- (1.) THIS is an appeal by the defendant firm Gulzarimal Gbeesalal against the judgment and decree of the Civil Judge, Kishengarh, in a suit for recovery of damages.
(2.) THE suit out of which this appeal arises was brought by the plaintiff firm ramchandra Radheshyam on the allegations that it did business as commission agent at Madanganj, and that the defendant was a joint Hindu family firm, of which Gheesalal was the manager, and that the said firm did business in the name of Gulzarimal Gheesalal at Nasirabad. It is admitted that there were dealings between these two firms. It is unnecessary to give particulars of the dealings between the parties in any detail, because the only dispute between them, so far as the present litigation is concerned, centers round the transaction relating to purchase and sale of 200 maimds of Gur. The case of the plaintiff was that it had purchased for the defendant 200 maunds of Gur on 29-1-1949, for a sum of Rs. 3350/- at the rate of Rs. 16/12/-per maund and sold the same for the defendant later as a result of which it suffered a loss of Rs. 1600/ -. Certain other incidental charges were also claimed amounting to Rs. 38/10/6 and allowance was made for the money which the defendant firm had to its credit with the plaintiff, and thus the plaintiff filed the present suit for Rs. 1083/14/3. The plaintiff also mentioned in paragraph four of the plaint that both parties had referred their dispute with respect to the transaction in question to certain arbitrators and that the said arbitrators had decided by their award (Ex. 1) dated 11-7-1951, that the defendant should settle this transaction at the rate of Rs. 18/instead of Rs. 16/12/- as claimed by the plaintiff, or, in other words, the transaction was decided to be settled by paying Rs. 180/- less than what the plaintiff had claimed. The plaintiff further mentioned in paragraph 111 of the plaint that it had called upon the defendant to comply with the award of the Panchas but the latter replied that the Panchas had neither given any notice to it to appear before them, nor had they given it any opportunity to lead evidence, and, consequently, the said award was not acceptable to it. The plaintiff, therefore, claimed a decree for Rs. 1083/14/3 on the basis of the original dealing between the parties, and, alternatively, it also claimed a decree in accordance with the award of the Panchas referred to above. The defendant resisted the suit. It denied that the plaintiff had ever purchased the 200 maunds of Gur for it or at its instance. The defendant admitted that the dispute between the parties had been referred to arbitration but it was contended that the Panchas had misconducted themselves, and, therefore, the award given by them was not binding on it. Certain other pleas were also raised; but it is unnecessary to make any particular mention of them for the purposes of the present appeal. The trial court found that the award was illegal and that the suit was maintainable on the original cause of action, and it gave a decree for Rs. 162/12/in favour of the plaintiff. Both parties went in appeal from the aforesaid decision to the Civil Judge, kishengarh. The learned Civil Judge held that the transaction in question relating to the sale and purchase of 200 maunds of Gur had been proved. Further, although the learned Judge did not give any finding as regards the validity or otherwise of the award, he held that the suit of the plaintiff should be decreed at the rate of Rs. 16/- per maund, and in this view of the matter, he gave a decree to the plaintiff for Rs. 933/14/3. The defendant has now come up in appeal to this court. It is strenuously contended before me by learned counsel for the defendant that the plaintiff's suit is not maintainable inasmuch as it is virtually a suit to enforce an award. Learned counsel relied on Sections 32 and 33 of the Indian Arbitration act, 1940 (Act No. X of 1940), which came into force in this State sometime in january 1950. It may be pointed out at the very outset that this ground of defence had not been taken up by the defendant at any earlier stage of the suit. This ground was not taken in the written statement, nor was it made the subject-matter of tiny issue, nor has it been discussed in the judgments of the courts below. The question, therefore, arises whether this ground should be allowed to be raised in this Court in the circumstances pointed out above. Having given my very careful and anxious consideration to this aspect of the case, i have come to the conclusion that the ground sought to be raised is, in the first place, a matter of pure law, and, secondly, that it goes to the very root of the case. What I desire to say is that if the contention put forward by learned counsel for the defendant turns out to be well-founded in law, the inevitable conclusion must be that the court below had no jurisdiction to entertain the suit. In this view of the matter, I am of opinion that opportunity to the defendant to raise this ground should not be refused, and I have, therefore, permitted this ground to be raised in this Court for the first time. I may point out in this connection that almost a similar situation arose in narmadabai v. Natverlal, AIR 1953 Bom 386, and Chagla C. J. , who delivered the judgment of the court in that case made the following observations which may usefully be quoted here: "whatever the parties may understand, what- ever the parties may agree to, if the Court has no jurisdiction, the absence of jurisdiction cannot be made good by any understanding between the parties. Therefore, if we are right in the view we take as to the interpretation of section 32, then it is clear that Shah J. , with respect, had no jurisdiction to try a suit which in substance and in effect was a suit to enforce an award. The result, therefore, is that the suit must fail on the preliminary ground that the suit is not maintainable, the suit being one to enforce an award duly given by arbitrators appointed by the parties and also because the award deals with the very disputes which are the subject-matter of the suit. " (These observations fully apply to the case in hand, and with respect I adopt them.) Now, two questions seem to me to arise in this appeal. The first question is whether a suit on the original cause of action can lie where the plaintiff comes forward with a case that the very dispute between the parties had been referred to an arbitration and that an award was given. The second question is whether a suit to enforce an award is competent apart from the provisions of the Arbitration Act. I take up the first question to start with.
(3.) IT seems to me that even before the Arbitration Act of 1940 was brought into force in this country, the general consensus of judicial opinion was that a valid award operates to merge and extinguish all claims embraced therein and once such an award has been made, the submission and the award furnish the only basis by which the rights of the parties can be determined and they constitute a bar to any independent action on the original cause of action. In Krishna Panda v. Balaram Panda, ILR 9 Mad 290, the facts were that certain disputes arose in a joint Hindu family, and the parties submitted the question of partition to arbitrators who passed an award. Both parties objected to the award, and it was never carried into effect. It was held that the award was equivalent to a final judgment and that to give effect to it, the subsequent consent or approval of neither party was required, and that in order that parties should be remitted to their previous rights, there must be positive evidence that both parties agreed that the former state of things should be restored. On this view, the suit for partition was thrown out. Again in Bhajahari Saha Banikya v. Behary Lal Basak, ILR 33 Cal 881, it was held that if an award is valid, it is operative even though neither party had sought to enforce it by regular suit or by the summary procedure, and it was further held that this conclusion was based upon the elementary principle that, as between the parties and their privies, an award was entitled to that respect, which was due to the judgment of a Court of last resort and was conclusive upon the merits of the controversy submitted, unless possibly the parties had intended that the award shall not be final and conclusive. Putting the matter in another way, the learned judge observed that a valid award operates to merge and extinguish all claims embraced in the submission, and after it had been made, the submission and award furnished the only basis by which the rights of the parties could be determined, and that independent action on the original demand was barred. The same view appears to have been almost unanimously taken by the High courts in India after the Arbitration Act of 1940 came into force. Reference may be made in this connection to Nathulal v. Beharilal, ATR 1952 Nag 65; and narmadabai v. Natverlal, AIR 1953 Bom 386,, which has already been referred to above. ;