Full Judgment Text
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PETITIONER:
GURPREET SINGH
Vs.
RESPONDENT:
CHATUR BHUJ GOEL
DATE OF JUDGMENT15/12/1987
BENCH:
SEN, A.P. (J)
BENCH:
SEN, A.P. (J)
RAY, B.C. (J)
CITATION:
1988 AIR 400 1988 SCR (2) 401
1988 SCC (1) 270 JT 1987 (4) 665
1987 SCALE (2)1338
ACT:
Civil Procedure Code, 1908: order XXIII Rule 3-
Settlement arrived at between parties in appeal-Compromise
not reduced in "writing and signed by the parties"-Whether
can be given effect to.
HEADNOTE:
%
A suit filed by the respondent for the specific
performance of a C contract entered into between him and the
father of the appellant was decreed by the trial court. A
Single Judge of the High Court affirmed the decree.
During the hearing of the Letters Patent Appeal filed
by the appellant, a settlement was arrived at between the
parties, and statements were made by them to that effect
before the court. The case was adjourned to the date on
which payment in terms of the compromise was to be made.
Though the statements formed part of the proceedings, the
compromise was not reduced in writing and signed by parties.
Taking advantage of this, the respondent tried to resile
from the compromise. When the case came up on the adjourned
date, the Division Bench directed that since the respondent
was not prepared to abide by the proposed compromise, the
appeal would be decided on merits and that the case should
be placed before another Bench.
ln the appeal by special leave against the aforesaid
decision, it was contended on behalf of the appellant that
the requirements of order XXIII Rule 3 Civil Procedure Code
were mandatory, that the claim in the suit for specific
performance having been settled by a lawful compromise
within the meaning of Rule 3, the High Court was not
justified in directing that the appeal be placed before
another Bench for decision on merits, that the word "in
writing and signed by the parties" qualified the words "any
lawful agreement or compromise" appearing in the first part
and, therefore, where the parties made a statement before
the Court that the dispute between them had been settled on
certain terms, and the settlement so made formed part of the
proceedings of the Court, there was no legal requirement to
have an agreement in writing embodying the terms of the
compromise.
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402
Dismissing the appeal,
^
HELD: The whole object of the amendment of Rule 3 of
the Civil Procedure Code, 1908 by adding the words "in
writing and signed by the parties" is to prevent false and
frivolous pleas that a suit has been adjusted wholly or in
part by any lawful agreement or compromise, with a view to
protract or delay the proceedings in the suit.[408C-D]
Under Rule 3 as it now stands when a claim in suit has
been adjusted wholly or in part by any lawful agreement or
compromise, the compromise must be in writing and signed by
the parties and there must be a completed agreement between
them. To constitute an adjustment, the agreement or
compromise must itself be capable of being embodied in a
decree. When the parties enter into a compromise during the
hearing of a suit or appeal, there is no reason why the
requirement that the compromise should be reduced in writing
in the from of the an instrument signed by the parties to
reduce the terms into writing. [408D-F]
The present case clearly does not come within the ambit
of the second part of Order XXIII Rule 3 of the Code. Under
the terms of the proposed compromise, the appellant was
required to pay Rs.2,25,000 by a bank draft on March 17,
1987 but before the due date the respondent resiled form the
promised compromise, saying that it was detrimental to his
interest. That being so, that appellant could only fall back
on the first part. But, in the absence of an agreement in
writing, the High Court had no other alternative but to
direct that the appeal be listed for hearing on merits.
[409C-D]
Manohar Lal & Anr. v. Surjan Singh & Anr., [1983] Punj.
Lj 402, overruled.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2035 of
1987.
From the Judgment and order dated 23.4.1987 of the High
Court of Punjab and Haryana in C.M.P. No 19 of 1987.
S.N. Kacker and R.S. Sodhi for the Appellant.
Mrs. Shyamla Pappu, A.M. Ashri, K.S. Thaper and V.K.
Jain for the Respondents.
403
The Judgment of the Court was delivered by A
SEN, J. The controversy in this appeal by special leave
centres, s around the words ’in writing and signed by the
parties’ added to order XXIII, r. 3 of the Code of Civil
Procedure, 1908 by the Code of Civil Procedure (Amendment)
Act, 1976 and the precise question is whether when a
settlement is arrived at between the parties in appeal
before the Court, the compromise cannot be given effect to
under Order XXIII, r. 3 of the Code unless the terms of the
compromise are embodied in an agreement in writing.
