Mohamed v Chadha (C.A. No. 23/1936) [1936] EACJ 1 (1 January 1936)

## APPELLATE CIVIL

## Before LUCIE-SMITH, J.

## ALI MOHAMED, Appellant (Original Plaintiff) v.

## **KUNDANLAL CHADHA, Respondent (Original Defendant)** C. A. No. 23/1936

Arbitration—Stay of proceedings—Onus of satisfying Court—"Court" -Subordinate Court-Jurisdiction-Repugnancy-Arbitration<br>Ordinance (Cap. 18) secs. 2, 17-Arbitration Act, 1889-Rules of Court (Proceedings in Arbitration), rr. 12, 17.

A. Commenced proceedings against B. in the Court of the Resident Magistrate—B, entered an appearance and then moved the Resident Magistrate's Court for a stay of proceedings under section 17 of the Arbitration Ordinance—B. filed an affidavit in support to which was exhibited a submission to arbitration—The Resident Magistrate granted a stay and A. appealed.

Held (21-9-36).—That the onus of showing that the case was not a fit one for arbitration is thrown on the person opposing the application to stay proceedings.

Held further.-That the "Court" in section 17 is the Supreme Court and that a Subordinate Court has no jurisdiction to stay proceedings under the section.

Ross for the appellant. $\cdot$

Budhdeo for the respondent.

JUDGMENT.-In this appeal from the decision of the Resident Magistrate's Court there are four grounds of appeal one of which the fourth, may be termed as a common form ground. The second and third grounds may I think be fairly dealt with together.

No. 2 reads as follows: "The learned Magistrate misdirected himself as to the effect of the affidavits and in not taking evidence to reconcile the contradictions apparent on the face of the affidavits," and No. 3: "The learned Magistrate misconceived the effect of the delay in acting by the Arbitrators apparent on the face of the pleadings and affidavits."

For the purpose of dealing with these two points it may be as well to consider shortly the chronological history of the case.

On 25-2-36 the appellant (original plaintiff) filed his plaint in the Court of the Resident Magistrate claiming the sum of Sh. 500 moneys lent to the respondent (original defendant) in part on the 27-3-35 and as to balance on 28-3-35. Summons on the above plaint was issued returnable on 6-3-36 and was duly served on 2-3-36. On 6-3-36 the parties appeared by their advocates and Mr. Budhdeo for the respondent informed the Court that there had been a submission to Arbitration and applied for time in which to file a formal application for a stay of proceedings under section 17 of the Arbitration Ordinance. Mr. Sethna, for the appellant, stating that he had no knowledge of the alleged submission, the case was adjourned to 12-3-36 for formal application for stay to be filed.

By Notice of Motion dated 11-3-36 the respondent herein asked the Resident Magistrate's Court for an order that all proceedings in the appellant's suit (C. S. $141/36$ ) be stayed. This application was made as was thought in accordance with Rules of Court (Proceedings in Arbitration r. 12 (Laws of Kenya Vol. 1, Orders, Proclamations, Rules, etc., p. 207).

Again in accordance with the rule above quoted, the application was supported by the affidavit of the present respondent which alleges $(1)$ the submission to arbitration, $(2)$ the appellant's statement to the arbitrators that he held a promissory note obtained from the respondent, (3) that the arbitrators called on the appellant to produce the said promissory note and that the appellant failed so to produce it, (4) that appellant subsequently stated that he would be satisfied if respondent took oath in the Radha Kishen Temple, (5) that appellant put obstacles in the way of such oath being taken and informed respondent that he would not accept such oath, (6) that appellant told the arbitrators that he would neither abide by the challenge by oath nor have the matter decided by the arbitrators. The affidavit closed with an allegation that both the arbitrators had always been willing and were at the time of the making of the affidavit still willing and ready to act, which should of course have been that the respondent was willing and had at the commencement of proceedings been willing to arbitrate. I shall refer to that point later. On 19-3-36 the appellant filed an affidavit in reply which stated inter alia (1) that the submission to arbitration was invalid (but that contention has been abandoned), (2) that the arbitrators, in spite of appellant's frequent requests (it is not alleged that such requests were in writing), had failed to enter on the reference, (3) that the arbitrators asked the respondent to take the oath mention in his affidavit.

