Ram Kishan vs Lalji Mal Tika Ram
1989 Latest Caselaw 446 Del

JUDGMENT

S.N. Sapra, J.

(1) By this order, I propose to dispose off an application,filed by plaintiff under Section 5 of the Arbitration Act, 1940, and Order 32Rule 7 read with Section 151 of Civil Procedure Code, thereby claiming the following reliefs:-

"(A)To revoke/recall the order dated 28/02/1985 and revoke the appointment of the arbitrator in relation to the claim between the plaintiff and the defendants in the present suit ;

(B)To further decree the suit of the plaintiff in terms of the prayer clause made in the plaint as the defendants have admitted the balance sheet of 1981."

(2) Briefly, the facts are that plaintiff, a minor, had filed a suit No.1723 of 1984, through his mother, next friend and natural guardian for recovery of Rs. 1,28,900.00 against defendants, on the ground that the amount was lying in deposit in the defendant No. 1's firm account, in hisname. Defendant No. 1, namely, M/s Lalji Mal Tika Ram, was a partnershipfirm, comprising defendants 2 and 3 as its partners. Defendants 2 and 3 are the real brothers. Defendant No. 2 is father of the plaintiff/applicant.

(3) In his written statement, defendant, No. 2 made various allegations against defendant No. 3. The claim of plaintiff was, however, not denied byhim.

(4) In his written statement, defendant no. 3 alleged that the suit was got filed by defendant No. 2. benami in the name of his son, only to harass him and to prolong the litigation.

(5) Similarly, the minor, Kumari Kumud, daughter of defendant no. 2,filed a suit No. 1724 of 1984, for recovery of Rs. 2.64,238.62 againstdefendants.

(6) Another suit, being suit No. 1657 of 1988 was filed by minor,Kumari Sangeeta against defendants for recovery of certain amount.Similar written statements were filed in those two suits.

(7) Defendant No. 2, Shri Ram Gopal, also instituted a suit No. 737of 1984 for dissolution of the partnership firm, namely, M/s Lalji Mal Tikka Ram and rendition of accounts, against his brother Shri Ram Charan. ShriRam Charan also filed a suit No. 1867 of 1984 for the similar reliefs against his brother Ram Gopal.

(8) It appears that after some discussion amongst the counsel forparties, in all the suits, and the two brothers, namely, Shri Ram Gopal and Shri Ram Charan, a settlement had taken place on 28/02/1985 beforeD.R. Khanna, J. Vide judgment dated 28/02/1985 D.R. Khanna, J..in suit No. 737 of 1984, recorded the settlement between the parties to the effect that the subsisting disputes be referred to an arbitrator. For thispurpose, time was sought by the parties to suggest a common name, ifpossible, who was to act as Sole Arbitrator.

(9) Parties, however, failed to suggest an agreed name to act as anarbitrator. Accordingly, they sought the appointment of the arbitrator, by the Court. Vide order dated 22/03/1985, Dr. Khanna. J. appointedMr. Justice G.D. Khosla, retired Chief Justice of the Punjab High Court, as the sole arbitrator, to adjudicate and decide the matters and dispates, as mentioned in order dated 28/02/1985. Incase, for any reason Mr.Justice Khosla declined to act as Arbitrator, or was not otherwise available,then, in that event Mr. Justice S.N. Shankar, retired Chief Justice of Orissa High Court would act as Arbitrator.

(10) In the present application, it is alleged that in his order dated 28/02/1985, Mr. Justice Dr.R Khanna had directed the arbitrator to straight-away proceed to direct payment to plaintiff in the suit, as the balance sheet, which had been admitted by all the parties/partners as correct,show the amount in suit, as payable to plaintiff by the firm. Thus, it is further alleged that keeping in view the nature of deposits and the admissionsmade, the amount in suit, was not disputed, so the question of referring the same to arbitrator, did not arise. The further ground of challenge to the order, is that plaintiff was never represented by the next friend, nor his counsel was present at the time of the alleged settlement, as such, no arbitrator could be appointed, unless the counsel gave a certificate to the effect, as required under Order 32 Rule 7 of Civil Procedure Code. As such,there is no reference in the eye of law. With regard to the disputes between defendants 1 and 2, plaintiff was not concerned.

(11) In reply, defendant no. 3 stated that the question of disputes could not be decided in isolation. The settlement was only to change the forum ofadjudication. Defendant No. 2, being the father and natural guardian of minors was present in Court. The matter was referred to arbitration, with the consent/permission of the Court.