First as to the facts. The respondent herein Chatur
Bhuj Goel, a practising advocate at Chandigarh first lodged
a criminal complaint against Colonel Sukhdev Singh, father
of the appellant, under s. 420 of the Indian Penal Code,
1860 after he had served the respondent with a notice dated
July 11, 1979 forfeiting the amount of Rs.40,000 paid by him
by way of earnest money, alleging that he was in breach of
the contract dated June 4, 1979 entered into between Colonel
Sukhdev Singh, acting as guardian of the appellant, then a
minor, and the respondent, for the sale of a residential
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house at 1577, Sector 18D, Chandigarh for a consideration of
Rs.2,85,000. In terms of the agreement, the respondent was
to pay a further sum of Rs.1,35000() to the appellant’s
father Colonel Sukhdev Singh by July 10, 1979 when the said
agreement of sale was to be registered and vacant possession
of the house delivered to him, and the balance amount of Rs.
1,10,000 on or before January 31, 1980 when the deed of
conveyance was to be executed. The dispute between the
parties was that according to Colonel Sukhdev Singh, there
was failure on the part of the respondent to pay the amount
of Rs.1,35,000 and get the agreement registered, while the
respondent alleged that he had already purchased a bank
draft in the name of the appellant for Rs.1,35,000 on July
7, 1979 but the appellant’s father did not turn up to
receive the same. The respondent met him at his residence at
Chandigarh on the morning of July 16, 1979 when it was
agreed that they would meet in the District Court precincts
later in the day for the purpose of registration of the
agreement, but again the appellant’s father did not turn up.
Although the learned Additional Chief Judicial Magistrate by
order dated October 31, 1979 dismissed the complaint holding
that the dispute was of a civil nature and no process could
issue on the complaint, a learned Single Judge of the High
Court by his order dated February 11, 1980 set aside the
order of the learned Additional Chief Judicial Magistrate
holding that the facts brought out clearly warranted an
inference of dishonest intention on the part of Colonel
Sukhdev Singh and accordingly directed
404
him to proceed with the trial according to law.
Aggrieved, Colonel Sukhdev Singh came up in appeal to this
Court by special leave.
This Court by its order in Criminal Appeal No. 595/80
dated September 2, 1980 reversed the judgment of the High
Court on the ground that the dispute was purely of a civil
nature and the criminal 13 process could not have been
employed for the purpose of coercing the appellant’s
guardian Colonel Sukhdev Singh to specifically perform the
contract. It was directed that Colonel Sukhdev Singh should
return the earnest money of Rs.40,000 to the respondent on
or before October 5, 1980 and in the meanwhile, the
respondent was at liberty to file a suit for specific
performance of the contract, if so advised. It was observed
that the return of the said amount of Rs.40,000 by Colonel
Sukhdev Singh would be without prejudice to the rights and
contentions of the parties, including the right of the
respondent to claim specific performance of the contract, if
he was in law otherwise so entitled. Pursuant thereto, the
appellant’s guardian Colonel Sukhdev Singh refunded the
amount of Rs.40,000 to the respondent. On October 3, 1980
the respondent instituted the suit in the Court of the
District Judge, Chandigarh, out of which this appeal arises,
for specific performance of the contract and, in the
alternative, claimed Rs.2,50,000 by way of damages. Both the
learned District Judge as well as a learned Single Judge on
a consideration of the evidence came to the conclusion that
the breach of contract was on the part of the appellant’s
guardian Colonel Sukhdev Singh and not on the part of the
respondent and accordingly decreed the suit for specific
performance. Thereupon, the appellant preferred an appeal
under cl. 10 of the Letters Patent.
The hearing of the Letters Patent Appeal commenced
before a Division Bench on January 14, 1987 and continued
for three days. On January 16, 1987, the appellant’s counsel
had not concluded and there fore the hearing was adjourned
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to January 28, 1987. On that date, after the appellant’s
counsel had addressed the Court for a while, the parties
took time to explore the possibility of a settlement. At the
resumed hearing later in the day, the appellant’s father
Colonel Sukhdev Singh made a statement to the effect:
"I make an offer that I shall personally pay
Rs.2,25,000 to the respondent Chatur Bhuj Goel by
way of full and final settlement of the dispute
between him and the appellant. The said amount
shall be paid by a bank draft in Court on 17.3.87.
