1380 THE N<BITF:f\TIOl\J & CONClLIAT!ON ACT. !996 [S.16

the time of making the aware; and if no period be stated for the enlargement it shall bedeemed to be an enlarqornent for one month; and in any case where an umpire shall havebeen appointed i! sh::.11be lawful for him to enter on the reference in lieu of the arbitrators,if the latter shall have allowed their time or their extended time to expire without makingan award or shall have delivered any party or to the umpire a notice in writing stating theycannot agree.

16. Rule to deliver possession of land pursuant to award to be enforced as ajudgment in ejectment:- When any award made on any such submission, document,ororder of reference as aforesaid directs that possession of any lands ortenements capableof being the subject of an action of ejectment shail be delivered to any party, eitherforthwith or at any future time or that any such party is entitled to the possession of anysuch lands or tenements, it shall be lawful for the Court of which the document authorisingthe reference is or is made a rule or order to order any party to the reference who shall bein possession of any such lands or tenements. or any person in possession of the sameclaiming under or put in possession by him since the making of the document authorisingthe reference. to deliver possession of the same to the party entitled thereto, pursuant tothe award, and such rule ororderto deliver possession shall have the effect of ajudgmentin ejectment against every such party or person named in it, and execution may issue, andpossession shall be delivered by the Sheriff as on a judgment in ejectment.

17. Agreement or submission in writing may be made rule of Court unless acontrary intention appear:- Every agreement or submission to arbitration by consent,whether by deed or instrument in writing not under seal, may be made a rule of anyoneof the Superior Courts of 12W or equity at Westminister, on the application of any partythereto, unless such agreement er submission contain words supporting that the parties.intend that it should not be made a rule of Court; and if any such agreement or submissionit is provided that the same shall or may be made a rule of one in particular of such SuperiorCourts, it may be made a rule of that Court only; and if when there is no such provisiona case be stated in the award and the document authorising the reference has not, beforethe publication of the award to the parties, been made a rule of Court, such document maybe made a rule only of the Court specified in the award forthe opinion of one of the SuperiorCourts. and such Court is or has been made a rule or order of anyone of such SuperiorCourts, no order of such Courts shall have any jurisdiction to entertain any motionrespecting the arbitration or award.

"13.REPORT OF THE CIVIL JUST!CECOMMITTEE 1924-25Chapter XIII, Pages 208-221.

ARBITRATION

1.The law as regards arbitration may be said to consist of the Second Schedule of thecivil Procedure Code and the Indian Arbitration Act of 1899. The provisions of the SecondSchedule to the Code are substantially the same as certain sections in the Code of 1882.The note was made by the Special Committee over which Sir Erie Richards presided in1907 was as follows:-

"We are of opiniion that the best course would undoubtedly be to eliminate fromthe Code all the clauses as to arbitration and insert therein a new andcomprehensive Arbitration Act. There are perhaps difficulties as tothis at present.We have determined and therefore, to leave the arbitration clauses much as theyare in the present Code; but we have placed them in into a Schedule in the hopethat at no distant date they may be transferred."

, That this hope has not been fulfilled, although sixteen years have elapsed. is certainlya pity, but it is important to observe that what is required is not so much that the whole oflaw, on this subject, should be put into one Act, as that the law should be made moreworkable.

2. The importance, especially in commercial matters, of a prompt and workmanlikesystem of arbitation requires little emphasis in a report such as this, in which the law'sdelays are the main subject-matter. The fact that a debtor can postpone judgement orexecution for a very long time by taking advantage of elaborate procedure and congestionin our courts, is not merely to be regarded as giving rise to injustice in an individual caseor cases, must be viewed as a general source of risk, and expenses which has to beprovided for out of the gross profits of every trade affected. In so far as an arbitrationsystem may be made from and affective, the public can expect to that its goods cheaper.In so far as t~e enforcement of contracts- forthe sale and purchase of goods is uncertain,dilatory and expensive, the public, when it buys, must expect to have included in the pricea certain sum as premium, or as reserve against this form of risk. Whether, without somesystem of arbitration, business would be possible or not, ceteris partibus, it would not bepossible at the present levels of prices. It is, therefore, in the interest of the Indianconsumer, as well as in the interest of persons engaged in commerce, that Indian tradeshould have the advantage of a workman-like system of commercial arbitration.

In the buying and selling of goods there is always special necessity for arbitration. Sofar as the ordinary law goes any variation between the goods tendered and the contractdescription entitles the buyer to reject. In the foreign trade especially rejection of goodsis a very serious matter. Accordingly in-many trades the usual form of contract providesthat even if the goods fail in some reasons to satisfy the contract description, an arbitratoror arbitrators may nevertheless require the buyer to accept the goods subject to-'allowance. This is a very important stipulation from a seller's point of view.

