Ichharam Damodardas vs Kantilal Nathubhai and Another

V.B. Raju, J.—This civil revision raises an important question as to whether the award of an arbitrator without the intervention of the Court

creating a charge on Immovable property worth more than Rs. 100/- requires to be registered before it is filed u/s 14 of the Arbitration Act, 1940,

which will hereinafter be referred to as the Act and followed by a judgment and decree as provided in section 17 of that Act. The award was !or

the payment of Rs. 8,000/- and it also provided that a charge should be kept on Immovable property worth more than Rs. 100/-. The learned

Judge, therefore, held that the award required registration and refused to accept such an award for the purpose of passing a decree in terms of it.

He, therefore, rejected the prayer of the arbitrator, who filed the award, to pass a decree in terms of it.

In revision, it is contended that this view is erroneous in view of the decision in Seonarain Lal Vs. Prabhu Chand, , which is a judgment of a

Division Bench of Fatna High Court, consisting of three Judges. u/s 17(1)(b) of the Registration Act, certain non testamentary instruments are

required to be registered. The question lor determination, therefore, is whether an award is a nontestamentary instrument of the type mentioned in

Section 17(1)(b) of the Registration Act, which reads as under :

Other non-testamentary instruments which purport, or operate to create, declare, assign, limit or extinguish, whether in present or in future, any

right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in immoveab''le property.

It is contended that under the Indian Arbitration Act, 1940, an award as such does not create, declare, assign, limit or extinguish any right, title or

interest, because the award has got to be followed by a judgment and decree as provided by Section 17, and unless it is followed by a judgment

and decree It cannot be enforced in a Court of law. The proposition that the award as such cannot be enforced in a Court of law unless it is

followed by a judgment and decree is provided in Section 17 of the Act, Section 32 of the Act provides as follows :

Notwithstanding any law for the time being in force, no suit shall be on any ground whatsoever for a decision upon the existence, effect or validity

of an arbitration agreement or award, nor shall any arbitration agreement or award be set aside, amended, modified or in any way affected

otherwise than as provided in this Act.

The learned Judges of the Patna High Court held that the award by itself is of no effect and that therefore an award does not purport or operate to

create any right, title or interest in the property dealt with by it and they therefore observed that an award even though it be in respect of

Immovable property worth one hundered rupees and upwards does not require registration. They also observed that looked from another point of

view, namely, that an award is only effective when a decree follows the judgment upon the award, such an award may be covered by the

exception mentioned in Section 17(2)(vi) (any decree or order of a Couit) of the Registration Act. The exception mentioned in section 17(2)(vi) of

the Registration Act is as follows :

Any decree or order of a Court except a decree or order expressed to be made on a compromise and comprising Immovable property other than

that which is the subject matter of the suit or proceeding"".

But an award is not a decree or order of the Court although it may be followed by a decree or order of the Court and with respect, the exception

contained in Section 17(2)(vi) of the Registration Act, would not apply to an award under the Act

No doubt, as observed by the learned Judges of the Patna High Court an award under the Act has to be followed by a judgment and decree,

and unless it is so followed, it cannot be enforced in a Court of law. But, that does not mean that the award by itself is of no effect. Section 3 of the

Act provides as follows :

An arbitration agreement, unless a different intention is expressed therein, shall be deemed to include the provisions set out in the First Schedule in

so far as they are applicable to the reference"".

Clause 7 of the First Schedule to the Arbitration Act provides that

the award shall be final and binding en the parties and persons claiming under them respectively.

In view of these two provisions an award becomes binding on the parties to the arbitration agreement and on the persons claiming under them, and

if tho award provides that a charge is kept on the Immovable property worth more than Rs. 100/-, it becomes final and binding on the parties to

the arbitration agreement and on the persons claiming under them. If the parties to the arbitration agreement accept the award and do not deem it

necessary to go to a Court of law, they can enter into subsequent transactions relying on the charge created by the parties to the arbitration

agreement. The subsequent riocumen'' can be enforced in a Court of law, although the award on which it is based is not enforceable in the Court of

law. In Dewaram Tewari Vs. Harinarain Tewari and Others, , it is observed as fallows:

The matter may be looked at from another point view. Supposing the parties to an award are satisfied with it and enter info possession of the

property respectively awarded to them and the value is over Rs. 100/- and no dispute arises between them, they are not bound to go to Court

under the provisions of the Arbitration Act. They are satisfied with the award and they do not want any Court to pronounce a decree in

accordance with the award. Has title to the property passed to the parties without the award being registered so that such a party can transfer the

title to a third party by sale, gift or otherwise? In my opinion, the answer is clear that no title to Immovable property of the value of above Rs.

