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Civil Rule No. 1004 of 1961, decided on 16th April 1964.
Ss. 4, 5 & 33‑Arbitrators initially vested with jurisdiction to proceed with case‑Mere pendency of another proceeding in civil Court or mere contingency of future happening does not render award null and void.
Where the arbitrators are ‑admittedly vested with initial jurisdiction to decide the matters in terms of contract entered into between the parties, the mere fact that there was some proceeding in the civil Court at the instance of one of the parties would not ipso facto take away the jurisdiction of the arbitrators to proceed with the case. Of course, when there is a dispute about the very existence of a contract, the arbitrators become functus officio and as such any award made by them would be a nullity. But when the dispute is under the contract, the m ere fact that the opposite‑party filed several suits under section 33 of the Arbitration Act, 1940 would not take away jurisdiction already vested 'in the arbitrators so as to make their award a nullity.
Hanutmull Boid v. Fatehchand Muralidhar A I R 1954 Cal. l; Heyman and another v. Darwins, Limited A I R 1942 A C 356 and 1 All. 337 ref.
First Sch, cl. 3 Phrase "entering on the reference"‑Meaning.
Clause 3 of the First Schedule to the Arbitration Act, 1940 mentions three cases giving the starting point of limitation. First is four months from entering on the reference, second four months after having been called upon to act by notice in writing from any party to the arbitration agreement and third, four months within such extended time as the Court may allow.
Although there are conflicting decisions but the words "entering on the reference" do not mean when the arbitrators have the parties before them and begin to hear the parties. They mean that when a reference has been made and the arbitrators accept the reference. The following are the reasons for adopting the above view. The Arbitration Act is for speedy disposal of the dispute between the parties. Any other view will frustrate that purpose of the Act and put the parties waiting for the result for an unknown time, e.g., after reference the arbitrators may not take up the matter immediately but put it off to indefinite time. It may be argued that for such emergency notice to arbitrators for action has been provided for. This argument cannot be accepted for the simple reason that in that case the provision "within four months after entering on the reference" will become redundant, that 4 months has also been provided in such cases; and that the provision for notice is not for a case when the arbitrators have accepted the reference but when not.
Firm Sardar Mal Hardat Rai v. Firm Sheo Baksh Rai Sri Narain A I R 1922 All. 106; Guardians of Newack Union v. The Guardians of Glandford Brigg Union L R 2 Q B 522; Abdul Majid v. Bhawal Baksh and others P L D 1950 Lah. 228; Messrs Ismail Brothers (Karachi) Ltd. Karachi v. Messrs S. N. Fazail & Co., Karachi P L D 1958 Kar. 158; Messrs Bajrangalal Laduram v. Ganesh Commercial Co. Ltd. A I R 1951 Cal. 78; Losstroglu v. Coumantaros L R (1941) 1 K B 396; Hari Sankar Lai v. Shamsbhu Nath and others A I R 1962 S C (Ind.) 78 and Md. Ismail Serang v. Munshi Ali Husain and others 6 D L R 641 ref.
, S. 28‑Court has absolute discretion to enlarge time‑Term "Court"‑Includes "appellate Court".
Narsing Das Hiralal Ltd. and another v. Bisandayal Satyanarain Firm A I R 1954 Orissa 29; Lakhmir Singh v. Union of India and another A I R 1957 Pat. 633; Nani Bala Saha v. Ram Gopal Saha and another A I R 1945 Cal. 19; Abani Bhusan Chakraborty and others v. Hem. Chandra Chakraborty and others A I R 1947 Cal. 93; Munni Lal v. Kishan Prasad and another A I R 1948 All. 443; Lakshmi Narain v. Ram‑Babu and another A I R 1953 All. 9 and Thakur Prasad v. Baleshwar Ahir and others A I R 1954 Pat. 106 ref.
Abani Bhusan Chakraborty and others v. Hem Chandra Chakraborty and others A I R 1947 Cal. 93 and Shukrullah and another v. Mst. Rahmat Bibi and others A I R 1947. All. 304 not fol.
‑Words and expressions in enactment taken from earlier statute in pari materia' and having received judicial interpretation‑Legislature presumed to be aware of interpretation while incorporating such words and phrases in later statute.
Halsbury" Laws of England (Hailsham 2nd Edn.), Paras. 770, 771 Vol. 31 ref.
A. S. M. Shamsuzzaman for Petitioner.
Asrarul Husain and Md. Nurul Huq for the Opposite‑Party.
