SCA/15498/2007 1/15 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 15498 of 2007 For Approval and Signature: HONOURABLE MR.JUSTICE M.R. SHAH ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================================= SANDHYA ORGANIC CHEMICALS PVT LTD. & 1 - Petitioner(s) Versus UNITED PHOSPHOROUS LIMITED & 2 - Respondent(s) ========================================================= Appearance : MR AMAR N BHATT for Petitioner(s) : 1 - 2. MR KAMAL TRIVEDI SR.ADV.FOR SINGHI & CO for Respondent(s) : 1, MR DHAVAL M BAROT for Respondent(s) : 2, MR JB PARDIWALA for Respondent(s) : 3, ========================================================= CORAM : HONOURABLE MR.JUSTICE M.R. SHAH Date : 29/09/2008 C.A.V. JUDGMENT 1. Rule. Mr.Kamal Trivedi, learned senior advocate, Mr.Dhaval Barot, learned advocate and Mr.JB Pardiwala, SCA/15498/2007 2/15 JUDGMENT learned advocate waive service of notice on behlaf of the respondent Nos.1, 2 and 3 repsectively. 2. With the consent of the parties, the matter is taken up for final hearing today. 3. By way of this petition under Article 227 of the Constitution of India, the petitioners – original defendant Nos.1 and 2 have prayed for appropriate writ, order and/or directions, quashing and setting aside the order 24/4/2007 passed by the learned Principal Senior Civil Judge, Valsad below Ex.186 in Special Civil Suit No.161 of 1996, by which the trial court has allowed the said application submitted by the original defendant No.3 accepting the consent terms arrived at between the plaintiff and the defendant No.3 and passing consent decree on the basis of the said consent terms and further passing an order to proceed further with the suit against the petitioners – original defendant Nos.1 and 2. 4. The respondent No.1 herein – original plaintiff has instituted Special Civil Suit No. 161 of 1996 against the petitioners and respondent No.3 herein - defendant Nos.1 to 3 for a declaration and permanent injunction and for damages to the tune of Rs.10 Crores against all the defendants alleging inter-alia that the defendants, in SCA/15498/2007 3/15 JUDGMENT collusion with each other, started manufacturing Aluminum Phosphide and Zinc Phosphide, by adopting process allegedly invented by the respondent No.1 herein - original plaintiff causing loss, damages or injury to it. In the said suit, the respondent No.1 – original plaintiff also submitted an application for temporary injunction restraining the defendants from adopting, using and/or resorting to the process allegedly invented by the plaintiff for manufacture of the Aluminum Phosphide and Zinc Phosphide 5. The defendants filed written statement at Ex.22 denying the claim of the plaintiff. It appears that an application Ex.64 was given by the defendant No.3 for taking a written statement and taking a stand inconsistence with Ex.22 on record. The evidence of the original defendant No.3 was submitted at Ex.179 in the form of Affidavit for Examination-in-chief and before he can be cross- examined, the original plaintiff and the defendant No.3 gave a purshis at Ex.186 submitting that they have compromised the suit as per the consent terms Ex.186 and that decree as per the consent terms may be passed. By the said purshis, defendant No.3 accepted the allegations levelled in the suit and defendant No.3 agreed SCA/15498/2007 4/15 JUDGMENT to pay Rs.25,000 by way of damages/compensation to the plaintiff. The defendant Nos.1 and 2 objected to the said compromise on the ground that the plaintiff and the defendant No.3 have colluded with each other to defeat the valuable rights of the defendant Nos.1 and 2 and that the defendant No.3 had taken a stand contrary to his written statement at Ex.22 and therefore, the compromise should not be recorded when the oral evidence of the defendant No.3 was not yet over. It was also submitted by the defendant Nos.1 and 2 that the compromise was not genuine and that the alleged compromise between some parties to the suit cannot be recorded. The learned trial court by the impugned order allowed the application Ex.186 and passed the consent decree in favour of the original plaintiff so far as against the defendant No.3 is concerned and passed further order to proceed further with the trial against the rest of the defendants i.e. defendant Nos.1 and 2, passing a decree directing the defendant No.3 to pay Rs.25,000 towards damages/compensation to the plaintiff on or before 31/3/2007. Being aggrieved by and dissatisfied with the order passed below application Ex.186 in passing a consent decree between the plaintiff and the SCA/15498/2007 5/15 JUDGMENT defendant No.3 and to proceed further with the trial against the rest of the defendant Nos.1 and 2, the petitioners – original defendant Nos.1 and 2 have preferred present Special Civil Application under Article 227 of the Constitution of India. 