Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 13
PETITIONER:
MUNSHI RAM
Vs.
RESPONDENT:
BANWARI LAL
DATE OF JUDGMENT:
09/01/1961
BENCH:
HIDAYATULLAH, M.
BENCH:
HIDAYATULLAH, M.
SHAH, J.C.
CITATION:
1962 AIR 903 1962 SCR Supl. (2) 477
CITATOR INFO :
RF 1966 SC1888 (6)
ACT:
Arbitration-Award filed in Court-Application
for setting aside award-Compromise between
parties-Decree in terms of award as modified by
compromise-Validity of-Arbitration Act 1940 (10 of
1940) ss., 15, 23, 30, 32 and 41-Code of Civil
Procedure, 1908 (5 of 1908), O. 23.
HEADNOTE:
The dispute between the parties regarding
their shares in a firm was referred to
arbitration. The arbitrator made his award, inter
alia, awarding certain sums of moneys to be paid
by certain instalments. There was also a provision
in the award that the parties shall be liable to
pay in equal shares the income-tax to be assessed.
The award was filed in court by the arbitrator.
The appellant made an application for setting
aside the award and the respondents filed their
replies to the application. Thereafter, the
parties came to terms and asked for a decree to be
passed in accordance therewith. The court passed a
decree on the award as modified by the compromise.
In execution, the appellant contended that the
decree was a nullity as the court had no
jurisdiction to modify the award by compromise.
^
Held, that the decree was not a nullity and
was executable. In cases of compromise after an
award, if the parties are dissatisfied with the
award and wanted to substitute it by a compromise
involving matters alien to the original dispute
which are inseparable, the court may supersede the
submission and leave the parties to work out their
agreement in accordance with the law outside the
Arbitration Act. In such circumstances the new
compromise itself furnishes a very good ground for
superseding the reference and thus revoking the
award. Where the parties do not throw the award
overboard but modify it in its operation, the
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 13
award, in so far as it is not altered still
remains operative and continuous to bind the
parties and cannot be revoked. If the whole of the
subject-
478
matter of the compromise is within the reference,
the court may include in the operative part of the
decree the award as modified. But if it is not so,
the court may confine the operative part of the
decree to the award as far as it is accepted and
the other terms of the compromise, if severable
and within the reference, in a schedule to the
decree. The portion included in the operative
portion would be executable but that included in
the schedule would be enforceable as a contract of
which the evidence could be the decree, but not
enforceable as a decree. In the present case the
compromise and the decree did not alter the
amounts awarded to the respondents by the award,
it only made adjustments after quantifying the
amount of income-tax. The difference was as to the
mode of payment by changing the number of
instalments. This was a matter on which parties
could agree and the court could substitute the
agreement in the operative part of the decree.
Lala Khunni Lal v. Gobind Krishna Narain
(1911) L. R. 38 I.A. 87 and Hemanta Kumari Debi v.
Midnapur Zamindari Co. (1919) L.R. 46 I.A. 240,
applied.
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal
No. 178 of 1956.
Appeal by special leave from the judgment and
order dated November 26, 1952, of the Punjab High
Court in L.P.A. No. 11 of 1952.
G. S. Pathak and G. C. Mathur, for the
appellant.
Nanak Chand for respondents 1 (a) and 1(b).
1962. January 9.-The Judgment of the Court
was delivered by
HIDAYATULLAH, J.-This appeal by special leave
has been filed by one Munshi Ram, a Judgment-
debtor, against whom a decree based on a
compromise, following an award by an arbitrator,
is sought to be executed. The respondents are the
decree-holders. The appeal is directed against, a
common judgment and decrees of the Punjab High
Court dated November 26, 1952, in two appeals
under the Letters Patent (Nos. 5 and 11 of 1952)
by which the orders of a learned single Judge of
the High Court in Execution First Appeals Nos. 56
and 121 of 1951 were confirmed. The present
479
appeal is, however, confined to the decision in
L.P.A.No 11 of 1952. To understand what these
orders were, and also the point involved in this
appeal, a somewhat long narration of facts is
necessary.
