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PETITIONER: NARAINDAS

       Vs.

RESPONDENT: VALLABHDAS & ORS.

DATE OF JUDGMENT15/10/1971

BENCH: KHANNA, HANS RAJ BENCH: KHANNA, HANS RAJ HEGDE, K.S.

CITATION:  1972 AIR    1            1972 SCR  (3)  28  1971 SCC  (3) 642

ACT: Arbitration  Act 10 of 1940--Person entitled to  maintenance out   of  certain  property  whether  necessary   party   to arbitration   agreement  relating  to  dispute  about   that property--Reference  made out of court--Whether all  parties to  reference  must sign award in token  of  acceptance,  of award--Whether  previous  litigation about a  property  bars reference  to  arbitration  of a  fresh  dispute  about  the property.

HEADNOTE: By  an  arbitration  award  given in  1933  D  was  given  a maintenance allowance enforceable against property  allotted to  the  appellant and his brothers and mother.   Since  the allowance  was not paid D secured a decree for the  sale  of houses  belonging  to the appellant and his  brothers.   The property  was  purchased by respondents 4 and  5  who  after obtaining  sale certificate from the court sought to  obtain possession  of the same.  On, 8th April 1955  the  appellant his   brothers  and  mother  entered  into  an   arbitration agreement  with  respondents  4 and  5.  According  to,  the agreement  respondents  4 and 5 gave up their claim  to  the houses   purchased  by  them  in  court  auction   and   the arbitrators were to make award in respect of the amounts  to be paid by either of the parties as well as the  maintenance allowance  payable to D and to the appellant’s mother.   The arbitrators  by  their award dated 20th  October  1956  made provision for the amounts payable to different parties.  The also  made on for the payment of allowance to D as  well  as for her residence. provision the award had been put in court objections  were filed against it.  The Additional  District Judge, set aside the award inter alia on the ground that the award  affected the rights of D and she had not been made  a party  to  the  agreement.   The  High  Court  reversed  the judgment  of  the Additional District Judge.  In  appeal  by certificate the appellant contended; (i) that the award  was invalid  because  D was an interested party in  the  dispute relating   to  arbitration  and  she  had  not  joined   the arbitration   agreement;   (ii)  that   the   reference   to arbitrators was made out of court and as all the parties  to the arbitration agreement did not sign the award in token of their  acceptance,  the  same could not be made  a  rule  of

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court; (iii) that because there had been earlier  litigation about the house allotted  to the appellant and his brothers, the  same  could not be the subject  matter  of  arbitration dispute, HELD  : (i) The rights of D remained intact and were  in  no way  affected  by the award dated 20th  October  1956.   The maintenance  allowance  payable to her was also  kept  as  a charge over the immovable property.  The fact that D did not sign the arbitration agreement as such would not vitiate the arbitration  proceedings.  ’She did not raise any  objection to the arbitration proceedings or the subsequent award.  Ac- cording  to  counsel  she  died three  years  ago.   In  the circumstances   the   question  whether  her   rights   were prejudicially affected by the award was purely academic  [31 E] (ii) An award given on a reference during the pendency of  a suit  relating to a dispute which is the subject  matter  of reference without obtaining the order of the Court cannot be enforced.   The underlying reason for the same is  to  avoid conflict of jurisdiction.  However according to s. 47 of the Arbitration  Act,  1940,  an  arbitration  award   otherwise obtained may with the consent of all the parties  interested be taken into consideration 29 as a compromise or adjustment of a suit by any court  before which  the suit is pending.’ In such an event, the Award  is enforced  as a compromise or adjustment of the suit  because all the interested parties give their consent to the  award. When  however,  as in the present case, no suit  is  pending with  respect  to  the subject matter  of  dispute  and  the parties choose to refer a dispute to the arbitrators, it  is not essential that the parties should signify their  consent to the award before the same can be enforced.  Agreement and consent  are imperative only at the stage of  referring  the dispute  to arbitrators but not at the stage of  the  award. [31H-32D]. Jagaldas  Damodar  Modi & Co. v. Pursottam Umedbhai  &  Co., A.I.R. 1953 690, held in applicable. (iii)  A  dispute  is referred to  arbitration  because  the parties agree to such a reference and the mere fact that the property which is the subject matter of dispute was also the subject  matter  of earlier litigation, cannot  prevent  the parties  to  refer  the  dispute  about  that  property   to arbitration.   What  is. referred to arbitrators in  such  a case  is the fresh dispute and although the finding  of  the Court  in the previous litigation may have a bearing on  the dispute  referred to the arbitrators, it would not stand  in the   way  of  reference  of  the  fresh  dispute   to   the arbitrators. [32 F]

