Skip to content


Chanbasappa Gurushantappa Hiremath Vs. Baslingayya Gokurnaya Hiremath - Court Judgment

LegalCrystal Citation
SubjectProperty;Civil
CourtMumbai
Decided On
Case NumberFirst Appeal No. 273 of 1925
Judge
Reported inAIR1927Bom565; (1927)29BOMLR1254
AppellantChanbasappa Gurushantappa Hiremath
RespondentBaslingayya Gokurnaya Hiremath
Excerpt:
civil procedure code (act v of 1908), order xxiii, rule 3-adjustment of suit-compromise-parties to suit-reference to arbitration without order of court-award-disputed award-award can be filed as compromise.;where parties to a suit refer their differences to arbitration without an order of the court and an award is made, the court can pass a decree in terms of the award under order xxiii, rule 8, of the civil procedure code, 1908, but not otherwise.;manilal motilal v. gokaldas rowji (1920) i.l.r. 45 bom. 245, s.c. 22 bom. l.r. 1048; gajendra singh v. durga kunwar (1925) i.l.r. 47 all. 637, f.b. and chinna venkatasami naicken v. venkatasami naicken (1919) i.l.r. 42 mad. 625, followed.;amar chand chamaria v. banwari lall rakshit (1921) i.l.r. 49 cal. 608 and hari parshad v. soogni devi.....amberson marten, kt., c.j.1. the question submitted to this full bench runs :-where in a suit parties have referred their differences to arbitration without an order of the court and an award is made, can a decree in terms of the award he passed by the court under order xxiii, rule 3, or otherwise?2. the referring judgment further states that it is to be understood in answering this question that no point arises here to the effect that subsequently to the award, the parties agreed to treat the award as an agreement or compromise of their claims. nothing of that sort happened. that being so, we have to consider the question under two headings, viz., (a) a decree passed under order xxiii, rule 3, and (6) a decree passed 'otherwise'.3. turning first to order xxiii, rule 3, that runs as.....
Judgment:

Amberson Marten, Kt., C.J.

1. The question submitted to this Full Bench runs :-

Where in a suit parties have referred their differences to arbitration without an order of the Court and an award is made, can a decree in terms of the award he passed by the Court under Order XXIII, Rule 3, or otherwise?

2. The referring judgment further states that it is to be understood in answering this question that no point arises here to the effect that subsequently to the award, the parties agreed to treat the award as an agreement or compromise of their claims. Nothing of that sort happened. That being so, we have to consider the question under two headings, viz., (a) a decree passed under Order XXIII, Rule 3, and (6) a decree passed 'otherwise'.

3. Turning first to Order XXIII, Rule 3, that runs as follows :-

Where it is proved to the satisfaction of the Court that a suit has been, adjusted wholly or in part by any lawful agreement or compromise, or where the defendant satisfies the plaintiff in respect of the whole or any part of the subject-matter of the suit, the Court shall order such agreement, compromise or satisfaction to be recorded, and shall pass a decree in accordance therewith so far as it relates to the suit.

4. It will be seen that Rule 3 contemplates two essentials, viz., (1) a lawful agreement or compromise, and (2) that the suit has been adjusted by it wholly or in part. Does then an agreement for arbitration followed by an award satisfy the words of this section The argument that it does not, is put very clearly in the dissenting judgment of Mr, Justice Mukerji in Gajendra Singh v. Durga Kunwar I.L.R. (1925) All. 637 where he says (p. 660) :-

If we give the words their plain meaning, we must say at once that, an 'award' is not meant by the plain and usual meaning of the words employed, An award is not the immediate result of an agreement or compromise. An award may be the ultimate result of an agreement, in so far as the parties have agreed to abide by the decision of a third party. But in that case we cannot say that the subject-matter of the dispute has been adjusted by an agreement by the parties, An award may be an adjustment of a dispute. But so is a decision by a court, But is an award an adjustment by an agreement 1 That is the question. The answer must be in the negative. Much less can we say that an award is the result of a compromise between the parties.

5. There is great force in these observations of the learned Judge, if one attributes to the word 'compromise' no greater effect than a mere agreement involving mutual concessions. But if so, the question arises why the expression 'agreement or compromise' was used, and not agreement only. A suggestion of my brother Crump has led, I think, to the solution, It is this. The original meaning of the word 'compromise' involved a reference to arbitration, and that is a primary meaning of the word as still given in the dictionaries. Thus, in Story on Equity Jurisprudence, 2nd Edn., p. 1001, it is stated: 'Arbitration called compromise (compromissum), was a mode of terminating controversies much favoured in the Civil law,' In Ainsworth's Latin English Dictionary, 'compromissum' is defined to mean 'a bond or engagement wherein two parties oblige themselves to stand to the arbitration or award of the umpire.' And a reference is given to the use of the word in that sense by Cicero.

6. So, too, if one turns to Murray's Dictionary, a compromise is defined as 'a joint promise or agreement made by contending parties to abide by the decision of an arbiter or a referee.' It is also defined as 'the settlement or arrangement made by an arbiter between contending parties; arbitration.' These are given as definitions 2 and 3. The other meaning I have first referred to, viz., 'a coming to terms, or arrangement of a dispute, by concessions on both sides' is given as No. 4. In Wharton's Law Lexicon, 13th Edn., p. 198, 'compromise' is defined as 'an adjustment of claims in dispute by mutual concession; also a mutual promise of two or more parties at difference to refer the ending of their controversy to arbitrators.'

7. It is clear then that the word 'compromise' may include a reference to arbitration. It may also include arbitration generally, and hence a reference completed by an award. In that case the difficulty in the wording of Order XXIII, Rule 3, pointed out by Mr. Justice Mukerji would, I think, substantially disappear. I do not mean that in every case under Order XXIII, Rule 3, we are to construe 'compromise' as meaning arbitration, but that in an appropriate case we may do so.

8. I will next consider whether there are any clear reasons why we should reject that interpretation in the present case. In the first place the expression 'agreement or compromise' is not a novel one introduced by the Code of 1908. We find it in the first Code, viz., that of 1859, where Section 98 runs : 'If a suit shall be adjusted by mutual agreement or compromise...such agreement, compromise, or satisfaction shall be recorded, and the suit shall be disposed of in accordance therewith...' In the Code of 1882 the corresponding section, viz., 375, ran: 'If a suit be adjusted wholly or in part by any lawful agreement or compromise.... such agreement, compromise or satisfaction shall be recorded and the Court shall pass a decree in accordance therewith.' And if we go still further back, viz., to Regulation VII of 1827, although the above expression 'compromise' is not used, yet the Regulation in the clearest possible terms allowed parties to refer their disputes to arbitration without the intervention of the Court. The preamble expressly provides for arbitration even after a suit has been filed. Section 1, Clause 2, gives express power to resort to arbitration notwithstanding a pending suit. Section 9, Clause 1, provides for awards when filed under the Act having the force of decrees. Clause 2 provides that 'arbitration awards or other adjustments' not so filed 'shall not be entitled to any other consideration in a court other than as evidence, or agreements, to be adduced or proceeded on by ordinary course of law.'

9. I attach great importance to that Regulation for though no doubt it was repealed in 1861 after the Code of 1859 had been passed, yet this may have been because the Legislature thought that the same general intentions were substantially preserved by the then new Code, although the actual language used was different. This Regulation of 1827 is also of importance in considering the next point that I propose to deal with, the use of the word 'lawful' in the expression 'lawful agreement or compromise.' This is on the basis that the word 'lawful' is given a wide meaning, and is not confined to negativing fraud etc. by any of the parties. If, however, the narrower meaning be given, the qualification imposed by this word may be disregarded in the present case, for there is no suggestion of fraud or anything of that sort.

