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1955 DIGILAW 60 (RAJ)

Phool Narain v. Madan Gopal

1955-02-15

BAPNA, SHARMA

body1955
Judgement BAPNA, J.:- This is an appeal against an order of the learned Additional District Judge, Jaipur, dated 31-5-1952, in a pending suit. 2. The respondent instituted a suit for recovery of Rs.21,646/12/3 against the appellant Phool Narain, which was contested by the appellant on various grounds. Various issues were struck, and 19-5-1952, was fixed for the recording of the evidence of the defendant himself. The defendant appeared in the witness box, and instead of making any statement in respect of the matters in dispute stated that the parties had appointed arbitrators without intervention of the court, who fixed Rs.7,816/- to be payable to the plaintiff in respect of his claim, and that this amount had been paid under a receipt executed by the plaintiff, which was in the possession of the arbitrators. Simultaneously with the above statement, an application was presented before the court by Ganpat Rai to the effect that the said Ganpat Rai and one Laduram were appointed arbitrators by the parties, who gave an award that the defendant was only liable to the extent of Rs.7,816/-, and the said amount was paid to the plaintiff in their presence, and a receipt was executed by the plaintiff. The award and the receipt were produced, and it was suggested by Ganpat Rai that the suit be dismissed. The plaintiff immediately made an application that he had never agreed to have his claim adjudicated by any arbitrator,: that he had never appointed any arbitrator, that he was not aware of any award, and that he had not received any amount from the defendant, and the signatures purporting to have been affixed by the plaintiff on the award and the receipt were forgeries, and the entire story of arbitration, of award, and the subsequent payment by the defendant to the plaintiff were concoctions. Certain more objections were raised by the plaintiff by a separate application dated 27-5-1952. The court framed the following issues on 29-5-1952. 1. Whether the award is invalid being against the provisions of the Indian Arbitration Act and cannot be given effect to by the court? 2. Whether the award ought to be on a stamp paper? If so, what is the stamp duty and penalty. 3. Whether there was an arbitration agreement between the parties on 4-5-52? If so, what were its terms? 4. 2. Whether the award ought to be on a stamp paper? If so, what is the stamp duty and penalty. 3. Whether there was an arbitration agreement between the parties on 4-5-52? If so, what were its terms? 4. Whether the alleged award was made by the arbitrators duly appointed by the parties and they are bound by it? The learned Additional District Judge heard arguments on issues Nos.1 and 2, and held that the award, as a result of the alleged arbitration outside the court, was illegal. He also held that the award could not also be recorded as adjustment under O.23, R.3, Civil P.C.On issue No.2 he held that an award required a stamp paper of Rs.10/-, and was inadmissible unless the penalty was paid by the party concerned. He accordingly refused to take the award into consideration, and directed the defendant to continue his evidence on the next date of hearing. The defendant has filed this appeal. 3. It was conceded by learned counsel for the defendant-appellant that an arbitration in a pending suit without the intervention of the court was not enforceable as an award, but he contended with great emphasis that in the present case the allegation was that the award had been accepted by the plaintiff in witness whereof he had affixed his signatures to the award, which contained a recital that the plaintiff had agreed to receive Rs.7,816/- in full satisfaction of his claim. It was also contended that the subsequent receipt by the plaintiff in full settlement of his claim amounted to an adjustment of the claim, and should have been recorded as such under the provisions of O.23 R.3, Civil P.C. 4. In respect of the last contention it need only be said that no application was made before the lower court by the defendant for recording of the adjustment on the basis of the receipt alleged to have been executed by the plaintiff in full satisfaction of his claim, and there is no finding of the lower court as to whether the receipt dated 4-5-1952, alleged to have been executed by the plaintiff was genuine. That is a question of fact, and will have to be tried by the lower court, and, therefore, no opinion need be expressed by this Court on that question. 5. That is a question of fact, and will have to be tried by the lower court, and, therefore, no opinion need be expressed by this Court on that question. 5. In respect of the first contention it was conceded that the Indian Arbitration Act 1940 did not provide for arbitration without the intervention of the court in respect of matters which were the subject of dispute in a pending suit, but it was contended that the subsequent acceptance of the award amounted to an agreement, and if, as in this case, the said agreement amounted to an adjustment, the same could be recorded under O.23, R.3, Civil P.C. It was argued that there was no law which prevented the parties from expressing their agreement to an award without intervention of the court in a pending suit, and if, for instance, the parties drew up an agreement incorporating the terms of the award and expressing their willingness to abide by its terms without mentioning the fact of arbitration, the said agreement could be put up before a court for recording of the agreement, compromise or adjustment under O.23, R.3 of the Code, and the court was not concerned to probe into all the factors which had induced the parties to come to that compromise. It was urged that it should not make any difference, if instead of jotting down all the terms of the award the parties only said that they agreed to settle their differences in terms of the award, and such agreement should be placed on the same basis as an agreement incorporating the terms of the award without making any reference thereto, and should be can able of being recorded under O.23 R.3, of the Code. It was argued that prior to the enactment of the Indian Arbitration Act (Act 10 of 1940), there was difference of opinion among the High Courts in India as to whether an award as a result of arbitration without intervention of court in a pending suit could be recorded as a compromise under O.23, R.3 of the Code. The Madras, Bombay and Allahabad High Courts were of opinion that such an award could be recorded as compromise. - Arumuga Mudaliar v. Balasubramania Mudaliar, AIR 1945 Mad 294 (A); - Chanbasappa Gurushantanoa v. Baslingayya Gokurnaya, AIR 1927 Bom565 (FB) (B); - Gajendra Singh v. Durga Kumari, AIR 1925 All 503 (FB) (C). The Madras, Bombay and Allahabad High Courts were of opinion that such an award could be recorded as compromise. - Arumuga Mudaliar v. Balasubramania Mudaliar, AIR 1945 Mad 294 (A); - Chanbasappa Gurushantanoa v. Baslingayya Gokurnaya, AIR 1927 Bom565 (FB) (B); - Gajendra Singh v. Durga Kumari, AIR 1925 All 503 (FB) (C). A contrary opinion was held by the Rangoon, Calcutta, Lahore and Patna High Courts. - Maung Hlay v.U Ge, AIR 1939 Rang 300 (FB) (D); - Amarchand Chamaria v. Banwari Lai, AIR 1922 Cal 404 (E); - Hari Parshad v. Mt. Soogni Devi, AIR 1921 Lah 232 (F); - Bhim-raj Kanai Lal v. Munia Sethani, AIR 1935 Pat 243 (G). Section 47, Arbitration Act, 1940, as framed, purported to give recognition to the latter view. The same High Courts, however, permitted the award to be considered as a compromise in case it was accepted by the parties, and S.47 should be interpreted so as to uphold acceptance of such award as compromise, if agreed to by the parties. Reliance was placed on - Pagammal v. Kasi Goun-dan, AIR 1951 Mad 387 (H); - Indramoni Mohapatra v. Nilamoni Moharana, AIR 1950 Orissa 169 (I); - Daya Devji v. Damji Devji, AIR 1952 Sau 92 (J); - Abdul Rahman v. Muhammad Siddiq, AIR 1953 Mad 781 (K); - Nazir Mohamed v. Kasturchand Gomaji Co., AIR 1951 Mys 57 (L). 6. In our opinion, the argument though plausible is without force. The controversy as to whether an award as a result of arbitration without the intervention of court in a pending suit could or could not be recorded as a compromise is now set at rest by S.47, Arbitration Act (Act 10 of 1940). The earlier cases which permitted consideration of an award which had been accepted by the parties as a compromise have also lost their force unless they are consistent with the provisions of S.47, Arbitration Act. Section 47 is as follows: "Subject to the provisions of S.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. The first part of the section lays down that all arbitrations have to be conducted according to the provisions of the Act, and an arbitration in violation of the provisions of the Act will become invalid. An arbitration of a dispute which is the subject-matter of a pending suit without intervention of the court is not provided, and such an award by the provisions of S.47 is not valid. The proviso, however, saves an award otherwise obtained for a limited purpose. It may with the consent of all the parties interested be taken into consideration as a compromise or adjustment of the suit by any court before which the suit is pending. According to the plain meaning of the proviso, the consent of the