Ct. A. Ct. Nachiappa Chettiar And Others vs Ct. A. Ct. Subramaniam Chettiar

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

Court: Supreme Court of India

Case Number: Civil Appeals Nos. 112 to 116 of 55

Decision Date: 13 November 1959

Coram: P.B. Gajendragadkar, J.C. Shah

In this case, the Supreme Court of India rendered its judgment on 13 November 1959. The judgment was authored by Justice P.B. Gajendragadkar and the bench was composed of Justice P.B. Gajendragadkar, Justice K. Subbarao and Justice J.C. Shah. The petitioners were C.T. A. C.T. Nachiappa Chettiar and several others, while the respondent was C.T. A. C.T. Subramaniam Chettiar. The decision is reported in 1960 AIR 307 and 1960 SCR (2) 209, and it has been subsequently cited in a number of later reports. The dispute arose out of a suit for partition of joint family properties that had been filed by the respondent against his brother and the brother’s sons, who are listed as appellants 1 to 5. The respondents, while acknowledging the relationship to the plaintiff and accepting a half‑share in the family assets, contended that the court lacked jurisdiction to divide the immovable properties situated in Burma and in the Indian State of Pudukottai. The trial court therefore issued a preliminary decree that expressly excluded those immovable properties from its operation. Multiple appeals against the preliminary decree were lodged before the High Court on various grounds; however, the respondent did not contest the trial court’s finding that it had no jurisdiction over foreign immovable property. During the pendency of those appeals, the parties jointly applied for arbitration, and the trial court consequently issued an order referring “all the matters in dispute in the suit and all matters and proceedings connected therewith” to two arbitrators appointed by the parties. The arbitrators subsequently rendered an award, which was filed in the trial court. Concerning the Pudukottai property, the award stated that because the parties had separated, the two branches would each enjoy an equal half of the Pudukottai assets. Regarding the Burma property, the arbitrators directed the parties to hold the title documents together, each retaining half for safekeeping, and instructed that when a final division of the property occurred, the documents should be assembled and a partition made in accordance with legal principles. The appellant challenged the validity of this award on two principal grounds: first, that the reference and the award improperly dealt with immovable properties located in Burma and Pudukottai, rendering them invalid; and second, that the trial court lacked the competence to make a reference under section 21 of the Indian Arbitration Act, 1940. The Court held that (1) that

The Court held that the reference to arbitration and the award could not be attacked on the ground that they dealt with foreign immovable property. The reason was that, at the time the dispute was referred, the trial court had already found that it lacked jurisdiction to adjudicate foreign immovable property. Further, the award did not actually divide the foreign property or fix the parties’ shares, but only recited that the parties, having separated, would each hold half. The Court distinguished a mere factual recital from an act that creates a title, relying on Bageshwari Charan Singh v. Jagarnath Kuari, (1932) L.R. 53 I.A. 130. The Court also clarified that the expressions “suit” and “court” in section 20 of the Indian Arbitration Act, 1940, are to be understood as including appellate court proceedings and the appellate court itself. In that respect, the decision in Abani Bhusan Chakravarthy and Others v. Hem Chandra Chakravarthy and Others, A.I.R. 1947 Cal. 93, was disapproved, whereas the decisions in Thakur Prasad v. Baleshwar Ahir and Others, A.I.R. 1954 Pat. 106; Moradhwaj v. Bhudar Das, A.I.R. 1955 All. 353; and Subramannaya Bhatta v. Devadas Nayak and Others, A.I.R. 1955 Mad. 693, were approved. The Court further explained that the term “judgment” in section 21 of the Act refers to a judgment that finally decides all matters in controversy in the suit, and does not include the various interlocutory orders or judgments that may be passed during the hearing. Consequently, a judgment delivered in a partition suit that is followed by a preliminary decree does not constitute a final judgment, and the court retains jurisdiction to make an order of reference under section 21 after the preliminary decree has been passed. This principle was supported by the authority of Jadu Nath Roy and Others v. Paramesway Mullick and Others, (1939) L.R. 67 I.A. 11. The Court further observed that when a preliminary decree has been prepared and an appeal filed against it, both the trial court and the appellate court possess part of the matters in dispute, and either court may issue a reference order covering all disputed matters. In the present case, because proceedings subsequent to the preliminary decree remained before the trial court, the trial court was competent to act under section 21 of the Act. Accordingly, the Court entered its judgment in the civil appellate jurisdiction, addressing Civil Appeals Nos. 112 to 116 of 55, which were appeals from the judgment and order dated 14 December 1951 of the Madras High Court in AAO 210 of 1946, AAO 661 of 1946, and AAO 49 of 1947, arising out of the judgment and order dated 28 January 1946 of the Subordinate Judge, Devakottai, in A. No. 18 of 1945 in O.S. No. 91 of 1941.

A. V. Viswanatha Sastri, K. Parasaran and M. S. K. Aiyangar appeared on behalf of the appellants, while K. Rajah Iyer, R. Rangachari and R. Ganapathy Iyer represented the respondent. The judgment was delivered on 13 November 1959 by Justice Gajendragadkar. The five appeals before this Court originated from a partition suit, original suit number 91 of 1941, which was filed by the respondent, Subramanian Chettiar, against his brother, the late Ct. A. Ct. Nachiyappa Chettiar, and the latter’s four sons, who are designated as appellants 1 through 5. The suit was originally instituted in the Court of the Subordinate Judge of Devakottai and was subsequently taken to this Court after the High Court of Madras granted a certificate of appeal under Article 133 of the Constitution.

The principal appeal among the group is Civil Appeal No. 112 of 1955. The principal question presented for determination is whether the award rendered by the arbitrators, to whom the parties’ disputed matters were referred during the pendency of the litigation, is valid. Before addressing that issue, it is helpful to set out the material facts that gave rise to the suit and to explain the origin and character of each of the five appeals.

The parties belong to the Nattukottai Chettiar community, an affluent mercantile family that operated an extensive money‑lending business in Burma. The patriarch, Chidambaram Chettiar, who was the father of both appellant 1 and the respondent, died on 20 August 1926. At the time of his death the respondent was a six‑year‑old child. Appellant 1 had already been involved in the family business alongside his father, and upon his father’s death he assumed the role of manager, taking charge of the family’s affairs and commercial activities.

