Munshi Ram vs Banwari Lal

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: L.P.A. No. 11 of 1952

Decision Date: 9 January, 1962

Coram: J.C. Shah, M. Hidayatullah

In the matter of Munshi Ram versus Banwari Lal, decided on 9 January 1962 by a bench consisting of Justices J. C. Shah and M. Hidayatullah, the Court recorded that the appellant, Munshi Ram, had filed a special‑leave appeal against a judgment and decree issued by the Punjab High Court on 26 November 1952. The decree was based on a compromise that followed an award rendered by an arbitrator, and the decree‑holders, identified as the respondents, were seeking execution of that decree. The High Court judgment and decree originated from two Letters‑Patent appeals, numbered 5 and 11 of 1952, which confirmed the orders of a learned single judge of the High Court in Execution First Appeals numbered 56 and 121 of 1951. The present appeal was confined solely to the decision in Letter‑Patent Appeal No. 11 of 1952, and the Court explained that a detailed narration of facts was required to understand the nature of the orders and the point raised on appeal. The Court then set out the family relationships of the parties, indicating that Munshi Ram had been adopted by Mangalsain when he was about five or six years old, and that Mangalsain belonged to a separate branch of the family. A firm called Kanhaiyalal & Sons, comprising Kanhaiyalal and his two sons, had experienced financial difficulties, although this matter was not before the Court. Munshi Ram, on his part, had established a separate business named “Munshi Ram, B.Sc.”, which allegedly prospered, and the respondents claimed partnership in that concern, a claim the Court noted but did not examine further. On 30 October 1946, the parties entered into an agreement to refer their dispute to the sole arbitration of Lala Premnath, an advocate. Lala Premnath issued an award on 3 March 1947, directing a payment of ₹50,000 to Faqir Chand in the following manner: ₹15,000 on 4 April 1947 and the balance in three equal instalments on 4 August 1947, 4 December 1947 and 4 March 1948, with interest on any defaulting instalment at a rate of 0‑8‑0 percent per month until payment. He also awarded ₹45,000 to Banwari Lal, payable as ₹15,000 on 4 April 1947 and the balance in three equal instalments on the same dates, with the same interest provision. Additionally, the award apportioned a residential haveli in half‑shares to Faqir Chand and Banwari Lal, including the portion constructed by Munshi Ram, while the remainder of the immovable property was declared to belong to Munshi Ram as his self‑acquired property, expressly stating that Faqir Chand and Banwari Lal would have no interest or claim in the business “Munshi Ram, B.Sc.”.

In this case, no proceedings were undertaken for a considerable period after the arbitration award. However, on 4 April 1947 a payment of fifteen thousand rupees was made to Banwarilal. Following a request made by Faqir Chand on 17 December 1947, the arbitrator filed an application under section 14(2) of the Arbitration Act on 6 January 1948. With that application he attached a signed copy of the award, noting that the original document could not be produced because it had been lost. On 19 February 1948 the stamp auditor examined the copy and observed that the endorsement indicated the original had been drawn on a stamp paper of fifty rupees value, and that a shortfall of six hundred sixty‑two rupees and eight annas existed. The auditor therefore recommended that the award be impounded. The Senior Sub‑Judge of Ferozepore ordered that the auditor’s report would be taken into account only when the original document was produced. Subsequently, on 11 July 1948 Munshi Ram filed an application seeking to set aside the award. Among the grounds pleaded were that the award had not been sufficiently stamped, that it had not been registered, that the arbitrator had engaged in legal misconduct, and that the award had been rendered after the prescribed time limit. The respondents answered these objections. During the pendency of the matter the parties appear to have reached an additional settlement, and they expressed their willingness to obtain a decree that would reflect the terms they had accepted. By an order dated 18 October 1948 the Court issued a decree based on the award, but modified the amounts in accordance with the compromise. The Court did not entertain the stamp auditor’s objections nor the other contentions raised by Munshi Ram.