.-1381

1~H32 :HF AF?8iTRATION S.CONCH. v\TiON ACf. i99(. [Item:! lie:1! 6J REPORT OF Tt-!E CIVIL JUSTICE COMMij'F.F. 1924-2;'

3. f:.. main feature of our arbitration t.aw is that we have twc systems-ona for mofussilindia, and tne other applicable to centres of trade and comrnerce-cniel!y I/;e Presidencytowns. This double system ~!,p!ies, however, only 10 arbitration that are ccrried out'r.ciepenrJim!iy of any suit. for pn:<ceeding in a law Court and to the enforcement of awardsmade in such arbitrations. When parties have once gone to law and a question arises of\3k:'9 the decision of the matter in dispute out of the hands of the court and giving it to anarbiuator or chosen by tile parties, the law applicable to this process is substaintially thesame for the whole of India. The first and broadest question, is whether as regardsar~itration which are carried on, are agreed to be carried independently of any suits it ispreacticabls to established one and the same law for the whole of India-that is, for thernotuss.t, as we" as for tile commercial towns. If so, it would seem that the IndianArbitration Act, which applies to towns, would require, witll some modification, to beextended to the mofussil, superseding in this respect certain provisions in the SecondSchedule of the Code. It would certainly not be practicable in Calcutta. Bombay or Karachii'J ;f;!V21! to the rudimentary provisions of the Second Schedule of the Code. The projectof extending the principles of the Act of 1899 to the whole OfIndia is as old as the Act itself.So tar the weight of opinion has always been against the proposal.

may require the othE:rto cornp'y with his agreement; to appoint or concur in appointing anarbitrator: or umpire. to iay thH dispute before the arbtritor, or arbitrators. for decisions: theaward, when made, hac only to be find in Court by tile arbitrators. in order that it maybecome capable of being carried into execution as though it we •.e a decree. If one partyto a submission refuse to appoint an arbitrator, or refuses to come before the arbitrationTribunal. when estabiished the system broadly speaking is that the party insisting uponarbitration may have the arbitration carried on ex parte and the award will be equallybinding. Under this system if any question arises as to the validity of the submission, orthe jurisdiction of the arbitrators, 01 as to the regularity of the proceedings, the partyobjecting has various courses open. One is to try by obtaining an injunction to prevent thearbitration proceedings from taking place, orfrom being brought to a conclusion. A second;s to wait until the award is made, and then apply to the Court to have the award set asideor declared to be void. There is, however a third course which in recent years has beenmuch resorted to by parties who desire to defeat an agreement to refer, namely, to institutea suit about dispute - usually a suit for a declaration of some sort-the object being thatas the matters in difference are thus brought before a Court of law, arbitration proceedingswill become fruitless, or will at least have to be suspended for many months until somequestions of procedure are settled atfirst instance oron appeal. Another form of proceduremuch affected of late, is to wait until the award is being put in execution by transfer to somemofussil Court for the purposes, and then to launch a suit in the mofussil asking fOI aninjunction to restrain the execution, and for a declaration, e.g., to effect that thesubmission was obtained by fraud, that the arbitrator, misconducted himself, and that theaward is not binding on the plaintiff,

6. The scheme of the lndian Arbitration Act of 1899 is in many cases, utterly ineffectivein the sense that a person, who has no defence to a just claim, who has agreed to referall suer, matters to arbitration, and against whom an award has been made in terms of hisagreement, may nevertheless, defy the other party, not for months only, but for years, bymeans of one or other of the methods above referred to. In all the courts, which have toadminister the Act of 1899, the advantages of arbitration can for practical purposes beabolished by bringing a suit to set aside the award as distinct from an application underthe Act. According to the rules of most High Courts applications under the Act are more,or less summary, and are intended to be disposed of with certain promptitude.

So long, however, as the plaintiff takes care to arise some question affecting the validityof the submission it is settled law that he is entitled to proceed by way of suit There isdifference of opinion as to whether it would be open to him to bring a suit merely for thepurpose of raising an objection of the type contemplated by Section 14of the Act, e.g.,misconduct of the arbitrator; and there is also room for difference of opinion as to whethersuch a question can be agitated in a suit, provided that the suit raised other questionsaffecting the validity of the submission. The one safeguard to be described in the Act,against the action of a party desires of defeating agreement to refer is the provision thatthe award, when files, shall be capable of excecution as though it were a decree..Accordingly it is in the power of any Court staying execution under the award or prohibitingthe plaintiff from carrying on execution, to require the party against whom the award hasbeen pronounced to give security in case. If necessary, as a condition depriving the

