Convenience Enterprises Pvt. Ltd. vs Kohli Housing and Development Pvt. Ltd. and Others

Madan B. Lokur, J.—The plaintiff has filed three suits in all (including this one) being CS (OS) No. 9/2006 in respect of Plot No. 18, Pine Drive, Malibu Towne, Gurgaon (Haryana), CS (OS) No. 10/2006 in respect of Plot No. 15, Pine Drive, Malibu Towne, Gurgaon (Haryana) and CS (OS) No. 10/2006 in respect of Plot No. 10, Club Road, Malibu Towne, Gurgaon (Haryana). In all these suits, the plaintiff has prayed for a decree of permanent injunction restraining the Defendants from selling, transferring, alienating or otherwise creating any third party rights or nomination of any nature whatsoever or parting with possession or raising any construction in respect of these plots. The plaintiff has also prayed for a declaration to the effect that he is a purchaser of these plots as a result of some agreements entered into read with letter dated 16th May, 2005.

Summons were issued in all three suits returnable on 17th April, 2006 and in the applications filed in these suits under Order 39 Rules 1 and 2 of the CPC, the Defendants were directed to maintain status quo with regard to the plots in dispute.

The plaintiff is a private limited company with Dr. R.K. Anand as its Managing Director. The plaintiff is a real estate consultant dealing in sale and purchase of Immovable property. In so far as the Defendants are concerned, Defendant Nos. 1 and 2 also deal in Immovable property and Defendant No. 3 is a Director and in-charge of the affairs of both Defendants No. 1 and 2.

It is not necessary to go into the detailed facts given in the plaints. For the present purposes, it is relevant only to mention what transpired in CS (OS) No. 9/2006 since it is the admitted position that the facts pertaining to CS (OS) 9/2006 apply equally to the other two suits.

As mentioned above, summons was issued in the suit and it appears that on receiving the summons, the Defendants negotiated a settlement with the plaintiff. Both parties then moved an application being is No. 865/2006 under Order 23 Rule 3 read with Section 151 of the CPC. This application is jointly signed and filed by the advocates of both the parties and is also signed by both the parties. Along with the application, the parties have filed an affidavit that they have read the contents of the joint application, which are true and correct to the best of their knowledge.

In the application, it is stated that the parties have amicably settled their disputes, differences and claims which have all been resolved and a Memorandum of Settlement dated 23rd January, 2006 has been entered into between them. A copy of the Memorandum of Settlement is annexed as Annexure A to the joint application and the parties state that with the execution of the Memorandum of Settlement the claims of the plaintiff in the above suit do not survive and accordingly the above suit be dismissed. It is also stated that the joint application has been filed by the parties out of their own free will and without any pressure, coercion or undue influence in any manner.

In the Memorandum of Settlement there is a chart which indicates the payment made by Defendant No. 1 to the plaintiff for settling their disputes. The amount paid is as follows:-

Plot No. By Draft Draft No. and Date By Cash Total

15 Pine Drive Rs. 6,82,000/- 990255 21.1.2006 Rs. 18,000/- Rs. 7,00,000/-

18 Pine Drive Rs. 6,82,000/- 9900256 21.1.2006 Rs. 18,000/- Rs. 7,00,000/-

10 Club Road Rs. 8,82,000/- 990257 21.1.2006 Rs. 18,000/- Rs. 9,00,000/- 8. In the Memorandum, the plaintiff has confirmed receipt of the cash amount and drafts and has agreed to unconditionally withdraw the three pending suits.

Significantly the Memorandum mentions that as result of the settlement between them, the plaintiff has returned to Defendant No. 1 all original documents, notably agreements to sell dated 8th April, 2005, 25th April, 2005 and 12th May, 2005.

Though the Memorandum of Settlement was entered into on 23rd January, 2006 the joint compromise application (IA No. 865/2006) was filed in this Court on 24th January, 2006. The application was listed for consideration on 25th January, 2006 but since the Hon''ble Judge was not holding Court on that day, the application was renotified for consideration for 6th February, 2006.

