# Ranmalsinghji etc v. Tht State of Gu.iaral

- **Citation:** [1962] Supp. 2 S.C.R. 477
- **Court:** Supreme Court of India
- **Decided:** 1962
- **Bench:** M. Hidayatullah, J. c. SHAH
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/ranmalsinghji-etc-v-tht-state-of-gu-iaral-2321
- **Pages:** 19

## Headnote

Arbitration-Award .filed in Court-Application for setting
aside award-Oompram1:ae between parties-DecreP in terms of
award as mo·iified 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
set~iug 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 pass~d 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.
v.
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 sou~ht 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 J

## Text

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 mo·iified 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
set~iug 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 pass~d 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.
v.
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 sou~ht 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
'
;-.-, .
2 S.C.R.
SUPREME COURT REPORTS
479
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 som~what long narration of fact~ is necessary.
The follo•vin!! genealogy gives the relationship of the part iPs :
I
Kanhaiyalal
I
I
Faqirchand
(Resp<lt. 2)
Mtmshi Ram
(appellant)
(adopted by l\fangalsain)
x
I
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 Kanhai~·alal & 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:
1961
1981
Muni/ii Rom
v.
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 awar~d 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, Ft·rozepore,
ordered that the report would be considered, when
the document would be produced.
2 S.C.R.
SUPREME COURT REPORTS
481
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
ll·lO· 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 fili·cl 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 n·covny of the <kfidt duty and
tho penalty, the μrnc("cdiugM were with·
IJU t juritidiction.
2 S.C.R.
SUPREME COURT REPORTS
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 thr original being lost, the copy
was admissible, anq the decree passed was not
without jurisdiction.
In dew of the d~cision 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 ohst·n·"<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 bt·cn 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 drc·rct· 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 d1·1·rot' 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
2 S.C.R.
SUPREME COURT REPORTS
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. 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.
1961
MtmsAi B..,
v.
Banu.wi 1Al
Hidayalulla J.
1931
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
1~gainst 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
stampl·d 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 prodnc·cd 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 1~he 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,
11161
Munshi Ram
v.
Ban.wari L'll
Hidayalullah J,
1901
Jl 111114i Ro
Y.
BOIUUUi Lat
488
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.
>
2 S.C.R.
SUPREME COURT REPORTS
48!)
(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 aw~rd 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 Srim~li 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.
1141
M,..mRaa
••
.11..w•i IAI
HU41•tu/loA J.
IHJ
Muruhi & 1
v.
B anu·ari Lal
HidayatuJlalz
,
{
1fl0 SUPR.RME COURT ltEPQ~TS [1962] SUJ'P.
"What the position w01ild :bl' ,in a 'case of
reference
wi~hou.t the intervqnt·i\>n .of the
Court, i~ is not qe_oeseyary to·consicller."
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 aside·Qr 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 ~lp~ll 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 pr·ivisiun" 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<liu·gs 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
w~re amt>lified
in
,lfo~anda'
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
•
2 S.C.R.
SUPREME COURT REPORTS
491
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 m~de
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.
11111
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 n·quired to pronounce a judgment
or to pass a dt·cn·c. 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
que~tion thus is
whether now that the Court does paHs a decree, it
can ignore the C!impri1mise reached, and pa~s 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 Koontt·er('), 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.
•
•
2 S.C.R.
SUPREME COURT REPORTS
493
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
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."
\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 pa~ties are dissatisfied
(I)
(191~) L.R. 46 I. A. 240, 246.
1961
Jl....i; ltm
v.
B__.Lol
Hi""""'"" ..I.
,,,,
JlwulliR•
••
,,..,..,.;Lo/
lffl9*UrA J.
494 SUPREME OOURT REPORTS [1062] SUPP.
with the award and want to su h~tit11te 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 a~recment in accordance with tho
law outside the Arbitration Act. In such circumstances, the new compromi~e 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.
I
•
,
2 s.c.R. SUPREME COURT REPORTS
495
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 reducing- the 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.
--
1961
Mwulli&ni
v.
BllllVJ4f'ilo1.
Hid4ya1Ullali ,r;