100/- can pass by the award -- it is a non-testamentary instrument -- without the document being registered.

Now, this decision has not been followed and has been differed from in Seonarain Lal Vs. Prabhu Chand, , which is a judgment of a Division

Bench of three Judges. But the argument advanced in Bhankumar Chand and Another Vs. Shree Lachmi Kant Rao Naik Kalia and Others, has

not been answered in the subsequent Patna case of 1958. It is contended by the learned counsel for the applicant that the decision in Dewaram

Tewari Vs. Harinarain Tewari and Others, has been overruled by the Division Bench of the Patna High Court in Seonarain Lal Vs. Prabhu Chand,

. There is nothing in the judgment of the Full Bench (Division Court of three Judges) to snow that they had overruled the decision in Dewaram

Tewari Vs. Harinarain Tewari and Others, . No doubt they have differed from the view taken in Dewaram Tewari Vs. Harinarain Tewari and

Others, . But the power to overrule such decisions tests only with the Supreme Court and none else. It is contended by the learned counsel for the

opponents that there are two judgments of Division Courts of the Patna High Court in ILR Pat 437 : (AIR 1948 320) and Jagdish Mahton and

Others Vs. Sundar Mahton and Others, , and that although these two judgments have not been followed by the Division Bench of three Judges of

the same High Court, this is a case In which the view of the Division Bench of two Judges should be taken as against the view taken by three

Judges of the Full Bench. But it is not necessary to go into this question. The Division Bench of three Judges in Seonarain Lal Vs. Prabhu Chand, ,

has not referred to the provisions of Section 3 of the Act and Clause 7 of the First Schedule to the Act. If they had done so, perhaps they might

have come to a different conclusion. Although the provisions of Section 3 of the Act and Clause 7 in Schedule I of the Act have not been referred

to in Yanadamma v. Venkateswarlu AIR 1947 Mad 168 they have observed as follows ;

When there is a dispute between parties and that dispute is referred to an arbitrator whose decision the parties agree to accept, there is, in fact, a

contract between these parties, the final terms of which will embody the decision of the arbitrator on the point referred to him. If the nature of the

contract between the parties is such that it actually declares or creates cr assigns any Interest in Immovable property, the award just tike any other

contract having the effect, must be registered. If, however, the contract between the parties merely relates to the terms on which one party shall

have the right to demand from the other party a future conveyance of property, then the award which settles the terms upon which this future

conveyance should be made, is nothing more than part of an agreement to convey, and it is well settled that an agreement to convey in future falls

under the exertion in Section 17 Registration Act.

Even in the case of an ordinary sale deed of Immovable property, it cannot be enforced without filing a suit, but that does not mean that the sale

deed has no effect by itself. Similarly, an award under the Act is not enforceable unless it is filed in a Court and followed by a judgment and decree

of the Court. But, that does not mean that the award itself has no effect. It is final and binding between the parties to the arbitration agreement, and

it has, therefore, great effect to that extent. I, therefore, hold that under the Arbitration Act of 1940, if an award creates a charge on Immovable

property worth Rs. 100A or more, it would require registration. To take any other view would result in making easy evasion of the provisions of

the Registration Act.

But in this case the award provided for two things : (1) the payment of Rs. 8000/- and (2) the creation of charge on Immovable property. So far

as the award created a charge on the Immovable property, it requires registration and to that extent the award is defective. But so far as the award

related to the payment of Rs. 8000/- there was no detect in the award. Section 15 of the Act provides that the Court may by order modify or

correct an award, where the award is imperfect in form or contains any obvious error which can be amended without affecting the decision on the

matter referred. In my opinion, the non-registration of that part of the award which relates to a charge on the Immovable property would be a

defect in form which could be modified and corrected by the Court. For another reason also, the Court can modify the award, because the

arbitration agreement referred only the question in respect of the amount due and the installments payable to arbitration. But the arbitrator created

a charge which was not one of the matters referred to in the arbitration agreement. To that extent, the award was in excess of the powers of the

arbitrator;, and as decided by the Privy Council in Amir Begam v. Badr-Ud-Din ILR All 336 : (AIR 1914 SC 105). where part of an award was

found to be invalid as being in excess of the arbitrator''s powers and it was separable from the rest, the remainder of the award being good, could

be maintained. In this case, the award relating to the payment of Rs. 8000/- is separable from that part of the award which creates a charge on the

immovable property. The award which is binding on parties to the arbitration agreement does not cease to have that effect merely because in law

an award cannot be enforced unless followed by a judgment and decree.

I, therefore, allow the revision application and direct the Court below to pass a judgment and decree in, terms of the award so far as it relates to

the payment of money. The person to whom the money is paid under the award should pay the costs of this revision application.