(12) In the first place, applicant has invoked the provisions of Section 5 of the Arbitration Act. 1940, for revoking/recalling the order dated 28/02/1985.

(13) Section 5 reads as under :    "5.Authority of appointed arbitrator or umpire irrevocable except by leave of Court.-The authority of an appointed arbitrator or umpire shall not be revocable except with the leave of the Court, unless a contrary intention is expressed in the arbitration agreement."  

(14) In M/s. Fulchand Kanhaiyalal Co. v. Kharda Company Ltd and two others, , their Lordships of SupremeCourt, were considering the scope of Section 5 of the Arbitration Act, 1940,and held :     

"WE now turn to the legal position which seems to us to be quiteclear. Before the Court exercises its discretion to give leave to revoke an arbitrator's authority, it should be satisfied that a substantial miscarriage of justice will take place in the event of itsrefusal. In considering the exercise by the Court of the power of revocation it must not be forgotten that arbitration is a particular method for the settlement of disputes. Parties not wishing the law'sdelays' know, or ought to know, that in referring a dispute to arbitration they take arbitrator for better or worse, and that his decision is final both as to fact and law. In many cases the parties prefer arbitration for these reasons. In exercising its discretion cautiously and sparingly, the Court has no doubt these circumstances in view, and considers that the parties should not be relieved from a tribunal they have chosen because they fear that thearbitrator's decision may go against them The grounds on which leave to revoke may be given have been put under five heads : 1.Excess or refusal of Jurisdiction by arbitrator.2. Misconduct of arbitrator.3. Charges of Fraud.4. Exceptional cases.

WE have held that there were no such exceptional circumstances in these cases as would justify us to come to the conclusion that the appointed arbitrator would be disqualified as a result of bias by reason of a conflicting class interest. In view of this finding it is unnecessary to examine the decisions, English or Indian, as respects the principle that an interest of which the parties were fully aware at the date of the arbitrator's appointment will not in general disqualify him, nor will the fact that he stands in a particular relationship to the parties or to the matters in dispute, if it can be said that the parties selected him with knowledge that this was or must be so. Nor are we concerned with the exception to which the aforesaid rule is subject in relation to arbitrators appointed to determine future disputes, and the statutory changes made in English law relating thereto."

(15) By the present application, applicant is seeking to revoke, not the authority of the arbitrator, but is assailing the compromise of the parties to refer the disputes to the arbitrator, the order of reference and also the appointment of arbitrator by the Court. In my view, the provisions of Section 5 of Arbitration Act, 1940, are not attracted in the present case.

(16) In the second place, applicant has invoked the provisions of Order 32 Rule-1 read with Section 151 of Civil Procedure Code for the revocation of the impugned order. Rule 7 of Order 32C.P.C. prohibits the next friend or guardian, of the minor in suit, from entering into an agreement or compromise, on behalf of a minor, with reference to suit, without the leave of the Court. It further provides that an application for leave, shall be accompanied by an affidavit of the next friend or the guardian for thesuit, as the case may be. If the minor is represented by a pleader, then, the application shall also be accompanied by a certificate of the pleader, to the effect that the agreement or compromise proposed, is in his opinion, for the benefit of the minor. This, however, does not preclude the Court from examining the question, whether the proposed compromise or agreement, is for the benefit of the minor or not If any such compromise or agreement,is entered into without the leave of the Court, then, the same shall be voidable against tall the parties, other than the minor.

(17) No doubt, in the present case. a compromise was arrived at without obtaining the leave of the Court. In fact, there was non-compliance of Rule 7. But, in my view, the impugned order cannot be revoked orrecalled, under Rule 7. Thus, an application, under Rule 7 of Order 32C.P.C. cannot be filed to revoke the impugned order.

(18) However, it is not the label of a section or the Rule, but the substance of the application, which is to be considered by the Court. In myopinion, the present application, in fact, is an application for review under Order 47 of Civil Procedure Code.

(19) Mr. R.K.. Makhija, learned counsel, for applicant, urged that since neither an application, under Rule 7, thereby seeking leave of the Court to enter into a compromise, was filed on behalf of the minor, nor any leavewas, otherwise granted, so, the order dated 28/02/1985, was liable to be revoked. The disputes between the two partners of the firm, were referred to the arbitrator. As such, the minor plaintiff, was not bound by the same.Mr. Makhija has further contended, that since plaintiff was neither represented by his next friend or his counsel, nor the counsel gave any certificate,as required under Rule 7, so, no arbitrator could be appointed, in respect of the claim of plaintiff in the suit. As defendants never disputed the claim of plaintiff and further, plaintiff was not concerned with the disputes, between the partners of the firm defendant No. 1, so the reference, in respect of the claim of plaintiff to arbitration was not called for and. as such, there was no reference in the eye of law. The impugned order, so far as it concerns the claim of plaintiff, is void and not binding upon the minors.