This Rule is directed against the judgment and decree passed in the suit for setting aside the award passed by the Arbitration Tribunal of the Dacca‑Narayanganj Chamber of Commerce on 12th June, 1959. The suit arose m the following ways : There was a contract between the petitioner and, the opposite‑party for sale of certain jute. As the opposite‑party did not supply the goods as contracted, the plaintiff‑petitioner sent a bill to the opposite‑party claiming certain amount being the difference between the contract price and the market price at the relevant time. As the opposite‑party did not accept the bill and as such a dispute having arisen, the petitioner referred the matter to the Arbitrators as provided in clause (18) of the contract, vide Exh. 3 (1) dated 21st October 1955. The Registrar issued notice asking the opposite‑party for submission of their statement and also a sum of Rs. 450 vide Exh.'3 (J) dated 25th October 1955. As no statements were submitted by the opposite‑party, three other reminders were given by the Registrar but the opposite did not submit their rejoinder and instead of submitting their rejoinder the opposite‑party started Misc. Case No. 151 of 1955 on 14th December 1955 and obtained an injunction order restraining the Arbitrators to proceed with the award. Subsequently, the Rule was discharged by the High Court on 17th December 1958. Then again on 20th January 1959 vide Exh. 17 notice was issued by the Registrar to the parties to submit their pleadings with a rider that if the pleadings were not submitted, the papers would be handed over to the Arbitrators. It appears that on receipt of the notice, the parties filed their rejoinder and an award was passed on 12th June, 1959 and the Registrar forwarded the award to the Court for disposal of the same in accordance with law.
Several objections were taken by the opposite‑party. The important ones that were pressed are (1) that the award was a nullity, (2) that the award was barred by limitation and (3) that the Arbitrators were guilty of misconduct.
Both the Courts below were of opinion that the award was barred by limitation; that the award was a nullity and that the Arbitrators were guilty of misconduct and in that view of the matter dismissed the suit. Hence the present Rule.
The same points have been pressed before me by the learned Advocate for the petitioner. As regards the nullity, the Courts below were of opinion that as there was a proceeding pending in a Civil Court challenging the validity of the contract, the Arbitrators had no jurisdiction to proceed with the proceeding in order to pass an award. In order to appreciate this point, it is necessary to refer to some facts. It appears that on 14th December 1955, the opposite‑party filed an application under section 33 of the Arbitration Act on which Misc. Case No. 151 of 1956 was started. The opposite‑party also obtained an ad interim injunc tion. It further appears that the order of ad interim injunction was at some time vacated and at some other time restored but ultimately the ad interim injunction restraining the Arbitrators to proceed with the case was vacated by the High Court on 17th December 1958. So merely because there was some proceeding in the Civil Court at the instance of the opposite‑party, that did not ipso facto take away the jurisdiction of the Arbitrators to proceed with the case as the Arbitrators had admittedly the initial jurisdiction to decide the matters, vide agreement entered into between the parties. The Court below opined that the Arbitrators were aware of the proceedings and if the suit had been decreed in favour of the opposite‑party, then the Arbitrators could have no jurisdiction. To this I cannot give my assent as I have already observed that the Arbitrators had initial jurisdic tion to proceed with the case as there was a dispute between the parties. That jurisdiction could not have been taken away merely because a separate proceeding was pending in the Civil Court or merely because an unknown happening, namely, the suit being decreed, would have taken away the jurisdiction vested in the Arbitrators or made the award to be passed a nullity. It has not been contended before me that the Arbitrators proceeded with the case during the continuance of the ad interim injunction but it appears that they stopped the proceeding of the case before them and only started action just after the discharge of the ad interim injunction order by the High Court. Then again if the Arbitrators did not proceed with the proceedings before them in the absence of any ad interim injunction, then in view of the provision of the Arbitration Act, the award would have been barred by limitation on the face of it. For the aforesaid reasons, I hold that merely because some proceedings were pending or merely because a decree might have been passed which has not been passed in this case, the Arbitrators could have no jurisdiction but in my opinion the Arbitrators had the jurisdiction and the award passed as such cannot be called al nullity on this count.
In this connection it has been argued by Mr. Asrarul Hussain that when there was a pleading by any of the parties before the Arbitrators that there was no contract or that the contract was frustrated, the Arbitrators could not have any jurisdiction to proceed with the arbitration and in support of the proposition reference has been made to the case of Hanutmull Boid v. Fatehchand Muralidhar (A I R 1954 Cal. 1) and the case of Heyman and another v. Darwins Limited (A I R 1942 A C 356). In the aforesaid Calcutta case it was held that if a party to a contract challenged the very existence of the contract, then the Arbitrators became functus officio as in such cases the very jurisdiction of the Arbitrators was challenged in that case reliance was placed on the case 1 All. 337. In the case A I R 1942 A C as referred to above, it was observed:
"At the risk of some repetition, I would summarize what I conceive to be the correct view on the matter as follows: An arbitration clause is a written submission, agreed to by the parties to the contract, and, like other written submissions to arbitration, must be construed according to its language and in the light of the circumstances in which it is made. If the dispute is whether the contract which contains the clause has even been entered into at all, that issue cannot go to arbitration under the clause, for the party who denies that he has ever entered into the contract is thereby denying that he has ever joined in the submission. Similarly, if one party to the alleged contract is contending that it is void ab initio (because, for example, the making of such a contract is illegal), the arbitration clause cannot operate, for on this view the clause itself also is void. But, in a situation where the parties are at one in asserting that they entered into a binding contract, but a difference has arisen between them whether there has been a breach by one side or the other, or whether circumstances have arisen which have discharged one or both parties from further performance, such differences should be regard as differences which have arisen 'in respect of', or with regard to', or under' the contract, and an arbitration clause which uses these, or similar, expressions should be construed accordingly. By the law of England (though not, as I understand, by the law of Scotland), such an arbitration clause would also confer authority to assess damages for breach, even though it does not confer on the arbitral body express power to do so.
