Modi Narandas Chhaganlal vs Shah Jamnadas Maneklal and Another

V.R. Shah, J.—This appeal arises out of the dismissal of Civil Appeal No. 317 of 1958 by the learned Assistant Judge, Baroda. The

appellant before me is the original plaintiff and he filed a suit against the two respondents before me to recover an amount of Rs. 5720/- on the

basis of a promissory note. While the matter was pending in the trial Court, the parties agreed to refer the matter to an arbitrator. The reference to

the arbitrator was not made by the Court, but it was a reference privately made by the parties themselves. The reference to the arbitrator was

made on 16th September, 1957 and the arbitrator save an award on the same day. The learned Assistant Judge has found as a matter of fact that

all the parties to the suit have accepted the award after it was made by the arbitrator. After the parties had accepted the award, they did not

immediately go to the Court and intimate to the Court about the making of an award or their acceptance thereof. The proceedings in the trial Court

continued until the issues were framed. Thereafter, the defendants in the suit made an application to the Court pointing out that the matter was

referred by the parties privately to an arbitrator and that the arbitrator has given an award and that the parties have accepted the award. The

defendants contended before the trial Court that the suit has been adjusted or compromised between the parties according to the terms of the

award and therefore a compromise may be recorded and a decree passed in terms thereof. This contention was based by the defendants on the

provisions of Order 23, Rule 3 of the Civil Procedure Code.

The plaintiff objected to the Court accepting the award as a compromise and passing a decree in terms of the award. The trial Court negatived

his objection and passed a decree in terms of the compromise represented by the award which was accepted by the parties. The plaintiff took an

appeal to the District Court at Baroda and the learned Assistant Judge, who heard the appeal came to the conclusion that the parties had accepted

the award after it was made and on that basis he came to the conclusion that the award represented a compromise or an adjustment of the suit by

the parties. He therefore, upheld the decree made by the trial Court and dismissed the appeal of the plaintiff.

In this Second Appeal, Mr. M.M. Patel, who appears for the appellant contended that mere acceptance of the award after it was made is not a

sufficient compliance with the provisions of the proviso to Section 47 of the Indian Arbitration Act, 1940 (hereinafter referred to as ''the Act'') and

that there should be an acceptance of the award by the plaintiff before the trial Court when the contention raised by the defendants was considered

by it. Mr. Patel urged that as the plaintiff has not given such a consent when the trial Court considered the contention of the defendants, the trial

Court had no jurisdiction to pass a decree in terms of the award.

On the other hand, Mr. S.B. Vakil, who appears for the respondents contended firstly that by accepting the award made by the arbitrator, the

same was turned into an agreement between them by the parties and since this agreement compromised or adjusted the suit of the plaintiff and was

lawful, the agreement should be accepted as a compromise or adjustment under the provisions of Order 23, Rule 3 of the Code. Mr. Vakil also

further contended that the proviso to Section 47 of the Act applies to those cases where the award is ""otherwise obtained"" that is, obtained

otherwise than in accordance with the provisions of the Indian Arbitration Act. But the award obtained in this case is not an award ""otherwise

obtained"" within the meaning of the proviso to Section 47 of the Act. He also urged that the proviso to Section 47 of the Act would have no

application to this case. Mr. Vakil, further contended that the consent required by the proviso to Section 47 of the Act can be given at any time

after the award is made and it is not necessary that the consent must be given at the time when the court is considering the question of recording a

compromise.

In support of his argument Mr. Patel relied on number of authorities. He relied on the decisions in the cases of (1) Indramoni Mohapatra Vs.

Nilamoni Moharana, Moradhwaj Vs. Bhudar Das, Phool Narain v. Madan Gopal AIR 1955 Raj 162 Zeauddin and Others Vs. Abdur Rafique

and Others, Raghunandan Rai v. Sukhlal Rai AIR 1952 Pat 25 and (6) Jugaldas Damodar Modi and Co. Vs. Pursottam Umedbhai and Co., . Mr.

Patel relied on these rulings in support of his contention that the consent required to be given under the proviso to Section 47 of the Act is a

consent that should be given at the time when the Court is hearing the contention that the award is a compromise or an adjustment of the suit and

that a decree should be passed upon it under the provisions of Order 23, Rule 3 of the Code in some of those cases it has been observed that a

consent given outside the Court is not a sufficient consent. However, all these cases differ on facts from the instant case, in that, in none of those

cases the parties had accepted the award before the application to consider it as a compromise or adjustment of the dispute was made to the

Court. At the time when the contention was raised in the Court that the award should be treated as a compromise or adjustment for the purposes

of Order 23, Rule 3 of the Code, the award had retained its character of an award and it was the award itself which was to be considered by the

Court; and the effect of parties accepting the award after it was given but before the contention was raised in the Court was not considered in any

of these cases because that fact was not present in any of those cases.

