Munshi Ram v. Banwari Lal, (SC) BS111466
SUPREME COURT OF INDIA

Before:- M. Hidayatullah and J. C. Shah, JJ.

Civil Appeal No. 178 of 1956. D/d. 9.1.1962.

Munshi Ram - Appellant

Versus

Banwari Lal (deceased) and after his heirs and legal representatives and another - Respondents

For the Appellant :- Mr. G. S. Pathak, Senior Advocate, Mr. G. C. Mathur, Advocates.

For the Respondent Nos. 1(a) and 1(d) :- Mr. Nanak Chand, Advocate.

Arbitration Act, 1940, Sections 15 and 41 - Civil Procedure Code, 1908, Section 141, Order 23, Rule 3 - Arbitration - Decree based on compromise following an award by an arbitrator - Award was filed in the court - Parties entered into a compromise modifying the terms of award - Court not disentitled to pass decree on award as modified by the parties.

[Para 19]

Cases Referred :-

Dwarka Das v. Krishna Kishore ILR 2 Lahore 114.

Chakrabarti v. Jnanendramohan Bhaduri ILR 58 Calcutta 1018.

Jnanendra Mohan Bhaduri v. Rabindra Nath, 60 Ind App 71.

Dooly Chand v. Mohan Lal, ILR 51 Calcutta 432.

Brindaban Chandra v. Kashi Chandra, AIR 1937 Calcutta 201.

Motandas v. Wadhumal, AIR 1948 Sind 74.

Behari Lal v. Dholan Das, 5 Ind Cas 994 (Lah), ILR 2 Lahore 114.

Attar Singh v. Bishan Singh, AIR 1945 Peshawar 41.

Fazal Ahmed v. Enayat Ahmad, AIR 1922 Oudh 189.

Prafulla Chandra v. Panchanan, ILR (1946) 1 Cal 398.

Lala Khunni Lal v. Gobind Krishna Narain, 38 Ind App 87 (PC).

Lalla Oudh Behari Lall v. Mewa Koonwer, 3 Agra HCR 82 at p. 84.

Hemanta Kumari Debi v. Midnapur Zamindari Co., 46 Ind App 240 (at p. 246).

JUDGMENT

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 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.

2. The following genealogy gives the relationship of the parties :

3. There was a firm known as Kanhyalal and Sons, consisting of Kanhayalal and his two sons. The affairs of the firm fell on evil days. We are, however, not concerned with it, Munshi Ram had, on the other hand, started 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 :

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:

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."

4. 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 Section 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.

5. On July 11, 1948, Munshi Ram made an application for setting aside the award on the following, among other, grounds :

6. 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 :

In the decree that was passed, it was set down -

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 in the made of payment. These payments were as follows:

Faqir Chand

Banwarilal.

15,000

5,000

7,500

5,000

7,500

5,000

7,500

5,000

7,500

5,000

1000

10000

40,000

26,000

1500

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.

7. 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 Order 47, Rule 1, Sections 47 and 151 of the Civil Procedure Code. 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:

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 decree passed was not without jurisdiction. In view of the decision in Dwarka Das v. Krishna Kishore ILR 2 Lahore 114, 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,

8. 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, Banwarilal 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.

9. 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 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 Section 47 of the Civil Procedure Code. The learned Judge observed:

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.

10. 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 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.

11. Against these orders, two appears 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 appears 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.

12. 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 Order 33, Rule 3 of the Civil Procedure Code, 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 ILR 2 Lahore 114, that the parties were entitled to enter into a 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:

13. 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 juridication, 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 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 a 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.

14. Learned counsel for the appellant relies upon Rabindranath Chakrabarti v. Jnanendramohan Bhaduri ILR 58 Calcutta 1018, which was approved by the Privy Council in Jnanendra Mohan Bhaduri v. Rabindra Nath, 60 Ind App 71., Dooly Chand v. Mohan Lal, ILR 51 Calcutta 432, Brindaban Chandra v. Kashi Chandra, AIR 1937 Calcutta 201 and Motandas v. Wadhumal, AIR 1948 Sind 74, 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 relies upon Behari Lal v. Dholan Das, 5 Ind Cas 994 (Lah), ILR 2 Lahore 114, Attar Singh v. Bishan Singh, AIR 1945 Peshawar 41 and Fazal Ahmed v. Enayat Ahmad, AIR 1922 Oudh 189.

15. In Rabindranath Chakrabarti's case ILR 58 Cal, 1018, 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 Section 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 an 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 Section 15. That section reads as follows :

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 norms of Section 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 v. Panchanan, ILR (1946) 1 Cal 398 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. Section 5 of the Arbitration Act, and on superseding the arbitration agreement thereafter under Section 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 Court could neither enquire into the factum of the compromise nor pass a decree different from the award. He pointed out that under Sections 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 ILR 51 Calcutta 432. 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 :

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 Order 23 Rule 3 of the Civil Procedure Code on the strength of Section 41 of the Arbitration Act where it is provided that the provisions of the Civil Procedure Code 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 Section 41 was headed "Subject to the provisions of the Act" and thus subject to Sections 15, 23(2) and 32 of the Arbitration Act. He was also of opinion that Section 41 only applied the procedural parts of the Civil Procedure Code, to proceedings under the Arbitration Act and as Order 23, Rule 3 applied only to suits, it could not be made applicable to proceeding 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."

16. The views so expressed were repeated in other cases, but were amplified in AIR 1948 Sind 74 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 be expressed himself with his characteristic vigour thus :

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 Section 5 of the Arbitration Act.

17. 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 Order 23, Rule 3 of the Civil Procedure Code, 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 5 Ind Cas 994 (Lah). In ILR 2 Lahore 114 it was observed at p. 124 (of ILR Lah) :

An additional reason was given in AIR 1945 Peshawar 41 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.

18. 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, 38 Ind App 87 (PC)9 approving the decision of the High Court of the North West Provinces reported in Lalla Oudh Behari Lall v. Mewa Koonwer, 3 Agra HCR 82 at p. 84 that it was the duty of the Court's to up old and give full effect to a compromise. Indeed, Courts have allowed compromises which go beyond the subject-matter of the suits before them. In Hemanta Kumari Debi v. Midnapur Zamindari Co., 46 Ind App 240 (at p. 246) the Privy Council said :

19. 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 has been successfully terminated, should again become the subject of litigation. If the parties are dissatisfied 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. 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 Civil Procedure Code, by Section 41 of the Arbitration Act and also Section 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 latter, the Court must proceed with the suit before it, and give effect to the compromise in the suit according to law.

20. 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. 4000/- 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 made of payment, and instead of three instalments per quarter, the amount was payable in mare 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.

21. In the result, the appeal fails, and is dismissed with costs.

Appeal dismissed.