Karnataka High Court
Munireddy vs N.R. Krishna on 28 April, 2020
Equivalent citations: AIRONLINE 2020 KAR 1870
Author: B.M.Shyam Prasad
Bench: B.M.Shyam Prasad
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 28TH DAY OF APRIL, 2020
BEFORE
THE HON'BLE MR.JUSTICE B.M.SHYAM PRASAD
REGULAR SECOND APPEAL NO.804 OF 2001
BETWEEN:
1. MUNIREDDY
SON OF LATE KONDA REDDY
AGED ABOUT 83 YEARS.
2. N. NARAYANA REDDY
SON OF NANJUNDA REDDY
AGED ABOUT 48 YEARS.
BOTH ARE RESIDING AT CHANDAPURA
VILLAGE, ATTIBELE HOBLI,
ANEKAR TALUK,
BENGALURU DISTRICT.
... APPELLANTS
(BY SRI. UDAYA HOLLA., SENIOR ADVOCATE FOR;
SRI. H.V. RAMACHANDRA RAO., ADVOCATE )
AND:
1. N. R. KRISHNA
SON OF RAMASWAMY,
AGED ABOUT 45 YEARS,
NO.G1, GROUND FLOOR APARTMENT,
PALACE ORCHARDS,
R.M.VILAS EXTENSION,
BENGALURU - 560 080.
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2. C. NAGARAJU
SON OF CHENNAPPA
AGED ABOUT 47 YEARS
R/OF A.NARAYANAPURA VILLAGE,
OLD MADRAS ROAD
BENGALURU - 560 080.
3. Y. CHENNAPPAIAH REDDY
SON OF K.YELLAPPA REDDY,
MAJOR.
4. Y. MUNIREDDY
SON OF K.YELLAPPA REDDY,
MAJOR.
BOTH ARE RESIDENT OF CHANDAPURA VILLAGE,
ANEKAL TALUK,
BANGALORE DISTRICT.
... RESPONDENTS
(BY SRI SANKET.M. YENAGI., ADVOCATE FOR R1;
SRI ASHOK HARANAHALLI., SENIOR ADVOCATE FOR;
SRI V. VISHWANATH., ADVOCATE FOR R2;
NOTICE SERVED ON R3 & R4;
SRI S.N. ASHWATH NARAYANA., ADVOCATE FOR
PROPOSED IMPLEADING APPLICANTS IN IA 3&4/19)
THIS REGULAR SECOND APPEAL IS FILED UNDER SEC.100
OF CPC., AGAINST THE JUDGEMENT AND DECREE DATED
02.08.2001 PASSED IN RA NO.18/97 ON THE FILE OF THE DIST.
AND SESSIONS JUDGE, BENGALURU RURAL DIST., BENGALURU,
DISMISSING THE APPEAL AND CONFIRMING THE JUDGEMENT AND
DECREE DATED 16.09.1997 PASSED IN OS NO. 3/90 ON THE FILE
OF THE II ADDL. CIVIL JUDGE (SR.DN), BENGALURU.
THIS APPEAL HAVING BEEN HEARD AND RESERVED ON
06.02.2020 AND COMING ON FOR PRONOUNCEMENT OF ORDERS
THIS DAY, THIS COURT DELIVERED THE FOLLOWING:
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ORDER
The question for consideration in this second appeal, as of now, is: "Whether the compromise petition filed by the appellants and respondent Nos.2 to 4 on 10.4.2002 and accepted by this Court is genuine and legal". This question arises for consideration in the light of the following circumstances.
2. The appellants were the owners of the 14 sites bearing Kaneshumari No.530 to 543 (totally measuring 1 acre 3 guntas) in Sy.No.92 of Chandapura, Attibele Hobli, Anekal Taluk and 36 vacant sites bearing Kaneshumari No.544 to 579 (totally measuring 2 acre 8 guntas) in Sy.No.93/2 of Chandapura, Attibele Hobli, Anekal Taluk. The first respondent, as duly constituted attorney for the appellants vide the separate Power/s of Attorney dated 09.01.1989, executed sale deed dated 24.08.1989 -4- transferring the aforesaid properties (referred to as the 'subject properties') in favour of the second respondent.
3. The appellants, who had filed earlier suit in OS No. 563/1989 and 568/1989 on the file of the Munsiff, Anekal for permanent injunction only against the first respondent, filed the present suit in O.S No.3/1990 on the file of the II Additional Civil Judge (Senior Division) (for short, the civil Court) against the respondents for declaration that the sale deed dated 24.08.1989 executed by the first respondent in favour of the second respondent as null and void and not binding on them, and for the consequential relief of permanent injunction not to create third party rights acting pursuant to such sale deed.
4. The civil Court dismissed this suit in O.S.No.3/1990 by its judgment dated 16.09.1997. The appellants being aggrieved by this judgment filed the first appeal in R.A. No.18/1997 on the file of the District and -5- Sessions Judge, Bangalore Rural District, Bangalore (for short, the 'appellate Court'). The appellate Court dismissed the appeal by its judgment and the decree dated 02.08.2001. The appellants filed the present second appeal calling in question the judgments in the suit and the first appeal. This Court admitted the appeal on 28.11.2001 and issued notice to the respondents. As of 08.04.2002, the second and fourth respondents were served but unrepresented. The notice issued to third respondent was returned with the postal shara "party left" and there was no intimation of service of notice to first respondent. The appellants had to furnish requisites for issuance of notice to first and third respondents.