(20) Mr. Makhija has placed reliance upon the judgments in Mt.Mariam and another v. Mt. Amina and others.. A.1.R. 1937 Allahabad 65:Seth Ram Gopal through Seth Fateh Chand. v. Lala Shanti Lal. A.I.R. 1942Allahabad 85; Chhabba Lal v. Kallu Lal and others. ; Venkataswami Naicker v. Krishna Naicker and others, A.I R. 1947Madras 47: Girdhar Prasad and others v. Ambika Prasad Thakur and others A I R. 1979 Patna 218; & Sheo Kumar Singh v. Hanumat Prasad Singh andothers, .

(21) Learned counsel for defendant no. 3, urged that the order dated 28/02/1985, has become final, because the same has not been challenged, either by an application for review or by an appeal. According to him,if an order is passed by a Court, without complying with the provisions of Order 32 Rule 7 C P.C., it could be set aside only by three modes viz.

(A)By a review application,(b) By filing an appeal or(c) by the minor filing a suit in a civil court.

He has placed reliance upon judgments in Kaushalya Devi and others v.Baijnath Sayal (deceased) and others, ; Ishar Singh v.Pritam Singh, ; Birbhan v. Harmukh Rai, ; Sant Bhushan Lal v. Brij Bhushan Lal and others. A.I.R. 1967Delhi 1371; Y.B. Patil and others v. Y.L. Patil. Air 1977 S.C. 392; &0m Pal & ors v. Kirat Ram & ors. 1985 All. L.J. Noc 22.

(22) Before coming to the question of limitation, with regard to the present application, which, I have treated, as an application for review, it will be proper to decide whether the impugned order is void or voidable, at the option of the minor.

(23) Rule 7 of Order 32 C PC. reads as under :

"7.Agreement or compromise by next friend or guardian for thesuit-(1) No next friend or guardian for the suit shall, without the leave of the Court, expressly recorded in the proceedings, enter into the agreement or compromise on behalf of a minor with reference to the suit in which be acts as next friend or guardian.

(1A)An application for leave under sub-rule (1) shall be accompanied by an affidavit of the next friend or the guardian for the suit, as the case may be, and also, if the minor is represented by a pleader, by the certificate of the pleader, to the effect that the agreement or compromise proposed is. in his opinion, for the benefit of the minor;Provided that the opinion so expressed, whether in the affidavit or in the certificate shall not preclude the Court from examining whether the agreement or compromise proposed is for the benefit of the minor.

(2)Any such agreement or compromise entered into without the leave of the Court so recorded shall be voidable against all parties other than the minor."

Sub rule I A of Rule 7 was added by Civil Procedure Code (Amendment)Act, 1976.

(24) In Birbhan v. Harmukh Rai (supra), the following questions were referred to for decision of a Full Bench of Allahabad High Court :

"1.Does the omission by the next friend of a minor party to a suit to obtain the leave of the Court as required by sub rule (1) of Rule 7 of Order 32 C P.C. to enter into an agreement to refer the case to arbitration render the order of reference and the award void or only voidable at the option of the minor ?

2.In case such an order of reference and the award are only voidable at the option of the minor, is it necessary for the minor to file a suit in order to avoid them within a certain period of limitation ? If so, what Article of the Indian Limitation Act would govern such a suit ?The Full Bench gave the opinion as under :-

"OUR attention was also drawn to the case of Johara Bibi v.Mohammad Sadak Thambi Marakayar, (1951) 2 Madras L.J. 56. In this case, after an elaborate discussion the view taken by the learned Judges who decided it was that the absence of sanction on behalf of the minor under Order 32 Rule 7 of Code of Civil Procedure, for an agreement to refer the dispute in suit to arbitration has the effect of making a reference a nullity and the award made on sucha reference cannot be said to have any legal effect. It is quite clear that the law laid down in this case is not on all fours with that which has found favor with the Supreme Court. It is, therefore,unnecessary to discuss this case any further. We are bound to follow the observations of their Lordships of the Supreme Courtand on a full consideration of the relevant law on the point our opinion in regard to question No. 1 is as follows : "IN our opinion, the omission by a next friend of a minor to obtain leave of the Court as required by sub-rule (1) of Rule (1) of Rule 7of the Order 32, Code of Civil Procedure to enter into an agreement to refer the case to arbitration has not the effect of rendering the order of reference and the award void ab initio. but has merely the effect of rendering it only voidable at the option of the minor."