10. What, then, is now the law of India And what was the law of India prior to the Code of 1859 as regards arbitrations whether in a suit or otherwise? Were they only lawful if expressly authorised by statute or by the Code, or were they lawful except in so far as they were otherwise governed by statutory or Court procedure? The present is a case from the mofussil, governed in the old days by the Regulation of 1827. That Regulation gives a clear answer, viz., that the statute itself permitted such arbitrations to be held. Indeed it is so widely expressed that it is difficult to see how any arbitration would not fall within it-at any rate within the preamble. But, in so far as that Regulation is not applicable, I take it that under Regulation IV, Chap. 26, the Company's Courts would have had to decide the case according to justice, equity and good conscience. In that event they might well have followed the English common law as to arbitrations which, as I shall show later, permitted arbitrations apart from statutory provisions. The English common law would also no doubt have been applicable if the case were one not in the Company's Courts, but in the Supreme Court at Bombay, for the Supreme Court Charter of 1823 contains numerous express provisions for the application of English law as nearly as circumstances of the place and of the inhabitants would admit. (See Hirabai v. Dinshaw : (1926)28BOMLR1334 .

11. It is of course important to note that generally speaking English law could only be applied so far as applicable to local conditions. But if one considers, as one ought to, the local conditions, then surely one would hold that arbitration or mediation without the intervention of the Court ought undoubtedly to be permitted in India. It is indeed a striking feature of ordinary Indian life. And I would go further and say that it prevails in all ranks of life to a much greater extent than is the case in England. To refer matters to a panch is one of the natural ways of deciding many a dispute in India. It may be that in some cases the panch more resembles a judicial Court because the panch may intervene on the complaint of one party and not necessarily on the agreement of both, e.g., in a caste matter. But there are many cases where the decision is given by agreement between the parties.

12. I next turn to consider the statutory law in India on the subject of arbitration, apart from Order XXIII, Rule 3. Most unfortunately that law is scattered through several different Acts, and even then it leaves obvious gaps. The Acts I refer to are the Indian Contract Act 1872 : the Specific Relief Act 1877 : the Indian Arbitration Act 1899 : and Section 89 and Schedule II to the Civil Procedure Code 190*. Turning first to the Indian Contract Act, an agreement for reference is prima facie a contract within Section 10, and though Section 28 avoids any agreement by which one party is restricted absolutely from enforcing his rights under the contract by the usual legal proceedings in the ordinary tribunals, yet Exceptions 1 and 2 in effect exempt arbitrations. The latter Exception runs :

Nor shall this section render illegal any contract in writing, by which two or more persona agree to refer to arbitration any question between them which has already arisen, or affect any provision of any law in force for the time being as to references to arbitration.

13. Next, if we turn to the Specific Relief Act, the proviso to Section 21 states :-

And, save as provided by the Code of Civil Procedure, and the Indian Arbitration Act 1899, no contract to refer present or future differences to arbitration shall be specially enforced; but if any person who has made such a contract and has refused to perform it, sues in respect of any subject which he has contracted to refer, the existence of such contract shall bar the suit.

14. The present case is not one requiring specific performance. The reference has been completed by an award, and the relief now asked is not based on specific performance. Moreover, the final sentence in the section would appear to contemplate first a reference and then a suit, and not vice versa as in the present case.

15. Next turning to the Indian Arbitration Act, 1899, that, speaking generally, only applies to the Presidency towns. Accordingly, the Act does not apply in the present case. But its provisions are not exhaustive, e.g., in the case of three arbitrators (see Gopalji Kuverji v. Morarji Jeram I.L.R. (1919) 43 Bom. 809 21 Bom. L.R. 308 although the Court may in such a case stay the suit. (See In re Babaldas Khemchand (1919) 22 Bom, L.R. 842.

16. We are, therefore, left with Section 89 and Schedule II to the Civil Procedure Code. The appellants have naturally laid great stress upon these provisions, but before dealing with their precise contentions, it will be convenient to state shortly what were the corresponding provisions prior to the Code of 1908.

17. As I have already indicated, Regulation VII of 1827 provided for arbitrations and for awards having the force of decrees, if they were filed and otherwise complied with the conditions of the Act. But as pointed out in Nusserwanjee Pestonjee v. Meer Mynoodeen Khan Wullud Meer Sudroodeen Khan Bahadoor (1855) 6 M.I.A. 134 it was necessary that the deed of submission should comply with the conditions required by the Regulation. Consequently, as those conditions were not complied with in that case, the award was directed to be taken off the file. But I take it that this decision rested on the express provisions of Clauses 1 and 2 of Section 9, which I have already referred to, and which in effect provided that only arbitration awards filed in conformity with the provisions of the Regulation should have the force of decrees. Their Lordships did not, therefore, decide that the award might not be valid aliunde. Thus at pp. 161 and 162 it is said :-

And these matters being omitted, their Lordships have, therefore, come to the conclusion that, although the award may have been a very good one in itself, it cannot have the force which this Regulation would have given to it if it had contained all the requisites which the sections specify. This being so, it is sufficient upon that ground to decide this case.

18. Next, when we come to the Code of 1859, Section 98 dealt, as I have already mentioned, with the adjustment of a suit by mutual agreement or compromise. In Chapter VI, Sections 312 to 325 dealt with arbitrations in a pending suit and for an order for reference-Section 326 provided for an agreement for reference being filed in Court and thereupon for an order for reference being made. Section 327 provided for a case where the matter had been referred to arbitration without the intervention of the Court and an award had been made. The award might then be filed in the Court and thereafter enforced as an award under the previous provisions of that Chapter.

19. Turning next to the Code of 1882, the old Section 98 as regards compromises became Section 375 in the 1882 Code. Chapter VI and Sections 312 to 327 in the 1859 Code became Chapter XXXVII and Section 506 to 526 in the 1882 Code. Sections 506 to 522 dealt with orders for reference in a suit: Sections 523 and 524 dealt with agreements for reference being filed in Court, and Sections 525-6 for an award being filed in Court.

20. It is, however, reasonably clear, I think, that the view taken by the Indian Courts of these two Codes was that they were not exhaustive on the law of arbitration. Thus in Jogessur Banerjee v. Kulyanee Churn Deo (1875) 24 W.R. 41 Sir Charles Poatifex and Mr. Justice Birch held that Sections 312 and 325 of the Code of 1859 were enabling and were not intended to be restrictive or exclusive, and that parties who were sui juris were competent, before decree, to make any agreement as to the settlement of the suit.

21. In Harivalabdas Kalliandas v. Utamchand Manekchand I.L.R. (1879) 4 Bom. 1 it was held by Sir Charles Sargent and Mr. Justice Bayley that, under Sections 523 and 525 of the Code of 1877, parties to a suit as well as persons not engaged in litigation might agree to refer matters in dispute between them to private arbitration without the intervention of the Court, and might apply to have the agreement filed; and the mere fact that a suit was pending with respect to the matters in dispute, was not of itself a sufficient reason to induce the Court to refuse to file the agreement. At p. 4 the judgment says:-

We may add that the same question arose on Section 327 of the old Procedure Code (Act VIII) of 1859, the language of which is almost identical with that of Section 623 of the present Code, and was determined in the same manner in Thakoor Doss Roy v. Hurry Doss Roy (1864) W.R. Mis. Rul. 21, and that decision has not been departed from or overruled in any reported case.