The decree altered the sums originally stipulated in the award. Instead of fifty thousand rupees payable to Faqir Chand and forty‑five thousand rupees payable to Banwarilal, the decree fixed the liabilities at forty‑six thousand rupees and forty‑one thousand rupees respectively. The award also contained a provision that income‑tax for the fiscal year 1945‑46 had not yet been assessed and that the three parties would share that liability equally. The decree further stated that, in fact, both the petitioner and the second party numbered two were each entitled to receive an additional four thousand rupees, but that the second party numbered one had deducted that amount from its share in order to meet its proportion of the income‑tax for the year 1945‑46. This shows that, with respect to the monetary amounts, the decree and the award were essentially the same; the only distinction lay in the manner of payment. The schedule of payments was set out as follows: Faqir Chand was to receive fifteen thousand rupees on 11 October 1948, followed by five thousand rupees on each of the dates 11 October 1949, 11 October 1950, 11 October 1951, 11 October 1952 and a further one thousand rupees on 11 October 1953, making a total of forty‑six thousand rupees, of which twenty‑six thousand rupees had already been paid. Banwarilal was to receive fifteen thousand rupees on 11 October 1948, followed by seven thousand five hundred rupees on each of the dates 11 October 1949 through 11 October 1952, and one thousand rupees on 11 October 1953, totalling forty‑one thousand rupees. It was also stipulated that the award would not be operative concerning the haveli, and that the parties would take

There was no further material distinction between the decree and the award, except for the fact that a different method of payment had been prescribed. On 27 December 1949 Banwarilal filed an application seeking execution of the decree for the instalment that had remained unpaid. Munshi Ram responded on 3 January 1950 by filing objections in a pleading that purported to be made under Order 0.47, Rule 1, and Sections 47 and 151 of the Code of Civil Procedure. The principal points of objection were that the order which had converted the award into a rule of the Court after amendment was “void, without jurisdiction, invalid and contrary to law.” The objections were founded on three specific grounds: first, that only the original award could be modified and not a mere copy; second, that the award had not been properly stamped and that, because the deficit stamp duty and the penalty had not been paid, the proceedings were devoid of jurisdiction; and third, that the decree, being an instrument of partition, also required stamping.

The opposite parties entered into issue on these points. The senior Sub‑Judge of Ferozepore, by an order dated 3 March 1951, held that the original document, though lost, could be replaced by a copy and that the decree thus passed was not beyond jurisdiction. Relying on the decision in Dwarka Das v. Krishna Kishore [(1921) I.L.R. 2 Lah. 114], the court observed that the parties were permitted to compromise even after the award had been made, and the senior Sub‑Judge adopted the same view. He further concluded that the award constituted an instrument of partition and that there was a deficiency of stamp duty. After examining whether the decree required stamp duty as an instrument of partition, he affirmed that it indeed did and that neither the award nor the decree could be acted upon until the appropriate stamp duty was paid. Consequently, he dismissed Banwarilal’s execution application, but he added a rider stating that, after the proper stamp was affixed to the decree, a fresh application for execution could be filed by the decree‑holder. Munshi Ram appealed this direction to the High Court of Punjab at Simla (Execution First Appeal No. 121 of 1951). In the meantime Banwarilal made a second application and deposited the requisite stamp papers on 10 March 1951. By order dated 28 March 1951, the executing court seized the decree and forwarded it to the Collector. Banwarilal appealed that order (Execution First Appeal No. 56 of 1951), while Munshi Ram also filed an appeal, which does not appear in the present record. Both appeals were later heard by a learned Single Judge of the High Court, though at different times. The first appeal to be disposed of was Execution First Appeal No. 56 of 1951, in which the judge delivered his decision on 28 December 1951. That appeal concerned Banwarilal’s challenge to the 28 March 1951 order of impounding the decree and sending it to the Collector; Munshi Ram’s similar appeal against the same order had not been heard at that stage. The Single Judge treated Banwarilal’s appeal as a revision and observed that the order in question did not fall within the scope of Section 47 of the Code of Civil Procedure.

The learned Judge observed that the court was justified in not proceeding with the execution application dated 3 March 1951, but once the decree‑holder made an application and the court ordered that the stamp duty be paid, the decree became a properly stamped decree. He noted that the proceedings initiated by the application of 27 December 1949 had concluded on 3 March 1951 and could not be reopened unless a new proper proceeding was taken, which had not occurred. On the other hand, Banwari Lal applied on 10 March for the stamp duty to be allowed, the application was granted, and consequently the decree on the file was no longer unstamped. The judge further explained that had the court carried out its own orders, there would have been no unstamped decree to be impounded on 28 March 1951. The judge then rejected the argument of counsel for Munshi Ram, who contended that the decree was a nullity or could not be executed; the judge held that such a contention did not arise in the appeal that had been treated as a revision, and therefore the order impounding the decree was set aside. Subsequently, the judge heard Execution First Appeal No. 121 of 1951, which Munshi Ram filed against the direction in the order of 3 March 1951. In his judgment dated 16 June 1952, the judge held that the appeal was incompetent and that he would not intervene in a revision. It appears that another appeal by Munshi Ram against the order of 28 March 1951 was also heard and dismissed, although separate reasons were not recorded, likely because that order had already been set aside by the decision rendered on 28 December 1951. Against these orders, Munshi Ram filed two appeals under the Letters Patent: L.P.A. No. 11 of 1952 against the order dated 16 June 1952 in Execution First Appeal No. 121 of 1951, and L.P.A. No. 5 of 1952 against the order in Banwari Lal’s appeal decided on 28 December 1951. Both appeals were dismissed by a common judgment in L.P.A. No. 5 of 1952 dated 26 November 1952, with a separate short order also issued in L.P.A. No. 11 of 1952. From the Divisional Bench’s judgment, it became clear that the contentions presented by the present appellant were not the same as those previously raised, and therefore the court needed to refer to the point now argued, to determine whether it had been raised earlier, in what form, and at which stage.