5. At this stage, on 10.04.2002, when the matter was listed for orders, a Compromise Petition signed by the appellants and second to fourth respondents is filed and accepted by this Court. The compromise petition reads inter alia that the second respondent accepts that the first -6- respondent executed the sale deed dated 24.08.1989 after the Powers of Attorney in his favour were cancelled and in fact, the Powers of Attorney executed by the appellants did not authorise the first respondent to execute the sale deed dated 24.08.1989. The second respondent also accepts that the sale deed dated 24.08.1989 is null and void and does not convey any title in his favour and that the appellants could not be bound by the sale deed dated 24.08.1989. The appellants have paid a sum of Rs.50,000/- to the second respondent, and the second respondent admits the receipt of the same.
6. This Court by order dated 10.04.2002 allowed the compromise petition and directed the office to draw decree according to the compromise. This Court's order on 10.04. 2002 reads as follows:
"Mr Sidappa, learned counsel files power for respondent No. 2.-7-
2. Both the sides have filed the compromise petition. All the parties are present. Advocates for both sides are also present. The compromise petition is allowed. In view of the compromise petition, the appeal stands disposed of. Draw the decree accordingly".
7. The first and the second respondents on 21.06.2002 have filed two separate applications/petitions viz., Civil Petition Nos.949/2002 and 950/2002 for recall of the order dated 10.04.2002. The first respondent has asserted in his affidavit in support of his application that he was not served with the notice of the appeal and as such, he was not present before this Court on 10.04.2002. This Court, in his absence, could not have recorded that all the parties were present and that the dispute is compromised. The first respondent is categorical that he has not signed the compromise petition and there cannot be compromise without his consent. In addition, the first respondent has echoed the grounds urged by the second -8- respondent in support of his application for recall of the order dated 10.04.2002.
8. The second respondent in support of his application for recall of the order dated 10.04.2002 has stated that he was unlawfully detained by the appellants and their henchmen from the evening hours of 09.04.2002. He was taken to a Bar and forced into an inebriation state. On the next day, i.e., 10.4.2002 he was forced into the appellants' car and taken to a lawyer's office in Shivajinagar, Cantonment Area, Bangalore, and from there he was brought to this Court's premises. While he was in the car, he was forced to sign certain papers. He was under duress because he was told that he and his family members would be doused with petrol and set on fire. He did not engage any counsel to represent him in the appeal, and in fact he had no notice of the appeal. The appellants handed over to him a cheque for a sum of Rs.25,000/- -9- when he was compelled to sign the papers, but he has not encashed the cheque.
9. These applications by the contesting respondents numbered as Civil Petition Nos.949/2002 and 950/2002 were dismissed by this Court vide order dated 23.07.2002. The respondents approached the Hon'ble Supreme Court with the Special Leave Petitions (Civil) Nos.23256- 23257/2002 and 22897-22898/20021 being aggrieved by the rejection of the aforesaid applications/petitions. The Hon'ble Supreme Court by order dated 4.8.2003 allowed the civil appeals setting aside the order dated 10.04.2002 remanding the appeals for fresh consideration of all questions, including the question as regards the genuineness of the compromise petition dated 10.04.2002.
1 Civil Appeal Nos.5531-5532/2002 and 5533-5534/2002
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10. This Court, on the premise that the compromise decree dated 10.04.2002 was set aside by the Hon'ble Supreme Court, heard the learned counsel for the parties on merits opining that there would be no need for any evidence on the genuineness of the compromise petition. This Court by order dated 02.01.2008 dismissed this appeal on merits confirming the concurrent findings against the appellants. The appellants being aggrieved by this order dated 02.01.2008 filed appropriate special leave petitions (later numbered as Civil Appeal No.2342/2008) before the Hon'ble Supreme Court, and the Hon'ble Supreme Court by its order dated 20.09.2018 has set aside this Court's order dated 02.01.2008 remanding the matter for fresh consideration with specific directions.
11. The Hon'ble Supreme Court has observed that this Court will have to consider the appellants' application for recall of the order dated 10.04.2002 on merits, and that this Court may remit appeal to the civil Court for the
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purposes of recording the evidence of the parties on the applications in a time bound manner. This Court should decide the question whether the compromise petition filed by the appellants and respondent Nos.2 to 4 on 10.4.2002 is genuine in the light of the evidence adduced by the parties with the observation that if this Court opines on such consideration that the compromise is proper and legal, there would be no need to decide the second appeal on merits. However, if the compromise is held to be illegal, the order dated 10.4.2002 would stand set aside and the appeal would be revived for being heard on merits.
12. This Court on 05.11.2018, in the light of the Hon'ble Supreme Court's aforesaid order has directed the civil Court to conduct enquiry as regards the genuineness of the compromise petition dated 10.4.2002 with opportunities to the parties to lead evidence in support of their respective cases in accordance with law. The civil Court has conducted such enquiry and sent the evidence
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recorded pursuant to the orders of this Court. The first and second respondents have examined themselves as RW.1 and RW.2. The appellants have examined the second appellant as PW.1. The respondents have marked the copies of the compromise petition dated 10.04.2002 and the subsequent applications filed by them as Exs.C.1 and C.2.