22. In the case of Thakoor Doss Roy v. Hurry Doss Roy, thus referred to, it was held that there was nothing in the Code of 1859 to prevent parties who had a suit pending in Court from agreeing to submit the subject-matter of that suit and other matters in dispute to arbitration under Section 327.

23. In Soophul Singh v. Methoo Sing (1864) 1 W.R. 163 it was held that Section 327 of the Code of 1859 did not provide that no arbitration award should be binding on the parties unless filed in Court. It gave the sanction of a decree to all awards duly filed. Awards not filed, when pleaded, required to be regularly proved.

24. In Palaniappa Chetti v. Rayappa (1868) 4 M.H.C.R. 119 Chetti the headnote runs :-

A suit lies to enforce an award made without the intervention of a Court of Justice. The procedure provided in Section 327 of the Civil Procedure Code (of 1859) is not imperative upon a plaintiff who seeks to enforce an award so made.

25. So, too, the Code of 1882 was generally construed on the basis that an award might be regarded as a compromise, although it did not comply with the express provisions of the Code as to arbitration. Accordingly in Pragdas v. Girdhardas I.L.R. (1901) 26 Bom. 76 3 Bom. L.R. 431 Sir Lawrence Jenkins and Mr. Justice Starling directed an award to be recorded under Section 375 and a decree passed in terms therewith, although the suit had been referred by the parties to arbitration and an award made without the intervention of the Court, Sir Lawrence said (p. 78) :-

Several objections have been taken to the decree under appeal. First it is said that Chapter XXXVII of the Civil Procedure Code, 1882, is an exhaustive exposition of the power to refer to arbitration pending a suit, I can find nothing, however, in Chapter XXXVII which invalidates a proceeding not in accordance with its provisions beyond the result that non-compliance deprives a party of a right to claim the consequences the chapter prescribes, and I therefore think the objection cannot succeed. It is then urged that the award on the reference cannot be made the basis of an adjustment under Section 375 of the Code. But can it be said that by an award under a voluntary submission a suit is adjusted 'by a lawful agreement or compromise'? It is conceded, and I must assume correctly, that under the special circumstances of the case the submission is valid, But every submission to arbitration implies an obligation to perform the award of the arbitrator: Lievesley v. Gilmore (1866) L.R. 1 C.P. 570; so that here there was an agreement to perform the award in adjustment of the suit, and that is an adjustment of the suit by agreement.

26. In Shivlingrao v. Rango : (1906)8BOMLR777 Sir Lawrence Jenkins and Mr. Justice Beaman directed an application to file an award to be treated as one under Section 525 of the Code of 1882 and to be dealt with under that section and Section 526. They accordingly reversed the judgment of the Subordinate Judge who had dismissed the suit on the ground that the award was final, and ended the matter, but that as the defendant objected to the award, the Court could not go into it, or pass a decree. The remedy there given by the High Court being under Section 525 was, therefore, different from that given under Section 375 in Pragdas v. Girdhardas, and to that extent inconsistent with it. It does not appear from the report that Section 375 was relied on.

27. It was strenuously argued for the appellant that the decision in Pragdas v. Girdhardas was inconsistent with the ruling of the Privy Council in Ghulam Jilani v. Muhammad Hussan (1901) L.R. 29 IndAp 51 4 Bom. L.R. 161 and that their Lordships had there summarised the law of arbitration and in effect had held that when once a suit had been filed, arbitration could only be resorted to under Chapter XXXVII of the 1882 Code or not at all. If I had thought that that was the true view of the Board's decision, it would suffice to say that the decision would also apply to and dispose of the present case, for it would involve the present arbitration being invalid or unenforceable because there was no order for reference nor was the agreement filed. But this is not, I think, the true view of the decision. Lord Macnaghten was only summarising the provisions of Chapter XXXVII of the 1882 Code, and he did not, i think, intend to lay down that suits must be referred to arbitration in accordance with that Chapter or else not at all.

28. I think then it may be taken that down to the Code of 1908 the view generally taken by our Court was that an award could be regarded as a compromise, and a decree could be passed thereon either under Section 98 of the 1859 Code, or afterwards under Section 375 of the 1882 Code, despite the views to the contrary expressed by Mr. Justice Beaman in Rukhanbai v. Adamji I.L.R. (1908) 33 Bom. 89 10 Bom. L.R. 366 in the year 1908.

29. Turning next to the Code of 1908, it will be seen that it was arranged on a different plan, viz., that instead of having a Code consisting entirely of sections, the 1908 Code consisted partly of sections and partly of Schedules which were brought into operation by various sections in the Code itself. Schedule I, for instance, deals with our main rules of procedure in Orders 1-51. It is in Schedule I where we find Order XXIII, Rule 3, dealing with compromises. Schedule II deals with arbitration. Shortly stated, paras 1-16 deal with arbitration in suits : para. 17 with orders on agreements to refer: and paras 20 and 21 with arbitration without the intervention of the Court. Substantially this Schedule II corresponds to Chapter XXXVII of the Code of 1882. It will accordingly be seen that some express provision had to be inserted in the sections or body of the Code in order to bring the Schedules into operation. This is, I think, the real meaning of Section 89 on which great stress was laid by the learned pleader for the appellant. That section provides as follows :-

(1) 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.

(2) The provisions of the Second Schedule shall not affect any arbitration pending at the commencement of this Code, but shall apply to any arbitration after that date under any agreement or reference made before the commencement of this Code.

30. Now it will be seen that the section expressly exempts the provisions of the Indian Arbitration Act and 'any other law for the time being in force.' But, on the other hand, it directs that all references 'shall' be governed by the provisions of Schedule II. I think, however, it is sufficient to give full force to the use of the word 'shall,' if one holds that Schedule II governs any particular case so far as applicable, but that it is not intended to be exhaustive or to prevent parties resorting to arbitration in some manner different from that expressly provided for in Schedule II. This is, I think, borne out by para 1 of Schedule II which, as I read it, is only permissive and not compulsory. It runs :-

Where in any suit all the parties interested agree that any matter in difference between them shall be referred to arbitration, they may, at any time before judgment is pronounced, apply to the Court for an order of reference.

31. The use of that word 'may' implies that it is not obligatory to apply for an order for reference.

32. So, too, in para. 17 it is only permissive and not obligatory on parties to file in Court an agreement for reference. Nor, again, if there has been an arbitration without the intervention of the Court, is it obligatory on the parties to apply under para. 20 for the award to be filed. The word there again used is 'may' and not 'shall,' Under these circumstances I am not concerned with the precise meaning of the exempting words 'any other law for the time being in force' in Section 89. Whether those words are confined to statute law, or would include Order XXIII, Rule 3, as being itself in effect statute law although enacted by the same Code, or whether they might also apply to the general law of the land quite outside any express statute as to the legality of arbitration, I need not, I think, decide in the present case.