I don't agree that an arbitration clause expressed in such terms as above ceases to have any possible application merely because the contract has come to an end,' as, for example, by frustration. In such cases it is the performance of the contract that has come to an end. The doctrine of discharge from liability by frustration has often been explained as flowing from the inference of an implied term, and in giving my opinion on the occasion of the recent decision of this House in Joseph Constantine Steamership Line, Ltd. v. Imperial Smelting Corporation, Ltd. Ante, p. 154, 163; 1 expressed the view that the most satisfactory basis upon which the doctrine can be put is 'that it depends on an implied term in the contract of the parties' if, therefore, when parties have entered into a contract, circumstances arise before the performance of the contract is completed which, in the view of one party, bring the contract to an end by frustration, and, therefore, discharge both parties from further performance but the other party does not agree, this is a difference about the applicability of the implied term and is just as such within the arbitration clause as if it were a difference about an express term of the contract. There is a previous decision of this House which establishes this precise proposition. I refer to Scott & Sons. Ltd. v. Del Sel 1923 S C H L 37, where sellers of jute contended that a contract to export from Calcutta 2,800 bales to Buonos Ayres was brought to an end, after a portion had been dispatched, by a Government prohibition of further export, notwithstanding that the contract contained an express term exempting the sellers from liability for late delivery due to unforeseen circumstances. The Arbitration clause ran: 'Any dispute that may arise under this contract to be settled by arbitration. The sellers argued that the dispute as to frustration was not a dispute under the contract, but a dispute as to the existence of the contract.' This contention was unanimously rejected. Lord Dunedin reasons thus (ibid 41) "They (the sellers) can only succeed .If they bring themselves within one of two categories. Either they must show that there was an express term of the contract which had that effect, i.e., of bringing the contract to an end,' or they must show that there was an implied term in the contract which had the same effect. That an implied term in a contact may have that effect is quite clearly shown by what was decided in this House in the case of Tamplin Steamship Co. (1916) 2 A C 397 and in the case of the Metropolitan Water Board v. Dick Keerr & Co. Ltd. 1918 A C 119. It seems to me, therefore, that they are in this dilemma, that in either view they have got to have recourse to the contract, it seems to me that the dispute is a dispute under the contract'."
From the aforesaid two decisions it is clear that when there is a dispute about the existence of a contract the arbitrator is became functus officio and as such any award passed by the arbitrators will be nullity, but not when the dispute is under the contract. In the present case, the' contract is admitted. Dispute arose between the parties on the difference of the market price and the contracted price. Furthermore, I have been taken through the pleadings filed by the opposite‑party wherefrom it does not appear that the opposite‑party in any way refuted the contract but placed their case as to what amount the petitioner would be entitled to get. I have already observed that merely because the opposite‑party filed several suits under section 33 of the Arbitra tion Act in the Civil Court, that did not take away the jurisdiction already vested in the arbitrators in order to make the award a nullity. I accordingly hold that the award that has been passed in this case is not a nullity.
