# RAMVALLABH TIBREWALLA v. DWARKADAS & CO

- **Citation:** [1966] 1 S.C.R. 689
- **Court:** Supreme Court of India
- **Decided:** 1965-08-31
- **Case number:** Civil Appeal No. 460 of 1965
- **Bench:** K. Subba Rao, J. R. Mudholkar, R. S. Bachawat
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/ramvallabh-tibrewalla-v-dwarkadas-co-3584
- **Pages:** 6

## Headnote

Arbitration Act ( 10 of 1940). s. 20-Scope of.
After the appellant instituted a suit against the respondent claiming
a money decree the parties entered into an agreement for reference of
the disputes to arbitration. The agreement provided for the withdrawal
C
of the suit and the suit was withdrawn on or about the same date as that
of the agreement. There were changes in the arbitrator, and also exten ..
sions of time, but no award was made. The appellant therefore applied
to the Court for filing of the arbitration agreement, under s. 20 of the
Arbitration Act, 1940, but the application was rejected on the ground
that the section was not attracted.
D
E
F
G
In .foe appeal to this Court,
HELD : In the light of the other parts of s. 20, its heading, and the
general scheme of the Act, the words "before the institution of any suit
with respect to the subject matter of the agreement or any part of it" in
the section, mean, ''while no suit with respect to the subject matter of
the agreement or any part of it is pending"; and not "where no suit has
been instituted".
Therefore, the section is attracted
to an arbitration
agreement entered into while no suit with respect to its subject matter
ia pending. [691 G-H; 692 H; 693 A-BJ
Since on a proper interpretation of the
agreement in the present
case the withdrawal of the suit was the essential condition, the agreement would become operative only upon its fulfilment.
Thus the effective arbitration agreement came into existence when the suit was withdrawn and may properly be said to have been entered into while no suit
with respect to its subject matter
was pending.
Therefore, the agreement could be filed under s. 20. [694 A-Cl

## Text

f
'
A
RAMVALLABH TIBREWALLA
v.
DWARKADAS & CO.
August 31, 1965
B
[K. SUBBA RAO, J. R. MUDHOLKAR AND R. S. BACHAWAT, JJ.]
Arbitration Act ( 10 of 1940). s. 20-Scope of.
After the appellant instituted a suit against the respondent claiming
a money decree the parties entered into an agreement for reference of
the disputes to arbitration. The agreement provided for the withdrawal
C
of the suit and the suit was withdrawn on or about the same date as that
of the agreement. There were changes in the arbitrator, and also exten ..
sions of time, but no award was made. The appellant therefore applied
to the Court for filing of the arbitration agreement, under s. 20 of the
Arbitration Act, 1940, but the application was rejected on the ground
that the section was not attracted.
D
E
F
G
In .foe appeal to this Court,
HELD : In the light of the other parts of s. 20, its heading, and the
general scheme of the Act, the words "before the institution of any suit
with respect to the subject matter of the agreement or any part of it" in
the section, mean, ''while no suit with respect to the subject matter of
the agreement or any part of it is pending"; and not "where no suit has
been instituted".
Therefore, the section is attracted
to an arbitration
agreement entered into while no suit with respect to its subject matter
ia pending. [691 G-H; 692 H; 693 A-BJ
Since on a proper interpretation of the
agreement in the present
case the withdrawal of the suit was the essential condition, the agreement would become operative only upon its fulfilment.
Thus the effective arbitration agreement came into existence when the suit was withdrawn and may properly be said to have been entered into while no suit
with respect to its subject matter
was pending.
Therefore, the agreement could be filed under s. 20. [694 A-Cl
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 460 of
1965 ..
Appeal by special leave from the judgment and order dated
February 21, 1964, of the Bombay High Court in Appeal No.
58 of 1960.
P. R. Mridul, G. L. Sanghi, J. B. Dadachanji, 0. C. Mathur
and Ravinder Narain, for the appellant.
A. V. Viswanatlza So.stri, D. R. Dhanuka, B. R. Agarwala,
and Tl. K. Puri, for the respondent.
H
The Judgment of the Court was delivered by
Bachawat, J.
