IMPORTANT POINT
Unless it is clearly established that such accord or compromise has been entered into between the parties, the powers under Order XXIII Rule 3 CPC could not be exercised.

Headnote:Code of Civil Procedure, 1908-Order 23, Rule 3-Compromise of suit-Arbitration award on money claim-Award made rule of Court-Respondent withholding part of amount due under decree allegedly due to it in two pending suits against appellant-Applications under Order 23, Rule 3 for recording satisfaction of suit claims-Single judge allowing application-Division Bench reversing judgment holding that whether there was a settlement or not between parties is a matter to be decided as an issue in suit and award arbitration per se cannot be considered as having resulted in settlement of suit claim-Justified on facts-Power under Order 23, Rule 3 could not be exercised unless it is established accord or compromise has been reached between parties.
Order 23, Rule 3 is a provision for making a decree on any lawful agreement or compromise between the parties during the pendency of the suit by which claim is satisfied or adjusted. The agreement, compromise or satisfaction may relate to the whole of the suit or part of the suit or it may also include matters beyond the subject matter of the suit. But Rule 3 clearly envisages a decree being passed in respect of part of subject matter on a compromise. Whether in fact there has been compromise or adjustment of the suit claim or any part thereof is itself put in dispute in this case. Unless it is clearly established that such accord or compromise has been entered into between the parties, the powers under Order XXIII Rule 3 CPC could not be exercised. The respondent s case is that the claim made in the suit were never before the arbitrators in any form and even the figures mentioned in the reconciliation statement also do not pertain to the suit claim and the scope of reference to the arbitrators does not enable them to make an award on that aspect of the matter. Those objections have to be dealt with appropriately on full trial. That is the course now adopted by the Division Bench of the High Court. Uninfluenced by the views of the Division Bench we have examined the correctness of the order of the learned Single Judge made in the two suits on applications filed under Order XIII Rule 3 CPC and we are clearly of the opinion that the order of the learned Single Judge cannot be sustained. The Division Bench of the High Court has not shut out the case put forth by the appellants but only relegated the parties to work out their respective rights in an appropriate manner in the course of a suit. (Paras 7 and 8)

JUDGMENT

Rajendra Babu, J.-In respect of a dispute arising out of a money claim made by the appellants against respondent the matter was referred to arbitration. The reference was entered into in January 1983. The arbitrators published their award on 15.2.1986 which, after setting out certain matters which were preliminary in nature, inter alia, stated as under :-

"We J.C. Shah and P.S. Subramaniam, Arbitrators appointed by the parties do hereby award and order that the Company (Indian Cements Ltd.) do pay to Star Construction and Transport Company Rs. 65,00,000 (in words Rupees Sixty Five Lacs) in full and final settlement of the claim of Star Construction and Transport Company with interest at the rate of 9 (nine) per cent per annum from the date hereof; and we further award and declare that all the disputes referred to by the parties under the claim made by the Star Construction and Transport Company and denied by the Indian Cements Ltd. are finally disposed of by this Award and that no part of the claim remains undetermined; and we further award and order that each party to bear its respective cost of and incidental to the arbitration proceeding including its share of the amount of remuneration paid by it to the Arbitrators.

Made this 15th day of February, 1986 at Bombay, in token whereof the Arbitrators have subscribed their signatures which are duly attested."

The award was filed in court on 15.4.1986 in O.P. No. 174 of 1986 under Section 14(2) of the Arbitration Act, 1940 (hereinafter referred to as the Act ). A decree was passed in terms of the award under Section 17(1) of the Act. Thereafter, the respondent by its letter dated 8.8.1986 paid a sum of Rs. 49 lacs while withholding a sum of Rs. 16 lacs which is stated to be money claims due to it in Suit No. C.S. 246 of 1984 and C.S. 315 of 1984, although this was disputed by the appellants in their letter dated 5.8.1986. It was stated therein that a Reconciliation of Account had been furnished to the arbitrators showing an amount of about Rs. 16 lacs claimed to be due from them in respect of which they had instituted the said two suits. The respondent contended that the issues before the arbitrators by way of several claims recorded in the award which the arbitrators had settled did not take into account moneys received by the appellants from it as advance and moneys paid by them on their behalf and which stand to their credit and accordingly credit should be given thereto. In the two pending suits applications were filed under Order XXIII, Rule 3 of the Code of Civil Procedure to record the satisfaction of the suit claim and dismiss the suit with other incidental reliefs. The learned single Judge of the High Court who was dealing with the suits passed a judgment on 17.4.1989 allowing the applications by holding that it was at the instance of the respondent that the claim in the suit was brought in before the arbitrators on 8.2.1986 and elected to claim this set off immediately under the award to be pronounced which was not opposed by the appellants and, therefore, under these circumstances, instead of an award of Rs. 81 lacs, an award of Rs. 65 lacs was made. On appeal the Division Bench of the High Court reversed the judgment of the learned Single Judge by holding that whether there was a settlement or not between the parties is a matter to be decided as an issue in the suit and that the award per se cannot be considered as having resulted in a settlement of suit claims.

2. The principal objection raised on behalf of the respondent is that the two applications filed under Order XXIII Rule 3 C.P.C. could not be maintained. It was also disputed that the amounts claimed in the suits related to the agreement dated 27.7.1979 which was not the subject matter of arbitration. It was contended that the subject matter of the suits could not be the subject matter of arbitration without further submission by the parties requesting the arbitrators to include the said matter and f

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2001 Supreme(SC) 273

IMPORTANT POINTUnless it is clearly established that such accord or compromise has been entered into between the parties, the powers under Order XXIII Rule 3 CPC could not be exercised.

Cases Referred (1)

IMPORTANT POINT
Unless it is clearly established that such accord or compromise has been entered into between the parties, the powers under Order XXIII Rule 3 CPC could not be exercised.