P.A. AHAMMED IBRAHIMversusTHE FOOD CORPORATION OF INDIA

A                          P.A. AHAMMED IBRAHIM
                                          v.
                     THE FOOD CORPORATION OF INDIA

                                AUGUST 17, 1999

B                   [D.P. WADHWA AND M.B. SHAH, JJ.]


         Arbitration Act, I 940-Section 20-Appointment of arbitrator by
  court-Scope and jurisdiction of-Appellant entered into an agreement with
  respondent having an arbitration clause-Held, sub-sections (2) and(/) of
C Section 20 mandate the court to pass an order either referring .the matter to
  arbitration or to reject the same and there was no jurisdiction to pass a
  decree in favour of the applicants-Thus application under Section 20 is not
  a suit-Before applying provisions of Order VI Rule I 7, there must be
  institution of the suit-Any application filed under provisions of different
D statutes cannot be treated as a suit unless otherwise provided in the said Act
  as otherwise it would cause serious prejudice to the other side-In such case
  court could not resort to inherent jurisdiction under Section I 5 I CPC as it
  would nullifY the procedure prescribed under the Act-Amendment of
  applications not filed under a pending suit-Inherent powers of the court-
  When to be exercised-Civil Procedure Code 1908, Order VJ Rule 17, Section
E 151
           Appellant entered into an agreement with the respondent to carry out
    the work of loading-unloading and transportation of foodgrains on their
    behalf from April 1973 to April 1975. Respondent had an option under the
    agreement to extend the contract by one year, and respondent informed the
F   appellant that it was not ready and willing to extend the period of con.tract
    beyond the original contract period. Agreement also had an arbitration
    clause. In April 1978, appellant filed a suit for recovery of certain sum from
    the respondent being money due on account of pending bills, security deposits
    etc. for the contract period. As against this, respondent filed petition under
G   Section 20 of the Arbitration Act in April 1978 for appointment of arbitrator
    to refer certain disputes. Respondent also filed an interim application under
    Section 34 of the Act for staying suit filed by the appellant against them.
    Trial Court dismissed the application filed by respondent on the ground that
    the same was not maintainable inasmuch as the application failed to disclose
    any dispute or difference between the parties which would come within the
H                                        498
                    P.A. AHAMMED IBRAHIM v. F.C.I.                          499
arbitration agreement. On appeal, a Division Bench of the High Court               A
dismissed it by holding that the trial court had rightly exercised its
jurisdktion in declining to stay the suit under Section 34 of the Arbitration
Ad                                                                 .

       In March 1986, the respondent filed an application for amendment of
the pending application under Section 20 of the Arbitration Act for converting     B
it as a suit for recovery of certain sum against appellant, which was dismissed
by the trial court. Respondent filed a revision petition before the High Court
which was allowed by resorting to its inherent jurisdiction under Section
151 CPC. Hence this appeal.

      Allowing the appeal, the Court                                               c
      HELD: Final order which is required to be passed in an application
under Section 20 of the Arbitration Act is either to refer the matter to the
arbitration or to reject the same and there is no question of passing any
decree in favour of the applicant Section 20 nowhere provides that application     D
filed for referring the dispute to the arbitrator is to be treated as a plaint
as contemplated under CPC. Hence, it cannot be considered to be a plaint.
Before applying provisions of Order VI Rule 17, there must be institution
of the suit. Any application filed under provisions of different statutes cannot
be treated as a suit or a plaint unless otherwise provided in the said Act. In
any case, the amendment would introduce a totally new cause of action and          E
change the nature of suit. It would introduc~ a totally different case which
is inconsistent with the prayer made in the application for referring the
dispute to the arbitrator. Primafacie, such amendment would cause serious
prejudice to the contention of the appellant that the claim of the respondent
to recover the alleged amount was barred by the period of limitation as it was     F
pointed out that cause of action for recovery of the said amount arose in the
year 1975 and the amendment application was filed on 30.03.1986. In such
cases, there is no question of invoking inherent jurisdiction of the court
under Section 151 of the CPC as it would nullify the procedure prescribed
under CPC. (502-E-F-G-H; 503-A)
                                                                                   G
      CIVIL APPELLATE JURISDICTION: Civil Appeal No. 63of1990.