33. Turning next to the authorities, I have very carefully considered the numerous cases which were brought to our attention during the course of the full and able arguments of the learned pleaders, but with all respect I do not propose to go into them in any detail. In Harakhbai v. Jamnabai I.L.R. (1912) 37 Bom. 639 15 Bom. L.R. 340 Mr Justice Davar held that an award could be recorded under Order XXIII, Rule 3. In Venkatachala v. Rangiah I.L.R. (1911) 36 Mad. 353 it was held that an award might be treated as an adjustment, but not a mere agreement to refer. A similar decision was arrived at in Vyankatesh Mahadev v. Ramchandra Krishna I.L.R. (1914) 38 Bom 687 16 Bom. L.R. 653. Next, however, came the judgment of Mr. Justice Macleod, as he then was, in Shavakshaw v. Tyab Haji Ayub I.L.R. (1916) 40 Bom. 386 18 Bom. L.R. 559. The learned Judge there held that it was wrong to apply in such a case under Order XXIII, Rule 3, and that the proper procedure was under para. 21 of Schedule II, and that accordingly the matter should be treated as an application under that paragraph and be determined accordingly. But in Manilal Motilal v. Gokaldas Rowji I.L.R. (1920) 45 Bom. 245 22 Bom. L.R. 1048 Sir Norman Macleod and Mr. Justice Fawcett reconsidered the matter and held that the award could properly be recorded under Order XXIII, Rule 3, and that the previous judgment of Mr. Justice Macleod to the contrary was incorrect. That decision has been followed in the Allahabad High Court by a majority of the Full Bench in Gajendra Singh v. Durga Kunwar I.L.R. (1925) 47 All 637 and again in Ram Devi v. Ganeshi Lal I.L.R. (1926) 48 All. 475.

34. In the High Courts of Calcutta and Lahore, however, different conclusions have been arrived at, In Hari Parshad v. Soogni Devi (1920) 3 L.L.J. 162, the Chief Justice and Mr, Justice Leslie-Jones held that an award cannot be recorded as an adjustment under Order XXIII, Rule 3, unless it itself has also been consented to, and that Section 89 prevented it being enforced by one of the parties without the consent of the other. A similar result was arrived at by Mr. Justice Rankin in Amar Chand Chamaria v. Banwari Lall Rakshit I.L.R. (1921) 49 Cal. 608 whore the learned Judge followed a previous decision of his in The Dekari Tea Co., Ltd. v. The India General Steam Navigation Co., Ltd. (1920) 25 C.W.N. 127 The learned Judge took the view that so far as the Code was concerned, arbitration was intended to be dealt with by Schedule II and not by Order XXIII, Rule 3. He held that an award, such as we have here, could not be enforced under Order XXIII, Rule 3, nor under paras 20 and 21 of Schedule II. It was, however, pointed out to us that at p. 612 the learned Judge seems to have been of the opinion that the provisions of Schedule II were compulsory, for he says :-

It is difficult to see what point there is in the second schedule saying or meaning that arbitration must be done in a particular way if, according to some other law or principle, it may still be done in another way.

35. With great deference to the learned Judge, as I read Schedule II, the words used are 'may' and not 'must.' Accordingly in the view I take the main provisions are only permissive and not compulsory or exhaustive.

36. I may here mention a very recent case in the Privy Council of Ram Protap v. Durga Prosad (1925) 28 Bom. L.R. 217, where an award was set aside on the ground that it dealt with matters not included in the order of reference by the Court. Their Lordships, however, reserved their opinion on the question whether there might not be exceptions to what was described as a comprehensive statement by the High Court of Calcutta as to the impossibility of the same arbitration being held in effect under different jurisdictions.

37. One other decision, viz., of Sir John Wallis and Mr. Justice Seshagiri Ayyar in Chinna Venkatasami Naicken v. Venkatasami Naicken I.L.R. (1919) 42 Mad. 625, I wish to mention as a special case, for there the reference in the suit was to the arbitration of the presiding Judge along with others. There the Chief Justice said (p. 629) :-

I think a reference of the suit to the presiding judge must be held to be altogether extra cursum curioe and not the less so when two others are joined with him, and that the decree passed in accordance with their decision must be regarded as a consent decree, and as not subject to the provisions of the second schedule.

38. That case, therefore, stands on its own grounds, but it is certainly not an authority in favour of the appellant, for the Court there confirmed the decree of the Subordinate Judge which had been passed in accordance with the award. Indeed, as I read the High Court's judgment, it was based mainly in reliance on Order XXIII, Rule 8.

39. I will next deal with the objection which I pointed out during the hearing that there are no saving words in Order XXIII, Rule 3, like there are in Section 89, and that accordingly so far as Rule 3 alone is concerned, it must either refer to all arbitrations where an award is made adjusting the dispute or else to none, I have given this objection careful consideration. It is quite true that there are no qualifying words in Rule 3. But, on the other hand, I see no insuperable difficulty in holding that the rule does apply to all cases which are not expressly dealt with by Schedule II or the Indian Arbitration Act. Where a general remedy is given as in Order XXIII, Rule 3, and certain limited special remedies are given as in Schedule II and in the Indian Arbitration Act, it may well be that the limited special remedies should be adopted in appropriate cases, and not the general one. But the special remedies being limited to certain cases, I do not see why in those other cases, where the special remedies are not available, the parties should not resort to the general remedy given by Order XXIII, Rule 3. If there was anything unlawful in so doing, the case, I agree, would be quite different. But in my judgment, for the reasons already given, there is nothing unlawful in parties going to arbitration outside the express statutory provisions. In saying this I am laying down no new law. I have already shown that it has existed in the mofussil of this Presidency from at least 1827.

40. As regards the English law, the interesting case of Doleman & Sons v. Ossett Corporation [1912] 3 K.B. 257 shows that under the English common law parties could go to arbitration even though a suit had been begun, and that the proper remedy was then to put in a fresh plea pleading the award. Thus Lord Justice Farwell says (p. 272) :-

It is well settled that a plea of an agreement to refer the subject-matter of the action to arbitration is a bad plea, but that a plea of an award duly made before action under an agreement between the parties is a good plea of accord and satisfaction. It is also clear that any binding agreement between the parties settling all the disputes raised in the action made after writ is a good defence as a plea puis darrein continuance (now pleaded under Order XXIV), whether such agreement is a direct settlement between the parties themselves, or made by means of a third person to whom they have referred the dispute after writ, or by means of an award made after writ in an arbitration existing before writ, if both parties subsequent to writ carry on the arbitration, and agree to an award being made notwithstanding the action. But this is because it is always open to litigants to settle their differences after writ as they please. The case is quite different if there is no such agreement after writ.

41. An alternative remedy in England might be to bring a suit on the award.

42. Then in the leading case of Scott v. Avery, (1855) 5 H.L.C. 811 the House of Lords upheld the validity of a covenant which provided that no right of action should accrue till a third person had decided on any difference that might arise between the parties to the covenant.

43. In my judgment, then, the award in the present case can be recorded under Order XXIII, Rule 3, provided it cannot be filed under para, 20 of the Second Schedule.

44. Para. 20 has received particular attention from us, and with respect I can well understand that Mr. Justice Macleod when sitting alone came to the conclusion in Shavakshaw v. Tyab Haji Ayub I.L.R. (1916) 40 Bom. 386 Bom. L.R. 559 that it could be applied in a case like the present. The opening words of Sub-para. (1) are quite general in terms and might apply whether a suit is pending or not. But it goes on to provide that an application may be made to any Court having jurisdiction over the subject-matter of the award. This then could hardly be intended to apply to a pending suit, for it might easily result in two different Courts exercising jurisdiction over what in effect was the same subject-matter. Thus, suppose a suit had been instituted in Bombay on a contract made in Bombay in respect of a bag of gold in Poona, and leave under Clause 12 of the Letters Patent had been obtained, and if the parties subsequently referred the matter to arbitration and an award was made, it might be open to either party to apply to the Poona Court to file and enforce the award notwithstanding that the High Court suit was still pending in Bombay. Again, sub-para, (2) requires the application to be numbered and registered as a suit between the applicant as plaintiff and the other parties as defendants. If, however, para. 20 was intended to apply to an existing suit, the parties would hardly have been required to file in effect a new suit. It would be sufficient to apply in the existing suit. On the whole, therefore, I think the better view is that para. 20 does not apply to arbitrations in a pending suit.

