The Kalyan People's Co-Operative Bank vs Dulhanbibi Aqual Aminsaheb Patil

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

Court: Supreme Court of India

Case Number: Civil Appeal Nos. 555 and 556 of 1960

Decision Date: 23 April 1962

Coram: K.C. Das Gupta, J.L. Kapur, Raghubar Dayal

The Supreme Court of India delivered its judgment on 23 April 1962 in the case titled The Kalyan People’s Co‑Operative Bank versus Dulhanbibi Aqual Aminsaheb Patil. The judgment was authored by Justice K.C. Das Gupta and was pronounced by a bench consisting of Justice K.C. Das Gupta, Justice J.L. Kapur and Justice Raghubar Dayal. The petitioner in the appeal was The Kalyan People’s Co‑Operative Bank and the respondent was Dulhanbibi Aqual Aminsaheb Patil. The case was reported in the law reports with citations 1966 AIR 1072 and 1963 SCR (2) 348. The dispute concerned a loan granted by the cooperative bank to a borrower identified as A and the guarantee provided by his surety, which was referred to arbitration under section 54 of the Bombay Co‑Operative Societies Act, 1925 (Bom. VII of 1925). The arbitration was conducted by a Board of Arbitrators originally composed of three members, one of whom was the nominee of the borrower. After the Board recorded some evidence, the borrower’s nominee retired and the Board was reconstituted with a new nominee, after which it recorded further evidence. Subsequently the newly appointed borrower’s nominee again retired, prompting a fresh constitution of the Board that retained the two original members and added another new nominee for the borrower, and this reconstituted Board recorded additional evidence before rendering its award. Dissatisfied with the award, A filed revision applications before the Bombay Co‑Operative Tribunal, raising both substantive objections and a preliminary objection that the award was illegal because the last‑constituted Board had acted on evidence not recorded before it. The Tribunal accepted the preliminary objection, set aside the award and remanded the matter to the Assistant Registrar for further proceedings. Shortly thereafter A died, and his heirs and legal representatives filed a writ petition in the Bombay High Court under Article 227 of the Constitution challenging the Tribunal’s decision. The High Court set aside the Tribunal’s order and restored the original award issued by the Board of Arbitrators. The cooperative bank then appealed to the Supreme Court by way of special leave.

The Supreme Court held that when the parties expressly or impliedly agree that evidence not taken before the Tribunal should be considered, it is not illegal for the Tribunal to act on such evidence. The Court explained that the mode of proof is a procedural matter that may be waived, and evidence taken in a previous civil proceeding can be admitted in a later proceeding if the parties consent. The Court further observed that while evidence irrelevant under the Evidence Act cannot be made relevant by agreement, relevant evidence may be placed on record without following the regular mode of proof when the parties agree. Accordingly, a party who does not raise an objection before a Court or Tribunal to the use of evidence already recorded before a previous Court or Tribunal, and who thereby invites the Court or Tribunal to consider such evidence, cannot later object to that consideration. The Court noted that the High Court, having concluded that the Tribunal was wrong to allow the preliminary objection, should not have ignored other questions that had been raised before the Tribunal and left unconsidered. The proper course, the Court said, would have been to set aside the Tribunal’s order and direct it to decide the revision applications on their merits. The judgment formed part of civil appellate jurisdiction, specifically Civil Appeal Nos. 555 and 556 of 1960, arising from the Bombay High Court’s order dated 17 July 1956 in Special Civil Applications Nos. 580 and 581 of 1956.

