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Judgment
K.P. Radhakrishna Menon, J.—The plaintiff in OS. 107/78 in the court of the Principal Sub Judge Palghat is the revision petitioner. The suit, instituted u/s 20 of the Arbitration Act, is for an order directing the defendant to file the agreement, containing the arbitration clause, entered into between the plaintiff and the defendant, in court for the purpose of referring the dispute to an arbitrator who will be appointed by the court. The defendant, instead of responding to the notice ordered in the suit, filed O.S. 130/78, wherein he had prayed that under the contract, amounts are due to him and since the plaintiff-petitioner failed to pay the said amounts despite notice, a decree be passed against the plaintiff. In the said suit the petitioner-plaintiff filed an application u/s 34 of the Arbitration Act The court below as also this court rejected the said application. Thereafter the court below has ordered joint trial of the suits; O.S. 107/78 and O.S. 130/78.
According to the petitioner-plaintiff, his suit would become in fructuous unless the reliefs prayed for therein are substituted by the reliefs made mention of in the petition filed by it under Order VI Rule 17 C.P.C. In the petition for amendment, the plaintiff has specifically stated that the prayer for appointment of the arbitrator has become In fructuous in view of the judgment in M. F. A. 661/80 of this court, confirming the order of the Subordinate Court rejecting its application u/s 34 Arbitration Act, seeking stay of the suit, O.S. 130/78. The plaintiff submits that in the changed circumstance, brought about by the above judgment of this court, the Subordinate Court, inasmuch as it has sensing of the matter, ought have to proceeded to adjudicate upon the matter sought to be referred to arbitrator. The petitioner-plaintiff however, can have this remedy only by amending the pleadings and incorporating the reliefs made mention of in the application in the place of the original reliefs.
The defendant opposed the amendment. He contended that the amendment if allowed, would change the character of the suit. He also contended that the dispute arising for consideration in the suit, the pleadings of which are sought to be amended, has nothing to do with the claim projected by him in O.S. 130/78. A dispute which is to be adjudicated upon by the arbitrator cannot be converted into a claim for recovery of damages in a suit, he submits. A suit for recovery of damages is already time barred and therefore the amendment sought for is liable to be rejected.
The court below after considering the various aspects of the conflicting contentions of the parties, has dismissed the petition for amendment and it is the said order that is under challenge in this revision.
The question arising for consideration is this; whether the amendment sought for can be allowed. This question, apparently simple, can however be answered only if we understand the nature of the courts'' jurisdiction under the law of arbitration. The law of Arbitration is primarily concerned with the questions whether the Court has jurisdiction to compel a party to arbitrate in accordance with the terms of the arbitration clause in a contract and honor the resulting award, whether the court can intervene to remedy injustice resulting from defects in the conduct of the proceedings by the arbitrator and so on. Here we are concerned only with an aspect covered by the second question, which, to put it specifically is; has the civil court the jurisdiction itself to enquire into the merits of a dispute which was sought to be referred to arbitrator but could not, due to supervening circumstances. Now coming to the legal aspects: Jurisprudentially speaking an arbitrator is only a delegate of judicial powers which essentially are the property of the State. It is only a court which represents the judicial power, namely the power by which every State must of necessity have to decide controversies between its citizens or, between itself and its citizens, whether the rights relate to life, liberty or property. (See Shell Co. Vs. Fed. Commissioners (1931 A.C. 275). One of the attributes of a court is the judex, or the judicial power, for the purpose of examining the truth of the fact alleged by the parties namely the plaintiff and the defendant and to determine the law arising upon that fact, and if any injury appears to have been done, to ascertain, and by its officers to apply, the remedy. (See Stephen, quoted in Brajnandan Sinha Vs. Jyoti Narain, . In short the courts are repositories of judicial powers, subject to the divesting of the power by the State, the proprietor of this power. Here comes the relevance of the law of arbitration which is mainly procedural in content.
The modern rules of arbitration, have made it possible for the court to have the dispute arising under a contract between citizens, between instrumentalities of State and Citizen and so on referred to arbitrator for decision in terms of the arbitration clause. In such cases there is what is called a renunciation of the jurisdiction by the court, competent to decide the dispute. But this renunciation is only provisional. Until a valid award is passed, the court retains its jurisdiction, which, on the arbitration being proved abortive will be survived, enabling the court to hear and decide the dispute on merits. I am fortified in this view by the ruling of the House of Lords in Hamlyn & Co., v. Talisker Distillery (1894 A.C. 202). The House of Lords observed:-
The jurisdiction of the Court is not wholly ousted by such a contract��.. Should the arbitration, from any cause, prove abortive the full jurisdiction of the court will survive, to the extent of enabling it to hear and determine the action up to its merits.
The jurisdiction of a court to decide the dispute arising out of a contract which contains an arbitration clause thus is not ousted merely because the parties have contracted to refer the said dispute to arbitration.