This appeal raises a question of construction of
s. 20 of the Indian Arbitration Act, 1940. The appellant instituted
'690
SUPREMB COURT- μPORTS
[1966] l S.C.R.
I
Suit No. 1712 of 1949 in the Bombay High Court against
A
the respondent claiming a decree for money ,said to be due on
account of various dealings between the parties.
On or about
February 18, 1954, the parties entered into an arbitration agree--
ment for reference of the disputes to the arbitration of Sri Ramrikhdas
Parasrampuria.
The agreement also provided
for
withdrawal of the suit.
In view of the agreement, !he suit was
<luly withdrawn.
Sri Parasrampuria was subsequently removed,
and in his place, two other arbitrators were appointed.
These
arbitrators were also subsequently removed, and in their place,
B
Sri S. V. Gupte "was appointed the arbitrator.
The time for
making the award was extended by orders of Court from time to
time up to March 2f, 1958.
Two more applications for
extension of time were rejected by the Court. Sri S. v. Gupte was
unable to make the award by March 25, 1958.
On April 3, 1958, the appellant applied to the Court for (a)
c
the filing of the arbitration agreement under s. 20 of the Indian
Arbitration Act, 1940, (b) extension of the time of Sri. Gupte to D
make the award, ( c) in the alternative, reference of the disputes
to some other person, and ( d) an order for exclusion ,of the time
from February 18, 1954 up to April 3, 1958 so as to save the
bar of limitation, if any_
The prayer for extension of the time
of Sri. Gupte to make the award was rejected by K. K. Desai,
J. and also by the appellate Court, and that prayer is no longer
E
pressed by the appellant.
Both Courts also rejected the appel-
, lant's prayer for the filing of the arbitration agreement
under
-s. 20. K. K. Desai, J. held that in order to attract s. 20, the
applicant must prove that the subject-mat\er of the arbitration
agreement was not the subject-matter of any suit already instituted. The appellate Bench held that the arbitration agreement
having been entered into five years after the institution 9f the
suit, could not be said to be an arbitration agreement before the
institution of any suit with respect to tJ:ie subject-matter of the
agreement as contemplated by s. 20( 1). The appellant now
appeals to this Court by special leave.
~
The responqent contends that the opening words of s. 20 pre--
dude the filing of the arbitration agreement dated February 18,
1954, as the agreement was entered into after the institution of
F
G
a suit with respect to the subject-matter of the agreement. The
appellant cqntends that ( 1) s. 20 pennits the filing of an arbitr.ation agreement entered into during the pendency of such a suit,
H
if the suit is not pe11.ding when the party applies for the filing,
in the alternative (2) s. 20 permits the filing of an arbitration
I
•
..
j
A
B
RAMVALLABH v. DWARKADAS (Bachawat, !.)
691
agreement entered into while no such suit is pending, though such
a suit might have been instituted previously, and ( 3) the arbitration agreement dated February 18, 1954 was intended to be
operative upon, the withdrawal of the suit and was thus an agreemeut entered into while the suit was no longer pending and it
could properly be filed under s. 20.
Sub-section ( I ) of s. 20 reads :
"Where any persons have entered into an arbitration agreement before the imtitution of any suit with
respect to the subject-matter of the a3reement or any
part of it, and wher;; a difference has arisen to which
c
the agreement a;)plies, they or any of them, instead of
proceeding under Chapter II, may apply to a
Court
having jurisdiction in the matter to wh;ch the agreement relates, that the agreement be filed in Court."
The dispute turns on the proper meaning to be given to the
n words ·"before the institution of any suit with respect to the subject-matter of the agreement 0r any part of it".
Four alternative interpretations of these words are suggested :
(1) The
\\'Ord
"before" suggests Precedence in point of time;
the
se~tion
contemplates
an
arbitration
:1greement
followed
by a suit with rcsnect to its subject-matter and if there is
E
no such suit, the section is not attracted; (2) The words "before
the institution of any suit" mean "where no suit has been instituted"; the section precludes the filing of an arbitration agreement
entered into after the institution of the suit, even though the suit
may have been withdrawn before the making of the agreement. (3)
The \VOrd"> "before th~ ins!itution of an"';r suit" mean "while no suit
F
is pending"; the section permits the filing of an arbitration agreement entered into while no suit is pending, though previously such
a suit was instituted; and ( 4) the words "before the institution of
any suit" e1c. qualify the words "may apply"; the section ,-,ermits
the filing of all arbitration agreements provided the application for
fiii.n g is mac'e while no suit is pending.