In the present case the Court observed that under Order 23, rule 3 of the Code of Civil Procedure the Court does not have the power to record a compromise, because an arbitral award may be set aside or altered only in the manner prescribed by the Arbitration Act, and the Act contains no provision for the Court to record a compromise. Order 23, rule 3 is intended for settlement of suits by compromise, but it cannot be extended to arbitral awards. The Arbitration Act, on the other hand, provides only for setting aside or modifying an award under its specific provisions and does not contain any clause permitting a compromise to be recorded after an award. This argument was not raised before the High Court or the trial Court. When the dispute was before the Senior Sub Judge at Ferozepore, the point was conceded on the basis of the Lahore High Court’s decision in Dwarka Das v. Krishna Kishore [(1921) 1 L.R. 2 Lah. 114], which held that the parties were entitled to enter into a compromise affecting the terms of the award and that a decree could be issued on the basis of an award that had been modified by such a compromise. The judgment of the Senior Sub Judge contains the following passage that reflects Munshi Ram’s contention at that stage: “This principle of law is not disputed by the learned counsel for the judgment‑debtor, who, however, argues that it was not open to the parties to enter into a compromise regarding the terms of the award which was never produced in Court.”

When Munshi Ram appealed the decision of the Senior Sub Judge, he did not challenge the legality of recording a compromise or contend that a compromise could not alter the award. The only grounds raised in that appeal were that the award had not been properly stamped, that it was not registered, that secondary evidence of the award could not be admitted, and that a decree could not be based on a copy of the award produced as secondary evidence. A broader ground was also raised that the decree was wholly without jurisdiction because the trial Court lacked inherent jurisdiction to pass such a decree. This broader ground related to the attack on the award itself and not to the later‑raised question of compromise. Consequently, the two orders dated by Kapur J. contain no reference to the present point. When the matter proceeded to the Divisional Bench on appeals under the Letters Patent, the parties again did not raise any controversy concerning a compromise. The sole objection then was that the Court had no authority to order that the copy of the award be stamped, and it was argued that a decree based on an unstamped award was a nullity and could not be executed. The issue of whether a compromise could be recorded was therefore absent from the Divisional Bench judgment, which is the judgment against which the present appeal is filed. Even the application for a certificate of fitness did not mention this point; the order refusing the certificate restated only the grounds previously raised. It was only after a petition for special leave was filed in this Court that the point was introduced, together with eight separate grounds that had not been raised at any earlier stage. On this basis alone the Court considered that the appeal should be dismissed, noting that the decree had never been questioned on this ground because it had been passed with the consent of the parties and could be attacked in execution only on the basis of nullity. The Court therefore decided to address the substantive question that remains unsettled in the High Courts: whether, after an arbitral award has been filed in Court and the parties subsequently enter into a compromise that modifies the award, the Court may pass a decree based on the award as altered by the compromise.

