Hanskumar Kishanchand vs The Union Of India (Uoi) on 22 August, 1958

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Not extracted

Decision Date: 22 August, 1958

Coram: Venkatarama Aiyar

In this case, the Court noted that two appeals were filed against a judgment of the High Court of Nagpur, which had been rendered in an appeal under section 19(1)(f) of the Defence of India Act, 1939. The judgment of the High Court was the subject of an appeal that the Supreme Court was now called upon to consider.

The factual background disclosed that, under the authority granted by section 75(A) of the Rules made under the Defence of India Act, the Central Government requisitioned certain properties belonging to Hanskumar Kishanchand on 19 February 1941. Because the parties could not agree on the amount of compensation to be paid for the requisition, the Government referred the matter to Mr. Jafry, who was then the Additional District Judge at Khandwa, invoking the provisions of section 19(1)(b) of the Act. On 31 March 1943, Mr. Jafry issued his award, fixing the annual rent for occupation of the premises at a sum of Rs. 13,000.

The appellant, dissatisfied with that award, filed an appeal to the High Court of Nagpur under the same section 19(1)(f). That appeal was heard by a Bench comprising Chief Justice Grille and Justice Padhye. In their judgment dated 31 December 1947, the Bench increased the annual rent payable by Rs. 3,250 and also granted additional compensation for the displacement of a High School that had been operating on the property.

Subsequently, the appellant sought leave to appeal the High Court’s decision to the Federal Court, invoking sections 109 and 110 of the Code of Civil Procedure with respect to the amounts that had been disallowed. The Government, on the other hand, filed a similar application concerning the enhancement of compensation ordered by the High Court. On 25 August 1949, both applications were allowed, and a certificate was issued confirming that the appeals satisfied the requirements of sections 109 and 110 of the Code of Civil Procedure. Accordingly, two separate appeals were before the Supreme Court: Civil Appeal No. 224 of 1954, filed by Hanskumar Kishanchand, and Civil Appeal No. 225 of 1954, filed by the Union of India.

At the commencement of the hearing, the learned Solicitor General raised a preliminary objection concerning the maintainability of Civil Appeal No. 224 of 1954. He argued that the judgment of the High Court, rendered in the appeal under section 19(1)(f), constituted an award rather than a judgment, decree or order within the meaning of sections 109 and 110 of the Code of Civil Procedure, and therefore the appeal was incompetent. He further contended that if this argument were correct, Civil Appeal No. 225 of 1954, filed by the Government, would likewise be incompetent. Although the objection could be raised by the Government as well, the Court observed that upholding the objection would inevitably lead to the dismissal of both appeals. The Court therefore proceeded to consider the objection on its merits.

The Court first set out the provisions of the Act that were central to the controversy. Section 19(1) states that whenever an action is taken of the kind described in sub-section (2) of section 299 of the Government of India Act, 1935, compensation must be paid and the amount of that compensation shall be determined in the manner and according to the principles that are later specified. Section 19(1)(a) provides that the amount of compensation may be fixed by agreement of the parties. Section 19(1)(b) adds that if the parties cannot reach an agreement, the Central Government shall appoint an arbitrator who must be a person qualified under sub-section (3) of section 220 of the same Act for appointment as a High Court judge. Sub-section (c) of section 19(1) empowers the Central Government to appoint a person possessing expert knowledge of the nature of the property that has been acquired, and that appointed person may nominate an assessor to assist the arbitrator. Sub-section (e) requires the arbitrator, when making his award, to take into account the provisions of sub-section (1) of section 23 of the Land Acquisition Act, 1894, insofar as those provisions can be applied. Sub-section (f) is particularly significant for the present case; it provides that an appeal lies to the High Court against an arbitrator’s award except where the amount of the award does not exceed a limit prescribed by a rule made by the Central Government. Finally, sub-section (g) declares that, save as expressly provided in this section or in any rules made thereunder, no other law then in force shall apply to arbitrations conducted under this section.

