Kehar Dass Vs. Tarak Singh and anr. - Court Judgment

1. This appeal is directed against the judgment and decree of the Senior Subordinate Judge, Ludhiana, dated April 30, 1963.

2. The facts of this appeal are that the site in dispute marked by letters 'ABCE' in plan Exhibit P. 1 is dera of which the plaintiff is the owner. It was declared to be part of dera in the year 1933 by the Sikh Gurdwara Tribunal. There is a wall towards the South of this site. Defendant No. 1 has illegally obtained permission from the Gram Panchayat of the village for opening a door in the wall and to pass the water over the site in dispute. Under the colour of this permission, Defendant No. 1 proposed to open the door and to pass water over the property in dispute. The plaintiff, therefore, filed a suit that defendant No. 1 be restrained from doing so. The suit was contested by defendant No. 1 who denied the allegations of the plaintiff. He, inter alia, pleaded that the plaintiff is not the owner of the site in dispute, that the judgment of the Sikh Gurdwara Tribunal did not relate to the site in dispute and that it is a part of the shamilat property on which the public has an access as of right. It was also pleaded by him that the matter had been referred to the Panchayat by the parties and the Panchayat entered upon the reference and gave an award Consequently, the suit was not maintainable in the Court. The trial Court decided the suit in favour of the plaintiff and decreed the same. Defendant No. 1 went up in appeal before the Senior Subordinate Judge, Ludhiana, who reversed the judgment and decree of the trial Court and dismissed the suit. The plaintiff having felt aggrieved from the judgment and decree of the Senior Subordinate Judge has come up in appeal to this Court.

3. The first contention of the learned counsel for the appellant is that the matter in dispute was not referred to the Gram Panchayat for arbitration and no award was given by it regarding the subject-matter of the suit. The learned counsel for the respondent No. 1 has referred to arbitration clause dated May 7, 1961, Exhibit D-1 and award dated June 19, 1961, Exhibit D-2. On reading the aforesaid two documents, it is clear that the matter in dispute was referred to the Panchayat as Arbitrator and the same was decided by it vide award, dated June 19, 1961, Exhibit D-2. In the circumstances, I reject this contention of the learned counsel for the appellant.

4. The second submission of the learned counsel for the appellant is that the appellant was not barred from instituting the suit in view of the award of the Arbitrator. He submits that the finding of the first appellate Court that the suit is not maintainable as the matter has already been decided by an Arbitrator, is erroneous. In order to consider the contention of the learned counsel for the appellant, it will be necessary to reproduce paras. 5 and 6 from the plaint, which are as follows:--

'5. That the defendant No. 1 illegally and to cause injury to the plaintiff proposes to open a door on the property of the plaintiff at the point shown red in the plan attached, and also to pass water through the property of the plaintiff. That defendant No. 1 has illegally and collusively secured permission to open a door and to pass water on plaintiff's property from the Gram Panchayat Bhutta vide its order dated 20-6-1961 and 19-6-1961. These orders of the Gram Panchayat are illegal, void and without jurisdiction and the plaintiff is not bound by it nor does it affect the rights of the plaintiff to use his property exclusively. The plaintiff and his predecessors-in-interest are in exclusive possession of this total property shown yellow in the plan attached, for more than 40 years.

6. That previously on 5-7-1961 the defendant opened the door at the point shown red in the plan attached forcibly, but the same was got closed by the Superintendent of Police, Ludhiana on 14-1-1962 vide the order of the Superintendent of Police, Ludhiana on 7-1-1962.'

A reading of the aforesaid paras shows that after passing of the award, the defendant No. 1 had opened the door on July 5, 1961, which was got closed by the Superintendent of Police, Ludhiana on January 14, 1962. For deciding the important question of law, it will be useful to peruse some relevant sections of the Arbitration Act, 1940(hereinafter referred to as the Act). Sub-section (b) of Section 2 defines 'award' which means an arbitration award. Section 14 relates to signing and filing of the award. Sub-section (1) says that 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 sub-section (2) states that the arbitrators and umpire shall at the request of any party or any person claiming under such party or if so directed by the Court, cause the award or a signed copy of it, together with any deposition and documents which may have been taken and proved before them, to be filed in Court, and the Court shall thereupon give notice to the parties of the filing of the award. Section 17 deals with the judgments and decrees that are to be made in terms of the award, Section 30 contains the grounds on which the award is liable to be set aside, Section 32 bars suits for contesting arbitration agreement and award and Section 33 states that the arbitration agreement or the award can be contested by an application. Sections 32 and 33 of the Act are as follows:--

'32. Bar to suits contesting arbitration agreement or award.--Notwithstanding any law for the time being in force, no suit shall lie on any ground whatsoever for a decision upon the existence, effect or validity of an arbitration agreement or award, nor shall any arbitration agreement or award be enforced, set aside, amended, modified or in any way affected otherwise than as provided in this Act.