The plaintiff says that on 24th January, 2006 it presented the three drafts for encashment to its bank, that is, Corporation Bank, New Delhi but they were returned because they were made out in the name of Convenience Enterprises Ltd. while the account of the plaintiff is in its name, that is, Convenience Enterprises Pvt. Ltd. The plaintiff then presented the drafts to another bank for encashment, that is, Citibank, New Delhi but they were returned for a similar reason. In view of these developments, according to the plaintiff, the Memorandum of Settlement dated 23rd January, 2006 was rendered infructuous, frustrated, void, unenforceable, invalid and not binding upon the plaintiff and the joint application filed under Order 23 Rule 3 of the CPC deserved to be dismissed. On these facts and grounds, the plaintiff moved an interim application on 24th January, 2006 being is No. 942/2006 seeking an order that there is no lawful, valid, binding or enforceable agreement or compromise between the parties and that the Memorandum of Settlement dated 23rd January, 2006 is invalid, void, unenforceable and not binding upon the plaintiff.

On 28th January, 2006 the plaintiff filed another application being is No. 1003/2006. In this application, the plaintiff for the first time made an allegation that he was coerced and pressurized to enter into the settlement. The relevant allegations made in this regard are contained in paragraph 2 of the application and these read as follows:- That after the service of the summons on the Defendants, they approached the plaintiff through its Managing Director, Dr. R.K. Anand, and he was told in specific and categorical terms that, in his own interest, he should compromise the matter and withdraw all the three cases against the defendants. Considerable pressure was exerted on him to compromise the matter and withdraw his cases. The plaintiff was rather cornered from all quarters and he had virtually no other option but to give in to the pressure and undue influence that was being exerted on him by the defendants. The plaintiff was under tremendous mental torture and he feared that in case he did not do what the defendants wanted him to do, then his life and the lives of his family members would be in danger. The plaintiff has a family and was Therefore very concerned about his own well being and as well as well being of his family members. Therefore finding no other way out, he gave in to the pressure and agreed to meet the defendants. In the meeting he found that certain documents had been prepared at the instance of the Defendants. The defendants had basically prepared Memorandum of Settlement dated 23rd January, 2006, Joint Applications (three in number) under Order 23 Rule 3 read with Section 151 CPC and the supporting affidavits. The plaintiff, (through its Managing Director, Dr. R.K. Anand) was then made to sign the above said documents and he was also made to sign three blank Vakalatnamas. In addition, the plaintiff was also made to prepare and sign a Resolution of Board of DIRECTORS of M/s. Convenience Enterprises Pvt. Ltd. dated 23.1. 2006 wherein it was recorded as under:-

RESOLUTION OF BOARD OF DIRECtorS OF M/S CONVENIENCE ENTERPRISES PVT. LTD. PASSED ON 23.1.2006

Present : Dr. R.K. Anand, Managing Director

Mrs. Veena Anand, Director

The company had filed CS(OS) Nos. 9/2006, 10/2006 and 11/2006 against M/s Kohli Housing and Development Pvt. Ltd. And Others in the Delhi High Court in respect of three Agreements to Sell all dated 8.4.2005, 25.4.2005, 12.5.2005 in respect of Plot No. 10 Club Road, 15 Pine Drive and 18 Pine Drive Malibu Towne, Sohna Road, Gurgaon in the State of Haryana. The company has now resolved all its disputes and differences with the Defendants and has executed a Memorandum of Settlement dated 23rd January, 2006.

RESOLVED that in view of and pursuant to the Memorandum of Settlement dated 23rd January 2006 the company hereby irrevocably authorizes and empowers Dr. R.K. Anand, Managing Director, resident of 53/25, Ramjas Road, Karol Bagh, New Delhi 110005 and/or Mrs. Nalini Sarin, wife of Mr. Varun Sarin resident of A-41C DDA Flats, Munirka, New Delhi to jointly or severally appoint lawyers, file Application, appear and make statements before the Hon''ble Delhi High Court and generally take all other steps as may be necessary to withdraw the above mentioned CS(OS) Nos. 9/2006, 10/2006 and 11/2006 on behalf of the Company and resolves that the powers hereby granted will not be revoked in any manner, till the withdrawal of the above mentioned suits is completed.

