@JUDGMENTTAG-ORDER
Shukla, J.@mdashThis revision is directed against the order dated. 29.4.93 of the 6th Addi. District Judge, Indore passed in M.C.C. 8/92 whereby while deciding Issue No. 5 the Defendant''s (applicant here) objection as to supersession of reference and non-maintainability of the application, has been rejected.
2. The brief facts of the case are that the parties i.e. Plaintiff and Defendant in the case entered into an agreement of Partnershp vide Agreement dated 5.2.79 Paragraph 24 of the Agreement provided for Arbitration in the case of dispute which reads as follows:
All disputes and questions in connection with the construction of this Deed or arising between the partners and the legal representatives of the other or between all their legal representatives shall be referred to the arbitration under the Arbitration Act, 1940 as amended at the time of such reference to the arbitrators.
3. The Partnership was dissolved on 30th June, 89. The two Arbitrators were appointed for resolving the dispute on 6.6.89. The applicant-Defendant also agreed for that on 18.8.89. However, one Arbitrator withdrew and other - Arbitrator, Shri J.W. Majahan Advocate continued with the proceedings and passed an Award on 25.11.89.
An objection u/s 14 of the Arbitration Act was filed and the same was registered as M.C.C. 1-B/90. In that case an objection was taken that the Award passed by one Arbitrator is not enforceable. The Plaintiff (NA in this case) filed an application before the Court for setting-aside of the Award with the further prayer of keeping the agreement of arbitration alive. As such, the Award was set-aside vide order dated 10.3.92 of 6th Addl. District Judge, Indore. Thereafter Plaintiff Non-applicant issued a notice dated 20th March, 1992 for appointment of Arbitrator. The Defendant applicant sent reply on 4.4.1992 that no dispute exists and did not agree for arbitration. Thereafter second notice was sent on 18.4.92 with the demand of money which was not replied by the applicant here. As such, application u/s 8(2) of the Arbitration Act was filed by Plaintiff N.A. on 13.4.1992.
4. Defendant-applicant raised various objections. The Issues were framed and a preliminary Issue (Issue No. 5) was framed to the effect whether because of setting aside of the Award given by Shri Mahajan in M.C.C. 1-B/90 the present application filed by the Plaintiff-NA is not maintainable.
5. After hearing the parties the trial Judge rejected the objection. Hence this revision.
6. The contention of the learned Counsel for the applicant is that the setting-aside of the Award would amount to withdrawal of the suit under Order 23 Rule CPC and therefore, in view of the provisions of Sub-rule (4) of Rule 1 of Order 23 of CPC no fresh suit (application here) can be filed on the same cause of action. Secondly, once the Award has been set-aside it would amount to the supersession of the reference and cessation of Arbitration Agreement and, therefore no fresh arbitration proceedings can be taken up.
7. It has also been submitted that setting-aside of the Award would have an automatic effect of supersession of reference and cessation of arbitration agreement even other wise since there is no specific order of keeping the reference alive it stands superseded impliedly.
8. As against it learned Counsel for the N.A. (Plaintiff) has submitted that the setting aside of the Award cannot be equated with withdrawal of the suit as referred in Order 23 Rule 1(4) of CPC Secondly, in the absence of any order of supersession of reference it would be deemed that the same including the agreement of arbitration has been kept alive. However, in this case there is a specific order that the agreement of arbitration shall subsist.
9. On perusal of the order-sheet of M.C.C. No. 1-B/90 dated 18.3.92 it appears that the Defendant (applicant here) was not present on that day and Plaintiff (N.A.) made a statement and agreed for setting aside the award. An application to that effect was also filed, therefore, it will have to be seen as to whether that would amount to abandonment of the claim or the suit. Order 23 Rule 1(3) CPC provides that where the Court is satisfied,--
(a) .. .. .. .. ..
(b).... it may, on such terms as it thinks fit, grant the Plaintiff permission to withdraw from such suit or such part of the claim with liberty to institute a fresh suit in respect of the subject-matter of such suit or such part of the claim.
Sub-Rule (4) further provides that if the Plaintiff abandons any suit or part of claim or withdraws any suit without permission of Court as referred to in Sub-rule (3), .. .. he shall be precluded from instituting any fresh suit in respect of such subject-matter or such part of the claim.
10. On a bare perusal of the application filed by the Plaintiff-non-applicant it would show that the Plaintiff-non-applicant agreed for setting aside the Award because the same was given by one Arbitrator despite an agreement of reference made to more than one Arbitrator. Para 3 of that application contains a recitation that the Award filed may be set-aside keeping the arbitration alive.
11. The Court allowed the application, set-aside the Award and gave a specific direction that the Agreement of Arbitration shall be kept alive and shall subsist. In such a situation it cannot be said that the Plaintiff-N.A. has abandoned any part of the claim or the suit without the permission of the Court and for this reason it cannot be allowed to be agitated that the fresh application is barred.
12. Learned Counsel for the applicant has referred to a case reported in Mt. Parbati v. Mt. Durga Devi AIR 1928 Lahore 170 in support of his contention and submitted that as the application became infructuous the Court cannot make second reference to the Arbitrator. No doubt it has been held in that case that where in a private arbitration the arbitrator has once delivered the Award and that Award has for some reason or the other been set-aside the Court cannot direct the arbitrator to make Anr. award without a fresh agreement freely entered into by both the parties. It has also been held in that case that Arbitrator after passing the award becomes functus officio and his authority cannot be revived after the Award is set-aside.