      From the Judgment and Order dated 14.7.88 of the Kerala High Court
in C.R.P. No. 494 of 1987.

      T.L. Viswanatha Iyer, E.M.S. Anam and Fazlin Anam for the Appellant.         H
     500                       SUPREME COURT REPORTS [1999] SUPP. l S.C.R.

A          S.K. Gambhir for the Respondent.

           TI1e Judgment of the Court was delivered by

           SHAH~ J. By the impugned order dated 14th July, 1998 in C.R.P. No. 494/
     87, the learned Single Judge of the High Court of Kerala by exercising
B    jurisdiction under Section I 15 of the Civil Procedure Code has granted
     permission to the respondent to amend the application filed on 4.4.1978 under
     Section 20 of the Arbitration Act, 1940 (hereinafter referred to as "the Act")
     for appointment of arbitrator to resolve the dispute between the parties so as
     to convert the same as a suit for recovery of amount claimed therein. On
C    30.3.1986, the respondent-Corporation filed an interim application being I.A.
     No.885 of 1986 for amending the pending application under Section 20 of the
     Act so as to convert the same as a plaint under Order VII Rule 1 of the C.P.C
     for recovery of money. The application was rejected by the trial court. The
     High Court set aside the order passed by the trial court and allowed the same
     by exercising powers under Section 151 and Order VI rule 17 of the Code of
D    Civil Procedure. That order is challenged by filing this appeal.

           It is the case of the appellant that the appellant entered into an agreement
     with the respondent-District Manager, Food Corporation of India, Palghat,
     Kerala State to carry out the work of loading-unloading and transportation of
     foodgrains on behalf of the Corporation from 4th April, 1973 to 4th April, 1975
E    at or around the godowns of the respondent at Palghat under the terms and
     conditions embodied in the tender document. The agreement contained an
     option clause which gave the respondent unilateral option to extend the
     contract by one year. It is. also admitted position that agreement contained
     a clause for arbitration in case of dispute; that before the expiry period of the
F    contract, appellant infonned the respondent on 16.12.1974 that he was not
     ready and willing to extend the period of contract beyond the original contract
     period which was to expire on 3rd April, 1975. On the basis of the
     communication, respondent-Corporation invited fresh tenders for the period
     commencing from 4th April, 1975.

G·         Thereafter, on 3.4.1978, the appellant filed Civil Suit No. O.S.130of1978
     before the Court of Subordinate Judge, Palghat for recovery of Rs.2,05,921.90
     from the respondent being money due on account of pending bills, security
     deposit etc., for the contract period 4.4.1973 to 3.4.1975.

          As against this, respondent filed Petition (Original Suit No. 107178)
H    under section 20 of the Arbitration Act, 1940 on 4.4.1978, before the



                                                                                          t.-
              P.A. AHAMMED IB~AHIM v. F.C.I. [SHAH, J.]                     501
Subordinate Judge, Palghat praying that (i) the agreement be filed; (ii) an         A
arbitrator be appointed and directed to proceed to adjudge the dispute in
accordance with law and (iii) for a direction for costs and such further relief.
The respondent-Corporation also filed an application being Interlocutory
Application No.1406of1978 under Section 34 of the Arbitration Act in Civil
Suit No.130 of 1978 for stay of further proceedings and for referring the
dispute to the arbitrator. The trial court dismissed the said application as not    B
maintainable inasmuch as the application failed to disclose any dispute or
difference between the parties which would come within the arbitration
agreement. Against that order, the respondent-Corporation preferred an appeal
to the High Court of Kerala being M.F.A No. 661 of 1980. By order dated
1.8.1985 the Division Bench of the High Court dismissed the said appeal by          C
holding that the trial court has rightly exercised its jurisdiction in declining
to stay the suit under Section 34 of the· Arbitration Act.

      Subsequently on 13th March, 1986, the respondent filed an application
for amendment of the pending application under Section 20 of the Arbitration
Act for converting it as a suit and praying for recovery of a sum of Rs.            D
1,74,067.08 from the appellant. The Principal Sub Judge, Palghat dismissed the
said application inter alia by holding that the dispute for appointment of
Arbitrator was now sought to be changed into a suit for recovery of amount
which could not be allowed as it would change the nature and character of
suit and also on the ground that the claim of the respondent was barred by          E
the period of limitation as the alleged debt claimed by the respondent became
due on 3rd April, 1976.

