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TMI Blog1947 (2) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... the arbitration in the present case was under the Arbitration Act and not under the Code of Civil Procedure, we yet consider that the principles on which the judgment in Sitaram Balmukand v. Punjab National Bank Ltd. 2 was based, having been criticised in the other High Courts, may be reconsidered by a larger Bench. We, accordingly, forward this case to the Hon'ble Chief Justice for such action as he deems fit. In pursuance of the above-said Order of Reference, the Full Bench consisting of Abdur Rahman, Mehr Chand Mahajan, S. A. Rahman, Cornelius and Falshaw, JJ., delivered the following judgment: JUDGMENT Cornelius, J. The facts of the case out of which this Letters Patent Appeal arises are as follows. A private company with limited liability known as Messrs. Narain Das and Company Limited went into voluntary liquidation on the 30th July, 1935, and R.B. Narain Das, a member of the company, was appointed the voluntary liquidator. In the course of the liquidation, for the purpose of settlinga claim against the company by a firm in Ferozepore named Messrs. Duni Chand and Company, the liquidator and the Ferozepore Company on the 29th February, 1936, by a writing, re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity [1936] 6 Comp. Cas. 337 . Accordingly, the appeal has been referred to a Bench of five Judges for disposal. In his written statement, R.B. Narain Das did not make a categorical reply to the allegation that he had referred the dispute in question to the arbitration of Seth Jetha Nand. He said vaguely that "some alleged disputes so far as defendant No. 3 remembers were referred to arbitration, but he does not remember the details of reference nor does he remember if the alleged reference was in writing". The position was corrected by a statement of counsel made on his behalf on the 22nd January, 1943, which was clearly to the effect that R.B. Narain Das acting as liquidator had signed the reference. Thus, the only ground upon which the validity of the proceedings before the arbitrator culminating in his award can be challenged is that R.B. Narain Das had no power to refer the dispute to his arbitration on behalf of the Company. The Courts below have relied mainly upon a Single Bench decision of the Allahabad High Court published as In the matter of Dehra Dun Mussoorie Electric Tramway Company Limited ( In Liquidation ) [1928] 50 All. 867 where the question was whether an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt, the Allahabad precedent affords valuable guidance for the decision of the present case. Mr. R.C. Soni for the appellant has attempted to argue that a power to refer disputes affecting a company in voluntary liquidation can be spelled out of the provisions of the Indian Companies Act in favour of the liquidator, and that in any case, such a power must be deemed to vest in the liquidator as incidental to the powers expressly conferred upon him by the Act. In support of the first argument he referred to sections 152, 179, 205 and 207 of the Companies Act. (As the reference was made in 1936, the sections will be considered as they stood prior to the extensive amendment of the Act carried out in 1937). By section 152, a company is given power to refer differences between itself and any other company or person, by written agreement, to arbitration, in accordance with the Indian Arbitration Act, 1899. In sub-section (2), companies are expressly empowered to delegate to the arbitrator power "to settle any terms or determine any matter capable of being lawfully settled or determined by the companies themselves, or by their directors or other managing body." section 205 provides that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the exercise by the directors of corporate powers on behalf of the company, subject to the sanction of the liquidator when a voluntary liquidation is in progress. Now, a liquidator is an agent employed for the purpose of winding-up the business of the company, and an agent can only exercise such powers as are conferred upon him by the principal, or by the statute. The powers of a company in relation to a winding-up are strictly limited by the Act, and do not provide for delegation to, or conferment upon, the liquidator, of any powers by the company. The Act in several sections clearly defines and delimits the powers of a voluntary liquidator, who, by clause ( ii ) of section 207 is to be appointed "for the purpose of winding up the affairs and distributing the assets of the company." The Act nowhere employs language which can be understood to convey to the liquidator plenary powers, co-extensive with those exercisable by the company either before or after the commencement of the winding-up. On the contrary, there are sections, of which section 234 may be particularly mentioned, which clearly provide that in certain very important respects, the liquidator can only act under the au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision whether or not the reference shall be made, rests either with the company, or with their statutory agents for the exercise of their corporate powers, namely the directors. In view of the existence of clear provision in the Act governing the exercise of the right to make references to arbitration it is obviously not permissible to include the right within the general words employed to define the executive and residuary powers of a liquidator in clauses ( d ) and ( i ) of section 179. These words must be construed ejusdum generis with the preceding words in the clauses in which they appear, as well as in the whole section, and when they are so construed, and full effect is given to the absence of express mention of arbitration in the section, and to the fact that in relation to the powers of the company, it is expressly mentioned in section 152, the conclusion cannot be escaped that the relevant power has been withheld from liquidators by the legislature. In support of his argument Mr. Soni referred to Dawsons Bank Ltd. v. Nippon Menkwa Kabuskaki Kaisha (Japan Cotton Trading Co., Ltd.) [1935] 5 Comp. Cas. 191 and In re Farrow's Bank Limited [1921] 2 Ch. D. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pose of the present decision. The argument that a power to refer disputes to arbitration is an incidental power belonging to a liquidator proves on examination to be equally unsound. It should be remembered that the word "incidental" does not imply any casual or fortuitous connection. In a legal sense as applied to powers, it means a power which is subsidiary to that which has been expressed, and of an instrumental nature in relation thereto, which is both necessary and proper for the carrying into execution of the main power which has been expressly conferred. It has been seen already that the Act contains provision reserving to the company the power to make such reference during a voluntary winding-up. There appears to be no principal power vesting in the liquidator of which the execution would be prevented or appreciably hampered if the power of reference were not available. The contention that reference to arbitration provides a very expeditious mode of settling disputes can, in the circumstances, be given no weight; mere expedition in this respect cannot justify excess of his powers by a liquidator. Mr. Soni attempted to draw a parallel between a liquidator in a winding-up a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer in kind from compromise but only in point of method. In a compromise, the parties themselves make "the give and take arrangement"; in an arbitration, this is done by the arbitrator, and it is obvious that the determination of the question how much each party is to give and how much it is to take may frequently be easier for a neutral person than for the contestants themselves. In fact "arbitration" is one of the meanings, according both to general and to law dictionaries, attaching to the word "compromise". For example in Murray's Dictionary, one of the meanings of the word "compromise" is given as under : "To entrust the matter to a person for his decision or award." In Wharton's Law Lexicon, one of the meanings given for the word "compromise" is "a mutual promise by two or more parties at difference to refer the ending of their controversy to arbitrators." Reference may also be made to the well-known authorities which lay down in relation to the word "compromise" as used in Order 23, rule 3, of the Civil Procedure Code, that it includes an award given by an arbitrator upon a reference made to him by the parties in a pending suit, without an order of the Court authorising suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atisfied in relation to the liquidator's action. These points are hardly relevant to the case before us, which relates to a decision by an arbitrator, since here the question is whether the arbitrator had authority to act at all. The matter would have been different if the liquidator had compromised the claim with Messrs. Duni Chand and Company at a certain figure; in that case if the liquidator had not armed himself with authority from the company as required by section 234, before entering into the compromise, it might have been argued on behalf of Messrs. Duni Chand and Company that they could not be prejudiced as the matter of the sanction was one relating to the internal management of the company. But here, the decision of the dispute was referred to an arbitrator and all his proceedings as well as his award depend for their validity as against each of the parties thereto, upon the validity of the reference by either party, and it is clear that the reference on behalf of the company was made by a person who had no power to do so. Therefore, the arbitrator's proceedings were plainly without jurisdiction and his award is without effect. The second case relied upon by Mr. Soni ..... 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