On 6 September 1941 the respondent served a notice on appellant 1 demanding that a partition of the family assets be effected and that an accounting of appellant 1’s management of the property be produced. The notice was ignored, and consequently the respondent instituted the partition suit on 24 September 1941.

The plaint described the family’s assets as comprising immovable properties located in British India and in the State of Pudukottai, enumerated as items 1 to 12 and item 13 respectively in Schedule A. The family’s jewelry and other moveable assets were listed in Schedule B. Two money‑lending firms owned by the family, situated at Minhla and Sitkwin in Burma, were identified in Schedules D and E. The plaint further alleged that Chidambaram Chettiar had entered substantial sums belonging to the family into accounts held in the names of various family members, known as “Thanathu maral” accounts, and that these investments, amounting to approximately Rs 15,00,000, were detailed in Schedule C.

The assets described in Schedules C, D and E also included immovable properties in Burma, and the respondent claimed an equal share in all of those assets. It appears that the family had also endowed several properties in favour of charitable institutions, which were listed in Schedule F. The respondent argued that the partition should be carried out in a manner that included a scheme for managing those charitable properties.

The respondent indicated that a number of family assets had been endowed to charities and were listed in Schedule F, and he argued that a scheme should be prepared for administering those charitable trusts during the partition of the parties’ property. He further alleged that the appellant identified as appellant I had, while managing the family affairs, altered the accounts and had actually misappropriated large sums of money, and therefore sought an account of the amounts allegedly taken. This description summarises the nature of the claim that the respondent placed before the court in his plaint. At the time the suit was filed, appellants 3, 4 and 5 were minors; consequently they were represented by appellant I. A written statement was filed by appellant I on his own behalf and also in the capacity of guardian for his minor sons, in which he acknowledged the respondent’s half‑share in the family properties. Nevertheless, the statement raised several disputes concerning the property that could be divided. It was contended that Items 10 and 11 in Schedule A had been dedicated to charitable purposes and therefore were not subject to division, and that Item 3 was being used as a school. The written statement also identified additional properties that were not mentioned in the plaint but, according to the appellant, were still liable to partition. Regarding the jewels and moveable items, the appellant asserted that many of the listed items either did not belong to the family or did not even exist, and that some of the jewellery shown in the schedule actually constituted the separate property of the various appellants. Concerning the Thanathu maral accounts, the appellants provided a detailed history of the sums involved and of the investments made; they admitted that the amounts originated from the family, although the investments had been made in the names of different family members. They further argued that the total value of the assets enumerated in Schedule C should be calculated as Rs 9,00,000 rather than the Rs 15,00,000 claimed by the respondent. The allegation that appellant I had tampered with the accounts and misappropriated family funds was expressly denied, with the appellants urging that, for the purpose of partition, the assets should be assessed as they stood on the date of partition. In addition, the appellants pleaded that the court possessed no jurisdiction to divide the immoveable properties situated in Burma. They cited a special practice prevailing among the Nattukottai Chettiar community, according to which appellant I was entitled to a reasonable remuneration for managing the joint family business and properties. Another custom pleaded by the appellants required that provision be made for future Seermurais for the unmarried daughters of the family. These matters collectively formed the principal contentions advanced by appellants 1 and 3 through 5.

Appellant 2, who held a major share in the family assets, filed a separate written statement that generally adopted the statements made by appellant 1; however, in his pleading he also placed the respondent …

The respondent was required to prove strictly the allegations he made in the plaint in support of his claim. In response to the contentions raised by the appellants, the respondent filed a reply in which he asserted, among other things, that a custom existed within the community whereby a member of a joint family, after marriage, would establish a separate family and that any monies drawn thereafter would be placed in a distinct account referred to as “Pathuvazhi.” He further contended that, at the time of partition, the sums appearing in that account should be debited to the member who had created it, and that the partition should be effected in accordance with this custom. On the basis of these pleadings, the learned trial judge framed fifteen issues for determination. The parties subsequently attempted to refer their disputes to arbitration; a reference was made on 6 April 1943, but the effort proved abortive and the suit was scheduled for trial, with hearing commencing on 11 December 1943. During the interim, on 6 December 1943, appellant 2 filed an application under Order 8, Rule 9 of the Code of Civil Procedure seeking permission to file an additional written statement, identified as I.A. No. 988 of 1943. By this application appellant 2 alleged that the deceased Chidambaram Chettiar, on 25 March 1925, had set apart two sums of Rs 2,10,251‑4‑0 each, one in the name of the respondent and the other in the name of appellant I, with the intention of vesting those amounts immediately, and he asserted that these sums and their accretions were not family properties subject to partition. The respondent opposed the application. On 14 December 1943 the trial judge dismissed the application, holding that it introduced a new and inconsistent plea apparently inspired by appellant 1. The trial judge then rendered his judgment on 29 December 1943, issuing a preliminary decree. The decision was appealed before the Madras High Court by three separate petitions: A.S. No. 115 of 1948 by appellant 2, No. 199 of 1944 by appellants 1 and 3‑5, and No. 499 of 1944 by the respondent. In the course of appeal No. 115 of 1944, appellant 2 sought a stay of further proceedings before the Commissioner (C.M.P. No. 1402 of 1944). The High Court ordered that a full stay of the Commissioner’s proceedings was unnecessary and that only the passing of the final decree should be stayed, thereby vacating the previously granted ex parte interim stay. After the final order on this application was

After the Commissioner began his inquiry, the parties decided before any progress could be made to refer their disputes to arbitration. Consequently, on 18 July 1944 the parties jointly filed an application before the trial judge requesting that the matters in dispute, together with all related proceedings, be referred to arbitration conducted by Mr. V. E. R. M. A. R. Ramanathan Chettiar of Kandanoor and Mr. R. M. A. N. S. R. M. Chellappa Chettiar of Kothamangalam. Because three of the parties were minors, an additional application under Order 32, Rule 7, was also presented.

On 21 July 1944 the trial court approved the joint application. The court certified that the proposed arbitration would benefit the minors and therefore ordered that “the matters in dispute in the suit and all matters and proceedings connected therewith” be referred to the two named arbitrators for determination. The arbitrators commenced their proceedings, issued an interim award on 1 August 1944, and subsequently rendered a final award on 6 December 1944. This final award was then filed with the trial court.

