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1963 (3) TMI 78 - HC - Indian Laws

Issues Involved:
1. Whether an unfiled arbitration award can be pleaded as a defense to a suit based on the original cause of action.
2. Whether an unfiled award, if performed by one of the parties, can be a valid defense to an action on the original cause of action.
3. Whether an unfiled award, if later accepted by the parties, can constitute a fresh cause of action.
4. Whether a court can pass a decree based on an unfiled award if produced by the arbitrators after the limitation period and whether the court can investigate the validity of such an award.

Detailed Analysis:

Issue 1: Unfiled Arbitration Award as a Defense
The court examined the legal standing of an unfiled arbitration award in the context of the Indian Arbitration Act, 1940. The court noted the divergence in judicial opinions across various High Courts in India. The primary question was whether an unfiled award could be used as a defense in a suit based on the original cause of action. The court referred to various precedents, including ILR (1949) Mad 111 and AIR 1948 Mad 436, which held that an unfiled award could be a valid defense if the defendant had performed his obligations under the award. However, the court ultimately concluded that an unfiled award could not ordinarily be used as a defense, emphasizing that the Arbitration Act, 1940, intended to integrate the arbitration process and required the award to be filed and made a decree of the court to be effective. Therefore, the first question was answered in the negative.

Issue 2: Performance of Unfiled Award as a Defense
The court acknowledged that if the terms of an unfiled award had been fully performed by one of the parties, it could afford a good defense to an action on the original cause of action by the other party. This principle was accepted in ILR (1949) Mad 111 and AIR 1948 Mad 436. The court reasoned that the arbitration proceedings are based on a contract, and if a party had fulfilled his part of the contract as decided by the arbitrator, it would constitute accord and satisfaction of the original cause of action. Thus, the second question was answered in the affirmative.

Issue 3: Unfiled Award Accepted by Parties as Fresh Cause of Action
The court referred to the Supreme Court's decision in Kashinathsa v. Narasingasa, [1981]2SCR600, which held that if an unfiled award is later accepted by the parties and acted upon, it would constitute a fresh cause of action. The court noted that setting up a defense based on such acceptance would not be precluded by the Arbitration Act, 1940, as it would be based on mutual agreement rather than the existence of the award itself. Consequently, the third question was answered in the affirmative.

Issue 4: Decree Based on Unfiled Award Produced by Arbitrators
The court addressed whether a decree could be passed based on an unfiled award if it was produced by the arbitrators after the limitation period. The court referred to Article 178 of the Limitation Act, which would not apply if the award was forwarded to the court by the arbitrators. The court cited Champalal v. Mst. Samrathbai, [1960]2SCR810, and Kumbha Mawji v. Dominion of India, [1953]4SCR878, to support the view that the time for filing an application to set aside an award would be reckoned only after the award comes into court. Therefore, if the award was sent to the court by the arbitrators, it would be competent for the court to file it and proceed accordingly, allowing the plaintiffs to file an application to set it aside within the time limited by law. The fourth question was answered in the affirmative.

Conclusion:
The court upheld the lower appellate court's order of remand, directing the trial court to dispose of the suit in light of the observations made in this judgment. There was no order as to costs.

 

 

 

 

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