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1973 Supreme(All) 31

Allahbad High Court
R.L.GULATI,S.P.SINGH
Kedar Nath - Appellant
Versus
Ambika Prasad - Respondent
Decided On : 01/31/1973

Advocates:
G.P. Bhargava, A.N. Bhargava and S.M. Chaturvedi, for Appellant; Karnini Mohan, for Respondents.

Headnote:

ARBITRATION - AWARD - EFFECT - AWARD NOT MADE RULE OF COURT - CAN BE SET UP AS DEFENCE TO SUIT - ARBITRATION ACT, 1940, SEC. 32.

Fact of the Case:

Plaintiff filed a suit for declaration that arbitration award was illegal and invalid and for dissolution and rendition of accounts of the firm. Defendant pleaded that suit was barred by provisions of Section 3 of Arbitration Act, read with Rule 7 of First Schedule and Section 32 of the Act.

Finding of the Court:

Arbitration award, even though not made rule of court, can be set up as defence to suit. Section 32 of Arbitration Act bars suit for decision upon existence, effect or validity of arbitration and prevents award from being enforced, set aside, emended, modified or in any way affected otherwise than is provided in Act. Word 'enforce' in Section 32 has to be interpreted so as to bar suit by plaintiff. Any other interpretation would render award mere waste paper.

Issues: Whether suit for dissolution of firm and rendition of accounts is maintainable in view of provisions of Section 3 of Arbitration Act, 1940, read with Sub-Sec. (7) of First Schedule thereof and Section 32 of the same Act?

Ratio Decidendi: Award is final and binding on parties and persons claiming under them (Paragraph 7 of Schedule I to Arbitration Act). Section 32 of Arbitration Act bars suit for decision upon existence, effect or validity of arbitration and prevents award from being enforced, set aside, emended, modified or in any way affected otherwise than is provided in Act. Word 'enforce' in Section 32 has to be interpreted so as to bar suit by plaintiff. Any other interpretation would render award mere waste paper.

Final Decision: Appeal allowed. Order of 1st Additional District Judge allowing appeal is modified to extent that it will be permissible for appellant in proceedings taken consequence to remand to rely on award as defence to suit.

Judgement

C.S.P. SINGH, J. :- Ambika Prasad, the plaintiff-respondent in the present appeal filed a suit against the appellant, and certain other respondents claiming a declaration that the arbitration award dated 18-8-1965 was illegal and invalid and for dissolution and rendition of accounts of the firm Kedar Nath Kailash Nath. The defence of the appellant was that the suit was barred by the provisions of Section 3 of the Arbitration Act, read with Rule 7 of the First Schedule as also by Section 32 of the same Act. Certain other pleas in defence were taken, but it is not relevant to mention them for the - purposes of the present appeal

2. The defence that the suit was barred in view of the provisions of the Arbitration Act was based on the fact that before the filing of the suit, a reference of the dispute had been made to arbitrator and an award in favour of the defendant had been given on 18th August 1965, which had been subsequently registered and a copy thereof had been sent to each of the partners. The plaintiff under the award was to pay a sum of Rs. 5,764/76 paise to, the contesting defendant. No proceedings for setting aside this award were taken by the plaintiff and as such it became binding qua the dispute between the parties, and as such the present suit was mis-conceived. Issue No. 2 which ran as follows :-

"2. Is the suit for dissolution of the firm defendant No. 1 and rendition of accounts not maintainable as said in paras 20 and 21 of the written statement filed by the defendant No. 2 ? Is this suit hit by the provisions of Section 3 of the Arbitration Act. 1940, read with Sub-Sec. (7) of the First Schedule thereof and is hit also by the provisions of the same Act ?" was tried by the Civil Judge as a preliminary issue, and was decided against the "plaintiff; The plaintiff thereafter preferred an appeal before the Additional District Judge, Varanasi. In the appeal it was conceded on behalf of the plaintiff-appellant that the first relief for declaration that the award was void end illegal could not be obtained by way of suit, in view of the provisions of the Arbitration Act. It was, however, urged that the award given by the arbitrators not having been filed in Court or made a rule of the Court, and the defendants not having obtained a decree on the basis thereof, the Civil Judge erred in dismissing the claim on the basis of such an award. The District Judge following a decision of this Court in Ram Sahai v Babu Lal, AIR 1965 All 217 held that the defendants could not rely on the award till a decree was passed on that award as till then it has no status in the eye of law. In view of this, he disagreed with the Civil Judge and held that the suit was maintainable and remanded the case. The appeal came up before Kirty, J., and inasmuch as he was unable to agree with the view taken by Satish Chandra, J., in AIR 1965 All 217 (supra) referred the case to a larger Bench. This is how the matter has now come up before us. There is considerable support for the view taken in AIR 1965 All 217 (supra) that an award if it is not made a rule of the Court has no efficacy and cannot be used as a defence to a suit.

The cases in support of this view are Salt Pamandass Sugnaram v. T.S. Manikyam Filial, AIR 1960 Andh Pra 59 (FB); O. Mohamed Yusuf Levai Saheb v. S. Hajee Mohamed Hussain Rowther (died), AIR 1964 Mad 1 (FB); Kapgal Konda Gireanna v. Kapgal Konda Basappa. AIR 1964 Mys 238; Rambilas Mahto v. Babu Durga Bijai Prasad Singh. AIR 1965 Pat 239 and Chandrabhaga Sadashiv v. Bhikachand Hansaji, AIR 1959 Bom 549. In Amod Kumar Verma v. Hari Prasad Burman, AIR 1958 All 720, it was held that till such time that the award is filed in Court, there is no threat to the rights of any party and, therefore, no one had any cause of action to apply for setting aside the award. Counsel for the respondent has urged that a necessary consequence of this view is that an award is a dead letter until such time that it is filed in Court and a decree ob








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