TMI Blog1963 (3) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... performed by one of the parties, can afford a good defence to an action on the original cause 'of action, by the other party; 3. Whether such an unfiled award if later on accepted by the parties thereto, can afford a fresh cause of action; and 4. Where an award made on a reference out of Court has not been filed into Court at the instance of any of the parties thereto within the time permitted by the law of limitation, whether it will be open to the Court to pass a decree in terms thereof, if it is produced before the Court by the arbitrators themselves; and if so, whether it would then be competent to the Court to investigate into the validity of such an award. 3. It is now necessary to set out briefly the facts which have given rise to this appeal. The appellant, the first respondent (who died pending this appeal and in whose place his legal representatives have been brought on record as respondents 8 to 18) and the second respondent constituted themselves into a partnership under an agreement dated 1-1-1949 for a period of five years. Differences, however, arose among the partners and on 14-12-1952, those differences were referred for adjudication by two arbitrator ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter referred to as the Act). In Suryanarayana Reddi v. Venkata Reddi, ILR (1949) Mad 111 :: AIR 1948 Mad 436 Happen and Govindarajachari JJ. held that the provisions of Sections 32 and 33 of the Arbitration Act, did not extend to a defence as opposed to the filing of a suit, and consequently, a defendant would not be precluded from putting forward an award which had been fully performed by him in answer to a claim by the plaintiff based on the original cause of action although such an award had not been filed under the provisions of the Act and judgment obtained. But the observations of the learned Judges went further and extended to a case where the defendant who relied on the unfiled award had not performed his obligations thereunder. It was held that the inhibition contained in Section 32 of the Arbitration Act was confined merely to a plaint by which a decision upon the existence, effect or validity of the award was sought and that its provisions did not extend to a defence as opposed to the filing of a suit thereon. In other words, the defendant who had not even performed his part of the award was held entitled to rely on such an award in answer to a claim based on the origin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nation of the first question. But before doing so, and indeed for a due understanding of those provisions, it will be necessary first to consider the nature of the arbitration proceeding and of the award made therein. 6. An arbitration arises either by reason of an agreement between the parties thereto or under certain statutes. We are not concerned in the present case with the latter type of cases, for example, like those contained in the Indian Electricity Act and Co-operative Societies Act, etc. 7. The fundamental basis of the former type of arbitration is an agreement between the parties thereto. In other words, settlement of disputes between the parties by arbitration is strictly a proceeding by which the parties by consent, submit the matter for determination by a tribunal of their own choice in substitution to tribunals provided under the original law. An award is thus a final judgment as it were of the arbitrator or arbitrators, in settlement of the controversy submitted to him or them, partaking the character of both a contract as well as a judicial finding. In Redman's Law of Arbitration and awards 5th Edn. while discussing the enforcement of an award by an ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. In Halsbury's Laws of England, 3rd Edn. Vol. 2 the same matter is dealt with thus, at page 45, As between the parties to the arbitration agreement award gives rise to an estoppel inter partes with regard to the matters decided therein analogous to that created by the judgment in an action in personam. It is this aspect of an arbitration award that was emphasised in Krishna Panda v. Balaram Panda, ILR 19 Mad 290, where it was held that an award duly passed in accordance with the submission of the parties would be equivalent to a final judgment and that there was no necessity for any subsequent consent or approval of the parties thereto in order to give effect to it. 10. But it will be seen from the above that an arbitration award is not the same thing as a judgment of a Court. This will be clear from the following passage in Black on Judgments, 2nd Erin, at page 2, Decision of any Arbitrator self-constituted or chosen by the litigants is not judgment. The law speaks only by its appointed organs. It is only when the deliverance comes from a true and competent Court that it is entitled to be called a judgment. 11. The two aspects of an award, namely, its aff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht in favour of the parties. Even if there be statutory provisions for the enforcement of the awards, the mere existence of such provisions which enable their enforcement was held not to bar any action on the award. For example, Section 26 of the English Arbitration Act, 1950 provides for summary enforcement of a private award as a demand, but notwithstanding it, it will be open to a party thereto to enforce the award by an action. In Russel on Arbitration we find the following at page 273 : Quite apart from the procedure laid down by Section 25 an award may be enforced by an action, as of right whether the arbitration was upon a written arbitration agreement or upon some parol submission. The submission is an actual mutual promise to perform the award of the arbitrators. ThU9 non-performance of the award is a breach of the agreement under which the arbitration took place ........The obtaining of leave to enforce an award as a judgment Under Section 26 does not prevent the applicant bringing an action on the award; nor does the entry of judgment in the terms of the award under the section. 