The award has also been challenged on the ground that the arbitrators mis-conducted themselves in the proceeding. 'The basis of this argument and the finding of the Courts below is that to the knowledge of the arbitrators there had been a civil suit pending before the Civil Court challenging the validity of the contract. Now let us see whether the arbitrators have themselves mis-conducted in the proceeding. It appears from the record that the contract was entered on 2nd July 1955 and as the goods were not supplied by the opposite‑party, the petitioner referred the matter to the arbitrators as agreed upon between the parties and subsequently the suit was filed by the opposite‑party on 14th December 1955. So initially the arbitrators had jurisdiction to proceed with the reference made to them. Now the question is whether any subsequent suit in a Civil Court challenging the contract will take away the jurisdiction already vested in the arbitrators. In my opinion that will not take away as observed that as the arbitrators were aware of the proceeding in the Civil Court including the High Court, the arbitrators should have restrained from proceeding with the arbitration and as they did not, they mis-conducted themselves. It appears that the reference was made before the suit was filed and after filing of the suit the opposite‑party obtained an ad interim injunction but the stay order was ultimately vacated by the High Court on 17th December 1958. It has not been found or contended by Mr. Asrarul Husain that during the pendency of the ad interim injunction arbitrators in any way proceeded with the case before me, rather it appears from the records that after the ad interim injunction order was discharged on 17th December 1958 the petitioner approached the arbitrators and as such the Registrar issued notice on 20th January 1959, vide Exh. 10 inviting the parties to file their pleadings. The last rejoinder was filed by the opposite‑party on 16th March 1959 and the award was made on 12th June 1959. Then again the Misc. Case No. 151 of 1955 on which much reliance has been placed by Mr. Asrarul Hussain as well as by the Courts below was dismissed for default on 15th November 1959 and the same was restored on 23rd May 1959, that is, long after the pro ceeding was started by the arbitrators commencing from 20th January 1959 and it has been submitted by the learned Advocate for the petitioner that the Registrar passed the papers to the arbitra tion on 17th March 1959. So up to 23rd May 1959, there was no suit by the opposite‑party pending. It further appears that the said suit was again dismissed for default on 23rd January 1960. This way the opposite‑party carried on with the litigation filed at his instance. In these circumstances I cannot agree with the Courts below that the arbitrators mis-conducted in the proceeding I am rather of opinion on the facts as disclosed in the records that the arbitrators did not misconduct themselves.
In this connection Mr. Asrarul Hussain has contended that his client was not given any chance to adduce any fresh evidence as to the amount to be paid by the opposite‑party to the petitioner and as such the arbitrators mis-conducted. This point has been negatived by the trial Court and I do not find anything in the appellate Court. I have been taken through the pleadings and I do not find that any further evidence needed to be furnished by the opposite‑party to the arbitrators in order to determine the amount to be paid by the opposite‑party to the petitioner. Hence in my opinion the case of Amin Jute Baling Co. Ltd. v. Aminpur Union Co‑operative Multi‑Purpose Society Ltd. (P L D 1961 Dacca, 102) relied on by Mr. Asrarul Hussain, is of no help to him.
There remains the question of limitation. In the present case both the Courts below have found that the award is barred by limitation. The learned Advocate for the petitioner has referred me to the provision of clause (3) of Schedule 1 of the Arbitration Act. Clause 3 runs as follows: '
"The arbitrators shall make their award within four months after entering on the reference or after having been called upon to act by notice in writing from any party to the arbitration agreement or within such extended time as the Court may allow."
Relying on the provision of clause 3 that the arbitrators shall make their award within four months after entering on the reference, it has been contended that in the present case four months commenced only from the date when the Registrar passed the papers to the arbitrators, namely, from 17th March, 1959 and the award having been passed on 12th June 1959, the award is not barred by limitation. This argument invites for interpretation of this clause 3. From the aforesaid clause we find three cases giving the starting point of limitation. First comes four months from entering on the reference, second four months after having been called upon to act by notice in writing from any party to the arbitration agreement and third, four months within such extended time as the Court may allow.
An extensive argument has been advanced by the learned Advocates for the parties on the meaning of the phrase "entering on the reference". It has been submitted by the learned Advocate for the petitioner that the phrase "entering on the reference" means when the arbitrators start the hearing of the case having the papers before them and as the arbitrators could not have started the business before the papers were passed on to them on the 17th March 1959, it cannot be said that the award is barred by limitation, that having been passed on 12th June 1959 in support of this contention the learned Advocate for the petitioner has relied on the case of Firm Sardar Mal Hardat Rai v. Firm Sheo Baksh Rai Sri Narain (A I R 1922 All. 106), the case of the Guardians of Newaok Union v. The Guardians of Glandford Brigg Union (L R 2 Q B 522 .), the case of Abdul Majid v. Bhawal Baksh and others (P L D 1950 Lah. 228) and the case of Messrs Ismail Brothers (Karachi) Ltd., Karachi v. Messrs S. N. Fazail & Co., Karachi (P L D 1958 Kar. 158). In the first case it was observed by Walsh, J:
"We are of opinion that the provisions entering on the reference' and having been called upon to act by notice in writing' are alternative in, this sense, that where no reference is entered upon at all, then the time runs from the notice calling upon the arbitrators to act. But, on the other hand, even although the arbitrators may be called upon to act by entering upon the reference, if they enter upon the reference, they have three months from that moment for making their award and for enlarging the time for making the award if the circumstances at the reference satisfy them that they cannot complete the award within three months. To hold otherwise would seem to strike out from clause 3 the words within three months after entering on the reference' in a case where one of the parties happened to call upon the arbitrators to act before they began the reference.
This clause was considered by the English Court of Appeal Baring Gould against Sharpington (1899) 2 C H D, p. 80. And the view which we take seems to be that which was laid down by the Master of the Rolls, the late Lord Lindley, in a passage contained in page 91 of the report.
