MODI NARANDAS CHHAGANLAL v. JAMNADAS MANEKLAL — 1968 DIGILAW 12 (GUJ)

V. R. SHAH, J. ( 1 ) 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. 5120. 00 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 gave 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 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. ( 2 ) 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 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 represents a compromise or an adjustment of the suit 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 represents 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. ( 3 ) 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 sec. 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. ( 4 ) 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 sec. 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 sec 47 of the Act. He also urged that the proviso to sec. 47 of the Act would have no application to this case. Mr. Vakil further contended that the consent required by the proviso to sec. But the award obtained in this case is not an award otherwise obtained within the meaning of the proviso to sec 47 of the Act. He also urged that the proviso to sec. 47 of the Act would have no application to this case. Mr. Vakil further contended that the consent required by the proviso to sec. 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. ( 5 ) IN support of his argument Mr. Patel relied on a number of authorities. He relied on the decisions in the cases of (1) Indramoni v. Nilamoni A. I. R. 1950 Orissa 169 (2) Moradhwaj v. Bhudar Das A. I. R. 1955 Allahabad 353 (3) Phool Narain v. Madan Gopal A. I. R. 1955 Rajasthan 162 (4) Zeauddin v. Abdur Rafique A. I R. 1952 Patna 66 (5) Raghunandan Rai v. Sukhlal Rai A. I. R. 1952 Patna 258 and (6) Jugaldas Damodar and Co. v. Pursottam Umedbhai and Co. A. I. R. 1953 Calcutta 690. Mr. Patel relied on these rulings in support of his contention that the consent required to be given under the proviso to sec. 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. 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. ( 6 ) 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 as 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 Civil Procedure Code 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 before 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 disputes between the parties. 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 disputes 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 assume 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 sec. 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 sec. 47 is given or not. ( 7 ) MR. Vakil cited to me the decision in the case of Rameshwar Lal v. Mangi Lal A. I. R. 1964 Patna 374 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 A. I. R. 1962 Andhra Pradesh 123 the Court has observed 8s follows:if before the filing of the award all parties signed on It the Court 18 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. 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 v. Md. Siddiq A. I. R. 1953 Madras 781 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 Civil Procedure Code and to base a decree in accordance with the terms of that award. In the case In Indramoni v. Nilamoni A. I. R. 1950 Orissa 169 (supra) 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 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. 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 18 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 sec. 47 of the Act or the proviso thereof. ( 8 ) IT is true as contended by Mr. Patel that if the case were to be decided on the basis of the proviso to sec. 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 sec. Patel that if the case were to be decided on the basis of the proviso to sec. 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 sec. 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 sec. 47 because that proviso does not apply to the facts of the case. The rulings relied upon by Mr. Patel and particularly the cases in Zeauddin and others v. Abdur Rafique A. I. R. 1952 Patna 66 Jugaldas Damodar and Co. v. Purshottam Umedbhai and Co. A. I. R. 1953 Calcutta 690 and Phool Narain v. Madan Gopal A. I. R. 1955 Rajasthan 162 which lay down that the consent necessary under the proviso to sec. 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. ( 9 ) I may mention that Mr. Vakil also urged that award is not otherwise obtained within the meaning of the proviso to sec. 47 of the Act. Since it is not necessary to consider the proviso to sec. 47 of the Act this argument need not be considered. ( 10 ) NO other point has been pressed in this appeal. The result is that the appeal fails and is dismissed with costs. Appeal dismissed. .