Sd/- Dr. R.K. Anand, Managing Director

Sd/- Mrs. Veena Anand, Director

Also, at the same time, the Defendants took away three original Agreements to Sell dated 8.4.2005, 25.4.2005, 12.5.2005 in respect of Plot No. ,10 Club Road, 15 Pine Drive and 18 Pine Drive Malibu Towne, Sohna Road, Gurgaon in the State of Haryana Along with certified copy of the Resolution of Board of Directors dated 8.4.2005, 25.4.2005 and 12.5.2005 of Defendant No. 1 i.e. M/s Kohli Housing and Development Pvt. Ltd. in respect of the three plots, which are the subject matter of three different but connected Civil Suits pending before this Hon''ble Court. From the plaintiff the Defendants also took away the original letter dated 16.5.2005 whereby the time for execution and registration of the Sale Deed in favor of the plaintiff as well as for making the balance payment had been extended up to 15.12.2006. Thereafter, the defendants gave three Managers'' cheques bearing No. 990255 dated 21.1.2006 for Rs.6,82,000/- (Rupees six lacs eighty two thousand only), No. 990256 dated 21.1.2006 for Rs.6,82,000/- (Rupees six lacs eighty two thousand only) and No. 990257 dated 21.1.2006 for Rs.8,82,000/- (Rupees eight lacs eighty two thousand only), all drawn on Citibank, NA to the plaintiff they also gave him a cash amount of Rs.54,000/- (Rs.18,000/- towards each plot) and the plaintiff had to accept it as he had virtually no choice.

It was disclosed in the application by the plaintiff that it had issued a lawyers notice to the Defendants on 27th January, 2006 calling upon them to stop exerting undue influence or pressurizing it and also to return all the original documents since the compromise and Memorandum of Settlement had been rendered infructuous and was otherwise void and unenforceable. In the application (IA No. 1003/2006) the plaintiff prayed for return of the agreements to sell dated 8th April, 2005, 25th April, 2005 and 12th May, 2005 and other original documents and for a direction to the Defendants not to pressurize the plaintiff in any manner.

On the same date, that is, 28th January, 2006 the Defendants also moved an application being is No. 1004/2006 in which it was stated that they had ''later'' realised that the pay orders given to the plaintiff were inadvertently made in the name of M/s Convenience Enterprises Ltd. instead of M/s Convenience Enterprises Pvt. Ltd. On coming to know of this inadvertent error, the Defendants prepared fresh pay orders on 24th January, 2006 itself. It was prayed in the application that a direction be given to the plaintiff to accept the new pay orders and return the original pay orders. It was submitted that the Defendants had nothing to gain by the clerical mistake and that the application of the Defendants was bona fide.

All the three applications mentioned above, that is, is No. 942/2006, is No. 1003/2006 and is No. 1004/2006 were listed for hearing on 30th January, 2006 when learned counsel for the plaintiff declined to accept any payment as offered. The parties were asked to complete pleadings in the applications and the matter was adjourned for hearing on 14th February, 2006 and with consent of the parties the date of 6th February, 2006 was cancelled.

On 6th February, 2006 the plaintiff moved yet another application being is No. 1444/2006 in which it was stated that the Defendants may be directed to accept the original pay orders which the plaintiff would like to return to them along with pay orders made out for the cash payment received by the plaintiff from the Defendants. This application (IA No. 1444/2006) was listed on 7th February, 2006. Thereafter another miscellaneous application was filed by the plaintiff being Crl.M. 1491/2006 u/s 340 of the Cr.P.C. in which it was alleged that the Defendants had relied upon a fabricated document. The Defendants filed is No. 2181/2006 in which it was prayed that a reply to the application u/s 340 of the Cr.P.C. may be taken on record.

Learned counsel for the parties made their submissions in respect of all these applications on 2nd March, 2006 when orders were reserved.

