1. This revn. petn. is against the order of the Subordinate Judge, Chickmagalur in Mis. Appl. no. 4 of 1949-50, confirming the order of the Mansiff Chickmagalur dismissing I. A. No. 6 in O. S. No. 220 of 1947-48 on his file. This appln. was filed under Order 23, Rule 3, C. P. G. for recording a compromise said to have bean arrived at between the parties.
2. The pltf. filed a suit for recovery of monies alleged to be due by the deft. The suit was contested; issues were framed & the case posted for trial The parties are then said to have referred their dispute in this pending an it to both their respective counsel for decision & the latter appear to have given a decision. The deft, (sic) thereupon made an appln. I. A. no. 5 for having that decision recorded as amounting to a compromise or settlement of the suit between the parties. The deft, op-posed the appln. Evidence was recorded thereon & the parties gave varying versions in the matter. The learned Muniff rightly found on the evidence of their counsel that the parties had unequivocally & unconditionally agreed to abide by their decision. But he held that he could not treat the decision as amounting to a compromise or settlement of the suit coming within Order 23 Rule 3, C. P. C. The learned Subordinate Judge on appeal has agreed with him on this question of law & the deft, has preferred this revn. petn.
3. Mr. M. Ramachandra Rao, learned counsel for the petnr, contended that the two cases decided by this Ct. in 27 Mya. C. C. R. 215 & 28 Mys. C. C. R. 182 which are on all fours with the present case & which hold that a decision or award of panchayatdars or arbitrators in such a pending case where there has been no reference through the Ct. (sic) require reconsideration in the light of certain provisions of the recent Mysore Arbitration Act of 1949, He refers to Section 47 of that Act which pro vides that subject to the provisions of Section 46 which relates to statutory arbitrations the Arbitration Act shall apply to all proceedings & arbitrations thereunder; & under the proviso to that section 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 Ct. before which the suit is pending. He also relies in this connection on a decision reported in Arumuga Mudaliar v. Bilasubra-mania, Mudaliar, A. I. R, (32) 1945 Mad. 294: (I. L. R. (1946) Mad. 39). In that case an award made in a private arbitration during the pendency of the suit was treated as an agreement to compromise & it was held that a decree could be passed on the terms of the award. Section 47, Arbitration Act, it was observed, was inserted by the legislature in order to allow the Ct. unfettered action under order 23 Rule 3. C. P. C. & that Section 47, Arbitration Act does not preclude an award in a private arbitration being made a decree of the Ct. unless all the parties interested in it have, after the award has been given, consented to a decree being passed in terms thereof. It was held that an agreement to accept a future award can be treated as a compromise in the suit & that the Arbitration Act of 1940 had in no way altered the position. The decision of the Madras H. C. is in accordance with the view taken earlier that an award made in a private arbitration during the pendency of the edit could be treated as an agreement to compromise & on that basis a decree could be passed in the terms of the award: see Subba Raju v. Venkata Hama Raju, 61 Mad. 800: (A. i. R. (15) 1928 Mad. 1025 F.B.). In our Ct. we have, however, chosen not to follow the line of decisions which have so held.
4. In 27 Mys. C. C. R. 215 it has been held that the decision of arbitrators unless accepted by the parties cannot amount to a mutual agreement for purposes of Order 23, Rule 3, C. P. C. & that Order 23, Rule 3 does not contemplate arbitration proceeding as such as amounting to a compromise or settlement. In 23 Mya. C. C. R. 182 it has been held that if the award of the arbitrators is accepted by both the parties, the agreement to refer plus the award which the parties had accepted would constitute an adjustment of the suit on lawful agreement, but that is not by virtue of the award itself or of its binding character but because the parties have chosen to adopt a decision given by the arbitrators as indicating the mode in which they want their dispute to be adjusted.