Arbitration under a submission

4. The indian Arbitration Act of 1899 through technically extends to tne whole of BritishIndia, was expressed to apply of its own only in cases where, if the subject-mattersubmitted to an arbitration were the subject of a suit, the suit could. whotheiwith leave orotherwise, be instituted in a Presidency town. By Section 2, however Local Governments',;ith the previous sanction of the Governor-General in Council were empowered byno!ifir.a!lon to declare that 'let tv be applicable in any other local area as jf it werePresidency town. Since 1920 the sanction of the Governor-General in Council has notbe8;1 necessary. The Act was immediately applied to Karachi (1899). Thereafter it wasapplied but on certain special terms to Oelhi (1909), to Cawnpore (1812), and to Armitsar(1915). Y~e Government of In(lia was apparently of opinion that the Act of 1899 was notentirely suitable for every variety of arbitration proceedings in such town as these.Itwouldonly sanction the application of the Act in these mofussil centres on condition thatmerchants should not come under its terms unless they had agreed to go to arbitrationunder the Act. The Act accordingly applies only '10 written agreements, subnnssion orreferences thereon, in which the parties expressly declare that it should apply" (ct. PunjabAct 1 of 1911 ).In like manner bylhe United Province Act 1of 1912 it is enacted by Section2, that for the purposes of the Indian Arbitration Act, 1899 and notwithstanding anythingto the contrary in the definition of the word "submission" as given in Section 4 (b) of thatAct "submission shall mean a written agreement to submit present or future differencesto arbitration under the Indian Arbitration Act, 1899, whettl!lr arbitrator is named thereinor not".

"Recently (March, 1923) the Act has been extended by the Madras Governmentto Tuticorn. '--

5. Under the Indian Arbitration Act, the scheme of arbitral law is roughly this - that ifparties have made in writing an agreement to refer, then, upon dispute arising one party

1384 THE ARBITRATION & CONCILIATION ACT. 1996 lIem9] REPORTOFTHE CIVIL JUSTICE COMMITIEE 1924-25 1385[lIem7

plaintiff of his prima facie right to execute the award. For one reasons or another thecou rts in India do not appear to succeed in utilising this weapon with sufficient effectivenessto put an end even to impudent attempts to defeat and delay just claims upon awards.

7. In the city of Karachi, the scheme olthe Indian Arbitration Act would appear to breakdown more constantly and in more striking fashion than in any of the Presidency towns.Merchants in Karachi do a great deal of business with the Punjab; commercially speakingthe Punjab is the hinter land of Karachi. In almost every trade the common form of contractemployed contains a submission clause, it has happened owing in recent years beingmade in favour of the Karachi merchant, and against the up-country dealer. Untilcomparatively recently the safeguard to which we have referred-namely the fact that theaward,when filed, is under the Act capable of execution at once as though it were a decree-was entirely overthrown by certain rules of the judicial Commissioner's Court. By theserules notices were issued to the parties: the parties against whom the award was made'was invited to take objections, and a more or less protracted litigation was embarked uponthe question whether or not the award should stand filed." Apart from such proceedings,subordinate Judges in Punjab, are readily induced to grant interim injunctions, frequentlyex parte; restraining the execution of awards. These injunctions, however misconceived,can be relied upon to occupy many months before being ultimately discharged. We havebeen assured that, from the Karachi merchant's point of view, it would appear possible tohave the execution of an award delayed almost indefinitely by proceeding from one courtto another in the Punjab obtaining injunctions the discharge of each of which would involvemuch time and in some cases would necessitate report to the High Court at Lahore.

8. Particular instance of protracted litigation arising out of agreement to refer may begiven to show the reality of the evil. We may first take the case which resulted in ruling ofthe High Court of Lahore, reported in I.LA. 3 Lah. 226. Messrs Jai Narain Babu Lalapparently carried on business as piece-goods merchants at Karachi, with branches atAmritsar and Delhi. They woulq seem to have sold piece-goods under written contractswhich contain an arbitration clause, providing for a reference to arbitration by the seller toEuropean merchants of Karachi. In 1918, before the Armistice, they entered into severalforward contracts with certain Delhi Merchants, for the sale of piece-goods to be suppliedin the beginning of 1919. After the Armistice in November, 1918, the piece-goods marketfell very heavily. The buyers declared to take delivery of the goods pleading that they wereinduced by fraud, to enter the contracts, and that the goods tendered were not of propershipment, and were otherwise in disconformity with the contract. in April or May, 1919, thesellers called upon the different buyers to refer the dispute to arbitration. It is to theproceedings that ensued upon this that we desire to call attention. The Delhi buyers filedsuit in Delhi for a declaration that the contracts were not binding on them: and for aninjunction restraining Messrs Jai Narain Babu Lal from going to arbitration. On the 9thOctober, 1919, the District Judge of Delhi, granted temporary injunctions against MessrsJai Narain Babu Lal. These injunctions were discharged by Mr. Justice Abdul Rasoof onthe 23rd December, 1919 [Vide 541.G. 546). But pending ail appeal against his decisionunder the Letters Patent temporary injunctions were again issued by the Lahore HighCourt which ~discharged on the 23rd February, 1920 by a Bench consisting of SirShadi Lal and Mr. Justice Martinue [Vide 55 I.C. 409). Pending appeal against theinterlocutory orders the plaints filed by the Delhi merchants were returned to them for

making certain amendments and were re-admitted in May, 1920 as suits of 1920: Thesesuits were dismissed on the 13th October, 1920 on the ground that the plaintiffs had nocause of action at that stage, and in the even of awards being passed against them theDelhi merchants could then come to court to set them aside. The Delhi merchantsappealed against the decision of the subordinate Judge dismissing their suits. There wasdelay in serving Messers. Jai Narain Babu Lal and the disposal of the appeals hung fire

for a long time.After the discharge of the injunctions by the Lahore High Court, Messers Jai Narain

