M.P. Rajya Tilhan Utpadak Sahakari Sangh Maryadit, Pachama, District Sehore and Others vs M/s Modi Transport Service.
Name of the Case: M.P. Rajya Tilhan Utpadak Sahakari Sangh Maryadit, Pachama, District Sehore and Others vs M/s Modi Transport Service.
Case Number: Civil Appeal No. 1973 OF 2022
Judges Name: Hon’ble Judges Sanjiv Khanna J, Bela M. Trivedi J
Order dated: 11.05.2022
Facts of the case:
- The appeal is preferred by M.P. Rajya Tilhan Utpadak Sahakari Sangh Maryadit, Pachama, District Sehore and Others (“Appellants”) against M/s. Modi Transport Service (“Respondent”). The Respondent filed a suit before the Hon’ble District Judge, Sehore Camp (“District Court”) for settlement of accounts and sought for payments from the Appellant.
- The District Court on an application moved by the Respondent, appointed a S K Mantri (“Panch”) as a Panch for auditing the accounts of both the parties. The Panch submitted his report stating a sum of Rs. 24,03,300/- is payable to the Respondent by the Appellants. The District Court passed an order stating the Panch was appointed as an arbitration under Section 21 of the Arbitration Act, 1940 (“Act”) and contentions of the Appellant that he was only appointed to audit accounts as a chartered accountant was overruled and the order appointing Panch as an arbitrator attained finality.
- The Appellant filed an appeal before the Hon’ble High Court. The Hon’ble High Court rejected the appeal on the ground the Panch was appointed as an arbitration with the consent of the parties in accordance with Section 21 of the Act. The Appellants have approached the Hon’ble Supreme Court by the way of this appeal.
Supreme Court observed/held as follows:
- The Court discussed the essentials of Section 21 of the Act and noted that the parties must agree for the dispute to be referred to arbitration and for the purposes of Section 21 of the Act, the parties should apply to the Court in writing for order of reference.
- The case of Firm Khetu Ram Bashamber Dass v. Kashmiri Lal was referred by the Court and held that the word ‘agree’ in Section 21 of the Act refers to consensus ad idem between the parties where they agree to forego their right of adjudication in Courts.
- It was observed that the application moved by the Respondent before the District Court was not signed by the Appellants and it would not constitute as an agreement or consensus for reference to arbitration.
- The Court recorded that there is a distinction between the scope and functions of an arbitral tribunal and a commissioner appointed under OXXVI Rule 9 and Rule 11 of the Code of Civil Procedure, 1908. The matter referred to the Panch was for limited for examination of the accounts.
- It was noted that the Panch himself did not decide the disputes related to the rents or security charges. The Court held that the report of the Panch is not an award and directed the suit to be heard and decided on merits.
The Hon’ble Supreme Court allowed the appeal.