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Judgment
K. Govindarajan, J.—The appellant who is the plaintiff in C.S.No.538/1996 has filed the said O.S.A.No.90/2002, having aggrieved by the
order passed in Application No.4212/1998, dated 27.11.2000 to set aside the preliminary decree dated 18.10.1996 on the basis of the memo of
compromise dated 15.10.1996 filed by the 1st respondent herein.
The following are the short facts which are necessary to dispose of the above Appeal.
The appellant filed a suit in C.S.No.538/1996 against the respondents for a preliminary mortgage decree directing the respondents to pay a sum
of Rs.1,24,67,547.47 together with interest at the rate of 12% per annum from the date of the plaint till date of payment and in default of payment,
to pass a final decree for sale of the mortgaged property. The said suit was filed on the basis that the respondents gave the properties as security
by creating mortgage. The said security was given towards the amounts payable by the 2nd respondent. A letter was also given to the appellant by
the respondents on 9.6.1996, confirming the same.
On the basis of the memo of compromise dated 15.10.1996, signed by the parties viz., the appellant and the respondents and their respective
counsel, the learned Judge in the judgment and decree dated 18.10.1996 passed a preliminary decree. To pass final decree on the basis of
preliminary decree, the appellant filed an application in A.No.548/96 and the Learned Judge in the order dated 30.6.1998 rejecting the defence
raised by the 1st respondent passed the final decree. Thereafter the 1st respondent herein filed Application NO,.4212/1998 on 11.11.98 to set
aside the preliminary decree dated 18.10.1996. In the said Application, the 1st respondent came forward with the plea that the 2nd respondent
herein obtained his signature in some blank papers and in stamp papers without his knowledge and they were used to create documents as if he
stood as guarantor for the loan borrowed by him. It is also stated that a fraud was committed upon the court to get preliminary decree as if the
matter was compromised between the parties, though the 1st respondent herein did not appear before the court. Though it was contested by the
appellant the Learned Judge in the order dated 27.11.2000 set aside the preliminary decree dated 18.10.96. Hence the appellant has filed the
above appeal.
The learned counsel appearing for the appellant submitted that when the 1st respondent accepted the signing of the Vakalath and the
compromise Memo, though it is stated that he signed in the blank Vakalath form and in blank papers, in the absence of any strong evidence
regarding fraud, the learned Judge ought not to have set aside the preliminary decree especially when another Learned Judge in the earlier order
dated 18.10.1996 found that he was physically present. He also submitted that the learned Judge is not correct in going into the merits of the case,
to set aside the preliminary decree, though the respondent has not established that the compromise decree was passed fraudulently against him. He
further submitted that in the judgment dated 18.10.86, it is specifically stated that the 1st respondent was present before the Court when the
compromise decree was recorded, and so the said fact mentioned in the judgment cannot be tested by the another learned Judge. Referring to the
order passed in Application No.548/1996 dated 30.6.1998, the learned counsel submitted that the learned Judge in the said Application
No.548/1996 rejected the same plea as defence raised by the 1st respondent, and so the Application No.4212/1998 filed on the same set of facts
cannot be sustained.
Learned counsel appearing for the 1st respondent submitted that the said Ramasami 1st respondent herein was not a party to the compromise,
as he did not sign the compromise memo, and he was not present when the decree was passed on the basis of the compromise memo as stated in
the judgment in C.S.No.538/1996, dated 18.10.1996. The summons itself was served on 21.10.1996, but according to the compromise memo
filed in the court, it was entered into between the parties on 15.10.1996, and filed into Court on 17.10.1996. The said facts clearly establish that
every thing was done in a hurried manner to defraud the 1st respondent. As the preliminary decree was obtained fraudulently, the learned Judge is
correct in setting aside the same with a view to give an opportunity to the parties to decide the same issue on merits.
We carefully considered the arguments put forth by both the learned counsel.
