* HIGH COURT OF DELHI : NEW DELHI + IA No. 47/2007 in CS(OS) No. 1394/96 and IA No. 36/07 in CS(OS) No. 434/1998 Judgment reserved on: May 10, 2007 % Judgment delivered on: October 5, 2007 Shri K.K Modi & Anr. ..... Plaintiffs Through: Mr. S.Ganesh, and Mr. Jayant Bhushan, Sr. Advocates, with Mr. Pravin Bahadur, Ms. Meghalee Barthakur, Ms.Kanika Gomber, Mr. Rajan Narain , Advocates. versus Shri K.N. Modi & Ors. ..... Defendants Through: Ms. Neha Khatri Advocate for defendant No. 3 and Lrs of defendant No. 1. Ms. Bharti, Advocate for defendant No. 2. Mr. Amit Chadha Sr. Advocate with Ms. Jayshree Shukla, Ms. Geeta Sharma and Ms. Preeti Dalal, Advocates for D.K. Modi/defendant no.15. Mr. Alok Dhir, Ms. Jayshree Shukla and Ms. Preeti Dalal , Advocates for Ginni Modi. Mr. P.K. Bansal for defendant no.12. Mr. A.S. Mathur for defendant No. 14 and LR of Dr. K.N.Modi Mr. Anurag Dubey, Mr. Meenesh Dubey, Ms. Anu Sahney for Mr. U.K. Modi. CORAM: HON'BLE MR. JUSTICE VIPIN SANGHI 1. Whether the Reporters of local papers may be allowed to see the judgment? CS(OS)1394-96 page 1 of 29 2. To be referred to Reporter or not? Yes 3. Whether the judgment should be reported Yes in the Digest? VIPIN SANGHI, J 1. By this order, I proceed to dispose of IA No. 47/2007 in CS(OS) No. 1394/96 and IA No. 36/07 in CS(OS) No. 434/1998, both filed under Order XXIII Rule 1 CPC by the respective plaintiffs in these suits for unconditional withdrawal of these suits. 2. The applications are vehemently opposed by defendant no. 12, Dr. B. K. Modi and defendant no.15, Dr. D. K. Modi in Suit No.1394/1996 and lengthy arguments have been addressed by both sides on the question as to whether the plaintiffs in these suits can be permitted to withdraw the suits unconditionally or not. Smt. Ginni Modi, defendant no.1A in the aforesaid suit has also opposed the said applications. In suit No.434/1998, Dr. D.K. Modi (Defendant no. 3A) and Ginni Modi (Defendant no. 3B) are the objecting defendants. Dr. B.K.Modi is not arrayed as defendant in the said suit. Background Facts: 3. Late Shri Gujjar Mal Modi had five sons; (i) Sh. K.K. Modi, (ii) Shri V.K. Modi, (iii) Shri S. K. Modi, (iv) Dr. B. K. Modi and (v) Shri U.K. Modi. CS(OS)1394-96 page 2 of 29 4. His younger brother Kedar Nath Modi (K.N. Modi) has three sons; (i) Shri M. K. Modi, (ii) Shri Y.K. Modi and (iii) Dr. D. K. Modi. 5. The Modi family has been in control of a large number of public limited companies, which hold properties, assets and businesses. The family also holds various other assets. Disputes surfaced between the members of the family and two groups were formed. Group 'A' comprises of Shri K.N. Modi and his three sons, and Group 'B' comprising of 5 sons of Late Gujjar Mal Modi. 6. A settlement was arrived at, and reduced to a Memorandum of Understanding (MOU) dated 24.1.1989 with the intervention of Financial Institutions, such as Industrial Finance Corporation of India Ltd. (IFCI), who also had a stake in seeing that the disputes get amicably resolved, as they have heavily invested in the various companies in question. Parties began implementing the understanding so arrived at. Clause 9, inter alia, stated that all disputes, clarifications etc. in respect of the implementation of the understanding shall be referred to the Chairman, IFCI or his nominee whose decision will be final and binding on the groups. In this process various representations were made to the Chairman and Managing Director of IFCI. The Chairman, IFCI submitted his report on 8th December, 1995 on the disputes referred to him, indicating therein CS(OS)1394-96 page 3 of 29 that the MOU already stood implemented to a large extent. As per the said report Rs.2135.55 lacs was payable by Group 'B' to Group 'A' by 1st January, 1996. 7. On 20.5.1996 suit No. 1394/96 was filed by Shri K.K. Modi and Shri S.K. Modi (Group B) to seek various reliefs of declaration and injunction, inter alia, to enforce the MOU dated 24.1.1989 and in respect of the decision of the Chairman, IFCI. In 1998, Sh. M.K. Modi (Group'A') filed suit No. 434/98. This suit primarily pertained to one of the companies viz. Modipon Ltd. Subsequently, Sh.U.K. Modi and Sh. V.K. Modi (of Group 'B') filed suits bearing nos. 2712/1998 and 2694/1998 respectively. These suits also sought, inter alia, the declaration that the MOU dated 24.1.1989 is binding on all the parties and also sought reliefs regarding the decision of the Chairman IFCI. On 28.9.1999, the above four suits were consolidated. 8. Common issues have been framed in all the suits, and all the parties have made a statement that they do not wish to lead any evidence and that the suits may be decided on the basis of the record. 