P.C. Pandit, J.
1. Gain Chand filed a suit for the issue of a permanent injunction restraining the defendants from interfering with his water spout on the ground that his water was being discharged from the same for the last twenty years, that three months before the suit the plaintiff had demolished the chaubara of his house and wanted to rebuild it, and when he was going to build the chaubara the defendants stopped him from reconstructing the water spout.
2. The suit was contested by the defendants who pleaded that the plaintiff used to discharge-his water from a part of his own wall, that when the defendants were minors, he changed the position of his water spout and now he wanted to open the same at a place where he had no right to do so.
3. A number of issues were struck and evidence was led by the parties on the same. On the 23rd January, 1956, the parties filed a joint application before the Court in which they admitted that the wall was joint of the parties and that it might be divided into two equal shares. It was further stated in this application that Gian Chand plaintiff would be the sole owner of the portion of the wall which would fall to his share and similarly, the defendants would be the owners of the other half of the wall, that the plaintiff would remove-his encroachments, if any, on the other hall of the wall which would fall to the share of the defendants, that the Court might appoint anybody to-partition the wall and his decision would be binding on the parties, that no party would have any right to file an appeal or revision from the decision-of that person who would be in the position of a referee and the parties would bear his expenses half and half, and that after the partition of the wall, the Court might dismiss the suit but the parties would have a right to file a separate suit.
On that very date, statements of the parties were recorded on this joint application and they stated that somebody might be appointed by the Court to partition the wall and his decision would be binding on the parties as that of a referee. On the same date the Court, in accordance with the-application of the parties, appointed Shri Trilok Chand to partition the intervening wall of the parties. It was further ordered that he should put in his report by the 6th of February, 1956. It seems that the report was not received on the 6th February, 19,56, and the case was adjourned to the 27th February, 1956.
Since the report was not received even on the 27th February, 1956, the case was fixed for the 29th February, 1956. On the 29th February, 1956, it was found that Shri Trilok Chand was not prepared to act as a referee and therefore the Court appointed Shri Satish Chandra Pleader to partition the wall and he was directed to go to the spot, partition the wall and send his report by the 3rd March, 1956. It appears that on the same clay an application was filed by Gian Chand plaintiff praying that since the previous arbitrator had refused to decide the matter, the Court itself should decide the same and it might not be referred to a new arbitrator,
On this application, the Court issued notice to the other side for the 3rd March. 1956, which was the date fixed in the case for the report of Shri Satish Chandra, the newly appointed referee. On the 3rd March, 1956, since Shri Satish Chandra's report had been received, the Court dismissed the suit as per statements and application of the parties dated the 23rd January 1956, and ordered the parties to bear their own costs. The Court further ordered that the parties could get the last report, namely, that of Shri Satish Chandra, duly enforced and on the same day, the Court passed the following order on the application dated the 29th February, 1956, of Gian Chand plaintiff:--
'The plaintiff is present and he states that he co-operated with the referee but had told the referee of this application. In view of the application of the parties and their statements dated 23-1-1956, this application is not tenable and is hereby rejected.'
4. Against the decree of the trial Court dated the 3rd March, 1956, the plaintiff went up in appeal to the Senior Subordinate Judge, Gurdaspur, who dismissed the same holding that the plaintiff had got no right of appeal from the order of the Court dated the 3rd March, 1956, by which the suit was dismissed in accordance with the agreement dated the 23rd January, 1956. He further held that the plaintiff had no right to withdraw from the agreement dated the 23rd January, 1956. when the plaintiff had specifically agreed not to file any objections or an appeal or revision against the decision of the person appointed by this Court. The plaintiff has come up in second appeal against the decree of the Senior Subordinate Judge.
5. The first question for decision in this case is whether the application filed by the parties on the 23rd January, 1956, amounts to an adjustment of the suit within the provisions of Order 23, Rule 6 of the Code of Civil Procedure. It was strenuously contended by the learned counsel for the respondents that the suit was adjusted by the parties and the case fell within the purview of Order 23 Rule 3 of the Code of Civil Procedure, and no appeal was competent against such a decree under the provisions of Section 96(3) of the Code of Civil Procedure.
6. After hearing the parties, I am of the view that the application dated the 23rd January, 1956, cannot be called an adjustment of the suit within the meaning of Order 23, Rule 3 of the Code of Civil Procedure. It can at the most be called an agreement to adjust the suit. No decree could have been passed on the basis of this application on that date. It was agreed between the parties that a referee should be appointed by the Court to partition the wall and it is only after the referee had made his report that the adjustment would have taken place and the suit could be dismissed. But in my view it cannot be said that on the 23rd January, 1956, the suit was adjusted as contemplate ed by Order 23, Rule 3 of the Code of Civil Procedure.
7. Reference in this connection may be made to the observations of Sulaiman, C. J. in Mt. Akbari Begam v. Rahmat Husain, AIR 1933 All 861 (880) (SB):--
'In my opinion the true basis of the binding character of such an agreement is that the original contract to abide by the statement of a third person is perfected into an adjustment of the claim in terms of the statement made, as soon as the referee makes the statement. After that stage, neither party can resile from the agreement because the claim has been duly adjusted and it has become the duty of the Court not only to record it, but also to pass a decree in terms of it. It is true that Under Order 23 Rule 3, before a Court can order an agreement or compromise to be recorded, and pass a decree in accordance therewith, it has to be satisfied that the suit has been adjusted wholly or in part by such agreement or compromise. Where the parties agree to abide by the statement of a third person their agreement is still in thp nature of a contract, and it may well be said that so long as that third party has not made his statement, and the contract has not been carried out, there is yet no adjustment of the suit. Matters have not proceeded beyond the domain of an agreement, and the stage of the adjustment of the claim has not yet been reached. Strictly speaking an agreement is not identical with a compromise of the suit, and may amount to a mere contract.
