As per case facts, Plaintiff Haridas bought property in auction, but Defendants later forcibly occupied it. Haridas filed a Civil Suit (1982 Suit) for possession and mesne profits. While this ...
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2026 INSC 591 1
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. OF 2026
(Arising out of SLP (Civil) No. 18146 OF 2025)
ASHOK AND ORS. …APPELLANTS
VERSUS
PADAM CHAND AND ORS. ...RESPONDENT S
J U D G M E N T
J.K. MAHESHWARI , J.
1. Leave Granted.
2. The Appellants herein assail the judgment and final
order dated 30.01.2025 passed by the High Court of
Madhya Pradesh, Bench at Gwalior (hereinafter, ‘High
Court’), in First Appeal No. 252/2010. By the impugned
judgment, the High Court affirmed the decree of the Xth
REPORTABLE
2
Additional District Judge, Gwalior (hereinafter, ‘Trial
Court’), dated 22.07.2010, which dismissed the
Appellants’ suit for possession and mesne profits mainly
on the premise that an earlier arbitration award in relation
to the same suit property had attained finality.
3. For the sake of convenience, the parties shall
hereinafter be referred to in accordance with their status
before the Trial Court, i.e., the Appellants as the Plaintiffs
and the Respondents as the Defendants.
FACTUAL BACKDROP
4. It is the case of the Plaintiffs that the suit property,
a three-storey commercial-cum-residential building
situated at Sarafa Bazar, Lashkar, Gwalior was sold to one
Pandit Krishna Biharilal by Smt. Patto vide registered sale
deed date d. 24.07.1941. By a Mortgage Deed dated
19.10.1948, Krishna Biharilal mortgaged the suit property
in favour of one Baburao Suryavanshi in lieu of certain
loan. On the failure of Krishna Biharilal to repay the loan,
the suit property was put up for auction sale in Execution
Case No. 29/56-1963 in the Court of the Second
Additional District Judge, Gwalior
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5. On 07.04.1964, the original Plaintiff, i.e., Haridas
emerged as the successful bidder and purchased the suit
property. As per the recitals in the plaint, the auction was
confirmed on 16.08.1973, and a Sale Certificate was
issued on 30.08.1973. As the building was occupied by
various tenants, symbolic possession was handed over to
Haridas on 22.09.1973.
6. As the suit property was in possession of various
tenant, Haridas instituted multiple eviction proceedings.
In one such proceeding i.e., Eviction Suit No. 274/1975
which was instituted against one Harikishan and
Munnalal, it came to light through the written statement
of a tenant that Defendant No. 1 had forcefully occupied
two rooms, two halls and a courtyard in the rear side of
the ground floor, that was otherwise in possession of
Harikishan and Munnalal. Thereafter, the Defendants, in
connivance with the tenants adopted wrongful means
including assault to keep the possession of the said
portion of the suit property and also started making claims
regarding ownership of upper floors of the suit property.
The said instance of assault has been attempted to be
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substantiated in the present Appeal by producing a
complaint that was filed against Defendants on
15.07.1981 under Sections 147, 148, 149 and 323 read
with 34 of Indian Penal Code (hereinafter, ‘IPC’).
Consequently, Plaintiff Haridas filed Civil Suit No.
3A/1982
1 (hereinafter, ‘1982 Suit’) seeking recovery of
physical possession and mesne profits. Since much has
been argued around identification of the suit property, it
is to be noted that as per the plaint, the suit property is
identified as having three passageways on three sides of
the courtyard, inside one passageway there is one room
and one square, and having three storey.
7. During the pendency of the Civil Suit No. 3A/1982,
the Plaintiffs and the Defendants referred the dispute for
arbitration vide referral letters dated 28.02.1983,
10.03.1983 and 01.08.1983 wherein the Plaintiffs were
party no. 1 and Defendants were party no. 2. This referral
culminated in award dated 15.09.1983 whereby the
operative part of the award read as follows –
“We all Panch together read Plaints of both the parties and
discussed with concerned persons. Understood intentions of
1
later renumbered as CS 34A/2010
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both the parties, made valuation of house through brokers
persons of market, since both the parties has in written as
well as oral has assured that they will accept the decision
of Panchayat with goodwill, Panchayat expects from both
the parties that for maintaining decorum of Panchayat
Panch and their relations they will accept this decision
which is expected and believed.
(1) Both the Parties will end civil and criminal litigations
pending, against each other.
(2) If Party No. 2 wants registry in four parts then Party No.
1 Shri Haridas will do.
(3) Remaining house tax etc related to the house and registry
expenses will be borne by Party No. 2.
(4) Whatever rent till date is of the house, Party No. 2 will
have the right to receive the same. The amount which is
deposited in court of rent, Party No. 2 will have the right to
receive the same and Party No. 1 will facilitate.
(5) Party No. 2 will give 2,75,000/- Two Lakhs Seventy Five
Thousand only to the Party No. 1 i.e. Shri Haridas Etc, and
Party No. 1 Sri Haridas ji will do registered sale deed in the
name of Party No. 2 Shri Padamchand ji etc.”
8. On 23.12.1983, Defendants filed Case No. 43A of
1984 (hereinafter, ‘1984 Proceedings’) before the Trial
Court praying to direct the umpire to present the award as
well as the related documents to the Court, the arbitral
award be made the Rule of the Court and on its basis a
decree be passed and, expenses for these proceedings be
provided.
9. In the interregnum, the Defendants had filed an
application under Section 34 of the Arbitration Act, 1940
(hereinafter, ‘1940 Act’) in 1982 Suit seeking to stay the
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said proceedings. The Trial Court dismissed the said
application on 10.02.1984 on the grounds that the date of
alleged agreement between the parties was not stated in
the application and it was not clear whether the alleged
agreement was in writing. Aggrieved by rejection of the
said application, Defendants filed Civil Revision No. 412 of
1984 before the High Court which was dismissed
summarily. On 23.04.1988, the Trial Court framed 9
issues in the 1982 Suit. Subsequently, original Defendant
No. 2-4 in the 1982 Suit moved an application therein
seeking to amend their Written Statements and
incorporate para 18 and 19 to state that during pendency
of the 1984 Proceedings, the 1982 Suit be stayed. This
application was allowed by the Trial Court vide order dated
08.03.1990. Aggrieved thereof, the Plaintiffs filed Civil
Revision No. 105 of 1990 before the High Court. High
Court disposed of the said revision vide order dated
10.10.1990 with following directions – (a) the Trial Court
shall proceed to try the 1982 Suit but shall not pronounce
final judgment till the decision of the 1984 Proceedings
and; (b) the hearing of the 1984 Proceedings shall be
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expedited. Subsequently, on 06.11.1990, the Trial Court
framed issue nos. 10 and 11.
10. Later, Plaintiffs filed an objection application in the
1984 Proceedings under section 47 of the 1940 Act. Vide
order dated 19.12.1990, the Trial Court dismissed the said
application on the grounds that, firstly, the subject
matters of the 1982 Suit and 1984 Proceedings are
different and in fact, only a portion of the subject matter
of the 1984 Proceedings is the subject matter of the 1982
Suit. Secondly, in the 1984 Proceedings, apart from
Haridas, who is the Plaintiff in the 1982 Suit, there are
other parties as well, hence, a reference of the dispute for
arbitration without leave of the Court is not fatal as such.