Order XXIII, Rule 3 of the CPC provides for passing of a decree on a memo of compromise entered into between the parties during the
tendency of a suit by which the claim is satisfied or adjusted. Before amendment made in 1976 oral settlement was also permissible and in the
amendment, the same is excluded. The compromise should not be recorded in a casual manner, but the court has to first satisfy with the memo of
compromise which has been entered into between the parties is lawful, before accepting the same and must apply its judicial mind while examining
the terms of the settlement before the suit is disposed of in terms of the agreement. Once such a proof of compromise is accepted by the court, it
becomes the order of the court and acquires the sanctity of a judicial order. Such an adjustment and compromise are necessary to have a speedy
disposal of cases with a view to relieving the litigants and the courts from the burden of mounting arrears. It is well settled that the counsel can also
enter into compromise on behalf of the parties.
In the decision reported in Byram Pestonji Gariwala Vs. Union Bank of India and others, the Apex Court has taken the said view and held as
follows:
We may, however, hasten to add that it will be prudent for counsel not to act on implied authority except when warranted by the exigency of
circumstances demanding immediate adjustment of suit by agreement or compromise and the signature of the party cannot be obtained without
undue delay. In these days of easier and quicker communication, such contingency may seldom arise. A wise and careful counsel will no doubt arm
himself in advance with the necessary authority expressed in writing to meet all such contingencies in order that neither his authority not integrity is
ever doubted. This essential precaution will safeguard the personal reputation of counsel as well as uphold the prestige and dignity of the legal
profession.
Considering the traditionally recognised role of counsel in the common law system, and the evil sought to be remedied by Parliament by the
C.P.C.(Amendment) Act, 1976, namely, attainment of certainty and expeditious disposal of cases by reducing the terms of compromise to writing
signed by the parties, and allowing the compromise decree to comprehend even matters falling outside the subject matter of the suit, but relating to
the parties, the legislature cannot, in the absence of express words to such effect, be presumed to have disallowed the parties to enter into a
compromise by counsel in their cause or by their duly authorised agents. Any such presumption would be inconsistent with the legislative object of
attaining quick reduction of arrears in court by elimination of uncertainties and enlargement of the scope of compromise.
The scope of appreciation of the memo of compromise by courts has been dealt with by the Apex Court in the decision in Banwari Lal Vs.
Smt. Chando Devi (through L.R.) and another, holding as follows:
When the amending Act introduced a proviso along with an explanation to Rule 3 of Order 23 saying 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"", the court before which a petition of
compromise is filed and which has recorded such compromise, has to decide the question whether an adjustment or satisfaction had been arrived
at on basis of any lawful agreement. To make the enquiry in respect of validity of the agreement or the compromise more comprehensive, the
explanation to the proviso says that an agreement or compromise ""which is void or voidable under the India Contract Act..."" shall not be deemed
to be lawful within the meaning of the said Rule. In view of the proviso read with the explanation, a Court which had entertained the petition of
compromise has to examine whether the compromise was void or voidable under which an appeal was maintainable against an order recording a
compromise. As such a party challenging a compromise can file a petition under proviso to Rule 3 of Order 23, or an appeal u/s 96(1) of the
Code, in which he can now question the validity of the compromise in view of Rule 1-A of Order 43 of the Code.
On the basis of the above settled principles of law we have to decide the issue raised in this appeal. Mr. Justice Raman in the judgment in
c.S.No.538/196, dated 18.10.1996 specifically mentioned that compromise memo was signed by the parties including 1st respondent herein and
their respective counsel and that the 1st respondent herein along with the 2nd respondent, Kannan was present and their counsel Mr. N.
Balasubramaniam was also present, as he filed vakalath for both the respondents. The learned Judge in the order under appeal went into the merits
of the case and found that there could not be any creation of mortgage by the 1st respondent for which preliminary decree was passed. The
learned Judge has also given much importance to the fact that the suit summons was served on the 1st respondent only on 21.10.1996, whereas
decree on the basis of the compromise memo was passed on 18.10.1996 itself. On that basis, the learned Judge proceeded as if the 1st
respondent had no knowledge about the filing of memo of compromise. The learned Judge also accepted the 1st respondent''s version as stated in
the affidavit without going into the veracity of the same. Even with respect to the delay, the learned Judge found that after receiving summons, the
1st respondent contacted the 2nd respondent, who in turn informed him that the matter would be settled, and believing the said representation the
1st respondent was keeping quiet, and after making enquiry, he came to know that there was a compromise recorded. On the basis of the above
finding, the learned Judge has come to the conclusion that there is no delay in approaching the Court by the 1st respondent to set aside the
preliminary decree.