When the petition for special leave was filed in this Court, the applicant introduced the issue that had not been raised earlier, and pleaded eight separate grounds, none of which had been taken up at any previous stage. The Court therefore concluded that, on the basis of this newly raised ground alone, it should refuse to entertain the matter and dismiss the appeal. The decree that had been issued was never contested on this ground because it had been passed with the consent of the parties, and it was only now being described as a nullity. In execution proceedings a decree may be attacked only on the ground that it is a nullity, and the Court found it unnecessary to examine the other objections because the point had already been argued before it. Noting a divergence of opinion among the High Courts on the question of compromises following arbitral awards, the Court considered it appropriate to settle the question of whether, after an arbitral award is filed in Court and the parties subsequently reach a compromise that alters the terms of the award, the Court may pass a decree based on the award as modified by the parties. Counsel for the appellant relied upon the decisions in Rabindranath Chakrabarti v. Jnanendra Mohan Bhaduri [(1931) I.L.R. 58 Cal. 1018], which the Privy Council affirmed in Jnanendra Mohan Bhaduri v. Rabindra Nath Chakravarti [(1932) L.R. 60 I.A. 71], Dooly Chand Srimali v. Mohan Lal Srimali [(1924) I.L.R. 51 Cal. 432], Brindaban Chandra v. Kashi Chandra and Motandas v. Wadhumal [A.I.R. 1948 Sind. 74]. Those authorities held that after an arbitration award has been made, the Court does not have the power to record a compromise that modifies the award nor to pass a decree incorporating the modified award. The respondents, on the other hand, cited the cases of Behari Lal v. Dholan Das [(1910) 5 Indian Cases 994], Dwarka Das v. Krishan Kishore [(1921) I.L.R. 2 Lah. 114], Attar Singh v. Bishan Singh [A.I.R. 1945 Peshawar 41] and Fazal Ahmad v. Enayat Ahmad [A.I.R. 1922 Oudh. 189] in support of their view. The Court also examined the decision in Rabindranath Chakrabarti’s case, which was decided before the present Arbitration Act and was governed by the Arbitration Act of 1899. Under section 15 of that Act the Court was not required to pronounce a judgment or pass a decree because the Act contained no provision for a decree; an award filed in Court, unless set aside, possessed the force of a decree and was directly executable. Consequently, the Court held that it had no general jurisdiction to modify an award, and any decree that altered an award was beyond its jurisdiction and therefore a nullity that the executing Court could refuse to enforce. The Court observed that the basis of the rule was the lack of jurisdiction to issue a decree on the award, and that a decree issued without such jurisdiction must inevitably be a nullity. The same principle was applied under the present Arbitration Act, even though the Court now pronounces a judgment according to the award and a decree follows that judgment.

In the matter before it, the Court explained that once an arbitral award was filed, the Court pronounced a judgment that gave effect to the award, and upon that judgment a decree automatically followed. The Court noted that this approach was applied because the powers of the Court to alter an arbitral award were expressly limited by section 15 of the Arbitration Act. Section 15 provided that the Court could modify or correct an award only in three limited situations: first, when a part of the award dealt with a matter that had not been referred to arbitration, and that part could be separated without affecting the decision on the arbitrated issue; second, when the award was imperfect in form or contained an obvious error that could be corrected without disturbing the substantive decision; or third, when the award contained a clerical mistake or an error caused by an accidental slip or omission. The Court observed that, because of these statutory limits, several earlier decisions had held that the Court could not act beyond the terms of section 15 even if the parties themselves had reached a compromise and wished to modify the award. The Court did not feel it necessary to recount every authority cited by counsel for the appellant, because the essential question had already been examined in detail in the decision of Prafulla Chandra Karmakar v. Panchanan Karmakar, reported in I.L.R. (1946) 1 Cal. 398, where Justice Chakravarti delivered the opinion. In that case, arbitration was referred while a partition suit was pending, and after the award was made the parties entered into a compromise. Justice Chakravarti ruled that the Court could grant the parties leave to withdraw the arbitration submission under section 5 of the Arbitration Act and, by superseding the arbitration agreement under section 12(2)(b), could pass a decree in accordance with the compromise. However, he stressed that as long as the original submission remained in force, the Court’s jurisdiction was suspended; consequently the Court could neither investigate the substance of the compromise nor issue a decree that differed from the award. He further pointed out that sections 30 and 32 of the Act allowed an award to be set aside or varied only in the ways expressly provided therein, and no other mechanism was available for altering the award.

The judge also observed that the precise issue raised in the present case had not been decided in the earlier decision of the same Court reported in Dooly Chand Srimali v. Mohan Lal Srimali [(1924) I.L.R. 51 Cal. 432]. He added that his earlier observations applied to a scenario where the Court intervened in an arbitration that was linked to a pending suit, and he remarked that the situation where an arbitration reference was made without any Court intervention need not be considered for the purpose of the present analysis. Further, the judge emphasized that the Arbitration Act did not list a compromise between the parties as one of the grounds on which an award could be set aside or modified. On this basis, he declined to apply Order 23, Rule 3 of the Code of Civil Procedure, invoking section 41 of the Arbitration Act. He gave three reasons for this refusal: first, section 41 was expressly qualified by the words “Subject to the provisions of the Act,” thereby making it subordinate to sections 15, 23(2) and 32 of the Arbitration Act; second, section 41 was intended to incorporate only the procedural provisions of the Code of Civil Procedure into arbitration proceedings, and Order 23, Rule 3 was a substantive rule that applied only to suits, not to proceedings on awards; and third, any modification of an award permitted by the Act was confined to the limited categories enumerated in section 15, whereas a full compromise of the entire dispute, independent of the award, would constitute a change that went beyond the scope of the award and thus fell outside the Court’s jurisdiction.