6. Mr.Mihir Joshi, learned senior advocate appearing on behalf of the defendant Nos.1 and 2 has vehemently submitted that the impugned order passed by the trial court is ex-facie contrary to law and against the provisions of the Code of Civil Procedure. It is submitted that the trial court has proceeded to pass the order under Order 23 Rule 1 (3) of the Code of Civil Procedure, whereas, application Ex.186 was given under Order 23 Rule 3 of the Code of Civil Procedure. It is submitted that when the oral evidence of the defendant No.3 was yet to over, the trial court could not have passed the order allowing application Ex.186 and passing the consent decree between the plaintiff and the original defendant No.3, more particularly when such order was likely to affect the petitioners' interest. It is further submitted that the defendant No.3 has colluded with the petitioners and had changed his version and was taking up a stand which is contrary to the stand taken in the written SCA/15498/2007 6/15 JUDGMENT statement Ex. 22. It is submitted that the trial court has erred in coming to the conclusion that the other defendants are not concerned with the compromise between the plaintiff and the defendant No.3 and that whether to compromise or not is within the powers of the said parties. It is submitted that the alleged compromise was not genuine and was a malafide attempt on the part of the plaintiff and the defendant No.3 to escape from admission of the defendant No.3 in his own cross examination, which was not over. 7. Mr.Joshi, learned Senior Advocate appearing on behalf of the petitioners- original defendant Nos.1 and 2 has relied upon the following decisions of the Hon'ble Supreme Court as well as Punjab and Hariyan High Court:- (i) A.I.R. 1961 S.C. 1795 (Tirumalachetti Rajaram Vs. Tirumalachetti Radhakrishnayya Chetty & Ors.). (ii)A.I.R. 1997 Punjab & Hariyana 155 (Chand Kaur Vs. Raj Kaur (died) & Ors.) 8. Mr.Joshi, learned Senior Advocate appearing on behalf of the petitioners - original defendant Nos.1 and 2 has submitted that before passing a consent decree in SCA/15498/2007 7/15 JUDGMENT exercise of the powers under Order 23 Rule 3 of the Code of Civil Procedure, Court must record satisfaction that adjustment of claim is by lawful agreement and parties have to be ad-liem as to the terms of compromise. It is submitted that therefore, when the said consent decree was affecting the rights of the petitioners and was prejudicial affecting the petitioners, the trial court ought not to have allowed the application Ex.186 and ought not to have passed the consent decree between the plaintiff and the defendant No.3. 9. On the other hand, Mr.Kamal Trivedi, learned Senior Advocate appearing for Singhi & Company while opposing the present Special Civil Application has heavily relied upon the following decisions:- (i) A.I.R. 1971 S.C. 1081 (Bai Chanchal & Ors. Vs. Syed Jalaluddin & Ors.) (ii)A.I.R. 1975 S.C. 2130 (Roshan Lal & Anr. Vs. Madanlal & Ors.). (iii)A.I.R. 1969 Gujarat 76 (V 56 C 16) (Modi Narandas Chhaganlal Vs. Shah Jamnadas Maneklal & Anr.). (iv)A.I.R. 1996 Bombay 338. (Ramchandra Bhikchand Nahar & another Vs. Narhar Maruti Udavant & Others). (v)A.I.R. 1998 ORISSA 145 SCA/15498/2007 8/15 JUDGMENT (Apani Dei alias Apana Devi & Another Vs. Purna Chandra Nayak & Ors.) 10.Mr. Trivedi, learned Advocate General has submitted that the original plaintiff had instituted the suit against the defendants for a decree of Rs.10 Crores from all the defendants towards damages and considering the financial position of the defendant No.3 and apprehending that if ultimately the suit is decreed, he will not be in a position to fulfill the decree and when the plaintiff was satisfied accepting Rs.25,000 only towards damages/compensation from the defendant No.3 and when the plaintiff and the defendant No.3 have submitted joint purshis / consent terms and on the basis of the