G
The object of the opening words is to restrict the op«ration of
s. 20 to a Jjmited cla~s of arbitration agreements.
It is obvious
that the opening words admit of more than one meaning. For the
purpose of resolving the ambiguity, it is legitimate to refer to the
other parts of the section, the heading of Chap. III and the general
H
seheme of the Act.
The Arbitration Act, 1940 contemplates three classes of arbitrations : ( 1 ) arbitration without intervention of a Court under
692
SUPUMB C.OURT
lll!POllTS
[I 9o6 J I S.C.R.
Chap. II; (2) arbitration with intc•rvention of a Court where
there is no suit pending, under Chap. Ill, and ( 3) arbitration in
suits under Chap. IV.
An arbitration agreement between
the
parties to a pending suit for reference of any dbpute in the suit
entered into while the suit is pending, may be enforced under
Chap. IV only by obtaining an order of rcierence from the Court
in which the suit is pending and not hy proceeding unJer Ci1apa. il
and III.
But an arbitration agreement entered into whik no suit
with respect to its subject-matter is pending cannot be enforced
under Chap. IV. and there is nothing in Chap. IV or the general
scheme of the Act, which preclude., tlic enforcement ot such an
agreement under Chaps. II and II I. The effect of a 'ubsequent
suit with respect to the subject-matter of the agreement is considered and dealt with in ss. 34 and 35 of Chap. V.
The beading of Chap. Ill shows that th~ subject-rnattcr of
s. 20 is "arbitration with intervention of a Court where there is
A
B
c
no suit pending". The heading is wide enough to include arbitration under an arbitration agreement entered imn while "'' s!1it
ll
with respect t<> the subject-matter is pending.
Tho words "instead of proceeding under Chapter II"' in 1. 20
suggest that the parties may proceed under Chap. lll where they
could proceed under Chap. II.
Reading Chap. ll with s. 2(a).
it is plain that an arbitration agreement entered into while no suit
with re,pect to its subject-matter is pendinl! may be enforced
under Cilap. II.
Since such an agreement is enforcr:ihlc under
Chap. TT. r:rima fade it is also enforceable under Chap. m.
The opening words of s. 20 contemplate that a suit with re<1pect to th~ subject-matter of the ~rbitration agreement may or
mav not be filed.
In order to attract s. 20, it is not, therefore,
n~ssary that the arbitration agreement shou Id be followed by "
· suit with respect to its subject-matter. The word "before~ is not
tL'C<i in the strict grammatical sense of priority in order of time.
In the light of the other parts of s. 20, its heading and the general
scheme of the Act. we think that the legislature used the wonJ.
"before the institution of any suit" in the sense of "while n" ,;uit
is pendinr" and not in the sense of "where no suit has hcen instituted." The former meaninj!. is more in harmony with th~ real
intention of the legislature. If the agreement is entered into while
no suit with respect to iL' subject-matter is pending. the fact that
its subject-matter was the subj~ct-matter of a previously instituted
suit would not preclude its enforcement under Chaps. TT :ind m.
We think, therefore, that the words "before the institution of anv
suit with respect to the subject-matter of the ogrrement <'r Jnv
G
11
'
'
~
..
.. ,
'
r"
t,
, j
RAMVALLABH I'. DWARKADAS (Bachawat, J.)
693
A part of it" mean "while no suit with respect to the subject-matter
of the agreement or any part of it is pending". These words
qualify the preceding words "an arbitration agreement" and not
the succeeding words "may apply". In other words, s. 20 is attracted to an arbitration agreement entered into while no suit with respect to its subject-m;itter is pending. If it is entered into while
B such a suit is pending, it cannot be enforced by an application
under s. 20, though the applicafon is made when the suit is no
longer pending.