13. The second respondent in his affidavit filed in lieu of his chief examination has stated that on 09.04.2002, the appellants' henchmen accosted him at Chandapura when he was visiting the subject properties. He was taken to a Bar and was forced to consume alcohol. He became semi-conscious. He was taken to a Choultry that the appellants were constructing in Chandapura. He was lodged in the Choultry's office throughout the night; next day, i.e., on 10.04.2002 he was taken by the appellants to their counsel's chambers at Shivajinagar, Bangalore. The appellants were accompanied by some other persons. He
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was later brought to the premises of this Court and made to sit in the car. He was threatened with dire consequences if he refused to sign papers stating that he and his family members would be doused with petrol and set on fire. Similar threats were also administered throughout the previous night. He was thus threatened to sign the papers. He did not engage any counsel, nor was he served with notice of the appeal. He was handed over a cheque for Rs.25,000/- but he did not encash the cheque.
14. He did not lodge any information with the police about being illegally detained and forced to sign papers under threat. However, he contacted his family members and the first respondent and related his agony. The first respondent took him to the chambers of Mr. Subramanya Jois, a leading senior member of the Bar. He also related his agony to the learned counsel who, after enquiry with the office of this Court, informed him that a compromise
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petition was filed in this appeal and the compromise petition is accepted by this Court.
15. It is obvious from the second respondent's chief examination that the fulcrum of his case is that the appellants forcibly took him to a Bar at Chandapura on 09.04.2002 and encouraged him to a state of intoxication. He was detained through the night in the appellants' property and later, on 10.04.2002, he was brought to the premises of this Court and he was compelled to sign certain papers under threat. However, the second respondent in the cross-examination has given a completely different version insofar as what transpired on 09/10.04.2002.
16. The second respondent has stated in his cross- examination that on 09.04.2002 he was staying over at this sister's house in Dasarahalli, Bengaluru . He reached his sister's house between 3:30 and 4:00 PM on 09.04.2002. The next day he and his sister travelled by bus to KR
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Market, Bengaluru to buy flowers. They reached the market by 5'o clock in the morning and they spent time till 7'o clock in the morning buying flowers. His sister returned to her home on her own, and he returned to his residence on his own. When the learned counsel for the appellants has persisted with cross-examination to ascertain the details of how he travelled home from Market and at what time he reached home, the second respondent has responded stating that he is discomforted by these questions and he has later stated he does not remember the details. He has also admitted to being a regular alcohol user but he has stated that he was driven to alcohol use because the appellants embroiled him in litigation. He has asserted that he was constrained because he had invested money in purchasing the subject properties and in meeting certain expenses.
17. The first respondent, who is examined as RW2, has stated in his chief examination that he was not notified
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about the appeal and as such, he was not aware of the pendency of the appeal. The second respondent informed him about the appellants whisking him, and threatening and torturing him to sign certain papers. Thereafter, he made enquiries from the office of this Court and learnt about the filing of the appeal and the orders of this Court on 10.04.2002. He neither signed the compromise petition nor was present before this Court on 10.04.2002. There could be no justifiable reason either for him or for the second respondent to agree upon the terms as contained in the compromise petition after having succeeded consecutively before the civil Court as well as the appellate court.
18. In the cross-examination, the first respondent has stated that the second respondent may have related over land line to him the circumstances of threat and compulsion to sign the papers. Initially he advised the second respondent to immediately consult his advocate on
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record before the civil court and the appellate court. He also enquired with the said counsel, and he was informed by the counsel that the second respondent was emotionally traumatized. He later contacted his counsel, and on his advice he filed his application for recall of the order dated 10.04.2002.
19. As regards what transpired on 09.04.2002 and 10.04.2002, the first respondent is categorical that he has no personal knowledge of the circumstances set out in the affidavit accompanying the application as regards the threat to the second respondent and his detention, or the compulsion on the second respondent to sign the papers. He has detailed those circumstances based on what the second respondent has told him. He is also categorical that he accompanied the second respondent when he called upon his counsel and secured advice on the course of action. The chief thrust of the first respondent's cross- examination is that he has prevailed upon the second
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respondent to file an application for recall of the order dated 10.04.2002 to harass the appellants and extract money and after the execution of the sale deed dated 24.08.1989 he cannot assert any subsisting right, title or interest in the subject property. The first respondent has denied all suggestions in this regard.
20. The second appellant has been examined as PW1. He has stated in his affidavit filed in lieu of chief examination that during the pendency of the appeal all the parties to the proceedings, except the first respondent, agreed on entering into a compromise. The second respondent agreed to withdraw his defence and for decree of the suit in consideration of payment of a sum of Rs.50,000/-. The appellants accepted such offer. The second respondent made the offer for compromise about two days prior to the filing of the compromise petition. After it was so agreed amongst all excepting the first respondent, the appellants and the other respondents
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together called upon their respective counsel, and it was also agreed and accepted before them that the second respondent shall withdraw the suit and agree for decree of the suit in consideration of receipt of a sum of Rs.50,000/. The appellants paid a sum of Rs.50,000/-on the date the compromise petition was filed and accepted by this Court.