9. Shri. K. K. Modi (Group B) and Shri. M. K. Modi (Group A) signed an “Aide Memoire” on 22.3.2003 to resolve their inter se disputes. Clause 1 (3) of the Aide Memoire provides for withdrawal of pending cases including in particular, suit Nos. 1394/96 and suit No. 434/98 by the respective plaintiffs. CS(OS)1394-96 page 4 of 29 10. In pursuance of the said mutual agreement between Shri. K.K. Modi and Shri M.K. Modi, the aforesaid applications have been filed by them to withdraw the respective suits filed by each one of them. Release of the amount of Rs. 5 crores deposited at the behest of Shri K.K. Modi the plaintiff in Suit No.1394/96 in this Court, on the direction of the Hon'ble Supreme Court given on 4.2.1988, as a condition for grant of an injunction restraining the sale of shares of Godfrey Philips (India) Ltd. is also prayed for. As aforesaid, these applications for unconditional withdrawal of suits have been opposed primarily by defendant nos. 12, Dr. B.K. Modi & 15, Dr. D.K. Modi (in suit no. 1399/1996) (herein also referred to as the objecting defendants) who have filed their replies to the said applications. 11. Since an application for unconditional withdrawal of a suit is generally granted, the plaintiff being the dominus litus, i.e., the master of the suit, subject, of course to the award of costs to the defendants if the court considers just in the facts and circumstances of the case (see AIR 1994 Delhi 207, AIR 1968 SC 111), it would be appropriate to first set out the objections raised by the objecting defendants to such unconditional withdrawal, as their contentions are that there are legally recognised exceptions to the said general rule, and that the suits sought to be withdrawn fall within those exceptions. OBJECTING DEFENDANTS CONTENTIONS CS(OS)1394-96 page 5 of 29 12. The objecting defendants contend that there is no absolute right of withdrawal of a suit. They content that in the peculiar facts and circumstances of the present case, as certain rights have got vested in favour of the defendants due to the pendency of these suits, plaintiffs cannot be permitted to withdraw the suits. The two suits in question have been filed to seek enforcement of the MOU dated 24.1.1989, which is in the nature of family settlement and is to be viewed differently. They rely on the observations of the Hon'ble Supreme Court in K.K.Modi v. K.N.Modi & Ors (1998) 3SCC 573, paragraph 52, which is a decision inter-parties, where they say, the Hon'ble Supreme Court observed that the MOU in question has been acted upon by some members of the family since 1989 and parties must be held to the settlement, which is in the interest of the family. They submit that all the parties have accepted the MOU, and have at no point in time sought to challenge the same. All the family members have been seeking the implementation of the said MOU. The respective rights and obligations of all the parties have to be determined in these suits. Each party has to receive something under the said MOU. The suits are akin to suits for partition of family property. Thus, each party is a plaintiff and therefore the suit cannot be permitted to be withdrawn. If the plaintiffs in these suits are permitted to withdraw the two suits, the defendants would be left remedeless, since their rights to claim enforcement of the MOU as a CS(OS)1394-96 page 6 of 29 family settlement and seek partition in terms thereof would either get barred by limitation or, at least, they would be relegated to filing their own suits at this stage, when the present suits are ripe for final hearing. Defendant no. 15 contends that he has interest in determination of issues pertaining to the validity and enforceability of the decision of the Chairman, IFC Ltd. under clause 9 of the Memo of Understanding and with regard to the scope and effect of the aforesaid “Aid Memoire”. They have also referred to the order dated 29.11.2005 of the Hon'ble Supreme Court in Civil Appeal No.9195-96/2003 M.K.Modi v. K. K. Modi & Others, with CA No.9197-9198/2003” IFCI Ltd. v. K.K.Modi & Others. Modipon Ltd. to contend that the said plaintiffs had led the Hon'ble Supreme Court to pass the said order on the premise that these suits would proceed and that they would be disposed off expeditiously. Withdrawal of these suits, when they are at the final stage of hearing is a dishonest and malafide attempt to scuttle the rights of the defendants. Defendant No. 15 particularly raised an objection to the withdrawal of the suit without a decision on the issue of transfer of seven lakhs shares of Modipon Ltd. which may result in collapse of the scheme sanctioned by BIFR and as approved by AAIFR. 