It is in recognition of this common law principle, in my judgment, the legislature enacted Sections 25, 34 and 35 (to mention only few of them) of the Arbitration Act. The proviso to Section 25 provides that the court may in any of the circumstances mentioned in Sections 8, 10, 11 and 12, instead of filling up the vacancies or directing the appointments, make an order superseding the arbitration and proceed with the suit, and where the court makes an order superseding the arbitration u/s 19 it shall proceed with the suit. Construing Section 34 courts have-consistently been holding that if neither party to the contract wants to have recourse to arbitration in terms of the arbitration clause, the ordinary civil courts can resume the powers suspended provisionally and decide the dispute on merits.
It is therefore clear from the scheme of the Arbitration Act that, should the arbitration, from any cause, either proves abortive or becomes impracticable, the powers of the court will revive and thereafter it is by its decision and by its decision alone, the rights of the parties are settled (See Russell on Arbitration) In short it is not only the privilege of the court but it is its duty also "to come to the assistance of the parties by the removal of the impasse and the extrication of their rights". (See the decision of the Privy Council in Cameron Vs. Cuddy, 1914 A.C. 651).
The Privy Council in Cameron has observed thus:-
When an arbitration for any reason becomes abortive, it is the duty of a Court of law, in working out a contract of which such an arbitration is part of the practical machinery, to supply the defect which has occurred. It is the privilege of a Court in such circumstances and it is its duty to come to the assistance of parties by the removal of the impasse and the extrication of their rights. This rule is in truth founded upon the soundest principle, it is practical in its character, and it furnishes by an appeal to a Court of Justice the means of working out and of preventing the defeat of bargains between parties".
(emphasis supplied).
Having understood the role, the court has to play under the Arbitration law thus, let us try to get the answer to the question, whether the amendment sought for could be allowed? It is clear from the facts available on record that the arbitration has become abortive in view of the judgment of this court dismissing the application of the petitioner u/s 34 of the Arbitration Act for slay of the suit, O.S 130/78. The reliefs sought for in O.S. 107/78 therefore have become impossible to be granted. The dispute sought to be referred and high-lighted in the suit instituted by the petitioner is intimately connected with the dispute arising for consideration in the suit (OS 130/78) instituted by the defendant. The amount claimed by the petitioner in OS 107/78 cannot now be put as a counter claim in the suit instituted by the respondent because of certain legal impediments. The suit, OS. 107/78 instituted by the plaintiff contains all the particulars that should contain in a regular suit. Whether the suit is one u/s 20 or a regular suit the cause of action is the same. The difference between a suit filed u/s 20 and a regular suit is only in regard to the reliefs prayed for In a suit u/s 20 the relief prayed for is that the claim be referred for the decision of the arbitrator whereas in the regular suit, the prayer is that a decree for the claim be passed. The suit u/s 20 in my view, is in the nature of a regular suit. A similar view has been expressed by Mehta, J of the Gujarat High Court. (See M/s. Korthari & Associates. Baroda Vs. State, AIR. 1985 Gujarat 42). Here the learned Judge was considering the question whether Order 2 Rule 2 and 3 would apply to proceedings u/s 20 of The Arbitration Act. The learned Judge after considering the various aspects of the question held thus:-
The claim before the arbitrator is clearly in the nature of a suit and instead of a Civil Court adjudicating upon the claim a separate form of arbitrator adjudicates upon the same claim.
Observing thus the learned Judge held that Order 2 Rule 3 enables the plaintiff in a suit u/s 20 "to include and unite in the same claim several causes of action against the defendant", While holding so the learned Judge dissented from the contra views expressed Brijlal Jagannath Vs. Allah Ditta (A.I.R. 1925 S nd 242), Bal Mukund Vs. Gopiram (A.I.R. 1924 Cal 808 (2)), Kerorimal v. Union of India (A. 1. R. 1964 Cal 545), and Alkarma Vs. Delhi Development Authority, ; but relied on Jiwnani Engineering Works Pvt. Ltd. Vs. Union of India (UOI), and Munshi Ram v. Ranwarilal ( AIR 1962 S. C. 503). With respect I agree with the views expressed by the learned Judge. It should id this connection be remembered that Order VI Rule 17 C. P. C. granting power of amendment to courts, was enacted with the object of doing full justice to the parties to litigations and not to punish them. Order VI Rule 17 thus is a special provision of completes wisdom That the principle that not only this provision but the CPC in its entirety, would apply to arbitration proceedings, no more can be doubted in view of the decision of the Supreme Court in Hakam Sing Vs. Gammon (India) Ltd., . The Supreme Court has seated that ''The CPC in its entirety applies to the proceedings under The Arbitration Act". (See also Section 41 of The Arbitration Act). Amendment sought for by the petitioner therefore requires to be granted. It is all the more so because by allowing the amendment, the court. as observed by lord Show of Dunfermline in re Cameron, would come to the assistance of the petitioner/plaintiff by the removal of the impasse and the extrication of their rights''.