21. The second appellant has also stated that the second respondent again approached the appellants for a further sum pleading financial difficulties. The appellants, being moved by the second respondent's entreaties, issued a post dated cheque for a sum Rs. 25,000/-. The learned counsel who appeared on behalf of the appellants and the second respondent are distinguished members of the bar. The appellant's counsel is now designated as a senior advocate and one of the counsel for the second respondent is elevated as a judge of this Court, and these distinguished members of the bar could not have been party to any fraud.
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22. In the cross-examination, the second appellant, while reiterating that the applications for recall of the order dated 10.04.2002 are filed to victimise the first appellant and him, has admitted the suggestion that the cost of one acre of converted land in Chandapura, as of the date of the compromise petition/this Court's order, could be Rs.6,00,000/- and the cost of a site could be between Rs.60,000 and 70,000/-. They have paid a sum of Rs.75,000/- to the second respondent as part of the compromise, including a sum of Rs. 50,000/- by the way of cash before this Court and a sum of Rs. 25,000/- by way of a post dated cheque. But, he has denied knowledge of whether this post dated cheque for a sum of Rs.25,000/- is presented for encashment by the second respondent. The second appellant has also been cross-examined about his family members and he being investigated for certain offences. The second respondent has denied suggestions in this regard.
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23. After the Hon'ble Supreme Court remanded the appeal for reconsideration as aforesaid, applications for impleadment have been filed by certain third parties asserting that they have, on 06.01.1990, purchased some of the sites that are subject matter of the present dispute either from the second respondent or by his power of attorney. The appellants have executed appropriate Power/s of Attorney in favour of the first respondent, who has got the lands converted for residential purposes and has transferred the entire layout - the subject properties - in favour of the second respondent. The second respondent either by himself or through his duly constituted power of attorney has transferred most of the sites - the subject properties - in favour of third parties including the applicants. Any order on the applications filed by the first and the second respondents, and in the appeal, would affect their rights. They are necessary parties to the
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proceedings and as such, they may be permitted to come on record as party - respondents.
24. Sri Uday Holla and Sri Ashok Haranahalli, learned Senior counsels appearing respectively for the counsel on record for the appellants and the second respondent, and Sri Sanket M Yenagi, leanred counsel for the first respondent are heard and Sri.S.N.Ashwathnarayana, learned counsel for the impleading applicants is also heard. In response to a specific query from this Court, the learned senior counsel and the learned counsel on record for the first respondent/ impleading applicants submit that they be heard on the question Whether the compromise petition filed by the appellants and respondent Nos.2 to 4 on 10.4.2002 and accepted by this Court is genuine and legal, and they further submit that if this Court concludes that the compromise is genuine and legal, then, as observed by the Hon'ble Supreme Court, no further orders on the merit of the
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appeal would be required: but, if this Court concludes that the compromise is not either genuine or legal, the appeal be listed for hearing on the merits of the appeal. The learned counsel for the impleading applicants submits that the application for impleadment could also be considered while deciding the aforesaid question, but the impleading applicants in any event waive the right to lead evidence as against the applications.
25. Sri Ashok Haranahalli, learned senior counsel, submits that undisputedly the first respondent was not present before this Court on 10.04.2002, but this Court has recorded that all the parties to the suit are present and have agreed upon the compromise. In the absence of the first respondent, who was not served, or the deletion of the first respondent from the array of parties, this Court's observation that all parties have agreed to the compromise and are present before the court is factually incorrect. This
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error demonstrates that there is complete lack of application of mind.
26. The learned senior counsel further submits that this Court, before accepting the compromise petition, should have on application of judicial mind satisfied itself that the appellants and the respondents were ad idem as regards the settlement and that the settlement was by way of a lawful agreement. But, this Court has failed to see that the first respondent was not even a party to the compromise, and rather, he was not even served with the notice of the appeal. The dispute is between the appellants on the one hand and the first and the second respondents on the other. The first respondent, apart from filing a separate Written Statement, has also lead evidence before the civil Court. As such, there could not have been a complete settlement without the first respondent also being a party to the settlement. Nevertheless, in the compromise petition there is no reference to the first respondent and in
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fact, no submission is made as regards service of notice to the first respondent or deletion of the first respondent from the array of parties. Thus, non-application of mind is obvious.
27. The learned senior Counsel elaborates that it is incumbent in law for a Court whenever a compromise is presented for acceptance to hold enquiry and satisfy itself that the compromise agreement is lawful in the sense that it is neither void nor voidable under the Indian Contract Act, 1872. In support of this proposition, the learned senior counsel relies upon the decision of the Hon'ble Supreme Court in Banwari Lal v. Chando Devi (through LRs) and another2. This Court's failure to apply its mind and ascertain whether the compromise is either void or voidable has resulted in acceptance of a compromise which perpetuates fraud practiced by the appellants on the contesting respondents.
2 (1993) 1 Supreme Court Cases 581.
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28. The learned senior counsel further submits that there is a concerted effort to project ad idem as regards the settlement involving the second respondent though he was not even served with the notice of the appeal. In this context, the learned senior counsel points out that the acknowledgement for service of notice of the appeal to the second respondent is allegedly signed by the second respondent, but such signature is in English and it is undisputed that the second respondent signs only in Kannada. In fact, the second respondent's signature in the alleged compromise petition is in Kannada.