45. In my judgment, then, there is no other provision applicable to the present case except Order XXIII, Rule 3. Under those circumstances I would hold that the application in question can be made under Order XXIII, Rule 3, inasmuch as the suit has been wholly adjusted by a lawful compromise. I would, accordingly, hold that the compromise as represented by the agreement for reference and the subsequent award cann be recorded and a decree passed in accordance therewith so far as it relates to this suit.

46. I would, therefore, answer the question submitted to us by saying 'Yes, under Order XXIII, Rule 3, but not otherwise,'

Crump, J.

47. The question referred to the Full Bench is stated as follows:

Where in a suit parties have referred their differences 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 ?

48. The latest decision of this Court will be found in the judgment of Macleod C.J. and Fawcett J. in Manilal Motilal v. Gokaldas Rowji I.L.R. (1920) 45 Bom. 246 22 Bom. L.R. 1048 That decision would answer the question in the affirmative. Stated as shortly as possible the learned Judges have held that there is generally speaking nothing in the existing law to preclude parties from resorting to arbitration in a pending suit without the orders of the Court, that Section 89 of the Code of Civil Procedure 1908 does not effect any change in the law, and that Order XXIII, Rule 3, furnishes the appropriate procedure in such cases and not para. 20 of Schedule II. The cases cited in the referring judgment show that the Allahabad and Madras High Courts take the same view. Per contra, the Calcutta and Lahore High Courts differ. The judgment of Rankin J. in Amar Chand Chamaria v. Banwari Lall Rakshit I.L.R. (1921) Cal. 608 proceeds upon the ground that the scheme of the Code is to prevent parties resorting to arbitration in pending suits otherwise than under Schedule II and that Section 89 contains an express prohibition in that behalf. The respect to which that judgment is entitled makes it necessary to examine the whole law.

49. These conflicting views and the elaborate arguments which we have heard suggest four main divisions of the matter before us.

A. Apart from Section 89 can the provisions of Schedule II of the Code of Civil Procedure 1908 be read as intended to be exhaustive BO as to exclude arbitration in any circumstances, or in any manner not within the Schedule ?

B. What is the true scope and effect of Section 89 of the same Code?

C. Is a settlement by arbitration an adjustment by agreement or compromise within the scope of Order XXIII, Rule 3 ?

D. Does a private arbitration in a pending suit fall within the scope of Schedule II, para. 20 ?

50. The first of these questions requires a consideration of the law upon the question of arbitration in pending suits in England and in this country. So far as the law in England is concerned, I do not propose to add anything to what has already been said in Manilal's case. It is at least clear that an award arrived at in a pending suit without the intervention of the Court is in no sense a nullity whatever may bo the precise remedy open to the parties thereto. In this country we have primarily the rule of 'justice, equity and good conscience.' It would be difficult to hold that on that rule parties are precluded from referring disputes to a private arbitration by the fact that a suit is pending. It has been said that the explanation of that rule may be sought in cases of doubt in the decisions of the English Courts. Even so the law in England being what it is, nothing can be deduced from it precluding private references in pending suits. Bat we are not left without a more definite guide. The law of arbitration was the subject of a statute at a very early date. Bombay Regulation VII of 1827 deals with the matter. That Regulation expressly lays down that the pendency of a suit shall not prevent the parties referring their disputes to arbitration without the intervention of the Court. Section 'Third' of that Regulation at the same time gives special privileges, as it were, to arbitrations within the Regulation. Thus we find even at that early date the germ of the distinction drawn by Jenkins C.J. in Pragdas v. Girdhardas I.L.R. (1901) 26 Bom. 76 3 Bom. L.R. 431 as to arbitrations under Chapter XXXVII of the Code of 1882 and arbitrations outside that Chapter. (The passage is cited later in this judgment), This Regulation of 1827 was considered by the Privy Council as far back as 1.855 in Nusserwanjee Pestonjee v. Meer Mynoodeen Khan Wullud Meer Sudroodeen Khan Bahadoor. (1855) 6 M.I.A. 131 Their Lordships held that the Court had no jurisdiction under the Regulation except upon fulfilment of the terms of the Regulation, and that certain essential matters had been omitted. But they do not say that the award in that case was bad. Indeed at p. 161 they say :-

And these matters being omitted, their Lordships have, therefore, come to the conclusion that, although the award may have been a very good one in itself, it cannot have the force which this Regulation would have given to it if it had contained all the requisites which the sections specify.

51. It may be observed that the Regulation of 1827 contained no provision analogous to Order XXIII, Rule 3. That first appeared as Section 93 of the Civil Procedure Code of 1859. It is there that the words 'adjusted by mutual agreement or compromise' first appear.

52. The Regulation of 1827 was not formally repealed until 1861 bat it was practically superseded by the Civil Procedure Code of 1859. Sections 312 to 327 of that Code contain provisions as to arbitration which have been substantially reproduced in the Codes of 1882 and 1908. The question whether those provisions of the Code of 1859 wore exhaustive was considered in three cases. Soophul Singh v. Methoo Sing (1864) 1 W.R. 163, Palaniappa Chetti v. Rayappa Chetti (1868) 4 M.H.C.R. 119 and Jogesswr Banerjee v. Kulyanee Churn Deo (1875) 24 W.R. 41.

53. In all these cases the view taken was that the arbitration provisions of the Code of 1859 were not exhaustive. The last case is precisely on all fours with the case now before us.

54. The general result appears to be that there is no warrant to be found in the statute law before 1882 for the proposition that the provisions as to arbitration enacted by the Legislature were intended to be exhaustive. The Courts have indeed expressed a contrary view.

55. Then followed the Civil Procedure Code of 1882. Chapter XXXVII of that Code contains the provisions as to arbitration. Section 375 contains the substance of Order XXIII, Rule 3, of the Code of 1908. The leading case in this Court is Pragdas v. Girdhardas. I.L.R. (1901) 26 Bom. 76 3 Bom. L.R. 431 The judgment of Jenkins C.J. is precisely in point upon the question under consideration. That learned Judge says (p. 78) :-

First it is said that Chapter XXXVII of the Civil Procedure Code, 1882, is an exhaustive exposition of the power to refer to arbitration pending a suit. I can find nothing, however, in Chapter XXXVII which invalidates a proceeding not in accordance with its provisions beyond the result that non-compliance deprives a party of a right to claim the consequences the chapter prescribes.

56. That is an authority which cannot be lightly disregarded. It is in accordance with what I conceive to be the history of the law upon this matter. Speaking with all deference I can find no reason to suppose that it is wrong. So far as I am aware it has been followed by the Courts in this Presidency and though doubts have been expressed as to its soundness in one or two cases in this Court it has never been overruled. I shall refer briefly to those cases hereafter.

57. It is thus (in my opinion) conclusively established that up to date of the Code of 1908 there has been no law which precludes the parties in a pending suit from settling their disputes by a private reference to arbitration. Section 93 of the Code of 1859 and Section 375 of the Code of 1882 were (in my opinion) intended to cover such settlements. That point, however, belongs more properly to the third division of the matter.

58. Comparing Chapter XXXVII of the Code of 1882 with Schedule II of the Code of 1908 I can find no indication of any intention to change the law in this respect. Nor is there anything in the general scheme of either Code to lead me to suppose that any such change was intended. The appellant's pleader betrayed his consciousness that this was so by his insistence on Section 89 of the Code of 1908.