Babu Lal served fresh notices on the Delhi merchants calling upon them to appoint theirarbitator. Some of them did so under protest. The arbitrators passed their awards inJanuary, 1921. The Delhi merchants thereupon filed fresh suits far a declaration andinjunction, interalia claiming to have the awards set aside on the ground that the arbitratorshad no jurisdiction to proceed with the matters in dispute pending the disposal of theappeals filed in the first set of suits. They also filed objections to the awards in KarachiCourt and applied that the hearing of the objections be stayed under Section 10 of the CivilProcedue Code pending the disposal of the second set of suits filed by them in the DelhiCourt. Under the rules then in force in the Judicial Commissioner's Court at Karachi noaward could be executed as a decree pending the disposal of objections to the award. Theapplications for stay was disallowed. Revision applications against this decision weresubsequently dropped. In the meantime the the buyers expedited the disposal of thesecond set of suits in the Delhi Court and obtained a decision in their favour setting asidethe awards on the preliminary point, that the arbitrators were functus officio during thependency of the appeals in the first set of suits. The Punjab Hight Court reversed thisfinding and remanded the suits for disposal on the merits (Vide I.L.R. 3 Lah. Page 296).The objections to the award 'were then proceeded with in Karachi and were disallowed on27th June, 1922, revision applications against the decision of the Karachi Court wre alsodisallowed. Though the awards could then be enforced as decrees. Messrs. Jai NarainBabu Lal had still to fight the Delhi suit on the merits and though they may have been ableto plead in the Delhi Court that the decision of the Karachi Court that the decision of theKarachi Court was binding, there was still plenty of scope for further delay in the DelhiCourt and they not unnaturally compromised the matter. So far as we are concerned thebuyers mayor maynot have had an excellent case for contesting their liability go toarbitration, but the possibility of such a claim of proceedings as above set out is in itselfproof that our arbitration law is ineffective;

9. Further illustration may be given of the manner in which arbitration clause can berendered nugatory by the misuse of the principle laid down in the well-known English case,Daleman vs. Osset Corporetin', namely that arbitration cannot proceed to decide adispute if there is a suit pending about the dispute, unless a stay of the suit has beenobtained from the court in order that the arbitrators might decide the matter. It is notuncommon for debtors to institute suits in the Punjab in respect of the same matter as inthe subject of arbitration in Karachi. Application for stay of such suits take a very long time.In certain cases suits for accounts were filed against the Karachi claimants in arbitration.

1. Daleman vs. Osset Corporatin. (1912) 3 K.B. 257.

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1386 THE ARBITR/\TION & CONCILIATION ACT, J 996 Item 1S] REPORT OF THE CIVILJUSTICE COMMITTEE 1924-25 1387[Item 10

The Karachi Claimants applied to the up-country Court for stay under Section 19 of theIndian Arbitration Act and proceed with arbitration. On the awards being filed in the JudicialCommissiner's Court at Karachi, they were set aside on the principle above mentioned,but on appeal the awards were ordered to be taken off the file and to be represented tothe court in the even of the stay application being granted (vide 17 Sind Law Reporter page225). We were informed, when at Karachi. that it sometimes takes from two to three yearsin up-country courts to have an application under Section 19 finally disposed of. It is notuncommon forthe up-country to be filed after the arbitrators have entered on the referenceand just a day or two before they make their award. Thus in the Karachi case numberedJ. Mis. No. 297 of 1921 ,the reference to arbitration is dated 29th April, 1921., the awardis the 18th May,f921, and the suit is the 14th May, 1921. The effect of such facts isfrequently to oblige claimants to settle for a much smaller sum than to which they areentitled.

10. The Associated Chamber of Commerce discussed the question of arbitration at ameeting in December, 1928, and urged upon Government that steps should be taken toput the law of arbitration in India into a more ..satisfactory state. We observe that Mr. R.S.Backhouse of the Karachi Chamber was of opinion, first, that the provisions of Section 15,to the effect that the awards on being filed shall be enforceable as if it were a decree shallbe modified, and also that provision should be made in the Indian Arbitration Act to thesame effect as is made by paragraph 17 of the Schedule to the Code - namely that theparty claiming arbitration may apply to the court, and the court after giving notice to theseveral parties concerned may make an order of reference if the agreement to referappears to be valid. Mr. Backhouse pointed out very forcibly certain of the defects of theIndian Arbitration Act, in particular the failure to provide a right of appeal in casearisinq in towns other than the Presidency towns. He also called attention to such rulingsas E.O. Sassoon Co. vs. Ram OattRamkrishna Des', and the case already referred to.JaiNarain Babu Lal vs. Jamap" which seem to permit unlimited right of suit about awards.