29. The learned senior counsel, while not disputing that the second respondent (who is examined as RW1) has been more than ambivalent in his cross-examination as regards what transpired on 09/10.04.2002, submits that the deceit is inherent in the purported agreement as per the
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compromise petition. As such, the question of fraud must be examined independent of such contradiction.
30. The learned Senior counsel emphasises that it is undisputed that the sale deed dated 24.08.1989 is executed in favour of the second respondent for a sum of Rs.69,000/-, but it is stated in the compromise petition that the second respondent, after a lapse of more than decade, has agreed for declaration that the sale deed in his favour is null and void in consideration of receipt of a sum of Rs. 50,000/-. This circumstance, especially when there is no material on record to justify why the second respondent would agree for such a lesser amount, probabilise that the agreement is vitiated by deceit practiced by the appellants for their own unlawful advantage.
31. The learned senior counsel submits that the test to decide whether a compromise is by a lawful agreement
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untrammeled by Fraud, and therefore neither void nor voidable as required under the provisions of Order XXIII Rule 3 of the Code of Civil Procedure,1908 (for short, 'the CPC'), is to ascertain whether two necessary elements of Fraud are established. The two necessary elements to constitute Fraud are 'deceit' and 'injury' in the sense that the person accused of fraud has derived an unfair advantage without even a corresponding loss to the other. The learned senior counsel relies upon the decision of the Hon'ble Supreme Court in Dr. Vimla vs. Delhi administration3, and relies upon paragraph-15 which reads as follows:
"To summarise: the expression "defraud" involves two elements, namely, deceit and injury to the person deceit. Injury something other than economic loss that is, deprivation of property, whether movable or immovable, or of money, and it will include any or whatever cost to any person in body, mind, reputation or such others. In short, it is a non-
3 A IR 1963 Supreme Court 1572
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economic or non-pecuniary loss. A benefit or advantage to the deceiver will almost always cause loss or detriment to the deceived. Even in those rare cases where there is a benefit or advantage to the deceiver, but no corresponding loss to the deceived, the second condition is satisfied".
32. The learned senior counsel submits that in the irrefutable facts and circumstances of the case, despite the contradictions in the second respondent's evidence, the first and second respondents are able to establish both 'deceit' and 'loss' in terms of the above proposition. Further, the learned senior counsel submits that the first and second respondents are able to indicate obvious error in accepting the compromise petition which bespeak of lack of application of mind to ascertain whether the compromise petition is vitiated because it is either void or voidable as contemplated under the Indian Contract Act, 1872. Therefore, the applications will have to be allowed and the order dated 10.04.2002 recalled and the appeal be heard on merits.
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33. Sri Sanket M Yenagi, the learned counsel for the first respondent, while adopting the submissions by the learned senior counsel, Sri Ashok Haranahalli, relying upon the decision of the Hon'ble Supreme Court in A V Papayya Sastry and other v. Government of AP and others4 submits that (i) fraud and justice never dwell together and fraud and deceit ought to benefit none and (ii) that once it is established that an order is obtained by practicing or playing fraud, the aforesaid proposition would apply on all fours and the order dated 10.04.2002 should be recalled. The learned counsel also relies upon the decision of the Hon'ble Supreme Court in Dadu Dayal Mahasabha v. Sukhdev Arya and another5 to submit that whenever it is asserted that a party has not given his consent for the compromise, the court has the power and the duty to investigate the matter and to set aside the consent decree if 4 AIR 2007 Supreme Court 1546 5 (1990) 1 Supreme Court Cases 189
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it is satisfied that the consent as a fact was lacking and the court was induced to pass the decree on a fraudulent representation made to it that the party had actually consented. The learned counsel submits that this proposition also applies to the facts and circumstances of the case.
34. Sri. S N Ashwathanarayana, the learned counsel for the impleading applicants submits that it is undisputed that the second respondent after the sale deed dated 24.8.1989 for the subject properties, has transferred some of the plots in favour of third parties either by himself or through his power of attorney. The sale deeds are executed in the year 1990 just a day after the institution of the present suit and as such, the second respondent, even if he wanted, could not have agreed for declaration that the sale deed dated 24.08.1989 is null and void or that the first respondent had executed such sale deed without necessary authority for the appellants. This is a material
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circumstance, which, amongst others, show that the agreement as per the compromise petition is vitiated.
35. Sri Uday Holla, learned Senior counsel, in support of his submission that the compromise petition filed by the appellants and the second to fourth respondents on 10.4.2002 and accepted by this Court is both genuine and legal, urges firstly that the first and second respondents are impugning the compromise decree on the ground of fraud. Whenever a party pleads fraud, the burden of establishing the same by cogent evidence would be on such party. The evidence led in that regard must be free of every doubt, and if there is any doubt about fraud being played, the same cannot be accepted as proof. Further, if the evidence brought on record indicates that the person charged with fraud has acted in good faith, the same would be incompatible with the hypothesis of fraud, in which event, the case of fraud cannot be accepted. The learned Senior counsel relies upon the decision of a
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Division Bench of this court in Union of India vs. Chaturbhai M Patel & Co.6 and the decision of the Hon'ble Supreme Court in Govind Nayak Gurunath Nayak Vs. Gururao Puttan Bhat Kadekar since deceased by lrs7 in support of these propositions.