59. I would add that some suggestion was made that any agreement which can be construed as ousting the jurisdiction of the Court was bad as being opposed to public policy. The law upon that topic is contained, so far as this country is concerned, in Section 28 of the Indian Contract Act, It is not possible to construe the provisions of that section so as to exclude agreements such as we have to consider in this case.

60. I now come to the second head. What is the true scope and intent of Section 89 of the Code of Civil Procedure, 1908 It is a new section in the sense that there was no similar provision in the Code of 1882. In the Code of 1882 everyting was 'in the body of the Code' to use an expression which has become familiar since the enactment of the Code of 1908. In the Code of 1882, and also in the first Code of 1859, provisions as to arbitration were contained in a separate chapter of the Code itself. (See Chapter VI of the former and Chapter XXXVII of the latter). Those chapters had full force and effect proprio vigore for they were just as much part of the body of the Code as anything else contained in it. In the Code of 1908 a now arrangement was adopted.

61. 'The Code consists (i) of that which is termed ' the body of the Code' and (ii) of the rules. The body of the Code is fundamental and is unalterable except by the Legislature: the rules are concerned with details and machinery and can be more readily altered. Thus it will be found that the body of the Code creates jurisdiction while the rules indicate the mode in which it is to be exercised. It follows that the body of the Code is? expressed in more general terms, but it has to be read in conjunction with the more particular provisions of the rules.' (Per Jenkins C.J. in Mani Mohan Mandal v. Ramtaran Mandal I.L.R. (1915) Cal. 148.)

62. Those remarks are made with reference to Schedule I; but generally speaking they are applicable to Schedules II and III. Those Schedules per se are so to speak inert, and until jurisdiction is conferred in the body of the Code they remain inert. The necessary link is wanting. Each Schedule is joined to the body of the Code by a section in the body of the Code, and each of those sections is necessarily a new section. In the previous Codes no such link was necessary. Thus there is a priori no reason to suppose that any change in the law was intended by the insertion of these new sections. That would not be so unless the intention is stated either in express terms or by necessary implication. It is only if the matter is regarded in that light that the true scope and intent of these new sections can be understood.

63. The first of these new sections designed to link the Schedules to the body of the Code is Section 69. The provisions of the Code of 1882 as to the execution of decrees by the Collector were Sections 320 to 325C. Section 320 created the jurisdiction. Sections 321 to 325C contained the details. The former reappears as Sections 68, 70 and 71 of the Code of 1908; the latter are relegated to Schedule III. The connecting link is the new section, Section 69, which runs as follows:

The provisions set forth in the Third Schedule shall apply to all cases in which the execution of a decree has been transferred under the last preceding section [i.e. to the Collector.]

64. Plainly hero no change is intended in the pre-existing law. The new arrangement requires this new section for the purpose of connecting the body of the Code and the Schedule.

65. Then comes Section 89 with which we are concerned here. The provisions of the Code of 1882 as to arbitration were contained in Chapter XXXVII. These have been relegated bodily to Schedule II without any substantial change. The new section, Section 89, thus became necessary to confer jurisdiction. It 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.

66. The second clause is merely a saving clause as to pending proceedings and does not touch the present matter.

67. Primarily this section, like Section 69, is intended to confer jurisdiction, to link up the Schedule and the body of the Code. There is no reason to suppose that any change in the law is intended unless it is so stated in express terms or unless it followed by necessary implication. The intention presumably is to provide for the exercise of jurisdiction in the case of those references to arbitration which fall within Schedule II, The phraseology of these two sections is slightly different, but the meaning is the same. In substance the phrase 'shall be governed by the provisions' means no more than the phrase 'the provisions shall apply.'

68. The question, therefore, is whether having regard to the genesis of Section 89 it is a correct conclusion that any change in the law was intended. The words 'save as provided by the Indian Arbitration Act or by any other law for the time being in force' are necessary in order to emphasize that nothing in Schedule II affects any law dealing with the subject of arbitration. The word 'other' construed grammatically can only mean 'other than the Indian Arbitration Act.' The words used suggest that statute law is meant. There are statutes other than the Indian Arbitration Act containing provisions for arbitration, e.g., the Indian Companies Act and the Dekkhan Agriculturists' Relief Act. The object of these words is to leave the provisions of such Acts unaffected. We are not here concerned with them. We are concerned with the Code of 1908 and nothing else. The question is within the four corners of the Code and it is whether Section 89 in any way bears upon the power to record a compromise conferred by Order XXIII, Rule 3. For that purpose we have to construe a 89 as though it ran as follows:-' 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 Schedule II.'

69. It would be difficult to read those words as introducing any change in the law. They provide for Schedule II precisely what Section 69 provides for Schedule III. The 'references to arbitration', which the Legislature has in mind, are references falling within the scope of Schedule II and none other. The classification laid down by Lord Macnaghten in Ghulam Khan v. Muhammad Hassan I.L.R. (1901) Cal. 167 4 Bom L.R. 161 still holds good and Section 89 bears that classification in mind. 'References by an order in a suit' covers head I and 'otherwise' heads II and III.

70. It is relevant to point out that either the words 'other law for the time being in force' include Order XXIII, Rule 8, or they do not. If they do, then cadet qucestio and Section 89 does not affect-Order XXIII, Rule 3, in any way, If they do not, then what reason is there for holding that the Legislature in enacting Section 89 meant to except from Order XXIII, Rule 3, all adjustments by compromise? As will be shown the word 'compromise' in its plainest and most direct meaning signifies an agreement between two parties to refer to an arbitrator and to abide by his award. How could the word 'compromise' have been left unqualified consistently with any such intention Even if we assume that the Legislature intended a change, is it conceivable that this form of words would have been used in Section 89 The words 'shall be governed by' are totally inapt to convey a prohibition. Ex hypotheis the intention was to forbid arbitration in any circumstances other than those to be found in Schedule II. Surely the Legislature would have said what they meant. The intention was to say 'You shall not arbitrate except in the manner and to the extent set forth in Schedule II.' The words used mean 'If you arbitrate your procedure shall be the procedure of Schedule II.' The Code is a procedure Code, and the words mean no more than this, that in those arbitrations which are dealt with by Schedule II the procedure of Schedule II shall be followed. So much it was necessary to enact to link Schedule II to the body of the Code, and there is no reason to impute to the Legislature any further intention. I cannot persuade myself that any statutory draftsman intending to indicate a change in the law would have used the form of Words to be found in Section 89, In view of the previous history of the law to suppose that any radical change was intended by the enactment of Section 89 is to place on that section a burden which it cannot possibly bear.

71. Such is, in my judgment, the true scope and intent of Section 89 of the Code of Civil Procedure, 1908. If that is a correct view Section 89 has no bearing on the matter before us. The law stands as it stood, and the decisions of this Court upon the Code of 1882 with reference to Section 375 and Chapter XXXVII are, until overruled, authoritative as to the correct application of Order XXIII, Rule 3, and Schedule II of the Code of 1908.

