Read Judgment: M.P. RAJYA TILHAN UTPADAK SAHAKARI SANGH MARYADIT, PANCHNAMA, SEHORE AND ORS Vs. M/S. MODI TRANSPORT SERVICE

Mansimran Kaur

New Delhi, May 12, 2022:  Directing that the report of the Chartered Accountant is not an award and is to be treated as a report of a commissioner appointed by the Court under Order XXVI Rule 11 of the  Code of Civil Procedure, 1908, the Supreme Court has opined that even if the court relies upon the report of the Commissioner appointed under such provision, it will merely aid and not bind the court.

By stressing on the principle of facilitator whereby the Court may appoint an expert or commissioner for a specific purpose, the Division Bench of Justice Sanjiv Khanna and Justice Bela M. Trivedi observed that in some cases the commissioner may even hear the parties and give expert opinion on the material or evidence produced by the parties before the Commissioner, however the same does not construe that he can act as an arbitrator.

The Bench was considering an appeal wherein the question with respect to reference of the matter to arbitration was raised under Section 21 of the Arbitration Act, 1940 and observed that there is a stark distinction between the scope and functions of an arbitral tribunal and a commissioner appointed under Order XXVI Rules 9 and 11. 

Factual background of the case was that the respondent- partnership firm, instituted a civil suit in the Court of District Judge, for the settlement of the account of transportation of coal undertaken by them in accordance with certain agreements. While the suit was lying pending, the application filed by the plaintiff seeking appointment of a Chartered Accountant was allowed and the report was submitted by the Arbitrator. In pursuance of the report, the defendants filed the objections, however the same were rejected by the Additional District Judge.The first appeal before the High Court and the matter was referred to arbitration in terms of Section 21 of the Arbitration Act. Hence, this appeal was filed.

The Apex Court noted that the existence of pre-existing agreement is mandatory between the parties as in the absence of the same the Court does not possess any power to refer the matter to arbitration. Further with respect to the application dated December 23, 1994, the Court opined that the same couldnot be construed as an application filed under Section 21 as the application was not for reference of disputes to an arbitrator for adjudication but an application seeking expert advice to settle the accounts of the parties in question.

Referring to its judgments in Kerala State Electricity Board and Another v. Kurien E. Kalathil and Another and Dayal Singh and Others v. State of Uttaranchal, the Apex Court observed that it was nowhere indicated in any portion of the order that the defendant gave his consent to arbitration as an alternative medium to resolve the said dispute. In addition to this, the Court observed that the matter was not even disposed of by the lower Court on the account of it referring the matter for arbitration. 

On the Commissioner’s jurisdiction the Bench said, “…the parties can contest an expert opinion/commissioners report, and the court, after hearing objections, can determine whether or not it should rely upon such an expert opinion/commissioners report. Even if the court relies upon the same, it will merely aid and not bind the court. In a strict sense, the commissioners’ reports are non-adjudicatory in nature, and the courts adjudicate upon the rights of the parties.”

Thus, in view of the aforesaid observations and precedents, the Court opined that in the instant case, the appointment of the Commissioner under Order XXVI Rule 9 of the Code was confined to only examination of accounts. Hence, the appeal was allowed and the impugned orders passed by the High Court and the Trial Court were set aside. 

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