The legal issue arising in the present appeal is whether the parties had agreed that the subject matter of the suit or a part thereof should be referred to arbitration under Section 21 of the Arbitration Act, 1940.
Brief Facts:
In this case, the court authorised a Chartered accountant to perform an audit of all the disputed records (Accounts) of both parties in an action for account settlement. He presented his report to the court, indicating that the defendant owed the plaintiff Rs.24,03,300/-. The defendants filed objections to the report on various grounds, among them. The Court dismissed the defendant's claim that S.K. Mantri was appointed as a commissioner under Order XXVI Rule 9 of the Code of Civil Procedure, 1908. The High Court also agreed with the lower court that the subject was sent to arbitration under Section 21 of the Arbitration Act while the case was pending. With the parties' permission, Chartered Accountant S.K. Mantri was selected as an arbitrator.
SC’s Observations:
The issue before the SC was whether the parties had agreed that the subject matter of the suit or a part thereof should be referred to arbitration under Section 21 of the Arbitration Act, 1940?
SC opined that Arbitration is an alternative to the court adjudication process by a private forum chosen by the parties. Normally reference can be made or even directed to the arbitrator only if a pre-existing arbitration agreement subsists between the parties.
SC stated that Order XXVI Rule 9 of the Code gives wide powers to the court to appoint a commissioner to make local investigations which may be requisite or proper for elucidating any matter in dispute, ascertaining the market value of any property, account of mesne profit or damages or annual net profit.
SC stated that Under Order XXVI Rule 11, the court has the power to issue a commission in a suit, in which examination of adjustment of accounts is necessary, to a person as it thinks fit directing him to make such examination or adjustment. When a court issues such a commission to such a person, it can direct the commissioner to make such an investigation, examination and adjustment and submit a report thereon to the court.
Further SC stated that the commissioner so appointed does not strictly perform a ‘judicial act commissioner’s discretion, and there is no occasion to use his judgment or permitting the commissioner to adjudicate and decide the issue involved; the commissioner’s report is only an opinion or noting, as the case may be with the details and/or statement to the court the actual state of affairs. Such a report does not automatically form part of the court’s opinion, as the court has the power to confirm, vary or set aside the report or in a given case issue a new commission. Hence, there is neither abdication nor delegation of the powers of functions of the court to decide the issue.
SC stated that sometimes, on examination of the commissioner, the report forms part of the record and evidence. The parties can contest an expert opinion/commissioner’s report, and the court, after hearing objections, can determine whether or not it should rely upon such an expert opinion/commissioner’s report. Even if the court relies upon the same, it will merely aid and not bind the court. In strict sense, the commissioners’ reports are ‘non-adjudicatory in nature’, and the courts adjudicate upon the rights of the parties.
SC Held:
After evaluating submissions made by both the parties the SC held that “In view of the aforesaid discussion, we allow the present appeal and set aside the impugned order dated 19th September 2019 of the High Court affirming the order dated 16th May 1996 passed by the Additional District Judge, Sehore Camp Astha. It is held that the report of the Chartered Accountant is not an award and is to be treated as a report of a commissioner appointed by the Court under Order XXVI Rule 11 of the Code. Objections of the defendant to the said report will be considered in light of the aforesaid discussion and our findings, and after hearing both the sides the trial will proceed as per law.”
Case Title: M.P. Rajya Tilhan Utpadak Sahakari Sangh Maryadit, Pachama, District Sehore and Others v. M/S. Modi Transport Service
Bench: J. Sanjiv Khanna and J. Bela M. Trivedi
Citation: CIVIL APPEAL NO. 1973 OF 2022
Decided on: 11th May, 2022
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