       Against that order, the respondent preferred Revision Application which
was allowed by the learned Single Judge by giving reasons, in his own words
thus-Jurisprudentially speaking an arbitrator is only a delegate of judicial        F
powers which essentially are the property of the State. In short the courts are
repositories of judicial powers, subject to the divesting of the power by the
State, the proprietor of this power. Here comes the relevance of the law of
arbitration which is mainly procedural in content. In short it is not only the
privilege of the Court but it is duty also "to come to the assistance of the        G
parties by the removal of the impasse and the extrication of their rights".
Learned Judge thereafter held that the suit no. O.S. 107 of 1978 instituted by
respondent contains all particulars that should contain in a regular suit,
whether the suit is one under Section 20 or regular suit, the cause of action
will be same, the difference between the suit filed under Section 20 and regular
suit is only in regard to the reliefs prayed for, the suit under Section 20 is in   H
    502                        SUPREME COURT REPORTS [1999] SUPP. I S.C.R.

A the nature of a regular suit; the amendment shall not cause prejudice to other
    side which cannot be compensated in terms of cost; it cannot also he said
    that by allowing the amendment, the plaintiff is allowed to agitate a cause
    barred by limitation. The learned Judge also resorted to inherent jurisdiction
    under Section 151 C.P .C. and held that in the interest of justice, amendment
B   requires to be allowed.

           Reading the order as above, it is apparent that the learned Judge has
     not verified the provisions of Section 20 of the Arbitration Act. Sub-section
     (2) no doubt provides that the said application shall be in writing and shall
     be numbered and registered as a suit, but at the same time, it cannot be stated
C    as a plaint filed under the Code of Civil Procedure. The language of sub-
     section (l) is clear which provides that in case of arbitration agreement
    "before the institution of any suit with respect to the subject matter of the
    agreement or any part thereof... ", any persons may apply to a Court having
    jurisdiction in the matter to which the agreement relates, that agreement be
    filed in Court. This would dearly mean that it is a stage prior to the institution
D   of the suit and is not a suit. Under the said Section after notice is given to
    the other party and if no sufficient cause is shown, the Court shall order that
    agreement be filed in the Court and refer the matter for arbitration to the
    arbitrator to be appointed by the parties or to an arbitrator appointed by the
    Court. The procedure for deciding the said application is different from deciding
E   the suit. Fina! order which is required to be passed in the said application is
    either to refer the matter to the arbitrator or to reject the same and there is
    no question of passing any decree in favour of the applicant. Section 20
    nowhere provides that application filed for referring the dispute to the arbitrator
    is to be treated as a plaint as contemplated under C.P.C. Hence, it cannot be
    considered to be a plaint.
F
           Further, before applying provisions of Order VI Rule 17, there must be
    institution of the suit. Any application filed under provisions of different
    statutes cannot be treated as a suit or plaint unless otherwise provided in the
    said Act. In any case, the amendment would introduce totally new cause of
G   action and change the nature of suit. It would also introduce a totally different
    case which is inconsistent with the prayer made in the application for referring
    the dispute to the arbitrator. Prima facie, such amendment would cause
    serious prejudice to the contention of the appellant that the claim of the
    respondent to recover the alleged amount was barred by the period of limitation
    as it was pointed out that cause of action for recovery of the said amount
H   arose in the year 1975 and the amendment application was filed on 30.3.1986.
              P.A. AHAMMED IBRAHIM v. F.C.I. [SHAH, J.]                    503
Lastly, it is to be stated that in such cases, there is no question of invoking   A
inherent jurisdiction of the Court under Section 151 of the C.P.C. as it would
nullify the procedure prescribed under the Code.

      In the view of the matter, the appeal is allowed with costs. The impugned
order passed by the High Court ofKerala in C.R.P. No. 494/87 is quashed and
set aside and the order passed by the trial court is restored.                  B
RK.S.                                                         Appeal allowed.