13. But that was a case prior to coming into force of the Arbitration Act, 1940. Section 19 of the Arbitration Act reads as follows:
19. Power to supersede arbitration where award becomes void or is set-aside -- Where an award has become void under Sub-section (3) of Section 16 or has been set-aside the Court may by order supersede the reference and shall thereupon order that the arbitration agreement shall cease to have effect with respect to the difference referred.
This section deals with two aspects. One-setting aside of the Award and supersession of the reference i.e. to say that the Court may set-aside the Award and may by order supersede the reference and if the reference is superseded it shall be imperative on the Court to order that the arbitration agreement shall cease to have effect.
14. In the order passed in MCC No. 1-B/90 the Court has only set-aside the Award and has not superseded the reference and has further observed that the agreement for arbitration shall survive. In such a situation the case under reference does not help the applicant.
15. Learned Counsel for the applicant, thereafter has referred a case reported in AIR 1983 Patna 3 (Brahmadeo Choudhary v. National Insurance Co. Ltd.) (A. D.B. decision) and submitted that enforceability of the Arbitration Agreement is superseded.
16. In that case an application u/s 33 of the Arbitration Act for withdrawal of the matter from Arbitrator was made as the agreement was void on account of fraud played on the applicant and the same was accepted by the Court and therefore, it was held that an order u/s 33 cannot be brought within the scope of Section 19 or 21 of the Arbitration Act.
17. In this case although the trial Court had made an order setting-aside the Award it had not passed any order u/s 19 of the Arbitration Act superseding the agreement to refer the arbitration rather than there is a specific order of keeping the Agreement alive. Inspite of an award being set-aside, the agreement to refer subsists unless and until it is superseded. For supersession of an agreement to refer, there must be a specific order. So long as there is no order of supersession, the reference and the agreement both survive. (... 1967 MPLJ SN 73)
18. So far as the argument of learned Counsel for the applicant about the Arbitrator being functus officio is concerned, it may be observed that:
It is true that generally speaking an arbitrator is functus officio after he has made the award; but this only means that no power is left in the arbitrator to make any change of substance in the award that he had made (Except in certain circumstances which have been provided in the law). What we have to see however are the scheme and the provisions of the Arbitration Act.
Regarding the supersession of the reference as referred in the case of Mt. Parbati (supra) it may be observed that the same was based on English Arbitration Act and that does not contain a provision similar to Section 19; the consequence of this is that the decisions of English Courts may not be of much assistance on this particular aspect of the matter. Secondly there was a parallel provision in para 15 (2) of Schedule II of the CPC before 1940 as to the order to be passed by the Court when setting aside an award which was in these terms:
Where an award becomes void or is set-aside under Clause (1), the Court shall make an order superseding the arbitration and in such case shall proceed with the suit.
But after coming into force of Section 19 of the Arbitration Act the position is absolutely different.
It is clear from Section 19 that there are three matters which have to be borne in mind in arbitration proceedings. There is first the arbitration agreement. Next comes the reference to arbitration and lastly the award. Section 19 provides inter alia that where an award has been set-aside, the Court may by order supersede the reference and shall thereupon order that the arbitration agreement shall cease to have effect with respect to the difference referred. The section therefore leaves it to the discretion of the Court when it decides to set-aside an award, whether to supersede the reference or not. It may not supersede the reference or not. It may not supersede the reference at all in which case though the award may be set-aside the reference will continue. But if it supersedes the reference it has also in consequence to order that the arbitration agreement on the basis of which the reference was made would cease to have effect with respect to the difference referred. It is only therefore when the Court orders supersession of the reference that the consequence follows that the arbitration agreement ceases to have effect with respect to the subject matter of the reference. ...
There Lordships of the Supreme Court
We are, therefore, of opinion that whatever may be the position in the absence of a provision similar to Section 19 of the Act there can be no doubt that Section 19 gives power to the Court not to supersede the reference and so leave the arbitration agreement effective even when it sets aside the award.
19. A similar question has been decided by the Division Bench of Calcutta High Court as reported in the case of
It is clear from Section 19 of the Act that the setting aside of an award does not, by itself terminate the reference, except obviously where the award is set-aside on a finding that the reference itself was invalid. In other cases, that is where the reference is valid and only the award is bad, after the award is set-aside, the reference has to be superseded by a further order, if it is desired to terminate it. If there is no order of supersession, the reference and the agreement both survive.
20. So long the Judge did not supersede the arbitration proceedings it must be presumed that Arbitration Agreement is subsisting. AIR 1956 Mad. 369.
21. However, in this case there is a specific order keeping the arbitration agreement alive.
22. A similar case has been decided by a Division Bench of Punjab High Court in Firm Gulab Rai Girdhari Lal and Ors. v. Firm Bansi Lal Hansraj AIR 1959 Punjab 102." In the absence of specific order superseding the reference it seems to me that it was within the competence of his successor to direct that the matters in controversy between the parties should be referred to arbitration in accordance with the terms of the agreement."
23. From the discussion above what comes out is that while setting aside the Award in exercise of powers u/s 19 and 16 of the Arbitration Act the Court may set-aside the Award without superseding the reference and if there is no specific order of supersession of reference the reference and the agreement of arbitration both shall subsist and continue.
24. In such a situation the contention of learned Counsel for the applicant cannot be accepted and in the opinion of this Court the objection has rightly been overruled by the trial Judge.
25. As a result the revision fails and is hereby dismissed with cost. Counsel''s fee Rs. 300/-.
