LPA/1189/2008 1/13 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD LETTERS PATENT APPEAL No. 1189 of 2008 In SPECIAL CIVIL APPLICATION No. 15498 of 2007 For Approval and Signature: HONOURABLE MR. JUSTICE MOHIT S. SHAH HONOURABLE MS.JUSTICE H.N.DEVANI ========================================= = 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 - Appellant(s) Versus UNITED PHOSPHOROUS LIMITED & 2 - Respondent(s) ========================================= = Appearance : MR AMAR N BHATT for Appellant(s) : 1 - 2. SINGHI & CO for Respondent(s) : 1, None for Respondent(s) : 2 - 3. ========================================= = CORAM : HONOURABLE MR. JUSTICE MOHIT S. SHAH and HONOURABLE MS.JUSTICE H.N.DEVANI LPA/1189/2008 2/13 JUDGMENT Date : 16/12/2008 CAV JUDGMENT (Per : HONOURABLE MS.JUSTICE H.N.DEVANI) 1. This Appeal under clause 15 of the Letters Patent challenges the judgement and order dated 29th September, 2008 passed by the learned Single Judge in Special Civil Application No.15498 of 2007 whereby the petition filed by the appellant herein challenging the order dated 24th April, 2007 passed by the learned Principal Senior Civil Judge, Valsad below Exhibit 186 in Special Civil Suit No.161/96 has been dismissed. 2. The facts stated briefly are that the respondent No.1 herein instituted a suit being Special Civil Suit No.161 of 1996 in the Court of the Civil Judge (SD) Valsad, against the appellants and the respondent No.2 herein, inter alia for a declaration and permanent injunction and for damages to the tune of Rs.10 crores from the appellants and respondent No.2 herein. In the suit, it is, inter alia, the case of the respondent No.1 that the appellants and the respondent No.2 in collusion with each other have started manufacturing Aluminium Phosphide and Zinc Phosphide by adopting process allegedly invented by the respondent No.1 herein causing loss, damage or injury to the respondent No.1. In the said suit, the appellants filed their written statement. It is the case of the appellants that the respondent No.2 also filed written statement Exh.22 denying the claim of the respondent No.1. Subsequently on 7th August, 2001, the respondent No.2 LPA/1189/2008 3/13 JUDGMENT gave an application at Exh.64 for taking on record a written statement wherein a stand inconsistent with the stand taken in the written statement Exh.22, on which later on it was endorsed on behalf of the respondent No.2 that he does not press the said application at Exh.64. On 9th April, 2002, once again the respondent No.2 submitted an application Exh.73 for taking on record a written statement taking a stand which was inconsistent with the stand taken in the written statement Exh.22, which came to be rejected by the Trial Court on the ground that the respondent No.2 had already filed his written statement at Exh.22. The evidence of respondent No.1 was completed on 3rd January, 2006. On 5th December, 2006 the respondent No.2 gave his oral evidence in the form of an affidavit of examination in chief at Exh.179. On 19th February, 2007 the appellant’s advocate cross-examined the respondent No.2 and the cross-examination was in progress. At that stage on 2nd March, 2007 the respondents No.1 and 2 gave a Purshis Exh.186 stating that they have compromised the suit in the terms stated therein and prayed that a decree in terms of the compromise be passed. The said prayer was objected to by the appellants on the ground that the respondents No.1 and 2 were colluding with each other to defeat the valuable rights of the appellants; that the respondent No.2 had taken a stand contrary to the stand taken by him in his written statement at Exh.22; that the compromise could not have been recorded when the oral evidence of the respondent No.2 was not yet over; that the compromise was not genuine and that the alleged compromise between some parties to the suit cannot be LPA/1189/2008 4/13 JUDGMENT recorded. 3. Vide its order dated 24th April, 2007, the trial court allowed the application Exh.186 and passed a decree in terms of the compromise between the respondent No.1 and respondent No.2. The appellants challenged the aforesaid order passed by the trial Court before this Court by way of a writ petition being Special Civil Application No.15498 of 2007. By the impugned judgement and order dated 29th September, 2008 the learned Single Judge was pleased to dismiss the petition. Being aggrieved the appellants have preferred the present appeal under clause 15 of the Letters Patent. 4. Heard Mr. Mihir Joshi learned Senior Advocate with Mr.Amar N. Bhatt learned Advocate for the appellants and Mr. K.B. Trivedi learned Senior Advocate with Mr.B.H. Chhatrapati learned Advocate for M/s Singhi and Co. for the respondent No.1. 