72. The third question which has been argued before us is, what is the true meaning of the words in Order XXIII, Rule 3 : 'A suit has been adjusted wholly or in part by any lawful agreement or compromise' These words are reproduced from the Code of 1882. The view has been expressed elsewhere and has been urged upon us here that an agreement to refer to arbitration followed by an award is not within these words. But this view overlooks the true meaning of the word 'compromise.' The Latin word 'compromittere' is a technical juridical term, and it signifies the act of the parties in agreeing to refer a dispute to arbitration and to be bound by the arbitrator's award. The New Oxford Dictionary under the word 'compromise' gives this as the second meaning of the word. The same thing will be found in Wharton's Law Lexicon, arid in Story's Equity Jurisprudence. [The passage is cited in the judgment of the learned Chief Justice.] Thus both the technical and the ordinary meanings of the word 'compromise' are far from excluding the notion of arbitration. Indeed the word is exactly adapted to cover what we have here, viz., a reference to arbitration followed by an award. With all deference to those who have expressed a contrary view I believe that the word 'compromise' is intended to cover precisely such cases as this. I see no warrant for refusing to accept what is authoritatively laid down as the true meaning of this term. Here again I find support in the judgment of Jenkins. C.J. in Pragdas v. Girdhardas. I.L.R. (1901) 26 Bom. 76 3 Bom L.R. 431 The earlier decisions of this Court, Samibai v. Premji Pragji I.L.R. (1895) 20 Bom. 304 and Ghellabhai v. Nandubai, I.L.R. (1896) 21 Bom. 335 are to the same effect. Those decisions are before 1908. Before the Code of 1908 came into force a note of dissent was struck by Beaman J. in Rukhanbai v. Adamji I.L.R. (1908) 33 Bom. 69, 10 Bom. L.R. 366 but that is the decision of a single Judge. After the Code of 1908 Davar J. in Harakhbai v. Jamnabai I.L.R. (1912) 37 Bom. 639 15 Bom. L.R. 340 followed Pragdas v. Girdhardas. The grounds on which that learned Judge held that Section 89 did not affect the provisions of Order XXIII, Rule 3, are not such as have been adopted in the later cases, but apart from that point the decision is that the Code of 1908 left the law as it was. In Vyankatesh Mahadev v. Ramchandra Krishna I.L.R. (1914) 38 Bom. 687, 16 Bom. L.R. 653 there was an agreement to refer but no award. Plainly there was no completed compromise here, and hence no adjustment. Beaman J. remarked (p. 693):-

Doubtless any parties litigating in Court have perfect liberty to compose their differences amongst themselves by entering into any lawful agreement, compromise or satisfaction. And when this is done they have only to apply to the Court to act under Order XXIII, Rule 3.

73. Then followed the decision of Macleod J. sitting alone in Shavakshaw v. Tyab Haji Ayub. I.L.R. (1916) 40 Bom. 386 18 Bom. L.R. 559 That decision has been overruled in Manilal's case I.L.R. (1920) 45 Bom. 245, 22 Bom. L.R. 1048 with the concurrence of that learned Judge himself.

74. The result is that in this Court the decision in Pragdas v. Girdhardas has been affirmed down to the present time notwithstanding the Code of 1908. In my opinion that is a correct position.

75. I would only add that in my judgment the word 'lawful' in Order XXIII, Rule 3, refers to the nature of the compromise arrived at, not to the procedure which the parties may have followed in bringing it about, But it is of course the duty of the Court to be satisfied that there has in fact been an adjustment by compromise.

76. The last question is whether a reference to arbitration in a pending suit without the intervention of the Court is such a reference as is contemplated by para. 20 of Schedule II of the Code of 1908. In my opinion it is not. The first heading of Schedule II is 'Arbitration in suits.' That covers paras. 1 to 16. Then follows the heading 'Order of reference on agreements to refer' which is dealt with in paras. 17 to 19. Then follows the last heading 'Arbitration without the intervention of a Court.' It seems to me reasonable to suppose that the Legislature had in mind two main divisions :

I. Arbitration in pending suits.

II. Arbitration where there is no pending suit.

77. In a pending suit the parties may apply for a reference under para. 1. It is within their discretion to do so or not, a point which is not without significance in considering how far the Schedule is intended to be exhaustive. If they do, their proceedings are within the Schedule. If not, they are outside it. The other class of arbitrations is where there is no pending suit. Here they may make the reference an order of the Court under para 17, or they may proceed to an award and then apply under para. 20. The words 'any Court having jurisdiction' in para. 20 appear to me to support this view. Those words by implication exclude the idea of a suit already pending between the parties, nor is it easy to believe that the Legislature intended that in such a case a Court other than the Court in which a suit was already pending should become seized of the matter. That would be contrary to the general principle to be found in Section 10 of the Code, and might lead to many practical inconveniences. The weight of judicial opinion certainly favours the construction which I suggest and I am content to follow the second decision of Macleod C.J. in Manilal Motilal v. Gokaldas Rowji I.L.R. (1920) 45 Bom. 245, 22 Bom. L.R. 1048, which has the concurrence of Rankin J. in Amar Chand Chamaria v. Banwari Lall Rakshit I.L.R. (1921) Cal. 608.

78. I agree that the question propounded should be answered as in the judgment of the learned Chief Justice.

Blackwell, J.

79. The question submitted for the decision of the Full Bench is as follows:-

Where in a suit parties have referred their differences to arbitration without an order of the Court, and an award is made, can ft decree in terms of the award be passed by the Court under Order XXIII, Rule 3, or otherwise?

80. It has been contended that Schedule II to the Civil Procedure Code provides the only machinery whereby parties to a pending suit can refer the matters in difference between them to arbitration. In support of this contention reliance was placed upon a decision of Rankin J. in Amar Chand Chamaria v. Banwari Lall Rakshit I.L.R. (1921) Cal. 608, in which he followed his previous decision in The Dekari Tea Co., Ltd. v. The India General Steam Navigation Co., Ltd. (1920) 25 C.W.N. 127 With great respect to that learned Judge I find myself unable to agree with his opinion, and in my judgment that decision is wrong for reasons which I will shortly state.

81. The relevant paragraphs of Schedule II which deal with arbitration in suits are paragraphs 1-16. Para. 1 (1) is in these terms:-

Where in any suit all the parties interested agree that any matter in difference between them shall be referred to arbitration, they may, at any time before judgment is pronounced, apply to the Court for an order of reference.

82. Having regard to the use of the word 'may' I am clearly of opinion that this is only one of the methods, and not the only method, whereby parties to suits may refer their differences to arbitration. I am fortified in my opinion by the view which was taken of corresponding provisions in the Civil Procedure Code of 1859 by Pontifex and Birch JJ. in Jogessur Banerjee v. Kulyanee Churn Deo (1875) 24 W.R. 41, a case very similar to the present case, There those learned Judges said (p. 41):-

On the other hand, the respondent argues that it follows from Sections 312 and 325 (Act VIII of 1859) that it is not intended that parties should refer to arbitration any matters in dispute pending before a Court except in exact pursuance of the course there laid down, or without the privity of the Court. We are of opinion that those Sections are enabling and were not intended to be restrictive or exclusive, and that before decree, parties who are sui juris are competent to make any agreement as to the settlement of the suit.

83. I take the same view of paragraphs 1 to 16 of Schedule II. In regard to the statement of Rankin J. in Amar Chand Chamaria v. Banwari Lall Rakshit that (p. 612) 'it is difficult to see what point there is in the second schedule saying or meaning that arbitration must be done in a particular way if, according to some other law or principle, it may still be done in another way,' my answer, with respect, is that Schedule II does not say this, the word used in para, 1 (1) being 'may', and not 'must.'

84. It was further contended that whatever view might be taken of the earlier Codes in regard to references to arbitration in pending suits, Section 89 of the present Code had made it plain that parties to a pending suit could only refer their differences to arbitration through the machinery provided by Schedule II. The relevant part of that section is 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.