WE now come to the second question in this case. That question.shortly stated, is that assuming the award and the decree to be voidable and not void. what is the period of limitation for 'avoidingit by means of a suit? This question assumes that it is necessary for the minor to file a suit in order to avoid the decree within a certain period of limitation. There can be no doubt that in this case the minor has instituted proceedings for partition and in those proceedings one of the issues is whether any permission of the Court for reference to arbitration on behalf of the minor was necessaryand, if so, what is the effect of the permission not having beenobtained. It is unnecessary to answer this question as both parties agree that in this particular case the period of limitation will be three years from the date of attainment of majority by the plaintiff appellant ".

(25) In Kaushalaya Devi & others (supra), their Lordships of the Supreme Court were interpreting the true meaning, object and scope of Order 32 Rule 7 Civil Procedure Code It was held : "THE effect of the failure to comply with Order 32 Rule 7(1) is specifically provided by Order 32 Rule 7(2) which says that any such agreement or compromise entered into without the leave of the court so recorded shall be voidable against all parties other than the minor. Mr. Jha reads this provision as meaning that the impugned agreement is voidable against the parties to it who are major and is void in respect of the minor; in other words, he contends that the effect of this provisions is that the major parties to it can avoid it and the minor need not avoid it at all because it is a nullity so far as he is concerned. In our opinion this contention is clearly in consistent with the plain meaning of the rule. What the rule really means is that the impugned agreement can be avoided by the minor against the parties who are major and that it cannot be avoided by the parties who are major against the minor. It is voidable and not void. It is voidable at the instance of the minor and not at the instance of any other party. It is voidable against the parties that are major but not against a minor This provision has been made for the protection of minors, and it means nothing more than this that the failure to comply with the requirements of Order 32 Rule 7(1) will entitle a minor to avoid the agreement and its consequences If he avoids the said agreement it would be set aside but in no case can be inform with in the agreement be used by other parties for the purpose of avoiding it in their owninterest. The protection of the minor's interest requires that he should be given liberty to avoid it. No such consideration arises in respect of the other parties to the agreement and they can make no grievance or complaint against the agreement on the ground that it has not complied with Order 32, laid down by respondent No. 1does not make the agreement or decree void for it does not effect the jurisdiction of the court at all. The non-observation of the said condition makes the agreement or decree only voidable at the instance of the minor, that, in our opinion, is the effect of the provision of Order 32 Rule 7(1) and (2)."

(26) In Chhabba Lal (supra), it was held that Order 32 Rule 7 C.P.C.was imperative and should be strictly complied with. It was further held that Rule also applied to the agreements to refer the matters in dispute to arbitration. However, an agreement, or settlement to refer the matter in dispute to the arbitrator, without complying with the provisions of Rule 7 could be avoided against all parties, except minor.

(27) In 0m Pal and others (supra), it was held that the production of affidavit from the guardian as well as from the counsel, as required by Rule 7 of Order 32 C.P.C., was mandatory. If the requirements of the Rule are not complied with, then the compromise is voidable at the instance of the minor,despite the absence of proof of fraud or mis-representation.

(28) In Bishundeo Narain and another v. Seogeni Rai & others, , The Supreme Court held : "IN our opinion. Order 32 Rule 7 must be read as a whole. Sub-rule (2) contemplates a position where the mandatory provisions of sub-rule (1) have been ignored. In such case, the resultant agreement on compromise is not to be held a nullity. It is only voidable.Therefore, it is good unless the minor chooses to avoid it. It follows that a decree or order based on the agreement is also good unless the minor chooses to challenge it That is the position where there is no sanction of the Ct. Reading the two provisions together, the rule merely means this No. next friend or guardian for the suit can enter into an agreement or compromise which will bind the minor unless the Ct. sanctions it. If the Patna decision is meant to convey that before the guardian even begins negotiations for compromise with the other side, he must obtain the sanction of the Ct. we are unable to agree with that view."