The following genealogy gives the
relationship of the parties :
X
|
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 13
-------------------------------------------------
| |
Kanhaiyalal Mangalsain
| |
-------------------------- Munshi Ram
| | (adopted)
Faqirchand Banwarilal
(Respdt. 2) (Respd. 1)
Munshi Ram
(appellant)
(adopted by Mangalsain)
Munshi Ram was adopted by Mangalsain, when the
former was five or six years old. Mangalsain was
separate from the other Branch.
There was a firm known as Kanhaiyalal & Sons,
consisting of Kanhaiyalal and his two sons. The
affairs of the firm fell on evil days. We are,
however, not concerned with it. Munshi Ram had, on
this other hand, stated another concern by the
name of "Munshi Ram, B.Sc.", and that concern
prospered. It appears that the respondents in this
appeal claimed to be partners in that business.
With the merits of their claim we are not again
concerned. On October 30, 1946, there was an
agreement between the contending parties, by which
the dispute was referred to the sole arbitration
of one Lala Premnath, Advocate. Lala Premnath gave
an award on March 3, 1947, by which he awarded
Rs.50,000/- payable to Faqir Chand as follows :
480
(a) Rs.15,000 on April 4, 1947.
(b) balance in three equal instalments on
August 4, 1947, December 4, 1947 and
March 4, 1948.
Interest on any instalment defaulted at
0-8-0 per cent per mensem until payment.
He also awarded Rs.45,000 payable to Banwarilal as
follows :
(a) Rs.15,000 on April 4, 1947.
(b) balance in three equal instalments on
the same dates as above with interest in
the same way on default.
There was also an award about the residential
house called haveli, which was given in moieties
to Faqir Chand and Banwarilal, including the
portion built by Munshi Ram. The rest of the
immovable property was given to Munshi Ram as his
self-acquired property, and it was declared that
Faqir Chand and Banwarilal would have no
connection with or claim in the concern, "Munshi
Ram, B.Sc.".
No action appears to have been taken for some
time. But on April 4, 1947, Rs.15, 000 were paid
to Banwarilal. On the request of Faqir Chand made
on December 17, 1947, the arbitrator filed an
application under s.14(2) of the Arbitration Act,
on January 6, 1948. With this application, he
produced a signed copy of the award. It may be
pointed out that the original award has not been
produced, and is said to be lost. On February 19,
1948, the stamp Auditor reported that according to
the endorsement on the copy of the award, the
original was written on a stamp paper of the value
of Rs.50/-, and that there was a deficiency of
Rs.662- 8-0. He recommended that the award be
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 13
impounded. The Senior Sub Judge, Ferozepore,
ordered that the report would be considered, when
the document would be produced.
481
On July 11, 1948, Munshi Ram made an
application for setting aside the award on the
following, among other, grounds: (a) that the
award was insufficiently stamped; and (b) that the
award was not registered. He also alleged that the
Arbitrator was guilty of legal misconduct, and
that the award was given beyond time. These
objections were replied to by the respondents.
Meanwhile, it appears that there was some further
settlement, and the parties stated that they were
prepared to have a decree passed in accordance
with the terms accepted by them. By an order dated
October 18, 1948, the Court passed a decree on the
award, modifying terms of the award according to
the compromise. The objections of the Stamp
Auditor as well as other objections were not
considered.
The modified terms in the decree were that
instead of Rs. 50,000 and Rs. 45,000 payable to
Faqir Chand and Banwarilal respectively, the sums
payable were Rs.46,000 and Rs. 41,000. In the
award, it was provided as follows:
"However, the amount to be paid as
income-tax for the year 1945-46 has not been
assessed so far. All the three parties shall
be liable to pay that in equal shares."
In the decree that was passed, it was set down:
"In fact both the petitioner and the
second party No. 2 were entitled to receive a
further sum of four thousand rupees each, but
the second party No. 1 has deducted that
amount from their shares on account of their
share of the income-tax for the year 1945-
46."
This shows that there was no difference between
the award and the decree, in so far as the amounts
were concerned. There was, however, a difference
482
in the mode of payment. These payments were as
follows:
Faqir Chand Banwarilal.