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 194 of 1967. Appeal  from the judgment and order dated April 27, 1964  of the  Madhya Pradesh High Court in Misc. (First Appeal  No.60 of 1960. S. N. Anand and Kailash Mehta, for the appellant. S. S. Khanduja and K. C. Dua, for respondent No. 1. The Judgment of the Court was delivered by Khanna,  J.  This is an appeal on a certificate  of  fitness granted  by  the  Madhya  Pradesh  High  Court  against  the judgment  of  that Court whereby that Court  in  appeal  set aside the order of the Additional District Judge,  Jabalpur, dismissed the objections against an award and directed  that

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the award be made a rule of the Court. Naraindas, appellant is the brother of Vallabhdas and Durga- prasad,  respondents  1  and 2 and son  of  Smt.   Sukhrani, respondent  No. 3. There were, some arbitration  proceedings in 1932 between the appellant and respondents 1 to 3 on  one side  and Pannalal and Smt.  Dulari Bahu on the other  side. Those  proceedings  related to partition of property  and  a claim  for maintenance allowance by Dulari Bahu.   An  award was  given in those proceedings and was made a rule  of  the Court  on 13-12-1933.  According to the award,  Dulari  Bahu was  to get a maintenance allowance of Rs. 12/-  per  mensem from  the appellant and his brothers . A charge was  created of  the maintenance allowance on the house which fell  as  a result of partition to the 30 share  of the appellant and respondents 1 to 3. It was  also provided  that if the appellant and his brothers  failed  to pay the monthly allowance, Dulari Bahu would, be entitled to get  the house sold.  Out of the sale proceeds, Rs.  3,000/- were  to be deposited in a bank on the condition  that  the, amount  of  interest would be paid to Dulari  Bahu  but  she would  not  be entitled to draw the  principal  amount.   On Dulari Bahu’s death, Rs. 2,000/-out of Rs. 3,000/- would  be paid  to the appellant and his brothers and Rs.  1,000/-  to Pannalal. The  amount  of  maintenance  payable  to  Dulari  Bahu  was increased  to Rs. 30/- per mensem in a suit brought  by  her and decided on 8-10-1949. As   the  appellant  and  his  brothers  did  not  pay   the maintenance  allowance to Dulari Bahu, she, in execution  of her  claim  for  maintenance  allowance,  got  their  houses situated at Jabalpur sold by Court auction.  The houses were purchased  for  Rs.  22,000/- by  Sitaram  and  Laxminarain, respondents  4 and 5. After obtaining the sale  certificate, respondents   4  and  5  took  proceedings   for   obtaining possession   of  the  houses  but  they  were  resisted   by respondent  No.  1. The appellant and his  brothers  further claimed that they had deposited some amount with respondents 4  and 5. The appellant and his brothers and mother  on  one side  and  respondents 4 and 5 on the other  side  thereupon appointed  four  arbitrators,  as per  agreement  dated  8th April, 1955.  According to the agreement, respondents 4  and 5  would  have no claim in the houses purchased by  them  in Court  auction  and  the arbitrators  would  make  award  in respect  of the amounts to be paid by either of the  parties as  well as regarding the maintenance allowance  payable  to Durga  Bahu and Sukhrani Bahu.  The  arbitrators  thereafter gave their award dated 20th October, 1956 wherein they  made provision  for  the amounts payable  to  different  parties. Regarding  the  amount of maintenance allowance  payable  to Dulari Bahu, the award provided that Rs. 3,000/- out of  the sale  proceeds  would  be withdrawn from the  Court  and  be deposited  with  Durgaprasad, respondent.   Durgaprasad  was made  liable  to pay the amount of Rs. 30/-  per  mensem  as maintenance  allowance  to Dulari Bahu.  The  award  further provided ’that out of the amount of Rs. 3,000/-, Rs. 1,000/- would be paid, to Pannalal and Rs. 2,000/- to Durgaprasad on the  death  of Dulari Bahu.  Dulari Bahu was  also  given  a right  of residence in a room and maintenance  allowance  of Rs.  30/-  payable to her was made, a charge  on  the  house allotted to Durgaprasad. After the award had been put in Court, objections were filed against  the award.  Learned Additional District  Judge  set aside  the award on the ground that the award affected  the, rights of

