Subbaraju vs Venkatramaraju

Phillips, J.—The question referred to us for decision is "where in a suit parties have referred their difference to arbitration without an order of the Court and an award is made, can a decree in terms of the award be passed by the Court under Order XXIII, Rule 3, or otherwise, the parties not accepting the award?".

This question has frequently come up for decision in this Court and has almost invariably been answered in the affirmative.

In Nanjappa Vs. Nanjappa Rao, , it was held that an award in such circumstances was a lawful agreement, compromise and adjustment within the meaning of Section 375 of the CPC Code, 1882, which is the section corresponding to Order XXIII, Rule 3. In that case the previous decisions of this Court were referred to and followed. The subsequent cases in which the decision was under the Code of 1908 have held that Order XXIII, Rule 3, can be applied in such circumstances-Chinna Venkatasami Naicken v. Venkatasami Naicken ILR (1919) Mad. 625 Belagoduhal Virabadra Gowd v. Kalyani Gangamma (1926) 97 I.C. 465, Alagu Pillai (died) and Others Vs. Veluchami alias Mayilappa Pillai and Others, , Chintalapalli Chinna Dorayya v. Chintalapalli Yenkanna (1923) 76 I.C. 502, and Nune Ayyannamma Vs. Valloori Ramaswami, .

The only cases in which a different opinion has been expressed are-Venkatachala v. Rangiah ILR (1913) Mad. 353, and Bodachari v. Muniachari (1921) 14 L.W. 666. In the former case there was a mere agreement to refer, but no award in pursuance of that agreement, and it was held that that was not an adjustment within the meaning of the Code. In the latter case, Krishnan and Odgers, JJ., were inclined to hold that Section 89 of the CPC was a bar to the application of Order XXIII, Rule 3, in such cases but did not definitely decide the point. It will be seen therefore that so far as this Court is concerned the view taken almost unanimously has been that Order XXIII, Rule 3, is applicable in such circumstances; but this reference has been made because the Calcutta High Court and the Lahore High Court have held to the contrary. In Calcutta the leading case is Amarchand Chamaria v. Banwari Lall Rakshit ILR (1922) Cal. 608, a decision of RANKIN, J., sitting as a single Judge, in which he followed an earlier decision of his own. This was followed by a Bench in Guimoni Dasi v. Tarini Charan Porel (1927) 104 I.C. 360. The Lahore High Court took. the same view in Hari Parshad v. Soogni Devi (1920) 3 Iah. L.J. 162, and based their decision on the provisions of Section 89 of the CPC Code. In Bombay, MACLEOD, C.J., agreed with the Calcutta view in Shavak Shaw v. Tyab Haji Ayub ILR (1916) 40 Bom. 386, but in a subsequent case, Manilal Motilal v. Gokaldas Rowji ILR (1921) 45 Bom. 245, he came to the opposite conclusion. The question was referred to a Full Bench and in Chanbasappa v. Basalingayya ILR (1927) 51 Bom. 908, it was held that Order XXIII, Rule 3, was applicable. The Allahabad High Court (Full Bench) have taken the same view in Gajendra Singh v. Durgakunwar ILR (1925) All. 637, although in a subsequent case, Baij Nath Prasad v. Narain Prasad (1927) 102 I.C. 608, a Bench of two Judges held that Order XXIII did not apply in the particular case they were considering, which was a case where the requirements of Clause 20, Schedule 2, CPC Code, had been complied with, and it was held that the award should be treated as an award and not as a compromise of the suit. The main body of opinion is therefore clearly in favour of an affirmative answer to the question before us, but it will be advisable to consider the matter in its legal aspects.

In the first place, is Order XXIII, Rule 3, in terms applicable to the case before us? Rule 3 provides

Where it is proved to the satisfaction of the Court that a suit has been adjusted wholly or in part by any lawful arrangement or compromise....

If an agreement to abide by the decision of an arbitrator can be held to be a compromise, the section is clearly applicable. It has been suggested that a mere agreement to be bound by a future award is not a compromise, whereas an agreement to accept an award that has been made is a compromise. It is difficult to see on what principle parties who agree to accept a certain fixed sum in satisfaction of a claim can be said to compromise that claim, whereas if they agree to accept a sum which is to be fixed by some one else that does not amount to a compromise. The meaning of the word "compromise" has been elaborately discussed by Marten, C.J., in Chanbasappa v. Basalingayya ILR (1927) 51 Bom. 908, and, with respect, I entirely agree with him that the agreement to abide by the decision of an arbitrator is a compromise of the claim.