The principal contentions urged by learned counsel for the plaintiff were that the compromise between the parties was void because it was entered into by pressurizing Dr. R.K. Anand on behalf of the plaintiff and that the compromise had broken down because the pay orders given by the Defendants were not encashable since they were not issued in the name of the plaintiff, that is, Convenience Enterprises Pvt. Ltd. There was, Therefore, no consideration or failure of consideration for the settlement between the parties. The second contention was that in case the Court were inclined to accept the compromise entered into between the parties under Order 23 Rule 3 of the CPC, then it must be satisfied that there exists a valid compromise in accordance with law.

On the other hand, learned counsel for the Defendants submitted that there was no coercion or pressure put on the plaintiff. In this context, they drew my attention to the e-mails exchanged between the parties, copies of which have been filed in reply to is No. 942/2006. It was submitted that these e-mails show that Dr. R.K. Anand had, at his convenience, checked the draft Memorandum of Settlement and had made corrections thereto, which were incorporated in the final Memorandum of Settlement. It was also submitted that the joint application for compromise was signed by the advocates of both the parties and surely they were not under pressure and finally the allegation of undue influence and coercion was not made when the first application (IA No. 942/2006) was filed on 24th January, 2006 but was made a few days later when a lawyers notice was sent on 27th January, 2006 and again in the application filed by the plaintiff on 28th January, 2006 being is No. 1003/2006. Quite apart from this, it was also submitted that the allegations of undue influence and coercion are extremely vague and unsubstantiated. With regard to the consideration, it was submitted that a bona fide error had been made in the preparation of the pay orders for which the Defendants cannot be blamed. In any case the Defendants had prepared fresh pay orders and as a result were out of pocket twice over. It was submitted that the transactions between the parties were purely commercial transactions and that for some reason the plaintiff wanted to back out of them even after the compromise was entered into between the parties and that he should not be permitted to do this.

I am of the view that the plaintiff freely entered into a compromise but that there was a failure of consideration, with the result that the joint application for compromise filed by the parties under Order 23 Rule 3 of the CPC should not be accepted.

On a reading of the material on record, there is no doubt that the parties had entered into a settlement of their own free will. An allegation of undue influence and coercion was made by the plaintiff for the first time only in the lawyers notice issued on 27th January, 2006 and no such allegation was made in the application filed on 24th January, 2006. Clearly these allegations were an afterthought and cannot be given any credence.

Moreover, it is quite clear from the e-mails placed on record (dated 21st January, 2006 and 23rd January, 2006) that the plaintiff had enough time to go through the draft Memorandum of Settlement and make corrections thereto. In fact, the plaintiff made as many as four corrections including incorporating a fact which was perhaps known only to the plaintiff, namely, that Plot No. 10, Club Road, Malibu Towne, Gurgaon (Haryana) was the subject matter of a further transaction between the plaintiff and one Mr. Kanwar Ajay Mahipal. Quite clearly, the lapse of time and the electronic correspondence between the parties indicates that there was no pressure on the plaintiff for entering into a compromise.

The averments made by the plaintiff of undue influence and coercion are completely vague and devoid of any material particulars. The allegations made by the plaintiff have already been reproduced herein above and they do not indicate who exerted influence on the plaintiff, when and how. On the other hand, Dr. R.K. Anand, along with another Director of the plaintiff passed a resolution on 23rd January, 2006 accepting the compromise. There is no allegation that the Defendants also pressurized the other Director of the plaintiff (perhaps the wife of Dr. Anand).

In this context, reliance placed by learned counsel for the Defendants on a Constitution Bench decision of the Supreme Court in Bishundeo Narain and Another Vs. Seogeni Rai and Jagernath, is quite apposite. In that case, while dealing with matters involving fraud, undue influence and coercion, the Constitution Bench categorically held that proper particulars are required to be furnished and general allegations are insufficient. It was said as follows:- It is also to be observed that no proper particulars have been furnished. Now if there is one rule which is better established than any other, it is that in cases of fraud, undue influence and coercion, the parties pleading it must set forth full particulars and the case can only be decided on the particulars as laid. There can be no departure from them in evidence. General allegations are insufficient even to amount to an averment of fraud of which any Ct. ought to take notice, however strong the language in which they are couched may be, and the same applies to undue influence and coercion.