33. Arbitration agreement or award to be contested by application.--Any party to an arbitration agreement or any person claiming under him desiring to challenge the existence or validity of an arbitration agreement or an award or to have the effect of either determined shall apply to the Court and the Court shall decide the question on affidavits:Provided that where the Court deems it just and expedient, it may set down the application for hearing on other evidence, also, and it may pass such orders for discovery and particulars as it may do in a suit.'

The object of the Arbitration Act appears to be that if certain parties want their disputes to be settled by the Arbitrator/Arbitrators of their choice, then they cannot be allowed to resort to litigation in a court of law. The arbitration agreements are not hit by Section 28 of the Indian Contract Act, 1872. Section 14 of the Specific Relief Act, 1963, states that save as provided by the Arbitration Act, 1940, no contract to refer present or future differences to Arbitration shall be specifically enforced, but if any person who has made such a contract and has refused to perform it, sues in respect of any subject which he has contracted to refer, the existence of such contract shall bar the suit. The remedies for challenging such agreements are provided in the Act itself. I am fortified in the aforesaid view by Hon'ble the Supreme Court in Union of India v. Hanskumar Kishan Chand, AIR 1958 SC 947, wherein their Lordships observed that when parties enter into an agreement to have their disputes settled by arbitration, its effect is to take the lis out of the hands of the ordinary courts of the land and to entrust it to the decision of what has been termed a private tribunal. Following the said decision, similar observations were made by a Division Bench of the Gujarat High Court in Thakker Vithaldas Hargovind v. Kachhia Jagjivan Motilal, ILR (1969) 10 Guj 12(at p. 20):--

'The object of the Act is to prevent parties to an arbitration form reagitating the very question in the dispute referred to arbitration in a manner other than as provided by the Act. It will be seen from a perusal of Section 34 of the Arbitration Act that if there is an agreement to refer a matter to arbitration, then if any person who is party to an arbitration agreement commences any legal proceeding, then those proceedings are stayed and the scheme appears to be that this is because legal proceedings should not be carried out or proceeded with where there is an arbitration agreement. Putting the matter differently, the Arbitration Act seems to contemplate that in respect of matters which are covered by the arbitration agreement, a suit shall not be entertained and proceeded with or in any event, it should be stayed. The clear object, therefore, of the provisions of the Act appears to be that if a particular subject-matter is shown to be a matter which is agreed to be referred to arbitration, then a suit in respect of the same subject-matter is barred. This is what is provided in reference to what can be described merely as an arbitration agreement.'

We have to keep in mind the aforesaid view in deciding the present case. Reading of Section 32 of the Act shows that suit to obtain decision on the existence, effect or validity of any arbitration agreement or award is barred and arbitration agreement or award cannot be enforced, set aside, amended, modified or in any way affected otherwise than as provided in the Act. Section 33 of the Act states that if any party to an arbitration agreement wants to challenge the existence or validity of an arbitration agreement or award or to have the effect of either determined shall apply to the Court which shall decide the question. From reading the aforesaid two sections, it is clear that the arbitration agreement and the award cannot be challenged except by way of an application under the Act. No party can bring suit in the civil Court for the purpose of challenging the existence or validity of an arbitration agreement or an award. If a suit is instituted in the Court by a party against another between which an arbitration agreement exists, the proceedings may be stayed by the Court on an application by the other party. Award means an arbitration award and not a judgment or a decree passed under Section 17 of the Act, on the basis of the award. If the intention of the Legislature was that the suit can be brought on the original cause of action if an award is not made a rule of the Court, it could have provided so in the Act. The reading of all the provisions shows that the Legislature did not want that the award given by the arbitrators should be set aside by the civil Court in suit. Mr. Jawanda, learned counsel for the appellant, vehemently urges that if the award is not made the rule of the Court, the award is merely a scrap of paper and cannot be used for any purpose. He further submits that a defence cannot be taken by the defendant in a suit filed on original cause of action that the suit could not be brought in view of the award given by the Arbitrator in a reference between the parties. In my view, the contention of the learned counsel for the appellant has no substance.