same, when consent decree has been passed against the defendant No.3 of Rs.25,000 only, it cannot be said that the same is illegal and/or contrary to the provisions of the Code of Civil Procedure, more particularly Order 23 Rule 3 of the Code of Civil Procedure. It is submitted that the original defendant No.3 did not want to take chance of decree of huge amount against him. 11.It is further submitted by Mr.Trivedi, learned Advocate General that the apprehension on the part of the SCA/15498/2007 9/15 JUDGMENT petitioners – defendant Nos.1 and 2 that the said consent decree, purshis and the admission of the defendant No.3 would be adversely affecting the rights of the petitioners, is not well founded, as the same can never bind the petitioners – defendant Nos.1 and 2, as they are not party to the said consent terms and/or consent decree and therefore, it cannot be said that the impugned order passed by the trial court below application Ex.186 is in any way illegal, which requires to be quashed and set aside. 12.Heard the learned advocate appearing on behalf of the respective parties. 13.At the outset, it is required to be noted that the original plaintiff had instituted the Special Civil Suit No. 161 of 1996 against the defendants for declaration and permanent injunction and for damages to the tune of Rs.10 Crores from all the defendants. The defendant No.3 thought it fit that if at all ultimately the suit is decreed, he along with other defendants might have to face the decree of huge amount and therefore, he had compromised with the plaintiff and admitted the claim of the decree for a smaller amount and therefore, the defendant No.3 submitted purshis Ex.186 admitting to SCA/15498/2007 10/15 JUDGMENT pay Rs.25,000 towards damages / compensation to the plaintiff which came to be accepted by the plaintiff and on the said purshis / consent terms, the learned trial court passed consent decree against the defendant No.3 and directed to proceed further with the suit against the other defendants. Considering the above, it cannot be said that there is any illegality committed by the trial court and/or even the action of the defendant No.3 is malafide and/or in collusion with the plaintiff. The defendant No.3 did not want to take any chance and did not want to face decree of higher amount and therefore, he admitted to pay damages of Rs.25,000 to the plaintiff and the plaintiff has accepted the same. Considering the above facts, it cannot be said that there is any collusion between the plaintiff and the defendant No.3. It is also required to be noted at this stage that this Court specifically called upon the petitioners to submit that in case in future a decree is passed against the defendant No.3 for higher amount, may be in crores, will plaintiff make good the same and the defendant No.3 would not be fasten with the liability to pay more than Rs.25,000 and on that ground the case of the petitioners can be considered, but there is no answer and/or reply from the SCA/15498/2007 11/15 JUDGMENT petitioners. 14.Therefore, the contention on behalf of the petitioners that the aforesaid decree and the admission of the claim by the defendant No.3 would be adversely affecting the petitioners – defendant Nos.1 and 2 also cannot be accepted for the simple reason that admittedly they are not parties to the purshis and/or consent terms and/or consent decree and when they are not party to the consent terms / consent decree, naturally the consent decree will not bind them. Plaintiff has to prove their case on merits against rest of the defendants. 15.In the case of Bai Chanchal (supra), the Hon'ble Supreme Court, considering the provisions of Orders 22 and 23, has held that in the same suit, there can be more than one decree passed at different stage in same suit. 16.In the case of Ramchandra Bhikchand Nahar & Another (supra), the Bombay High Court has observed and held that no decree can be passed against all the defendants if consent terms is singed by only one and not by all of them, but if one or more defendants give consent, decree can be passed against that or those defendants, as the case may be and the suit may proceed with respect to the rest of the defendants, as SCA/15498/2007 12/15 JUDGMENT was observed by the Hon'ble Supreme Court in the case of Bai Chanchal (supra). In the said decision, the Bombay High Court has further held that merely because some of the parties who were continued in the array of defendants, decree passed against the consenting defendant will not be an invalid decree. 