In the event of failure on my part to pay the
405
amount as stipulated on that date, the Letters
Patent Appeal No. 734 of 1983 shall stand
dismissed and the appellant shall have no right to
file an appeal against the decision to the Supreme
Court."
The above statement was duly endorsed by Shri V.K. Sharma,
learned counsel appearing for the appellant and stated: B
"The appellant makes an offer that in full and
final settlement of the dispute between the
parties, the appellant Gurpreet Singh in his
personal capacity or through his father Colonel
Sukhdev Singh shall pay Rs.2,25,000 to the
respondent on 17.3.87 by a bank draft payable at
Chandigarh, if the respondent agrees to the
Letters Patent Appeal No. 734 of 1983 being
allowed and that in the event of non-payment of
the amount on the stipulated date, the said appeal
shall stand dismissed and the appellant shall have
no right to file an appeal in the Supreme Court."
The respondent Chatur Bhuj Goel who, as already stated, is a
practising advocate, was respondent by Shri Bhagirath Dass,
a senior advocate practising at Chandigarh. Apparently, the
respondent on mature deliberation made the following
statement in the presence of his counsel
"I accept the offer made by Colonel Sukhdev Singh
and Shri V.K. Sharma, counsel for the appellant
Gurpreet Singh. ’
Thereupon, the learned Judges adjourned the appeal to
March 17, 1987 i.e. the date on which the payment of
Rs.2,25,000 was to be made. The aforesaid statements form
part of the proceedings of the Court. Admittedly, the
compromise was not reduced in writing and signed by the
parties. Taking advantage of this fact, the respondent on
February 9, 1987 made an application by which he tried to
resile from the compromise stating:
"on 28th January 1987, the offer of compromise was
made by the appellant, which was recorded. The
statement of the respondent was also recorded. The
respondent however did not sign the statement.
That the statement was made by the respondent
without thinking of the repercussions of his
statement. He was influenced by the stand, which
was
406
adopted by his Senior Advocate Shri Bhagirath
Dass. If the statement recorded by the Court which
has not been signed by the respondent is given
effect to, the respondent would suffer a
tremendous loss."
On the adjourned date i.e. March 17, 1987, the learned
Judges directed that in view of the fact that the respondent
was not prepared to abide by the proposed compromise, the
appeal would now be heard and decided on merits, with a
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further direction that it be placed before another Bench.
Hence, this appeal by special leave.
In support of the appeal Shri S.N. Kacker, learned
counsel for the appellant, contends that the requirements of
order XXIII, r. 3 of the Code are mandatory and the claim in
the suit for specific performance having been settled by a
lawful compromise within the meaning of r. 3, the learned
Judges were not justified in directing that the appeal be
placed before another bench for decision on merits. The
learned counsel submits that order XXIII, r. 3 of the Code
is in two parts. According to him, the words ’in writing and
signed by the parties’ qualify the words ’any lawful
agreement or compromise’ appearing in the first part and
these words cannot obviously be read into the second part at
all. It is urged that the first part of order XXIII, r. 3 of
the Code refers to an adjustment on settlement of the claim
in suit by a lawful agreement or compromise outside the
Court, meaning thereby that where the parties make a
statement before the Court that the dispute between them has
been settled on certain terms and the statements so made
form part of the proceedings of the Court, there is no legal
requirement to have an agreement in writing embodying the
terms of the compromise.
For a proper appreciation of the contentions advanced,
it is necessary to set out the Statement of objects and
Reasons which is in these terms:
"Cl. 77-Sub-cl(iii). It is provided that an
agreement or compromise under rule 3 should be in
writing and signed by the parties. This is with a
view to avoiding the setting up of oral agreements
or compromises to delay the progress of the suit.
The words ’lawful agreement or compromise’ in
rule 3 have given rise to a conflict in the matter
of interpreta-
407
tion. One view is that agreements which are
voidable under s. 19A of the Contract Act are not
excluded. While this stand is taken by the High
Courts of Allahabad, Calcutta. Madras and Kerala,
a contrary view has been expressed by the High
Courts of Bombay and Nagpur. An Explanation has,
therefore, been added to the rule to clarify the
position. A proviso has been added to clarify that
no adjournment should ordinarily be granted where
a decision is necessary as to whether an
adjustment or satisfaction has or has not been
arrived at
In view of the words ’so far as it relates to
the suit’ in rule 3, a question arises whether
decree which refers to the terms of a compromise
in respect of matters beyond the scope of the suit
is executable or whether the terms of the decree
relating to the matters outside the suit can be
enforced only by a separate suit. The amendment
seeks to clarify the position."