15,000 11-10-1948 5,000
7,500 11-10-1949 5,000
7,500 11-10-1950 5,000
7,500 11-10-1951 5,000
7,500 11-10-1952 5,000
1,000 11-10-1953 1,000
------ ---------
46,000 26,000
already paid. 15,000
---------
41,000
---------
It was also provided that the award was not
operative, so far as the haveli was concerned, and
parties would take other action. There was no
other vital difference.
On December 27, 1949, Banwarilal filed an
application for execution of the decree for the
defaulted instalment. On January 3,1950, Munshi
Ram filed objections by an application purporting
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 13
to be under O.47,r.1, ss.47 and 151 of the Code of
Civil Procedure. The main objections were that the
order making the award into a rule of the Court
after modifying it was "void, without
jurisdiction, invalid and against law" on the
following grounds:
(1) The original award was not filed and
only the original could be modified and
not a copy.
(2) The award was not properly stamped and
without recovery of the deficit duty and
the penalty, the proceedings were
without jurisdiction.
483
(3) The decree being an instrument of
partition, must be stamped.
The opposite parties joined issue. The senior
Sub Judge, Ferozepore, by his order dated March 3,
1951, held that the original being lost, the copy
was admissible, and the decree passed was not
without jurisdiction. In view of the decision in
Dwarka Das v. Krishna Kishore (1), the parties
admitted that a compromise could be made even
after the award, and the Senior Sub Judge also
held likewise. He held further that the award was
an instrument of partition, and that there was
deficiency of stamp duty. The learned Senior Sub
Judge then considered whether the decree needed to
be stamped as an instrument of partition, and held
that it was an instrument of partition, and could
not be acted upon, unless either the award or the
decree was properly stamped. He, therefore,
rejected the application for execution, but added
a rider that,
"After paying the proper stamp on the
decree, fresh execution application may be
put in by the decree-holder."
Against the last direction quoted here,
Munshi Ram appealed to the High Court of Punjab at
Simla (Execution First Appeal No. 121 of 1951).
Meanwhile, Banwari Lal made a second application
depositing the necessary stamp papers on March 10,
1951. By order dated March 28, 1951, the Executing
Court impounded the decree, and sent it to the
Collector. Against that order, Banwarilal appealed
to the High Court (Execution First Appeal No. 56
of 1951). Munshi Ram also appealed, but his appeal
has not been printed in the record here.
These two appeals were heard by a learned
Single Judge of the High Court but at different
times. The first to be heard was Execution First
Appeal No. 56 of 1951, in which order was passed
on December 28, 1951. That was the appeal of
484
Banwarilal against the order of March 28, 1951,
impounding the decree and sending it to the
Collector. Munshi Ram’s appeal against the same
order was not then heard. The appeal of Banwarilal
was treated by the learned Single Judge as a
revision. According to the learned Judge, the
order did not fall within s. 47 of the Code of
Civil Procedure. The learned Judge observed:
"......I am of the opinion that the
Court was justified in not proceeding with
the execution application on the 3rd March,
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 13
1951. But once on an application made by the
decree-holder it had ordered the stamp duty
to be put in and the stamp had been put in,
the decree passed had become a properly
stamped decree. The proceedings which had
been brought on an application dated the 27th
of December, 1949 had ended on the 3rd of
March, 1951 and could not be reopened unless
some proper proceedings had been taken and no
such proceeding was taken. On the other hand,
on the 10th of March, Banwari Lal applied
that stamp duty be allowed to be put in which
was allowed and, therefore, after the proper
stamp duty had been put in there was left no
unstamped decree on the file...if the Court
had carried out its own orders there would
not have been any unstamped decree to be
impounded on the 28th March 1951."
The learned Judge repelled the argument of the
counsel for Munshi Ram, who urged that the decree
was a nullity or was unexecutable, which, he held,
did not arise at all in that appeal treated as a
revision. The order impounding the decree was,
therefore, set aside.