5. Mr. Mihir Joshi learned Senior Advocate for the appellants submitted that respondent No.2 had initially filed a written statement Exh.22 denying the allegations made in the suit. Subsequently he had sought to file another written statement taking a stand contrary to the stand taken in the earlier written statement, which application had been rejected by the Trial Court. It was pointed out that the respondent No.2 had filed his examination in chief by way of affidavit and cross examination of the respondent No.2 was in progress at which stage application Exh.186 was filed praying for a decree in LPA/1189/2008 5/13 JUDGMENT terms of the compromise arrived at between the respondent No.1 and 2. It was urged that the compromise arrived at between the respondents was not a genuine one and was a malafide attempt on the part of the respondents No.1 and 2 to get away and get out of the admission of the respondent No.2 in his cross examination which is not yet over and that the respondents No.1 and 2 had colluded with each other to defeat the valuable rights of the appellants. It was submitted that the respondent No.2 had taken a stand contrary to his written statement and that the compromise could not have been recorded when the oral evidence of the respondent No.2 was not yet over, more particularly as such order was likely to affect the interest of the appellants. It was further submitted that by passing a decree in terms of the compromise, a situation has been created, whereby there would be two decrees arising from a single suit. It was further submitted that the trial Court has passed the order under Order 23 Rule 1 (3) of the Code of Civil Procedure, 1908 whereas the application ought to have been treated as one under Order 23 Rule 3 of the CPC. It was submitted that parties could be permitted to compromise a suit under Order 23 Rule 3 provided it is proved to the satisfaction of the Court that the suit has been adjusted wholly or in part by a lawful agreement or compromise. In support of his submissions the learned Counsel placed reliance upon the decision of the Punjab and Haryana High Court in the case of Chand Kaur v. Raj Kaur (died) & Others, AIR 1997 P & H 155 and more particularly to paragraph 13 thereof for the proposition that Order 23 of the Code LPA/1189/2008 6/13 JUDGMENT postulates that it is only some forms of compromises or agreements which, subject to their being in writing and lawful, can be recorded by a Court and a decree passed in terms thereof provided they judiciously satisfy the Court of these ingredients. The minimum pre-requisite of a valid compromise is that it must emerge from a willing and voluntary act of the parties and an act which is forced on the parties looses the very essence of its being a valid and lawful agreement. The parties have to be ad idem with regard to the terms which emerge from a valid consent and terms which are lawful. That in case of compromise between some of the parties to the suit and prayer for passing of a decree affecting rights of all, the Court has the discretion to accept or reject such a request. It was submitted that the Trial Court without recording such satisfaction has proceeded to pass order below Exh.186 applying order 23 Rule 1(3) of the CPC. It was urged that in the circumstances, the Trial Court has erred in allowing the application Exh.186 and that the learned Single Judge was not justified in confirming the order passed by the trial Court. 6. On the other hand Mr.K.B. Trivedi learned Senior Advocate with Mr. B.H. Chattrapati for the respondent No.1 vehemently opposed the appeal. It was submitted that the compromise between the respondent No.1 and respondent No.2 could in no manner prejudicially affect the right of the appellants. It was submitted that the respondent No.2 did not want to take any chance and did not want to face decree of higher amount and therefore entered into a compromise with the respondent No.1 LPA/1189/2008 7/13 JUDGMENT admitting his liability to pay damages of Rs.25,000/-. It was argued that the said settlement is only between the respondents No.1 and 2 and as such the decree passed on the basis of the said settlement would not bind the appellants so as to prejudicially affect their interest. As regards the contention that there cannot be two decrees from a single suit, the learned Counsel has placed reliance upon a decision of the Supreme Court in the case of Bai Chanchal v. S. Jalaluddin, AIR 1971 SC 1081 and more particularly to paragraph 8 thereof wherein it has been held that in the same suit, there can be more than one decree passed at different stages. Reliance was placed upon the decision of the Bombay High Court in the case of Ramchandra Bhikchand Nahar v. Nahar Maruti Udavant, AIR 1996 Bom 338 for the proposition that if one or more defendants give consent, then decree can be passed against that or those defendants, as the case may be, and the suit may proceed in respect of the rest of the defendants. Reliance was also placed on the decision of this Court in the case of Modi Narandas Chhaganlal v. Shah Jamnadas Maneklal, AIR 1969 Gujarat 76. The decision of the Orissa High Court in the case of Apani Dei alias Apana Devi v. Purna Chandra Nayak, AIR 1998 Orissa 145 was cited for the proposition that the rights of parties who have not signed the compromise