11. We have been furnished with a copy of a draft Bill to consolidate and amend thelaw relating to arbitration in British India, prepared by Mr. Harchandrai Vishlands ofKarachi. Apart from minor amendments of the law and from the fact that the whole law ofarbitration is intended to be incorporated into one Act, the general intention of the Billappears to be to apply the principles of the Indian Arbitration Act of 1899 to other wholeof India, making however certain modification seem to be (1) that an award may beenforced as a decree but by leave olthe court, such leave to be obtainable only after lapseof a certain time in order that an application to set aside, modify, or remit the award maybe made meanwhile; (2) that no suit should lie to contest the validity of a submission oraward or any ground other than fraud; and (3) that no award should be deemed to beinvalid by reason only of its being on a reference which amongst other matters, includesthe subject matter of a pending suit or proceedings.

12. On the whole we think experience shows that arbitration is an extraordinaryineffective device in the absence of a fairly high degree of honesty in the~. If the

result of a submission clause is that one party to defeat the arbitration will always allegea fraud, or misconducted of the arbitrator, or something else, no provision of the law willever succeed in securing a quick settlement of dipsutes. The simple fact seems to be thatthe more carefully the law be amended the more ingenuity will be applied in makingallegations of a kind which courts of law cannot refuse to investigate at length. We doubtwhether mofussillndia is ready for, or requires a system of arbitration any more elaboratethan is provided for by the Second Schedule. We would recommend rather that the law,under the Indian Arbitration Act, should be made more drastic and effectual than that itshould be extended.

13. What seems to be most required is that in the case of every arbitration one courtand one only should be the forum in which all questions relating to the validity of the awardshould be finally determined. It is, we think, necesary to require all persons, which desireto challenge awards made by arbitrators in Presidency towns and other commercialcentres, to bring their proceedings in the court of the town. There seems to be no hardship,whatever, in saying that people who have agreed to arbitrate e.g., in Karachi should litigateabout the arbitration in Karachi, Under Section 2 olthe Act of 1899 a submission may comeunder the Act or under Schedule II of the Code according as a suit wo".ld lie, orwould notlie, in a Presidency town. This depends on various accidental circumstances, e.g., if oneparty out of many lives in the Presidency town, or ifone part of the state in their submissionclause that the reference is to be under the Act, and that all proceedings are to be taken,o.g., in Karachi or in some particular Presidency town or commercial centre to whch theAct applies. When an arbitration has been held or is being held under such a clause thelaw should require all questions to be determined by the court of the town whether thefactum and validity of the submission be challenged or not. Such a rule is no more opento abuse than many others which work well in practice.

14. We think also that the practice of granting injunction to restrain arbitrationproceeding is one that might with advantage be totally prohibited. As we understand thelaw such injunctions should never be granted to a party whose case is that he never entredinto an agreement to refer, but should be granted only in very special cases where thereis an agreement to refer, but the plaintiff claims that it relates, to a matter in respect of whichthere is some equity which makes it desirable to prevent, proceedings being carried on.Such cases are extemely rare and there is no hardship, in our opinion, in refusing suchinjunctions in any case-still less in conferring the right to grant such injunctions to courtsof Presidency towns, or other commerci~1 centres.

15. We see no reason why a provision on the lines of paragraph 17 of the SecondSchedule should not be made applicable to arbitrations under the Indian Arbitration Actprovided always that this provision is purely facultative. and is not in any ways intendedto require persons claiming arbitration to apply to the Court in the first place to enforce theagreement to refer.

16. We are against the suggestion that the award should not be enforceable themoment it is filed,. This we regard a very valuable improvement upon English practice and.the only thing that has made arbitation in India in any degree effective. We have noevidence whatever of abuse of this provision and though it is open to be abused we seeno grounds for repealing it.

1. ED. Sassoon Co. vs. Ram Oatt Ramkrishna Oas.I.L.R. 50 CaL 81.2. Jai Narain Babu Lal vs. Jamal. LL.R. 3 Lah. 296.

~

1388 THE t\RBITRNION & CONCiLIATION ACT, 1996 [Item 17 item 22] REPORTOFTHE CIVIL JUSTICE COM~iT"TEE 1924-25 1389

17. We are aiso against the suggestion that the arbitrators should be compellableby the court to state a C."Ise, as this would, in India, be sure to iead to wide and grossabuse.

18. In our judgement ria amendment of the law will effect very much for the benefit oftrade unless in those centres, to which the Indian Arbitration Act at present applied thereis provided a summary method of disposing of objections to awards, as well as a provisionwhich will be effective to prevent !be interference of any other court. We think that everyCourt acting under the Indian Arbitration Act, should be empowered to require allapplications to set aside awards, on whatsoever ground, to be made by motion on affidavitevidence, it being open to the court, if itthinks necessary (e.g., in acase where allegationsof fraud are made) to give facilities for oral evidence, and for discovery, and to requireparticulars from each party of his allegations, In an ordinary High Court,with an OriginalSide there is nothing to prevent a Judge disposing of a motion under the Indian ArbitrationAct as carefully and as thoroughly as though he were trying a suit, with the aid of discoveryor oral evidence as necessary. To provide that an allegation of fraud will entitle the plaintiffto proceed by the more elaborate method of a suit, is merely to invite plaintiffs to compelallegations of fraud with any ohter case that theymay have.