11. Aggrieved against the dismissal of the objection
application under Section 47 of the 1940 Act, the Plaintiffs
again knocked the doors of the High Court by filing Civil
Revision No. 43 of 1991. High Court vide order dated
24.02.1992 disposed of the revision with following
directions:
“After hearing (sic) Counsel at some length, to take care of
the grievances made on both sides, in the interest of justice,
the following directions are made to prevent protraction in
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litigation. Accordingly, the impugned order dated 19-12-
1990, passed by the Court below, in Civil Suit Ho. 43-A of
1984, stands modified in terms of the directions here in after
made:
(1) In the aforesaid suit, application was filed on 21-12-1983
by the non-petitioners for making the award dated 15-9-
1983 (sic), rule of the Court. It is submitted that in the
application which was filed u/s 47 proviso of the Arbitration
Act, 1940, in regard to that award, it has been contended
that the arbitration agreement was void, being procured
through coercion, accordingly, that objection shall be
decided by the trial Court in terms of the provision (sic) 30
(c) of the Act. It shall be open to the parties to adduce
evidence and, indeed, it shall to competent for the trial Court
to frame specific issues for deciding finally the application
of the non-petitioner dated 21-12-1983 in terms of the order
to be passed u/s 30 (c) of the Act, within three months, the
final order of the court shall be passed in terms of S.30(c) in
civil suit no. 43-1/1984.
(2) Between the same parties, in the same court, is pending
trial Civil Suit No. 3-A/1982. It is submitted that evidence is
being recorded in that suit. However, trial of that suit shall
be kept in abeyance for a period of six months and in the
face of the decision made u/s 30(c), aforesaid, going in
favour of the Plaintiff-Petitioner, the proceedings for trial of
the suit would continue and from the stage left and the suit
shall be decided in accordance with law without taking into
consideration anything that transpired in the proceedings in
Civil Suit No. 43-A/1984. However, should the plaintiff-
petitioner fail in the other proceedings, in Civil Suit No. 43-
A/1984, it would be open to him to press the objection made
under the proviso to s. 47 that the compromise which had
been entered could be considered only in terms of Order 23
Rule 1 C.P.C. Eventually therefore, the order passed in Civil
Suit No - 43/1984 u/s 30(c) of the Act would be subject
finally to the order to be passed on the pending application
preferred u/s 47 proviso disposed of by the impugned order
which shall be dealt with afresh in the pending suit.
12. Thereafter, the original Plaintiff filed review petition
bearing MCC No. 155 of 1992 against the order dated
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24.02.1992 in Civil Revision No. 34 of 1991 on the ground
that he had recently undergone some operation and is
gradually losing his voice, hence he wanted to be cross-
examined on the next date. High Court allowed the said
prayer vide order dated 01.05.1992. In the meanwhile,
Plaintiffs also filed an objection under Section 30 of the
1940 Act in the 1984 Proceedings on the grounds that the
so-called arbitration agreement is a result of coercion and
the so-called reference without leave of the Trial Court is
illegal.
13. Subsequently, the Trial Court, vide judgement
dated 02.08.2000 decreed the 1984 Proceedings while also
disposing of the objection application filed by the Plaintiff
under Sections 30(c) of the 1940 Act and made the award
a Rule of the Court primarily on the grounds that – (i) the
Defendants were not aware of the pendency of the 1982
Suit and even if it is assumed that they were aware,
referring the dispute for arbitration while a suit is pending
is not illegal as the subject matter of both the suits are
different; (ii) prior consent of the Plaintiff was voluntary
and award obtained subsequently is not illegal and; (iii)
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the award was communicated to the Plaintiff within
limitation period and hence, it is not illegal.
14. Aggrieved against the decree passed in the 1984
Proceedings, Plaintiffs preferred Miscellaneous Appeal No.
674 of 2000 before the High Court.
15. Simultaneously, on 08.10.2001, Plaintiffs also
moved an application in the 1982 Suit under Order 6 Rule
17 and Order 14 Rule 5 of Code of Civil Procedure, 1908
(hereinafter, ‘CPC’) seeking amendment of the pleading
and framing of additional issues that seems to have been
necessitated by the order passed in 1984 Proceedings.
Trial Court dismissed the said application vide order dated
20.02.2002, with a finding that these applications have
been moved with an intent to delay the proceedings and
that proposed amendments and additional issues are not
necessary for disposal of the 1982 Suit. It is forthcoming
from the records that against rejection of these
application, Plaintiffs filed Civil Revision No. 267 of 2002
before the High Court but was withdrawn with liberty to
seek any appropriate relief before the appropriate forum.
Nonetheless, Plaintiffs again approached the High Court
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by way of Writ Petition No. 2058 of 2005 seeking to
challenge the order rejecting application under Order 6
Rule 17 of CPC. High Court dismissed the said writ
petition observing that since the Plaintiffs was to raise
pure questions of law by way of amendment, same can be
raised at the stage of final arguments even without
amendment.
16. In the due course thereafter, Miscellaneous Appeal
No. 674 of 2000 preferred by the Plaintiffs challenging the
order of the Trial Court in the 1984 Proceedings came to
dismissed by the High Court vide order dated 05.04.2006
with following observations:
“10. This Court with the consent of the parties modified the
order dated 19.12.1996 passed in C.S. No.43A/84. From
perusal of para 2 of the order dated 24.2.92, it is very clear
and specific that the appellants never raised any objection
at the time of passing of the order dated 24.2.92 nor the
appellants challenged the order passed by this Court on
24.2.92. This Court In this order dated 24.2.92 very
specifically directed that if appellants, who were plaintiffs
in C.S. No. 3A/82, fall in the proceedings in C.S. No.43A/84,
it would be open to them to press the objection made under
the Proviso to Section 47 of the Act that the compromise
which had been entered could be considered only in terms
of the Order 23 Rule I. C.P.C. All the orders passed in C.S.
No.43-A/84 would be subject to finality to the order to be
passed on the pending application preferred under Section
47 Proviso disposed of by the impugned order which shall
be dealt with afresh in the pending suit. Thus, from the
aforesaid finding of this Court, it is clear that after the order
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dated 24.2.1992 the pending application under Section 47
shall be dealt with afresh in the pending suit, i.e., in C.S.
No.3A/82 (sic). Thus, if the petitioner has any grievance in
respect of the impugned order, the said grievance of the
petitioner can be decided afresh in the pending suit. Now the
petitioner is free to raise the objection made under the
proviso to section 47 of the Arbitration Act, 1940, afresh in
the pending Civil Suit No. 3A/82. Now at this stage, he
cannot raise objection under Section 47 of the Arbitration Act
by filing this appeal under Section 39 of the Act. It is well
settled that, ordinarily it is not open to the appellate Court
to substitute its own opinion unless it is shown that the
Court below has acted unreasonably or capriciously or has
not adopted the general approach in the matter. Learned
counsel for the appellants has failed to show any material
for coming to a different conclusion, he also could not make
out a case for interference and could not show that how the
judgment of the Court below making the judgment as a rule
of the Court is unjustifiable. Thus. I do not find any merit or
substance in the appeal filed by the appellants and no case
is made out by the appellants for Interference by this Court
in this appeal in the reasonings adopted by the Court below
in making the award a rule of the Court.
11. In the result, the appeal filed by the appellants is
accordingly dismissed with no order as to costs.”
Subsequently, Special Leave Petition No. 12710 of 2006
filled by the Plaintiffs against the dismissal of the
Miscellaneous Appeal No. 674 of 2000 was also dismissed
by a division bench of this Court vide order dated
14.08.2006.
17. After dismissal of Miscellaneous Appeal No. 674 of
2000, the Defendants filed Execution Petition No.
43A/84/2001 in the 1984 Proceedings. The Plaintiffs filed
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an objection as well as an application seeking stay of
execution thereto, which came to be dismissed by the Trial
Court vide order dated 11.01.2008. Aggrieved thereby, the
Plaintiffs instituted Writ Petition No. 1518 of 2009, which
came to be dismissed by the High Court on 12.08.2008.
18. Plaintiffs again moved an application on 28.08.2008
under Order 6 Rule 17 of CPC seeking amendment of
plaint in the 1982 Suit, specifically, insertion of Para 8(A)
pertaining to objections regarding the arbitral award. Trial
Court allowed the amendment application on 04.11.2008
while noting the necessity of such amendment in light of
the liberty granted by the High Court while dismissing
Miscellaneous Appeal No. 674 of 2000. Consequently, Trial
Court also allowed the application of Defendants seeking
to amend their Written Statements in the 1982 Suit. In the
meanwhile, vide order dated 17.11.2008, the Trial Court
granted injunction in favour of the Plaintiffs while
adjudicating the application under Order 39 Rules 1 and
2 of CPC which came to be quashed by the High Court on
20.03.2009 in Miscellaneous Appeal No. 1363 of 2008 filed
by the Defendants.
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19. Plaintiffs again made an application before the
Executing Court seeking stay of the proceedings which
was rejected as per order sheet dated 16.04.2009. Said
rejection was challenged before the High Court in Writ
Petition No. 2253 of 2009, only to be dismissed vide order
dated 21.10.2009.
20. The Trial Court allowed another amendment to the
plaint in the 1982 Suit, whereby Para 8(B) was sought to
be added pertaining to a sale deed dated 03.11.2009
executed by the Plaintiffs in the favour of the Defendants,
which was subject to final outcome of the 1982 Suit.
21. This long-drawn litigation before the Trial Court in
1982 Suit came to its conclusion on 22.07.2010 whereby
the Trial Court dismissed the 1982 Suit. Findings of the
Trial Court can be summarized as follows:
a) Plaintiff purchased the suit property through
court auction and obtained symbolic possession as
well.
b) Defendants failed to prove their possession for
last 40 years over the suit property. Moreover, the
15
ancestor of the Defendants i.e., Lakhmichand, was a
tenant in the suit property.
c) No agreement proved between the parties that
the property would be transferred in the name of the
ancestor of the Defendants in lieu of amount of court
auction being paid to the original Plaintiff.
d) The Defendants were not aware of pendency of
the 1982 Suit on the date when dispute was referred
to the arbitrator and in fact the Plaintiffs could have
taken the leave of the Trial Court as per mandate of
Section 21 of the 1940 Act. Settlement/arbitration
proceedings concluded between the parties is not
illegal.
e) Subject matter of the 1982 Suit and the
arbitral proceedings is different.
f) Both the parties directed to bear their
respective costs.
22. Aggrieved by the decision of the Trial Court,
Plaintiffs preferred First Appeal No. 252 of 2010 before the
High Court. During pendency of the Appeal, the High
16
Court, vide order dated 26.05.2017, directed the parties to
maintain status-quo regarding the suit property. On
08.01.2019, the application filed by the Defendants
seeking vacation of the status quo order was dismissed by
the High Court. Subsequently, on 21.01.2025, the
Plaintiffs moved an IA No. 599 of 2025 before the High
Court seeking production of following additional
documents – (a) complaint dated 13.07.1981 made by the
original Plaintiff to the Superintendent of Police that the
Defendants are pressuring and assaulting him to sell the
suit property, (b) private complaint no. 4732/82 made by
the original Plaintiff before the CJM, Gwalior, (c) copy of
notice dated 13.10.1981 issued against original Plaintiff in
Case No. 1000/81 which was registered by the Defendant
in connivance with the police, (d) judgement in Criminal
Case no. 2420 of 1982 arising out of FIR lodged by the
Defendants against the original Plaintiff whereby he was
acquitted, (e) complaint dated 03.08.1983 made by the
original Plaintiff alleging his abduction by the Defendants
and having obtained signature of the original Plaintiff on a
stamp paper, (f) Case no. 165/1984 under Section 111 of
17
Criminal Procedure Code, 1973 filed by Defendants
against the original Plaintiff, (g) copy of complaint made by
Plaintiffs dated 20.12.1983 to the Hon’ble Chief Justice of
the High Court and, (h) reminder letter dated 24.02.1984
when no action was taken on complaint dated 20.12.1983.
23. Vide impugned order dated 30.01.2025, the High
Court dismissed the First Appeal No. 252 of 2010 along
with the IA No. 599 of 2025, primarily on the following
grounds:
a) Plaintiff did not produce any proper
explanation that why the additional documents were
not produced before the Trial Court even when the
original Plaintiff categorically deposed in his cross-
examination that he possess all these documents.
b) It is not open for the Appellate Court to
substitute the findings of the Trial Court, unless
such findings are unreasoned or capricious.
c) Plaintiffs have not pleaded specifically in the
plaint regarding forgery, coercion or
misrepresentation and thus, such contention fall in
the teeth of Order 6 Rule 4 of CPC.
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d) Subject matter of the 1982 Suit and the
arbitral proceedings is different and hence, Section
21 of the 1940 Act is not applicable.
24. Plaintiffs have challenged the impugned order by
way of the present appeal, with a hope to conclude this
long-drawn litigation.
ARGUMENTS ADVANCED
25. Learned Senior Counsel Mr. Dama Seshadri Naidu,
appearing for the Plaintiffs submitted that:
a) The 1940 Act contemplates three classes of
arbitration: (i) Chapter II i.e., arbitration without
intervention of the Court, which presupposes a pre -
existing arbitration agreement; (ii) Chapter III i.e.,
arbitration with intervention of the Court where there is
no suit pending (Section 20), which also presupposes a
pre-existing arbitration agreement; and (iii) Chapter IV i.e.,
arbitration in suits (Section 21), which alone applies
where, at the time of reference, a suit is pending.
b) Even if any of the alleged referral letters are treated
as a valid arbitration agreement under Section 2(a) of the
19
1940 Act, none is pre-existing in relation to the 1982 Act.
The arbitration cannot fall within Chapters II or III. It
must, obviously then, fall within Chapter IV; and Section
21 mandates an order of reference by the Court, which was
admittedly never obtained.
c) The Defendants had knowledge of the 1982 Suit
prior to the Award. By the order sheets of the Trial Court,
summons were sent to the Defendants over fifteen times;
substituted service by affixation was ordered on
18.10.1982; and service by paper-publication was ordered
on 06.08.1983; all prior to the Award dated 15.09.1983.
d) The subject matter of the 1982 Suit and the
arbitration was the same. The Trial Court, by its order
dated 08.03.1990, accepted this position on an application
filed by the Defendants themselves and stayed 1982 Suit
on that very ground.
e) The Award could only be acted upon under the
proviso to Section 47, which requires the post-award
consent of all the parties for treating the award as a
compromise under Order XXIII Rule 3 CPC. The Plaintiffs
have, throughout, opposed the Award.
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26. Per Contra, learned Senior counsel Mr. NK Mody,
and learned counsel Mr. Divyakant Lahoti, appearing for
the Defendants made following contentions:
a) Section 21 of the 1940 Act is not applicable to the
facts of the present case. The Defendants had no
knowledge of the pendency of the 1982 Suit at the time of
the reference to arbitration as they were not served until
21.09.1983, the day on which they entered appearance for
the first time.
b) The Plaintiffs failed to file any application under the
proviso to Section 47 of the 1940 Act in the 1982 Suit
despite repeated opportunities. The order of the High
Court dated 24.02.1992 expressly required them to do so,
and so did the order dated 05.04.2006. The Trial Court, in
paragraph 23 of the impugned judgment, has rightly held
that no application was filed and that the proviso to
Section 47 cannot be invoked.
c) The parties to the arbitration proceedings and the
1982 Suit are not the same. The Award was made between
(i) Haridas, his seven brothers Babulal, Bhagwandas,
Radhelal, Prakashchand, Ramswaroop, Chotelal and
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Mahendra Kumar (s/o Motilal), all having authorised
Haridas to act on their behalf, and (ii) Padam Chand,
Satish Kumar, Rakesh Kumar, Mukesh Kumar and
Umesh Kumar, all five having authorised Padam Chand to
act on their behalf. On the other hand, the 1982 Suit was
between Haridas and the four Padam Chand brothers.
d) I.A. No. 599 of 2025 is rightly rejected by the High
Court. The documents sought to be brought on re cord
were available with the original Plaintiff during his cross-
examination and were neither produced nor proved at the
trial. They cannot be produced at the appellate stage after
a delay of over four decades.
ANALYSIS
27. Having heard the learned counsel for both the
parties and having perused the records, we find that the
following questions arise for consideration in the present
appeal:
(1) Whether the subject matter of the 1982 Suit and the
arbitral proceedings were identical or substantially
the same, and whether the courts below erred in
holding otherwise?
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(2) Whether the Defendants had knowledge of the
pendency of the 1982 Suit at the time of reference to
arbitration, and what legal consequence flows from
such knowledge upon the validity of the Award as
pleaded in the 1982 Suit?
(3) Whether the arbitral proceedings culminating in the
Award dated 15.09.1983 fell within the ambit of
Chapter IV of the 1940 Act, and consequently,
whether the absence of a formal order of reference by
the Trial Court under Section 21 of the 1940 Act
renders the Award legally ineffective with respect to
the Plaintiffs’ suit for possession and mesne profits
in the 1982 Suit?
(4) Whether, the arbitral Award could have been used to
non-suit the Plaintiffs in the 1982 Suit, in the
absence of post-award consent of all parties as
required under the proviso to Section 47 of the 1940
Act?
(5) Whether the High Court, while affirming the
dismissal of the 1982 Suit, fell into error by treating
the Award as having attained finality so as to
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preclude an independent examination of its validity
in relation to the 1982 Suit, particularly in light of
the liberty expressly reserved to the Plaintiffs by the
High Court’s own orders dated 24.02.1992 and
05.04.2006?
(6) Whether the 1982 Suit, filed by the Plaintiffs seeking
possession and mesne profits , deserves to be
decreed?
28. For sake of convenience, all these issues are being
examined simultaneously and summarized separately in
the latter part of the judgment.
29. Before proceeding to examine the rival contentions,
it is necessary to briefly advert to the statutory scheme of
the Arbitration Act, 1940, insofar is relevant for purposes
of present Appeal. The 1940 Act, as it stood at the relevant
time, contained VII chapters. Chapter I contained
introductory provisions. Chapter II dealt with arbitration
without intervention of a Court. Chapter III was titled as
‘Arbitration with intervention of a Court where there is no
suit pending’, on the other hand, Chapter IV dealt with
arbitration in suits. Chapter V contained general
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provisions like grounds for setting aside award, effect of
legal proceedings on arbitration, etc. Chapter VI dealt with
appeals and the last Chapter i.e., Chapter VII contained
certain miscellaneous provisions.
30. Therefore, it is apparent that the 1940 Act
envisioned three distinct modes of arbitration through
Chapters II, III and IV. To be able to understand the
mandate of Chapter II, it is necessary to refer to Section
2(a) and Section 3 of the 1940 Act, which are reproduced
as thus:
“2. In this Act, unless there is anything repugnant in the
subject of context, - (a). “arbitration agreement” means a
written agreement to submit present or future differences to
arbitration, whether an arbitrator is named therein or not.
3. Provisions implied in arbitration agreement – An
arbitration agreement, unless a different intention is
expressed therein, shall be deemed to include the provisions
set out in the First Schedule in so far as they are applicable
to reference.”
Thus, read contextually, it is apparent that for an arbitral
proceeding to fall within Chapter II, there has to be a
written agreement to the effect of submitting present or
any future differences.
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31. As far as Chapter III is concerned, it contains only
one provision, viz., Section 20. For ready reference, said
provision is reproduced as thus:
“20. Application to file in Court arbitration
agreement:- (1) Where any persons have entered into an
arbitration agreement before the institution of any suit with
respect to the subject-matter of the agreement or any part of
it, and where a difference has arisen to which the agreement
applies, they or any or them, instead of proceeding under
Chapter II, may apply to a Court having jurisdiction in the
matter to which the agreement relates, that the agreement
be filed in Court.
(2) The application shall be in writing and shall be numbered
and registered as a suit between one or more of the parties
interested or claiming to be interested as plaintiff or
plaintiffs and the remainder as defendant or defendants, if
the application has been presented by all the parties, or, if
otherwise, between the applicant as plaintiff and the other
parties as defendants.
(3) On such application being made, the Court shall direct
notice thereof to be given to all parties to the agreement other
than the applicants, requiring them to show cause within the
time specified in the notice why the agreement should not be
filed.
(4) Where no sufficient cause is shown, the Court shall order
the agreement to be filed, and shall make an order of
reference to the arbitrator appointed by the parties, whether
in the agreement or otherwise, or, where the parties cannot
agree upon an arbitrator, to an arbitrator appointed by
Court.
(5) Thereafter the arbitration shall proceed in accordance
with, and shall be governed by, the other provisions of this
Act so far as they can be made applicable.”
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As per this section, where parties have entered into an
arbitration agreement before the institution of a suit and
a dispute has arisen covered by that agreement, they may
apply to the relevant Court to have the agreement filed,
instead of proceeding under Chapter II. This application
must be made in writing and is registered as a suit, with
the applicants treated as plaintiffs and the remaining
parties as defendants. Once the application is made, the
Court issues a notice to all other parties to the agreement,
asking them to show cause within a specified time as to
why the agreement should not be filed. If no sufficient
cause is shown, the Court orders the agreement to be filed
and refers the dispute to the arbitrator appointed by the
parties, or if they cannot agree on one, to an arbitrator
appointed by the Court itself. The arbitration then
proceeds in accordance with the other applicable
provisions of the Act.
32. Chapter IV of the 1940 Act contain Sections 21 –
25. Section 21 provides that parties to suit may apply for
order of reference. Said provision is reproduced as thus:
“21. Parties to suit may apply for order of reference:-
Where in any suit all the parties interested agree that any
27
matter in difference between them in the suit shall be
referred to arbitration, they may at any time before
judgment is pronounced apply in writing to the Court for an
order of reference.”
The first condition for invoking Section 21 is that the
parties to the suit must agree that any matter of difference
between them shall be referred to arbitration. All
interested parties must agree and apply to the court where
the suit is pending to obtain an order of reference to
arbitration. The subject-matter of the reference must be
any of the matters between the parties to the suit. Entire
subject-matter of the suit may not be referred to
arbitration. Parties may agree to only refer a part or
portion of the dispute to arbitration. In the context of
Section 21, the court can refer a dispute/difference
subject-matter of a suit when the parties mutually agree
to arbitration. There must be a meeting of minds between
the parties to go for arbitration in respect of a subject-
matter in a pending suit.
2
33. Section 22 deals with appointment of arbitrator,
which is to be done as may be agreed by the parties.
2
M.P. Rajya Tilhan Utpadak Sahakari Sangh Maryadit v. Modi Transport Service, (2022) 14
SCC 345
28
Section 23 explains the manner in which the order of
reference is to be made. Section 24 provides that if only
some of the parties to the suit have applied for order of
reference, in that situation, the suit may proceed qua
those who have not applied and reference can be made
only with respect to parties who have applied, if the
subject-matter is separable. Lastly, Section 25 mandates
application of other provisions of the 1940 Act for
arbitration under Chapter IV except as provided in the
proviso therein.
34. The significance of this three-pronged scheme lies
in the fact that the three chapters are mutually exclusive.
Therefore, a reference to arbitration, depending upon the
factual matrix of each case, must necessarily fall within
one and only one of these chapters, and the procedural
requirements of the applicable chapter cannot be
bypassed or circumvented.
35. Yet another important aspect of the 1940 Act is
Section 47, particularly, the proviso appended therein. For
ready reference, the said provision is reproduced as thus:
29
“47. Act to apply to all arbitrations:- Subject to the
provisions of section 46, and save in so far as is otherwise
provided by any law for the time being in force, the
provisions of this Act shall apply to all arbitrations and to all
proceedings thereunder:
Provided that 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 Court before which the suit is pending.”
36. Section 47 provides that the provisions of the 1940
Act shall apply to all arbitrations and to all proceedings,
subject to the provisions of Section 46 and any other law
for the time being in force. Nonetheless, the proviso
appended therein stipulates an arbitration award that has
been obtained without adhering to the mandate of the
1940 Act. In such a situation, it is provided that with
consent of all the parties, such an award may be taken
into consideration as a compromise of adjustment of a suit
by any Court before which the suit is pending. It is in this
statutory backdrop, we proceed to adjudicate the present
Appeal.
37. It is the first and foremost contention of the
Plaintiffs that without following the mandate of Section 21
of 1940 Act, the dispute could not have been referred for
arbitration when 1982 Suit was pending with respect to
30
same suit property. The Defendants counter ed this
argument by contending that the subject-matter of the
arbitral proceedings and the 1982 Suit is different. The
Trial Court, as well as the High Court, have accepted the
contention of the Defendants on the ground that only a
part of the subject matter of the arbitral proceedings is
subject matter of the 1982 Suit. Hence, Section 21 of the
1940 Act was found to be inapplicable.
38. In this context, identification of the subject-matter
of the arbitral proceedings as well as the 1982 Suit
becomes necessary. A reference to the plaint of the 1982
Suit is helpful in this regard. Para 1 therein is relevant and
hence reproduced:
“1. The house in respect of which this claim is made, is
situated in Sarafa Bazar Lashkar in the State Bank line
behind, towards the lane of Mor Bazar, in which there are
three passageways on three sides of courtyard, inside one
passageway there is one room and one square, and the
house which is shown with diagonal lines of red ink in the
attached map, that house three storey, boundaries of which
is as under:
North: House of Mannu Khan which is now with
Deennath Sunar and house of Narayan Das Babulal.
South: Large part of Plaintiffs House which is adjacent to
the disputed house.
East: Mandir Swa Man Saaligram ji ka.
31
West: Room of Plaintiffs house and alley leading to Mor
Bazar.
And Municipal numbers always keep changing, hence it is
not being given.”
39. From above-quoted portion, the house number or
the municipal number of the suit property is not
mentioned. To ascertain the same, we may profitably refer
to the court auction certificate issued in favour of the
Plaintiffs in Case No. 29/56-1963 on 30.08.1973 forming
the basis of their claim in the 1982 Suit , which is
undisputed. The relevant portion of the said certificate is
reproduced as thus:
“Specification of properties:-
House property situated at Sarafa Bazar, Lashkar, specified
in the map annexed herewith as moertgaged and sold is
bounded as below –
HOUSE MUNICIPAL NO. 03/10 (OLD)
1. To the East – Sarafa Road, Lashkar
2. To the West – Municipal Lane
3. To the North – Mandir Shri Shaligramji & House of Mannu
Khan
4. To the South – House of Manoharmal at present Jwala
Prasad Das”
32
40. Similarly, subject-matter of the arbitral proceedings
has been provided in referral letter dated 28.02.1983 as
follows:
“(1) That, the dispute is of one house which is situated in
Sarafa Bazaar, we in year 1964 purchased it by way of
auction. By fighting case uptill Supreme Court we got our
rights on the house which is Constitutional, this property is
offered by our family for development of Dharamshala.
(2) That, Shri. Padamchand Son of Late Shri Gulabchand ji
and his brothers has forcibly occupied some part of this
house, and by creating disputes without any reason are
included for quarrel which is completely inappropriate and
irrelevant.”
Plaint of the 1984 Proceedings is also germane in this
regard, wherein the description of the subject-matter of
the arbitration is contained in Para 1-3. Said portion of the
plaint is reproduced as thus:
“(1) That, between the Applicants and the Non-Applicants
dispute arose over property situated at Safra Bazar,
Lashkar. The disputes arose over the building, description
of which is as under:
SavikMyu. House No. 3/10 p nya 45/132
Boundaries:-
East - House of Salagram
West- Alley
North- House of Deenath Narayan Das Babulal
33
South- House of Jawalaprasad Narayandas
Situated at- Sarafa Bazar, Lashkar
Ward no. 10 (Old) New 132
(2) That, the aforesaid house was purchased in auction in
the name of Non-Applicant.
(3) That, in respect of the aforesaid building, when the
dispute arose, an agreement was made between Applicants
and Non- Applicants whereby on 10-3-1983 the aforesaid
dispute was handed over to a Punch Nimaya Samiti.”
41. On bare perusal of the reproduced portions and
looking at the description as provided and the house
number as contained in the Plaint of the 1984 Proceedings
and Court auction certificate dated 30.08.1973, we are not
in a position to come to a conclusion that the subject-
matter of the arbitral proceedings and the 1982 Suit was
distinct. It is crystal clear from the perusal of the recitals
that the dispute in the both the proceedings pertained to
the same house. Additionally, it is also to be noted that
keeping in mind this commonality of subject-matter, the
Trial Court in the 1982 Suit vide order dated 08.03.1990
stayed the said suit during pendency of the 1984
Proceedings on the ground that the subject-matter of both
the proceedings is one and the same.
34
42. It has been further contended by the Defendants
that they were unaware of the pendency of the 1982 Suit
at the time of referring the dispute to arbitration, and
therefore had no occasion to seek the permission of the
Trial Court for such reference in terms of Section 21 of the
1940 Act. At the outset, it must be noted that knowledge
of pendency is not a sine qua non for the applicability of
Section 21 of the 1940 Act. The provision requires only two
conditions to be satisfied: (i) a suit must be pending, and
(ii) the parties interested must agree to refer the dispute,
or any part thereof, to arbitration. This position is
reinforced by a comparison with Section 20 of the 1940
Act, which governs arbitration with court intervention in
cases where no suit is pending. The language employed
therein “where any persons have entered into an
arbitration agreement before the institution of any suit…”
makes the fact of institution of the suit the determinative
factor. Thus, Sections 20 and 21 operate in distinct but
complementary fields, together forming a complete code
governing arbitration with court intervention, depending
on whether a suit is pending or not. A contextual reading
35
of these provisions makes it clear that the legislature has
not treated ‘knowledge’ of pendency as a relevant or
determinative consideration. Rather, the statutory scheme
makes the ‘institution’ or ‘pendency’ of the suit a
determinative factor.
43. Notwithstanding the preceding paragraph, even if
we consider this argument to be acceptable on the face of
it, it is an admitted fact that the Award was passed on
15.09.1983, while the service of the summons on the
Defendants was completed in the 1982 Suit on
06.08.1983. In this view of the fact, it cannot be said that
Defendants did not have any occasion to exercise option
under Section 21 of the 1940 Act since the arbitral
proceedings had still not concluded on the date when
summons were served to Defendants. At this juncture, it
also to be noted that as per the case of the Plaintiffs, they
had never applied for order of reference before the Trial
Court as required under Section 21 of 1940 Act. Similar is
the situation with respect to Defendants. Even otherwise,
as already discussed, the requirement under Section 21 is
that all the parties interested must agree that the matter
36
in difference between them in suit shall be referred to
arbitration. Therefore, for any valid arbitration referral
between the parties during pendency of the 1982 Suit,
both the parties had to agree and apply before the Court
where the 1982 Suit was pending, which admittedly is not
the case herein. In light of foregoing discussion, it is
luculent that once a suit was pending between the parties,
only option available for referring the matter to arbitration
was by way of application under Section 21 of the 1940
Act. Any other route either under Chapter II or Chapter III
of the 1940 Act would be improper.
44. Above view is also fortified by the statutory scheme
of the 1940 Act, especially, in the face of the dichotomy
created by simultaneous existence of Chapter II
(Arbitration without Intervention of a Court), Chapter III
(Arbitration with intervention of a Court where there is no
Suit Pending), Chapter IV (Arbitration in Suits) ,
compliance of Section 21 and Chapter IV of the 1940 Act
becomes mandatory as and when the parties come into
knowledge of the pendency of a suit prior to
pronouncement of judgment therein. To hold otherwise
37
would mean watering down the legislative intent behind
the 1940 Act.
45. One more contention has been raised by the
Defendants, albeit faintly, that in light of the mandate of
Section 21 of the 1940 Act, it is not the obligation of the
Defendants solely to apply for a reference to arbitration
and the Plaintiffs are equally obligated to do so. Though
this argument appears impressive at first blush, however,
it is quite self-serving in nature. In our view, Section 21 of
the Act doesn’t obligate either the Plaintiffs or the
Defendants independently, rather, if the parties are
interested in referring the dispute to arbitration, such an
obligation is mutual and all the parties interested must
agree that any matter in difference between them in the
suit shall be referred to arbitration.
46. Upshot of the above discussion is that arbitral
proceedings could not have been initiated or continued
without complying Section 21 of the 1940 Act once the
parties to the suit had knowledge of the pendency of the
Suit. In this view of the matter, any arbitral award passed
without the leave of the Trial Court when a suit is already
38
pending cannot be said to be made in compliance of the
provisions of the 1940 Act.
47. Now we will consider the contention of the
Defendants that the parties to the arbitral proceedings and
the 1982 Suit were different. In this regard, it is to be noted
that this Court is not, in this Appeal, required to set aside
the Award qua any non-party to 1982 Suit. We are only
concerned with the legal effect of the Award qua the parties
to the 1982 Suit i.e., the original Plaintiff and his heirs and
the four Padam Chand brothers who are the Defendants.
In the present factual setting, for the Plaintiffs, the Award,
having been rendered without the leave of the Court under
Section 21, in any event cannot be effected with respect to
them. The fact that the Award also contained directions
concerning persons not parties to the 1982 Suit does not
save it qua the parties to 1982 Suit.
48. Consequently, at this stage, only route that remains
open for the award dated 15.09.1983 to be made workable
with respect to the parties of the 1982 Suit is to take it as
a compromise or adjustment of a suit by the Trial Court
39
where the suit is pending in terms of Section 47 of the
1940 Act.
49. As noted above, the proviso to Section 47 carves out
a distinct and limited possibility through which an award
obtained outside the requirements of the 1940 Act may
nonetheless be given effect. It provides that such an award
may, “with the consent of all the parties interested”, be
taken into consideration as a compromise or adjustment
of a suit by any Court before which the suit is pending.
Therefore, two conditions are envisioned as per the
language of the proviso - first, the award must be
‘otherwise obtained’, i.e., obtained without compliance
with the 1940 Act; and second, all the parties interested
must consent to the award being treated as a compromise
or adjustment, after the award has been made.
50. In this regard, to understand the scope of the
proviso to Section 47 of the 1940 Act, a reference can be
made profitably to the judgement of this Court in
Naraindas v. Vallabhdas & Ors.
3. This Court while
3
(1971) 3 SCC 642
40
considering the arguments of the appellant in the facts of
the said case observed as follows:
“7. It is next argued by Mr Anand that as the reference to
arbitrators was made out of court and as all the parties to
the arbitration agreement did not sign the award in token of
their acceptance, the same could not be made a rule of the
court. There is no substance, in our opinion, in the above
contention. It is always open to parties to refer a
dispute to arbitration without the intervention of the
court. In case, a suit is pending in respect of the
subject-matter of the dispute, there can be no valid
reference during the pendency of the suit, to
arbitration without the order of the court. The
underlying reason for that is to avoid conflict of jurisdiction
by both the court and the arbitrator dealing concurrently
with the same dispute. An award given on a reference
during the pendency of a suit relating to dispute
which is the subject -matter of reference without
obtaining the order of the court cannot be enforced.
The only exception to this rule is provided by the
proviso to Section 47 of the Arbitration Act (Act 10 of
1940) according to which “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 court
before which the suit is pending”. In such a n event,
the award is enforced as a compromise or adjustment
of the suit because all the interested parties give their
consent to the award. Where, however, as in the present
case, no suit is pending with respect to the subject-matter of
dispute and the parties choose to refer a dispute to
arbitrators, it is not essential that the parties should signify
their consent to the award before the same can be enforced.
Any other view would run counter to the entire scheme and
object of arbitration for the settlement of disputes according
to which, agreement and consent are imperative only at the
stage of referring to dispute to arbitrators but not at the
stage of the award. The decision of Bachawat, J. (as he then
was) in Jugaldas Damodar Modi and Co. v. Pursottam
Umadbhai and Co. [AIR 1953 Cal 690 : 92 CLJ 181] relied
41
upon by the appellant has no bearing as the said case dealt
with an arbitration reference during the pendency of a suit.”
(emphasis supplied)
A perusal of the aforesaid observations makes it clear that
an arbitral award obtained otherwise than in consonance
with the provisions of the 1940 Act can be taken on record
by the Trial Court as a compromise or adjustment of the
suit only if the parties mutually consent to such an award.
Hence, a post-award consent is contemplated.
51. Prior to Naraindas (supra) same view was also
endorsed by a Full-Bench of Madras High Court in Abdul
Rahman Sahib v. Muhammad Siddick
4 in following
words:
“Examining first the language of the proviso to S. 47, it
enacts that an “arbitration award” may be taken into
consideration as a compromise or adjustment of a suit only
“with the consent of all the parties interested.” The consent
here referred to must be something other than the
consent to refer the dispute for arbitration because
without such a consent there can be no arbitration
proceedings and in requiring that an arbitration
award may be taken into account only with the
consent of the parties, the plain intendment of the
enactment is that, to do so, there must be something
more than a consent to refer to arbitration, that it
must be a consent to the arbitration award itself. If
this is the correct interpretation of the proviso, the
result is that where there is a private reference in
4
1953 SCC OnLine Mad 85
42
respect of a matter pending in the suit, the award
which is given thereon cannot as such be filed as an
adjustment under O. 23, R. 3. But if subsequent to the
award the parties agree to accept it, that could be
recorded as a compromise under O. 23, R. 3 .
*** *** ***
We are accordingly of opinion that under the proviso to S.
47, an arbitration award obtained otherwise than in
proceedings taken in accordance with the Act cannot
without more be recognised as a compromise or adjustment
of the suit; that no decree can be passed thereon under the
provision of O. 23, R. 3; and that the decision
in Arumuga v. Balambramania(1), should be overruled. But
if, after an award is made, the parties thereto agree to
accept it, that will be a compromise and a decree based
thereon could be passed under O. 23, R. 3.”
(emphasis supplied)
52. Moreover, a Single Judge of Gujarat High Court has
also voiced same view in Malpati Sevasangh v. Gujarat
State Khadi
5. While relying upon Naraindas (supra) in
Para 19 therein, following was observed by the learned
Single Judge:
“20. In my view, considering the aforesaid judgment of the
Honourable Supreme Court, and considering the provisions
of Section 47 of the Arbitration Act, 1940, especially as per
the proviso to Section 47 of the Act, such Award can, at
the most, be pressed into service in a pending suit only
for the purpose of recording the settlement or
compromise, as, such Award, on its own, is not
enforceable in any manner. Considering the scheme of
Section 47 proviso as well as considering the provisions of
5
2003 SCC OnLine Guj 271
43
Order 23 Rule 3 of the Code of Civil Procedure, such Award
can only be treated as a compromise between the parties
and the same can be presented before the Court for the
purpose of recording the compromise or adjustment of the
suit, and not beyond that. It is not in dispute that the plaintiff
has, ultimately, taken a stand, by which the plaintiff has not
agreed to treat the said Award as a compromise or
adjustment of the dispute.
*** *** ***
27. It is, no doubt, true that the Award of the Arbitrators is
in the picture. However, unless it is agreed by both the
sides to abide by the said Award, the said Award
cannot be taken as a compromise in a pending suit.
Apart from the provisions of Order 23 Rule 3, which
clearly provide that such compromise should be
signed by the parties, even otherwise, as per the
proviso to Section 47 of the Arbitration Act, such
Award, which is otherwise obtained may with the
consent of all the parties interested be tak en into
consideration as a compromise or adjustment of a suit
by any court before which the suit is pending. If one of
the parties to a suit is not agreeable to such consent for
accepting such Award for the purpose of settling the dispute
pending in the suit, the Court has no option but to proceed
with the suit on its own merits…” (emphasis supplied)
53. We also find ourselves in agreement with the
position of law evident from above-mentioned authorities
of law. However, we would also like to supplement the
reasons thereof. The proviso to Section 47 must be
understood as a balanced legislative mechanism that
seeks to rescue, subject to the conditions so prescribed,
an award that would otherwise be rendered unenforceable
44
or non-est in the eyes of law. The framework of the 1940
Act contains various safeguards such as the requirement
of a valid arbitration agreement, superintendence of the
court over the reference, and the mechanisms of filing,
challenge, and judicial scrutiny of the award under
Sections 14 to 17 and 30 to 33 of the 1940 Act. This
framework ensures that an award rendered within the
framework of the 1940 Act carries with it a presupposition
of procedural regularity and legal enforceability. However,
an award that falls outside this framework is deprived of
these protections by the very circumstance of its creation.
It is precisely to address this situation that the proviso to
Section 47 has been introduced, and it provides some
degree of safeguard by the requirement of post-award
consent of all the parties interested. It is this post-award
consent that gives the otherwise unenforceable award its
only basis for enforceability in the eyes of law. Then also,
it is only given effect not as an award but as a compromise.
The award serves merely as the instrument around which
the said compromise takes shape and can be recorded by
the court under Order 23 Rule 3 of the CPC.
45
54. Adverting to the facts of the present case, the
Defendants have contended that the Plaintiffs failed to
avail themselves of the liberty expressly reserved to them
by the High Court vide orders dated 24.02.1992 and
05.04.2006, insofar as the objection under proviso to
Section 47 was concerned. The Trial Court took a view that
no application was filed by the Plaintiffs in terms of proviso
to Section 47 of the 1940 Act. On the other hand, High
Court found that since the subject matter of the arbitral
proceedings and the 1982 Suit was distinct, objection
under Section 47 of the 1940 was dismissed.
55. A careful reading of the High Court’s order dated
24.02.1992 in Civil Revision No. 34 of 1991 is instructive
in this regard. The High Court, while directing disposal of
the objection under Section 30(c) of the 1940 Act within
three months, simultaneously clarified that should the
Plaintiffs fail in objection under Section 30(c) of the 1940
Act, it would be open to them to press the objection under
the proviso to Section 47 in the 1982 Suit. The High Court,
further in its order dated 05.04.2006 while dismissing
46
Miscellaneous Appeal No. 674 of 2000, observed in
paragraph 10 therein as follows:
“10. This Court with the consent of the parties modified the
order dated 19.12.1996 passed in C.S. No. 43A/84. From
perusal of para 2 of the order dated 24.2.92, it is very clear
and specific that the appellants never raised any objection
at the time of passing of the order dated 24.2.92 nor the
appellants challenged the order passed by this Court on
24.2.92. This Court In its (sic) order dated 24.2.92 very
specifically directed that if appellants, who were plaintiffs
in C.S. No. 3A/82, fail (sic) in the proceedings in C.S.
No.43A/84, it would be open to them to press the objection
made under the Proviso to Section 47 of the Act that the
compromise which had been entered could be considered
only in terms of the Order 23 Rule I. C.P.C. All the orders
passed in C.S. No.43-A/84 would be subject to finality to the
order to be passed on the pending application preferred
under Section 47 Proviso disposed of by the impugned order
which shall be dealt with afresh in the pending suit. Thus,
from the aforesaid finding of this Court, it is clear that after
the order dated 24.2.1992 the pending application under
Section 47 shall be dealt with afresh in the pending suit, i.e.,
in C.S. No.3A/92. Thus, if the petitioner has any grievance
in respect of the impugned order, the said grievance of the
petitioner can be decided afresh in the pending suit.”
Thus, the High Court itself, on two separate occasions,
gave the liberty to the Plaintiffs to press their objections
under proviso to Section 47 of the 1940 Act at the time of
disposal of the 1982 Suit.
56. In light of the above, there was no need for the
Plaintiffs to file a fresh application under proviso to Section
47 of the 1940 Act, as the liberty was given to press the
47
said objection for afresh consideration and not to file the
said application afresh.
57. Now coming to the substantive merits of the
objection under proviso to Section 47 of the 1940 Act, the
Plaintiffs, throughout the litigation, have consistently
opposed the Award. From the perusal of the records of this
Appeal, it is clear that there is not a single moment in this
litigation when the Plaintiffs consented, expressly or by
conduct, to the Award being treated as a compromise or
adjustment of the 1982 Suit. Thus, the sine qua non of the
post-award consent is completely missing.
58. In view of the above discussion, it also follows, that
the Award dated 15.09.1983 could not have been set up
as a defence against the Plaintiffs’ suit for possession and
mesne profits in the 1982 Suit. It could not have been
treated as settling or adjusted the Plaintiffs’ rights with
respect to the suit property, in the absence of the Plaintiffs’
post-award consent to treat it as a compromise under the
proviso to Section 47 of the 1940 Act. Hence, the Trial
Court, as well as the High Court, committed a manifest
error of law in proceeding as though the Award had
48
attained a finality qua the Plaintiffs and that it was enough
for non-suiting the Plaintiffs.
59. At this stage, it is also to be noted that the 1982
Suit was filed seeking possession of the suit property and
mesne profit from 25 months prior to the filing of the Suit.
The Trial Court although non-suited the Plaintiffs on the
basis of the Award dated 15.09.1983, also rendered a
finding vide its order dated 22.07.2010 that the Plaintiff
purchased the disputed property through auction by the
Court if 2
nd Additional District Judge, Gwalior on the date
fixed for 07.04.1963 and the Plaintiff obtained symbolic
possession on 22.09.1973. The Plaintiffs thereafter
challenged the order of the Trial Court in First Appeal No.
252 of 2010 before the High Court which was dismissed
on 30.01.2025. However, the findings that were in favour
of the Plaintiffs were never ch allenged in Appeal
specifically by the Defendants. Be that as it may, we are
cognizant of the law laid down by this Court in S. Nazeer
Ahmed v. State Bank of Mysore
6 as followed in Saurav
Jain v. A.B.P. Design
7, that a respondent in an appeal
6
(2007) 11 SCC 75 (Para 7)
7
(2022) 18 SCC 633 (Para 28)
49
need not file a memorandum of cross-objection merely to
challenge adverse findings of the trial court, so long as the
ultimate decree is in their favour; such findings can be
contested to support the decree. A cross-objection is
necessary only where the respondent seeks to overturn
part of the decree or claim additional relief, as clarified by
the 1976 amendment to Order 41 Rule 22 CPC.
60. On perusal of the counter affidavit as well as the
note of the written submission filed by the Defendants
before this Court, we do not find any challenge made by
them, either in letter or substance, to the findings of the
Trial Court as rendered in favour of the Plaintiff. Therefore,
we have no hesitance in holding that once the eclipse of
the award qua the Plaintiff is removed from the findings of
the Trial Court, the 1982 Suit deserves to be decreed in
terms of the finding of the Trial Court that the Plaintiff
purchased the disputed property through auction by the
Court if 2
nd Additional District Judge, Gwalior on the date
fixed for 07.04.1963 and the Plaintiff obtained symbolic
possession on 22.09.1973.
50
61. In the backdrop of the above discussion, we are of
the considered opinion that all the questions framed for
consideration must be answered in favour of the Plaintiffs
and against the Defendants.
62. On Question (1), we hold that the subject-matter of
the 1982 Suit and the arbitral proceedings culminating in
the Award dated 15.09.1983 was the same and pertained
to the house situated at Sarafa Bazar, Lashkar, bearing
Municipal No. 03/10 (Old). The courts below committed a
manifest error in holding otherwise, particularly in the face
of the unambiguous recitals in the Court auction
certificate dated 30.08.1973, the referral letter dated
28.02.1983, and the plaint of the 1984 Proceedings, all of
which, when read conjointly, admit of no other conclusion.
This finding is further reinforced by the order of the Trial
Court itself dated 08.03.1990, whereby the 1982 Suit was
stayed during the pendency of the 1984 Proceedings
precisely on the ground that the subject-matter of both
proceedings was one and the same.
63. On Question (2), we hold that knowledge of
pendency of the 1982 Suit is not a condition precedent for
51
the applicability of Section 21 of the 1940 Act. The
determinative factor under the statutory scheme is the fact
of pendency of the suit, not the subjective awareness of
any party thereof. Nonetheless, even on the Defendants’
own case, the arbitral proceedings had not concluded as
on 06.08.1983, being the date on which summons in the
1982 Suit were served upon them as per their counter
affidavit filed before this Court. Therefore, having come
into knowledge of the pendency of the suit prior to the
passing of the Award dated 15.09.1983, the Defendants
had the opportunity to approach the Trial Court under
Section 21 of the 1940 Act, which they failed to avail. The
legal consequence flowing therefrom is that the Award
arising out of the arbitral proceeding initiated without
following the mandate of Section 21, while the 1982 Suit
was pending, cannot be permitted to operate as a valid
defence against the Plaintiffs’ claims in the 1982 Suit.
64. On Question (3), we hold that the arbitral
proceedings did not and could not have fallen within the
ambit of Chapter II or Chapter III of the 1940 Act, having
been initiated and concluded during the pendency of the
52
1982 Suit between the same parties and in respect of the
same subject-matter. The only chapter of the 1940 Act
that could have governed such a reference was Chapter IV,
and the only permissible route thereunder was an
application by all interested parties under Section 21
before the Trial Court where the 1982 Suit was pending.
Since no such application was ever made, and no order of
reference was ever passed by the Trial Court, the arbitral
proceedings were co nducted sans the mandatory
requirements of Section 21 and Chapter IV of the 1940
Act. The Award dated 15.09.1983 is, therefore, legally
ineffective as a bar to the Plaintiffs’ suit for possession and
mesne profits in the 1982 Suit.
65. On Question (4), we hold that the Award dated
15.09.1983, while it may be valid inter se the parties to the
arbitral proceedings, could not have been set up as a
defence or used to non-suit the Plaintiffs in the 1982 Suit.
The only saving provision available to the Defendants in
the circumstances of the present case was the proviso to
Section 47 of the 1940 Act, which permits an award
obtained otherwise than in compliance with the provisions
53
of the 1940 Act to be taken into consideration as a
compromise or adjustme nt of a pending suit, but
contingent upon the post-award consent of all the parties
interested. The Plaintiffs, as is apparent from the records
of this Appeal, have consistently opposed the Award. There
is not a single instance in the record where the Plaintiffs
consented to the Award being treated as a compromise or
adjustment of the 1982 Suit. The sine qua non of post-
award consent being wholly absent, the Award could not
have been given effect as a compromise under the proviso
to Section 47.
66. On Question (5), we hold that the High Court
committed a manifest error of law in treating the Award as
having attained finality so as to preclude an independent
examination of its validity in the context of the 1982 Suit.
The High Court, by its own orders dated 24.02.1992 in
Civil Revision No. 34 of 1991 and 05.04.2006 in
Miscellaneous Appeal No. 674 of 2000 , had expressly
reserved to the Plaintiffs the liberty to press their
objections under the proviso to Section 47 of the 1940 Act
afresh in the pending 1982 Suit. Having itself carved out
54
this liberty, the High Court was not, in the subsequent
proceedings, at liberty to shut out those very objections by
treating the Award as final and binding upon the Plaintiffs.
67. On Question (6), we conclude that the 1982 Suit
deserves to be decreed in favour of the Plaintiffs, since the
Trial Court’s findings, which remain unchallenged,
establishes that the Plaintiffs had validly purchased the
suit property through a court auction on 07.04.1963 and
obtained symbolic possession on 22.09.1973, and once
the effect of the Award against the Plaintiffs is removed,
there is no basis to deny the decree.
68. During the course of hearing, it was informed to this
Court that pursuant to the execution proceedings initiated
by the Defendants, the Plaintiffs have executed a sale deed
in favour of the Defendants on 03.11.2009. However, it is
quite evident that the recitals contained therein would
indicate that the said sale deed is subject to the decision
in the 1982 Suit. Therefore, once the 1982 Suit is decreed
in favour of the Plaintiffs, in consequence, the said sale
deed falls flat in light of the recitals contained therein.
55
CONCLUSION
69. Consequent to the discussion made hereinabove ,
the Appeal is allowed in the following terms:
a) The judgment and final order dated 30.01.20 25
passed by the High Court in First Appeal No. 252 of
2010, stands set aside.
b) The judgment and decree dated 22.07.2010 passed
by the 10
th Additional District Judge, Fast Track
Court, Gwalior, in Civil Suit No. 34-A of 2010
(originally Civil Suit No. 3-A of 1982), is set aside to
the extent it dismisses the Plaintiffs’ suit.
c) The finding of the Trial Court in paragraphs 11, 12
and 32 of the judgment dated 22.07.2010 that the
Plaintiffs have been successful in proving ownership
of the disputed property described in paragraph 1 of
the plaint is affirmed.
d) The arbitration award dated 15.09.1983 is held to be
unenforceable in law qua the Plaintiffs for non-
compliance with Section 21 of the Arbitration Act,
56
1940 as well as being in teeth of the proviso to
Section 47 of the Arbitration Act, 1940.
e) The sale deed dated 03.11.2009 having, on its face,
been made subject to the final outcome of Civil Suit
No. 3-A of 1982, is not binding on the Plaintiffs.
f) A decree for recovery of possession of the Suit
Property is passed in favour of the Plaintiffs and
against the Defendants, in terms of paragraph 1 of
the plaint and the site map annexed thereto. The
Defendants shall deliver vacant and pe aceful
possession of the Suit Property to the Plaintiffs
within a period of two months from the date of this
judgment.
g) The matter is remitted to the Trial Court for the
limited purpose of an enquiry into mesne profits. The
Trial Court shall conclude the enquiry within nine
months of receipt of this Judgement.
h) The Defendants shall deposit the costs of these
proceedings, quantified at Rs. 1,00,000/- (Rupees
One Lakh Only), with the registry of this Court within
four weeks from the date of this judgment.
57
Thereafter, the registry shall remit the said amount
to the bank account of the Plaintiffs.
i) In light of the above, appropriate Decree be drawn by
the jurisdictional Trial Court, accordingly.
70. Pending applications, if any, shall stand disposed of
in terms of the foregoing.
……….…………….…………J.
(J.K. MAHESHWARI)
……….…………….…………J.
(ATUL S. CHANDURKAR )
New Delhi;
May 29, 2026.
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