In addition to that, under the old clause in England, which was slightly different in form, an equally strong Court came to the conclusion in Baker against Stephens L R 2 Q B 523 that entering upon the reference means not' when an arbitrator accepts the office, or takes upon himself the duty but when he actually enters upon the matter of the reference,. when the parties are before him, or under some peremptory order compelling him to conclude the hearing ex parte."
2 Q B has not been supplied to me. In the Lahore case as referred to above, it was held by S. A. Rahman, J. as he then was:
"Reference in this connection may be made to Sardar Mal Hardat Rai v. Sheo Bakhsh Rai Sri Narain A I R 1922 All. 106. It was held therein that an arbitrator enters on the reference when he enters upon the matter of the reference, i.e., when the parties are before him or under some peremptory order he is compelled to conclude the hearing ex parte. On 6th November, 1944 the umpire merely directed that no further notice need be sent to the respondent but the actual ex parte order was given on 25th November 1944 and that seems to be the relevant date. The argument of the learned counsel for the respondent appears to be devoid of force."
In the Karachi case relied on by the learned Advocate it was held:
"The other contention of Mr. Dingomal relating to the question of limitation has also no force. The most favourable interpretation to the plaintiff that can be put on the words taking over the reference' would be that it means entering upon the reference' within the meaning of the Arbitration Act. As to what is the meaning of entering upon the reference' has been considered in various authorities. The arbitrators are said to have entered upon the reference when they have issued notice to the parties intimating the date of hearing. In fact, in the case of Lossingoglu v. Coumantaros L R 1941, 1 K B 396, it was held that if one of the arbitrators refused to act, the arbitrators will be deemed to have entered upon the reference as they had accepted their appointment and had communicated with each other about the reference. In the present case, the freshly appointed arbitrators, as already mentioned above, had given notice on 30th July 1956 calling upon the parties to appear before them on 8th August 1956. On the face of it, it would be against the spirit of the Arbitration Act to interpret the rules and the Act in such a way as to prolong the proceeding before the arbitrators. The object of the Arbitration Act is to give expeditious relief to the parties concerned unhampered by the rules and procedure prescribed by the Code of Civil Procedure or the Evidence Act."
This case is apparently against the petitioner.
Mr. Asrarul Husain has argued that "entering on the reference" means when the arbitrators take action in the reference. In support of this contention he has relied on the case of Messrs Rajrangalal Laduram v. Ganesh Commercial Co. Ltd. (A I R 1951 Cal. 78) the case reported in P L D 1958, Karachi, the case of Lossifoglu v. Coumantaros, (L R (1941) 1 K B 396) the case of Hari Senkar Lal v. Shamsbhu Nath and others (A I R 1962 S C (Ind.) 78) and the case of Md. Ismail Serang v, Munshi Ali Hussain and others (6 D L R 641). The relevant passage in the Calcutta case relied on by Mr. Asrarul Husain is as follows:‑----
"I agree with the learned Chief Justice that Baker v. Stephens 1867‑2 Q B 528, 36 L J Q B 236 would not be considered as good law in England in view of the judgment of the Court of appeal in Lossifoglu v. Counmentaros (1941) 1 K B 396: 110 L J K B 54. In the latter case six learned Judges including Viscount Caldecota, C J and Scott, L J rejected the argument advanced on behalf of the appellants that entering upon reference does not take place till the arbitrators actually meet and discuss matters. In my view, the arbitrators enter upon reference when they take upon themselves the office of arbitrators and exercise some functions as arbitrators. If they meet and determine the date of hearing and issue directions as to pleadings they exercise the functions of arbitrators and therefore, they should be treated as having entered on the reference."
The Karachi case relied on by Mr. Asrarul Husain has already been reproduced in connection with the contention of the learned. Advocate for the petitioner. In L R 1941, 1 K B 396, it was held:
"In this case a question has arisen as to the appointment of an umpire pursuant to the provisions of section 5 of the Arbitration Act, 1889, under an arbitration clause contained in an agreement. The question raised by the appeal nearly resolves itself into this: when can arbitrators be said to enter upon a reference In my view, they enter upon it as soon as they have accepted their appointment and communicated with each other about the reference."
Mr. Asrarul Husain has also relied on the provision of Rules 11, 4, 5 and 24 of the Dacca‑Narayanganj Chamber of Commerce and the Rules of the Tribunal of the Arbitration. In order to support his contention he has contended that the Registrar acts at the direction of the arbitrators and notice that had been issued in this case was issued at the direction of the arbitration and as such when the arbitrators issued notice on 21st October 1955, they entered upon a reference on that very same date.
Now I propose to make my own comments on the cases cited by the learned Advocates for the parties. As to the Allahabad decision it appears from the judgment that reliance was placed on 2 Q B 523 which as appears from (1941)1 K B 396 was not followed in latter base and a different view was taken as already quoted. In P L D 1950 Lahore His Lordship only followed the case in A I R (1922) Allahabad.