parties is required for taking it into consideration as a compromise or adjustment. In other words, the court will not take into consideration an award otherwise obtained, if all the parties do not consent that it should be taken into consideration as a compromise or adjustment. Any alleged consent outside the court is immaterial. In the present case the award as soon as set up was denied by the plaintiff and its consideration was strongly opposed by him. The Orissa case instead of helping the appellant supports the plaintiff respondent. Learned counsel for the appellant relied on the observations of Das, J., at p.183, para 48: "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 O.23, R.3; and if the facts relevant to such a situation are disputed, they will have to be enquired into as in any disputed adjustment." These observations are, however, preceded by an observation "It may also be noticed that the consent required under the proviso is the consent to take the award into consideration and not a consent to the award itself." The observations of Ray, C.J., are more explicit. In para 40 it is observed that "The provision is an enabling one and allows an award otherwise obtained to be taken into consideration as a compromise or adjustment of a pending suit, provided all parties interested give consent to such consideration. The provision is not capable of any other construction." The same view has been taken in - Zeauddin v. Abdur Rafique, AIR 1952 Pat 66 (M). The provision is not capable of any other construction." The same view has been taken in - Zeauddin v. Abdur Rafique, AIR 1952 Pat 66 (M). It was observed by Shearer, J., that "It seems to me quite clear that the consent of the parties required under that proviso is a consent to the Court taking the arbitration award into consideration, and not, as was suggested by the learned Advocate for the plaintiffs, a consent expressed by the parties out of Court to be bound by the award." The other cases cited are really not relevant, and are distinguishable. In Pagammals case (H) defendant 4 had not agreed to the arbitration, but was found to have given his consent to the award, and the award was recorded as a compromise. So far as defendant 4 was concerned, therefore, it was his assent which was treated as compromise. He was no party to the arbitration, and even if such arbitration would have been through the court, he was not bound by the award. If this Madras case be, however, considered to lay down that an assent given outside the court to an award made without intervention of the court in a pending dispute be taken into consideration, we would with great respect differ from that decision, for it did not take into consideration the effect of S.47, Arbitration Act. The Saurashtra case, AIR 1952 Sau 92 (J) really turns on a finding that there were no regular arbitration proceedings, and the intervention of the Panchas only brought about a compromise between the parties, which having been accepted could be considered as a compromise capable of being recorded as an adjustment under O.23, R.3 of the Code. The effect of S.47, Arbitration Act was not at all considered. In Abdul Rahman Sahib v. Muhammad Siddiq (K), there is an observation that "if, after an award is made, the parties thereto agree to accept it, that will be a compromise and a decree based thereon can be passed under O.23, R.3." In that case there was no agreement after the award, and the crucial question as to whether the consent, required for converting the award into a compromise, is required to be given in court was not considered. The decision only purported to overrule the view taken in the previous Madras case, AIR 1945 Mad 294 (A), that an award made in a pending suit as a result of arbitration without intervention of the court could be recorded as a compromise. In the Mysore case AIR 1951 Mys 57 (L) also there was no consent at any time after the award, and the entire discussion relates to the correctness or otherwise of the view taken in AIR 1945 Mad 294 (A). It was not discussed or decided as to when the consent is to be given by the parties in order to convert an award into a compromise. In our opinion the lower court has rightly held that the award set up by the defendant as a result of the alleged arbitration outside the court in respect of a matter which was the subject of a pending suit, could not be recorded as a compromise either by its own force or supplemented by an alleged consent of the parties outside the court after the award, because the parties did not give their consent before the court for its consideration as compromise or adjustment of the suit. 7. The appeal fails and is dismissed with costs. Appeal dismissed.