These sections came up for interpretation before their Lordships of the Supreme Court in Kashinathsa Yamosa Kabadi v. Narsingsa Bhaskarsa Kabadi, AIR 1961 SC 1077. The learned Shah, J; while speaking for the Court observed as follows:--

'In S.K. Kuer v. B. N. Sinha, ILR (1952) 31 Pat 886 = (AIR 1953 Pat 42) the Patna High Court held that by virtue of Section 32 of the Arbitration Act, 1940, an award made on a private reference to arbitration is not operative of its own force; it only becomes operative on being made a rule of the Court. It was held in that case that an award cannot be set up as a defence to an action unless it is filed in court and a decree is obtained thereon. Similar view was taken in Pamandass v. Manikyam Pillai, AIR 1960 Andh Pra 59(FB); Venkatasubbayya v. Bapadu, AIR 1951 Mad 458 and Firm Gulzarimal Gheesalal v. Firm Rameshchandra Radheshyam, ILR (1959) 9 Raj 515 = (AIR 1959 Raj 162). On the other hand, in Suryanarayana Reddy v. Venkata Reddy, ILR (1949) Mad 111: (AIR 1948 Mad 436) it was held that Sections 32 and 33 of the Indian Arbitration Act, 1940, did not preclude a defendant from setting forth an award which had been fully performed by him but which was not filed in Court under Section 14 and on which a judgment was not pronounced or a decree given under Section 17 of the Act, in answer to the plaintiff's claim which was the subject-matter of the reference and the award. That view was accepted in Rajamanickam Pillai v. Swaminatha Pillai, AIR 1952 Mad 24. It is not necessary in this appeal to express a considered opinion on this disputed question. It may be sufficient to observe that where an award made in arbitration out of court is accepted by the parties and it is acted upon voluntarily and a suit is thereafter sought to be filed by one of the parties ignoring the acts done in pursuance of the acceptance of the award, the defence that the suit is not maintainable is not founded on the plea that there is an award which bars the suit but that the parties have by mutual agreement settled the dispute, and that the agreement and the subsequent actings of the parties are binding. But setting up a defence in the present case that there has been a division of the property and the parties have entered into possession of the properties allotted, defendant No.1 is not seeking to obtain a decision upon the existence, effect or validity of an award. He is merely seeking to set up a plea that the property was divided by consent of parties. Such a plea is in our judgment not precluded by anything contained in the Arbitration Act.'

Though various authorities on the controversial matter were observed by the learned Judge, but no definite opinion was given on the question. It was, however, expressly said that where an award made in arbitration out of Court is accepted by the parties and it is acted upon voluntarily and a suit is thereafter sought to be filed by one of the parties ignoring the acts done in pursuance of the acceptance of the award, the defence that the suit is not maintainable is not founded on the plea that there is an award which bars the suit, but the parties have by mutual agreement settled the dispute, that the agreement and the subsequent actings of the parties are binding. It is also observed that the plea that the award has been acted upon is not precluded from anything contained in the Arbitration Act. Subsequently, a similar matter was decided by Hon'ble the Supreme Court in Uttam Singh Dugal & Co. v. Union of India, Civil Appeal No. 162 of 1962 decided on 10-10-1962(SC). The facts of that case were that Union of India requested Colonel S.K. Bose, respondent No. 2, to decide the disputed questions between it and the appellant. The appellant took an objection that the reference to respondent No. 2 was not competent because an award had already been passed by him on April 23, 1952, in which all the relevant matters between them had been decided. The appellant filed an application under Section 33 of the Act in the Court to determine the effect of the earlier award. According to the appellant, the second reference was incompetent. The award which had been given by the arbitrator earlier had been satisfied. The application filed by the appellant was allowed by the trial Judge and it was held that the claim had merged in the award. The Union of India went up in revision before the High Court which took a view that the second reference was valid. Consequently, the application under Section 33 of the Act was dismissed. An appeal was taken from that order to the Supreme Court. Their Lordships, while deciding the matter, observed as follows:--

