2 S.C.R.

SUPREME COURT REPORTS 477

BY CoURT : In accordance with the opinion of the majority, these petitions are allowed with costs. As tne petitions have bP-en heMd together there will be only one hearing fee.

MUNSHI RAM v

BANWARILAL (M. HIDAYATULLAH and J. c. SHAH JJ.)

Arbitration-Award .filed in Court-Application for setting aside award-Oompram1:ae between parties-DecreP in terms of award as moiified by compromiae-Validity of-Arbitration Act 1940 (10 of 1940) ss., 15, 23, 30, 3! and 41-Code of Civil Procedure, 1908 (.5 of 1908), O. 23.

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 p; irties shall be liable t" pay in eq ta! shares theincome-tax to be assessed.

The award was filed in court by the arbitrator. The appellant made an application for setiug aside the award and the respondents filed their replies to the application. Thereafter, the parties came to ter111'> and askej for a decree to be passd in accorda.nce therewith.

The court passed a decree on the award as modified by the c )mpromise.

In execution, the appellant contended that the decree was a nullity as the cr, urt had no jurisdiction to mo.iify the award by compromise.

Held, that the decree was not a nullity and was e:<ecutable. In cases of compromise after an award, if the parties are dissatisfied with the award and wanted to substitute it by a co1npron1ise involvinb matters alien t() the original dispute

\YhL::h are inseparable, the court n1ay supersede the submhsion and leave the parties to \vork out their agreement in accordance with the law outside the Arbitration ;\ct.

In such circumstance-s the new cornpr-.1mise itself furnishes a very g<lod 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 award, in so fa1 as it is not altered still remains operative and continuous to bind the parties and cannot be revoked. If the whole of the subjectll/Gl

Maharana Shri

Jayvantsinghji Ranmalsinghji etc.

Tht State of Gu.iaral

Ayyan.1ar J.

January 9

19el

Bonuinl Lal

478 SUPREME OOURT REPORTS [1962] SUPP.

matter of the compromise is within the reference, the court may include In the operative part of the decree the award as modified.

Rut 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 'chedule to the decree. The portion included in the operative portion would he executable but that included in the schedule would he enforceable as a contract of which

th~ evidt:>nce could he the decree-, but not enforceable as a df'crre.

Tn th~ prc5ent case the con1promise and the decree di<l not altrr the amounts awarded to the r'5pondrnts by the av•ard, it only maric adiustments after quantifying the arnount of income-tax. The difference was as to the mode of payment by chan'?'ing the number of instalments. This \vas a n1atter on whirh parti~ could agree and the court could substitute the a!Urcment in the op"rati\le part of the decree.

TAJ.a Khilftni Lal v. Gobind KriAhnaNarnin (191 I) L. R. 38 I.A. 87 and Hemanfa Kumari Debi v. Midnapur Zamindari Co. (19JQ) L.R. 46 J.A. 24-0, applied.

Crvn, APPELT, ATE JvRISDICTTON: Civil Appeal No. 178 of 19511.

Appeal by special leave from the judgment and orcler dated Novt-mber 26, 1952, of the Punjab High Court in L.P.A. No. II of l9:i2.

G. S. Pathak and G. C. Mathur, for the appel. lant.

Nanak Chand for respondents l (a) and 1(b).

1962. January 9.-The Judgment of the Court was delivered hy

Hidayatul/ahJ.

HIDAYATVUAH, J.-This appeal by special )rave has been filPd by one Munshi Ram, a .Judgment-debtor, against whom a decree bascrl on a compromise, following an award by an arbitrator, is souht to be executed. The respondents are the decree-holders.

The appeal is rlirected agai1••t a common judgment and decrees of the Punjab High Court dated November 26, Hl52, in two appi:als under the Letter& Patent (Noe. 5 and II ,, f 1952) by which the order& of a learned single Judire of the High Court in Execution First Appeals Nos. iiG and 121 of 1951 were confirmed.

The present '

;-.-, .

appeal is, however, confined to the decision in L.P.A.No 11 of 195~.

To understand what theAe orders were, and alao the point involved in this arirnal, a somwhat long narration of fact~ is necessary.

The follo•vin!! genealogy gives the relationship of the part iPs :

I Kanhaiyalal

I Faqirchand (Resp<lt. 2) Mtmshi Ram (appellant) (adopted by l\fangalsain)

Banwarilal ( Respdt. I)

I Manga]Aain

. I Munshi Ram (adopted)

Munshi Ram was adopted by Mangalsain, when thti former was five or six years old.

M•ingalsain was separate from the other Branch.

There was a firm known as Kanhaialal & Sons, consisting of Kanbaiya.lal and his tw•> sons. The affairs of the firm fell on evil days.

We are, however, not concerned with it. Munshi Ram h•d, on the other band, stated another concern by the name of ":\Iunshi Ram, B.Sc.", and that concern proshered. It appears that the respondents in thi8 appeal claim?d to be partners in that bllsiness.

With the merits of their ~!aim we are not again concerned.

On October 30, l!H6, there was an agre1>ment between the contending parties,. by wh'ch the dispute was referred to the sole arbitration of one Lala Premna.th, Advo(!ate.

Lala Premnath gave an award on March 3, 19!7, by which he award:d Rs.50,000/. payable to Faqir Chand as follows:

Muni/ii Rom

Banwori IAI

Hid~>-..lullah J.

480 SUPREME OOURT REPOR~ (1962) SUPP.

(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 a.ny instalment defaulted e.t,0·8·0 per cent per men8l'ID until pa.ymell{.

He alao award Rs.45,000 payable to Ranwarila.1

BS follows :

la)

~:'J.5,000 on April 4, 1947. ( b) ha.lance in three equal instalments on the same date& as above with interest in the same way on default.

There WM also a.n a.ward a.bout the residential house r1'llea haveli, which was given in moieties to Fa.qir Chant! and Banwarila.I, inoluding the portion built I y Munshi Ram.

Tho rest of the immovable property was given to Munshi Ram as his self. acquired property, and it was declared that Faqir Chand and Banwaril"l would have no connection with or claim in the concern, "Munshi Ra.m, B.Sc.".

No action appears to have bren taken for some time. But on April 4, 19-17, Hs.'15, ll(JO were

pBid to Ra.nwari!Bl.

On the request of Faqir Chand made on December 17, lfl47, the arbitrator file<l Bn application unrln s.14(2) of the Arbitration Act, on .January 6, 1948.

With this application, he produced a. signed copy of the a.ward It may be pointed out that the original award has not been produl:cd, and is said to be lost. On February 19, 1948, the Htamp Auditor reported that according to the endorsement on the copy of the a.ward, the

ori!!inal was written on a stamp pa.per of the value of -Rs.50/., and that there wa.s a deficiency of Rs.ti62-8-ll.

He recommended that the award be impounded.

The Senior Sub Judge, Ftrozepore, ordered that the report would be considered, when the document would be produced.

On July 11, 1948, Munshi Ram made an application for setting aside the award on t.he following, among other, grounds : (a) that the award was insufficiently stamped; and (b) that the award was not registered. He also qlJeged 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 pllssed, 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 ded.ucted 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 diflerence between the award and the decree, in so far as the amounts were concerned. There was, however, a difference

l961

Nruulii Ram

v, b•w01i L•l

Hidayatvl/"11 J

,,.,

Jt.., hi R""'

v. ,,__, Lal

HW.,'61v/IG/a J.

48:.:l SUPREME illURT REPORTS [1962] SUPP.

in the mode of payment.

Thcl!<l paymenU! were as follows :

I<'aq ir Cha11d .Banwarilal. 15,000 lllO HJ48 5,000 7,500 ll-IO l!l4 9 5,000 7,500 ll-10·1950 5,000 7,500 ll-I0-1951 5,000 7,500 11-10-1952 5,000 1,000 ll JO. 1!153 1,000 ---- ----- 4(),000 26,000 already po.id. lli,000 ··------ 41,000 ------

ft was also provided that the award was not operative, so far as tho haveli was concerned, ancl parties would take other action. There was no other vital differenco.

On December :17, 194!1, Banwarilal fibd an application for execution of the <leer"'' for the

default.€d insta]m(•nt.

On .January 3. rn;; o, 1lunshi Ram filicl objections by an application 1•urporting to be u11dt•r 0.47, r.I, ss.47nnd151 oftht>Codeof Civil Pwcedure.

The main ohjections were that the order making the award into a rule of the Court after modifying it was "void, without juris

diction, invalid and against law" on the following grounds: (I) The original award was not filed and only tht; original could be modified and not a copy.

(2) The award was not properly stamped and without ncovny of the <kfidt duty and tho penalty, the µrnc("cdiugM were with

IJU t juritidiction.

(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 thr original being lost, the copy was admissible, anq the decree passed was not without jurisdiction.

In dew of the dcision 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 th1lre was deficiency of stamp duty. '1 he 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 Hiirh Court of Punjab at Simla (Execution First Appeal No. 121 of 19Jl). Meanwhile, Banwari Lal made a second application depositing the necessary stamp papers on March

10, 1.951.

By order dated March 28, 1951, the Executing Court impounded the decree, and sent it to the Ctlllector. Against that order, Banwarilal appealed to the High Court (ExeC9.tion First Appeal No, 56 of 1951).

Munshi Ram also appealf!d, 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 differ<'nt

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 (I) (1921) LL.R. 2 Lab, 114.

lffl

Munshi Ram • Bo11wari /, t, J

484 SUPREME COURT REPORTS [1962] SUPP.

Banwarilal 3gainst the order of :\larch 28, l!l51, impounding the decree and 8cnding it to the Collector. Munshi Ram's appeal against th<> Hamo order was not then heard. The appc•al of Llanwarilal was troated by the 1 .. arned Single Judge as a revision. According to tho lea"'1ed .Judge, the order did not fall within s. 47 of tho Code of Civil Procedure. The learned Judge ohstn"<l :

" ...... I am of the opinion that the Court was justified in not proc•Nling with the execution application on the 3rd March, 19iH.

Hut onco on an applieation nrncle by the decree-holder it hi~ ordered thf titarnp duty to be put in and the stamp hail btcn put in, the decree passed had beci'me a properly st; Lmped decree.

The proci:edings \1 hich bad been brought on an application <l•Lted tht> 27th of December, l!l4\J had ended on tho :Jrd of March, IH51 and could not be reopened unlet<S some proper proceeding8 br, cl bu<'n taken and no such procPcding was taken. On the other hand, on the 10th of 2\fareh, Banwari Lal applied that stamp duty be allowed to be put in which was allowed a11d, thercforl', after the proper stamp duty had llt'en put in thcr<' was left no unstamped drcrct on the fih .... if tht• Court had carried out its own onlers there would not have been any unstarn Jl"d decree to be impounded on the 28th i\la1 ch I !l:i I."

The learned Judge repelled the arg11ml'nt of tho counsel for .M11nshi Ram, wh.-i \ll''"'"'l t.hat the decree was a nullity or was uncxc<:11l:1LI,., whivh, he held, did not arist• <Lt 1111 in that appcal treated as a rev1s10n.

The order impounding the d1·1rot' was, therefore, set aside.

The leamed .Judge: th"n hl'<ml Excrntion First Appeal l\o. 121 of rn;, J.

That app1;; l 11as filo<l Ly Munshi 1:.am against the di1cct-io11 iu the order of

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. 11of1952 was filed against the order dated June 16, 1952 passed in Execution First Appeal No. 121of1951. L.P.A. No. 5 of 1952 was filed against the order in the a.ppeal 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 tte 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 0. 23, r. 3 of the Code of Civil Procedure, because an award can only be set aside or modifiad, 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.

When the matter was before the Senior Sub Judge, Ferozepore it was conceded, in view of the decision of the Lahore High Court inDwarka Das v.K rislina KiBhore('),

that the parties were entitled to enter into (1),(19'll) 11.. R. 2 Lah. 114.

MtmsAi B..,

Banu.wi 1Al

Hidayalulla J.

MUIUAi Rt1m

v, Ra1110uri lAl

J''

486 SUPREME COURT REPORTS (1962] SUPP.

compromise regardinµ the terms of the award, and

that a decree could be passed on tho basis of an award, modified b.v 8twh a compromise.

The following pa; suge from the jmlgmcnt of the 8enior Sub .Judge Fcrozepore, shu11'ti the contention of lun, hi Ram at that time :

"This principle llf 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 tnms of the award which was never produced in Court."

In thn appeal which was filed hy Munshi Ram

1gainst the decision of the Senior Sub , Judge, Ferozepore, no ground was taken that the compromise could not be recordP<l, or that by compromise tho award could not be modified. The only objection then takPn was that the a ward was insufficiently stampld and not ngi, t.rcd, that secondary evidence of the award coulJ not be admitted, and further that no decree could have been pasae<l on the basis of the copy of the award prodnccd as secondary eviden<Jt>.

There was a general ground thllt 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, wo find no mention of the present point in the two orders pas.; ed by Kapur, J. (as he then was). Wben the matter was taken to the Divit!ional 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

paesed on the basis of the unstamped award was a nullity, and could nut be executed. The point, now urged, therefore, does not figure in the judgment of the Divisional Bench, against which the pre.tent

r'-

.? S.C.R.

SU)?REME COURT REPORTS 487

appeal has b~' filed.

Further, even when an application wast :\de for a certificate, this point was not mentic;>. ed as one of the grounds of appeal.

All the points tlat were urged then are mentioned in the order rffiµsing certificate. It was only when the petitkn fdr/ special leave was filed in this Court that this point iwas included, and as many as t>ight separate grounds were 11rged, which, as has been shown above, were not taken at an earlier stage. On this ground alone, this Court shoulrl 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, bhcrause in execution, a decree can only be questioned on the ground that it is a nullity.

We need not g£J to these objections, since the point was argued before us, and as there appt'ars to be a conflict of view in the High Courts upon the subject df' compromises following awards by arbitrators, we think it proper to decide 1he question whether after

ti award is fped . in the o?rt, and parties enter into a com J1rom111e mod1fymg the terms of the ai.vard, the Cqurt can pass a . decree on the award, all modified by the parties. •

Learned, counsel for the appellant relies upon R'abindranath , Ghakrabarti v.

Jnwwndra lllohan Bhaditri ( \ which was approved by the Privy Council in Jnnnerulip_ Mohan Blwduri v. R'tbindra Nath

Chnkravarti (''f; y; ooly <)hand Srinwli v . . Mohan Lal 8rimoli i'), B1•indaban Chandra v. Kashi Chandra (•) a.nd 1lfo/; t111las v. IVadhumal ("), where it has been laid down that afLer n arbitration award has been made, it is not<Jpen to the Court to record a compromise rnodifyipg the award aud pass a decreo incorporating the modified award. The other side

(IJ 11931) l.L•R.SRC'.al. !018. (21 (lq32) L.R.601A 71.

(3) (19Zt) 1.1,.R. 51Cal.432.

(4) A.LR. 1937 Cal. 201. '(5) A.l.R. 1948 Sind. 74,

Munshi Ram

Ban.wari L'll

Hidayalullah J,

Jl 111114i Ro

BOIUUUi Lat

SUPREME COURT REPORTS [1962) SUPP.

rclios upon Belw.ri L11l v. Dhohm DIM (1), Dwarka Das

v. Krishan Kishore ('), Attar Singh v. Bishan Singh

(') and Pawl Ahmad v. Enay11t Ahmad(').

In R1ibindraiwt.h Chakrabarfi's case ( ), which also went before the Privy Council, the arbitration was beforo the present Arbitrat, ion Act was passed, and was governed by the Arbitration Act of 1899.

Gnder s.15 of that Act, the Court was not required to pronounce a judgment or pass a decree, since tho Act did n"t contain any provision for passing a dPcrce.

The award when filed in Court, unless set aside, had the force of a decree and was per se executable. Ir, was, theref•>re, held that tho Court had no general juristliction over the matter, and that a decree pas•;, d modifying an award was without jurisdiction and a nullity, which the executing Court coultl 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 th~ Court now pronounces a judgment arcording to the awa!'d 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 decisimi. on the matter referred ; or

(I\ (1910) 5 Indian C'..a,.s. 994. (2)

(1921) l.L.R. 2 Lob. 114. (3) A J.R. 1945 Peshawar 41. (41 A [.R. 1922 Oudb. 1119. (5)

(1931) J.L.R. 58 Cal. 1018.

(b) where the award is imperfect in form, or contains any obvious error which can be amendr, d without affecting such decision; or

(c) where the award contains a clerical mistake or an error arising from an accidental slip or omission." In view of tho 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 a;!reed to modify the award. It is not necessary to refer to all the oases relied upon by the learned counsel for the appellant, because the question was elaborately considered in Prafulla Chandra Karrnakar v. Panchanan Karinakar (') 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 C'.Jurt could give leave to the parties to revoke 11 submission under s.5 of the Arbitration Act, and on superseding the arbitration agreement thereafter under s.12(2)(b), pass a decree in terms of the compromise.

He, however, held that till the submission lasted, the Court's authority was suspended, and the Comt could neither enquire into the factum of the compromise nor pass a decree d'ifferent from the award.

He pointed out that under ss. 30 and 32, the awrd 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 wts not decided in the earlier case of the same Court reported in Dooly Chand Srimli v. Muhan 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 peniing suit, and add€d :

(I) U .. R (1946) I Cal 398

(2) (1924) J.L.R. 51Cal,432.

M,..mRaa

•• .11..w•i IAI

HU41•tu/loA J.

IHJ

Muruhi & 1

B anuari Lal

HidayatuJlalz

, {

1fl0 SUPR.RME COURT ltEPQ~TS [1962] SUJ'P.

"What the position w01ild :bl' , in a 'case of reference wihou.t the intervqnti\>n .of the Court, i~ is not qe_oeseyary toconsicller."

The learned .Judge then pointed•1 out that a

'Compromis~ betwl'yll the. parties was.not mentioned in the Arbitration Act as one nf the grounds. on which an award oou\11 be ~:t asideQr inpdified. He declined to apply ().:!:J: R 1,:l of 'the Code of Civil Procedure 9n the str, ugt It uf s.41 of th~ Arbitrati1m Aot, where it is provided that the' pro'l'isions of 'the

Code of Civil Procedutc lpll apply to .all proceed ings before the Court and to all appeals m.ider the Arbitration A, ct.

H,, gave three reasons for not doing so.

The first wao that s.4 l was headed "Subject to the privisiun" of the Act" and thus subject to ss.15, 23(:?) and 3: of the Arbitration Act.

He was also uf opinio11 thtit s.41 only applied the procedural parts of the Code of Civil Procedure, to proceeding,; u11dur the Aruitration Ac:t and -.s O.-~:l, R. 3 applied "nly to suik it c<>uld not lw made applicible tu pruceedings on awards, which were not suits.

Accordiog tu him, the procee<liugs on an award invblved only the consideration of the award, and modifying the award to the extent allowed by the Act was differenc from "a uomprnmise of the' entire dispute between the parties apart from aud indl'pen<len•!y of tlio award", and 'hu held that

"tliat would be going outside the award.''

The viewa so exp1essed were re[J'"'ted in other cases, but wre amt>lified in , lfoanda' v.

Wadhumal('), where it was held that the proccedinge

on an award were not a suit, even though th use. pro ceedings were registered as a suit. It may be pointC'd out that even Chakra,, artti, J. felt that the resulting position led to .an anomn.ly, which he eX'pressed himself with his characteristic vigour thu; :

" ..... .it would seem strange if the law also were that once a reference has been ma.de

Ul A.1.R. 1948 Siad. 74, '

• I

to arbitration, the parties can no longer even settle their dispute or bring the settlement before the Court, but mu9t continue tile strife till a decree on the basis of the award is mde 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 altemative machinery of decision. That a statute should, because a reference has been ruade to arbitration, forbid the p irties to terminate the dispute by mutual agreement and to obtain from the Court au agreed decree, would certainl, v seem axtraordinary.

"Specially since uo 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 ori which a reference could be superseded or award set aside, might b~ regarded a9 a good cause for revoking the submission within s.5 of the Arbitration Act.

As againRt this. the Lahore High Court has, in more than one rase, held that a compromise is possibl8 after an award, and the Court, can pass a decree under 0.23, H..3 of the Code of Civil Procedure modifying the award according to t.he compromise.

Those casc8 h:1ve already been cited above. No special reasr1ns, however, were given in those cases, and they are all based upon the decision in Behari Lrrl v. Dlwlan Das('). In Du:arka Da& v.

Krishan Kislwi'e('), it was observed at p. 124 :

"jlr. Tt:kchand contended that the parties had no power to modify the award and that the Court c:ould not havE\ passed a decree othcr.nse than upon the award as given by the :irbitrator. It appears to me, however, that if the original a ward was valid, so far as (1)

(1910) 5 Indian casesl994,

(2) (1921) I.L.R. 2 Lab. 114.

Munshi lUa

•• Baa.,., iLol

H idayalwllaA J

lHl

492 SUPREME COURT REPORTS [1962) SUPP.

Jai Gopal wall concerned, it certainly cannot be considered to be invalid merely bo cause it was somewhat modified in his favour. In the ca.ae of Behari Lal v. Dhdan Dns (1) it was held by Rattigan, J., the late Chief Justico of this Court. that it is compe tent to the parties to compromise the proceedings und<"r S<"ction 525, Civil Procedure Code,

by alterin11 anw1 ding or adding to the award."

An additional reason was given in Attar Si'Tl{Jh v.

Bishan Si'Tl{Jh{'), and it was that the Act lays down the powers of the Conrt to interfere with awards, but it does not !av do\\ n that a party may not withdraw from a claim.

In that cast•, after the award one party ,, ffered to bf' hound by the special oath of the other !'arty, and the oath having been taken, a decree was passed.

In our .opinion, cases •md .. r th1> Arbitration Act of 18\l!l <annot afford a <.'Our( guidance in this mattl'r. As has already hct":1 pointed out, und(•r that Act the a.ward waH ilselfexecutabk aH a deerc!', and the Court was not nquired to pronounce a judgment or to pass a dtcnc. If the Court had not the power tu pass a decree at all, it cr, uld, even leRR, pass a deree modifying the award even by the consent of the parties. The quetion thus is whether now that the Court does paHs a decree, it can ignore the C!impri1mise reached, and pas a decree which the partiPR do not intend, should be passed. It waR ohHerved by the Privy (Jouncil in Lal.a Khunni l.al v.

Gobirul Krishna Karain ('), approving the decision of the High Court of tho North West. Provinces reported m Lalla Owl, h Behari Lall v. Mewa Koontter('), 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

(11

(1910) 5 Indian Cases 994. (2) A.LR 1945 Pcshwar41. 13)

(1911) L. R. 381. A. 87. (4}

11868) 3 Asra H.C, R. 82, Bi.

of the euits before them. In Hemanta Kumari Debi v.

Midnapur Zimindari Company('), the Privy Council said

"A perfectly proper and effectual method of carrying out the terms of this (R.:l. 0.23) 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 decreedid 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."

\Ve 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 pnrties from terminating their dispute in a different way, 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 paties are dissatisfied

(I)

(191~) L.R. 46 I. A. 240, 246.

Jl....i; ltm

B__.Lol

Hi""""'"" ..I.

,,,,

JlwulliR•

•• ,,..,..,.; Lo/

lffl9*UrA J.

494 SUPREME OOURT REPORTS [1062] SUPP.

with the award and want to su htit11te it by a oompromise involving matters alien to tlie original dispute which arc' inseparablo, thP Court may supers(de the submisaion, anrl leave the parties to work out their arecment in accordance with tho law outside the Arbitration Act. In such circumstances, the new compromie itf!elf 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 caae ('). If tho whole of the subject.-

matter of the compromise is within the refcrenoe, tho 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 executahle, but the agreement included in the schedule would be enfor oeable as a oontract, of which the evidence would be the decree but not enfor.ceable as a de<-ree. 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 remain& 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 submisl!ion is superseded in the former, there is nothing more the Court can do, but in the

(1) (1919) L. R.46.I.A. 2f0,246.

latter, the Court must proceed with the suit before it, and give effect to the compromiee in the su'.t acPording to law.

In the present {'a:; e, the decree on the award was propeily framed, because the award made room for adjustment of the income-tax, ordering that the income-tax, when assessed, would be home equally by the three parties, and the compromise merely worked out that direction by reducingthe amounts payable to the two respondents by Rs. 4,000/- earh. The compro mise, on this part, did not go outside the award,

but was a direct consequence of the award. It '.uantified income-tax, which, under the award, was to be quantified later. The amounts were the eame which were originally payable, less the income-tax.

The only difference was as to the mode of payment, and 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 Aot, 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 dismi&mJ. --

Mwulli&ni

BllllVJ4f'ilo1.

Hid4ya1Ullali , r;

MUNSHI RAM

BANWARILAL (M. HIDAYATULLAH

c. SHAH JJ.

Code of Civil Procedure, 1908

L. R. 38 I.A. 87

s. 47

Code of Civil Procedure

the Code of Civil Procedure

s. 994

ss. 30 and 32

the Code of Civil Procedure

ss.15, 23(:?) and 3

the Code of Civil Procedure

the Code of Civil Procedure

Civil Procedure Code

L.R. 46 I. A. 240

the Code of Civil Procedure