TMI Blog1953 (4) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... ix directors and the compromise was to the effect that these directors were prepared to pay a total sum of Rs. 20 lakhs to the liquidator in such proportion or manner as Sir Jamshedji Kanga shall in his absolute discretion decide as a valuer and not as an arbitrator after giving each of the directors a summary hearing. When this compromise was reported to counsel for the liquidator, he insisted on the liability of all the directors being joint and several. He was prepared to accept a sum of Rs. 20 lakhs, but he did not want the liability to be fixed by Sir Jamshedji Kanga to be several, and he wanted each of the directors to be liable for the whole amount. This anxiety on the part of the counsel for the liquidator arose from the fact that he had serious doubts as to the solvency of one of the directors who was Anandji, respondent No. 3 to the summons. Thereupon the appellant, who was respondent No. 8, Vadilal Chatrabhuj Gandhi, offered in court to guarantee the liability of Anandji to pay such amount as was fixed by Sir Jamshedji Kanga. Mr. Seervai, counsel for the liquidator, was satisfied with this offer and the matter was adjourned in order that the liquidator should get the san ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arbitrator. In order to decide whether Sir Jamshedji Kanga was to act as an arbitrator or not, obviously we must first look at the document itself which referred to him the particular question with regard to the allocation of liability to the different directors. It is a commonplace that the intention of the parties must be primarily gathered from the document which purports to express that intention, and when we turn to this document the first significant fact which strikes us is that the parties clearly intended that Sir Jamshedji Kanga should decide the particular matter as a valuer and not as an arbitrator. The Advocate-General says that the mere description of Sir Jamshedji Kanga as a valuer will not make any difference to the real decision if in fact he acted as an arbitrator and not as a valuer. There the Advocate-General is perfectly right. But the fact that the parties had a clear conception that Sir Jamshedji Kanga should not give a judicial decision is apparent from the fact that they wanted him to act as a valuer and not as an arbitrator. We are not dealing here with laymen drafting a particular document. It is in evidence that the document was drafted by attorneys and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he leading case is the one reported in In re Carus-Wilson and Greene. Lord Esher, Master of the Rolls, at page 9 lays down the test which should be applied in order to decide whether a person acts as an arbitrator or not. This is what the Master of the Rolls says: ".................If it appears from the terms of the agreement by which a matter is submitted to a person's decision, that the intention of the parties was that he should hold an inquiry in the nature of a judicial inquiry, and hear the respective cases of the parties, and decide upon evidence led before him, then the case is one of an arbitration. The intention in such cases is that there shall be a judicial inquiry worked out in a judicial manner." Now, two of the important ingredients on which the Master of the Rolls laid emphasis are absent in this agreement. Sir Jamshedji Kanga had not to decide upon evidence led before him; he had to decide in his absolute discretion; and further there was not to be a judicial inquiry worked out in a judicial manner. A judicial inquiry is only worked out in a judicial manner when the inquiry results in a judgment or a decision given upon evidence. Further on, the Master of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of the law to be found in Halsbury, Vol. 1, Second Edition, on this point is at page 622: "In order to constitute a submission to arbitration there must be some difference or dispute, either existing or prospective, between the parties, and they must intend that it should be determined in a quasi-judicial manner. Therein lies the distinction between an agreement for a valuation and a submission to arbitration, for in the case of a valuation there is not, as a rule, any difference or dispute between the parties, and they intend that the valuer shall, without taking evidence or hearing argument, make his valuation according to his own skill, knowledge and experience." Therefore, what the learned author emphasises is the intention of the parties that the difference or dispute should be determined in a quasi-judicial manner in order that it should constitute an arbitration, and as we have already pointed out, the document which we are considering makes it patently clear that the intention of the parties was not that Sir Jamshedji Kanga should decide the question referred to him in a quasi-judicial manner. It was rather the intention of the parties that Sir Jamshedji Kanga shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xecutable as if it were a decree. Therefore, the proceedings, by way of a misfeasance summons, are very similar to proceedings in the nature of a suit. In a suit also a party has to make out a cause of action and has to claim a certain amount from the defendant, and after a trial the court passes a decree in favour of the plaintiff or dismisses his suit. We refuse to attach the same importance to the expression "compel him to repay or restore the money or property" which the Advocate-General wants us to attach, in section 235. In Palmer's Company Precedents, Part II, at page 685, there is a form of the order that is to be made on a misfeasance summons, and that form clearly shows that when the court is of the opinion that a director or an officer of the company is liable and he should make good to the company a certain amount, the order that it passes is an ordinary order for payment of money. Reliance was placed by the Advocate-General on a decision of the Allahabad High Court in Liaqat Husain v. Official Liquidator. In that case the security for costs was asked against the liquidator under section 280 of the Companies Act, and Mr. Justice Young held that misfeasance proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as f r as it can be made applicable to proceedings under section 235. The question is whether there is anything in section 235 which would make us say that the procedure laid down in Order XXIII, rule 3, is not applicable to misfeasance proceedings. In our opinion there could not be' a better case where a compromise should be given effect to than in a misfeasance summons, if the compromise is a fair and a proper one. Cases are bound to arise where the liquidator would say to himself that if the officers of the company are prepared to pay a reasonable amount it would not be worth his while to incur heavy costs in establishing the liability of the officers. In company matters it is always difficult to establish the liability of directors or other officers of the company and to bring home to each one of them his misdeeds or his misconduct or his misfeasance. Therefore, even more than in a suit, a fair and reasonable compromise should always be welcomed in company matters where the liquidator would be saving heavy costs which the company would otherwise have to incur; and here again, to set all doubts at rest, we have in Palmer's Company Precedents the form of a compromise on misfeasa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tween the parties, and in order that the compromise should be given effect to, what is required is a sanction by the court under section 234 and not a condonation under section 281. It may be that if the court wanted to exercise its powers under section 281, obviously the court that would exercise those powers would be the court that would be trying the misfeasance summons, but when we are dealing with a case of a sanction, as we have pointed out before, there is nothing whatever in the Companies Act which indicates as to which particular Judge should give the sanction. The sanction has to be given by the court and the court is constituted by any Judge sitting on the Original Side of the High Court. In the court below the appellant had taken up the contention that the offer of guarantee made by him was withdrawn on November 5, 1952. Evidence was taken before Mr. Justice Tendolkar, Sir Jamshedji Kanga went into the witness-box, and the appellant did not care to step into the witness-box and controvert the evidence given by Sir Jamshedji Kanga. Therefore, on the evidence the learned Judge rightly held that the offer of guarantee made by the appellant had not been withdrawn as alleg ..... X X X X Extracts X X X X X X X X Extracts X X X X
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