On the basis of these statutory provisions, the Government argued that the reference made under section 19(1)(b) and the subsequent appeal under section 19(1)(f) are both parts of arbitration proceedings. Accordingly, the Government maintained that the decision rendered by the High Court in that appeal is, in effect, an award rather than a judgment, decree, or order, and therefore cannot be challenged under sections 109 and 110 of the Code of Civil Procedure, which are limited to judgments, decrees or orders of courts. The appellant’s counsel, while not disputing that the proceedings under section 19(1)(b) are indeed arbitration, contended that once the matter is before the High Court on appeal under section 19(1)(f), it transforms into a civil proceeding within the ordinary jurisdiction of the court. Consequently, any decision of the High Court in that appeal should be subject to further appeal under sections 109 and 110 of the Code of Civil Procedure. The appellant’s counsel also argued that, independent of those sections, the appeal was valid under Clause 29 of the Letter Patent and that the certificate issued by the High Court was granted pursuant to that provision.

Before examining the authorities that each side cited to support its arguments, the Court found it necessary to set out the established legal principles that govern the issue before it. When the parties agree that any dispute between them will be resolved by arbitration, that agreement removes the dispute from the ordinary jurisdiction of the courts and assigns it to a body that is described as a private tribunal. Such an arbitration agreement is not invalidated by section 28 of the Contract Act on the ground that it restrains legal proceedings, because section 21 of the Specific Relief Act explicitly states that, except as provided by the Arbitration Act of 1940, a contract that refers present or future differences to arbitration shall not be specifically enforced; and if a party to such a contract refuses to perform it and then sues concerning a matter that the contract required to be referred to arbitration, the existence of the contract will bar the suit. A comparable provision also exists in section 28 of the Contract Act for situations where the Arbitration Act is not applicable. When an arbitration is conducted under such an agreement and a decision is rendered, that decision replaces the adjudication that would otherwise have been performed by the ordinary courts, and the parties’ rights thereafter are governed by the arbitration award.

The law recognises that courts possess the power to set aside arbitration awards on limited grounds, such as when the award concerns matters not referred to arbitration, when the arbitrators have acted improperly, or when there are obvious errors apparent on the face of the award. However, if no such ground for setting aside the award exists, the court is required to issue a decree in accordance with the award. Section 17 of the Arbitration Act provides that an appeal against that decree is permissible only on the basis that the decree exceeds, or does not conform to, the terms of the award. Consequently, an award that has not been set aside functions as the definitive adjudication binding the parties, and the court’s role is limited to enforcing that award through a decree. This creates a clear distinction between a decision rendered by a court after hearing the merits of a case—constituting a judgment, decree, or order issued in the normal civil jurisdiction and therefore appealable under provisions such as sections 96, 100, 104, 109 and 110 of the Code of Civil Procedure—and a decision that is the formal award of a private tribunal, which merely bears the court’s seal for enforcement purposes.

In this case, the Court explained that when an arbitration award falls within the scope of the reference, the award becomes final and cannot be appealed. The same legal principle applies when the reference to arbitration arises not from an agreement between the parties but from a statutory provision, because the statute removes the dispute from the ordinary court’s jurisdiction and places it before a private tribunal. The decision of that tribunal is an award and it enjoys the same status as an award made under a party agreement. For this reason section 46 of the Arbitration Act of 1940 provides that, except for sub-section (1) of section 6 and sections 7, 12, 36 and 37, the provisions of the Act apply to every arbitration under any other enactment in force, as if the arbitration were based on an agreement and as if that other enactment were an arbitration agreement, unless the Act conflicts with that enactment or with any rules made under it. The Court further noted that it makes no difference that a statute may designate a Court to act as arbitrator. In such a situation the Court hears the matter not as a regular civil court but as a persona designata, and its decision is an award that is not subject to appeal under the ordinary law governing court decisions. However, a statute might provide that a Court decides a dispute as a Court, in which case the decision is a decree or order issued in its ordinary civil jurisdiction and therefore follows the normal procedural rules, including the right of appeal. Consequently, where the reference is to a Court as persona designata, the decision is not appealable unless the statute expressly provides otherwise; whereas where the reference is to the Court as a Court, the decision is appealable under general law unless the statute limits that right. The Court observed that it may sometimes be necessary to determine whether a statutory reference is to a Court as a Court or as a persona designata, but once it is established that the reference is to a Court as persona designata, the decision cannot be appealed under ordinary law. The Court then turned to the authorities relevant to this issue, citing several cases relied upon by the Government to support the view that the present appeals were incompetent.