19. We have ascertained that since the meeting of the Associated Chambers ofCommerce in December, i923, the Government of India in the Legislative Departmenthave made an investigation of the points of difficulty presented by the existing law. A fewof the more important points on which the law requires to be amended, or defined, maybe noted here. In a case arising in Cawnpore, or Amritsar, i.e., a commercial centre towhich the Indian Arbitration Act has been applied but which has not got a Chartered HighCourt, it should be provided that an order confirming or setting aside an award is to besubject to one appeal, and one only. We agree that the principle of Do/emon vs. OssetCorporation', should be reconsidered; the mere filing of a suit should not of itself interruptan arbitraton (et. I.L.R. 3 Lah~296 at 307). The effect of devolution of the rights of a partyto a submission should be-declared particularly as regards offICial assignees, or officialreceivers in insolvency. A period of limitation should be provided for motion to take anaward off the file or to set aside the award on whatsoever grounds. Provision should bemade enabling witnesses to be summoned before arbitrators and enabling commissionsto be issued to examine witnesses for the purpose of an arbitration.

"Arbitration In A Suit20. As regards arbitrations in suits, the chief question which requires attention is the

question whether it is advisable to permit parties to a suit referring their disputes toarbitration otherwise than by the procedure provided by Articles 1-16 of the SecondSchedule to the Code. Whether the language of the Second Schedule or of Section 89 ofthe Code amounts to a prohibition of arbitraton in suits otherwise than by the meansdescribed on the Schedule is a matter upon which judicial opinion, is divided. The HighCourt of Bombay in Manilal Moti/al vs. Gokuldas MooljP, has held that an arbitration in asuit, without any orders as required by the Second Schedule, may be enforced as an

adjustment of the suit under Order XXI II, Rule 3, We consider that it would be advantageousjf all arbitrations in suits except as, provided by the Second Schedule were made void; theawards should only be recorded as adjustments of the suits when the court is asked to doso by all the parties.

21. It sometimes happens that the matters in difference in a pending suit, together withother matters connected therewith, can most conveniently be disposed of by arbitration.Under the second schedule it would seem to be impossible to have any arbitration in a suitwherein the award should validly extended to other matters. We see no reason why othermatter should not, by consent of all concerned, be included in such an arbitration at allevents by the leave of the court. we think, moreover, that this kind of objection, even whenleave of the court as not being obtains, should be regarded as one to which the court neednot give effect. In other words, we think that the court should have the power to grant thenecessary leave ex parte. Provisions will be necessary in such cases and is alsonecessary as regards adjustments which comprise matters not in suit, to make clear thatthe Registration and Stamp Acts are not defeated.

22. It would appearthat order settnq aside an award under paragraph 15 of the SecondSchedule to the code may result in unlimited litigation notwithstanding the provisions ofSection 104 sub-section (2) of the Code. The summary given beiow of proceedings whicharose out of an order of the Munsif of Fatehpur in the Bawnpore Judge ship is well WOt1hstudy. We are told that the properties involved are two shops; worth about four or fivehundred rupees. The litigation as will be seen arose from the circumstances that anarbitrator who had been given time till 30th january, 1918, filed his award on the 31st. Thecorrectness of the order setting aside this award as made out of time was canvassed onappeal from the Munsiff's decree in the suit. The case has taken seven years and is nowbefore the High Court of Allahabad. The case is not uninstructive as regards some of thepoints discussed in the chapters of this report which deal directly with appeals.

17th August, 1917- Suit instituted (No. 438 of 1917).

5th September, 1917- Written statement filed by defendant.

13th December, 1917 - Case referred to arbitration.

15th January, 1918 -Order extending time for filing award; "The arbitrator should filehis award before the 31 st January, 1918, Case to be brought forward on 31st January,1918."

31st January, 1918 - Award made and filed-decreeing the suit in toto in plaintiff'sfavour, 2nd February, 1918. Defendant's objection that the award had been made beyondtime by one day, and should be set aside.

1st March, 1918-Munsif allowed objection, set aside award and fixed 22nd March,1918, for trial.

22nd March, 1918 - Trial, evidence recorded.

. 25th Mar,,;;, 1918 - Judgp.mpnt delivered-plaintiff and defendant joint-owners in'equal shares.

22nd April, 1918, and 29th April, 1918 - Appeal and cross appeal by both parties tothe District Judge at Cawnpore who transferred them to subordinate Judge.

1. Dolemon vs. Osset Corporation, (1912) 3 K.B. 257.2. Manilal Motilal vs. Gokuldas Moolji. I.L.A. 45 Bom. 245.

i 390 THE ARBITRATION & CONCILIATION ACT, 1996 [Item 23

Ii

14th June, 1918 - Plaintiff's appeal allowed, defendant's appeal dismissed on theground that the award had been made within time and should nol have been set aside.

Decree passed in favour of the plaintiff in accordance with the award.

