 9 to 14 are necessary parties in the suit filed by the plaintiffs for the reliefs claimed. They may be necessary parties in the suit because specific reliefs have been prayed for against them but are they parties interested in the matter in dispute concerning validity of writing dated 1-2-1976 between the plaintiffs and defendants 1 to 6 that has been referred to arbitration. The reference was in respect of the specific matter and not the whole suit. As already noted by us, the reference to the Arbitrator was made on the basis of the Consent Terms entered into between the plaintiffs and defendants 1 to 6 only is a pending suit. The Consent Terms provide (i) all the disputes in the suit between the parties hereto including the question as to whether writings/contracts (Exhibit B to the plaint) are liable to be cancelled or not, are referred to the sole arbitration of Mr. S. H. Doctor and (ii) that the Arbitrator shall have power to determine the rights of the parties hereto, in the suit property particularly described in Exhibit A to the plaint and the Arbitrator shall have the power to award monetary compensation in such ratio as may be determined to the parties or any of them or to determine as to which of the parties be awarded all or any one or more of the flats in the building constructed on the suit plot, either in addition or in lieu of monetary compensation payable towards their respective share, if any, in the suit property. It appears to us clearly that the dispute referred to arbitrator pertained to the writing (Exh. B annexed to the plaint) between the parties to the reference alone i.e. plaintiffs and defendants 1 to 6 and further, determination of rights of the parties to the reference in the suit property described in Exhibit A to the plaint. The reliefs which were sought by the plaintiffs in the suit against the defendants 9 to 14 were not at all referred to the Arbitrator, it was so because they were not parties to the Consent Terms. In the plaint, the plaintiffs against defendants 9 to 14 prayed for declaration that the agreements for sale of flats in respect of flat Nos. 4, 5, 6, 7 and 8 were bad in law, illegal, inoperative, ineffective and not binding upon the plaintiffs and defendants 9 to 14 be ordered and decreed to quit, vacate and hand over quiet, vacant and peaceful possession of their respective flats to the plaintiffs and the defendants No. 1 to 6 that is the heirs of the deceased Vinayakrao in equal share. Some ancillary reliefs against the defendants 9 to 14 by way of damages and mesne profits and for restraining them from alienating, encumbering or parting with possession or creating any third party rights in the suit property were also claimed. These disputes between the plaintiffs and defendants 9 to 14 or the reliefs which have been claimed by the plaintiffs against defendants 9 to 14 were not referred for adjudication to the arbitrator. We assume that the learned Judge when he passed the order on Consent Terms entered into between the plaintiffs and defendants 1 to 6 was alive to this position and it appears to us that the learned Single Judge exercised his power in the pending suit under Section 24 of the Arbitration Act, 1940. Section 24 of the Act of 1940 makes a provision for reference to arbitration by some of the parties. It provides that where some of the parties to a suit apply to have the matters in difference between them referred to arbitration in accordance with, and the manner provided by Section 21, the Court may, refer such matters to arbitration provided it is satisfied that the same can be separated from the rest of the subject matter of the suit. Though in the order dated 15-3-1991, the learned Judge has not referred to any provision of law, the very fact that he passed the order in terms of Consent Terms tendered by some of the parties to the suit and ordered reference to arbitration in terms of Consent Terms, we have no hesitation in observing that such order was passed by the learned Judge under Section 24 of the Act of 1940. The Consent Terms were entered into between the plaintiffs and defendants 1 to 6 and all the disputes between them including the question with regard to the writing dated 1-2-1976 (Exh. B to the plaint) whether such writing was liable to be cancelled or not, was referred to the sole Arbitrator and for determination of the rights of the parties to the reference in relation to the suit property described in Exhibit A to the plaint. What is necessary for invocation of power under Section 24 by the judge in the pending Suit is, (a) some of the parties to a suit apply to have the matter in difference between them referred to arbitration; (b) the Court is satisfied that the dispute so referred to the Arbitrator at the instance of some of the parties to the suit can be separated from the rest of the subject matter of the suit; (c) the suit continues so far as it relates to the parties who have not joined in the said application and the matters not contained in the said reference in the same manner as if no such application has been made and (d) the award made in pursuance of such a reference shall be binding only on the parties to reference. In the present case, though the order dated 15-3-1991 passed by the learned Judge does not expressly deal with these aspects, but in the facts and circumstances of the case, the learned Judge seems to have been impliedly satisfied that upon dispute between the plaintiffs and defendants 1 to 6 in the suit being referred to the arbitration, the rest of the subject matter of the suit, particularly concerning defendants 9 to 14 who are only flat purchasers can be separated. Be it noted that insofar as the writing dated 1-2-1976 is concerned, the parties to the reference are only parties to the document. The flat purchasers viz. defendants 9 to 14 are not parties to the writing dated 1-2-1976. The flat purchasers also had no interest in the plot of land or the transfer of shares by the society concerning the said plot of land. The flat purchasers were not even in the picture when the writing dated 1-2-1976 was executed. We find it difficult to hold that the flat purchasers, in the circumstances, can be said to be interested in the dispute referred to arbitration. The flat purchasers have interest in the flats purchased by them and the protection of their interest in the flats on the ground that they are bona fide purchasers with valuable consideration. Though, none of the defendants except defendant No. 12 filed written statement, the thrust of the defence set up by defendant No. 12 in the written statement in opposition to the claim made by the plaintiffs against them is that they are bona fide purchasers for valuable consideration. Apparently and obviously the subject matter that has been referred to arbitration can be separated from rest of the matter pertaining to defendants 9 to 14. If the writing dated 1-2-1976 is held to be binding on all the heirs of Vinayakrao - as in fact has been held in the award - defendants 9 to 14 are not at all affected. On the other hand if the decision was otherwise about the validity of the writing dated 1-2-1976, the defendants 9 to 14 could protect their interest in the flats purchased by them on the ground that they are bona fide purchasers of the flats for valuable consideration and that is why that part, of the suit has been separated and it remains pending between the plaintiffs and defendants 9 to 14. We do not find any likelihood of conflict between the award which is binding between the plaintiffs and defendants 1 to 6 and the matter to be decided by the Court between plaintiffs and defendants 9 to 14. It is so because the entire thrust of the defence set up by the defendants 9 to 14 is that they are bona fide purchasers of the flats for valuable consideration. Such defence remains unaffected by any finding of the Arbitrator in respect of the dispute between the plaintiffs and defendants 1 to 6. In the facts and circumstances of the present case, therefore, in our considered opinion, the learned Judge passed the order of reference to arbitration on the basis of consent terms between plaintiffs and defendants 1 to 6 in exercise of the powers under Section 24 of the Arbitration Act, 1940. The entire argument of the learned senior counsel for the appellants that the Arbitrator had no jurisdiction to entertain the reference as the reference was not validly made because all the parties interested had not joined in the reference is based on fallacious assumption that the reference was made only and solely under Section 21 of the Arbitration Act, 1940. It overlooks and ignores Section 24 of the Act of 1940, purportedly in exercise whereof the order dated 15-3-1991 came to be passed. The contention of the learned senior counsel for the appellants also assumes that the defendants 9 to 14 were parties interested in the dispute between the plaintiffs and defendants 1 to 6 referred to arbitration. Section 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. The expression 'all the parties interested' occurring in Section 21, in our considered view, do not mean necessarily all the parties to the suit but all the parties interested in any matter in difference between them which they intend to refer. What is required under Section 21 is that all the parties interested in the subject matter of reference should have joined. This does not mean that there must be an agreement amongst all the parties in the suit for reference to arbitration. The subject matter of reference in the present case pertains to cancellation of writing dated 1-2-1976 and division of the property left by late Vinayakrao. The plaintiffs and defendants 1 to 6 were parties to the writing dated 1-2-1976 and are the legal heirs of deceased Vinayakrao. Thus, they are the only parties interested in the subject matter of reference. The defendants 9 to 14, as already observed by us, are purchasers of some of the flats from one of the legal heirs of Vinayakrao and they cannot be said to be parties interested in the subject matter of reference i.e. to the writing dated 1-2-1976 and declaration of respective shares in the plot of land left by late Vinayakrao. If the argument of the learned senior counsel for appellants is accepted, that would effectively mean that under Section 21 the parties in the subject matter of the suit, shall be the parties interested which is not the correct legal position. What Section 21 of Arbitration Act, 1940 requires is that all parties who are interested in the subject matter of reference must agree that matter in difference between them shall be referred to arbitration and not parties interested in the subject matter of the suit. A party may be a necessary party to a suit without being interested party with regard to dispute between the parties to the reference. Is in the nature of dispute between the parties to the reference, the flat purchasers are the parties interested in such dispute. The answer is, no. The flat purchasers have no interest in the plot of land.