The main objection that has been taken to the application of Order XXIII, Rule 3, is that it is opposed to Section 89 of the CPC Code. That section runs as follows:

Save in so far as is otherwise provided by the Indian Arbitration Act, 1899, or by any other law for the time being in force, all references to arbitration whether by an order in a suit or otherwise, and all proceedings thereunder, shall be governed by the provisions contained in the second schedule.

Two arguments are advanced in support of this proposition, firstly that the words "any other law for the time being in force" cannot include Order XXIII which finds a place in the schedule to the CPC itself, and secondly that Section 89 is exhaustive and provides that all references to arbitration shall be governed by the second schedule of the Code. The first argument does not appeal to me, for if the whole of the provisions of the CPC are excluded by the words "any other law for the time being in force" it would mean that the provisions of the second schedule were exhaustive and self-contained and the various rules of procedure laid down in the other parts of the Code would be inapplicable. The words "any other law" are very general and there seems to be no reason for interpreting them as excluding the law laid down in other parts of the CPC Code. The second argument that Section 89 makes the second schedule exhaustive and therefore excludes the provision of Order XXIII in cases of award has more force. If an award comes within the meaning of compromise in Rule 3, as I have found that it does, a certain right is conferred on parties by that section and that right cannot be taken away except by a specific enactment. Unless it is necessary to read Section 89 as having that effect it should not be so read. In the first place, the second schedule, CPC Code, is not mandatory, but provides for reference to arbitrators at the will of the parties and also provides that certain procedure must be followed if they take action under that schedule. It does not, however, say that there shall be no arbitration other than what is dealt with by the second schedule, and if parties to the suit choose to refer to arbitration it is open to them to adopt the provisions of the second schedule or not as they please. In the present case the parties have agreed to decide a pending litigation in accordance with the award of an arbitrator. Under Clause 20 of the second schedule they could apply to have the award filed in Court and then the procedure provided by that clause would be followed. If, however, the award satisfies the provisions of Order XXIII, Rule 3, there is no provision in the CPC which expressly takes away the right of the parties to proceed in accordance with the section; and unless the right is clearly taken away by law, it must be enforceable in Court, and certainly there is no express provision of law which takes away such right nor any provision which necessarily has that implication. I am therefore of opinion that Order XXIII, Rule 3, can be applied in the circumstances of the present case, although I am not prepared to hold that in appropriate circumstances the parties would be precluded from taking action under Clause 20 of the second schedule.

Another argument has been adduced by Mr. T.M. Krishnaswami Ayyar for the Respondent, namely, that when parties engage in litigation and give the Court jurisdiction to decide that dispute it is not open to them to oust that jurisdiction by an agreement among themselves; and reliance is placed on Doleman and Sons v. Ossett Corporation [1912] 3 K.B. 257, which was followed in Ram Prosad Surajmull v. Mohan Lal Lachmi Narain ILR (1920) Cal. 752, and Appavu v. Seeni ILR (1918) Mad. 115. That case is not, however, at all applicable to the present question, for there it was held that, when there was, what is called an artbitration clause in an agreement and in contravention of that clause a suit had been filed, it was not open to plead an award given after suit as a bar to the action. There, however, the agreement to submit the disputes for arbitration was made before the suit was filed and on this ground the case is distinguishable. Fletcher Moulton, L.J., observed at page 269:

It follows, therefore, that in the latter case the private tribunal, if it has ever come into existence, is functus officio unless the parties agree de novo that the dispute shall be tried by arbitration, as in the case where they agree that the action itself shall be referred.

Farwell, L.J., also observed:

When the Defendant has submitted to the jurisdiction, he cannot withdraw without the leave of the Court, or the consent of his opponent.

From these observations it is clear that the learned Judges distinguished the case they were considering from one in which the parties make a reference to arbitration after the suit had been filed and that the latter was not governed by their decision. I am, therefore, of opinion that the question referred to us must be answered in the affirmative.

Ramesam, J.

I agree.

Madhavan Nair, J.

I agree.