Appeal by the defendant against the two decrees of the lower appellate Court.15th July, 1918 - Second appeals (Nos. 910 and 911 of 1918) in the High Court by

the defendants against the two decrees of the lower appellate court.

4th January, 1921 - Both second appeals heard by single Judge and dismissed.30th March, 1921 - Letters Patent appeals (Nos. 21 and 22 of 1922) filed.

6th July, 1922 - Letters Patent appeals allowed-Order of the Munsif setting aside theaward restored, and the case remitted to the lower appellate court.

6th November, 1922 - Letter of the Registrar to the Sub-ordinate Judge, Cawnporereturning records of the case.

12th May, 1923- Case heard by the subordinate Judge on the merits, and Judgementof Munsif affirmed - Appeal and cross-appeal dismissed.

29th November, 1923- Second appeal (No. 1591 of 1923) filed bylhe plaintiff, (Delayin filing the appeal was probably due to the intervention of the long vacation).

3rdJanuary, 1924 -Hearing under Order XLI, Rule 11, Civil Procedure Code; appealadmitted.

It would seem necessary to provide that an order setting aside an award andsuperseding an arbitration should not be impeached in an appeal from the decree.

23. An important question as to which we consider that the law might well be cleareris the question of the extent to which a court should be expected or required to interferewith the arbitrator's conduct of an arbitration between date of the order of reference andthe date limited for filing the award. Sometimes complaints are made to the court of theconduct of the arbitrator during the period. It seems to us that if long periods are not limitedfor the filing of the award it would be as well to prescribe that attacks upon the conduct ofthe arbitrator should not be entertained except upon the question whether the time shouldbe further extended, or after the award has been made.

24. Some flagrant cases occur where there are two arbitrators each apponted by onesid. sometimes defendant's arbitrator will withdraw from the case just before the timecomes to make the award and after many proceedings have been taken before himselfand his colleague. Even if the court has power to appoint another arbitrator such tacticswill in general produce extreme delay. Apart all togetherfrom cases where the defendant'sarbitrator is not playng fair, we have been given particulars of cases sent to arbitrationunder the second schedule where for one reason or another the delay has beenunconscionable after time has been given on one ortwo occasions the court is aptto grantfurther extensions of time rather than to have all the cost and expense already incurredbefore the arbitrators thrown away. Sometimes in the end the reference has to besuperceded. Sometimes also the award has in the end to be set aside. In such cases thecase has to commence de novo many months after it might h~een heard originallyby the court itself. No rules of law can be suggested by us to obviate entirely this type ofdisaster. all that can be done when such cases are noticed by a district Judge or High CourtJudge at the time of inspection or in the course of a scrutiny of statements of delay it to

Item 26] REPORTOF THE CIVIL JUSTICE COMMITIEE 1924-25 1391

give such criticism and such advice as regards the handling of these cases as effectivenesswhich the court has in its power 10 limit the time for the making of Ihe award.

25. Under paragraph 20 of Schedule" of the civil Procedure Code where any matterhas been referred to arbitrator without the intervention of a court. and an award has beenmade there on, any person interested in the award may apply to any court havingjurisdiction over the subject-matter of the award that the award be filed in court. Theapplication shall be numbered and registered as a suit between the applicant as plaintiffand the other parties as defendants. The court shall direct notice to be given to the partiesto the arbitration, other than the applicant, requiring them to show cause within a timespecified why the award should not be filed. After such notice, according to paragraph21 ,where the court is satisfied that the matter has been referred to arbitration and that anaward has been made thereon and where no ground, such as is mentioned or referred toin paragraph 14 or paragraph 15 is proved, the court shall order the award to be filed andshall proceed to pronounce judgement according to the award. Upon the judgement sopronounced the decree shall follow.

Accordng to these provisions and to the decisions thereon, if there is any ground suchis mentioned in paragraph 14 or 15 is proved, the court has only one course open, namely,to dismiss the petition. It can either accept the award as it is or reject it altogether. ifhowever, the arbitration had been in a suit or under an order of reference on an agreementto refer them, under paragraph 14, the court could have remitted the award or the matterreferred to arbitration to the reconsideration of the same arbitrator or umpire upon suchterms as it might think fit. Moreover, it is not clear that the court acting under paragraph20 can modity or correct the award as it can do under paragraph 12 in the case or an awardmade in an arbitration through court. This is very hard on the parties in whose favour theaward is ; it discourages reference to arbitration and leads to unnecesary litigation. It isnow the accepted opinion, that arbitration should be encouraged as much as possible. Itis therefore necessary that the court should have powers even in the case of referenceto arbitration, without the intervention of the court. to exercise the powers given inParagraph 12 and 14 or the schedule. Both on the original Bill of 1901 and as it emergedfrom the Select Committee in 1905, it was provided that "for the purpose 01Section 526(corresponding to paragraph 21) the court shall have all the powers conferred and shallperform all the duties imposed upon it by Sections 513 to 522. "Section 518 correspondsto the present paragraphs 12 and 520 corresponds to the present paragraph 14. Probablythis change was not carried out because the Special Committee which sat to consider theBill in 1970 thought, as we have been-that the whole law of arbitration should betransferred to a separate comprehensive Arbitration Act, It is, however, very, desirablethat the change contemplated in the Bill of 1901, should be made as early as possible.Most arbitrators are not professional lawyers and often made obvious mistakes of formwhich do not affect the merits of their decision.