In the instant case the parties have accepted the award after it was given. It is necessary to consider as to what is the effect of the acceptance of

such an award by all the parties to the suit. Does it remain an award even after all the parties to the suit accepted it? In my opinion, it does not

remain an award as such, that is, it does not remain a decision of an arbitrator. By reason of the fact that all the parties to the suit have accepted it,

the award becomes, as it were"" an agreement between the parties or an adjustment of the suit arrived at by all the parties. Order 23, Rule 3 of the

CPC gives unlimited latitude to the parties to a suit to settle the disputes between them in any manner they like and they can always put that

settlement of dispute be-fore the Court and request the Court to make a decree in terms of that settlement. All that the Court has to do in such a

case is to see whether the settlement or the compromise is lawful one or not. If it is a lawful compromise or settlement the Court is bound to pass a

decree in terms of the settlement to the extent that it settles the dispute between the parties. The Court is not required to enter upon any enquiry as

to what were the means adopted by the parties to arrive at such an agreement or compromise; or who persuaded the parties to enter into such a

compromise or adjustment or what were the matters considered by the parties in arriving at such a settlement or compromise. The parties may

arrive at a settlement or compromise by the instrumentality of a third person: or they may arrive at such a settlement or compromise on accepting

the advice of some persons. When an award is accepted by the parties to a suit all that they do is to make the award an instrument to enable them

to come to an agreement or adjustment of the suit. Once the parties have accepted the award, the award ceases to be a decision of a third person

and it assumes the character of an agreement arrived at by the parties to the suit. When, therefore, after accepting the award any party goes to the

Court and states to it that the parties have accepted the award and therefore it should be accepted as a compromise or adjustment of the suit, what

is put before the Court is that there has been an agreement between the parties to the suit and it should be acted upon. When the other side

appears in the Court and says that there has been no such agreement, the Court is entitled to enter into an inquiry as to whether, there was an

agreement in fact or not and if the Court is satisfied, despite the objection raised by the other side that there was in fact an agreement or settlement

of the dispute between the parties, the provisions of Order 23, Rule 3, authorise the Court to arrive at such a decision and to pass a decree on the

basis of that decision. In the instant case, when the defendants told the Court that the parties including the plaintiff have accepted the award, what

the defendants intimated in fact to the Court was that the suit is settled or adjusted in a particular manner as expressed in the award made by the

arbitrator, and the defendants asked the Court to record that agreement or settlement of the dispute and to pass a decree in accordance with the

said award. The Court, therefore, when it recorded a finding that the plaintiff had accepted the award, did in fact record a finding that the

agreement alleged by the defendants is proved. In the instant case, therefore, in my opinion, the proviso to Section 47 of the Act does not at all

come into play and it is, therefore, not necessary to consider the rulings cited on behalf of the appellant in support of the contention as to whether

the consent necessary under the proviso to Section 47 is given or not.

Mr. Vakil cited to me the decision in the case of Rameshwar Lal Vs. Mangi Lal, where, in almost identical circumstances, the learned Judge of

the Patna High Court has arrived at the same conclusion as arrived at by me in this case. The learned Judge has held therein ""where parties to a suit

agree out of Court to get their dispute referred to arbitration and consent to the award given by the arbitrator, the award can be treated as a

compromise between them and a decree can be passed on the basis of such compromise even though one of the parties backs out from the

compromise before the Court."" So also in the case of Salima Bibi v. Md. Ibrahim Saheb. AIR 1962 A P 123, the Court has observed as follows:-

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If before the filing of the award, all parties signed on it, the Court is entitled to take it into consideration as a compromise or adjustment of a suit

within the meaning of Order 23, Rule 3, Civil Procedure Code.

It is not necessary that the party should consent to the award at the time when the compromise petition is taken up for consideration by the Court.

It does not matter whether the consent is signified outside the Court or before the Court.

The Madras High Court in a Full Bench case in Abdul Rahman Sahib Vs. Muhammad Siddig and Another, has also laid down that if an award

which is not obtained in accordance with the provisions of the Indian Arbitration Act is accepted by the parties after it is made, the Court is entitled

to accept such an award as a compromise or adjustment of the dispute between the parties for the purposes of Order 23, Rule 3 of the CPC and

to base a decree in accordance with the terms of that award. In the case i Indramoni Mohapatra Vs. Nilamoni Moharana, . Das J. has observed

on page 183 as follows:--

If the award is agreed to, after it is given, it operates as an adjustment and a decree in terms will have to follow under Order 23, Rule 3, and if the

facts relevant to such a situation are disputed, they will have to be enquired into as in any disputed adjustment.

In my opinion, therefore, the acceptance of the award by the parties to the dispute converts it into an agreement or adjustment between the parties

and when the application is made to the Court, the application is not to pass a decree in terms of any award, but the application is to pass a decree

in terms of a compromise or adjustment arrived at between the parties under the provisions of Order 23, Rule 3 of the Civil Procedure Code. In

this view which I take, it is not necessary to consider the provisions of Section 47 of the Act or the proviso thereof.

It is true as contended by Mr. Patel that if the case were to be decided on the basis of the proviso to Section 47 of the Act, the consent should

be given at the time when the Court is called upon to consider whether the award should be accepted as an adjustment or a compromise. The

language of the proviso to Section 47 of the Act is, in my opinion, very clear and leads to this interpretation only. However, I refrain from entering

into any detailed discussion of this question because in my opinion, as I stated earlier, it is not necessary to consider the interpretation of the

language of the proviso to Section 47 because that proviso does not apply to the facts of the case. The rulings relied upon by Zeauddin and Others

Vs. Abdur Rafique and Others, which lay down that the consent necessary under the proviso to Section 47 of the Act must be a consent given

before the Court and not earlier, do not deal with a case where the parties to the suit had accepted the award prior to the matter being agitated in

the Court. The question, therefore, as to what would be the effect of the parties accepting the award after it is made did not arise in those cases

and those cases, are therefore, not helpful to me in the decision of this case.

I may mention that Mr. Vakil also urged that this award is not ""otherwise obtained"" within the meaning of the proviso to Section 47 of the Act.

Since it is not necessary to consider the proviso to Section 47 of the Act, this argument need not be considered.

No other point has been pressed in this appeal. The result is that the appeal fails and is dismissed with costs.