have to be decided on the basis of the material on record without being influenced in any manner by way of the recitals in the compromise petition. It was accordingly submitted that no prejudice is caused to the interest of the appellants. The decision of the Supreme Court in the case of Roshan Lal v. Madan Lal, LPA/1189/2008 8/13 JUDGMENT AIR 1975 SC 2130 was cited for the proposition that if parties choose to enter into a compromise due to any reason such as to avoid the risk of protracted litigating expenses, it is open to them to do so. The Court can pass a decree on the basis of the compromise. In such a situation the only thing to be seen is whether the compromise is in violation of any requirement of law. It was, accordingly, urged that the Trial Court was therefore justified in passing a decree in terms of the compromise arrived at between the respondents No.1 and 2 and the learned Single Judge was right in upholding the same. That the appeal being devoid of any merit deserves to be dismissed. 7. From the facts and circumstances noted hereinabove it is apparent that one of the defendants in the suit has entered into a compromise with the plaintiff by admitting his liability to pay damages. According to the appellants, the decree passed in terms of the compromise arrived at between the respondents No.1 and 2 is prejudicial to the interest of the appellants as the same could be used as evidence against the appellants. The said contention is thoroughly misconceived in view of the fact that the said compromise does not in any manner bind the appellants. The apprehension that the admission made by the respondent No.2 could be used as evidence against the appellants is also without any basis inasmuch as the admission made in the compromise purshis cannot ipso facto be used as an admission of the respondent No.2 in further proceedings against the appellants without any evidence in that regard being led by the respondent No.2, LPA/1189/2008 9/13 JUDGMENT in which case the appellants would get an opportunity of cross-examining him. The submission that the trial Court ought to have passed the order under Order 23 Rule 3 and not under order 23 Rule 1(3) also does not carry the case of the appellants any further inasmuch as the impugned order duly meets with the requirements of Order 23 Rule 3. Besides, nothing has been pointed out to show that the compromise is in any manner unlawful. We agree with the view taken by this Court in the case of Modi Chhaganlal (supra), wherein it has been held thus: “Order 23, Rule 3 of the Civil Procedure Code gives unlimited latitude to the parties to a suit to settle the disputes between them in any manner they like and they can always put that settlement of dispute before the Court and request the Court to make a decree in terms of that settlement. 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. The Court is not required to enter upon any enquiry as to what were the means adopted by the parties to arrive at such an agreement or compromise; or who 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.” 8. As regards the contention that the impugned order LPA/1189/2008 10/13 JUDGMENT passed by the trial Court would result in a situation whereby there would be two decrees arising from the same suit, it is settled legal position as held by the Supreme Court in the case of Bai Chanchal (supra) that in the same suit, there can be more than one decree passed at different stages between different defendants. 9. The learned Single Judge on consideration of the submissions advanced by the learned Advocates for the parties and the record of the case, has recorded the following findings: “[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 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 LPA/1189/2008 11/13 JUDGMENT 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 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.” LPA/1189/2008 12/13 JUDGMENT 10.The learned Single Judge after referring to the various decisions cited on behalf of the parties further held as follows: “[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 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 LPA/1189/2008 13/13 JUDGMENT 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 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.” 11.We are in full agreement with the reasoning adopted by the learned Single Judge and do not find any reason to take a different view. In the circumstances, as there is no infirmity in the impugned judgment and order passed by the learned Single Judge, the appeal does not merit acceptance and is accordingly dismissed. 12.At this stage, the learned counsel for the appellant prays that the ad-interim stay operating may be continued for some time to enable the appellant to take further recourse in accordance with law. 13.In the facts and circumstances of the case, the request is granted. Ad-interim stay operating so far shall continue for a period of one month from today. [M.S.SHAH, J.] [HARSHA DEVANI, J.] parmar*