The respondent, however, has opposed the amendment It has therefore become necessary to recapitulate the principles governing the subject. There are some well established, principles and they are; All amendments generally are permissible especially when they are necessary for determination of the real controversy in the suit. But at the same time substitution of one cause of action or the nature of the claim for another in the original plaint or change of the subject-matter of or controversy in the suit is not permissible especially when the new cause of action is barred. Similarly introduction by amendment of inconsistent or contradictory allegations which would set at naught the admitted position of facts or mutually destructive allegations of facts are also impermissible although inconsistent pleas on the admitted position can be allowed by way of amendment. To put it pithy the amendment shall not cause prejudice to the other side which cannot be compensated in terms of costs. The Supreme Court in A.K. Gupta & sons vs. Damodar Valley Corpn. (AIR. 1967 S C. 96), has observed:
Amendment of a claim or relief which is barred by limitation when the amendment is sought to be made should not be allowed to defeat a legal right accrued except when such consideration in outweighed by the special circumstances of the case.
In Shikharchand Jain Vs. Digamber Jain Praband Karini Sabha and Others, the Supreme Court has held thus:-
It is open to a Court (including a court of appeal) to take notice of event which have happened after the institution of the suit and afford relief to the parties in the changed circumstances where it is shown that the relief claimed originally has (J) by reason of subsequent change of circumstances become inappropriate, or (2) where it is necessary to take notice of the changed circumstances in order to shorten the litigation, or (3) to do complete justice between the parties''.
(emphasis supplied)
See also A.K. Gupta and Sons Vs. Damodar Valley Corporation, , and Pirgonda Hongonda Patil Vs. Kalgonda Shidgonda Patil and Others, .
In the decision in Shanti Kumar R. Canji Vs. The Home Insurance Co. of New York, the Supreme Court laid down that "In exceptional cases an amendment has been allowed where the effect is to take away from a defendant a legal right which has accrued to him by lapse of time, because the court found that consideration of lapse of time is outweighed by the special circumstances of the case".
Applying these principles to the facts of the case, in my judgment, the amendment sought for ought to have been allowed by the court below. It is all the more so because it is not the case of the respondent-defendant that the cause of action will be changed; for that matter the respondent cannot contend for that position. It cannot also therefore be said that by allowing the amendment the plaintiff is allowed to agitate a cause barred by limitation. It is relevant in this context to bestow our attention on the indisputable fact that the defendant/respondent by filing O.S. 130/78 has proclaimed that he has no intention to honour the arbitration clause in the contract. This attitude of the respondent/defendant in regard to the arbitration clause has been approved by this court by dismissing the appeal, the petitioner had filed challenging the order of the court below dismissing its application u/s 34 of The Arbitration Act.
To sustain its plea that the amendment would change the character of the suit, the defendant-respondent relied on a decision of the Delhi High Court in Sheel Chandra Vs. Central Bank of India, . On a reading of the ruling it is clear that the learned Judge had no occasion to consider the principles of law stated above, which according to me clinch the issue, before the learned Judge held that an ''application seeking conversion of arbitration proceedings into a regular suit, is not maintainable in law. With respect, I cannot agree with this view.
The amendment sought for, in my view, can in any event, be allowed by the court invoking the inherent power recognised u/s 151 C. P. C. The facts already stated would show that unless the amendment is allowed, the petitioner (plaintiff) would suffer irreparable damages and injury. As observed by the Supreme Court "the courts have power, in the, absence of any express or implied prohibition to pass an order as may be necessary for the ends of justice or. to prevent the abuse of the process of the court. To hold otherwise would result in quite a number of cases a gross miscarriage of justice". ( Jaipur Mineral Development Syndicate, Jaipur Vs. The Commissioner of Income Tax, New Delhi, ), It should in this connection be remembered that the provisions of the Code are not exhaustive for the simple reason that the legislature is incapable of contemplating all the possible circumstances which may arise in future litigation and consequently providing the procedure for them (See Manohar Lal Chopra Vs. Rai Bahadur Rao Raja Seth Hiralal, ) The court therefore could order the amendment in exercise of its inherent power recognised u/s 151 provided the following conditions are satisfied: (!) the amendment, if not allowed, would result in gross miscarriage of justice, (2) there does not exist any express or implied prohibition to order the amendment, (3) the circumstances highlighted by the facts do not bring it within the prescribed rule and (4) will not defeat a legal right accrued (to the opposite party) by lapse of time except when such consideration is outweighed by the special circumstances of the case. All these conditions, in my judgment, are satisfied here and therefore the amendment requires to be allowed. In this connection it is worth noting that there is. nothing in the Code prohibiting the issue of an order allowing amendment of the pleadings in circumstances not covered by Order VI Rule 17. A civil court therefore has ample jurisdiction to deal with and dispose of an amendment application in the exercise of the inherent jurisdiction recognised u/s 151 C.P.C. The amendment sought tor, therefore ought to have been allowed by the court below, at least in the exercise of inherent jurisdiction. The petition, I. A. 885/86 is allowed. The court below shall pass appropriate orders enabling the plaintiff to carry out the amendment. The court below is further directed to dispose of the suits, O.S. No. 107 and 130 of 1978 as expeditiously as possible, in any event within four months from the date of receipt of a copy of the order.
The C.R.P. is allowed in the manner indicated above. There will be no order as to costs.