Decided on March 06,1953

Abdul Rahman Sahib Appellant
Muhammad Siddig And Anr. Respondents


Venkatarama Ayyar, J. - (1.) THE facts leading up to these revisions are these : The petitioner filed O. S. No. 154 of 1945 on the file of the Court of the District Munsif of Tiruchirapalli to recover possession of Immovable property. He also claimed mesne profits. There was also a prayer for injunction. The defendants contested the claim. While the suit was pending the parties agreed to refer the matters in dispute between them in the suit and various other matters as well to arbitration and on 14 -10 -1945 they executed a muchilika in favour of five named arbitrators containing 'inter alia' the following statement: "We two parties shall accept the decision of the panchayatdars regarding the said suits and asset; etc." In pursuance of this reference the panchayatdars pronounced an award on 18 -11 -1945, Ex. P. 2 and applied under Section 14 (2), Arbitration Act, to file the same into Court, I, A. No. 1627 of 1945. The plaintiff being dissatisfied with the award applied to set it aside under Ss. 30 and 33 of the Act, I. A. no. 51 of 1946, on the ground that there was no proper enquiry and that arbitrator; were guilty of misconduct. The plaintiff also contended that as the reference related to matters pending in a suit and as there was no order of reference through Court under Section 23 the award was void. The defendants filed I. A. No. 364 of 1946 for recording the award as a compromise under Order 23 Rule 3, Civil P. C. All these applications were heard together by the learned District Munsif. He held that as there was no order of reference through Court the award could not be upheld as such and he accordingly dismissed I. A. No. 1627 of 1945. He further 'held that the charges of misconduct against the arbitrator; had not been established and he, therefore, dismissed I. A. No. 51 of 1946. He however, held that the award could be treated as a compromise under Order 23, Rule 3, Civil P. C. and ordered I. A. No. 364 of 1946. In the result the suit was decreed in terms of the award treating it as a compromise.
(2.) THE plaintiff took up the matter in appeal to the District Court. In C.M.A. No. 12 of 1947 the District Judge confirmed the order in I. A. No. 1627 of 1945, on the ground that the reference not having been through Court, the award could not as such be upheld. In C.M.A. No. 13 of 1947 the learned District Judge agreed with the learned District Munsif that the charges of misconduct against the arbitrators were not made out and he confirmed the order of dismissal of I. A. NO. 51 of 1946. In C.M.A. No. 43 of 1946 he agreed with the order of the learned District Munsif in I. A. No. 364 of 1946 that the award though not valid as such could be upheld as a compromise under Order 23, Rule 3, Civil P. C. In the result the decisions of the lower Court were confirmed. The plaintiff has preferred the above civil revision petitions against the orders in C.M.A. Nos. 12 of 1947, 13 of 1947 and 43 of 1946. Before me no attempt was made to attach the finding that the award is not vitiated by the misconduct of the arbitrators, nor has the award been sought to be supported on the ground that it would be valid as such notwithstanding that there is no order of reference through Court. It would follow that C. R. P. NOS. 1783 and 1784 of 1949 must be dismissed. In C. R. P. No. 1785 of 1949 which is against the order directing the award to be recorded as adjustment under Order 23, Rule 3, Civil P. C., the petitioner contends that an award which is not valid qua award could be treated as a compromise only under Section 47, Arbitration Act, which is in these term; "Subject to the provisions of Section 46 and save in so far as is otherwise provided by any law for the time being in force, the provisions of this Act shall apply to all arbitrations and to all proceedings thereunder; provided that an arbitration award otherwise obtained may with the consent of all the parties interested be taken into consideration as a compromise or adjustment of a suit by any Court before which the suit is pending." He argues that as the petitioner consented only to a reference to an arbitration and not to the award itself, it could not be taken into consideration as a compromise under Order 23 Rule 3, Civil P. C. In - - 'Subbaraju v. Venkataramaraju',, AIB 1928 Mad 1025 (A), a Full Bench of this Court held that when the parties agreed to refer the matter pending in a suit, to a private arbitrator and to abide by his award, the award when pronounced could be treated as an agreement under Order 23 Rule 3. That, however, was a case of reference under Schedule 2 of the Civil P. C. in which there was no provision corresponding to Section 47 and it was observed that Schedule 2 was not mandatory and that it does not say that there should be no arbitration other than that which is dealt with by that schedule. After the enactment of the Arbitration Act the question was raised in the case in - - 'Arumuga Mudaliar v. Balasubramania Mudaliar',, AIB 1945 Mad 294 (B). There the learned Judges were called upon to decide whether the law was governed by the Arbitration Act having regard to the enactment of Section 47. In holding that the Arbitration Act had not made any difference in the law the Court observed as follows: "We are merely concerned with the proviso in Section 47 which plainly indicates that an arbitration award obtained otherwise than under the Act may with the consent of the parties interested in it be regarded as a compromise of a pending suit. There is nothing in the proviso which precludes antecedent consent. Order 23 Rule 3 says that where it is proved to the satisfaction of the Court that a suit has been adjusted wholly or in part by a lawful agreement or compromise or where the' defendant satisfies the plaintiff in respect of the whole or a part of the subject -matter of the suit, the Court shall, order the agreement, compromise or satisfaction to be recorded and shall pass a decree in accordance therewith so far as it relates to the suit. The proviso to Section 47 leaves this provision of law untouched. In fact it would appear to be likely that it was inserted by the legislature in order to allow the Court unfettered action under Order 23 Rule 3." In the result it was held that the decision in - -' : AIR 1928 Mad 1025 (A)', remained good law under the Arbitration Act and that the consent given for reference might be treated as consent to the award to be pronounced on the reference and that it would fall within Order 23 Rule 3. In - - 'Palaniandichetti v. Kandappa Gpundsn', (C), the question again came up for consideration and in following the decision in - - ' : AIR 1945 Mad 294 (B), as he was bound to sitting as single Judge, Viswanatha Sastri J. observed as follows: "Sitting singly I am bound by this decision though I consider that it is probable that the legislature intended that a private reference to arbitration in a pending suit without the knowledge of the Court and without its direction which results in an award should not be made a rule of Court unless all the parties interested in the suit consent to the award being filed into Court as a compromise or adjustment of the suit. Indeed the Calcutta High Court had consistently taken that view before the Arbitration Act of 1940 and the proviso to Section 47 appears to confirm that view." My attention has also been, drawn to a case reported in - - 'Pagammal v. Kasi Goundan', (D), where Raghava Rao J. sitting singly followed the decision in - - 'AIB 1945 Mad 294 (B). The Orissa High Court had recently occasion to go into this question fully and after an elaborate review of the case law it held that a consent to the reference was not sufficient to make the award an adjustment within the meaning of p. 23 Rule 3, Civil P. C., and that unless there is agreement to the award after it is pronounced it could not be regarded as a compromise under Order 23 Rule 3. Vide - - 'Indramoni v. Nilamoni', (E). The decision in - -'AIR 1945 Mad 294 (B)' is expressly dissented from. In - - 'C.M.A. No. 623 of 1946 (P)', a Bench of this Court consisting of Happell and Govindarajachari JJ. referred to a Full Bench the question whether an award not agreed to could be regarded as compromise under Order 23 Rule 3 and whether - - 'AIR 19 -15 Mad 294 (B) -, was correctly decided. But the appeal, however, was not prosecuted and the question was not determined. It appears to me that the question is one of considerable importance and having regard to the divergence of judicial opinion there ought to be an authoritative pronouncement on the Question. The papers will accordingly be placed before His Lordship the Chief Justice for orders as to the posting of the case before a Bench or Full Bench. JUDGMENT Venkatarama Ayyar, J.
(3.) THE facts leading up to this reference have been fully stated in the order of reference and there is no need to recapitulate them. The question that arise; for determination is, whether when parties to a suit refer their disputes to arbitration without the intervention of the Court and that results in an award, a decree can be passed under Order 23 Rule 3, Civil P. C., in terms of the award, treating it as an adjustment or compromise of the suit. The answer to it depends on the construction of the proviso to Section 47, Arbitration Act 10 of 1940. To begin with, it will be useful to examine what the law on the subject was before the enactment of Section 47. That was contained in two statutes: The Indian Arbitration Act 9 of 1899 and the second schedule to the Code of Civil Procedure, Act of 1898. Leaving out the former enactment as not material to the present discussion the latter contained provisions for these classes of arbitration: (1) where in a pending suit the parties thereto agree to refer the matter to arbitration through Court, that is provided in paras. 1 to 16 of the second schedule corresponding to Sections 506 to 522 of Act 14 of 1382 and Ss. 312 to 325 of Act 8 of 1859; (2) where in pursuance of an agreement to refer, the parties move the Court to refer the matters in dispute to arbitration that is provided in paras, 17 to 19 in the Second Schedule corresponding to Ss. 523 and 524 of Act 14 of 1882 and Section 326 of Act 8 of 1859; and (3) where there is a private reference and an award and the parties apply to the Court for filing the award - - provision for this is made in paras. 20 and 21 of the Second Schedule corresponding to Sections 525 and 526 of Act 14 of 1882 and Section 327 of Act 8 of 1859. There were provisions in all these three classes of arbitration for the Court enquiring into the validity of the award and passing suitable orders, either passing a decree in terms of it or setting it aside or remitting it for reconsideration. None of these provisions had any application where in a pending action the parties referred their disputes to the decision of an arbitrator not through Court but privately and there was an award passed on such reference. In the absence of an express provision in the Code as to how such an award was to be dealt with, the question frequently came up for determination whether it could be regarded as a compromise under Order 23 Rule 3, Civil P. C., even when one of the parties refused to accept the same; and on that there was a sharp difference of opinion among the several High Courts. That it could be recorded as an adjustment of the suit under Order 23 Rule 3 notwithstanding that one of the parties refused to accept it, was the view taken by a Full Bench of this Court in - - : AIR 1928 Mad 1025 (A); of the Bombay High Court in - -'Chanbasappa v. : AIR1927Bom565 (G); and of the Allahabad High Court in - - Gajendra Singh v. : AIR1925All503 . The contrary view that such an award could not be given effect to as a compromise or adjustment under Order 23 Rule 3 was maintained by the Calcutta High Court in a number of cases. Vide - - 'Dekari Tea Co. Ltd. v. Indian General Steam Navigation Co., Ltd.',, AIR 1921 Cal 238 (I); 'Amarchand v. : AIR1922Cal404 (J); - -'G. Dasi v. : AIR1927Cal887 ; - - 'Rohini Kanta v. : AIR1934Cal643 and - - 'Mahammad Mia v. : AIR1935Cal239 , by the Lahore High Court in - - 'Hari Parsad v. Soogni Devi',, AIR 1921 Lah 232 (N); - - 'Nihal Singh v. Ashtawakar',, AIR 1930 Lah 860 (O) and - - 'Sitaram v. Harbans LaT,, AIR 1936 Lah 374 (P) by the Patna High Court m - - 'Bhimraj Kanailal v. Munia Sethani', : AIR 1935 Pat 243 (Q), by a Pull Bench of the Rangoon High Court in - - 'Maung Hlay v. U. Ge',, AIR 1939 Rang 300 (R); and by the Nagpur High Court in - - 'Ramdayal v. Sheodayal', : AIR 1939 Nag 186 (S).;

Click here to view full judgement.
Copyright © Regent Computronics Pvt.Ltd.