36. The learned senior counsel after taking this Court through the affidavit filed by the second respondent in lieu of his chief examination in support of the application took this Court through the appellant's response in cross- examination to buttress his submission that there are gross contradictions in the second respondent's evidence. The contradictions that are elicited in the cross-examination create serious doubts about the second respondent's assertion of fraud. The first and second respondents are unable to establish fraud beyond reasonable doubt. 6 (1976) 1 Supreme Court Cases 747 7 AIR 1971 Mys. 330
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37. The learned senior counsel relying upon the decision of the Hon'ble Supreme Court in Kartar Singh vs State of Punjab8 submits that the statements made by a witness in the cross-examination is an acid test of the truthfulness of the statement made by such witness on oath in examination-in-chief and as such, the statements in the cross-examination will have a higher significance and must be accordingly regarded. The appellants in the cross- examination of the second respondent have elicited the truth from the second respondent as to what transpired on 09/10.04.2002, and this not only destroys the evidentiary value of the second respondent's statements in the chief examination but also impeaches him as being an untrustworthy witness. Therefore, this Court, in the light of the second respondent's contradictory evidence in his cross-examination, must necessarily conclude that the first and second respondents have not been able to establish 8 (1994) 3 Supreme Court cases 569
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fraud. Further, these respondents have not placed any material on record to indicate that the appellants have not acted in good faith. As such, the applications will have to be dismissed.
38. The learned senior counsel further submits that the argument on the other side that this Court has failed to apply its mind to satisfy itself that all the contesting parties by the agreement/compromise were parties to the agreement to settle the dispute and such agreement is not vitiated either on the ground of being void or voidable as contemplated under the provisions of the Indian Contracts Act, 1872, is completely unfounded. The learned senior counsel submits that it is not necessary for the court to say in express terms that it is satisfied that the compromise is a lawful one as there is a presumption that the court is so satisfied unless the contrary is proved. The learned senior counsel relies upon the decision of the Hon'ble Supreme Court in Amteshwar Anand v. Virendra Mohan Singh
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and others9 in support of this proposition, and submits that in this case the contesting respondents have not placed any material on record to the contrary. Therefore, the entire argument that there is an error or that the court has not satisfied itself about the permissibility of the compromise is wholly fallacious and requires to be rejected.
39. The learned Senior Counsel insofar as the applications filed by the first respondent for recall of the order dated 10.04.2002 submits that the first respondent's right, even according to his pleadings and evidence, is only as a power of attorney/agent. It is settled law that even after an agent is duly constituted vide, a proper power of attorney, the principal can act on his own. Further, it is equally settled that an agent (power of attorney) never gets any personal benefit only because of his appointment as an agent. Therefore, the first respondent, who is only a power of attorney/agent, cannot assert any personal interest in 9 (2006) 1 Supreme Court cases 148.
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the subject properties or independent locus to impugn the compromise. The first respondent's application will have to be rejected on this sole ground. Insofar as the impleading applicants, the learned senior counsel submits that they are only pendente lite purchasers and they cannot have any right in the subject properties as against the appellants. As such, these applicants will not have any say in the matter and their applications will have to be accordingly rejected.
40. The question, whether the compromise petition filed by the appellants and respondent Nos.2 to 4 on 10.4.2002 and accepted by this Court is genuine and legal, in the light of the rival submissions requires this Court to decide on the following questions:
a. Whether this Court when it allowed the compromise petition recording that the parties are present and directed drawing of decree according to the compromise, satisfied itself as to the requirements envisaged under the
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provisions of Order XXIII Rule 3 of Code of Civil Procedure, 1908.
b. Whether on appreciation of the evidence now placed on record, this Court could reasonably conclude that the agreement as per the compromise petition accepted on 10.04.2002 is vitiated by fraud and therefore voidable.
41. It is settled law that courts are expected to apply judicial mind while examining the terms of the settlement before the suit is disposed of in terms of such agreement10. It is also settled law that the courts must distinguish between the parties having adjusted, wholly or in part, the suit claim by way of a lawful agreement and a defendant satisfying the plaintiff's claim either wholly or in part. If the court is satisfied that the parties in filing the compromise have by an agreement adjusted the suit claim i.e., as against the defendant satisfying the plaintiff's claim, the courts must examine whether such agreement is in 10 Banwari Lal v. Chando Devi (through LRs) and another supra
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writing and signed by the parties and whether such agreement is lawful in the sense that it is not either void or voidable as contemplated under the provisions of the Indian Contract Act, 187211. It is further settled that it is not necessary for a court to expressly state that it is satisfied that the compromise could be accepted as contemplated under Order XXIII Rule 3 of CPC as there is a presumption, unless it is otherwise proved, that the court is indeed so satisfied when the compromise is accepted12.
42. In the present case, the compromise petition indicates that the appellant and the second to fourth respondents propose a decree in favour of the appellants for declaration that the sale deed dated 28.04.1989 executed in favour of the second respondent would be null and void and not binding on the appellants and that this agreement is in consideration of the appellant's paying a 11 Gurpreet Singh v. Chatur Bhuj Goel (1988) 1 SCC Page 270 12 Amteshwar Anand v. Virendra Mohan Singh and others Supra
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sum of Rs.50,000/- to the second respondent. This Court, when accepting the compromise petition dated 10.04.2002, had to satisfy itself on two counts viz., (i) whether all the parties to the dispute agreeing to the aforesaid had adjusted, wholly or in part, their respective claims and
(ii) that the agreement as per the compromise petition was a lawful agreement in that it is not vitiated by fraud or such other circumstances as exempted under the provisions of the Indian Contract Act, 1872.