In the case before the Court, the judge observed that the Arbitration Act expressly provides that the provisions of the Code of Civil Procedure apply to every proceeding before the Court and to every appeal that arises under the Arbitration Act. Nevertheless, the judge explained that the Court could not apply Order 23, Rule 3 of the Code of Civil Procedure to the proceedings concerning an arbitration award, and he set out three separate reasons for this conclusion. The first reason was that section 41 of the Arbitration Act is headed “Subject to the provisions of the Act,” which means that its operation is limited by sections 15, 23(2) and 32 of the same Act. Consequently, the judge held that section 41 could not override the specific provisions that govern the arbitration process. The second reason advanced was that section 41 only incorporates the procedural parts of the Code of Civil Procedure into proceedings that arise under the Arbitration Act; since Order 23, Rule 3 is applicable solely to suits, it could not be extended to proceedings that concern an award because such proceedings are not classified as suits. The third reason stressed that the nature of the proceedings on an award is confined to the judicial consideration of the award itself, and that modifying the award within the limits permitted by the Arbitration Act is distinct from a “compromise of the entire dispute between the parties apart from and independently of the award.” To modify the award in that broader sense, the judge warned, would amount to stepping outside the award. The same view was reiterated in subsequent cases and was further developed in the decision of Motandas v. Wadhumal, where the Court held that even when the proceedings on an award were entered as a suit, they were not to be treated as a suit for the purpose of applying Order 23, Rule 3. Justice Chakravartti also expressed concern about the anomalous result that would arise if, after a reference to arbitration, the parties were barred from settling the dispute by mutual agreement or from seeking an agreed decree from the Court, thereby forcing them to continue the litigation until a decree based on the award was issued and only then consider a compromise. He described such a consequence as extraordinary, especially since no public‑policy considerations were at stake, but noted that if the Arbitration Act imposed such a restriction, it had to be observed. Accordingly, he suggested that a compromise, although not listed among the grounds for superseding a reference or setting aside an award, could be regarded as a sufficient cause for revoking the submission under section 5 of the Arbitration Act. In contrast, the Lahore High Court, on numerous occasions, has held that a compromise is permissible after the award has been made, and that the Court may pass a decree under Order 23, Rule 3 of the Code of Civil Procedure to modify the award in accordance with the parties’ settlement; the judgments supporting that position have already been cited above.

No special reasons, however, were given in those cases, and each of them was based on the decision in Behari Lal v. Dholan Das [(1910) 5 Indian Cases 994]. In the judgment of Dwarka Das v. Krishan Kishore [(1921) I.L.R. 2 Lah. 114] at page 124, the Court recorded that Mr Tekchand argued that the parties had no power to modify the award and that the Court could pass a decree only on the award as given by the arbitrator. The Court, however, observed that if the original award was valid as to Jai Gopal, it could not be considered invalid merely because it had been somewhat modified in his favour. The Court also referred to the earlier authority of Behari Lal v. Dholan Das [(1910) 5 Indian Cases 994], where Rattigan, J., the then Chief Justice of this Court, held that the parties are competent to compromise the proceedings under section 525 of the Civil Procedure Code by altering, amending or adding to the award. An additional reason was supplied in Attar Singh v. Bishan Singh [A.I.R. 1945 Peshawar 41]; the Court noted that while the Arbitration Act sets out the powers of the Court to interfere with awards, it does not prohibit a party from withdrawing from a claim. In that case, after the award, one party offered to be bound by the special oath of the other party; once the oath was taken, a decree was passed. In our opinion, decisions made under the Arbitration Act of 1899 do not provide satisfactory guidance on this point. We noted that under that Act an arbitral award itself functioned as an executable decree and the Court was not required to pronounce a separate judgment or pass an additional decree. Consequently, if the Court originally lacked the power to pass a decree, it could not later acquire the power to modify an award by decree even with the consent of the parties. The question therefore arose whether, now that the Court does pass a decree, it may disregard a compromise reached by the parties and instead issue a decree contrary to their intention. The Privy Council, in Lala Khunni Lal v. Gobind Krishna Narain [(1911) L.R. 38 I.A. 87], endorsed the decision of the High Court of the North West Provinces reported in Lalla Oudh Behari Lall v. Mewa Koonwer [(1868) 3 Agra H.C.R. 82, 84] and held that courts have a duty to uphold and give full effect to a compromise. The Privy Council further observed that courts have, on occasion, allowed compromises that go beyond the subject‑matter of the original suits. In Hemanta Kumari Debi v. Midnapur Zimindari Company [(1919) L.R. 46 I.A. 240, 246], the Privy Council stated that a perfectly proper and effective method of carrying out the terms of Order 23 Rule 3 would be to cause the decree to recite the whole of the agreement and then conclude with an order that addresses the part of the agreement that is the subject of the litigation.