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31 Dulari  Bahu  and  she  had not been made  a  party  to  the arbitration agreement.  The reference to arbitration as well as the award, according to the Additional District Judge did not  amount to an adjustment and were,, therefore,  invalid. It  was  also  held  that the award was  in  excess  of  the arbitration  agreement.  Some other grounds were also  given but  we  are not concerned with them.  On appeal,  the  High Court reversed the decision of the Additional District Judge and  held  that there was no infirmity  in  the  arbitration proceedings or the award.  In the result, the award was made a rule of the Court. Mr.  Anand,  on  behalf of the appellant,  has  argued  that Dulari Bahu was an interested party in the dispute  relating to  arbitration  and  as she did not  join  the  arbitration agreement,  the reference to arbitration and the  subsequent award  should  be  held to be invalid.   There  is,  in  our opinion, no force in this contention.  The dispute which was referred  to  the  arbitrators  related  to  the  houses  in question  which  had  been  sold  in  Court  auction.   The, interest  of Dulari Bahu pertained only to the  recovery  of her  maintenance allowance.  According to the earlier  award which  Dulari  Bahu sought to enforce, she was  to  get  the maintenance  allowance from an amount of Rs.  3,000/-  which was  to  be kept in deposit.  The rights of Dulari  Bahu  in this respect remained in-tact and were in no way affected by the  award  dated  20th  October,  1956.   The   maintenance allowance payable to her was also kept as a charge over  the immovable property.  The fact that Dulari Bahu did not  sign the  arbitration  agreement as such would  not  vitiate  the arbitration proceedings.  The present is not a case  wherein the  arbitration  proceedings are sought to be  assailed  by Dulari  Bahu.  On the contrary, it is the admitted  case  of the parties that Dulari Bahu did not raise any objection  to the  arbitration proceedings or the subsequent award on  the ground  that  her rights had  been  prejudicially  affected. This  apart,  we  find that Dulari Bahu,  according  to  the learned  counsel,  died  about  three  years  ago.   In  the circumstances,  it would be purely academic to  dilate  upon the  question as to whether the rights of Dulari  Bahu  were prejudicially affected by the award in question. It  is  next argued by Mr. Anand that as  the  reference  to arbitrators was made out of Court and as all the parties  to the arbitration agreement did not sign the award in token of their  acceptance, the same could not be made a rule of  the Court.  There is no substance, in our opinion, in the  above contention.  It is always open to parties to refer a dispute to  arbitration without the intervention of the  Court.   In case, a suit is pending in respect of the subject matter  of the  dispute,  there can be no valid  reference  during  the pendency of the suit, to arbitration without 32 the  order of the Court.  The underlying reason for that  is to avoid conflict of jurisdiction by both the Court and  the arbitrator  dealing concurrently with the same dispute.   An award  given  or a reference during the pendency of  a  suit relating to dispute which is the subject matter of reference without obtaining the order of the Court cannot be enforced. The  only exception to this rule is provided by the  proviso to  section  47  of the Arbitration Act  (Act  10  of  1940) according to which "an arbitration award otherwise  obtained may with the consent of all the parties interested be  taken into  consideration as a compromise or adjustment of a  suit by any Court before which the suit is pending".  In such  an event,  the award is enforced as a compromise or  adjsutment

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of  the suit because all the interested parties  give  their consent  to the award.  Where,, however, as in  the  present case, no suit is pending with respect to the subject  matter of  dispute  and the parties choose to refer  a  dispute  to arbitrators,  it  is not essential that the  parties  should signify  their consent to the award before the same  can  be enforced.   Any other view would run counter to  the  entire scheme  and  object  of arbitration for  the  settlement  of disputes  according  to  which, agreement  and  consent  are imperative  only  at the stage of referring the  dispute  to arbitrators but not at the stage of the award.  The decision of Bachawat, J. (as he then was) in Jugaldas Demodar Modi  & Co. v. Pursottam Umedbhai & Co.(1) relied upon by the appel- lant  has  no  bearing  as  the  said  case  dealt  with  an arbitration reference during the pendency of a suit. We are also not impressed by the contention raised on behalf of  the  appellant  that  because  there  had  been  earlier litigation about the house allotted to the appellant and his brothers,  the  same  could not be, the  subject  matter  of arbitration  dispute.  A dispute is referred to  arbitration because the parties agreed to such a reference and the  mere fact  that  the  property which is  the  subject  matter  of dispute   was  also  the  subject  matter  of   an   earlier litigation, cannot prevent the parties to refer the  dispute about  that  property to arbitration.  What is  referred  to arbitrators in such a case is the fresh dispute and although the finding of the Court in the previous litigation may have a  bearing  on the dispute referred to the  arbitrators,  it would not stand in the way of reference of the fresh dispute to  the  arbitrators.  It is not the case of  the  appellant before  us  that the precise dispute which was  the  subject matter  of  the  award dated 20th  October,  1956  had  been adjudicated upon earlier in a civil Court. The appeal consequently fails and is dismissed with costs. G.C.                  Appeal dismissed. (1) A.I.R. 1953 p. 696 33