43. This Court on 10.04.2002 recorded inter alia as all the parties are present. Advocates for both sides are also present while allowing the compromise petition and directing a decree to be drawn accordingly. The learned senior counsel and the learned counsel for the first and second respondents, to substantiate their contention that this Court did not apply its mind to satisfy itself as to the aforesaid requirements of Order XXIII Rule 3 of CPC point out to certain errors. Firstly, it is pointed out that this
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Court has recorded that all the parties and their learned counsel were present though it is undisputed that the first respondent was neither served with the notice of the appeal nor was present in the Court. Secondly, the third and fourth respondents supposedly have signed the compromise petition dated 10.04.2002, and this Court has recorded that their counsel were also present. However, no counsel had entered appearance for these respondents and in fact the third respondent was not even served. Thirdly, this Court failed to notice that there is no reference to the first respondent in the compromise petition though he had contested the suit filing separate written statement and leading his own evidence in support of the sale in favour of the second respondent. If the appellants were bona fide in filing the compromise petition, they would have ensured that the first respondent was served, or in the least, deleted the first respondent from the array of parties offering justifiable reasons therefore. Fourthly, the
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acknowledgement for service of notice of the appeal on the second respondent bears the second respondent's signature in English but it is undisputed that the second respondent signs only in Kannada. The learned Senior counsel and learned counsel contend that this creates serious doubts about the service of notice to the second respondent.
44. In the undisputed facts and circumstances as discussed above, this Court is of the considered view that the first three of the errors pointed out are indeed material, but the purported error in the second respondent's signature on the acknowledgement will not be helpful to the first and second respondents. There is no material on record, except that the admission that the second respondent signs only in Kannada, to conclude that the acknowledgement does not bear the second respondent's signature. If the first three errors are read cumulatively, this Court will have to conclude that these errors indicate that this Court did not ascertain whether all the parties to
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the proceedings had settled their respective claims wholly or in part or that they were present before the court in acceptance thereof. It may also be relevant to observe at this point of time that unlike the normal practice, the signatures of the parties are also not taken in the order sheet. These errors render themselves to a reasonable conclusion that this Court did not apply its mind to examine as to the requirements under Order XXIII Rule 3 of CPC. As such, the first of the questions is answered in the negative in favour of the first and second respondents.
45. In expression "not lawful" used in Order XXIII Rule 3A of CPC also covers a decree based on a fraudulent compromise. Hence, a challenge to the compromise on the ground that it was obtained by fraudulent means would also fall under the provisions of Order XXIII Rule 3A of CPC. Therefore, the question whether the compromise decree dated 10.04.2002 is vitiated by fraud, at the instance of the appellants, will have to be examined in the
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present proceedings as declared by the Hon'ble Supreme Court in Horil v Keshav13.
46. Insofar as the controversy as regards the fraud alleged by the first and the second respondents, it is contended on behalf of the appellants, relying upon the contradictions in the second respondent's evidence as regards what transpired on 09/10.04.2002, that the contesting respondents, who are enjoined in law with the burden of establishing fraud, have failed to discharge such burden. It is argued that these respondents are not able to establish their case on the scale of preponderance of probabilities beyond all reasonable doubt - a must in law if one is to succeed on the ground of fraud.
47. It is pointed out that these respondents assert that the second respondent has not consented to the decree and his signatures in the compromise petition are obtained 13(2012) 5 Supreme Court Cases 525
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fraudulently in certain circumstances as detailed by him in his chief-examination. But, the second respondent in the cross-examination has described his whereabouts on 09/10.04.2002 and these statements are totally contrary to his evidence in chief-examination. It is urged that the contradictions in the statement by the second respondent in his chief examination and cross-examination are so gross that it entirely demolishes the edifice of these respondents' case that the compromise decree is vitiated by fraud.
48. On behalf of the first and second respondents, without denying the contradictions in the second respondent's evidence, which are rather undeniable, it is contended that the fraud in projecting the second respondent's consent for the compromise decree is inherent in the very terms of the compromise. The respondents rely upon certain circumstances. It is urged that the second respondent, who has acquired title to the subject properties
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under the sale deed dated 24.08.1989 for a valuable consideration of Rs.69,000/-, could not have under normal circumstances agreed to give up his title to the subject properties in the year 2002 for a consideration of Rs.50,000/-. It is also urged that admittedly, the value of one acre of land converted for residential uses and situate in the vicinity of the subject properties and the value of a site could be Rs.6,00,000/- per acre and Rs.60,000/- and Rs.70,000/- respectively. Therefore, it is highly improbable that the second respondent would have agreed for the compromise agreeing to give up his title to the subject property under the Sale deed dated 24.8.1989 for a sum of either Rs.50,000/-. .