It is relevant to mention that while filing Application No.548/1998 by the appellant to pass a final decree in C.S.No.538/1996, the 1st
respondent filed a counter reiterating the same reasons as if he did not sign the memo of compromise, and he was not present in the Court. The
said defence was rejected by the learned Judge, and the learned Judge passed the final decree on 30.6.98. In view of the rejection of the said
defence of the 1st respondent by the learned Judge in the order dated 30.6.98, the 1st respondent cannot raise the same plea subsequently by
filing separate Application No.4212/1998 seeking to set aside the preliminary decree passed on 18.10.1996. The learned Judge in the order under
appeal did not appreciate the said aspect while entertaining the said Application.
The first respondent has also come forward with the plea that he had no knowledge about the said suit and the memo of compromise entered
into between the parties as he has not signed in the memo as well as the preliminary decree passed therein. To test the correctness of the said plea
of the 1st respondent we have to consider his averments in the affidavit. In the affidavit filed in support of Application No.4212/1998, the 1st
respondent came forward with the following averments:
I trusted the 2nd respondent and had participated in the above transactions, duly on his promise that he would discharge the loans and that I need
not concern myself about it. Believing his words, I gave him blank vakalath as requested by him in the first week of October 1996, when he
informed me that it was necessary to settle some disputes. I had not signed any memo of compromise nor appeared in Court on any day, more
specifically on 18.10.1996 and I believe that one of my signed blank papers with the 2nd respondent must have been utilised for the same in the
course of perpetrating the fraud on me and on the court.
I was not even aware of the nature of suit etc. till 21.10.1996 when I was served with suit summons. When I approached the 2nd respondent to
show him the same, he informed me that the matter was settled and that I need not worry.
In the end of December 1997, I had chance to meet a friend, an advocate Mr. A. Balaji who is also practicing in the High Court. I just informed
him about the suit and that it was settled. To my surprise, the said Balaji apprised me of the alleged compromise decree dated 18.10.1996
prejudicially affecting my interest.
In the evidence as P.W.1, in chief-examination, he has deposed as follows:
I also gave power of attorney to the first respondent. I received a summons from the Court on 21.10.1992. I immediately contacted the second
respondent and he told me that the matter is already settled and I need not worry about it. I signed in blank vakalath and also in some blank forms
and gave it to the second respondent. Even one month prior to 21.10.92 I have entrusted the blank signed vakalath to the second respondent. The
second respondent told me that if there is any case, the signature is necessary and I believed him and gave those documents. One year later I have
contacted an advocate fiend named Balaji and informed him about the case matter. After verification the said Balaji informed me that preliminary
decree has been passed against me. I took steps to cancel the vakalath.
In cross examination he deposed that he came to know about the decree only in 1998. He also stated that during October 1996 he was in
Nagari village and from June 1996 to November 1996 he was away from Madras. At the same time, he further deposed that during September
1996, he signed vakalath and in blank papers and gave them to the 2nd respondent. He received the court summons on 21.10.1996.
It is also necessary to extract the relevant portion from the counter filed by the 1st respondent in Application No.548/1998 in C.S.No.538/96
wherein he stated as follows:
The first respondent even without showing the contents of the plaint in the above suit, has obtained my signature in a blank vakalath stating that the
petitioner herein has filed a suit on accounts against him and myself and, therefore, he wanted to file vakalath on my behalf and promised me that
no decree would be passed against me. Believing his representation, I did not make any enquiry. Since the suit summons in the above suit was
served upon me on 21.10.1996, I thought the first respondent is defending the said suit on my behalf and the same is pending.
On the basis of the above said affidavit, counter affidavit and the evidence of the 1st respondent, we have to decide the issue raised in this
Appeal. Though, in the evidence the 1st respondent has stated that from June 1996 to November 1996 he was away from Madras, he has
admitted that he received summons on 21.10.1996 and signed vakalath, in cross examination in September 1996 and gave it to the 2nd
respondent. From the above contradictory statements, the case of the 1st respondent that he was not available in town when the decree on the
basis of the memo of compromise was passed and so he could not be present in the court when the decree was passed cannot be accepted.