26. There are a number of other amendments which might well be made to the SecondSchedule in points of detail. These, however, cannot usefully be discussed here.

R. 4] HU!...CSOF ARBITRATION OF THE INDIAN GOUI\CIL OF JI.RBITRf..T!ON 1393

ARBITRATijON RULES OF THE INDIANCOUNCIL OF ARBITRATION ANDCHAMBERS OF COMMERCE

India; (iii) a company or an association or a body at individuals WhOS8 centra;rnsnaqernent and control is exercised in any country other than India: or (IV) theCovernrnent of a foreign country.

(viii) "Part means a party to an arbitration agreement. It shall include any individual,finn, company, Government, Government organisation or GovernmentUndertaking.

(ix) "Panel" means the Panel of Arbitrators maintained by the Council.(x) "Registrar" means the Registrar for the time being appointed by the Committee

and includes such other persons as the Committee may nominate for carrying outthe duties of the Registrar under these rules.

(xi) "Rules" means the Rules of Arbitration of the Council;(xii) "Fast Track Arbitration" means arbitration in accordance with Rule 82.(xiii) Words importing the singular number include, where the context admits or

requires, the plural number and vice versa.Arbitration Committee

Rule 3. (a) The Governing Body of the Council shall constitute an ArbitrationCommittee for performing the functions prescribed under these Rules. The Committeeshall consist of the President of the Council, who shall be the ex otticio Chairman of theCommittee and three members of the Governing Body of the Council elected by theGoverning Body from amongst themselves. The Committee shall hold office for a year.

(b) The Committee may co-opt not more than two persons to be additional membersof the Committee during its terms of office. Persons who are not members of theGoverning Body may also be co-opted 10 be members of the Committee.

(c) The Committee or the Chairman of the Committee may delegate to the Registrarthe power to take certain decisions provided that any such decision shall bereported to the Chairman or the Committee as the case may be.

Rules ApplicableRule 4. (a) Any dispute relating to any commercial matter mcludiny shipping, sale,

purchase, banking, insurance, building construction, engineering, technical assistance,know-how, patents, trade marks, management consultancy, commercial agency orlabour, arising between two ormore parties in India or a party or parties in India and a partyor parties in a foreign country or between.foreign parties who agree or have agreed forarbitration by the Council 0( under the Rules of Arbitration of the Council, shall bedetermined and settled in accordance with these Rules.

(b) The CoLincil shall also be competent to administer the conduct of arbitration in anydispute or difference relating to a commercial transaction between parties asmentioned in sub-clause (a) where they have agreed to have their disputearbitrated under any other Rules of Arbitration or otherwise and have agreed tohave such arbitration administered by the Council, wholly or in respect of somematters ari~ut of such arbitration.

(c) The Council shall be competent to function as AppOinting Authority as contemplatedunder the Arbitration Rules of the United Nations Commission on InternationalTrade Law (UNCITRAL).

74. RULES OF ARBITRATION OF THE INDIANCOUNCil OF ARBITRATION

ICA Arbitration Clause

The Indian Council of Arbitration recommends to all parties desirous of makingreference to arbitration by the Indian Council of Arbitration, the use of the followingarbitration clause in writing in their contracts:

"Any dispute or difference whatsoever arisinq between the parties out of or relating totile construction, meaning, scope, operation or effect of this contract or the validity or thebreach thereof shall be settled by arbitration in accordance with the Rules of Arbitrationot the Indian Council of Arbitralfon and the award made in pursuance thereof shall bebinding on the parties".

DefinitionsRule 1 ; (i) These rules may be called the "Rules of Arbitration of the Indian Council

of Arbitration".

(ii) These rules shall apply where parties have agreed in writing that (a) a dispute hasarisen or (b) a dispute which may arise between them in respect of a defined lega:relationship whether contractual or not shall be settled under the Rules ofArbitration. ,

Rule 2: In these rules, !he following words have the following meanings:

(I) "Arbitral Tribunal" means an arbitrator or arbitrators appointed for determining aparticular dispute or difference.

(u) "Arbitral Award" includes an interim award.

(iii) "Committee" means the Arbitration Committee of the Council as provided forhereinafter.

(iv) "Council" means the Indian Council of Arbitration;

(v) "Governing Body" means the Governing Body of the Council;

(vi) "Guidelines" means the guidelines for arbitrators and the parties to arbitration forexpeditious conduct of the arbitration proceedings given in the Annexure to theseRules.

(vii) "International Commercial Arbitration" means an arbitration relating to disputesarising out of legal relationships, whether contractual or not, considered as_commercial under the law in force in India and where at least one of the partiesis (i) an ino.vrcua: who IS a national of, or habitually resident in, any country otherthan India; 0, (ii) a body corporate which is incorporated Inany country other than

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