13. It is also contended that the plaintiff Shri K.K. Modi has obtained an advantage/benefit under the suit inasmuch as, the plaintiff in suit nos. 1394/1996 opposed the transfer of seven lakhs shares of CS(OS)1394-96 page 7 of 29 Modipon Ltd. in favour of Rajputana Distillaries Ltd. The Hon'ble Supreme Court passed an order on 7.1.1998 whereunder the transfer of the shares held by Group A companies in Godfrey Phillips India Ltd was stayed, subject to the plaintiff Shri K.K. Modi depositing Rs. 5 crores in this suit. The interim order pertaining to share holding in Modipon Limited was also continued. 14. Defendants contend that the plaintiffs have all this while prevented the transfer of these 7 lakhs shares of Modipon Ltd. in favour of Rajputana Distillaries Ltd. by keeping this suit pending. The defendants further contend that the plaintiff have prevented the AAIFR from pronouncing upon the Memorandum of Understanding on the ground that these suits are pending and that the said issue would be determined in these suits. Now that the time for determination has arrived, the plaintiffs in these suits are seeking to withdraw the suits to prevent the determination of the validity and enforceability of the Memorandum of Understanding and other related issues. It is argued that the applications for withdrawal have been filed after the defendants had filed IA No. 13117/2006 in Suit No. 1394/1996 to seek a restraint against the implementation of the “Aid Memoire”, and merely to avoid a decision on that application. 15. Moreover, vide order dated 28.9.1999 the above four suits were consolidated as raising interconnected issues. Consolidated CS(OS)1394-96 page 8 of 29 issues have been framed in these four suits and therefore it is not possible to bifurcate these issues with regard to a particular case. Thus, the individual suits have lost their independent existence, and have became one suit for all practical purposes. To draw support, several decisions have been relied upon which I will deal with later. Plaintiffs contentions 16. The suits are being withdrawn unconditionally and without seeking any liberty to file a fresh suit on the same cause of action. The plaintiff has an unqualified right to abandon his claim at any stage and withdraw his suit. The present suits are not for partition, nor has any preliminary decree been passed in the suits for any vested right to come into existence in favour of any of the parties. 17. Moreover, the application filed by K.K. Modi for amendment of plaint, seeking to bring on record the said “Aide Memoire” and praying for orders and directions in accordance therewith has already been allowed on 11.4.2005. No objection to the said amendment was taken by Dr. B.K. Modi, defendant No. 2 and having so acquiesced to the said “Aide Memoire”, it is not open to Dr. B.K. Modi to object to withdrawal of suit no. 1394/96. Said defendant No. 2 in suit No. 1394 of 1996 was expressly given the liberty to get himself impleaded as a plaintiff in suit no. 1394/96. The offer is duly recorded in the order dated 16.4.1998 of S. N. Kapur, J. However, he did not choose to avail CS(OS)1394-96 page 9 of 29 of the opportunity. Therefore, the said defendant cannot now object to the withdrawal of his suit by the plaintiff. Moreover, the said defendant has till date not even filed his written statement, and by his conduct he is dis-entitled from raising objections to the withdrawal of the suit. 18. Dr. B.K. Modi, defendant no. 12 has also filed an affidavit dated 14.1.2005 affirming that the “Aide Memoire” provides for full and final settlement of all disputes between Shri K.K. Modi & Shri M. K. Modi, and the plaintiff contends that after having acquiesced in the said “Aide Memoire”, the said defendant cannot now seek to object to the withdrawal of the suit, since the withdrawal is in consonance with the terms of the “Aide Memoire”. 