'The true legal position in regard to the effect of an award is not in dispute. It is well settled that as a general rule all claims which are the subject-matter of a reference to arbitration merge in the award which is pronounced in the proceedings before the arbitrator and that after award has been pronounced, the rights and liabilities of the parties in respect of the said claims can be determined only on the basis of the said award. After an award is pronounced, no action can be started on the original claim which had been the subject-matter of the reference. As has been observed by Mookerjee, J. in the case of Bhajshari Shah Benikya v. Beharilal Basak, (1906) ILR 33 Cal 881 'the award is in fact, a final adjudication of Court of the parties' own choice and until impeached upon sufficient grounds in an appropriate proceeding, an award which is on the face of it regular, is conclusive upon the merits of the controversy submitted, unless possibly the parties have intended that the award shall not be final and conclusive. In reality, an award possesses all the elements of vitality even though it has not been formally enforced, and it may be relied upon in a litigation between the parties in relation to the same subject-matter.' This conclusion according to the learned Judge, is based upon the elementary principle that as between the parties and their privies, an award is entitled to that respect which is due to the judgment of a Court of last resort. Therefore, if the award which has been pronounced between the parties has in fact, or and in law, be deemed to have dealt with the present dispute, the second reference would be incompetent. This position also has not been and cannot be seriously disputed.'

It was further observed by their Lordships that the trial Court was right in holding that the disputes which were then sought to be raised were covered by the first award and, so, that reference was incompetent in law. The aforesaid observations clearly go to show that the appellant had no right to institute the suit regarding a matter which had already been decided between the parties by the Gram Panchayat to whom the matter had been referred by them under the Act. The observations further go to prove that a defence can be taken by the defendant that an award given by the arbitrator can be set up as a defence in a suit. I am bound by the observations of Hon'ble the Supreme Court. This judgment was followed by the Gujarat High Court in ILR (1969) 10 Guj 12(supra). In that case a suit was instituted for dissolution of partnership and rendition of accounts. A defence was taken that the subject-matter of the suit was referred to arbitration, that the arbitrator had given an award and that, therefore, no suit was maintainable. The learned Division Bench observed as follows:--

'An award which is not filed and which is not made the rule of the Court is not a nullity and is not a scrap of paper. The original cause of action merges in such an award and such an award can be set up as a defence to a suit on the original cause of action.................... An award given by an arbitrator remains valid until it is set aside and such an award even if not filed in the Court remains valid and binding between the parties to it. Where no action is taken by a party affected by the award for setting aside the same under Section 33 read with Section 30 or for having it reconsidered under Sections 15 and 16 of the Act, the award, though not made a rule of the Court by having it filed under Section 14(2) of the Act and having obtained a decree thereon under Section 17 of the Act so as to make it enforceable by any competent Court, it stands as a valid award as between the parties in respect of the subject-matter entrusted to the arbitrator. The validity of the award is presumed and it cannot be challenged in a suit or proceeding other than the one taken under the provisions of the Act. While it may not be an enforceable award in the sense that it has not merged in a decree under Section 17 of the Act so as to be executable by any competent Court, it does not lose its existence as between the parties thereto. It may bar a remedy for enforcing the same, but it cannot bar or take away the right of a party thereto to challenge the maintainability of a suit by the other party ignoring the award, in respect of the same subject-matter which was entrusted to the decision of an arbitrator and when in fact, an award has been given by him it binds the parties.'

The learned counsel for the appellant has placed reliance on Sait Pamandass Sugnaram v. T.S. Manikyam Pillai, AIR 1960 Andh Pra 59(FB); O. Mohamed Yusuf Levai Saheb v. S. Hajee Mohammed Hussain Rowther (died), AIR 1964 Mad 1(FB) and Rambilas Mahto v. Babu Durga Bijai Prasad Singh, AIR 1965 Pat 239, wherein a contrary view was taken and it was observed that it is not open to the defendant to set up an award as a bar to a suit filed on the original cause of action where the award has not been filed and all proceedings relating thereto had not been gone through as required by the Arbitration Act. The observations of the learned Judges run counter to those of Hon'ble the Supreme Court with which I, with great respect and humility, agree and which are also binding upon me. In the circumstances, no reliance can be placed on the decisions referred to above by the learned counsel for the appellant.

5. There is another way of looking at this question. I have already reproduced para 5 of the plaint wherein it is admitted by the plaintiff-appellant that the defendant had opened the door after the award of the Gram Panchayat on July 5, 1961, and which was got closed by the Superintendent of Police. As the award had been accepted and acted upon in part, therefore, the plaintiff-appellant was barred to file the present suit. Even if the Act does not bar such a suit, yet the suit merits dismissal on the ground of estoppel. In the said observations, I am supported by the observations of Hon'ble the Supreme Court in Kashinathsa Yamosa Kabadi's case, AIR 1961 SC 1077(supra). After examining this matter from both points of view, I regret my inability to accept the contention of the learned counsel for the appellant, and, therefore, I reject the same.

6. For the reasons recorded above, this appeal fails and the same is dismissed with costs.

7. Appeal dismissed.