Learned counsel for the parties cited before us the following
cases decided under paragraph 17 of Sch. II of the Code of 1908,
C viz., Kokil Singh v. Ramasray Prasad Choudhary('), Lal Chand
v. Sri Ram('), Hira Ram v. Ram Ditta(') and Dinkarrai Lakshmi-
. prasad v. Yeshwantrai Hariprasad(').
It is to be noticed that
the heading of Chap. III "Arbitration with intervention of a Court
where there is no suit pending" and the words in s. 20 "before the
institution of any suit with respect to the subject-matter of the
D
agreement or any part of it" and "instead of proceeding under
Chapter II" do not find any counterpart in the corresponding provision of Sch. II of the Code of Civil Procedure, 1908. In the
circumstances, we think that the cases decided under paragraph
17 of Sch. II of the Code of 1908 are not decisive on the question
of construction of s. 20 of the present Act, and that section must
E
be construed in the light of ·its own language and the scheme of
the prerent Act.
Now, the question is whether the agreement dated Febmary
18, 1954 is an agreement, to which s. 20 is attracted. The relev11nt operative portion of the agreement reads :
I'
"All matters in disputes in suit No. 1712 of 1949
(Ramvallabh Tibrewalla v/s. Messrs. Dwarkadas & Co.)
in Bombay High Court including the question of whether the accounts were made up and adjusted and/or
settled between the parties as pleaded in the written
statement of the Defendants and the costs of the suit be
G
referred to the sole arbitration of Ran1rikhdas Parasrampuria .... The intention of the parties is that the
said matters in dispute between them be decided by
arbitration and it is agreed that the said suit will therefore be withdrawn."
The agreement was signed on February 18, 1954. while the suit
H
~lj:~ pending. Before us, it is admitted by counsel for both parties
(I) (1924) l.L.R. J Patna 443.
(3) A.I.R.. 1935 Lab. 59.
'
(2) A.LR. 1930 Lab. 1066.
(4) (1930) I.L.R. 54 Bom. !97.
694
SUPREME
COURT
REPO!l.TS
[196.6] 1 S.C.R.
I
,
that the suit was withdrawn on OJ about the sap:ie date. The pa'rties
obviously intended that the pending suit would, be withdrawn imc
mediately so that the disputes might be resolved by arbitration
without recourse to litigation. On a proper interpretation of the
agreement, the withdrawal of the suit was the essential cqnditio,h,
upon the fulfilment of which the agreement would,becorhe operative. Thus, the effective arbitration agreement came into existence
when the suit was withdrawn and may properly be said to have
been entered into while no suit with· respect to its subject-matter
was pending. The agreement can, therefore, be filed under s. 20.
'
.
The ground upon which the Courts below dismisseA,.l)w-application for filing the arbitration agreement under s .. 20 cannot,
therefore, be upheld. A technical objection as to the frrune of the
application based on Rule 391 of the High ·Court Rules is. no
longer pressed.
But the respondent also contenils that ( 1) the
appellant elected to proceed with the arbitration under Chap: II,
and having so ·elected, he cannot now claim arbitration under
Chap. III; (2) the application is barred by limitation, and the
prayer for exclusion of time under s. 3 7 ought not to be allowed;
and ( 3) the parties intended that the arbitration would be by
Ramrikhdas Parasrampuria only, and as he is not willing to act
and/ or has been removed, there can be no further arbitration.
The Courts below have not considered these contentions of the
respondent. Having heard learned counsel on both sides, we think
that the respondent is entitled to ask for the Jina\ disposal of tht: I
application after consideration of these points by the lower appellate Court, and for that purpose, this' case should be remanded.
In the result, the appeal is allowed, the judgment. «nd decree
dated February 21, 1964 of the Bombay High Court in Appeal·
No. 58 of 1960 are set a•ide and the aforesaid Appeal No. 58 of
1960 is remanded to the Court below for disposal in accordance
with law. The respondent shall pay to the appellant the costs of
this appeal.
•
Aipeal allowed.
" '
•
A
),
~~
- ·' 6,
B
l
.-
~ ...
c
D ,
F