19. Smt. Ginni Modi, one of the Legal representative of deceased defendant no. 1 Sh. K. N. Modi had also filed an affidavit dated 19.7.2005 unequivocally stating that she was not an interested party in determination of the issues by the Court in the suit. She has also signed a formal declaration dated 7.9.2005 relinquishing all her rights/interests in properties, assets, etc. of the deceased defendant no.1. She has also sought her deletion as a party defendant to the suit. Thus, she cannot object to the suit being withdrawn. DISCUSSION & DECISION 20. Before dealing with the rival submissions made and the law cited by the parties, I may note that on 10.5.2007, with the consent of CS(OS)1394-96 page 10 of 29 parties, the following order was passed with regard to the seven lakh shares of Modipon Ltd. and for that reason, objection of defendant no.15 to that extent has become infructuous: “+I.A.Nos. 11046/03, 931/04, 5821/04 and 6163/04 in CS(OS)434/1998 with I.A Nos.11047/03, 932/04, 6198/04,5292/04 in CS(OS)No.1394/96 With the consent of the parties this order is being passed in the aforesaid two suits and the same be placed in the files of both the suits. The parties agree that 7 lakh shares of Modipon Ltd held by Modi Spinning and Weaving Mills Ltd be transferred to Rajputana Fertilisers Ltd, in terms of the scheme formulated by BIFR and as approved by the AAIFR in its order dated 11-8- 2006. Accordingly the interim order dated 13-9- 2004 passed in Suit No.434/98 stands vacated. There is no impediment on the transfer of 7 lakh shares of Modipon Ltd held by Modi Spinning and Weaving Mills Ltd to Rajputana Fertilisers Ltd., in terms of the scheme sanctioned by the BIFR on 24th March, 2004 and subsequently confirmed by the AAIFR in its order dated 11th August, 2006. The aforesaid applications are accordingly disposed of.” 21. On the same day an order was passed with regard to the withdrawal by the plaintiff of the amount of Rs.5.00 crores and the vacation of the stay on the transfer of shares of Godfray Phillips India Ltd. in the following terms. CS(OS)1394-96 page 11 of 29 “+I.A. No.47/07 in CS(OS)1394/1996 Arguments have been heard by me at length on this application and they are still continuing. Counsel for the plaintiff points out that in terms of the directions issued by the Hon'ble Supreme Court in its judgment in Civil Appeal No.613/98 and 614/98 along with T.C.13/97 decided on 4-2- 1998, which is reported as (1998) 3 SCC 573 and further order of this Court dated 5-3-1998, the defendants in the suit designated as Group `A' headed by Late Shri K.K.Modi, now by Shri M.K.Modi, Shri Y. K. Modi and Shri D.K.Modi were restrained from selling any shares held in Godfrey Philips India, provided the plaintiffs in the suit i.e. K.K. Modi & Ors. deposit a sum of Rs. 5 crores within four weeks from the date of the said order. In accordance with that order, Indofil Chemical, the chemical division of Modipon Limited, which is under the control of the plaintiff deposited for and on behalf of plaintiff no.1, an amount of Rs.5 crores in the name of the Registrar of this Court. The said amount was thereafter invested in a fixed deposit with Corporation Bank, Connaught Place, New Delhi. The fixed deposit matured on 23rd March, 2007, and counsel for the plaintiff states that the same has been renewed once again. Counsel for the plaintiff submits that since the said deposit was made only with a view to secure the interim protection to prevent the parties designated as Group A as aforesaid from selling their shares held in Godfrey Philips India, they be permitted to withdraw the amounts deposited since they are no longer pressing for continuance of the stay. Counsel appearing for defendants 2, 13 and 15 have no objection to the withdrawal of CS(OS)1394-96 page 12 of 29 the deposit made by the plaintiffs since the interim injunction is also simultaneously vacated. Counsel for defendant no.12 however does not consent to the same. In any event, in my view since the deposit was required to be made only as a condition for enforcement of an interim order and since the plaintiff has himself stated that he does not wish that the interim order should continue, I see no impediment in directing the return of the amounts deposited along with upto date interest to the plaintiff. The plaintiff prays that the amount to be returned, be paid through a cheque drawn in favour of Indofil Chemical Company. Let the registry draw out a cheque in the name of Indofil Chemical Company for the entire proceeds lying deposited in the fixed deposit, details whereof are mentioned in para 4 of the application which is stated to have been renewed on its expiry on 23-3-2007. The plaintiff's counsel should collect the cheque from the Deputy Registrar(O) on 17-5-2007 at 2 p.m. This order is being passed without prejudice to the rights and contentions of the parties. Interim order dated 5th March, 1998 passed in CS(OS) 434/1998 stands vacated.” 