The learned Judge then heard Execution First
Appeal No. 121 of 1951. That appeal was filed by
Munshi Ram against the direction in the order of
485
March 3, 1951. The learned Judge by his judgment
dated June 16, 1952, held that the appeal was
incompetent and that he would not interfere in
revision. It appears that the other appeal against
the order of March 28, 1951 by Munshi Ram was also
heard, but it was also dismissed, though no
reasons appear to have been given separately,
perhaps because the order appealed against, had
already been set aside by the learned Judge in the
appeal decided on December 28, 1951.
Against these orders, two appeals under the
Letters Patent were filed by Munshi Ram. L.P.A.
No. 11 of 1952 was filed against the order dated
June 16, 1952 passed in Execution First Appeal No.
121 of 1951. L.P.A. No. 5 of 1952 was filed
against the order in the appeal of Banwarilal,
which was decided on December 28, 1951. These two
appeals were dismissed by a common judgment in
L.P.A. No. 5 of 1952 on November 26, 1952, though
a separate short order was also passed in L.P.A.
No. 11 of 1952. From the judgment of the
Divisional Bench, it appears that the contentions
of the present appellant were not what they are
before us, and it is, therefore, necessary to
refer to the point which has been argued before
us, and to see whether it was raised before, in
what form, and at what stage.
It has been argued before us that after a
dispute is referred to arbitration and an award
has been obtained and filed in Court, it is not
open to the Court to record a compromise under O.
23, r. 3 of the Code of Civil Procedure, because
an award can only be set aside or modified, as
laid down in the Arbitration Act, and there is no
provision in the Arbitration Act for recording a
compromise. This point does not seem to have been
urged in the High Court or in the Court below.
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 13
When the matter was before the Senior Sub Judge,
Ferozepore it was conceded, in view of the
decision of the Lahore High Court in Dwarka Das v.
Krishna Kishore(1), that the parties were entitled
to enter into a
486
compromise regarding the terms of the award, and
that a decree could be passed on the basis of an
award, modified by such a compromise. The
following passage from the judgment of the Senior
Sub Judge Ferozepore, shows the contention of
Munshi Ram at that time:
"This principle of law is not disputed
by the learned counsel for the judgment-
debtor, who, however, argues that it was not
open to the parties to enter into a
compromise regarding the terms of the award
which was never produced in Court."
In the appeal which was filed by Munshi Ram
against the decision of the Senior Sub Judge,
Ferozepore, no ground was taken that the
compromise could not be recorded, or that by
compromise the award could not be modified. The
only objection then taken was that the award was
insufficiently stamped and not registered, that
secondary evidence of the award could not be
admitted, and further that no decree could have
been passed on the basis of the copy of the award
produced as secondary evidence. There was a
general ground that the decree in question was
wholly without jurisdiction, and that the learned
"trial Court" lacked inherent jurisdiction to pass
such a decree. This ground obviously had reference
not to the point of law now mooted but to the
grounds on which the award was attacked. As a
result, we find no mention of the present point in
the two orders passed by Kapur, J. (as he then
was). When the matter was taken to the Divisional
Bench by appeals under the Letters Patent, no
point bringing out the controversy was raised. The
only objection was that the Court had no
jurisdiction to order that the copy of the award
should be stamped, and it was urged that the
decree passed on the basis of the unstamped award
was a nullity, and could not be executed. The
point, now urged, therefore, does not figure in
the judgment of the Divisional Bench, against
which the present
487
appeal has been filed. Further, even when an
application was made for a certificate, this point
was not mentioned as one of the grounds of appeal.
All the points that were urged then are mentioned
in the order refusing certificate. It was only
when the petition for special leave was filed in
this Court that this point was included, and as
many as eight separate grounds were urged, which,
as has been shown above, were not taken at an
earlier stage. On this ground alone, this Court
should decline to consider this matter, and this
appeal should be dismissed. Further, the decree
was never questioned on this ground, as it could
hardly be, since it was passed on consent of the
parties. It is now being characterised as a
nullity, because in execution, a decree can only
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 13
be questioned on the ground that it is a nullity.
We need not go to these objections, since the
point was argued before us, and as there appears
to be a conflict of view in the High Courts upon
the subject of compromises following awards by
arbitrators, we think it proper to decide the
question whether after an award is filed in the
Court, and parties enter into a compromise
modifying the terms of the award, the Court can
pass a decree on the award, as modified by the
parties.
Learned counsel for the appellant relies upon
Rabindranath Chakrabarti v. Jnanendra Mohan
Bhaduri (1), which was approved by the Privy
Council in Jnanendra Mohan Bhaduri v. Rabindra
Nath Chakravarti (2), Dooly Chand Srimali v. Mohan
Lal Srimali (3), Brindaban Chandra v. Kashi
Chandra, (4) and Motandas v. Wadhumal (5), where
it has been laid down that after an arbitration
award has been made, it is not open to the Court
to record a compromise modifying the award and
pass a decree incorporating the modified award.
The other side
488
relies upon Behari Lal v. Dholan Das (1), Dwarka
Das v. Krishan Kishore (2), Attar Singh v. Bishan
Singh (3) and Fazal Ahmad v. Enayat Ahmad, (4).
In Rabindranath Chakrabarti’s case, which
also went before the Privy Council, the
Arbitration was before the present Arbitration Act
was passed, and was governed by the Arbitration
Act of 1899. Under s.15 of that Act, the Court was
not required to pronounce a judgment or pass a
decree, since the Act did not contain any
provision for passing a decree. The award when
filed in Court, unless set aside, had the force of
a decree and was per se executable. It was,
therefore, held that the Court had no general
jurisdiction over the matter, and that a decree
passed modifying an award was without jurisdiction
and a nullity, which the executing Court could
refuse to execute. It will easily be seen that the
reason of the rule was the absence of jurisdiction
to pass a decree on the award, and a decree passed
without such jurisdiction must evidently be a
nullity. The principle, however, was applied also
under the present Arbitration Act, even though the
Court now pronounces a judgment according to the
award and upon the judgment so pronounced, a
decree follows. The principle is now invoked,
because of the limitations upon the powers of the
Court to modify an award under s.15. That section
read as follows:
"15. The Court may by order modify or correct
an award-
(a) where it appears that a part of the
award is upon a matter not referred to
arbitration and such part can be
separated from the other part and does
not affect the decision on the matter
referred; or
489
(b) where the award is imperfect in form, or
contains any obvious error which can be
amended without affecting such decision;
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 13
or
(c) where the award contains a clerical
mistake or an error arising from an
accidental slip or omission."
In view of the limits of the powers of the
Court, it has been held in some cases that the
Court cannot go outside the terms of s.15, and
make a decision of its own, even though the
parties might have compromised the dispute and
agreed to modify the award. It is not necessary to
refer to all the cases relied upon by the learned
counsel for the appellant, because the question
was elaborately considered in Prafulla Chandra
Karmakar v. Panchanan Karmakar (1) by
Chakravartti, J. In that case, there was a
reference to arbitration during the pendency of a
partition suit, and after award, the parties
entered into a compromise. Chakravartti, J. held
that the Court could give leave to the parties to
revoke a submission under s. 5 of the Arbitration
Act, and on superseding the arbitration agreement
thereafter under s.12(2)(b), pass decree in terms
of the compromise. He, however, held that till the
submission lasted, the Court’s authority was
suspended, and the Court could neither enquire
into the factum of the compromise nor pass a
decree different from the award. He pointed out
that under ss. 30 and 32, the award could be set
aside or varied as provided there and in no other
way. The learned Judge observed that the precise
question raised in the case before him was not
decided in the earlier case of the same Court
reported in Dooly Chand Srimali v. Mohan Lal
Srimali (2). He also observed that what he said in
the case applied to an arbitration with the
intervention of the Court in a pending suit, and
added:
490
"What the position would be in a case of
reference without the intervention of the
Court, it is not necessary to consider."
The learned Judge then pointed out that a
compromise between the parties was not mentioned
in the Arbitration Act as one of the grounds on
which an award could be set aside or modified. He
declined to apply O.23, R.3 of the Code of Civil
Procedure on the strength of s.41 of the
Arbitration Act, where it is provided that the
provisions of the Code of Civil Procedure shall
apply to all proceedings before the Court and to
all appeals under the Arbitration Act. He gave
three reasons for not doing so. The first was that
s.41 was headed "Subject to the provisions of the
Act" and thus subject to ss. 15, 23(2) and 32 of
the Arbitration Act. He was also of opinion that
s.41 only applied the procedural parts of the Code
of Civil Procedure, to proceedings under the
Arbitration Act and O.23, R. 3 applied only to
suit, it could not be made applicable to
proceedings on awards, which were not suits.
According to him, the proceedings on an award
involved only the consideration of the award, and
modifying the award to the extent allowed by the
Act was different from "a compromise of the entire
dispute between the parties apart from and
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 13
independently of the award", and he held that
"that would be going outside the award."
The views so expressed were repeated in other
cases, but were amplified in Motandas v.
Wadhumal(1), where it was held that the
proceedings on an award were not a suit, even
though those proceedings were registered as a
suit. It may be pointed out that even
Chakravartti, J. felt that the resulting position
led to an anomaly, which he expressed himself with
his characteristic vigour thus:
"... it would seem strange if the law
also were that once a reference has been made
491
to arbitration, the parties can no longer
even settle their dispute or bring the
settlement before the Court, but must
continue the strife till a decree on the
basis of the award is made and compromise, if
at all, thereafter. A suit is but a dispute;
the function of the Court is but to decide
it; and an arbitration is but an alternative
machinery of decision. That a statute should,
because a reference has been made to
arbitration, forbid the parties to terminate
the dispute by mutual agreement and to obtain
from the Court an agreed decree, would
certainly seem extraordinary.
"Specially since no question of public
policy can possibly be involved; but if the
Arbitration Act contains provisions to that
effect, they must of course be enforced."
His solution, therefore, was that a compromise
between the parties, though not mentioned in the
Arbitration Act as one of the grounds on which a
reference could be superseded or award set aside,
might be regarded as a good cause for revoking the
submission within s.5 of the Arbitration Act.
As against this, the Lahore High Court has,
in more than one case, held that a compromise is
possible after an award, and the Court, can pass a
decree under O.23,R.3 of the Code of Civil
Procedure modifying the award according to the
compromise. Those cases have already been cited
above. No special reasons, however, were given in
those cases, and they are all based upon the
decision in Behari Lal v. Dholan Das (1). In
Dwarka Das v. Krishan Kishore(2), it was observed
at p. 124:
"Mr. Tekchand contended that the parties
had no power to modify the award and that the
Court could not have passed a decree
otherwise than upon the award as given by the
arbitrator. It appears to me, however, that
if the original award was valid, so far as
492
Jai Gopal was concerned, it certainly cannot
be considered to be invalid merely because it
was somewhat modified in his favour. In the
case of Behari Lal v. Dholan Das (1) it was
held by Rattigan, J., the late Chief Justice
of this Court, that it is competent to the
parties to compromise the proceedings under
section 525, Civil Procedure Code, by
altering amending or adding to the award."
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 13
An additional reason was given in Attar Singh v.
Bishan Singh(2), and it was that the Act lays down
the powers of the Court to interfere with awards,
but it does not lay down that a party may not
withdraw from a claim. In that case, after the
award one party offered to be bound by the special
oath of the other party, and the oath having been
taken, a decree was passed.
In our opinion, cases under the Arbitration
Act of 1899 cannot afford a good guidance in this
matter. As has already been pointed out, under
that Act the award was itself executable as a
decree, and the Court was not required to
pronounce a judgment or to pass a decree. If the
Court had not the power to pass a decree at all,
it could, even less, pass a decree modifying the
award even by the consent of the parties. The
question thus is whether now that the Court does
pass a decree, it can ignore the compromise
reached, and pass a decree which the parties do
not intend, should be passed. It was observed by
the Privy Council in Lala Khunni Lal v. Gobind
Krishna Narain (3), approving the decision of the
High Court of the North West Provinces reported in
Lalla Oudh Behari Lall v. Mewa Koonwer (4), that
it was the duty of the Courts to uphold and give
full effect to a compromise. Indeed, Courts have
allowed compromises which go beyond the subject-
matter
493
of the suits before them. In Hemanta Kumari Debi
v. Midnapur Zimindari Company(1), the Privy
Council said:
"A perfectly proper and effectual method
of carrying out the terms of this (R.3. O.23)
would be fore the decree to recite the whole
of the agreement and then to conclude with an
order relative to that part that was the
subject of the suit, or it could introduce
the agreement in a schedule to the decree;
but in either case, although the operative
part of the decree would be properly confined
to the actual subject-matter of the then
existing litigation, the decree taken as a
whole would include the agreement. This in
fact is what the decree did in the present
case. It may be that as a decree it was
incapable of being executed outside the lands
of the suit, but that does not prevent it
being received in evidence of its contents."
