M/S. Surajmull Nagarmull vs State of West Bengal

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

Court: supreme-court

Case Number: Civil Appeal No. 403 of 1959

Decision Date: 17 April 1962

Coram: J.C. Shah, S.K. Das, M. Hidayatullah

The case titled M S Surajmull Nagarmull versus the State of West Bengal was decided on 17 April 1962 by the Supreme Court of India. The judgment was authored by Justice J C Shah and the bench comprised Justices J C Shah, S K Das and M Hidayatullah. The official citation of the decision appears as 1963 AIR 393 and 1963 SCR (2) 163. The matter concerned the interpretation of the Defence of India Act 1939, particularly sections 19(1), 19(1)(f), 19(1)(g) and 19(3)(c), together with the Defence of India Rules 1939, especially rule 75A and the second proviso to rule 19, which together regulated the appointment of arbitrators and the right of appeal against their awards.

According to the headnote, the appellants were tenants of three warehouses and of adjoining vacant land which they used for storing jute belonging to them. By an order issued under rule 75A of the Defence of India Rules, the Government requisitioned the warehouses in 1943. An arbitrator was then appointed under section 19(1)(b) of the Defence of India Act to determine the amount of compensation payable to the owners. The arbitrator rejected the appellants’ claim for loss of earnings and loss of business. The appellants challenged that award, but the Calcutta High Court dismissed the appeal as not maintainable. The Supreme Court held that an arbitrator appointed under section 19 of the Defence of India Act is not a court and that a tribunal of that kind is not subject to the appellate jurisdiction of the High Court. While the Act confers a right of appeal against an arbitrator’s award, the exercise of that right is restricted by the rules made under the Act. The second proviso to rule 19 provides that no appeal lies against an arbitrator’s award when the compensation awarded does not exceed rupees 5,000. An award that dismisses a claim in its entirety falls within that monetary limit, and consequently an appeal to the High Court was permissible. The civil appeal, numbered 403 of 1959, arose by special leave from a judgment and order dated 27 June 1955 of the Calcutta High Court and involved an original decree dated 28 1948. Counsel for the appellant included A V Viswanatha Sastri and B P Maheshwari, while counsel for the respondent comprised B Sen, P K Chatterjee and P K Bose. The judgment, delivered by Justice Shah, reiterated that the tenants, referred to as the appellants, occupied three warehouses and the adjacent vacant land commonly known as the Shamnagar Jute Godown, which belonged to Sri Hanuman Seva Trust. By an order dated 17 August 1943 issued under rule 75A of the Defence of India Rules, the warehouses were requisitioned and possession was taken on 21 September 1943.

In 1943 the compensation that could be payable to the owner of the three warehouses could not be fixed by agreement, and consequently an Arbitrator was appointed under section 19(1)(b) of the Defence of India Act, 1939. Before the Arbitrator, Sri Hanuman Seva Trust, the owner of the warehouses, claimed compensation as the proprietor. The appellants, who were tenants of the warehouses, claimed compensation for loss of earnings, damage to business and the cost of removing eighteen thousand maunds of jute together with some iron implements, which they said had to be removed because of the requisition order. The appellants placed their estimate of the compensation at one lakh rupees.

The Arbitrator, in an order dated 13 December 1947, observed that the appellants had failed to prove any actual loss of business resulting from the requisition, and therefore rejected the appellants’ claim. The appellants then preferred an appeal against the Arbitrator’s order to the High Court of Judicature at Calcutta, valuing the claim at one hundred and fifty thousand rupees. At the hearing of that appeal, the State of West Bengal contended that the appeal was not maintainable, relying on the provisions of section 19(1)(f) and (g) and section 19(3)(c) of the Defence of India Act and on the second proviso to rule 19 framed under the same Act. The High Court accepted the State’s contention and dismissed the appeal. With special leave, the appellants subsequently filed an appeal before this Court.

The Court examined the relevant statutory language. Under clause (1) of section 19 of the Defence of India Act, 1939, the provision, insofar as it is material, states: “Where under section 19A or by or under any rule made under this Act any action is taken of the nature described in sub‑section (2) of section 299 of the Government of India Act, 1935, there shall be paid compensation, the amount of which shall be determined in the manner and in accordance with the principles hereinafter set out, that is to say … (f) An appeal shall lie to the High Court against an award of the Arbitrator except in cases where the amount thereof does not exceed an amount prescribed in this behalf by rule made by the Central Government. (g) Save as provided in this section and in any rules made thereunder, nothing in any law for the time being in force shall apply to arbitrations under this section.” Sub‑section (3), insofar as it is material, adds: “(3) In particular and without any prejudice to the generality of foregoing power, such rules may prescribe … (c) the maximum amount of an award against which no appeal shall lie.” By a notification dated 22 March 1945, rules were framed under section 19 relating to arbitration for settlement of compensation. Rule 19 of those rules provides: “19. Any appeal against the award of the Arbitrator shall be presented within six weeks from the date of receipt by the Collector of the party by whom the appeal is preferred of the copy of the award sent under Rule 17: Provided further that no appeal shall lie against an award made under these Rules where the amount of compensation awarded does not exceed Rs. 5,000 in lump or Rs. 250 per mensem.”

The Court examined the provision that an appeal could be filed only after the party received a copy of the award under Rule 17 and noted the additional proviso stating that no appeal could be entertained against an award made under the Rules when the compensation awarded did not exceed Rs 5,000 in a lump sum or Rs 250 per mensem. It observed that the Arbitrator appointed under Section 19 of the Defence of India Act was not a court or a tribunal subject to the appellate jurisdiction of the High Court. While the Act conferred a right of appeal against the Arbitrator’s award, that right was limited by the procedural rules. The second proviso to Rule 19 expressly barred an appeal where the amount of compensation awarded was Rs 5,000 or less. In the present case the Arbitrator had dismissed the appellant’s claim and had awarded no compensation at all.

Counsel appearing for the appellants argued that Section 19(1)(f) provided a general right of appeal against all awards and that the restriction applied only when some compensation, though less than Rs 5,000, was awarded. The counsel contended that the limitation should be strictly construed and that when no compensation was awarded, the bar in Section 19(1)(f) and the second proviso to Rule 19 should not operate. The Court rejected this contention, holding that an appeal is a creature of statute and that an appeal could arise only where the statute expressly permitted it. The Legislature had clearly stipulated that where the awarded compensation did not exceed Rs 5,000, no appeal could lie. The rule did not limit the bar to situations where a positive amount, however small, was awarded; the bar applied equally when the award was zero. Consequently, the Court concluded that the appellant’s case fell within the scope of the second proviso to Rule 19 because the compensation awarded was nil and therefore did not exceed Rs 5,000. The Court further observed that the right of appeal depended solely on the amount awarded by the Arbitrator and not on the size of the claim made before the acquiring authority, the Arbitrator, or the High Court. Even though the rule might appear unusual, it could not be expanded to create a right of appeal for a claimant whose claim had been wholly rejected. Accordingly, the Court held that the right of appeal was exercisable only when the awarded amount exceeded Rs 5,000, and it dismissed the appeal as barred by the statutory provision.

The Court observed that its earlier determination not to entertain the pending appeal was proper. Accordingly, the Court concluded that the appeal did not satisfy the necessary criteria for consideration and therefore failed. On that basis, the Court ordered that the appeal be dismissed. The final disposition was a dismissal of the appeal, confirming that the appeal had no further force or effect.