On 3 January 1945 the appellants filed a petition, identified as I.A. No. 18 of 1945, invoking sections 30 and 31 of the Indian Arbitration Act. In that petition the appellants sought to have the award set aside and advanced several grounds. They alleged that the reference to arbitration had been obtained through coercion and undue influence, that the arbitrators had failed to conduct a proper enquiry, and that the arbitrators were partial and biased. Accordingly, they claimed that the reference was defective and that the arbitrators had engaged in misconduct.

The appellants further challenged the validity of both the reference and the award on the basis that they contravened the principle of private international law, which precludes a court in one country from adjudicating title to immovable property situated in a foreign country or directing its division. Because the reference and the award involved immovable properties located in Burma, the appellants contended that they were invalid. Additionally, the appellants argued that the arbitration reference contravened the orders issued by the High Court in C.M.P. No. 1402 of 1944, rendering it void.

The respondent opposed the petition, denied all of the appellants’ allegations, and insisted that a decree pursuant to the award should be granted. During the hearing, neither party presented oral evidence; both relied solely on documentary evidence in the record and on points of law they raised. The trial judge rejected the appellants’ allegations of arbitrators’ misconduct and found no substance to the claim that the arbitration reference resulted from undue influence or coercion.

In this case the trial judge found that the arbitrators had conducted a proper enquiry and that, on the merits, the award could not be challenged. However the judge held that the reference to the arbitrators included matters that were in dispute in the suit and specifically involved questions of title to immovable property situated in Burma; because such questions were beyond the jurisdiction of the court, the reference was without jurisdiction and therefore invalid. The judge further observed that the reference also encompassed a dispute concerning the sum of Rs 2,10,251‑4‑0 that had been entered in the Thanathu maral accounts of appellant 1 and the respondent, and that this portion of the reference violated the order previously issued by the High Court in C.M.P. No. 1402 of 1944. Accordingly the judge upheld both of the appellants’ contentions, set aside the reference and the award, and declared them void. The respondent then filed C.M.A. No. 210 of 1946 against that order. The High Court allowed the respondent’s appeal, confirmed the trial court’s findings on the allegations of arbitrator misconduct and on the invalidity of the reference on the ground that it resulted from coercion and undue influence, but it reversed the trial court’s conclusion that the reference and the award were invalid because they related to immovable property in Burma and contravened the stay order passed by the High Court. The High Court interpreted the order effecting the reference to the arbitrators and the award and held that neither could be challenged on either of the two grounds raised by the appellants. It also rejected the contention that the order of reference was invalid because, under section 21 of the Act, the trial court lacked competence to make the reference. In its final finding the High Court declared the reference and the award to be valid and directed that a decree be passed in accordance with the award. Civil Appeal No. 112 of 1955 was filed against this High Court decision, and the appeal raised the question of the validity of the award, on which the trial court and the High Court had reached differing conclusions. Before addressing the merits of those questions, the judgment indicated how other appeals arose. In A.S. No. 115 of 1944 filed by appellant 2 before the High Court, the appellant presented Miscellaneous Application C.M.P. No. 2374 of 1946 under Order 23, Rule 3, seeking an order that the interim award (Exhibit P. 15) passed by the arbitrators, which had been signed by all parties as a token of their consent, should be treated as a compromise and that a decree be passed in accordance with it under Order 23, Rule 4. The High Court observed that, in view of its decision in C.M.A. No. 210 of

Referring to its 1946 decision, the High Court held that it was unnecessary to pass any further order in the appeal; nevertheless, because the matter was likely to be taken in appeal to this Court, the High Court thought it prudent to issue a formal order directing that a decree be drawn in accordance with the interim award under Order 23, Rule 3. In response to that order, the appellants filed Civil Appeal No 116 of 1955 in this Court. The appellants had earlier made a similar application in Application Statement No 199 of 1944, which was recorded as C.M.P. No 3273 of 1946. The High Court allowed that application for comparable reasons, and its decision gave rise to Civil Appeal No 115 of 1955. At the trial‑court level, the appellants had presented two analogous applications under Order 23, Rule 3; both applications were rejected by the trial court, and those rejections were the basis of two appeals to the High Court, namely C.M.A. No 661 of 1946 and C.M.A. No 49 of 1947. The High Court allowed both of those appeals and ordered that a decree be passed on the terms of a compromise under Order 23, Rule 3. Against the High Court’s orders in those two appeals, the appellants have filed Civil Appeals Nos 113 and 114 of 1955 in this Court. Thus, the four subsidiary appeals originated from the trial‑court rejections and the High Court’s subsequent willingness to decree on the basis of the interim award or compromise.

Having set out the background of the subsidiary appeals, the Court returned its attention to the principal matter presented in Civil Appeal No 112 of 1955. The first ground on which the validity of the reference and the award was challenged concerned the assumption that the reference sought to determine title to immovable property situated in Burma, or that the award itself actually resolved that title issue. The appellants argued that Indian courts unquestionably lack jurisdiction to determine questions of title to immovable property located abroad, or to order any division of such property. This principle is well settled and, as the appellants noted, cannot be disputed. The rule of law on the subject was articulated by Dicey: “The courts of a foreign country have no jurisdiction to adjudicate upon the title or the right to the possession of any immoveable property not situate in such country.” (Dicey, “Conflict of Laws”, 6th Ed., pp. 141 and 348). The appellants further submitted that where a court has no jurisdiction to determine a matter such as the title to foreign immovable property, it likewise lacks jurisdiction to refer that matter to arbitrators for determination. This position, they contended, is likewise indisputable. Finally, the appellants maintained that if the reference included both property over which the court possessed jurisdiction and property over which it lacked jurisdiction, the entire reference would be invalid, and it would not be permissible to separate the invalid portion from the valid portion.