5. The Bombay H. C. has in Chanbasappa v. Baslingayya, 61 Bom. 908: (A. I. B. (14) 1927 Bom 565 F. B.) following Mamlal Motilal v. Gokal Das Rowji, 45 Bom. 245: (A. i. R. (8) 1921 Bom. 310) held that if in a suit parties have referred their differences to arbitration without an order of the Gt. & an award is made, a decree in terms of the award can be passed by the Ct. under Order 23, Rule 3, C. P. C. Marten C. J. in his elaborate judgment has referred to divergence of opinion among the several H. Cts. on the question whether such an award, not agreed to by one of the parties thereto can be said to be an adjustment of the suit within the meaning of Order 23. Rule 3 & has chosen to follow the earlier Bombay view in Manilal Motilal v. Gokaldas Bawji, 45 Bom. 245: (A. I. B. (8) 1921 Bom. 310) & the Madras view in Chinna Venkatasami v. Venkatsami, 42 Mad. 625; (A. I. R. (7) 1920 Mad. 800) which latter case has been followed in Subba Raju v. Venkata Rama Raju, 51 Mad. 800: (A. I. R. (15) 1928 Mad. 1025 F B.) & Gajendra Singh v. Durga Kumari, 47 ALL. 637. (A. I. B. (12) 1915 ALL. 503 (F.B.) & dissented from the view of the Calcutta H. C. in this nuttier reported in Amarchand v. Banwarilal, 49 cal. 608 : (A. I. R. (9) 1922 Cal. 404) & of tbe Lahore H.C. in Hari Parshad v. Mt. Soogni Devi, 3 Lab. L. J. 162: (A. I. B. (8) 1921 Lah. 232). According to him the word 'compromise' in Order 23, Rule 3 may include a reference to arbitration & it may also include arbitration generally & hence a reference completed by an award. He has also made it clear that in answering the question which was referred to the F. B. & which was answered by them in the affirmative in the terms set out above.
'No point arises to the effect that subsequently to the award the parties agreed to treat the award as an agreement or compromise of their claims' as nothing of that sort had happened in the case before them.
6. The Allahabad H. C. in Gajendra Singh v. Durga Kumari : AIR1925All503 Walsh & Kanhaiya Lal JJ. (Mukerji J. dissenting) have held that an agreement & arbitration operate as an adjustment of the matters in dispute under Order 23 Rule 3, C. P. C. & this view has been followed in Ram Devi v. Ganeshi Lal : AIR1926All501 Mukherji J. in Gajendra Singh v. Durga Kumari : AIR1925All501 his in the course of his dissenting judgment observed that the question is a difficult one. He has re erred to the divergence of opinion between the H. Cs. of Bombay, Calcutta & Madras in this matter & has set himself to examine the meaning of Rule 3 of Order 23 of the Civil P. C. He arrives at the conclusion that on the plain meaning of the words 'adjusted wholly or in part by any lawful agreement or compromise' an award obtained on a reference to arbitration without the intervention of the Ct cannot amount to such an adjustment or compromise. A compromise contemplated under Order 23, Rule 3 according to him can only be the direct result of an agreement between the parties & Rule 3 must betaken as directed only to cases where the par. ties have agreed that the Ct. should decide a matter between themselves in a particular way & that an arbitration cannot come within the purview of Rule 8.
7. In the Calcutta H. C. Rankin J. has in Amarchand v. Banwari Lal, A. I. R. (9) 1922 Cal. 404: (49 Cal. 608) held that if in a pending case the parties go to a private arbitration without the consent of the Ct. the award cannot be enforced either under Order 23, Rule 3, C. P. C. or under the provisions of the Indian Arbitration Act. He observes during the course of his judgmett
'in formal & uncontrolled arbitrations between parties to a suit leading up to litigation on the bare issue as to whether in fact there is a valid adjustment are the very things from which the second Sch. (now Chap. IV of the Arbitration Act) was meant to deliver litigants.'
In Mahammad Mia v. Oosman Ali, : AIR1935Cal239 Mitter J. has followed this view observing 'that so far as our (Calcutta) Ct. is concerned it is now settled law that an award made on a reference without the intervention of the Ct. during the pendency of a suit cannot be recorded as a compromise or adjustment of the suit under Order 23, Rule 3, C. P. C.'
8. The Rangoon H. C. in Hlay Maung v. U Ge, A. I. R. (26) 1939 Rang. 300 : (1939 Rang. L. B. 280 PB) has pointed out that
''It is entirely wrong to import into the meaning of words used in Order 23, Rule 3 some connotation which is at variance with the provisions of Section 89 or Schedule 2 Order 23 Rule 3 deals with adjustment by compromise & not with compromise merely. Adjustment means settlement & the harmonizing of disputes & where there exists no settlement & no harmony the dispute cannot be said to have been adjusted by lawful agreement or compromise'
& held that
'Where therefore an award expressed to be made in an arbitration without the intervention of Ct. during the pendency of a suit is disputed & challenged by one of the parties, such award is not an adjustment by lawful agreement or compromise within the meaning of Order 23, Rule 3.'
9. The Lahore H. C, has taken the view that an award made in a pending case without there being a reference through the Ct. cannot be recorded as an adjustment unless all the parties agree. See Ban Perskad v. Mt. Soogni Devi, 67 I. C. 123: 3 L. L. J. 162: (A. I. R. (8) 1921 Lah 232).