No further affidavits were filed or evidence led nor were the respective deponents cross-examined on their affidavits.

Mr. Ross has argued that it is for him who applies for a stay under section 17 to satisfy the Court that there is no sufficient reason why the matter should not be referred in accordance with the submission, but he has quoted no authority in support of such contention.

On the other hand Mr. Budhdeo says that once a valid submission to arbitration has been produced by the applicant for a stay then the respondent to such application must show cause why such stay should not be granted. In support of his contention he has referred to Dinabandhu Jana v. Durgaprasad Jana (46 Cal. 1041) and Anglo Persian Oil Co. v. Panchapakesa Aiyer (47 Mad. 164). The first case referred to may not be considered to be entirely material in that it is not a case arising out of the Arbitration Act and really deals with the discretion of the Courts in India to stay a suit where the Court is apprised that the suit has been instituted in contravention to The two Judges who tried the appeal an arbitration agreement. disagreed and the case was referred to a Bench of three Judges. That Bench held that (I am now quoting), "The burden, therefore, lies on the plaintiff (the person opposing the arbitration) to show that some sufficient reason exists why the matter should not be referred to arbitration and not on the defendant to show that no such reason exists; it is the prima facie duty of the Court to act upon the agreement between the parties." The Madras case above referred to is

very much in point. In that case the respondent (original plaintiff) had brought action against the appellants (original defendants), the defendants, under section 19 of the Indian Arbitration Act, applied for a stay of proceedings which application was refused. Hence the Schwabe, C. J. in his judgment dealing with the onus of appeal. satisfying the Court says, "The law provides that if there is a submission for a reference to arbitration and a party chooses to bring his suit, the other party can then decide whether or not he will remain before the Court, which he indicates by taking some step in the action, or whether he will avail himself of his contractual rights to have the dispute referred to arbitration." Again, "As I understand the principle in England and here, the Court, where there is a submission to arbitration, in order to refuse to stay the proceedings must be satisfied that there is no sufficient reason why the matter should not be referred to arbitration in accordance with the submission, that is really saying in other words that the onus is on the party resisting the application for stay to show some sufficient reason why in the particular case the parties should be relieved from the obligation which they have contracted, namely, that the case should go before arbitrators selected by them and not before the ordinary tribunals of the land."

Krishnan, J., in his judgment deals with the question of onus as follows: "The section (sec. 19) puts the burden upon the person who seeks to get the stay refused to show good reasons for taking such action."

I would refer to Hodgson and another v. The Railway Passengers Assurance Company, a Court of Appeal case reported in 9 Q. B. D. 188. The Court consisted of Jessel, M. R., Lindley and Bowen L. J. In a short judgment, with which the other Lords Justices agreed, Jessel M. R. says "I have always acted on the simple rule that where a party applying cannot adduce a reason in support of his application the Judge may be satisfied that no reason exists. The plaintiffs here (in that case the party resisting the stay) are in the position of a party applying, and if there is any reason why the matter should not be referred to arbitration, it is their duty to bring it forward and present it to the judge, and if they cannot do so the judge is quite justified in being satisfied that there is no reason." See also the dictum of Chitty, J. in *Vawdrey v. Simpson* (1896 1 Ch. 166) at p. 169: "and the onus of showing that the case is not a fit one for arbitration is thrown on the person opposing the application to stay proceedings, though the Court must consider all the circumstances, and exercise its discretion according to the varying nature of the different cases presented to it."

In view of the authorities and the affidavits I am of opinion that the learned Magistrate was justified in his ruling that he was unable to find any sufficient reason for refusing the application.