The respondent acknowledged that the appellant’s contention that the reference should be divided from the portion that is valid is contested, but for the sake of the present appeal the respondent agreed to argue on the basis that this contention might be well‑founded. The respondent maintained that neither the reference nor the arbitral award purported to address any immoveable property situated in Burma; consequently, the appellants could not succeed in challenging the validity of either the reference or the award on the legal grounds they raised. Accordingly, the court found it necessary to scrutinise both the reference and the award in order to determine whether the factual premise advanced by the appellants in challenging the validity of both documents was justified. In order to resolve this issue, the first step was to ascertain the extent of the request made by the parties when they applied to the trial court for a reference of their dispute to arbitration. In the application filed as Exhibit P‑12, the parties gave a brief description of the nature of the respondent’s claim and stated that the dispute between them was then pending before the High Court in the form of three appeals preferred by the parties. The application further asserted that appellants numbered three to five were minors and that, because the proposed reference was intended for their benefit, a separate application had been filed seeking the court’s sanction for a reference with respect to those minors. The application expressed the parties’ desire and agreement that “all matters in dispute in this suit and all matters and proceedings connected therewith” should be referred to the unanimous decision of the two named arbitrators. The parties also agreed to be bound by the arbitrators’ unanimous decision, to empower the arbitrators to partition the joint‑family properties between the parties, to allow payment of money where necessary to equalise the shares, to require the arbitrators to take the necessary accounts, and to enable the arbitrators to decide all matters in dispute between them, including the costs. Moreover, the parties undertook to produce their own papers and copies before the arbitrators and authorised the arbitrators, if they required any additional papers, accounts or documents that had been filed in the court, to direct the Commissioner to forward such material to them. On the basis of this application, the trial court issued an order directing that “all matters in dispute in this suit and all matters and proceedings connected therewith” be referred for determination to the two named arbitrators. The question that now arises for determination is: what was the scope and extent of the matters referred to arbitration? Put differently, did the order of reference encompass the respondent’s claim for a share in the immoveable properties located in Burma? The appellants argument is that the order of reference includes not only all matters in dispute in the suit but also all matters and proceedings connected therewith, and on that basis they contend that the claim concerning the Burma properties falls within the ambit of the reference.

In the Court’s view, the two clauses mentioned in the order are sufficiently broad to encompass the respondent’s claim for a share in the immovable properties located in Burma. The later clause undoubtedly relates to matters and proceedings that are connected with the suit; however, the appellants’ argument can succeed only if it can be demonstrated that the respondent’s claim for a share in the Burmese properties was, at the material time, connected with the suit or formed part of the matters that were connected with it. To determine this, the Court examined the pleadings of both parties, the issues framed by the trial court, and the trial court’s decisions on those issues, in order to ascertain the nature and extent of the dispute that remained pending before the High Court in the three separate appeals. In the respondent’s plaint, he asserted a right to a share in the immovable properties situated in Burma. He alleged that advances made by the family firms in Burma, together with advances recorded in the accounts described as Thanathu Maral accounts, were employed to purchase lands and other properties, and that those assets became part of the firms’ holdings and the Thanathu Maral accounts. The written statement filed by appellant 1 acknowledged that Thanathu Maral transactions had taken place during the lifetime of Chidambaram Chettiar and that all sums drawn from the family assets, although invested for convenience in the name of one family member or another, were owned by the family and treated as family assets. The appellants, however, contended that the respondent had exaggerated the extent of the Thanathu Maral transactions. Overall, the written statement admitted that the branches represented by appellants 1 through 5 on one side and the respondent together with his son on the other side were each entitled to a half‑share of the assets, but it pleaded that those shares should be allocated only after making certain provisions out of the joint family funds for the future payment of Seermurai and other obligations owed to the unmarried daughters in the family. The written statement further argued that the court lacked jurisdiction to divide the immovable properties in Burma, although it conceded that the respondent was entitled to relief concerning the division of the family assets as set out in the statement. Appellant 2 adopted the same written statement in a general manner, denying the allegations in the plaint that he had not expressly admitted in his own written statement. Consequently, it becomes clear that the respondent’s share in the family properties was not genuinely contested, nor was his share in the Burmese properties seriously challenged; the sole ground raised against the latter claim was the contention that the court had no jurisdiction to adjudicate it. This particular state of the pleadings accurately reflects the true nature of the dispute between the parties.

In the present case the parties shared a common understanding that they belonged to a trading family, and consequently the family’s assets could be divided among the family members. On the basis of this common knowledge the trial judge formulated fifteen specific issues and proceeded to conduct the hearing. During the proceedings appellant 2 sought to modify his earlier written statement by introducing further and additional pleas. To obtain permission for this amendment he filed an application, identified as Exhibit P. 3 (a), requesting leave to file an additional written statement. The trial court declined the application, but for the purpose of this discussion it is necessary to examine the content of the additional pleas that appellant 2 intended to raise. He intended to argue that the sums of money that had been set aside by the deceased father for the benefit of appellant 1 and the respondent had been kept invested in a distinct and separate manner throughout his lifetime. He contended that, as a matter of law, these invested sums should be regarded as the separate property of the two respective branches of the family. In other words, appellant 2’s proposed plea was that because the amounts had been invested under the names of appellant 1 and the respondent, the monies became the individual and separate assets of each son’s line and therefore belonged exclusively to those branches. This argument therefore related solely to the nature and character of the invested amounts and did not concern any immovable property situated in Burma.

Because the trial court refused to allow appellant 2 to present this additional plea, he continued to argue the issues that had already been framed. In that context he maintained that the court lacked jurisdiction to adjudicate matters involving immovable properties located in Burma, and he consequently asked for the appointment of a Commissioner to conduct an inquiry pursuant to the preliminary decree. The preliminary decree expressly excluded from its operation the immovable properties situated in Burma as well as those in the Indian State of Pudukottai. When the Commissioner proceeded with his inquiry, both parties agreed that the properties in Burma and Pudukottai should be omitted from the accounts, and no dispute was raised before the Commissioner regarding the treatment of the firms’ accounts in Burma. In the subsequent appeal filed by the respondent against the preliminary decree, the respondent did not challenge the trial court’s finding that the court had no jurisdiction over immovable properties outside British India. The respondent’s appeal focused on other matters that need not be detailed here. This acceptance is significant because it demonstrates that the respondent acquiesced to the trial court’s jurisdictional finding and did not seek to have the High Court consider any claim for a share in the properties that had been excluded from the decree.