The decree that was issued in the present matter incorporated the parties’ agreement in its entirety. The Court could have chosen either to set out the whole agreement within the operative part of the decree, or to annex the agreement as a separate schedule to the decree. Whichever method was adopted, the operative portion of the decree would have been limited strictly to the subject‑matter that was actually before the Court, while the decree as a whole would still contain the complete agreement. In the case before us, the decree was drafted in exactly that manner, embracing the full agreement. Although the decree could not be executed beyond the lands that formed the subject of the suit, this limitation does not preclude the decree from being admitted as evidence of the terms of the agreement.

The Court acknowledged that the Privy Council decision has generated divergent views in India, yet it still provides a useful guide for resolving the present difficulty and for avoiding the anomalies identified by Justice Chakravartti. Once an arbitral award has been rendered, the parties may challenge it only in the ways prescribed by the Arbitration Act. The statutory powers granted to the Court are confined to accepting an award when there is no objection, to issuing a decree in accordance with that award, or to superseding, revoking, modifying, or remitting the award as authorized by the Act. The Act, however, does not forbid the parties from ending their dispute by another means. If the parties are dissatisfied with the award and wish to replace it with a compromise that includes matters beyond the original dispute but which are inseparably linked, the Court may supersede the award and allow the parties to pursue their agreement under the law outside the Arbitration Act. In such a situation, the new compromise may constitute a strong basis for superseding the reference and consequently revoking the award, as Justice Chakravartti observed. Conversely, where the parties merely adjust the effect of the award without discarding it, the unaltered portion of the award remains in force, continues to bind the parties, and cannot be revoked. In those circumstances, the Court may follow one of the two approaches outlined by the Privy Council in Hemanta Kumari Debi’s case. If the entire subject‑matter of the compromise falls within the scope of the reference, the Court may incorporate the modified award into the operative part of the decree. If, however, part of the settlement lies outside the original reference, the Court may limit the operative part of the decree to the accepted award and place the remaining, severable terms of the settlement in a schedule to the decree. The portion included in the operative part would be enforceable as a decree, whereas the agreement contained in the schedule would be enforceable as a contract, with the decree serving as evidence of its terms but not as a decree‑enforceable judgment.

The Court explained that the authority to record an agreement and to incorporate it into a decree—whether by placing it in the operative portion or by attaching it as a schedule—arises from the provisions of the Code of Civil Procedure, namely section 141, and from section 41 of the Arbitration Act. It further pointed out that when a reference is made without the intervention of the Court, the Court does not possess a general jurisdiction over the subject‑matter, unlike a reference that arises in a pending suit. In the former situation, if the submission is superseded, the Court has nothing further to do; in the latter situation, the Court must continue to conduct the suit before it and must give effect to the compromise in accordance with law. In the present matter, the decree that gave effect to the award was properly framed because the award itself provided for adjustment of income‑tax and directed that the assessed tax be borne equally by the three parties. The compromise merely gave effect to that direction by reducing the amounts payable by the two respondents by Rs 4,000 each. The compromise did not go beyond the award; rather, it was a direct consequence of the award. It quantified the income‑tax that the award had indicated would be quantified at a later stage. The amounts remained the same as originally payable, less the tax, and the only difference lay in the mode of payment: instead of three instalments per quarter, the sum was to be paid in a greater number of instalments on a yearly basis. The Court held that the parties were free to agree on this matter and that the Court could substitute their agreement into the operative part of the decree. Nothing in the Arbitration Act prevents the Court from taking note of an agreement of this character, and consequently the decree cannot be characterized as a nullity on that ground. Accordingly, the appeal failed and was dismissed with costs, and the appeal was dismissed.