By stressing on the principle of facilitator whereby the Court may appoint an expert or commissioner for a specific purpose. It was further observed that in some cases the commissioner may even hear the parties and give expert opinion on the material or evidence produced by the parties before the Commissioner, however the same does not construe that he can act as an arbitrator. In view of the same, the Court allowed the present appeal.
A Division Bench of Justice Sanjiv Khana and Justice Bela M. Trivedi allowed the appeal wherein the question with respect to reference of the matter to arbitration was raised under Section 21 of the Arbitration Act, 1940 by observing that there is a stark distinction between the scope and functions of an arbitral tribunal and a commissioner appointed under Order XXVI Rules 9 and 11.
The legal issue emerging out of the present appeal was whether the parties agreed that the subject matter of the suit or the part thereof should be referred to Arbitration under Section 21 of the Arbitration Act, 1940.
Factual background of the case was that on September 3, 1993, the respondent- partnership firm, instituted a civil suit in the Court of District Judge, for the settlement of the account of transportation of coal undertaken by them in accordance with the agreement dated October 1, 1990 and the supplementary agreement dated December 13, 1991.
While the suit was lying pending, the plaintiff filed an application seeking appointment of a Chartered Accountant before the District Court. The said application was allowed. Consequently, the report was submitted by the Arbitrator on June 22, 1995. In pursuance of the report, the defendants filed the objections, however the same were rejected by the Court Additional District Judge through order dated May 16, 1996.
Thereafter, the defendant filed the first appeal before the High Court and the same was also dismissed by the impugned judgment dated September 19, 1996. The High Court affirmed the trial court's view that during the pendency of the suit, the matter was referred to arbitration in terms of Section 21 of the Arbitration Act and S.K. Mantri, Chartered Accountant, was appointed as an arbitrator with the consent of the parties.
Thus, the appeal was then filed before the Apex Court. The Court considered Section 21 of the Act and noted that the condition for invoking Section 21 is that the parties to the suit shall mutually agree to the condition that in case of dispute, they would refer the same to Arbitration. It was further observed that the existence of pre- pre-existing agreement is mandatory between the pirates as in the absence of the same; the Court does not possess any power, authority or jurisdiction to refer the matter to arbitration.
Further with respect to the application dated December 23, 1994, the Court opined that the same cannot be construed as an application filed under Section 21 of the Act. Reason being, the application was not for reference of disputes to an arbitrator for adjudication but an application seeking expert advice to settle the accounts of the parties in question. It was further noted that even the jurisdiction of the Court to decide the matter in its finality continued in the same fashion.
To further seek clarification with respect to the matter in dispute, the Court re analyzed the content of the order. While doing so, the Court observed that it was nowhere indicated in any portion of the order that the defendant gave his consent to arbitration as an alternative medium to resolve the said dispute. In addition to this, the Court observed that the matter was not even disposed of by the lower Court on the account of it referring the matter for arbitration.
The Court preferred to some cases to emphasize on the aforesaid observations.
The case of Kerala State Electricity Board and Another v. Kurien E. Kalathil and Another was referred wherein the question of reference to arbitration was examined in the case where there was no arbitration agreement between the parties. The Court observed that there was no arbitration agreement between the parties, without joint application the High Court ought not to have referred the matter to arbitration.
Further reference was made to the case of Dayal Singh and Others v. State of Uttaranchal, wherein it was stated that the purpose of an expert opinion is primarily to assist the court in arriving at a final conclusion. Such a report is not binding upon the court. The court is expected to analyze the report, read it in conjunction with the other evidence on record and then form its final opinion as to whether such report is worthy of reliance or not.
It was further observed by the Top Court that there is a stark distinction between the scope and functions of an arbitral tribunal and a commissioner appointed under Order XXVI Rules 9 and 11. It was further observed that for submission to arbitration, there must be an arbitration agreement or an agreement in terms of Section 21 of the Act that the difference or dispute between the parties for which they intend to be determined in a quasi- judicial manner.
The Court further pointed out the principle of facilitator whereby the Court may appoint an expert or commissioner for a specific purpose. It was further added that in some cases the commissioner may even hear the parties and give expert opinion on the material or evidence produced by the parties before the Commissioner. It was further observed that the parties can contest an expert opinion/commissioners report, and the court, after hearing objections, can determine whether or not it should rely upon such an expert opinion/commissioners report. Even if the court relies upon the same, it will merely aid and not bind the court. In a strict sense, the commissioners' reports are non-adjudicatory in nature, and the courts adjudicate upon the rights of the parties.
Thus, in view of the aforesaid observations and precedents, the Court opined that in the instant case, the appointment of the Commissioner under Order XXVI Rule 9 of the Code was confined to only examination of accounts. Hence, the appeal was allowed and the impugned orders passed by the High Court and the Trial Court were set aside.
Case name: M.P. RAJYA TILHAN UTPADAK SAHAKARI SANGH MARYADIT, PANCHNAMA, SEHORE AND ORS Vs. M/S. MODI TRANSPORT SERVICE
Picture Source :