In the appeal preferred by appellant 2, he contended, inter alia, that the trial court ought to have permitted him to raise additional pleas. He also asserted that the trial court lacked jurisdiction to order the division of the moveable properties belonging to the firms situated in Burma. The memorandum filed by appellant 2 makes it unmistakably clear that none of the pleas he sought to present before the High Court referred in any way to immoveable properties in Burma. Consequently, in none of the three appeals then pending before the High Court did any party argue that the immoveable properties in Burma should be brought within the ambit of the partition suit. The parties’ application for arbitration, which has already been referenced, deliberately identified the pendency of those three High Court appeals at the relevant time to supply the factual backdrop for assessing the scope and nature of the dispute that was to be referred to arbitration. The trial court had rejected the respondent’s claim for a share in the properties situated outside India, and because the respondent did not challenge that decision, the judgment became final. Therefore there can be no doubt that the respondent’s claim lay outside the purview of the controversy that was then before the High Court between the parties. That claim was not, and could not have been, intended to form part of the dispute in the suit between the parties or any related proceedings. Accordingly, we are satisfied that the High Court correctly concluded that the reference to arbitration did not encompass any claim concerning the immoveable properties in Burma. It is nevertheless submitted that the reference did include the points raised by appellant 2 in his High Court appeal, and that submission is factually accurate. The crucial question, however, is what effect those grounds raised by appellant 2 actually have on the scope of the arbitration reference. As previously noted, those grounds did not introduce any issue relating to immoveable properties in Burma, but rather concerned the character of the sums invested by the deceased Chidambaram Chettiar in the names of appellant 1 and the respondent. Thus the dispute centered on money or other moveable assets, prompting appellant 2 to argue that the trial court lacked authority to adjudicate such moveables. That contention is plainly without merit and was never raised before the lower courts nor before us. The sole argument advanced is that the arbitration reference included claims concerning immoveable properties in Burma, but this cannot be sustained on the basis of appellant 2’s pending High Court appeal. Even if that appeal were to succeed, it could not introduce any reference to immoveable properties in

In this case the Court observed that the allegation that the reference was improper because it purported to include immovable property situated in Burma could not succeed. The Court then examined whether the award itself actually dealt with such immovable property in Burma. The Court explained that if the award did address those foreign immovable assets, it would be void not only because it attempted to regulate property located abroad, but also because it would exceed the scope of the reference. During the hearing of the present appeals, counsel for the appellants, Mr Viswanatha Sastri, endeavoured to criticize the arbitrators’ decision on several grounds. However, the Court did not permit him to raise any arguments concerning the merits of the award, because both the trial court and the appellate court had already rejected the appellants’ objections on that basis, and the concurrent findings of those courts barred the appellants from re‑litigating the same points. Consequently, the Court limited its review to those portions of the award that, according to the appellants, demonstrated that the arbitrators had divided the immovable property located in Burma and the immovable property situated in Pudukottai. Regarding the property in Pudukottai, the award stated in paragraph 3 that “the plaintiff and the defendants shall enjoy them in equal halves as under marukkal kuttu. In proportion to their respective shares the plaintiff shall pay one‑half of the taxes and the defendants the other half. Since the aforesaid property has been situated in Pudukottai State it has not been divided on the good and bad qualities of the soil; if it is necessary, the plaintiff and the defendants shall have it divided in equal halves later on when required.” Concerning the property in Burma, paragraph 1 of the award provided that “after communications are restored in Burma the plaintiff and the defendants have to divide the firms in Burma at the places Minhla and Sitkwin belonging to them and the lands, godowns, homes, gardens and the property items, bank deposits, jewels, movables, all assets etc., and the subsequent income attached thereto into two halves; and the plaintiff has to take one half and the defendants the other half.” Paragraph 2 added that because both parties had agreed to divide the movable property attached to the said shop at a later stage, the arbitrators had not effected that division at the time of the award. The award further recorded that the sale deeds at Alagapuri relating to the lands attached to the firms had been split into two lots, and for safekeeping two lists identified as Schedule A and Schedule B had been prepared, both parties having signed the lists. The award instructed that at the time of division of the lands, firms and assets, all relevant documents should be gathered together and each party should take the documents corresponding to its respective share. After addressing these matters, the arbitrators considered the additional plea that appellant 2 sought to raise and, in substance, refused to entertain that plea.

In the arbitration award the arbitrators refused to permit the appellant to raise an additional plea, holding that, given the conduct of both parties, pursuing that plea would be futile. Consequently, the arbitrators directed that the plaintiff’s branch and the defendant’s branch each possessed equal shares in all monetary amounts involved, and they added that the parties’ behaviour fully justified such a conclusion, which the parties themselves accepted. The appellants relied on these portions of the award to argue that the arbitrators had already dealt with the immovable properties situated in Pudukottai and Burma. The Court, however, found this contention to be insufficiently supported. It observed that the arbitrators had only divided those properties that formed the immediate subject‑matter of the dispute and, by doing so, had indicated the legal position the parties would occupy with respect to any other properties that lay outside the dispute. In assessing the impact of the language employed in the award, the Court kept in mind that the arbitrators were laypersons lacking familiarity with the technical nuances of legal terminology, and therefore their clauses needed to be read as a whole to discern the substantive intention behind their decisions.

Turning to the specific recitals concerning the Pudukottai properties, the award expressly stated that those properties had not been divided by the arbitrators and that the plaintiff and the defendants would undertake division when such a step became necessary. The award further noted that, since the parties had separated and the properties in dispute before the arbitrators had already been physically divided by metes and bounds, the two branches would enjoy the Pudukottai properties in equal halves. This provision, the Court explained, could not be interpreted as an actual division of the properties nor as a determination of each party’s share; rather, the parties’ shares were already admitted, and the award merely affirmed that, as divided members, they would each hold and enjoy half of the property. A similar analysis applied to the properties located in Burma. The award again stated that those properties had not been divided, and it referred merely to the true legal position that each branch would possess an equal half‑share. Regarding the Burma properties, the arbitrators proposed a practical arrangement: the parties were to retain the title documents in equal halves for safe custody, and when the parties eventually decided to divide the properties, all documents would be assembled and a partition would be effected in accordance with law. The Court characterized this arrangement as a commonsense measure rather than a substantive decision, emphasizing that the award did not decree the parties’ shares but simply reflected the acknowledged legal position of their rights in the said immovable properties.