In support of the view that the appeals presently before it were incompetent, the Court referred to a series of earlier decisions. These included the cases of Rangoon Botatoung Company v. The Collector, Rangoon ([1912] L.R. 39 I.A. 197), The Special Officer, Salsette Building Sites v. Dossabhai Bezonji ([1912] I.L.R. 37 Bom. 506), The Special Officer, Salsette Building Sites v. Dossabhai Bozanji Motiwala ([1913] 17 C.W.N. 421), Manavikraman Tirumalpad v. The Collector of the Nilgris ([1918] I.L.R. 41 Mad. 943) and Secretary of State for India in Council v. Hindusthan Co-operative Insurance Society Limited ([1931] L.R. 58 I.A. 259). In the Rangoon Botatoung case the facts were that certain lands had been acquired under the Land Acquisition Act of 1894 and the Collector had fixed the amount of compensation payable to the former owners. The owners objected to the quantum of compensation and the matter was referred to the Chief Court of Burma, where a bench of two judges awarded Rs 13,25,720 as compensation. Dissatisfied with that award, the owners filed an appeal to the Privy Council under the provisions of the Code of Civil Procedure. A preliminary objection was raised that the decision sought to be appealed was not a judgment of a court but an award, and therefore could not be taken to the Privy Council. In rejecting that objection the Board observed: “Their Lordships cannot accept the argument or suggestion that when once the claimant is admitted to the High Court he has all the rights of an ordinary suitor, including the right to carry an award made in an arbitration as to the value of land taken for public purposes up to this Board as if it were a decree of the High Court made in the course of its ordinary jurisdiction.”

Shortly after that judgment, the question arose in The Special Officer, Salsette Building Sites v. Dossabhai Bezonji ([1912] I.L.R. 37 Bom. 506) whether a decision rendered by the High Court on appeal under section 54 of the Land Acquisition Act constituted a judgment within clause 39 of the Letters Patent, thereby permitting an appeal to the Privy Council. The applicant attempted to distinguish the Rangoon Botatoung case on the ground that there the appeal was against a decision of the Chief Court of Burma and the maintainability issue was decided under the Code of Civil Procedure, whereas in the present case the right of appeal was claimed under clause 39 of the Letters Patent. The High Court rejected this distinction and again relied on the earlier observation from the Rangoon Botatoung case, stating: “This passage shows that it is a mistake to suppose that the award made in such a case by the High Court is a decree within the ordinary jurisdiction to which the Civil Procedure Code refers; and it seems to me it would be equally erroneous to regard such an award as a final judgment or order within the meaning of clause 39 of the Letters Patent.” Consequently, leave to appeal to the Privy Council was denied, and a subsequent application for special leave was also refused. The report of the Privy Council proceedings in The Special Officer, Salsette Building Sites v. Dossabhai Basenji Motiwala ([1913] 17 C.W.N. 421) confirmed that the Bombay High Court’s interpretation had been accepted as correct. Finally, in Manavikraman Tirumalpad v. The Collector of the Nilgris ([1918] I.L.R. 41 Mad. 943) the Court examined whether a High Court judgment on appeal under the Land Acquisition Act fell within the meaning of clause 15 of the Letters Patent for the purpose of a further appeal, and held, after considering the authorities already discussed, that it did not constitute such a judgment.