If a party fails to raise any objection before a Court or Tribunal to the use of evidence that has already been recorded before an earlier Court or Tribunal, and by that conduct implicitly invites the new Court or Tribunal to consider such evidence, the party may not later object to the Court or Tribunal having taken that evidence into account. The High Court held that the Tribunal was wrong in allowing the preliminary objection that had been raised before it, but the High Court could not disregard the fact that, before the Tribunal, other questions had been raised which the Tribunal had not examined. In such a situation, the proper order would ordinarily be to set aside the Tribunal’s order and to direct the Tribunal to decide the applications for revision on their merits. The matter proceeded in the Civil Appellate Jurisdiction as Civil Appeal Numbers 555 and 556 of 1960. Special leave was obtained to appeal from the judgment and order dated 17 July 1956 of the Bombay High Court in Special Civil Applications Numbers 580 and 581 of 1956. Counsel for the appellants appeared, and counsel for respondents Numbers 1 and 3 to 6 appeared. The judgment was delivered by Justice Das Gupta. The dispute arose between the appellant, a cooperative bank, and Amin Saheb Patil, who had taken loans from the bank, and Kutubuddin Mohamad Ajim Kazi, who had stood as surety for those loans. The parties were referred to arbitration under section 54 of the Bombay Co-operative Societies Act, 1925. The Board of Arbitrators originally consisted of Messrs. L. V. Phadke, C. K. Phadke and Trilokekar. After several meetings and the recording of some evidence, Mr. Trilokekar, who was the borrower’s nominee, retired. The Board was then reconstituted with Mr. Kotwal as the new nominee of the borrower. This Board also recorded evidence, but after some time Mr. Kotwal retired as well. A fresh constitution of the Board was then made, retaining the two original members and adding Mr. M. D. Thakur as the borrower’s nominee. Further evidence was recorded by this newly constituted Board, and the Board finally rendered its award on 14 March 1955. Dissatisfied with these awards, Amin Saheb filed two revision applications before the Bombay Co-operative Tribunal. In addition to several objections on the merits, a preliminary objection was raised before the Tribunal challenging the legality of the awards on the ground that the Board as last constituted had acted on evidence not recorded before it. The Tribunal accepted this preliminary objection, set aside the awards and remanded the cases to the Assistant Registrar for rehearing. Shortly thereafter, Amin Saheb died, and his heirs and legal representatives filed two applications before the Bombay High Court under Article 227 of the Constitution challenging the Tribunal’s decision. The High Court held that the Tribunal …

The Court observed that the High Court had erred in concluding that the Board of Arbitrators had acted illegally by relying on evidence that had been recorded by the earlier Boards. The Court noted that the reliance on such evidence occurred with the full knowledge of both parties and without any objection from either side. Because of this finding, the High Court set aside the orders of the Tribunal and restored the awards that had been made by the Board of Arbitrators. After obtaining special leave to appeal to this Court, the Bank challenged the High Court’s decision. In support of the appeal, the Bank raised three separate contentions. First, it argued that the Tribunal had not erred in holding that the Board acted illegally by considering evidence recorded by the previous Boards. Second, it contended that even if the Board had committed an error, the error was not of a nature that would permit interference by this Court under Article 227 of the Constitution. Third, it maintained that the High Court was not justified in setting aside the awards because the Tribunal had decided the matter only on preliminary points and had not examined the merits of the applications.

In response, the Court held that the first two contentions lacked merit. The Court reiterated that, as the High Court correctly pointed out, it would ordinarily be wrongful and illegal for a Tribunal to act on evidence that had not been taken before it. However, the Court explained that the position changes when the parties expressly or implicitly agree that evidence not taken before the Tribunal may nevertheless be treated as admissible and considered. Established law holds that the mode of proof is a procedural matter that can be waived; consequently, evidence taken in a prior judicial proceeding may be admitted in a later proceeding if the parties consent. This principle applies to civil proceedings. While evidence that is irrelevant under the Evidence Act cannot be rendered relevant merely by consent, evidence that is relevant may be placed on record for the consideration of a Court or Tribunal without complying with the usual procedural requirements, provided the parties agree. The rationale for this rule is that it would be unfair to require a party to prove a fact that the opposite party has already admitted as sufficiently proved. Applying this reasoning to the present facts, the Court observed that the appellant Bank did not object to the Board, as last constituted, relying on evidence already recorded by the previous Boards and, in fact, appeared to invite the Board to act on that evidence. Therefore, the Bank could not later object to the Board’s consideration of the evidence merely because the decision was adverse to it. The Tribunal’s view to the contrary was therefore erroneous, and the error was apparent on the face of the record, justifying the High Court’s intervention.

The Court observed that the High Court possessed both the authority and the duty to interfere with the order issued by the Tribunal. However, the Court also noted that although the High Court had determined that the Tribunal was erroneous in allowing the preliminary objection raised before it, the High Court could not overlook the existence of other questions that had been presented to the Tribunal and left unconsidered. In the Court’s view, the appropriate remedy in such circumstances was to set aside the Tribunal’s order and to direct the Tribunal to decide the pending revision applications on their substantive merits. Accordingly, the Court allowed the appeals in part and modified the earlier order of the High Court. The modification directed that the Tribunal’s order remanding the matters to the Assistant Registrar be set aside, and that the Tribunal now proceed to hear the revision applications, evaluating them on their merits. In view of the facts and the procedural posture, the Court ordered that each party should bear its own costs. Thus, the appeals were allowed in part.