But as no decree can be passed forthwith in terms of a mere contract to abide by the statement of a third person, I am perpared to hold that there can be no adjustment of the suit by such a contract until the statement has been made. But as soon as the agreement has been fully carried out by the Court and the referee has made his statement in favour of one party or the other it is also too late for either party to go back upon the agreement; and at this stage the agreement must be deemed to have eventuated into an adjustment of the claim in accordance with the statement already made. A party cannot be allowed to retract his solemn promise for consideration made before that Court after he has come to know the nature of the statement by which he had agreed to abide.
It is no longer a question of the carrying out of a promise Or the specific performance of a contract. The compromise must be deemed to have been carried out and accordingly the claim already adjusted. The Court cannot therefore entertain an application to withdraw from the previous agreement and to resile from it unless fraud, misrepresentation, coercion, influence or mutual mistake were established.''
8. Apart from the ruling mentioned above, there is good deal of authority for the view that it is only after the referee had made his statement in accordance with the agreement of the parties that the suit is said to have been adjusted, and before the statement is made by the referee it is merely an agreement, e.g., Bishambhar v. Radha Kishunji, AIR 1931 All 557.
9. Where a party agrees to the appointment of a referee and gives his consent to the case being decided on the statement made by the referce, the party is not debarred from resiling from the agreement before the statement is actually made by the referee. He can insist on the case being decided by the Court instead of in accordance with the statement of the referee. The statement of the referee in such a case, in view of the agreement between both the parties, would be binding upon them as an admission under Section 20 of the Indian Evidence Act and surely a party cannot be bound to make an admission and can resile from making the same before the said statement is actually made. Breach of such an agreement might entitle a party to sue for damages, but the suit cannot be adjusted in accordance with the same and either party can resile before the referee gives his statement.
10. It was observed by Kapur, J., in Moni Ram v. Hari Chand, (1955) 57 Pun LR 327, as follows:
'A party agreeing to the appointment of a referee and consenting to the case being decided on the statement made by the referee, is not debarred from resiling from the agreement before the referee makes the statement.'
11. In this connection, I may also notice the the following observations of Agarwala J. in the Full Bench decision reported as Saheb Ram v. Ram Newaz, AIR 1952 All 882 (886):
'With all respect, I see no reason why such an agreement between the parties should not be given effect to. The Civil Procedure Code is not exhaustive of the modes in which a proceeding may be decided. When two parties agree that the decision of a case may be reached in a particular manner, e. g., according to the statement of a particular person, common sense and natural justice point to the conclusion that the case may be decided in that particular manner. There is nothing in the Code of Civil Procedure or any other law which prevents the Court from following the procedure suggested by the parties.
This matter was dealt with by a Full Bench in 1933 All. L.J. 1127: (AIR 1933 All 861) and it was held that an agreement like the one under discussion is binding on the parties, that the case can be decided according to it and that the Court has a power to follow the procedure indicated by the parties in deriding the case. It was further held that the agreement was not opposed to public policy nor repugnant to the provisions of the Contract Act or any other law and was binding on the parties.
In my opinion where an agreement is made between the parties to abide by the statement of a person, it is a valid agreement enforceable by the Court except when there are sufficient reasons for resiling from it in which case the Court may allow one of the parties to resile from the agreement. In the absence of any such sufficient cause tne Court is bound to enforce the agreement, to take down the statement of the party concerned and to decide the case accordingly. The true basis of the power of the Court to decide a case in accordance with the agreement between the parties is neither Section 20, Evidence Act, nor Order 23, Rule 3, Civil P. C., nor the Arbitration Act but the agreement of the parties themselves. If the agreement is valid, the Court has a power under its inherent jurisdiction to give effect to it.'
12. With great respect to the learned Judge, I cannot persuade myself to subscribe to the abovementioned proposition enunciated by him.
13. Apart from the fact that the case dealt with by the Full Bench, was one under the Indian Oaths Act, I am of the view that such an agreement cannot be enforced in the same suit, because the Court is not concerned with the enforcement of that agreement, the suit having not been filed for that purpose. The Court can take cognizance of the adjustment of the suit, if in pursuance of that agreement the referee has made the statement and the agreement is perfected into an adjustment of the claim. For the breach of such an agreement the remedy of the aggrieved party may be by way of a separate suit for damages. There cannot be specific enforcement of such an agreement which is, by its nature, revocable, because a party cannot be bound to make an admission and can resile from making the same before it is actually made (see Section 21(d) of the Specific Relief Act).
The inherent powers of the Court cannot be invoked for the enforcement of an agreement which, under the law, cannot be specifically enforced even in a separate suit. Besides, the enforcement of such an agreement is likely to lead to confusion, because the Court, instead of determining the rights and liabilities of the parties in respect of the subject-matter of the suit, would be compelled to launch an enquiry into extraneous matters. It is also significant to mention that the Full Bench decision did not disagree with the Special Bench decision in AIR 1933 All. 861 wherein it was held by Sulaiman C.J., that a party could resile from the agreement, before the referee made his statement.
14. In the present case, it has not been found whether the application of Gian Chand resiling from the agreement was filed previous to the order of the Court appointing Shri Satish Chander as a new referee or afterwards, but it is common ground that the plaintiff had resiled from this agreement before the newly appointed referee had made his report He could, therefore, under the law, resile from the agreement and ask the Court to decide the case on merits.
15. In view of what I have said above, this appeal is accepted, the judgment and decree of the lower appellate Court are set aside and the case is sent back to the trial Court for decision on merits. The parties will, however, bear their own costs in this Court. Parties have been directed to appear in the trial Court on 10th October 1960.