In the affidavit filed in Application No.4212/1998 it is specific case that till 21.10.1996 when he was served with suit summons, he was not
aware of the nature of the suit. He also stated that he gave blank vakalath, as requested by the 2nd respondent, in the first week of October 1996
for the purpose of settling the dispute. In the counter filed in Application No.548/1998 it is his case that the 2nd respondent even without showing
the contents of the plaint in the suit obtained his signature in blank vakalath stating that the appellant herein filed a suit against the respondents and
therefore he wanted to file vakalath on behalf of the 1st respondent also. In the evidence he has come forward with different story stating that
immediately after receipt of summons on 21.10.1996, the 1st respondent contacted the 2nd respondent and the 2nd respondent told him that the
matter was settled and the 1st respondent need not worry about it. It is also stated that even before receipt of summons he signed in blank vakalath
and in some blank forms which were given to the 2nd respondent. From the said different stands taken by the 1st respondent with respect to his
knowledge of the said suit filed by the appellant, it is clearly proved that the 1st respondent has not come forward with true facts. Moreover, it is
clear that the 1st respondent had knowledge about the said suit filed by the appellant against the respondents. Knowing that such a suit was filed he
gave vakalath even before receipt of summons either to settle the matter or to contest. He had knowledge that the said suit was settled. The 1st
respondent did not verify the court records to know about the nature of the suit immediately after signing and handing over the vakalath or on
receipt of summons dated 21.10.1996, though he knew that such a suit was filed by the appellant even against him. It is not the case of 1st
respondent that the 2nd respondent informed that no decree was passed against him. When such was the position, there is no reason to accept the
case of the 1st respondent that he was kept quiet without verifying the nature of the suit and the result of the same.
The learned Judge has not properly appreciated the evidence of P.W.1, as he proceeded that the 2nd respondent informed the 1st respondent
that the matter would be settled. But in the evidence of P.W.1, the 1st respondent stated that ""I immediately contacted the 2nd respondent and he
told me that the matter is already settled, and I need not worry about it."" No acceptable reasons were given by the 1st respondent for the delay in
approaching the court for more than 11/2 years to set aside the decree after knowing the settlement. As a party to the proceedings it is for him
atleast to ascertain from 2nd respondent about the nature of settlement.
Though the 1st respondent sought consent for change of vakalath, no averment or evidence is available to show whether he enquired the said
counsel as to how he could appear without his consent. As mentioned already, 1st respondent has not denied the signature in the vakalath and in
the memo of compromise filed. To establish that he did not engage Mr. Balasubramaniam, the counsel who appeared even for the 1st respondent,
he did not examine the said counsel nor summoned him to give evidence. Merely because, he received summons only on 21.10.1996, the case of
1st respondent that he could not have signed the memo of compromise cannot be accepted, as he knew about the said suit filed by the appellant
even prior to service of summons and he also stated that the vakalat was given to settle the suit.
The learned Judge, in the judgment dated 18.10.1996 has specifically mentioned that the 1st respondent was present in court at the time of
recording the compromise. Unless specific evidence is available to come to the conclusion that the 1st respondent was not present in court, the
learned Judge cannot interfere with the said factual finding. In this case, no such evidence acceptable is available. Except saying that he did not
appear the appellant failed to take any steps to establish the same. He never issued any notice to the counsel informing him about his absence and
he never asked for any details from the counsel who appeared at the time of recording compromise as the calling for details as to who brought the
defendants in the suit and who identified the parties before the court. we do not find any bonafide in the plea of the appellant about his absence a
the time of recording the compromise especially taking into consideration of the statement of fact recorded by the court. If such statements are to
be lightly treated, then there is no sanctioning for the same in spite of the fact that the statement was made by a Judge of the High Court.
In view of the discussions made above, the order passed by the learned Judge cannot be sustained. Consequently , the order passed by the
learned Judge in Application No. 4212/1998, dated 27.11.2000 is set aside and this Appeal is allowed accordingly. No costs. Consequently
connected CMPs are closed.