Summary
A transport firm sued a cooperative federation in 1993 for settlement of accounts for coal transportation. The plaintiff alone applied for appointment of a Chartered Accountant as 'panch/commissioner' to audit the accounts and report; the court, recording that defence counsel had no objection, appointed him and later called him an arbitrator. His report found Rs. 24,03,300 due to the plaintiff. The trial court treated it as an award under Section 21 of the Arbitration Act, 1940, rejecting objections as time-barred, and the Madhya Pradesh High Court affirmed. The Supreme Court allowed the appeal: Section 21 requires all interested parties to agree and apply in writing for a reference — a consensus to forgo court adjudication — which the application and order did not disclose; the Chartered Accountant was a commissioner under Order XXVI Rule 11 CPC whose report only aids the court.
Issues
- Whether an application by the plaintiff alone for appointment of a Chartered Accountant as 'panch/commissioner' to audit the accounts, accepted by the court on defence counsel stating he had no objection, amounts to an agreement of all parties to refer the subject matter of the suit to arbitration under Section 21 of the Arbitration Act, 1940.
- What distinguishes an arbitrator from an expert or a commissioner appointed by the court, and what is the status of the report of a Chartered Accountant appointed to examine accounts in a pending suit.
Provisions considered
- Section 21 (parties to suit may apply for order of reference), Arbitration Act, 1940All parties interested must agree that a matter in difference in the suit be referred to arbitration and apply in writing before judgment; 'agree' connotes consensus ad idem, a considered decision to forgo adjudication by the court (Firm Khetu Ram Bashamber Dass approved). Without an arbitration agreement the court cannot refer unwilling parties and counsel's oral consent does not suffice (Kerala State Electricity Board v. Kurien E. Kalathil; Byram Pestonji Gariwala), and a reference made without the agreement of all parties, and the award founded on it, are without jurisdiction. The plaintiff's unilateral application for an audit and the order accepting it did not satisfy Section 21. (¶¶ 15, 16, 17, 18, 19, 20, 21, 23, 24, 25, 26, 27)
- Order XXVI Rules 9 and 11 (commissions for local investigation and to examine or adjust accounts), Code of Civil Procedure, 1908A commissioner may be appointed by the court with or without the parties' consent and performs a ministerial, non-adjudicatory function, reporting to the court which may confirm, vary or set aside the report or issue a new commission; the report aids but does not bind the court and may become part of the evidence. The Chartered Accountant here was such a commissioner, confined to examining accounts, and his report of 22.06.1995 is to be so treated. (¶¶ 32, 33, 35, 36)
- Section 14A (power of court to engage experts), inserted by Act 18 of 2018, Specific Relief Act, 1963Noted as a parallel scheme under which an expert's opinion forms part of the record and the expert may be examined in court, illustrating that an expert or commissioner acts as a facilitator for the court rather than an adjudicator. (¶ 34)
Held
- The application dated 23.12.1994 was moved and signed by the plaintiff alone and sought the appointment of a Chartered Accountant as panch/commissioner to conduct an audit of the accounts and submit a report to the court; it cannot be read as an application founded on a prior agreement or consensus for reference to arbitration. The order accepting it, recording only that defence counsel had 'no objection' to the proposed person being appointed as panch and fixing his fee by the arbitration schedule, is vague and does not record any agreement or concession by the defendant to arbitration as a substitute for court adjudication; the suit was not disposed of, the court retained dominion over it and continued to pass orders, and the letter of appointment required an audit of the disputed accounts and a report to the court. (¶¶ 6, 7, 8, 9, 18, 19, 20, 21)
- Arbitration is a private alternative to court adjudication; absent a pre-existing arbitration agreement, a court may refer the subject matter of a pending suit only when the parties mutually agree, and under Section 21 the requirement is stricter still — the interested parties must agree in writing before the court. Reference to arbitration has serious civil consequences, an award being challengeable only on limited grounds, so a joint application or an agreement recorded and signed by the parties is required (Afcons Infrastructure; Shailesh Dhairyawan; Kerala State Electricity Board). (¶¶ 15, 17, 23, 24, 26, 27)
- Whether a chosen form of dispute resolution is arbitration or expert determination is a matter of construction of the parties' intention; an arbitral tribunal decides on the evidence and submissions of the parties by applying the law, whereas an expert decides on his own expertise and investigation, and an expert's report assists the court and is not binding on it — an expert deposes, he does not decide (K.K. Modi; Bharat Bhushan Bansal; Dayal Singh). A commissioner under Order XXVI performs a ministerial act with nothing left to his discretion; the court may appoint such a 'facilitator', commissioner or expert, for ascertainment even of a disputed fact, who may hear the parties and opine on the material they produce to help the court decide. (¶¶ 28, 29, 30, 31, 32, 33)
- The matter entrusted to the Chartered Accountant was limited to examination of the accounts, whereas the disputes in the suit — the applicable rate after withdrawal of the letter of 05.06.1992, the 1% shortage stipulation, deductions for moisture and quality, delay, interest and storage charges — were far wider; he exceeded his remit by deciding such questions while himself leaving the rent and security charges to the court. His report is not an award but the report of a commissioner under Order XXVI Rule 11, the defendant's objections to it are to be considered in that light, and the suit is to be tried and decided on merits. (¶¶ 10, 35, 36)
Result
Appeal allowed; the Madhya Pradesh High Court's judgment of 19.09.2019 in First Appeal No. 505 of 1996 and the Additional District Judge, Sehore's order of 16.05.1996 treating the Chartered Accountant's report of 22.06.1995 as an arbitral award under Section 21 of the Arbitration Act, 1940 set aside; the report to be treated as that of a commissioner appointed under Order XXVI Rule 11 CPC, the defendant's objections to be considered accordingly and the civil suit to proceed and be decided on merits. Pending applications disposed of; no order as to costs.