We now come to what is I suppose the most important ground of appeal, viz. "that the learned Magistrate erred in law in holding that the word 'Court' in section 17 of Cap. 18 of the Laws of Kenya, referred to his own Court, and erred in holding that he had any power to make the order asked for". The relevant part of section 17, which is identical with section 19 of the Indian Arbitration Act, reads as follows: "Where any party to a submission, etc., commences any legal proceedings, etc., any party to such legal proceedings may, etc., apply to the Court to stay proceedings; and the Court if satisfied, etc., may make an order staying the proceedings." The material part of section 2 of Cap. 18 reads as follows: "... unless there is anything repugnant in the subject or context the Court 'means the Supreme Court'."

The corresponding section in the Arbitration Act of 1889 is section 27 which reads "In this Act unless the contrary intention appears, etc., 'Court' means Her-Majesty's High Court of Justice, 'Judge' means a Judge of Her Majesty's High Court of Justice."

The material part of section 5 of the English Act which is the corresponding section to our section 17 reads as follows: "If any party to a submission, etc., commences any legal proceedings in any Court, etc., any party to such legal proceedings may, etc., apply to that Court to stay the proceedings and the Court or a Judge thereof, etc., may make an order staying the proceedings." It would seem to be convenient here to set out the material part of section 22 of our Ordinance, which section was enacted by Ordinance No. 7 of 1926, " $\ldots$ if any party to a submission etc., any party to such legal proceedings, may, etc., apply to the Court to stay the proceedings, and that Court or a judge thereof, etc., shall make an order staying the proceedings."

Mr. Budhdeo has argued that the interpretation of "Court" in the section as "Supreme Court" is repugnant in the subject or context of the section. It appears to me that the word "repugnant" used in our section 2 is of greater emphasis than the words "unless the contrary intention appears" of section 27 of the English Act.

In Runciman v. Smyth (20 T. L. R. 625) the Lord Chief Justice. Lord Alverstone, expressed a doubt as to whether a County Court Judge had a right to stay proceedings under section 4 of the Arbitration Act and stated that he was not by any means satisfied that he had such a right. This query must be borne in mind.

In Morriston Tinplate Co. v. Brooker Dore and Co. (1908 1) K. B. 403) (four years later), on an appeal from the decision of a County Court Judge dismissing an application for stay on the ground that he had no jurisdiction under section 4, the Court, composed of Channell, Bray and Sutton, JJ., held that the wording of section 4 was such as to show "a contrary intention" as laid down in the definition section of the English Act. The argument for the appellant was this "It is suggested that the provisions of section 4 do not apply because section 27 defines 'Court' to mean 'Her Majesty's High Court of Justice' and 'Judge' to mean 'a Judge of Her Majesty's High Court of Justice'. But section 27 is qualified by the words 'unless the contrary intention appears'; and section 4 provides that if a party to a submission commences legal proceedings in 'any Court' that Court or a Judge thereof may stay the proceedings. The use of the words 'any Court' shows a contrary intention, within the meaning of section 27 and 'any Court' is not limited to the High Court". It seems to me that the argument could have been strengthened by stressing the use of the word "thereof" after the words "that Court or a judge".

Channell, J., in his judgment says "On looking into the matter, however, the point seems to me to be very clear. The definition section of the Arbitration Act, section 27, says that 'unless the con-<br>trary intention appears', 'Court' means the High Court of Justice...; but in section 4 the words are 'any Court' and 'that Court' and those words in my opinion indicate a contrary intention. We cannot read the words 'any Court' as being limited to the High Court of Justice; they mean any Court, and I think there is nothing more to be said upon the point."

Bray, J. in agreeing says "But in section 4 there is a deliberate" use of different and wider words ... It seems to me that there was a deliberate use of those different words 'any Court' and that the intention was that any Court should have jurisdiction to stay proceedings when there was a submission to arbitration."

It is interesting to note that a similar decision to the above was given in Australia under the Australian Arbitration Act, 1895, which apparently also uses the words "any Court" in the material sectionsee footnote 311 i 2 E. and E. Digest p. 361.

Several Indian cases have been cited and I propose taking these in their chronological order.