In this case the Court noted the observations made by Viscount Dunedin in Bageshwari Charan Singh v. Jagarnath Kuari (1). The Privy Council in that matter was asked to decide whether a petition, which the parties relied upon as an acknowledgment of liability under section 19, sub‑section (1) of the Limitation Act, could be admitted as evidence. It was contended that the petition was inadmissible because it allegedly sought to create or declare a right in immoveable property, and that such a declaration would be compulsorily registrable under section 17(1)(b) of the Registration Act, 1908. To support this objection, numerous Indian decisions were cited before the Privy Council, each interpreting the word “declare” in section 17(1)(b). The authorities revealed a sharp conflict of opinion. In Sakha Ram Krishnaji v. Madan Krishnaji (2), West, J., explained that the word “declare” is placed alongside terms such as “create”, “assign”, “limit” and “extinguish”, all of which signify a definite alteration of the legal relationship to the property by an expression of will embodied in the document, and he added that the same reasoning applied to “declare”. Conversely, other cases had interpreted “declare” in a broad, liberal sense, and the objection to the petition’s admissibility was founded on those broader constructions. Lord Dunedin, while rejecting the objection, observed that although the word “declare” might be given a wide meaning, the view originally expressed by West, J. was correct. He emphasised the distinction between a mere recital of fact and a statement that actually creates a title. The Court found these observations useful in determining whether the portions of the award that were challenged actually “declared” the parties’ rights in immoveable property, meaning that the award decided those rights as matters referred to arbitration. The Court held that the High Court had correctly answered this issue against the appellants, and therefore the award could not be attacked on the ground that it dealt with immoveable property beyond the court’s jurisdiction. The Court then turned to the next ground of attack, namely the allegation that the award contravened the order of the High Court on the stay petition filed by appellant 2. The Court found no substance in that allegation. The High Court had merely directed that, pending the final decision of the appeals, a final decree should not be drawn, and it had expressly observed that there was no reason to stay all proceedings before the Commissioner. The Court noted that such an order is the usual practice in similar cases and concluded that the award did not violate the High Court’s directions.

It was noted that the order of the High Court could not be said to have been violated either by referring the dispute to arbitration or by the award that later followed that reference. The award, the Court explained, neither claimed to be nor was intended to operate as a final decree in the proceedings, and the matters before the arbitrators closely mirrored the enquiries that the Commissioner would have conducted even while complying with the High Court’s order. Consequently, the argument that the award contravened the High Court order was rejected.

The Court then turned to another serious objection raised against the validity of the reference. The objection contended that the reference and the award were invalid because the trial court lacked the competence to issue an order of reference under section 21 of the Act. Section 21 was read aloud: “Where in any suit all the parties interested agree that any matter in difference between them in the suit shall be referred to arbitration, they may at any time before judgment is pronounced apply in writing to the Court for an order of reference.” The Court observed that two conditions must be satisfied before a written application for reference can be made. First, every party who has an interest in the suit must agree that a reference is desired. Second, the subject‑matter of the reference must be a matter in dispute between the parties to the suit. When these two conditions are fulfilled, the application may be filed at any time before the judgment is pronounced. In this broad sense, the construction of the section presented no difficulty.

However, the Court acknowledged that difficulty arose when the implications of the two conditions were examined, particularly the meaning of the word “court” in the section. The appellants argued that “court” should be interpreted as defined in section 2(c) of the Act, which describes a “civil court having jurisdiction to decide the questions forming the subject‑matter of the reference if the same had been the subject‑matter of a suit,” and that this definition, prima facie, points to the trial court. According to this view, only the trial court could make an order of reference, not an appellate court, and consequently no reference could be made after the suit had been decided and a decree had been drawn up following the trial court’s judgment.

In the present case, a judgment had indeed been delivered by the trial court and a preliminary decree had been drawn in accordance with that judgment, leading the appellants to assert that there was no scope for issuing any order of reference. The Court examined this first part of the argument carefully and questioned whether the term “court” in the context of section 21 necessarily meant the trial court. The Court observed that this construction could not be easily reconciled with the first condition of the section. After a decree is issued by the trial court and an appeal is filed against it, the appellate proceedings are a continuation of the original suit; therefore the existence and meaning of “court” required further analysis in the light of the statutory provisions and the procedural posture of the case.

In accordance with section 107 of the Code of Civil Procedure, the Court explained that the appellate court possessed every power that the trial court held and could, to the greatest possible extent, perform the same duties that were conferred on the trial court. Consequently, the Court observed that while an appeal was pending, the matters in dispute that existed between the parties in the original suit continued to remain matters in dispute before the appellate court. The Court noted that the decision rendered by the appellate court could significantly alter the character and effect of the decree that was under appeal. It was further pointed out that the issues raised for determination by the appellate court were often the very same points of difference that had existed in the suit. In that respect, even after the trial court had rendered its decision, the identical points of disagreement persisted between the parties when the matter was before the appellate court. The Court then stated that if, during the pendency of such an appeal, the parties who were interested agreed that any point of difference between them in the appeal should be referred to arbitration, the first two statutory conditions for reference were satisfied.

The Court turned to the question of whether the Legislature, when enacting section 21, intended to prohibit any reference to arbitration during the pendency of an appeal even when the parties fulfilled the first two statutory conditions. In addressing this issue, the Court considered the historical fact that, before the enactment of the 1940 Act, Indian courts had a long‑standing practice of referring disputes that were pending before an appellate court to arbitration. The Court observed that if the purpose of section 21 had been to bar such references at the appellate stage, it would have produced, as the High Court had remarked, “a revolution in the existing practice.” The Court examined whether such a radical change was truly intended. Noting that the wording of section 21 was substantially identical to the language used in Schedule 11, paragraph 1, of the earlier Code, the Court found it difficult to sustain the argument that the legislature intended a drastic departure from established practice. The Court reasoned that, had the legislature intended such a departure, it would have amended the language of section 21 accordingly. Accordingly, the Court concluded that the term “court” in section 21 could not be limited solely to the trial court, as the appellants had contended, and that the term “suit” could not be confined narrowly to the original suit, excluding an appeal. In the Court’s view, “court” under section 21 encompassed the appellate court, whose proceedings were generally recognised as a continuation of the suit, and “suit” included those appellate proceedings. The Court added that section 41 of the Act was consistent with this interpretation and that no other provision contradicted it. Finally, the Court identified the next issue for determination: the appropriate time at which an application for reference could be made, as prescribed by the statute.

In this case, the Court observed that an application for reference to arbitration may be filed at any time prior to the pronouncement of the judgment. The Court noted that it had been fairly conceded that the term “judgment” does not encompass the various interlocutory orders and interim judgments that may be issued during the hearing of the suit, and therefore the term cannot be given the meaning assigned to it by section 2(9) of the Code. The Court further clarified that the term does not refer to the statement of the judge outlining the grounds of a decree or order; rather it must signify a judgment that finally decides all matters in controversy in the suit. Consequently, the parties are entitled to apply for a reference to arbitration any time before the final judgment is pronounced. The Court then considered whether the parties could seek a reference concerning matters of difference even though such matters might have already been dealt with by interlocutory judgments issued in the meantime. The appellants argued that although reference to arbitration is permissible at any time before the final judgment, the subject matter of the reference must be something not already covered by any court decision rendered in the interim. Their argument interpreted the word “judgment” as applying to each specific matter in dispute; if an interlocutory judgment had addressed a particular difference, that difference could no longer be referred to arbitration. The Court expressed that it was not persuaded by this contention. In the Court’s view, the language of the provision does not allow the insertion of any qualifying words to limit the meaning of “judgment.” The phrase “at any time before the judgment is pronounced” is intended solely to mark the temporal limit beyond which no reference may be made, and that limit is reached only when a final judgment is pronounced. Accordingly, the provision that “any matter in difference between the parties in the suit can be referred to arbitration” cannot be further restricted by a condition that the matter must not have been covered by a court judgment. The effect of the section, as the Court understood it, is that as long as the final judgment has not been pronounced, any matter – whether some or all of the differences between the parties – may be referred to arbitration provided the parties agree. The Court observed that if a reference can be made even at the appellate stage when all differences have been finally decided by the trial court, it is difficult to justify imposing an additional condition at the trial‑court stage that only those differences not already addressed by interlocutory judgments may be referred. Accordingly, the Court held that the trial court may refer any matters of difference between the parties to arbitration, provided the parties agree and the application is made before the final judgment is pronounced.

It was held that the parties to a suit could refer matters in which they disagreed to arbitration, provided they consented, so long as the trial court had not yet pronounced its final judgment. The court then examined whether, at the moment the order of reference was made, a final judgment had already been rendered by the trial court. The record showed that the trial court had indeed delivered a judgment and that a preliminary decree had subsequently been drawn up. The court noted that, in a partition suit, a judgment followed by a preliminary decree does not constitute a final judgment. The parties remain bound by the suit until a final decree is passed, and any steps taken under the preliminary decree are still considered part of the pending suit. The Privy Council, in Jadu Nath Roy & Ors. v. Parameswar Mullick & Ors. (1939‑40) 67, observed that a partition suit with a preliminary decree remains pending, and that the rights of parties who join after the preliminary decree must be adjusted at the time of the final decree. This principle was accepted as settled law. Accordingly, the fact that a preliminary decree had been prepared in the present case, based on the court’s earlier judgment, did not bar the operation of section 21. The judgment that had been delivered was not the “final judgment” contemplated by section 21, and therefore the trial court retained the jurisdiction to issue the order of reference. However, the court identified an additional complication: at the relevant time three appeals were pending before the High Court. Those appeals had raised the same disputes between the parties that were existing in the suit, meaning that the matters in difference were effectively before the High Court and not exclusively before the trial court. The court considered which forum possessed the authority to make the reference in such circumstances. It concluded that where the suit remains pending in the trial court without a final judgment, the trial court is the proper authority to refer the dispute to arbitration. Conversely, if the trial court has delivered a final judgment and drawn up a decree with no appeal lodged, the suit is concluded and section 21 cannot be invoked. When a decree has been issued and an appeal is pending, the appellate court alone holds the power to act under section 21. Thus, the three possible situations—suit pending in the trial court, suit finally decided with no appeal, and decree appealed—each designate a distinct competent court for making an arbitration reference.

The Court observed that when a preliminary decree has been issued and an appeal has been filed against that decree, a complication arises because the disputes between the parties are legally pending before two separate courts. The proceedings that must be taken by the parties in accordance with, and as a consequence of, the preliminary decree remain before the trial court, while the issues that are covered by the preliminary judgment and decree and are being contested on appeal remain before the appellate court. The Court noted that one might logically propose that arbitration of the disputes arising from proceedings after the preliminary decree could be directed by the trial court, and that arbitration of all matters finally determined by the trial court’s preliminary judgment but now pending before the appellate court could be directed by the appellate court. However, the Court said that such a logical approach does not align fully with section 21 and, rather than resolving the difficulty, would in practice create unnecessary complications.

The Court further explained that, in most cases, the matters in dispute before the trial court in final‑decree proceedings are so closely interwoven with the matters in dispute on appeal that effective arbitration can be ordered only by a single reference and not by two separate references. Consequently, the Court was inclined to hold that where both courts possess a portion of the matters in dispute, either court may issue an order of reference covering all of the disputes between the parties. The Court rejected the argument that this construction would lead to conflicting decisions if two sets of arbitrators were appointed, stating that such a conflict was unlikely to arise. If the parties apply to the trial court and obtain a reference order, they would inevitably seek a stay or withdrawal of the appellate proceedings; similarly, if they obtain a reference order from the appellate court, they would apply for a stay of the trial‑court proceedings for the same reasons.

Applying this principle to the present case, the Court held that the proceedings subsequent to the preliminary decree were pending before the trial court, and therefore the trial court was competent to act under section 21. On that basis, the Court concluded that the objection to the validity of the reference on the ground of section 21 could not succeed. The Court then indicated that it would briefly consider certain decisions that had been cited. It noted that before the 1940 Act, the procedure for referring disputed matters in pending suits was governed by Schedule 11 to the Code of Civil Procedure, and there appeared to be a consensus of judicial opinion that, under Schedule 11, paragraph 1, the appellate court could make an order of reference.

In this case the Court observed that Schedule 11, paragraph 1 of the Code of Civil Procedure allowed an appellate court to issue an order of reference for matters in dispute between the parties when an appeal was pending before it. A dissenting view, however, had been expressed by a Full Bench of the Calcutta High Court in the case of Jugessueur Dey v. Kritartho Moyee Dossee (1). That matter arose under the provisions of the Code of 1859, and the Full Bench held that an appellate court possessed no power, even if the parties consented, to refer a case to arbitration under the arbitration sections of Act VIII of 1859, which applied only to courts of original jurisdiction. The Full Bench also held that section 37 of Act XXIII of 1861 did not confer such power on an appellate court. Chief Justice Couch, who delivered the principal judgment of the Full Bench, reasoned that neither reason nor convenience required an appellate court to refer a suit to arbitration after the trial court had decided the matter. Justice Kemp, who agreed with the decision, expressed a concern that allowing parties to refer matters to arbitration after a final judgment might lead lower courts to be held in contempt. The Court in the present judgment considered that apprehension to be unfounded. It noted that when parties agree to refer their disputes to arbitration they usually seek a resolution free from the rigid technicalities of court procedure. Although the arbitration route can sometimes lead the parties onto a long path of litigation, the Court said that was a separate issue.