8. For what we have said above, we do not find any invalidity in the reference. When the reference was valid, the arbitrator had jurisdiction to adjudicate the dispute referred to him. We are unable to agree with the submission of the learned senior counsel for the appellants that reference to the arbitration required the Arbitrator to give the decision on the claims made in the suit in which inter alia there was a challenge to the purported agreement for sale in favour of the flat purchasers. Insofar as the prayers made by the plaintiffs against the defendants 9 to 14 are concerned, the said prayers are separated and subject matter of pending suit. It is different matter that the said prayers may not be granted to plaintiffs in view of the award passed by the Arbitrator that the writing dated 1-2-1976 is binding on the original plaintiffs and the defendants 1 to 6 and the legal heirs of such parties who had died.
9. We may now deal with some of the decisions cited by the learned senior counsel for the appellants in support of his first contention upon which heavy reliance was placed.
10. In Girijanath Roy Chowdhury, the Division Bench of Calcutta High Court held with reference to Civil Procedure Code 1908, Schedule 2, para 1(1), (Pari materia to Section 21 of the Act of 1940), that the agreement to refer to arbitration and the application to the Court founded upon it must have the concurrence of all the parties concerned and if all the defendants including those who have not appeared and contested the suit, do not join in the reference to arbitration, the award is wholly invalid not only against those who did not join in the reference but also against those who joined in it and is liable to be set aside on the application of any of the parties. The Calcutta High Court held that it is necessary that all the parties interested in a suit must agree before any reference to arbitration can be made under para 1(1) of Schedule 2 of Civil Procedure Code. In the present case the Court in the pending suit passed an order of reference at the instance of only some of the parties. Such power can be traced in Section 24 of the Act of 1940. Incidentally, we may observe that there was no provision like Section 24 in Schedule 2 of Civil Procedure Code at that time. The said section was enacted for the first in the Arbitration Act, 1940.
11. Similarly, the Full Bench judgment of Calcutta High Court in Laduram Nathmull also has no application on facts of the present case though the legal position reiterated therein is that unless all the parties interested in a dispute consent, a Court has no jurisdiction to make an order of reference in arbitration.
12. In T.S. Suba Rao, the learned Single Judge of Madras High Court held that the words 'parties interested in the suit' should not be restricted only to those persons against whom relief is claimed. A person against whom no relief is claimed may be interested in the result of the suit inasmuch as his liability to the plaintiff may ultimately arise by reason of any decision that may be given in that suit. That was a case where the plaintiff sued for possession of the property on the ground that he was usufructuary mortgagee from the 3rd defendant. The defendants 1 and 2 claimed the property as theirs. The defendant No. 4 was a mortgagor. The reference was made to arbitration at the instance of the plaintiff and defendants 1 to 3. One of the main issues in the case was whether the property belonged to the defendant No. 4 or the defendant No. 1 and it was held that defendant No. 4 was interested in the decision of the suit. The Madras High Court held that a person who may be ultimately liable by a reason of such decision is covered by the expression 'parties interested in the suit'. The facts of the present case, as already indicated above, would show that the judgment of the learned Single Judge in T.S. Subba Rao has no application.