As regards the first two cases Pershad Singh v. Ram Pertab Roy (1895) (22 Cal. 77) and Gyannessa v. Robarakannessa (25 Cal. 210) I am in complete agreement with the dicta of the learned Judge that. English cases are of much assistance in elucidating general principles and construing enactments when the Acts of the Indian Legislature happen to be in pari materia with English Statutes: the same might be said as regards American Statutes so long as that par materia is present.

In Ralli v. Noor Mahomed (1907) (31 Bombay 236) it was held that the language of section 19 of the Indian Arbitration Act was quite clear and that it gave jurisdiction to the High Court to stay proceedings in any Court subordinate to its jurisdiction. That section in the beginning refers to a party to a submission commencing any legal proceedings; then it goes on to refer to such legal proceedings. and then provides for staying the proceedings. Nowhere is there any indication in the section or the Act that the legal proceedings contemplated must be proceedings in the High Court.

The learned Judge in his judgment says "It is interesting tonotice that section 19 of the Indian Arbitration Act is almost a verbatim reproduction of section. 4 of the English Act of 1889." It is to be noted that this case comes after 20 T. L. R. supra but before (1908) 1 K. B. supra. The next case in point of time is that of Sita Ram Nath Mal v. Sushil Chandra Das and Co. (1921) (43 All. p. 553) where it was held by a Court of two Judges that "the Court" mentioned in section 19 of the Arbitration Act is not necessarily the Court of the District Judge, but the Court before which the suit or other legal proceeding which it is sought to refer to arbitration is The learned Judges do not appear to refer to any instituted. authorities in the matter but state that section 19 is a "mere repetition" of section 4 of the English Arbitration Act, and "it is in our view idle to contend, looking at the language of the section itself, a fortiori

looking at the long course of decisions in the English Courts under the corresponding section, that the Court spoken of in that section is not the Court before whom the legal proceedings or other attempt to bring a suit are in fact instituted.'

I have unfortunately been unable to trace "the long course of English decisions" referred to and even though I have searched up to date the only reported English case I can find specifically dealing with the point is that of Morriston Tinplate Co. It is true that it may be inferred from Clough v. County Live Stock Insurance Association (85 L. J., K. B. 1185) and Parker Gaines and Co. v. Turpin (1918) 1 K. B. 358) that a County Court has jurisdiction under section 19 but the point was not taken or argued in either of those two cases.

We next come to the case of *In re Babaldas Khemchand* (1921) (45) Bom. 1). The learned Judge in this case differed from the decision in Ralli v. Noor Mahomed (supra) but his reasons for so differing are not very clear to me, probably because I am not aware of the constitution and jurisdiction of the various Indian Courts. It would appear that in India it is possible to have a conflict of laws between various Presidencies or districts. It is to be noted that the Specific Relief Act referred to does not apply in this country. This I think is the proper place to point out that the Kenya Arbitration Ordinance applies to the whole of the Colony and Protectorate while the Indian Act is limited in its application: see section 2 of the Act.

As regards the point taken by Mr. Ross in his argument, but not in his Memo of Appeal, that the respondent herein did not state in his affidavit that when the proceedings were commenced he was ready and willing and remains ready and willing to arbitrate, I would refer to the final paragraph of the learned Judges' judgment. In Tatya Rowji v. Hathibhai Bulakhidas (1928) (52 Bomb. 420) the learned Judges followed the decisions in Babaldas and Sita Ram (supra) in preference to *Ralli* but gave little or no reason for so doing.

Lort-Williams, J. in Radhakissen Dhanuka v. The Bombay Co., Ltd. (1929) (56 Cal. 761) is somewhat scathing as regards the Babaldas and Sita Ram judgments, and as to Tatya Rowji's case he says "The learned Judges have simply followed these two decisions (Babaldas and Sita Ram) and rejected the decision in Ralli v. Noor Mahomed without making any very careful analysis or scrutiny of the reasoning applied by the learned Judges who decided them."