The Court observed that the leave to appeal to the Privy Council under clause 39 of the Letters Patent had been denied. An application for special leave to the Privy Council in the same matter was also refused. The report of the proceedings before the Privy Council in The Special Officer, Salsette Building Sites v. Dossabhai Basenji Motiwala (1913 17 C.W.N. 421) confirmed that the interpretation advanced by the Bombay High Court in The Special Officer, Salsette Building Sites v. Dossabhai Bezonji (1912 I.L.R. 37 Bom. 506) was accepted as correct. In the later case of Manavikraman Tirumalpad v. The Collector of the Nilgris (1918 I.L.R. 41 Mad. 943), the question arose whether a judgment of the High Court rendered in an appeal under the Land Acquisition Act constituted a judgment within the meaning of clause 15 of the Letters Patent, and therefore entitled a party to lodge a further appeal to the High Court under that clause. After examining the authorities previously mentioned, the Court held that such a High Court decision was not a judgment within the meaning of clause 15 and could not be appealed further. The Court then considered Secretary of State for India in Council v. Hindusthan Co-operative Insurance Society Limited (1931 L.R. 58 I.A. 259), a decision arising under the Calcutta Improvement Act, 1911. That Act created a tribunal to assess compensation payable on land acquisition, and the Calcutta Improvement (Appeals) Act, 1911 provided an appeal from the tribunal’s award to the Calcutta High Court. The issue before the Privy Council was whether the High Court’s decision on such an appeal could be taken to the Privy Council. The Privy Council answered in the negative, relying on the earlier Rangoon Botatoung decision, and held that there was no right of appeal against the High Court’s decision. It further explained that the amendment to the Land Acquisition Act, 1921 which introduced a Privy Council appeal under section 54 did not affect this conclusion, because that amendment had not been incorporated by reference into the Calcutta Improvement Act, 1911.

The Court therefore summed up the law emerging from the preceding authorities. It explained that not every order issued by a court may be described as a judgment, decree or order within the scope of the Code of Civil Procedure or the Letters Patent. Whether an order falls within those categories depends on whether the matter was presented to the court in the ordinary course of its civil jurisdiction or whether the court was called upon to act as a “persona designata.” When a dispute is referred to the court for determination by arbitration, as in Rangoon Botatoung Company v. The Collector, Rangoon (1912 L.R. 39 I.A. 197), or when the matter comes before the court as an appeal against an award, as in The Special Officer, Salsette Building Sites v. Dossabhai Bezonji, Manavikraman Tirumalpad v. The Collector of the Nilgris, and Secretary of State for India in Council v. Hindusthan Co-operative Insurance Society Limited, the decision rendered is not to be treated as a judgment, decree or order under either the Code of Civil Procedure or the Letters Patent. Consequently, such decisions do not give rise to a further right of appeal under the provisions of the Letters Patent or the Code of Civil Procedure.

When a dispute is expressly characterized as an award, as demonstrated in The Special Officer, Salsette Building Sites v. Dossabhai Bezonji ([1912] I.L.R. 37 Bom. 506), Manavikraman Tirumalpad v. The Collector of the Nilgris ([1918] I.L.R. 41 Mad. 943) and Secretary of State for India in Council v. Hindusthan Co-operative Insurance Society Limited ([1931] L.R. 58 I.A. 259), the resultant decision does not fall within the meaning of a judgment, decree or order under either the Code of Civil Procedure or the Letters Patent. The court therefore treated such determinations as distinct from ordinary civil judgments, emphasizing that their procedural origin lies outside the regular civil jurisdiction and that they cannot be appealed in the same manner as a decree or order issued by a court exercising its ordinary civil powers. This principle was reiterated to clarify that the nature of the decision, being an award, precludes it from acquiring the status of a judgment or decree, and consequently the statutory mechanisms of appeal that apply to judgments do not attach to it.