85. Reliance was again placed upon the remarks of Rankin J. in Amar Chand's case in which he said (p. 612) : 'In any case the logical gap, if there bo any, is stopped up by Section 89.' With great respect I find myself again unable to agree. Section 89 excepts from its operation 'any other law for the time being in force.' Having regard to the context that must, I think, mean any other law relating to arbitration. I do not think that 'other law' refers only to statute law. I think it would include any other law, such as the general law of contract, whereby parties may agree to refer their disputes to arbitration. If this be the right construction of the section, as I think it is, then the provision that '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 Schedule II' can only apply to cases in which persons choose to avail themselves of the machinery provided by Schedule II, and not to cases in which they adopt other methods of submitting their differences to arbitration.

86. It was pointed out in the course of the argument that in the earlier Codes of 1859 and 1882 the provisions relating to arbitjation were to be found in the body of the Code itself, and not in a Schedule as in the present Code. It was argued from this that the only object of Section 89 was to provide that Schedule II should have effect as if enacted in the body of the Code, just as by Section 121 it is provided that 'the rules in the First Schedule shall have effect as if enacted in the body of this Code until annulled or altered in accordance with the provisions of this Part.' It is, however, apparent that the phraseology of Sections 89 and 121 is very different. I prefer, therefore, myself to construe the words of Section 89 as I find them, rather than to speculate upon the intentions of the Legislature in using the particular phraseology employed in Section 89.

87. In Manilal Motilal v. Gokaldas Rowji I.L.R. (1920) 45 Bom. 245, 22 Bom. L.R. 1048 both Macleod C.J. and Fawcett J. drew attention to the fact that there was nothing in English law to prevent parties to a pending suit from referring their differences to arbitration by agreement without the intervention of the Court, Fawcett J. citing in this connection a passage from the judgment of Farwell L.J. in Doleman & Sons v. Ossett Corporation. [1912] 3 K.B. 257 Both Macleod C.J. and Fawcett J. were of opinion that there was nothing in Indian law to prevent parties to a pending suit from adopting a similar course. I respectfully agree with them. In this connection reference may be made to the Indian Contract Act, 1872, Section 28, Exception 2. I further agree with both these learned Judges that either party could file a suit to enforce the award and apply for a stay of the original suit, and with Fawcett J., that the defendant could, with the leave of the Court, under Order VIII, Rules 8 and 9, of the Code, plead the award in bar of the suit.

88. The question, however, in the present case is whether a decree can in terms of an award made in such circumstances be passed by the Court under Order XXIII, Rule 3, or otherwise. Order XXIII, Rule 3, is in the following terms:-

Where it is proved to the satisfaction of the Court that a suit has bean adjusted wholly or in part by any lawful agreement or comprom se, or where the defendant satisfies the plaintiff in respect of the whole or any part of the subjeot-matter of the suit, the Court shall order such agreement, compromise or satisfaction to be recorded, and shall pass a decree in accordance therewith so far as it relates to the suit.

89. On the face of it this rule is not a rule directly relating to arbitration proceedings. It is a rule dealing with the adjustment of a suit by any lawful agreement or compromise. It is quite true that arbitration may be resorted to, and an award made, and that by virtue of that award a suit may be adjusted, but in my opinion the rule cannot be said to be a rule in itself applying to or governing arbitration, although arbitration proceedings may have taken place which have resulted in an adjustment. In my judgment, therefore, the rule does not fall within the exception of 'any other law for the time being in force' provided for by Section 89 of the Code (which, as I have already said, in my opinion, means other law relating to arbitration), even if a rule of an Order in Schedule I to the Code could properly be regarded as covered by the words 'any other law' used in the body of the Code itself. Upon this point I prefer the view taken by Macleod C.J. to that of Fawcett J. in Manilal's case. In my opinion Section 89 does not affect the operation of Order XXIII, Rule 3, at all, and parties to a suit can resort to it if they have in fact adjusted the suit by an award. The fact that the rule itself provides that it must be 'proved to the satisfaction of the Court that a suit has been adjusted' is a safeguard to either party who questions the validity of an award if that be the adjustment relied on, inasmuch as, unless the Court is satisfied that the award, if challenged, is valid, it cannot be satisfied that the suit has been adjusted. But I have no doubt whatever that the words 'adjusted wholly or in part by any lawful agreement or compromise' are wide enough to include an adjustment by arbitration followed by a valid award. In this connection it is worth observing that the word 'compromise' is stated in Murray's New English Dictionary to bear, among other meanings, the following meanings : (a) 'a joint promise or agreement made by contending parties to abide by the decision of an arbiter or referee,' and (b) 'the settlement or arrangement made by an arbiter between contending parties; arbitration.'

90. The last decision of this Court was Manilal's case, above referred to, decided in 1920. It followed the view taken by Jenkins C.J. and Starling J. of Section 375 of the Civil Procedure Code of 1882 (corresponding with Order XXIII, Rule 3) in Pragdas v. Girdhardas I.L.R. (1901) 26 Bom. 3 Bom. L.R. 431. It decided that a decree in terms of the award can be passed by the Court under Order XXIII, Rule 3, where parties in a suit have referred their differences to arbitration without an order of the Court. In my opinion both those decisions are right. In the judgments in Manilal's case most of the earlier decisions upon the point are reviewed, including a decision of Macleod J. the other way, which was overruled, namely, Shavakahaw v. Tyab Haji Ayub I.L.R. (1916) 40 Bom. 386 18 Bom. L.R. 559. I do not, therefore, think it necessary to refer to those decisions here. A similar view has been taken in the High Courts of Madras and Allahabad. Decisions the other way have been given by Calcutta in the two decisions of Rankin J., above referred to, in a further Calcutta decision in Rampratap Chawria v. Durgaprasad Chamria (1923) 28 C.W.N. 424, and in a Lahore decision in Hari Parshad v. Soogni Devi (1920) 3 L.L.J. 162. In my judgment the Calcutta and Lahore decisions are wrong.

91. There remains the question whether parties to a suit who have referred their differences to arbitration without an order of the Court can avail themselves of the provisions of paragraphs 20 and 21 of Schedule II of the Code. In my opinion they can not. I think that the scheme of Schedule II was intended to provide by paras. 1 to 16 for arbitration in suits, and by paras. 17 and 20 and 21 for arbitration not in suits. I think that this was clearly the view of the Privy Council in Ghulam Khan v. Muhammad Hassan(1), in reference to Section 523 of the Code of 1877, which corresponded with paragraph 17 of Schedule II to the present Code, In my opinion a similar view should be taken of paragraphs 20 and 21. I have formed this opinion from what I conceive to be the scheme of Schedule II itself, quite apart from any considerations of inconvenience which might arise if a contrary view prevailed, namely, that an application under paragraph 20 may be made to any Court having jurisdiction over the subject-matter of the award, and that the application itself must be numbered and registered as a suit. It would obviously be inconvenient if the application were made to a Court other than the one in which the suit between the parties was instituted, and the procedure itself seems quite inappropriate where a suit between the parties is already pending. If, therefore, parties to a suit, who desire to refer their differences to arbitration, desire to avail themselves of the provisions of Schedule II, they can in my judgment do so only under paras. 1 to 16 of that Schedule. Upon this point, I entirely agree with the views of Macleod C.J. and Fawcett J. in Manilal's case.

92. I would answer the question submitted as follows:- 'Yes, under Order XXIII, Rule 3, and not otherwise.'


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //