' RUSTAM S. SIDHWA, J.---This is an appeal by Sufi Mehdi Hasan, appellant, against the judgment of a learned Single Judge of the Lahore High Court, dated 12-10-1980 accepting the appeal of Malik Muhammad Sadiq, respondent No,1, setting aside the order of the Civil Court, dated 26-11-1978 dismissing the execution applications and directing the executing Court to execute the compromise decree in so far as it is within the conformity and scope of the award and not to execute such conditions if they happen to be extraneous to the award.
2. The brief facts of the case are that Sufi Mehdi Hasan appellant and Malik Muhammad Sadiq and Abdur Rashid Minhas, Respondents Nos. 1 and 2, had been carrying on joint business of petrol pump as well as dealing in the purchase and sale of evacuee properties against verified claims. Disputes having arisen between the parties, an arbitration agreement was executed on 7-3-1971 in which Sufi Mehdi Hasan appellant was the first party and Malik Muhammad Sadiq and Abdur Rashid Minhas, respondents Nos. 1 and 2, constituted the second party. This arbitration agreement provided that the disputes referred to in the arbitration agreement shall be referred to arbitrators, i.e, Ch. Muhammad Anwar, Ch. Muhammad Din and Syed Shahid Hussain Gilani and in all seven disputes were specified. For the sake of convenience the disputes referred were as follows:-
(i) Dispute about Gowell Filling and Service Station on G.T. Road, Gujrat.
(ii) Dispute about claim re lands Nos. 231 and 92 Sanghar (Sindh).
(iii) Dispute about the allotment and distribution of land in Sheikhupura.
(iv) Dispute about allotment of 50 acres garden in Chak No,29, Tehsil Phalia, District Gujrat.
(v) Dispute about financial dealing between the appellant and the respondents.
(vi) Dispute about property No,8, Egerton Road lahore between the parties.
(vii) Dispute about plot situated at Ramgarh, Mughalpura, Lahore.
' On 2-7-1971 the arbitrators gave their award in respect of disputes Nos. 1 and 3 to 7, but no decision with regard to dispute No,2 covering claims re lands Nos. 231 and 92, Sanghar District, Sindh was given. According to the terms of the award, the Gowell Filling and Service Station was held to be the exclusive property of Malik Muhammad Sadiq, respondent No,1. As regards the amount of Rs,23,000 taken by the appellant from respondent No,1, which according to the appellant was towards his share of the profits out of the petrolpump, but according to respondent No,1 was loan taken from him, the arbitrators held that the appellant should refund Rs,13,000 to respondent No,1 with the other amounts as stated in the last para. Of the award. With regard to disputes Nos. 3 to 7 it was held that Sufi Mehdi Hasan appellant shall pay Rs,27,200 to Malik Muhammad Sadiq respondent No,1 in full settlement of the said claims and that subject to the said amount and Rs,13,000 stated above, i.e, Rs,38,000 in all, being paid by the appellant to respondent No,1 within six months, all properties covered by the said items as stated in the award shall stand transferred to the appellant and the appellant shall have the right to get the said properties transferred in his name at his own cost, bearing the expenditure in the said connection himself, and subject to payment being made in full, respondent NO.1 shall be deemed to have renounced all his rights, title and interest in properties covered by the said disputed claims as referred to in the award.
3. On 29-7-1971 it appears that a further agreement was entered into between the appellant and respondents Nos.1 and 2 in which after reciting the factum of the settlement of their disputes Nos. 1 and 3 to 7 by the arbitrators, they settled their dispute No,2 about their rights to claim re lands Nos.
231 and 92 Sanghar District, Sindh. As per the said agreement, the appellant agreed to reimburse respondent No,1 Rs, 1,10,000 which he had paid in respect of claims re lands Nos. 231 and 92, Sanghar District, Sindh, so as to secure full rights in respect of the said property; in short, to pay Rs,1,10,000 for the said Sanghar lands and Rs,38,000 for the properties covered by disputes Nos. 3 to 7 and on receipt of the said Rs,1,39,000 respondent No,1 would release and renounce his rights, title and interest in these properties; it being understood that the petrol pump would exclusively belong to respondent No,1.
4. In the meantime on 1-9-1971 an application was made by 'Malik Muhammad Sadiq respondent No,1 before the Civil Court under sections 14 and 17 of the Arbitration Act calling upon the Civil Court to make the award a rule of the Court. Necessary proceedings were conducted by the Civil Judge in respect of the said award which is apparent from the Civil Judge's judgment, dated 26-11-1978.
5. On 21-12-1971 the parties filed an application for recording the compromise entered into by them on 1-9-1971. The Civil Court passed a decree in terms of the mutual compromise which it marked as Exh.P.1 in the said case. The English translation of the order of the Court, dated 21-12-1971 runs as under:--- "Order: In terms of the aforesaid statements of the parties the suit is decreed in terms of the conditions stated in Exh. P.1. Parties shall bear their own costs. Exh P 1 shall be treated as an annexure to the decree. Record to be consigned to the record room after completion of formalities."
' Underneath the said order, by way of "Note", were reproduced the compromise terms, which have been reproduced by the executing Court in para.1 of its order dated 26-11-1976.
6. Thereafter on 6-1-1972 respondent No,1 filed an application for execution and on 18-12-1974 the appellant filed his application for execution. In the application filed by respondent No,1 he claimed Rs,1,39,000 from the appellant, whereas in the execution application filed by the appellant he claimed 1/3rd share of the past profits regarding the petrol pump and the appointment of a receiver in respect of future profits. In reply to the application filed by the respondent No,1 the appellant stated that the executing Court should order the respondent within a month to release and renounce his interests in respect of the disputed property, in which case he would pay the sum of Rs,1,39,000 to the respondent before the Court. In reply to the application filed by the appellant, the respondent submitted that the appellant had no claim to the petrol pump uner the decree. In neither case the appellant nor the respondent took up the plea that the decree was a nullity on the ground, that the compromise decree was not based on the award or that no compromise could have been effected in a case where the arbitrators had given their award.
7. Both the execution applications were dismissed by the executing Court by its judgment dated 26-11-1978. The Civil Judge inter alia held that the award submitted and filed by the arbitrators in Court was never acted upon and as such it was never made a rule of the Court and that by filing the compromise the parties had sought the adjudication of their disputes on the basis of those terms as were contained in their compromise Exh. P.1. The Civil Judge further held that these terms and conditions which were settled were in the form of promises which had to be performed by them and on account of the peculiar nature of the decree, they were incapable of execution, as both parties had not performed their parts of the agreement. He accordingly held that the execution application of respondent No,1 was not maintainable and that the subject-matter of the execution application of the appellant was not the subject-matter of the decree and the executing Court had no jurisdiction. And that the appellant could file a suit for rendition of accounts to claim 1/3rd share of the income and profits of the petrol pump.
8. Being aggrieved by the dismissal of his execution application, respondent No,1 filed EFA No,28 of 1979 before the Lahore High Court, whereas the appellant filed a separate suit regarding the income and profits of the petrol pump in the Civil. Court. The appellant did not file any cross- objections to the execution appeal filed by respondent No,1 urging that the decree was a nullity and therefore void. The learned Single Judge on 12-10-1980 accepted the appeal of respondent No,1, in terms stated in para.
1. Above. In arriving at the said conclusion, the learned Judge held: (i) that whatever were the terms of the decree within the conformity of the 'award and the agreement placed on the record, the same were executable; (ii) that the executing Court could not go behind the agreement; and (iii) that in respect of the terms and conditions which were not executable, they could be enforced by the parties by mutual agreement or by litigation, for which no direction of the executing Court was necessary.
9. Being aggrieved by the said judgment, the appellant petitioned this Court for leave to appeal, which leave was granted to consider whether the decree could have been based on a compromise between the parties which did not form part of the arbitration award, in so far as it departed from the award.
10. On behalf of the appellant it is submitted that the compromise did not merge into the award at any stage. In this connection the learned counsel refers to sections 23(2) and 25 of the Arbitration Act. It is further submitted that the award was never remitted to the arbitrators under section 16, so that they could modify their award on the basis of the compromise and therefore neither could the compromise be embodied in the award and the compromise therefore could not be made a decree of the Court. It is submitted that the compromise was an agreement between the parties outside the Court, which was not enforceable as a decree and the decree passed by the Civil Judge was not therefore executable.