22. Consequently, the objections of the contesting defendants based on the stay of transfer of the shares of Modipon Ltd. and Godfrey Phillips India Ltd. no longer survive. Even otherwise, before the BIFR/AAIFR, as well as before the Supreme Court in I.A. No. 3/1997 in SLP (C) No.18711/1997, the issue pertaining to transfer of shareholding of Modipon Ltd. concerned only Shri K.K. Modi (plaintiff in Suit No.1394/1996 and Shri M.K. Modi (Plaintiff in Suit No.434/1998) CS(OS)1394-96 page 13 of 29 and did not concern any of the contesting defendants The said order was neither obtained against the objecting defendants, nor obtained by them against the plaintiff in the two suits sought to be withdrawn. They were not concerned with the issue relating to the sale of the said shares of Modipon Ltd. Consequently, it cannot be said that Shri K.K.Modi or Shri M.K. Modi obtained any unfair advantage against the objecting defendants by filing or continuing with their suits. Therefore this objection is also without any merit. 23. I now proceed to deal with the remaining objections raised to the withdrawal of the suit unconditionally. 24. The defendants have sought to contend that vested rights have accrued in favour of the defendants. In support of this argument, reliance has been placed on Vidhydhar Dube and others V. Har Charan & Others, AIR 1971 all 41; Kanhaiya and Others V. Mst. Dhaneshwari & another, AIR 1973 All 212; Ram Dhan V. Jagat Prasad & Others, AIR 1982 Rajasthan 235. In my view, these cases are of little assistance to the defendants, as these decisions are based on the proposition that once a decree is passed, or final determination of rights is made in favour of one of the parties to the lis and certain rights get vested in favour of such parties, the other cannot seek to deprive the party the fruits of such determination by seeking to withdraw the proceeding. All these are cases in which withdrawal of CS(OS)1394-96 page 14 of 29 the suit was sought to be made at the appellate stage by a plaintiff against whom the declaration of rights had been made in the suit. In the suits before me, no decree has been passed (preliminary or final) whereunder rights of the parties have been crystalised. 25. Reliance is also placed on R. Ramamurthi Aiyar(dead) by L.Rs vs. Raja V. Rajeswara Rao, AIR 1973 SC 643 and Ms. Hulas Rai Baij Nath v. Firm K.B.Bass and Co. ,AIR 1968 SC 111 to contend that even if a decree (preliminary or otherwise) has not been passed in the suit, if a vested right has come into existence court could refuse withdrawal of the suit. 26. In Hulas Rai (supra), the court refused to answer the question as to whether a court is bound to allow withdrawal of the suit to a plaintiff even after some vested right may have accrued in the suit in favour of the defendant, and noted that in the facts of the case before it, no vested rights existed in favour of the opposite party to deny the right of the plaintiff to withdraw the suit. The Court was dealing with the application for withdrawal of suit for rendition of accounts at the stage of recording of evidence where no preliminary decree had been passed. The Court rejected the proposition that in a suit for accounts, a defendant is always entitled to relief in his favour and that the withdrawal of such a suit by the plaintiff cannot be permitted. The Court observed that the plaintiff may not be CS(OS)1394-96 page 15 of 29 necessarily permitted to withdraw the suit if the defendant has become entitled to a relief in his favour. Such a right can accrue only upon passing of a preliminary decree for rendition of accounts. Thus, unless a preliminary decree was passed the plaintiff's right to withdraw the suit would remain unbriddled. 27. An exception to the rule recorded in the decision is where a counter claim or a set off has been pleaded by a defendant. Otherwise there is no provision in the code which requires the Court to refuse permission to the withdrawal of the suit by the plaintiff unconditionally. 28. In Ramamurthi (supra) a two judge bench of the Apex Court recognized one more exception to the rule enunciated in Hulas Rai (supra) in the facts and circumstances of the case before it. The Court held that in a suit for partition, as soon as a shareholder applied for leave to buy at a valuation the share of a party asking for sale under Section 3 of the Partition Act, an advantage, a privilege or a benefit accrues in favour of such a shareholder, as the Court is thereafter bound to order a valuation and after getting the same done, bound to offer to sell the same to the shareholder who has so applied at the valuation made. Therefore, once a shareholder (defendant) so applied for purchase of the plaintiff's share, permitting the plaintiff to withdraw the suit would defeat the purpose of Section 3(i) of the CS(OS)1394-96 page 16 of 29 Partition Act as also the right/privilege so accrued in favour of the defendant/shareholder.