2022 (5) TMI 703 - SC - Indian Laws

Scope and power of the Commissioner / Panch appointed by the court - Reference of subject matter of the suit or a part thereof to arbitration under Section 21 of the Arbitration Act, 1940 - HELD THAT - In the present case, the application dated 23rd December 1994 was moved by the plaintiff and it was not signed by the defendant. As per the heading, the application was for the appointment of a commissioner/arbitrator to conduct an enquiry in respect of the accounts by a competent Chartered Accountant who shall act as a panch/Commissioner and submit a report after conducting an audit of the accounts. It was stated that the transactions between the parties are fairly large in number and, therefore, it is necessary to handover the aforesaid task to a Chartered Accountant. The application also states that for the enquiry regarding accounts an opportunity of hearing should be given to both the parties. Name of S.K. Mantri, Chartered Accountant, to act as panch/commissioner was proposed. The prayer in the application was that the panch/ commissioner would submit the report to the court after conducting an audit of the accounts. The application cannot be read as an application moved on a prior agreement or consensus for reference to arbitration. Order XXVI Rule 9 of the Code gives wide powers to the court to appoint a commissioner to make local investigations which may be requisite or proper for elucidating any matter in dispute, ascertaining the market value of any property, account of mesne profit or damages or annual net profits. Under Order XXVI Rule 11, the court has the power to issue a commission in a suit, in which examination of adjustment of accounts is necessary, to a person as it thinks fit directing him to make such examination or adjustment. When a court issues such a commission to such a person, it can direct the commissioner to make such an investigation, examination and adjustment and submit a report thereon to the court. The commissioner so appointed does not strictly perform a judicial act which is binding but only a ministerial act . Nothing is left to the commissioner s discretion, and there is no occasion to use his judgment or permitting the commissioner to adjudicate and decide the issue involved; the commissioner s report is only an opinion or noting, as the case may be with the details and/or statement to the court the actual state of affairs. Such a report does not automatically form part of the court s opinion, as the court has the power to confirm, vary or set aside the report or in a given case issue a new commission. Hence, there is neither abdication nor delegation of the powers of functions of the court to decide the issue. Sometimes, on examination of the commissioner, the report forms part of the record and evidence. The matter referred to S.K. Mantri was limited to examination of the accounts. The issues and questions of dispute in the suit were far broader and wider. These included questions as to the agreed price or the rate of transportation in view of the letter dated 05th June 1992, which was withdrawn by letter dated 30th September 1992, computation of the transportation costs payable to the plaintiff under the contract in case the coal delivered was within or beyond the 1% stipulation, whether or not the defendants were right in making deductions on account of bad quality coal, higher moisture content etc. whereby the weight of the coal had increased, delay in delivery on the part of the plaintiff, whether the defendants are entitled to charge interest while making recoveries, etc - It is interesting to note that the S.K. Mantri himself did not decide whether or not the plaintiff is entitled to rent of the plot or security charges observing that this was an aspect for the court to decide. However, he forgot that his jurisdiction was limited to checking and verifying accounts and not deciding any issue or questions beyond the accounts on issues and questions referred. The impugned order dated 19th September 2019 of the High Court affirming the order dated 16th May 1996 passed by the Additional District Judge, Sehore Camp Astha, is set aside. It is held that the report of the Chartered Accountant is not an award and is to be treated as a report of a commissioner appointed by the Court under Order XXVI Rule 11 of the Code. Objections of the defendant to the said report will be considered in light of the aforesaid discussion and our findings, and after hearing both the sides the trial will proceed as per law. We clarify that the observations made in this judgment are for the disposal of the present appeal. The civil suit will be decided on merits without being influenced by any findings recorded by us that only relate to the limited aspect of the report dated 22nd June 1995 of the commissioner. Application disposed off.

Summary

Issues Involved:
1. Whether the parties agreed to refer the subject matter of the suit to arbitration under Section 21 of the Arbitration Act, 1940.
2. Interpretation and application of Section 21 of the Arbitration Act, 1940.
3. Validity of the appointment of S.K. Mantri as an arbitrator or a commissioner.
4. Legal implications of the report submitted by S.K. Mantri.
5. Objections raised by the defendant regarding the report and their timeliness.
6. Distinction between arbitration and expert determination/commissioner’s report.

Detailed Analysis:

1. Agreement to Arbitration under Section 21 of the Arbitration Act, 1940:
The primary issue was whether the parties had agreed to refer the subject matter of the suit to arbitration under Section 21 of the Arbitration Act, 1940. The court noted that for Section 21 to be invoked, all parties interested must agree in writing to refer the matter to arbitration. The application dated 23rd December 1994, moved by the plaintiff for appointing an arbitrator/commissioner, was not signed by the defendant. The court emphasized that an arbitration agreement requires a mutual agreement or consensus ad idem, which was not present in this case.

2. Interpretation and Application of Section 21:
Section 21 mandates that parties must agree in writing to refer the matter to arbitration. The court highlighted that the term "agree" signifies a mutual understanding or arrangement. The court referred to various precedents, including Firm Khetu Ram Bashamber Dass v. Kashmiri Lal, which underscored that all interested parties must agree for a valid reference to arbitration. The court concluded that the application dated 23rd December 1994 did not constitute an agreement under Section 21 as it was not a mutual application by all parties.

3. Validity of Appointment of S.K. Mantri:
The court examined whether S.K. Mantri was appointed as an arbitrator or a commissioner. The application by the plaintiff sought the appointment of a Chartered Accountant to conduct an audit of accounts, not explicitly for arbitration. The court order dated 23rd December 1994, which appointed S.K. Mantri, did not clearly state that he was being appointed as an arbitrator. The court concluded that S.K. Mantri was appointed as a commissioner to facilitate the court by examining accounts, not as an arbitrator.

4. Legal Implications of the Report by S.K. Mantri:
The report submitted by S.K. Mantri was treated as a commissioner’s report rather than an arbitral award. The court emphasized that an expert’s report is not binding on the court and serves to assist the court in arriving at a final decision. The court noted that the report should be considered as an opinion to aid the court rather than a final determination of the dispute.

5. Objections Raised by the Defendant:
The defendant's objections to the report were initially dismissed as barred by limitation. However, the court noted that the objections should be considered in light of the finding that the report was not an arbitral award but a commissioner’s report. The court directed that the objections be heard, and the trial should proceed accordingly.

6. Distinction Between Arbitration and Expert Determination/Commissioner’s Report:
The court elaborated on the distinction between arbitration and expert determination or a commissioner’s report. Arbitration involves a quasi-judicial process where the arbitrator decides the rights of the parties, whereas a commissioner or expert acts as a facilitator to assist the court. The court referred to various legal texts and precedents to underscore that an expert’s role is to provide an opinion based on their expertise, which the court may accept, vary, or reject.

Conclusion:
The appeal was allowed, setting aside the High Court's order affirming the trial court's decision. The court held that the report by S.K. Mantri was not an arbitral award but a commissioner’s report. The objections to the report were to be considered, and the trial was to proceed as per law. The court clarified that its observations were limited to the disposal of the appeal and did not influence the merits of the civil suit. All pending applications were disposed of without any order as to costs.