The Court further noted that the Calcutta view was rejected by the Madras High Court in Sangaralingam Pillai (2). The Madras Court expressed respect for the learned judges of Calcutta but declared itself unconvinced by their reasoning that an appellate court could not, with the parties’ consent, refer the disputed matters in an appeal to arbitration. The Madras judges added that in the case before them an order of reference had been sought under section 582 of the Code of 1877, and they held that under that provision the appellate court was given powers and functions essentially the same as those of a trial court. The Madras High Court’s position was later accepted and affirmed by the Calcutta High Court in the decisions of Bhugwan Das Marwari & Anr. v. Nund Lall Sein & Anr. (1) and Suresh Chunder Banerjee v. Ambica Churn Mookerjee (2). The Court therefore concluded that, before the enactment of the Arbitration Act, there existed a long‑standing judicial practice whereby appellate courts issued orders of reference in respect of disputes between parties in appeals pending before them.

There has been a long‑standing practice in Indian courts whereby appellate courts, while hearing appeals, have passed orders of reference to arbitration in respect of the matters that remain in dispute between the parties. The interpretation of section 21 of the Arbitration Act, however, has produced differing opinions among the various High Courts. In the case of Abani Bhusan Chakravarty & Ors. v. Hem Chandra Chakravarty & Ors., the Calcutta High Court held that the term “court” as used in the Arbitration Act does not include an appellate court, and therefore the Act provides no authority for an appellate court to refer to arbitration any matter that is still contested by the parties. That judgment relied on a mistaken premise that “court” in section 21 refers only to the court defined in sub‑section 2(c) and that the powers of an appellate court prescribed by section 107 are irrelevant to the Act. The judges appearing to decide that a reference to arbitration at the appellate stage might bring the lower courts into contempt also contributed to this view. It is well settled that a court does not possess an inherent power to refer a dispute to arbitration; such a power must be expressly granted by statute, and the existence of that statutory authority depends on the proper construction of section 21. The Calcutta High Court’s construction of the provision was consistent with its earlier decision in the case of Jugesseur Dey. By contrast, the Patna High Court adopted an opposite stance in Thakur Prasad v. Baleshwar Ahir & Ors., where Justice Jamuar, delivering the judgment of the court, examined the Jugesseur Dey decision and expressly dissented from it. The Allahabad High Court has expressed somewhat inconsistent opinions at different times; however, regarding whether an appellate court may refer a contested matter to arbitration and whether a suit includes an appeal, the Full Bench of that court in Moradhwaj v. Bhudar Das reached a conclusion similar to that of the Patna High Court. That Full Bench also addressed the question of whether section 21 applies to execution proceedings, but that issue is not relevant to the present appeal. The Madras High Court has echoed the same view in Subramannaya Bhatta v. Devadas Nayak & Ors. None of the cited decisions, however, examined the specific situation where a preliminary decree has been passed by a trial court and an appeal is subsequently filed against that decree, leaving the competence of both the trial court and the appellate court in such circumstances untouched.

An appeal was filed against the decree that had been passed. The Court observed that most Indian High Courts have interpreted the expressions “suit” and “court” in section 21 in a broad manner, so that they include appellate proceedings and the appellate court itself. Consequently, the Court held that the trial court possessed the authority to refer the matter to arbitration and that the reference was valid and could not be challenged. This left only one further issue to be examined.

The appellants argued that the arbitrators acted without legal authority when they ordered the appellants to pay the respondent interest of Rs 2,682‑6‑0 on the sums specified in the award up to 5 December 1944, and thereafter at a rate of five percent per annum, thereby creating a total liability of Rs 2,36,782‑11‑9. In addition, the arbitrators directed the appellants to pay future interest on the same amount at eight percent per annum from that date until full payment was made. The appellants based this argument solely on observations made by Justice Bose in the judgment of this Court in Seth Thawardas Pherumal v. Union of India. In that earlier case, the arbitrators had awarded a claim for an unliquidated sum, and the Court explained that the Interest Act 1839 applied because interest was otherwise unavailable by law for such claims.

Justice Bose had outlined four conditions that must be satisfied before interest could be awarded under the Interest Act, and he noted that none of those conditions were present in the earlier case. Accordingly, he concluded that an arbitrator lacked the power to grant interest merely because the arbitrator believed the payment to be reasonable. The appellants also raised an alternative contention that interest could be awarded under section 34 of the Code of Civil Procedure, 1908. The Court dismissed this argument, holding that an arbitrator is not a “court” within the meaning of the Code and that the Code does not govern arbitrators.

Counsel for the appellants, relying on Justice Bose’s observations, argued that arbitrators could never be authorised to award interest. The Court expressed doubt as to whether those observations were intended to create such an all‑encompassing rule. Nevertheless, the Court declined to explore the issue further because the appellants had not raised it before the High Court. Although the point appeared in the appeal, the judgment of the High Court showed that it had not been argued at the hearing. Given these circumstances, the Court determined that it would be inappropriate to consider the argument at this stage, and therefore it accepted the High Court’s decision.

In this case the Court observed that the earlier order directing that a decree be drawn in accordance with the arbitral award was correct, and therefore that order was confirmed. Consequently, the Court held that Civil Appeal No. 112 of 1955 could not succeed and it was dismissed, with the appellant ordered to pay costs. The Court further noted that it had been conceded that, should the principal appeal in the group fail, there would be no need to issue any further effective orders affecting the remaining appeals that formed part of the same group of proceedings, as noted in the citation [1955] 2 S.C.R. 48. In light of that concession, the Court found that the other appeals contained in the same group also failed. Accordingly, those appeals were dismissed as well, but the Court expressly stated that no order as to costs would be made in respect of those dismissals. Thus, all the appeals that were before the Court were dismissed, the decree based on the award was confirmed, the principal appeal was dismissed with costs, and the subsidiary appeals were dismissed without any costs order.