It must not be forgotten that Dr. Anand is not illiterate; he is clearly literate and his letterhead indicates that he is a real estate consultant who deals in immovable property. It is not that he is totally unaware of the practical requirements of this branch of the law and being in the same business as the Defendants, it can hardly be imagined that he would be so easily pressurized by them as is sought to be made out, particularly after he had approached a Court of law for relief. It must also not be forgotten that his advocate, who was certainly not under pressure from the Defendants, signed the joint application filed by the plaintiff.

The contentions urged on behalf of the plaintiff based on undue influence, pressure and coercion are, Therefore, rejected.

As regards the joint application for compromise entered into between the parties, I am of the view that it ought not to be accepted. I have already held that the parties had freely entered into a compromise. But, the erroneous description of the plaintiff in the pay orders, and consequent inability of the plaintiff to encash them, is of crucial importance. Consideration for the agreement was not passed on to the plaintiff even though he had done whatever was required of him, including handing over all original documents to the Defendants.

The position today is that the plaintiff is left high and dry he neither has the consideration nor the original documents. It is not enough for the Defendants to say that there was a bona fide clerical error it could well be deliberate, but that is not the question before me. The Defendants admit that they made a mistake but say that they realized it ''later''; when it was realized and how has been left vague. Nor is it enough for the Defendants to prepare fresh pay orders (as indeed they have done). There was a time and occasion for the Defendants to make the payments, but they let it slip by. It would have been another matter if the plaintiff were to condone the lapse, but he is not inclined to do so, partly because, as he says in paragraph 13 of is No. 942/2006, he required urgent funds for other property deals but was let down due to non-encashment of the pay orders. Whatever be the reason, the plaintiff cannot be compelled to accept the settlement on the present facts. The question whether the requirements of Section 25 of the Contract Act have been met must be answered in the negative, entitling the plaintiff to successfully contend that the Memorandum of Settlement is voidable. A contrary view could possibly result in a situation where, for example, a dishonest contracting party might issue a cheque knowing that it is going to bounce or incorrectly sign a cheque so that it is returned by the bank, and thereafter plead innocence and seek enforcement of the contract. I do not think Section 25 of the Contract Act is intended to aid such a contracting party. 29. On the procedural requirements, learned counsel for the parties drew my attention to the provisions of Order 23 Rule 3 of the CPC. This reads as follows:- 3. Compromise of suit.

(1) xxx xxx xxx(2) xxx xxx xxx (3) 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 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 1872), shall not be deemed to be lawful within the meaning of this rule.

The requirements of Order 23 Rule 3 of the CPC are that the Court must be satisfied that a suit has been adjusted wholly or in part by any lawful agreement or compromise in writing and signed by the parties and secondly the Court must be satisfied that the agreement or compromise is not void or voidable under the Indian Contract Act, 1872.

In so far as the terms of the compromise are concerned, I am satisfied that there has been a failure of consideration and Therefore the agreement between the parties is voidable. The plaintiff cannot now be compelled to accept the terms of the settlement, even if the Defendants are prepared (as they have been) to issue fresh drafts to the plaintiff. Indeed, on 30th January, 2006 learned counsel for the plaintiff refused to accept the payment offered by the Defendants.

In view of the above, I am not satisfied that there exists a valid or binding compromise between the parties.

The result of this discussion is:

IA 865/2006 is dismissed.

IA 942/2006 is allowed.

IA No. 1003/2006 is allowed and the Defendants are directed to deposit in the Registry of this Court within four weeks all the original document handed over by the plaintiff to the Defendants while executing the Memorandum of Settlement dated 23rd January, 2006, more particularly the agreements to sell dated 8th April, 2005, 25th April, 2005 and 12th May, 2005 in respect of the three properties in dispute.

IA No. 1004/2006 is dismissed.

IA No. 1444/2006 is allowed. The Registry is directed to return the original pay orders annexed to this application to the Defendants.

Crl.M.1491/2006 is dismissed.

IA No. 2181/2006 is allowed and the reply is taken on record.