17. In the case of Apani Dei alias Apana Devi & Another (supra), the Orissa High Court, in a case where the petition was signed by only plaintiff and some of the defendants and other defendants who were not parties to the compromise submitted the objections to the recording of the compromise contending that the compromise between the appellant and the respondents who had singed the compromise, the same was collusive, the Orissa High Court disposed of the Revision Application by observing that the respondent No.1 (B-2) who has not signed the compromise, they would not be bind by the terms of the compromise and therefore, their interest, if any, in the property shall not be affected in any manner and whatever is stated in the compromise would not be binding on the said respondents who were not signatory to the compromise and the rights of the parties who had not signed compromise have to be SCA/15498/2007 13/15 JUDGMENT decided on the basis of materials on record without being influenced in any manner by way of recital in the compromise petition. 18.In the case of Modi Narandas Chhaganlal (supra), the learned Single Judge of this Court has observed and held that while recording agreement and passing decree under Order 23 Rule 3 of the Code of Civil Procedure all that the court has to do in such a case is to see whether the settlement or the compromise is lawful one or not. If it is a lawful compromise or settlement, the Court is bound to pass a decree in terms of the settlement to the extent that it settles the dispute between the parties. It is also further observed and held that the Court is not required to enter upon any enquiry as to what were the mens adopted by the parties to arrive at such an agreement or compromise; or what persuaded the parties to enter into such a compromise or adjustment or what were the matters considered by the parties in arriving at such a settlement or compromise. 19.Under the circumstances and considering the above, more particularly when it is so stated in the purshis submitted by the defendant No.3 that looking to his financial position it is not possible for the him to take a SCA/15498/2007 14/15 JUDGMENT risk and therefore, he agreed to pay Rs.25,000 towards the claim of the plaintiff in the suit by way of damages and that the plaintiff has accepted the same and considering the same, when a consent decree is passed only between the plaintiff and the defendant No.3, it cannot be said that any illegality has been committed by the trial court and/or has acted without jurisdiction. As the defendant Nos.1 and 2 have not signed the compromise, obviously they would not be bound by the terms of the compromise and/or their right and/or defence shall not be affected in any manner by the said consent decree and/or admission of the defendant No.3. The rights of the petitioners – defendant Nos.1 and 2, who have not signed the compromise and who are not party to the compromise, have to be decided on the basis of the (rights and defence) material on record without being influenced in any manner by way of recital in the purshis submitted by the respondent No.3 and the consent decree and that the consent terms shall not in any way affect the rights and defence of the petitioners – defendant Nos.1 and 2 in any manner whatsoever. Considering the above, now the suit against the petitioners - defendant Nos.1 and 2 shall have to be SCA/15498/2007 15/15 JUDGMENT proceeded further and the same shall be decided by the trial court in accordance with law and on merits, in light of the observations made hereinabove. 20.For the reasons stated above, the petition deserves to be dismissed and is accordingly dismissed. Rule is discharged. Interim relief, if any, stands vacated forthwith. [M.R. SHAH, J.] rafik After pronouncement of the judgement, Mr.Amar Bhatt, learned advocate appearing on behalf of the petitioners requests to continue the ad-interim relief granted earlier so as to enable the petitioners to approach the higher forum. The prayer is opposed by the learned advocates appearing on behalf of the respondents. In the facts and circumstances of the case, the ad-interim relief granted earlier is directed to be continued upto 19/10/2008. [M.R. SHAH, J.] rafik