Agents and Counsel's Authority to Refer Disputes to Arbitration

The court held that both agents and counsel have the authority to refer a dispute to arbitration without express authority from the principal or client, provided such authority is not expressly countermanded. The authority to "compromise" includes the power to refer to arbitration, and counsel have inherent powers to act in the best interests of their clients, including compromising and referring disputes to arbitration.

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Issues Involved:
1. Powers of an agent to refer a dispute to arbitration without express authority.
2. Powers of counsel to refer a dispute to arbitration without express authority.

Detailed Analysis:

1. Powers of an Agent to Refer a Dispute to Arbitration Without Express Authority:

The primary issue concerns whether an agent, without express authority, can refer a dispute pending in a court to arbitration. The appellant sued for possession and other reliefs, and during the trial, an application was made to refer the matter to arbitration. The application was signed by agents and counsel on behalf of both parties, but the plaintiff challenged the authority of his agent and counsel to make such a reference.

The plaintiff's agent, Mohanlal, held a special power of attorney, and the plaintiff's counsel had a vakalatnama. Neither document explicitly conferred authority to refer the dispute to arbitration. The argument was whether the power to "compromise" included the power to refer to arbitration. The court noted that the term "compromise" in English courts could include arbitration, but in the vernacular, it might not extend beyond its literal meaning of "give and take."

The court concluded that the power of attorney, which included the authority to "compromise" and to do whatever was necessary in the conduct of the suit, did include the power to refer to arbitration. The court emphasized that the terms of the power of attorney must be read in conjunction with the rest of the order and the facts of the case. The court cited several precedents indicating that a power of attorney should be construed to include all incidental powers necessary for carrying out its object effectively.

2. Powers of Counsel to Refer a Dispute to Arbitration Without Express Authority:

The second issue was whether counsel in India (Advocates including Barristers) have implied powers to compromise a pending suit or refer it to arbitration without express authority or consent of the client. The court answered affirmatively, stating that counsel have inherent powers to compromise a suit or refer it to arbitration unless expressly countermanded by the client.

The court referred to the Judicial Committee of the Privy Council's decision in Sourendranath v. Tarubala Dasi, which held that the power to compromise a suit is inherent in the position of an Advocate in India. This authority is implied in the appointment of counsel to conduct the suit on behalf of the client. The court noted that this implied authority is essential for the effective conduct of a suit, as counsel must make decisions minute by minute in the best interests of the client.

The court also discussed the impracticality of requiring a power of attorney to envisage every possible contingency and act necessary for the conduct of a suit. It emphasized that the engagement of counsel is a special kind of contract, and the terms of such a contract must be construed with reference to the normal duties of counsel. The court cited Section 9 of the Indian Contract Act, which provides for implied terms in a contract based on the usual understanding of persons entering into similar transactions.

The court concluded that the authority to compromise includes the authority to refer to arbitration, as arbitration is a recognized method of settling disputes. The court emphasized that counsel's inherent powers include the power to refer to arbitration unless expressly countermanded by the client. The court also noted that Order 3, Rule 4 of the Code of Civil Procedure requires a written authority of appointment for counsel to "act," but once appointed, counsel have the inherent power to compromise or refer to arbitration.

Conclusion:

The court held that both agents and counsel have the authority to refer a dispute to arbitration without express authority from the principal or client, provided such authority is not expressly countermanded. The authority to "compromise" includes the power to refer to arbitration, and counsel have inherent powers to act in the best interests of their clients, including compromising and referring disputes to arbitration.

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