(29) These decisions, therefore, are Authority for the propositions that(1) No next friend or guardian for the suit, can enter into an agreement or compromise on behalf of the minor, with regard to the matter in suit, without the express leave of the Court; (2) Such leave has to be recorded expressly in the proceedings, though, no particular forum is required for recording such leave in the proceedings; (j) the provisions of Order 32 Rule 7 Civil Procedure Code should be strictly complied with; (4) The affidavit of the next friend and the certificate by the counsel, if the minor is represented, are mandatory; (5) the certificate of the counsel does not preclude the Court from arriving at its own satisfaction, to the effect that the proposed agreement or compromise is for the benefit of the minor (6) when, in ease, a compromise or agreement is enteredinto, without the leave of the Court, then, such agreement or compromise is not void, but voidable against all parties, other than the minor. In other words such agreement can be avoided by the minor against the parties, who are major, but the same cannot be avoided by the parties against the minor.It is voidable and not void. It is voidable at the instance of the minor and not at the instance of any other party; (7) it is not void, because it does not affect the jurisdiction of the Court at all.

(30) There is no force in the arguments of learned counsel for theapplicant, that when the compromise was arrived at on 28/02/1985,counsel for the minor was not present. It may be noted that all the suits, thatis. suits filed by the minors for recovery of their deposits against defendants and the suits filed by the two brothers against each other, were listed on the same date, i.e. 28/02/1985. Order was passed in suit No. 737 of 1984.As the order was passed in suit No. 737 of 1984, so in the order, the presence of the counsel for plaintiff and defendants in that suit wasrecorded.

(31) As all the suits were listed on the same day, so presence of counsel for the parties was recorded in the other suits. In suit No. 1723 of1984. filed by the present applicant, the following proceedings were recorded on 28/02/1985 :

"28.2.1985PRESENT: Mr. N.S. Vashist for the plaintiff. Mr. Arun Mohan withMs. Sangita Mehta for defendant no. 1.For order see suit No. 737 of 1984.28.2.1985."

Sd/'JudgeIt clearly shows that when the order was passed, counsel for the present applicant was present.

(32) In the order dated 28/02/1985, D.R. Khanna. J. has observed that there were five connected suits and that the parties' counsel were present and discussion for settlement had taken place in Court. In the order, it is also in observed : "SO far as the amounts which are lying deposited in the account.books of the firm Lalji Mal Tika Ram in the names of the wives and the children of Ram Charan and Ram Gopal respectively, or their joint Hindu families. It is agreed between the two brothers and plaintiffs of the other three suits that those amounts would be payable to them and the entries in them are correctly recorded. Incase any payments have also been made to any of them against those deposits, they too have been recorded in the account books of the firm, and they are accepted by the parties. The balance sheet dated 9th October will be considered as the base. It will be equitable and fair that payments to both sides should be simultaneously made so that nobody steals a march over the other or given anypreference."

(33) Thus, I am of the view that the settlement was arrived at on 28/02/1985, in the presence of the counsel for the parties and twobrothers, namely, Shri Ram Charan and Shri Ram Gopal.

(34) The present application has already been treated, as an application for review of the impugned order. The next question, arising for decision is with regard to limitation.

(35) The order was passed on 28/02/1985. Application being I A. No. 5077 of 1985 was filed in Court on 9/09/1985. The period of limitation for application for review is 30 days, from the date of the decree or order, as provided under Article 124 of the limitation Act, 1^63. Thus,there is a delay of 5 months and 9 days. Plaintiff has not filed any application for condensation of delay. Thus, in my view, the present application is barred by limitation.

(36) It is, however, will be appropriate to note that the claims of the minors, were referred to the arbitration under the aforesaid settlement.because it had been agreed between the two brothers and the plaintiffs of the other 3 suits, that the amounts would be payable to them and that the entries in the balance sheet of the firm were correctly recorded. This was also with regard to the deposits, made in the names of the wives and children of both the brothers, though no suit had been filed by them. As these amounts had been admitted by two brothers, who are defendants in the suits, filed byminors, at the time of settlement, so it was observed by D.R. Khanna, J.that the arbitrator could give his award straightaway about these undisputeditems.

(37) I hope that the arbitrator will consider this aspect of the order,with regard to the passing of the award for immediate payment to the wives and children of the two brothers, including the minors, who filed suits for recovery of various amounts against the present defendants.

(38) It is made clear that this decision will not affect any right of the minor applicant, with regard to taking any appropriate action, after he attains the age of majority.

(39) Under the circumstances, the application, being 1.A. No. 5077 of1985, is dismissed. No order as to costs.