In the Calcutta case referred to above, the decision is that the arbitrators entered upon the reference when they take upon themselves the office of arbitrators and exercise some function as arbitrators as to meet and determine the date of hearing as to the pleadings. The Karachi case is also on the same line and in the King's Bench cage it has been held that the arbitrators entered upon a reference when they accepted their appointment and communicated with each other about the matter:
In the case of Supreme Court of India referred to above, it was held that the legal position might be formulated thus:
"(a) A notice to act may be given before or after the arbitrators entered upon the reference. (b) If notice to act is give, before they entered upon the reference, the four months would be computed from the date they entered upon the reference. (c) If a party gives notice to act within 4 months after the arbitrators entered upon the reference, the arbitrators can make an award within 4 months from the date of such notice. And (d)' in that event, after the expiry of the said 4 months the arbitrators become functus officio, unless the period is extended by Court under section 28 of the Act; such period may also be extended by the Court, though the award has been actually made."
The above observation of Subba Rao, J. perhaps, has not been correctly printed as it subsequently appears from the observation of Raghubar Dayal, J. . . The following quotation is to the point:
"If the arbitrators have entered upon the reference, the period of four months begins to run from the date they entered on the reference. Any notice subsequently given to them calling upon them to act will not make the period of four months start afresh from the date of the service of the notice. Such a notice would be ineffective for the purposes of deter mining the period of four months within which the arbitrators had to make the award. In fact, there would be no valid occasion for giving such a notice subsequent to the arbitrators entering on the reference. Parties cannot prompt them for conducting their‑ enquiry or taking steps in connection with the enquiry. Even if they do, in case the arbitrators were lethargic, such a notice is not contemplated by R. 3 of the First Schedule.
I also do not consider it necessary to decide in this case as to when arbitrators can be said to enter on the reference or what is meant by their being called upon to act' by notice under R. 3 of the First Schedule. I simply note that I agree with the view expressed in Lossifoglu v. Counmantaros (1941) 1 K B 396 that arbitrators enter upon a reference as soon as they have accepted their appointment and have communicated with each other about the reference. This is 'a stage earlier than their starting the proceedings in the presence of the parties or under some peremptory order compelling them to conclude the hearing ex parte. Calling upon the arbitrators to act' does not include asking the arbitrators to enter on the reference, but may also include asking them to do anything in connection with the reference except asking them to do the routine acts connected with the enquiry."
From the above discussion it is apparent that there are conflicting decisions but in my opinion the words "entering on the reference" do not mean when the arbitrators have the parties before them and begin to hear the parties. They mean that when a reference has been made and the arbitrators accept the reference. The followings are the reasons for adopting the above view. The Arbitration Act is for speedy disposal of the dispute between the parties. Any other view will frustrate that purpose of the Act and put the parties waiting for the result for an unknown time, e.g. After reference the arbitrators may not take up the matter immediately but put it off to indefinite time. It may be argued that for such emergency notice to arbitrators for action has been provided for. This argument cannot be accepted for th: simple reason that in that case the provision "within four months after entering opt the reference", will become redundant; that 4 months has also been provided in such cases; and that the provision for notice is not for a case when the arbitrators have accepted the reference but when not. In the present case the arbitrators entered on the reference not on the 17th March, 1959, but on the 25th October 1955, when notice was issued asking the opposite‑party to file statements etc. But the petitioner is entitled to get the time during, which the arbitrators were restrained from functioning as arbitrators, namely, 14th December 1955 up to 17th December 1958, and as the award was passed on the 12th June 1959, still it cannot be said that award is not barred by limitation being filed beyond four months.
In this connection the learned Advocate for the petitioner has contended that his application for extension of time filed before the lower appellate Court should have been accepted and the award passed in this case as filed within time. In support of this contention he has relied on the provision of subsection (1) of section 28 of the Arbitration Act and also the case of Narsing Das Hiralal Ltd. and another v. Bisandayal Satyanarain Firm (A I R 1954 Orissa 29) the case of Lakhmir Singh v. Union of India and another (A I R 1957 Pat. 633) and the case of Nani Bala Saha v. Ram Gopal Saha and another (A I R 1945 Cal. 19).
On the merits he has argued that in this case apparently confusion in the mind of the arbitrators was created by the opposite‑party initially. The opposite‑party filed the suit and obtained ad interim injunction and thereafter having it dismissed and again restored and in this way they continued up to December 1958. So the arbitrators ware not in a position to know whether the award that could have been passed by them would be barred by limitation or not. It has been further argued that the action of the opposite‑party had all along been mala fide as observed by this High Court in the case of Pakistan Trading Company v. M. M. Ispahani and another (P L D 1960 Dacca 81) at page 89 of the report. In these circumstances he is entitled to get an extension of time.