The provision contained in order XXIII, r. 3 of the Code, as
amended, provides:
"Where it is proved to the satisfaction of the
Court that a suit has been adjusted wholly or in
part by any lawful agreement or compromise, in
writing and signed by the parties, or where the
defendant satisfies the plaintiff in respect of
the whole or any part of the subject-matter of the
suit, the Court shall order such agreement,
compromise or satisfaction to be recorded, and
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shall pass a decree in accordance therewith so far
as it relates to the parties to the suit, whether
or not the subject-matter of the agreement,
compromise or satisfaction is the same as the
subject matter of the suit
Provided that where it is alleged by one
party and denied by the other that an adjustment
or satisfaction has been arrived at, the Court
shall decide the question; but no adjournment
shall be granted for the purpose of deciding the
question, unless the Court, for reasons to be
recorded thinks fit to grant such adjournment.
Explanation. An agreement or compromise which is
void or voidable under the Indian Contract Act,
1872 (9 of
408
1872), shall not be deemed to be lawful within the
meaning of this rule."
According to the grammatical construction, the word
’or’ makes the two conditions disjunctive. At first blush,
the argument of the learned counsel appears to be plausible
but that is of no avail. In our opinion, the present case
clearly falls within the first part and not the second. We
find no justification to confine the applicability of the
first part of order XXIII, r. 3 of the Code to a compromise
effected out of Court. Under the rule prior to the
amendment, the agreement com promising the suit could be
written or oral and necessarily the Court had to enquire
whether or not such compromise had been effected. It was
open to the Court to decide the matter by taking evidence in
the usual way or upon affidavits. The whole object of the
amendment by adding the words ’in writing and signed by the
parties’ is to prevent false and frivolous pleas that a suit
had been adjusted wholly or in part by any lawful agreement
or compromise, with a view to protract or delay the
proceedings in the suit.
Under r. 3 as it now stands, when a claim in suit has
been adjusted wholly or in part by any lawful agreement or
compromise, the compromise must be in writing and signed by
the parties and there must be a completed agreement between
them. To constitute an adjustment, the agreement or
compromise must itself be capable of being embodied in a
decree. When the parties enter into a compromise during the
hearing of a suit or appeal, there is no reason why the
requirement that the compromise should be reduced in writing
in the form of an instrument signed by the parties should be
dispensed with. The Court must therefore insist upon the
parties to reduce the terms into writing.
In our considered opinion, the view to the contrary
expressed by the High Court in Manohar Lal & Anr. v. Surjan
Singh & Anr., [1983] Punj. LJ 402 that the first part
relates to a lawful agreement or compromise arrived at by
the parties out of Court, does not seem to be correct.
Sandhawalia, CJ speaking for himself and Tewatia, J.
observes that the word ’or’ makes the two parts disjunctive
and they visualise two distinct and separate classes of
compromise. According to the learned Judges, the first part
relates to a lawful agreement or compromise arrived at by
the parties out of Court, while the second is applicable
where the defendant satisfies the plaintiff in respect of
the whole or any part of the subject matter of the suit.
Such a restricted construction is not warranted by the
language used in r. 3. The word
409
’satisfies’ denotes satisfaction of the claim of the
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plaintiff wholly or in part, and for this there need not be
an agreement in writing signed by the parties. It is open to
the defendant to prove such satisfaction by the production
of a receipt or payment through bank or otherwise. The
satisfaction of the claim could also be established by
tendering of evidence. It is for the Court to decide the
question upon taking evidence or by affidavits as to whether
there has in fact been such satisfaction of the claim and
pass a decree in accordance with order XXIII, r. 3 of the
Code.
In any event, the present case clearly does not come
within the ambit of the second part of order XXIII, r. 3 of
the Code. Under the terms of the proposed compromise, the
appellant was required to pay Rs.2,25,000 by a bank draft on
March 17, 1987, but the fact remains that the respondent
before the due date resiled from the proposed compromise
saying that it was detrimental to his interest. That being
so, the appellant could only fall back on the first part.
But in the absence of an agreement in writing, the learned
Judges had no other alternative but to direct that the
appeal be listed for hearing on merits.
In the result, the appeal must fail and is dismissed.
The High Court is directed to hear and decide the appeal on
merits. There shall be no order as to costs.
N.P.V. Appeal dismissed.
410