10. The Patna H. C. has in their recent oases followed the Calcutta view; see Bhimraj v. Munia Sethani, 156 I. C. 1050: 14 Pat 799; (A. I. R. (22) 1935 Pat. 243), Sir Dinahaw Mulla in his commentaries on the rule has ex-pressed his own open on that the Calcutta view is more correct; even in Bombay in Dinkar Rai v. Yeskwani Rai : AIR1930Bom98 Rangnekar J, has observed that he is inclined to prefer the Calcutta view.
11. Mr. Ramachandra Rao contends that since the parties had consented before they referred the matter to abide by the decision of the arbitrators, the same & the subsequent award or decision amounts to a compromise as there is nothing to prevent the parties consenting to the decision in advance. He relies for this argument strongly on Arumuga Mudaliar v. Balasubramania Mudaliar, A I. R. (32) 1945 Mad. 294 . (I. L. R. (1946) Mad. 39) & urges that Section 47, Arbitration Act, merely refers to such consent & does not expressly say that the consent must be subsequent to the award. No doubt that decision supports him. I am how-aver not impressed with that argument & I say so with great respect to the learned Judges who have decided that case in that way. By saying that there is nothing in the proviso which precludes antecedent consent' I think the object; of the proviso is practically destroyed. The plain language of the proviso does not support such a construction. The same expressly reads as if an award may be taken into consideration as a compromise only with the consent of all the parties interested.
12. The efficacy of an award rests on its being an adjudication by an arbitrator who is a Judge of the parties choice & is like a decision of a Ct. It does not depend on the consent of the parties either prior to or subsequent to its passing. There is always consent implicit in every reference to arbitration that the parties will abide by the decision of the arbitrators. The mere circumstance that they expressly say so in their reference cannot make the award an adjustment or compromise of their differences which they have submitted for arbitration & decision.
13. An examination of the circumstances under which & the object with which Section 47. Indian Arbitration Act of 1940 was enacted though it may not be strictly speaking relevant, would throw considerable light on the meaning of its proviso. In para. 90 of their report the Civil Justice Committee which was constituted in 1996 to examine the reasons for delay in disposal of cases observed:
''As regards arbitration in suits the chief question which requires attention is the question whether it is advisable to permit parties to a suit referring their dispute to arbitration otherwise than by the procedure provided by Articles 1-16 of the Schedule 2 to the Code. Whether the language of Schedule 2 or of Section 89 of the Code amounts to a prohibition of arbitration in suits otherwise than by the means described in the Schedule is divided. The H. C. of Bombay in Manilal Motilal v. Gokul Das 45 Bom. 245: (A. I. R. (8) 1921 Bom. 310) has held that an arbitration in a suit, without any order as required by Schedule 2, may be enforced as an adjustment of the suit under Order 23, Rule 3. We consider that it would be advantageous if alt arbitration in suits, except as provided by Schedule 2 warp made void; the awards should only be recorded as adjustments of the suits when the Ct. is asked to do so by all parties.'
Thereafter Section 47 of the Act was enacted. The report of the Select Committee on this section was as follows:
'The effect which this section as redrafted is designed to produce is that arbitrations shall not be conducted in any way repugnant to the Act & that any arbitration award may with the consent of the parties be used for the purposes of Rule 3 of Order 23, C. P. G.
This I think would clearly mean consent given subsequent to the award, as otherwise the Ct. trying the suit would have to abandon the trial of the suit & embark on a probably long & complicated enquiry as to the factum & validity of the reference & award.'
14. On a consideration of the above circumstances I think the decision in 38 Mya C. C. U. 182 that, if in a pending suit the parties refer their differences to arbitration without the cognizance of the Ct. the reference & the resulting award unless agreed to by the parties cannot constitute an adjustment or compromise nor can be acted upon under Order 28, Rule 3, C. P C. is fully in accordance with the real intent & meaning of Section 47, Arbitration Act as well as Order 23 Rule 3, C. P. C. It lays down, if I may say so with respect, a safe, convenient & correct rule. Nor is there any hardship to the parties following it. It is open to the parties in a pending suit to have a formal reference made through the Ct. under chap, IV of the Act in respect of the matters concerned in the suit & the award passed thereon would be given effect to between the parties.
15. I, therefore, see no reason to differ from the others of the Cts, below & dismiss this revn. petn. The conduct of the parties in resiling from their agreement does not merit either of them being awarded any costs.