Munshi Ram Vs. Banwari Lal [1961] INSC
4 (9 January 1961)
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 installments.
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 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.
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 |
------------------------------------------------- | | 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 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 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, 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.
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 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;
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 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." 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, 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 instead of three installments per quarter, the amount was payable
in more installments 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.
Back