14. Prior to the passing of the Indian Arbitration Act, 1940, the statutory provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal would lie from the decree passed on the basis of the arbitration award except to the extent of its being in excess or otherwise not in accordance with the award. Section 18 confers on the Court power to pass interim orders after the filing of the award and before entering judgment on the basis thereon. Even at the earlier stage, that is when the matter is pending with the arbitrator, the Court is given power to pass certain orders, vide Section 41 and the matters specified in Sch. II. There is also a power in the Court to supersede the reference itself when the award becomes void or has been set aside. It will be thus seen that right from the time when the arbitrator enters on his duties there are provisions for approaching the Court for appropriate orders and that the judgment and the decree on the award are but the final stage in an integrated scheme of adjudication of the rights by a private agency. In Hanskumar v. Union or India: [1959]1SCR1177 , the Supreme Court observes: Where an arbitration is held in pursuance of such an agreement and that results in a decision, that decision takes the place of an adjudication by the ordinary courts and the rights of the parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt 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 language of the former section is, no doubt, wide. It has been uniformly held that a suit to enforce an award will be incompetent. But the section appears at first sight to go further than this. It says that no suit shall be for a decision as to the existence of the award. Suppose for example in answer to a suit, the defendant were to set up a mythical award, it would be unreasonable and indeed a mockery of justice, if the Court were to be prevented from going into the question whether there is an award or not, but that the plaintiff should first be asked to go to the appropriate Court, obtain a declaration in the form of a negative relief, namely, that there is no award in existence and then come back to the Court to pursue the suit. To obviate that absurdity a more limited scope of Section 32 should be put. We consider that the word award in Section 32 of the Act should be read as meaning an award which may be or can be filed under Section 14. This was the view taken by Subrahmanyam J. in D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 436. 19. We shall now consider the two lines of the argument. It is clear from the provisions of Section 32 of the Act as well as from the decision reported in: AIR1946Mad346 , that a private award will not furnish a fresh cause of action to sustain a suit. Indeed in: ILR (1942) Bom 452 : AIR 1942 Bom 101, Chagla, J. (as he then was) observed : That a party cannot possibly be prejudiced by the existence of an award which has not been filed in Court. It will follow from the above that the principle on which an award was considered effective under the law as it stood prior to 1940, namely, the merger of the original cause of action in the award which furnished a fresh cause of action to the parties, and also of itself operating as equivalent to a judgment has no longer any validity. It cannot also be said that the original cause of action is satisfied by the mere passing of the award, for without filing it and obtaining a judgment thereon the party cannot enforce it. Secondly an award by an arbitrator after the Act is but a stage in a scheme formulated therein for the adjudication of disputes by a private tribunal. The confirmation of the same by a judgment of Court is e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or no Court can allow a party to plead the award and at the same time preclude the other party, namely, the plaintiff, from showing that the award was not valid. In such a case the Court will necessarily have to embark upon an enquiry whether the award was valid or not, a procedure which is expressly prohibited by Section 32 of the Act. As we said, the distinction between a case of forcing the award by a suit and of relying upon it by way of defence besides being artificial is not justified by the terms of Section 32. Indeed the acceptance of such a distinction will facilitate evasion of the specific provisions contained in the statute. For example, take a case where there are a number of parties to an arbitration award. Suppose one of them is anxious to obtain relief on the basis of the award after the period for filing the same had expired; he would be able to do that by merely persuading one of the other parties to the arbitration who is colluding with him, to set up the award by way of defence even though he might not be able to do so himself in the suit and thus practically obtain enforcement of the award by a suit in the very teeth of the provisions contained in Section 32 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 , and characterised the observation made therein as more or less an obiter. 21. The precise question as to the availability of an unfiled award as a defence to an action on the original cause of action came up for consideration before the Bombay High Court in Chandra Bhaga v. Bhikchand,: AIR1959Bom549 . The view taken in ILR (1949) Mad 111 : AIR 1948 Mad 436 was not accepted. The learned Judges held that an award will be effective only if a decree were obtained thereon; until it was made so effective it would not be capable of merging the original cause of action. Patel J. observed: What is barred is a suit in relation to the arbitration agreement and or the award. It has no reference whatsoever to what was the subject-matter of the award with regard to which there is no prohibition either express or implied and it would not make any difference whether or not the plaintiff mentioned in his plaint that there was an arbitration agreement and an award which was ineffective. It does not take into account the express provisions of Sections 31 and 32 which prohibit the determination of the existence, validity or effect of an award otherwise than under the Act. If the award is un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. 23. But that does not mean that under no circumstances can an unfiled award be relied on as a defence to an action. If the terms of the award had been fully performed by one of the parties thereto it must certainly afford a good defence to an action on the original cause of action by the other party. In ILR (1949) Mad 111 :: AIR 1948 Mad 436, the learned Judges accepted this principle; the judgment in AIR1951Mad458 , follows the same view. We have referred at an earlier stage that the arbitration proceedings are the result of a contract between the parties, each party agreeing that he would perform what is decided by the arbitrator. If in pursuance of the award a party had done everything he was obliged to do under it, he should be deemed to have fulfilled his part of the contract, and there would thereby be accord and satisfaction in respect of the original cause of action. An accord exists if the two minds agree as to how their obligations inter se should be discharged. The person under such obligation having discharged in the manner contemplated there will be a satisfaction. Therefore if there had been a performance 'in its entirety of the obligations imposed on a part ..... X X X X Extracts X X X X X X X X Extracts X X X X
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