While on the other hand Mr. Asrarul Husain has argued that section 28 speaks of the Court which means according to his submission, the trial Court and not the appellate Court. In support of his contention he has relied on the case of Abani Bhusan Chakraborty and others v. Hem Chandra Chakraborty and others (A I R 1947 Cal. 93). He has also relied on the case reported in Lakhmir Singh v. Union of India and another in support of his contention that when the matters were argued before the trial Court and an application filed for extension of time, that application could not be accepted as it was not filed within a reasonable time.
There is no dispute that the Court has absolute jurisdiction to exercise a judicial discretion in order to extend time in suitable cases. The provision of section 28 is clear on this point.
Section 28 of the Arbitration Act runs thus:
"28.(1) The Court may, if it thinks fit, whether the time for making the award has expired or not and whether the award has been made or not, enlarge from time to time, the time for making the award.
(2) Any provision in an arbitration agreement whereby the arbitrators of umpire may, except with the consent of all the parties to the agreement, enlarge the time for making the award, shall be void and of no effect."
The above provision authorises the Court to extend the time whether an award has been passed or not, and in the former case extension of time by the Court tantamounts to acceptance of the award after condonation of delay and in the latter case extension of time when an award has not been made authorises to make an award within the extended time. .
Now the question is whether in the facts and circumstances of the case the Court should have condoned the delay and accepted the award. In my considered opinion, the facts and circumstances of the case justify condonation of delay. The facts are as follows : After the petitioner approached the arbitrators to make an award, the opposite‑party on 14th December 1955, started a miscellaneous case being No. 151 .of 1955 in the 4th Court of Munsiff, Narayanganj, under section 33 of the Arbitration Act for declaration that the contract had been frustrated and was impossible for performance and that the arbitration clause as such had become null and void and ceased to exist or remain valid. In that proceeding ad interim injunction was obtained restraining the petitioner and the Registrar from proceeding with the arbitration. The petitioner filed an objection against granting temporary injunction and the Court after hearing the parties vacated the order of ad interim injunction on 9th January 1956. Though the petitioner informed the arbitrators of the order vacating temporary injunction but the arbitrators could not proceed with the case inasmuch as the opposite party preferred a miscellaneous appeal being No. 59 of 1956 against the said order of the learned Munsiff and obtained an ex parte order of injunction restraining the arbitration proceedings. The appellate Court after hearing the parties dismissed the appeal on contest and also vacated the order of temporary injunction. The opposite‑party again adopted some other dilatory tactics. During the pendency of the said miscellaneous case and the mis cellaneous" appeal the opposite‑party applied to the Pakistan Jute' Association for declaration that the contract in question had become impossible of fulfillment due to the devaluation of the Pakistan currency. The Pakistan Jute Association refused to interfere and as such it rejected their application. Being aggrieved the opposite‑party filed Writ Petition No. 9 of 1956 to this Court but the said petition was rejected on 2nd March 1956. Thereupon the opposite‑party filed an application for leave to appeal to Federal Court of Pakistan, which was ultimately rejected on 4th April 1957. The opposite‑party also filed an application under section 5 of the Arbitration Act, in the 4th Court of Munsif, Narayanganj for revocation of the authority of the arbitrators and thereon Miscellaneous Case No. 71 of 1956 was started. The opposite‑party obtained an ad interim in. junction restraining the arbitration proceeding which was subsequently made absolute. The Parried Munsif on 29th September 1958 dismissed the miscellaneous case under section 5 of the Arbitration Act upon which the opposite‑party filed an application before this Court under section 115 of the Civil Procedure Code. A rule was issued on l5th October 1958 and ad interim injunction was also issued restraining the arbitrators from proceeding with the arbitration case. It also appears that this Rule was not also diligently prosecuted. The Civil Rule was heard and discharged with costs on the 17th December 1958. That case has been reported at page 81, of P L D (1960) Dacca. It was observed at page 89 as follows:---
"I have already stated the facts in the beginning of my judgment relating to the conduct of the petitioner in following proceedings one after another, and to keep his application under Order IX, rule 9 of the Code of Civil Procedure for restoration of the proceeding under section 33 of the Arbitra tion Act dismissed for default pending uptill now which sufficiently makes it clear that it is nothing but an attempt to delay the arbitration proceeding and not a bona fide application."
The aforesaid facts conclusively go to show that the opposite -party adopted all means, whether fair or foul, to defeat the arbitration proceedings. The opposite‑party did not try to face the proceedings before the arbitrators, rather tried to create chaos in the proceeding. This being the case, it cannot be said that the arbitrators due to their negligence did not proceed with the arbitration proceeding as the arbitrators could not be in position to know when they were to start with or stop the arbitration proceeding.
The above view of mine brings us to the question whether the term "Court" includes "appellate Court". The word "Court" has been defined in section 2 of the Arbitration. Act as follows
'Court' means a Civil Court having jurisdiction to decide the questions forming the subject‑matter of the reference if the same had been the subject‑matter of a suit; but does not, except for the purpose of arbitration proceedings under section 21, include a Small Cause Court."
and came up for consideration before the Calcutta, Allahabad and Patna High Courts.