13. The learned Single Judge of Allahabad High Court in Ram Harakh Singh held that the interest of the two co-mortgagors being inseparable, any decision arrived at in the arbitration proceedings would have enured to the benefit of both or operated equally against them, if the decision favoured the mortgagee. The matter in difference between the parties to the case was on what amount redemption should be decreed in favour of the mortgagors and both the mortgagors were equally interested and in that background it was held that Section 24 could not be invoked and that Section 21 cannot be construed to restrict the meaning of the word 'interested' only to a case where the person is claiming something in his favour.
14. The Division Bench of Punjab High Court in Narsingh Das, with reference to Section 24 held that the said section applies where the dispute between the plaintiff and some of the defendants can be definitely separated from his dispute with the other defendants but it can have no application at all in a suit brought against defendants in their individual capacity jointly and severally for the recovery of money. In the present case, on facts, we have found that the dispute between the plaintiffs and defendants 1 to 6 could be separated from the dispute between the plaintiffs and defendants 9 to 14. This judgment, thus, has no application.
15. The Full Bench of Punjab High Court in Firm Khetu Ram Bachamber Dass, in the backdrop of facts obtaining therein, held that as the rest of the subject matter of the suit was not separated, Section 24 was not attracted. The Full Bench though held that Section 24 specifically provides for certain matters being referred to arbitration at the instance of only some of the parties, but for exercise of the power under Section 24, the following conditions must be satisfied viz. (1) the matter desired to be referred to arbitration can be separated from the rest of the subject matter of the suit; (2) the suit continues 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 in the same manner as if no such application has been made and (3) the award made in pursuance of such a reference shall be binding only on the parties who have joined in the reference. In the present case, we have applied the aforesaid legal position and on facts found that all the three conditions are fully satisfied and reference was made by the learned Single Judge under Section 24 of the Arbitration Act, 1940 though the provision has not been referred in the order.
16. In Nachiappa Chettiar, the Supreme Court with reference to Section 21 of the Arbitration Act, 1940 held that for the applicability of Section 21, two conditions must be satisfied before an application in writing for reference was made; (i) all the interested parties to the suit must agree to obtain a reference and (ii) the subject matter of the reference must be any matter in difference between the parties in the suit. If two conditions are satisfied, the application for reference must be made at any time before judgment is pronounced. The legal position laid down by the Apex Court with reference to Section 21 is beyond question. However, as indicated above, in the present case, the reference was made under Section 24 of the Arbitration Act, 1940, Nachiappa Chettiar does not help the appellants at all.
17. Thus, we are not persuaded by the first contention of the learned senior counsel for the appellants and we overrule the same. In our considered view the reference to the Arbitrator vide order dated 15-3-1991 was valid and resultantly the jurisdiction of the Arbitrator or the Award passed by him cannot be faulted by pressing into service Section 21 of the Arbitration Act, 1940.