Mr Achhru Ram challenged this proposition and relied heavily on the authority of National Telephone Company Limited v. Postmaster General ([1913] A.C. 546) to support his position. The issue in that case concerned the construction of the Telegraph (Arbitration) Act, 1909. Section 1 of the Act provided that any dispute between the Postmaster-General and another person, if the parties consented, could be referred for decision to the Railway and Canal Commission, which had been constituted under an Act of 1888. Section 2 stipulated that all inquiries arising from such a reference were to be conducted by the Commission in accordance with the 1888 Act. After a reference was made under these provisions, the Railway and Canal Commission rendered determinations, and the question arose whether those determinations were amenable to appeal. Under the 1888 Act, the Commission was designated a court of record, and an appeal from its decision lay to the Court of Appeal, limited to questions of fact and locus standi. The House of Lords held that, because the 1888 Act treated the Commission as a court, the reference made under the Telegraph (Arbitration) Act, 1909 must similarly be regarded as a reference to a court rather than to a body of arbitrators, thereby rendering an appeal permissible. Viscount Haldane LC expressed the principle thus: “When a question is stated to be referred to an established court without more, it, in my opinion, imports that the ordinary incidents of the procedure of that court are to attach, and also that any general right of appeal from its decision likewise attaches.” It is important to note that the use of the word “arbitration” in the title of the 1909 Act was the basis for the contention that the Commission’s proceedings were arbitrative. However, that description did not alter the substantive character of the reference, which remained a reference to the Commission as a court of record. In reality, no element of arbitration was present in the proceedings. Although the Act allowed a reference only by agreement of the parties, such agreement did not change the nature of the proceedings, just as a statute may provide that a court’s jurisdiction be invoked by consent of the parties, for example in cases falling under Order 36 of the Code of Civil Procedure.

In discussing the applicable law on appeals from decisions rendered by a body that is described as an arbitrator, the Court observed that there is nothing in the authority of National Telephone Company Limited v. Postmaster General ([1913] A.C. 546) that conflicts with the principle articulated in Rangoon Botatoung Company v. The Collector, Rangoon ([1912] L.R. 39 I.A. 197). That principle states that when a statute refers to a court acting as an arbitrator, the decision of that court is not open to appeal. The Court then turned to the Privy Council decision in Secretary of State for India v. Chelikani Rama Rao ([1916] L.R. 43 I.A. 192) to underline the distinction between two categories of cases: those in which the reference is to a court functioning as a court, and those in which the reference is to the same body functioning as an arbitrator. In the Chelikani Rama Rao case, the dispute arose under certain provisions of the Madras Forest Act, 1882, which required that claims concerning lands proposed to be declared reserved forests be investigated by the Forest Settlement Officer, with a statutory right of appeal from the officer’s decision to the District Court. The issue before the Privy Council was whether the District Court’s decision could be further appealed under the Code of Civil Procedure. The appellant argued that the reference to the District Court under the Forest Act was intended to make the court act as an arbitrator, and therefore, according to the rule set out in Rangoon Botatoung Company, the decision should not be appealable. Lord Shaw rejected this argument, noting that although the Land Acquisition Act designates its proceedings as “from beginning to end ostensibly and actually arbitration proceedings,” the proceedings created by the Forest Act were of a fundamentally different nature. He explained that the claim involved an assertion of a legal right to possession and ownership of land, and that when ordinary courts are called upon to resolve such a dispute, a specific statutory limitation would be required to exclude the ordinary incidents of litigation. Having clarified these settled principles, the Court examined whether, in the present matter, an appeal to the High Court under section 19(1)(f) of the governing Act should be regarded as an appeal from a court acting as a court or as an appeal from an arbitrator. Section 19(1)(b) expressly designates the reference to an arbitrator, and the statute does not require that the arbitrator be a judge of a court; it is sufficient that the person be qualified to be appointed a Judge of the High Court. Consequently, under existing law no appeal lies to the High Court from the decision of such an arbitrator. Therefore, the appellate provisions in section 19(1)(f) must be interpreted as referring to the High Court’s jurisdiction over an authority designated as an arbitrator rather than over a traditional court. The fact that, in the present proceedings, the reference was made to a District Judge does not alter this analysis. Moreover, the decision of the arbitrator appointed under section 19(1)(b) is expressly described in section 19(1)(f) as an “award.” The Court emphasized that an appeal is essentially a continuation of the original proceedings, and when the underlying proceedings are arbitration, the appellate review remains part of the same arbitration process.