In the case of Abani Bhusan Chakraborty and others v. Hem Chandra Chakraborty and others, the Calcutta High Court held that the term "Court" does not include "appellate Court", the reason being that there is nothing in the Arbitration Act to indicate that the term "Court" includes appellate Court, though before the Arbitration Act, 1940, the term "Court" include appellate Court, in view of the provision of section 107 (2) of the Code of Civil Procedure. This was also the view taken by the Allababad High Court in the case of Shukrullah and another v. Mt. Rahmat Bibi and others (A I R 1947 All. 304).
A different view was taken by the Allahabad High Court in the case of Munni Lal v. Kishun Prasad and another (A I R 1948 All. 443) and the case of Lakshmi Narain v. Ram Babu and another (A I R 1953 All. 9). The case reported in A I R 1953 All. 9 was also followed by the Patna High Court in the case of Thakur Prasad v. Baleshwar Air and others (A I R 1954 Pat. 106).
I am inclined to hold that the term "Court" includes' Appellate Court for the following reasons given in the Patna case:
"Section 21, Arbitration Act speaks of parties to a suit and matters in difference between them in the suit. It enables such parties to apply in writing to the Court, before judgment is pronounced, for an order of reference. Examining the defini tion of the term "Court" as given in section 2(c), Arbitration Act, quoted above, there seems no valid ground for holding that it excludes an appellate Court. Just as a Court of first instance has jurisdiction to decide the questions forming the subject‑matter of the reference, if the same had been the subject- matter of a suit, so also an appellate Court has the same juris diction to decide the question forming the subject‑matter of the reference, if the same had been the subject‑matter of a suit. This is the function of an appellate Court as well."
I see, therefore, no reason why a restricted meaning should be given to the word 'suit' as used in section 21, Arbitration Act in my opinion, the term 'suit' in that section ought not to be taken to exclude an appeal. I, for myself, find no good ground for the Legislature, while giving power to the Court of original jurisdiction to make an order of reference under section 21, Arbitration Act, to exclude an appellate Court, from making such an order.
The Arbitration Act, 1940, was an Act passed mainly to consolidate the law relating to arbitration. I have already pointed out that, before the passing of this Act, the law bad been that an appellate Court had the power to make an order for reference to arbitration. This power has not been specifically taken away by the Legislature while passing the Arbitration Act, 1940. It is always to be assumed that the Legislature knows the law, even in technical matters.
It is the rule that, where words and expressions in a statute are plainly taken from earlier statutes in pari materia which have received judicial interpretation, it must be assumed that the Legislature was aware of such interpretation and intended it to be followed in later enactments. I would, accordingly, conclude that it may be inferred that the Legislature intend the words used in section 21, Arbitration Act, 1940, to be understood as they were understood in their previously accepted meaning. There would seem to be no basis for the view that the Legislature intended to deprive the parties to a civil litigation from settling their disputes by arbitration after the termination of a suit and when an appeal is pending. The distinction between statutes which codify and those which consolidate the law has been well summarised in paras. 770, 771 of Volume 31 Halsbury's Laws of England (Hallsham 2nd Edition):
"770. 1n construing a codifying statute the proper course is, in the first instance, to examine its language and to ask what is its natural meaning. It is an inversion of the proper order of consideration to start with inquiring how the law previously stood, and then, assuming that it was probably intended to leave it unaltered, to see if the words of the enactment will bear interpretation in conformity with this view. After the language has been examined without presumptions, resort may be had to the previous state of the law for the construction of provisions of doubtful import, or of words which have acquired a technical meaning. The same words used in different codes may have different meanings in each code according to the intentions of the statutes having regard to the mischiefs which they are designed to prevent.
771. If a distinction is to be drawn between statutes which codify and those which consolidate the law, it is that in constru ing the latter there is presumption that the law was not intended to be altered, but this presumption must yield to plain words to the contrary, where a consolidating statute re‑enacts sections that have come into existence at different previous dates, the state must be construed on the same principles as one which enacts the provisions in question for the first time . . . . . . . '
I am of the opinion that the term Court' in section 2 (c), Arbitration Act, 1940, must be construed to include an appellate Court, and that, therefore, the appellate Court may also pass an order for reference to arbitration under section 21 of the Act."
Now coming to the merits of the case, it may be observed here that I have already stated the facts and circumstances beforehand in order to show that the Court in such circumstances should condone the delay and accept the award. I accordingly condone the delay and accept the award.
The learned Advocate for the opposite‑party referred to some provisions in the Civil Rule and orders but I do not find that they in any way affect my above view.
In the result the Rule is made absolute, the judgments and decrees of the Courts below are set aside and the suit is decreed with costs all through.
K. B. A. Rule made absolute.
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