Lort-Williams. J. to my mind puts the matter very clearly when he says, at p. 759, "In the English Act, the word 'Court' is defined as meaning the High Court of Justice, unless the contrary intention appears and, having regard to the words 'legal proceedings in any court' and 'apply to that Court' in section 4, it is clear that it was intended that such application under the English Act should be made to the court of trial, and it has been so held ... But it will be noticed immeditately that these or similar words have been deliberately omitted from section 19 by the draftsman of the Indian Act— whereas. etc."

The last Indian case referred to was that of Babubhai Tansukhlal v. Madhavji Govindji (1930) (55 Bom. 503) in which the Court followed

the decision in *Tatya Rowji* but apparently neither *Ralli's* case nor that of Radhakissen were referred to or considered.

After careful study of those Indian cases which support Mr. Budhdeo's contention I have come to the conclusion that the fundamental error on which those decisions are based is the acceptance of the postulate that the wording of section 4 of the English Act and section 19 of the Indian are "identical" or that section 19 "is almost a 'verbatim reproduction' of section 4", or as Stephens, J. said in The Old East African Trading Company v. Ibrahimji Moosaji and Bros. (10 K. L. R. 93), at p. 94, "section 4 of the English Arbitration Act, 1889, is in practically identical terms."

I must respectfully disagree as regards the wording of our section 17 resembling in any close degree that of section 4 of the Act. In our Ordinance the draftsman, as did the Indian draftsman, deliberately refrained from following the wording of section 4.

Giving our section 17 the ordinary meaning of the words used I am of opinion that all applications for stay of proceedings must be brought before the Supreme Court and that the Supreme Court only (except in the case of applications under section 22) has jurisdiction to deal with them. I would refer to the Rules of Court (Proceedings in Arbitration) r. 12 which deals with applications for stay under section 17 and also to r. 17, the part material to this case being, "All other fees for other proceedings . . . shall be such fees as may be prescribed from time to time by Rules of Court in the Table of Fees leviable in the Supreme Court in similar matters." I do not think it can be contended seriously that an application for stay of proceedings is not a proceeding under the Ordinance. It was laid down by Lord Wensleydale in Grey v. Pearson (6 H. L. C. 61) "that in construing wills and indeed statutes and all written instruments, the grammatical and ordinary sense of the words is to be adhered to. unless that would lead to some absurdity, or some repugnance or inconsistency with the rest of the instrument, in which case the grammatical and ordinary sense of the words may be modified so to avoid that absurdity and inconsistency, but no further." Stroud and Wharton both give "Repugnant" as "that which is contrary to anything said before", which is not of much practical help in this case, while Webster gives as synonyms of the word, "opposite, opposed, adverse, contrary, inconsistent, irreconcilable, hostile, inimical.

I can find nothing in section 17 repugnant to the "Court" therein referred to being the Supreme Court and only the Supreme Court, vide section 18 C. P. O. and the power of the Supreme Court in bankruptcy to stay all pending suits. I wish to make it quite clear that I am of opinion, not only that the Supreme Court has jurisdiction to stay proceedings under the Ordinance, but that Subordinate Courts have no such jurisdiction—save perhaps under section 22—as to which I offer no opinion. It appears to me that in this country we have deliberately varied the wording of the English section so as to assure that the Supreme Court, and only the Supreme Court, shall have jurisdiction in matters arising under or out of our Arbitration Ordinance. It has been suggested that the Court in which proceedings have been instituted is in a better position to decide as to a stay than the Supreme Court. I cannot agree—the only material which would be before the lower Court would be the plaint, the application for a stay, the submission and the affidavits. Before the Supreme<br>Court you would have the application for a stay, the submission and the affidavits with the plaint in the lower Court exhibited thereto.

In the result Mr. Ross's first ground of appeal must prevail and the appeal be allowed with costs together with the costs of the motion. I should like to thank both the advocates concerned for the very able assistance they have given to the Court.

As this is, as far as I know, the first time this question has come to be decided, and as it appears to be of some importance, I should welcome a further appeal.