We are aware that the Privy Council case has
led to a great difference of opinion in India; but
it does furnish the right cue to the decision of
the problem with the view of avoiding the
anomalies pointed out by Chakravartti, J. When an
award is given, the parties cannot, under the Act,
challenge it except as laid down there. The powers
of the Court are indicated by the Act. They are
limited to accepting the award, if there be no
objection and passing a decree in accordance
therewith, or superseding the reference or
revoking or modifying the award or remitting it
for further consideration, as laid down in the
Act. But, the Act does not disable the parties
from terminating their dispute in a different way,
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 13
and if they do, it could not be intended by law
that a dispute, which had been successfully
terminated, should again become the subject of
litigation. If the parties are dissatisfied
494
with the award and want to substitute it by a
compromise involving matters alien to the original
dispute which are inseparable, the Court may
supersede the submission, and leave the parties to
work out their agreement in accordance with the
law outside the Arbitration Act. In such
circumstances, the new compromise itself may
furnish a very good ground for superseding the
reference and thus revoking the award, as said by
Chakravartti, J. where the parties do not throw
the award overboard but modify it in its
operation, the award, in so far as it is not
altered, still remains operative and continues to
bind the parties and cannot be revoked. In that
contingency, the Court may follow one of two modes
indicated by the Privy Council in Hemanta Kumari’s
case (1). If the whole of the subject-matter of
the compromise is within the reference, the Court
may include in the operative part of the decree
the award as modified. But if it is not so, the
Court may confine the operative part of the decree
to the award as far as accepted, and the other
terms of settlement which form a part thereof, if
severable and within the original reference, in a
schedule to the decree. The portion included in
the operative part would be executable, but the
agreement included in the schedule would be
enforceable as a contract, of which the evidence
would be the decree but not enforceable as a
decree. The power to record such an agreement and
to make it a part of the decree, whether by
including it in the operative portion or in the
schedule to the decree, in our opinion, will
follow from the application of the Code of Civil
Procedure, by s.41 of the Arbitration Act and also
s.141 of the Code. It only remains to point out
that in a reference without the intervention of
the Court, the Court has no general jurisdiction
over the subject-matter as in a reference in a
pending suit. If the submission is superseded in
the former, there is nothing more the Court can
do, but in the
495
latter, the Court must proceed with the suit
before it, and give effect to the compromise in
the suit according to law.
In the present case, the decree on the award
was properly framed, because the award made room
for adjustment of the income-tax, ordering that
the income-tax, when assessed, would be borne
equally by the three parties, and the compromise
merely worked out that direction by reducing the
amounts payable to the two respondents by Rs.
4,000/- each. The compromise, on this part, did
not go outside the award, but was a direct
consequence of the award. It quantified income-
tax, which, under the award, was to be quantified
later. The amounts were the same which were
originally payable, less the income-tax. The only
difference was as to the mode of payment, and
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 13 of 13
instead of three instalments per quarter, the
amount was payable in more instalments yearly.
This, in our opinion, was a matter on which the
parties could agree, and the Court could
substitute their agreement in the operative part
of the decree. There is nothing in the Arbitration
Act, which disentitles the court from taking note
of an agreement of this character, and, in our
opinion, the decree cannot be characterised as a
nullity on this ground.
In the result, the appeal fails, and is
dismissed with costs.
Appeal dismissed.
496