18. It is now time to turn to the second contention of the learned senior counsel. The contention is that the award suffers from non-application of mind and legal misconduct inasmuch as the writing dated 1-2-1976 which was required to be compulsorily registered was not admissible nor enforceable. We do not find any merit in this contention and find ourselves in complete agreement with the view of the learned Single Judge on this aspect. It is not in dispute that the society is tenant ownership society and the dispute pertains to the plot of land in such type of society under the Maharashtra Co-operative Societies Act, 1960. Section 41 of the Maharashtra Co-operative Societies Act, 1960 exempts from compulsory registration the instruments relating to shares and debentures of society. It provides that Clauses (b) and (c) of Sub-section (1) of Section 17 of the Indian Registration Act, 1908 shall not apply to any instrument relating to shares in a society, notwithstanding that the assets of the society consist in whole or in part of immovable property or to any debentures issued by any society and not creating, declaring, assigning, limiting or extinguishing any right, title or interest to or in immovable property except provided therein. The writing dated 1-2-1976 is clearly covered by Section 41. The learned Single Judge in this regard held thus :
'It must be borne in mind that the dispute pertains to a plot of land in a Co-operative Housing Society registered under the Maharashtra Cooperative Societies Act. There are two types of Co-operative Societies contemplated under the Act. One type is called 'tenant co-partnership society'. Another is called 'tenant ownership society'. A 'tenant Co partnership society' is a society where the land is owned by the society and upon which houses are constructed by the society for the benefit of its members. In such society, it is the society in which the land and the buildings in the eye of law vest. In a 'tenant ownership society' the land is vested in the society and the member is supported to construct the house on the plot allotted to him at his own cost and in case the house is constructed, obviously it would be of the ownership of the concerned member. Thus in 'tenant ownership society' the principle of duality of society is accepted. Section 41 of the Co-operative Societies Act specifically provides that nothing in Clauses (b) and (c) of Section 17 and the Indian Registration Act shall apply to any instrument relating to shares in a society, notwithstanding that the assets of the society, assessed in whole or in part of immovable property. Thus, in case of a 'tenant ownership society', shares carrying with it, as necessary incident, the member's interest in the land which belongs to the society can be transferred without a registered instrument but the super-structure cannot be transferred except under a registered instrument contemplated by Sub-section (1) of Section 17 of the Registration Act, 1908 read with Section 54 of the Transfer of Property Act because the expression 'shares in Society' used in Section 41 includes land which belongs to the society but does not cover the super-structure which exclusively belongs to the member and which has nothing to do with the member's 'shares in society'. (See in this connection Full Bench decision of Gujarat High Court in Mulshanker Kunverji v. Juvansinhi Shivubha, : AIR1980Guj62 . It is an admitted position that in 1976 when the plot was transferred under the writing dated 1st February, 1976 there was no super-structure upon the property. In these circumstances, the writing dated 1st February, 1976 does not require registration.'
19. We concur with the aforesaid discussion of the learned Single Judge and do not find any infirmity therein. The Full Bench of Gujarat High Court in Mulshankar Kunverji Gor and Ors. v. Juvansinhi Shivubha Jadeja, : AIR1980Guj62 with reference to Section 42 of Gujarat Co-operative Societies Act which is identical to Section 41 of Maharashtra Co-operative Societies Act held thus:
'5. We have no doubt in our minds that Section 42 of the Gujarat Cooperative Societies Act, 1961, inter alia, exempts from compulsory registration instruments relating to shares in a society notwithstanding that the assets of such society consist wholly or in part of immovable property. Shares in a co-operative housing society have a necessary relation to the immovable properties which the society constructs and which are allotted by the society to its members. It is necessary, therefore, to find out what an instrument of transfer relating to 'shares in a society' conveys to the transferee. It has been argued that there are two types of co-operative housing societies. One type is called 'tenant Co partnership society'. Another is called 'tenant ownership society'. A 'tenant co-partnership society' is a society where the land is owned by the society and upon which houses are constructed by the society for the benefit of its members. It is the co-operative venture of all the members of a co-operative housing society which brings into being the houses which the members in their turn may occupy. They are constructed out of its own assets and out of the moneys borrowed by it. The debt is discharged by the society by collecting periodical contributions from them in specified amounts. In such a society, it is the society in which the land and the building in the eye of law vest. The learned District Judge has on facts found in the instant case that the society in question is a tenant co-partnership society. Therefore, when a member of such a cooperative housing society transfers his shares to another with the approval