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HIGH COURT OF ALLAHBAD
P. L. BHARGAVA, J.
Lakshmi Narain
Versus
Ram Babu
Second Appeal No.2039 of 1946
Decided On : 27-09-1951
ARBITRATION - Reference of dispute - Validity - Dispute pending in appeal - Whether can be referred to arbitration without intervention of Court - Agreement to abide by statement of referee - Whether valid - Effect of such agreement.
Fact of the Case:
A dispute between Ram Babu and Lakshmi Narain was the subject matter of an appeal pending in the Court of the Civil Judge of Agra. Apart from this dispute, there were other disputes between the parties, which were referred to arbitration without the intervention of the Court. The parties agreed to abide by the statement of a referee appointed by common consent on all the disputes, including the dispute pending in appeal. The referee made a statement upholding the validity of the award. The trial court, however, held that the reference to arbitration of the dispute pending in appeal was illegal and set aside that portion of the award.
Finding of the Court:
The Court held that the dispute pending in appeal could have been referred to arbitration through the intervention of the Court. However, the reference without the intervention of the Court was not absolutely prohibited under the Arbitration Act. The parties were entitled to settle their disputes out of Court and approach the Court to record an adjustment of the claim in respect of the subject-matter of the suit or appeal without interfering with the jurisdiction of the Court. The agreement to abide by the statement of the referee was valid and binding on the parties, including Ram Babu, as his guardian had entered into the agreement with the permission of the Court. The Court should have given effect to the adjustment and decided the matters in controversy in accordance therewith.
Issues: 1. Whether the dispute pending in appeal could be referred to arbitration without the intervention of the Court? 2. Whether the agreement to abide by the statement of the referee was valid? 3. Whether the Court was bound to give effect to the adjustment arrived at between the parties?
Ratio Decidendi: 1. The Court held that the dispute pending in appeal could have been referred to arbitration through the intervention of the Court. However, the reference without the intervention of the Court was not absolutely prohibited under the Arbitration Act. The parties were entitled to settle their disputes out of Court and approach the Court to record an adjustment of the claim in respect of the subject-matter of the suit or appeal without interfering with the jurisdiction of the Court. 2. The Court held that the agreement to abide by the statement of the referee was valid and binding on the parties, including Ram Babu, as his guardian had entered into the agreement with the permission of the Court. 3. The Court held that the Court should have given effect to the adjustment and decided the matters in controversy in accordance therewith.
Final Decision: The Court allowed the appeal, set aside the decision of the Courts below, dismissed the objections filed against the validity of the award, and directed that a decree be prepared in terms of the award.
2. Ram Babu, a minor through his father Kishen Lal as next friend, instituted suit No.297 of 1942, in the Court of the Munsif of Agra, against Lakshmi Narain the appellant, for recovery of possession over a piece of land and for demolition of certain structures built thereon by the defendant, namely, Lakshmi Narain. The suit was contested and was eventually dismissed on 31-8-1943. Against the decision of the Munsif, Ram Babu preferred an appeal No.292 of 1943 in the Court of the District Judge of Agra. The appeal was transferred for disposal to the Civil Judge of Agra and it is still pending there.
3. Apart from the dispute which was the subject-matter of the litigation mentioned above, there were other disputes, the disputants being Hub Lal, the grandfather of Ram Babu, and Kishen Lal, the father and guardian of Ram Babu, first party, Asa Ram, second party, Lakshmi Narain, the appellant, third party, and Gajadhar Singh, fourth party. On 10-7-1949, all the disputants, including Ram Babu through his father, executed a deed of agreement to refer the entire dispute, including the dispute which was the subject-matter of the appeal pending in the Court of the civil Judge of Agra, to arbitration. The dispute which was the subject-matter of the appeal was referred to arbitration without reference to or intervention of the Court. But, subsequently, on 7-8-1944, a joint application was made on behalf of Ram Babu, through his counsel, by Hub Lal, the grandfather of Ram Babu, and by Lakshmi Narain, the appellant, to the Civil Judge of Agra stating that the dispute in the appeal along with certain other matters had been referred to arbitration out of Court, and a deed of agreement for reference to arbitration had been executed by the parties. The prayer in the application was that some distant date be fixed in the appeal so that the matter may be decided by the arbitrators in pursuance of the said agreement. This application was granted on the same date and the hearing of the appeal was postponed.
4. In pursuance of the deed of reference, the arbitration proceedings commenced and in due course an award was made by the arbitrators on 16-8-1944. As regards the dispute between Ram Babu and Lakshmi Narain, the decision of the arbitrators contained in the award was that the latter should pay to the former a sum of Rs.700/-for the land. Lakshmi Narain was satisfied with the award; while the other disputants were not satisfied with it. Accordingly, Lakshmi Narain filed the suit which has given rise to this appeal.
5. Under the direction of the Court, the award was filed by the arbitrators in Court and, upon the receipt of notice of the filing of the award, Ram Babu and others filed written statements challenging the validity of the award on various grounds. The ground of objection, which is material for the purposes of this appeal and which had been raised on behalf of Ram Babu, was that the reference made on his behalf without the permission of the Court was bad in law and the reference being incompetent, the award based upon it was also invalid and not binding upon him.
6. During the pendency of the objections to the award on 30-5-1945, an application was made to the Civil Judge on behalf of Ram Babu, through his counsel, saying that the appointment of a referee would be beneficial in the interest of the minor and that the necessary sanction for the appointment of a referee in the case be given. This application was allowed.
7. On the same date, viz., 30-5-1945, counsel for the parties, including the counsel for Ram Babu, made the following statement before the Court :
"Vaklai Fariqain ne bayan
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