It was observed that an appeal constituted a continuation of the original proceedings, and when the proceedings created by section 19(1)(b) were arbitration proceedings, their nature could not be altered simply by being presented before an appellate tribunal. The Court cited the earlier decisions in The Special Officer, Salsette Building Sites v. Dossabhai Bezonji, The Special Officer, Salsette Buildings’ Sites v. Dossabhai Basanji Motiwala [(1913) 17 C.W.N. 421], Manavikaraman Tirumalpad v. The Collector of the Nilgris [(1918) I.L.R. 41 Mad. 943] and Secretary of State for India in Council v. Hindusthan Co-operative Insurance Society Limited [(1931) L.R. 58 I.A. 259] to support the view that an appeal against an award remained part of, and was a further stage of, the original arbitration proceedings. Accordingly, the Court held that any proceeding that began as arbitration retained its character as arbitration even when taken up on appeal, provided that the statute permitted such an appeal.

The question of whether an appeal under section 19(1)(f) was itself an arbitration proceeding, and whether the decision rendered therein qualified as an award, was directly considered in Kollegal Silk Filatures Ltd. v. Province of Madras [(1948) I.L.R. Mad. 490]. In that case, a bench of the Madras High Court consisting of Patanjali Sastri and Chandrasekhara Aiyar JJ. had held that the term “arbitration” in section 19(1)(g) covered the entire process from its commencement before an arbitrator to its termination in the High Court on appeal, and that the High Court, while hearing and deciding the appeal, functioned essentially as an arbitration tribunal. The present Court agreed with that reasoning and concluded that an appeal under section 19(1)(f) was an arbitration proceeding. Consequently, the decision of the High Court on such an appeal was not a judgment, decree or order within the meaning of sections 109 and 110 of the Code of Civil Procedure or clause 29 of the Letters Patent of the Nagpur High Court (which corresponds to clause 39 of the Letters Patent of the Calcutta, Madras and Bombay High Courts). On that basis, the Court held that the present appeals were incompetent. The petitioner, Mr Achhru Ram, thereafter contended that even if no appeal lay under sections 109 and 110 of the Code of Civil Procedure or clause 29 of the Letters Patent, the Court still possessed the jurisdiction to grant leave to appeal, arguing that the Privy Council had authority to grant such leave against a Nagpur High Court decision in an appeal under section 19(1)(f). He further argued that section 3(a)(ii) of the Federal Court (Enlargement of Jurisdiction) Act I of 1948 had transferred that power to the Federal Court, and that under Article 135 the authority now rested with this Court, which therefore should grant leave to appeal. The Court found that the Federal Court’s power under section 3(a)(ii) applied only where the proposed appeal was against a “judgment,” which under the definition in section 2(b) meant a judgment, decree or order of a High Court in a civil case. Since the decision in the appeal under section 19(1)(f) was an award and not a judgment, decree or order, no order could be passed granting special leave under section 3(a)(ii). Accordingly, the Court dismissed both appeals as incompetent, ordered each party to bear its own costs, and entered the final order that the appeals were dismissed.

The Court considered the submissions that the Federal Court possessed authority, under section 3(a)(ii), to grant special leave of appeal only when the intended appeal was directed against a judgment. In interpreting that provision, the Court referred to the definition contained in section 2(b), which characterises a “judgment” as a judgment, decree, or order issued by a High Court in the course of a civil proceeding. Accordingly, the Court held that the power to grant leave could be exercised solely in those circumstances where the adverse instrument fell within the meaning of a judgment, decree, or order as defined. The Court then turned to the specific matter before it, namely the decision rendered in the appeal filed under section 19(1)(f). After careful analysis, the Court concluded that this decision did not constitute a judgment, decree, or order; rather, it was an award. Because the instrument was an award and not a judgment within the meaning of section 2(b), the Court determined that no order granting special leave could have been issued under section 3(a)(ii). Consequently, the Court found that the appeals were not maintainable and were therefore incompetent. As a result, the Court dismissed both appeals. It further directed that each party bear its own costs in the proceedings before this Court, and the dismissals were entered as final orders.