of the society, he not only transfers the shares but also, as a necessary incident thereof, transfers his interest in the immovable property which has been allotted to him. What Section 42, Clause (a), therefore, exempts from the rule of compulsory registration is an instrument relating to 'Shares in a society' which carry with them, as a necessary incident, member's interest in the immovable property occupied by him. We say so because both the land on which the house has been constructed by the society and the house itself vest in the society in the eye of law. It is therefore difficult to uphold the argument raised by Miss Shah that with the transfer of 'shares in such a society', what are transferred are merely the shares in the society and not the right to occupy the house which necessarily flows from the allotment of the houses by the society to its members. In case of a 'tenant co-partnership society', 'shares in a society' which a member holds appear to us to be inseverable from his interest in the immovable property which has been allotted to him for his occupation and enjoyment. Now, it is necessary for us to make it clear that the expression 'shares in a society' used in Clause (a) of Section 42 connotes shares in the assets of the society which include the immovable properties of the society which the society has allotted to its members for enjoyment and occupation. Looking at it from another angle, we find that since the immovable property - the land and the house - vest in the society, no title is transferred to the purchaser with the transfer of shares. Title continues to remain with the society. Right to occupy and enjoy it is transferred by the transfer of his shares by one member to another. This expression does and cannot therefore embrace within its sweep any personal interest, independent of the society, which a member may have in the immovable property which he occupies. Such a situation arises in case of 'a tenant ownership society'. It has been argued that in 'a tenant ownership society', the land belongs to the society and the super structure thereupon is constructed, not by the society out of its funds but, by the member out of his personal funds. In such a case, when by an instrument a member transfers his 'shares in the society' to another person, he not only transfers his shares but also his right to occupy and enjoy the land belonging to the society and the superstructure which he has constructed out of his personal funds and which belongs to him personally. The transfer of such a superstructure cannot be effected except under a registered conveyance because Clause (a) of Section 42 does not exempt from compulsory registration the transfer of a member's personal immovable property - not belonging to the society - to another. It is therefore clear that in case of 'a tenant co-partnership society', the transfer of shares necessarily carries with it the transfer of member's interest in the immovable property allotted to him and that such a transfer can be brought about without a registered instrument because Clause (a) of Section 42 carves out an exception to the rule enunciated in Sub-section (1) of Section 17 of the Registration Act, 1908. In case of 'a tenant ownership society', shares carrying with it, as necessary incident, the member's interest in the land which belongs to the society can be transferred without a registered instrument but the super-structure cannot be transferred except under a registered instrument contemplated by Sub-section (1) of Section 17 of the Registration Act, 1908 read with Section 54 of the Transfer of Property Act because the expression 'shares in a society' used in Section 42(a) of the Gujarat Co-operative Societies Act, 1961 casts its net upon land which belongs to the society but does not reach the super-structure which exclusively belongs to the member and which has nothing to do with the member's 'shares in a society.'
20. The learned Single Judge rightly applied the aforesaid judgment to the facts of the present case and cannot be said to have erred in holding that in case of a tenant ownership society shares carrying with it, as necessary incident, the members interest in the land which belongs to the society can be transferred without a registered instrument. There is no merit in the submission of the learned senior counsel that the writing dated 1-2-1976 is an instrument of gift. Nor he is right in contending that Section 41 of the Act of 1960 has no application since the document amounted to giving up rights in relation to the plot of land.
21. The Arbitrator, therefore, cannot be held to be guilty of legal misconduct as canvassed by the learned senior counsel.
22. Incidentally we may observe that no prejudice has been caused or is claimed to have caused to the appellants in the absence of flat purchasers before the Arbitrator. The plaintiffs (the appellants are legal representative of first plaintiff and the second plaintiff) were the parties to the consent term and at their instance and at the instance of defendants 1 to 6, the specific matter was referred to arbitration. They fully participated before the arbitrator. No plea was raised by them before the arbitrator that flat purchasers were parties interested in the dispute referred or that the reference was bad. The award having gone against them, the appellants in the proceedings under Sections 30 and 33 of the Act of 1940, raised the plea that reference itself was invalid.
23. All in all, the appeal has no merit and is dismissed. No order as to costs.
24. The interim order stands discharged.
25. Oral prayer for stay of this order is rejected. Certified copy expedited.