10-A. On behalf of the respondent it is submitted that the award stood actually modified, in terms of the compromise and that the Arbitration Act does not prohibit such a modification of the award, if it does not alter its basic character. In this connection Munshi Ram v. Banwari Lal AIR 1962 SC 903 is referred. It is further submitted that the compromise deed dated 29-7-1971 was admittedly entered into by the parties after the announcement of the award and in so far as it merely reiterated the decisions already taken by the arbitrators on disputes Nos. 1 and 3 to 7, the arbitration award did not stand materially modified and as regards dispute No,2 in respect of which the parties finally entered into compromise and settled the matter, the same also did not materially modify the earlier award, because the total amount of Rs,1,39,000 was made payable by the appellants to respondent No,1, instead of earlier figure of Rs,38,000. It is also contended that apart from section 16 of the Arbiration Act, the award can be modified by the Court, provided the basic features are not disturbed.
11. We have given our anxious consideration to the arguments on behalf of the appellant and the respondents and have perused the record. It is admitted between the parties that after the arbitrators gave their award on 2-7-1971, a compromise agreement was entered between the parties on 29-7-1971, whereafter an application was filed on 1-9-1971 by Malik Muhammad Sadiq respondent No,1 under sections 14 and 17 of the Arbitration Act to make the award a rule of the Court. From the final order of the executing Court, dated 26-11-1978 it appears that on the application under sections 14 and 17 of the Arbitration Act, "necessary proceedings were duly conducted by the Civil Court in respect of the award", but in the absence of the record it is not dear whether both the parties were called upon to file their objections to the same. However, during the midst of these proceedings on. 21-12-1971 the parties filed an application for the recording of the compromise in terms of the compromise agreement, dated 29-7-1971, and for a decree to be passed thereon. Since the case was one of arbitration out of Court, the Court could have made the award alone a rule of the Court and passed a decree in terms thereof. Assuming the Court felt that since the parties had compromised all their disputes, the majority through the arbitrators and one solitary dispute themselves, the Court could have recorded the compromise and passed a decree in terms of the decision of the arbitrators, because the award could alone have been made a rule of the Court and decree passed in accordance therewith, treating the compromise terms as a part of the record, so that the agreement between the parties relating to dispute No,2 could have been left to be adjusted out of Court or through another suit. In Munshi Ram v. Banwari Lal AIR 1962 SC 903, which was a case of arbitration not in suit, an award filed in Court was by compromise of parties slightly modified so that income-tax payable by some of the parties was reduced from the payments to be made to them and a slight change was made in the mode of payment, on the basis of which compromise the Court passed a decree on the award as modified by the compromise. The Supreme Court held that since the compromise terms did not go outside the award and the modification related to ancillary matters, they were matters on which the parties could agree and the Court could substitute their agreement in the operative part of the decree. It held that there was nothing in the Arbitration Act which disentitled the Court from taking note of an agreement. Of this character and in their opinion the decree could not be characterised as a nullity on this ground. In the instant case the compromise terms contained the terms of the award, apart from the decision on dispute No,2. In regular appeal against the decree, the decree in so far as it covered the agreement relating to dispute No,2 could have been set aside. Here the parties who had a right to challenge the decree, did not do so. On the contrary, they accepted the decree and both parties filed execution proceedings thereon. In these circumstances, whilst not unmindful of the rule laid down by this Court in Combined Enterprises v. Water and Power Development Authority PLD 1988 SC 39, we would act on the decision in Ghulam Haider v. Muhammad Nawaz 1975 SCM R 491 where this Court in somewhat similar circumstances accepted the compromise decree which was passed after the award, as we would not like to perpetuate an injustice. We also cannot forget the fact that though the decree is based on a compromise, not countenanced by the proceeding under the Arbitration Act, yet it incoroporates the terms of the award, i.e, decision of the arbitrators on disputes Nos. 1 and 3 to 7, and to that extent, it cannot be treated as a nullity.
12. For the foregoing reasons, whilst not upsetting the compromise decree, but holding that it is valid and executable in so far as it incorporates the decision of the arbitrators on disputes Nos. 1 and 3 to 7, but not the decision regarding dispute No,2, we would remand the case to the High Court for determination of the respondents' plea taken in his grounds of appeal on which no decision has been given. The appellate Court has not dealt with the question whether the decree was capable of execution and whether both the parties are or were capable of performing their reciprocal promises.
13. For the foregoing reasons, we accept this appeal in terms as stated above, set aside the judgment of the Lahore High Court, dated 12-10-1980 and remand the execution appeal of Muhammad Sadiq respondent No,1 back to the High Court for determination of the pleas of respondent No,1 taken in the grounds of appeal, in so far as it challenges the findings of executing Court.