49. It is further canvassed that in the compromise petition it is asserted that the appellants have paid the second respondent a sum of Rs.50,000/- and the second respondent has acknowledged the receipt of the same. But there is no proof of the same, except the statement in the
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compromise petition. In fact, the evidence as regards the amount paid by the appellants to the second respondent for the compromise is very tenuous. The second appellant, for the first time in his chief-examination (though there is no statement about the same in the Objection Statement) has stated that the appellants have paid the additional sum of Rs.25,000/- by way of a post dated Cheque being moved by the second respondent's subsequent entreaties for such payment after the proceedings before this Court on 10.04.2002. It is asserted that this is an effort to explain the irreconcilable contradiction that a sum of Rs.50,000/- was paid as of 10.04.2002 and another sum of Rs.25,000/- after 10.04.2002. The second appellant has stated in his cross-examination, that he has not ascertained whether this post dated cheque for a sum of Rs.25,000/- purportedly issued to the second respondent after 10.04.2002 is encashed. Therefore, there is not only contradiction but also an effort at improvement and a
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convenient denial, and these, along with the other circumstances, demonstrate that the compromise petition is presented to this Court in fraudulent circumstances.
50. It would be useful to refer to the decision of the Hon'ble Supreme Court in Seth Gulabchand v. Seth Kudilal14 in deciding on the merits of the rival submissions. The Hon'ble Supreme Court has referred to the following enunciation by the Division Bench of the High Court of Calcutta in Jarat Kumari Dassi's case:
"Demonstrations, or a conclusion at all points logical cannot be expected nor can a degree of certainty be demanded of which the matter under investigation is not reasonably capable. Accepting the external test which experience commends, the Evidence Act in conformity with the general tendency of the day adopted the requirements of the prudent man as an appropriate concrete standard by which to measure proof.
14 AIR 1966 SC 1734
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The Evidence Act is at the same time expressed in terms which allow full effect to be given to circumstances or conditions of probability or improbability, so that where, as in this case, forgery comes in question in a civil suit, the presumption against misconduct is not without its due weight as a circumstance of improbability, though the standard of proof to the exclusion of all reasonable doubt required in a criminal case may not be applicable."
The Hon'ble Supreme Court after referring to the aforesaid exposition and the provisions of Section 3 of the Indian Evidence Act, has declared as follows:
"It is apparent from the above definitions that the Indian Evidence Act applies the same standard of proof in all civil cases. It makes no difference between cases in which charges of a fraudulent or criminal character are made and cases in which such charges are not made. But this is not to say that the Court will not, while striking the balance of probability, keep in mind the
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presumption of honesty or innocence or the nature of the crime or fraud charged."
51. The pith of the afore exposition is that it would not be possible in all cases to insist upon a degree of certainty as regards the existence of a particular fact and therefore, the external test of a prudent man believing the existence of a particular fact in the circumstances of the case is contemplated under the Evidence Act, 1872. The courts must consider the probability of the existence of a fact from a prudent man's perspective; insofar as fraud, the courts must necessarily weigh the probabilities with due weightage to a person accused of fraud having acted in good faith. In other words, the person alleging fraud must discharge the burden of proving fraud by placing necessary circumstances on record which, from a prudent person's perspective, would establish fraud while eliminating the probability of the other person who is accused of fraud having acted in good faith.
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52. This Court, between the circumstances relied upon by the contesting respondents to establish fraud and the contradiction in the second respondent's evidence highlighted by the appellants, will have to decide whether the contesting respondents have placed on record circumstances from which a prudent man would believe the existence of the elements of deceit and loss; if this Court concludes that the contesting respondents have so discharged the burden, then the next question is whether the appellants have discharged the onus of establishing the contrary.
53. In this background, this Court has weighed the undisputed facts that the sale deed dated 28.04.1989 is executed in favour of the second respondent for a sum of Rs. 69,000/- and that the admitted price/value of similarly situate lands in the year 2002 was Rs.6,00,000/- per acre (and the value of a site being between Rs.60,000/- and
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Rs.70,000/-). The absence of a plausible explanation as to why the second respondent agreed to receive much lesser amount, in the considered opinion of this Court, is a material and relevant circumstance. The appellants have, for the first time in the second appellant's evidence, stated that an additional sum of Rs.25,000/- is paid after 10.04.2002 because of the entreaties made by the second respondent. The fact that it is brought out for the first time in the chief examination makes it seem very convenient creating serious doubts. These are also another set of material and relevant circumstances.
54. Further, on 10.04.2002, it is represented before this Court that all the parties were present when compromise was reported though admittedly the first respondent was not present. There is complete failure to explain why the first respondent was not either served or represented at the time of filing of the compromise petition except for a subsequent assertion that he had only a
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limited interest as a power of attorney. Furthermore, the second respondent in his evidence before the civil Court at the time of the trial on merits has stated in unequivocal terms that even as of the date of his evidence he had transferred certain sites that are subject matter of the dispute.
55. This Court is of the considered view that the contesting respondents in bringing out the aforesaid circumstances have established from a prudent man's perspective the necessary elements of deceit and loss, the necessary ingredients of fraud. The appellants to discharge the resultant onus to prove to the contrary should have placed on record any material to explain the circumstances to establish that they had acted in good faith in presenting the comprise petition. But, the appellants have not placed some material from which a reasonable inference in their favour can be drawn. When the circumstances brought out by the contesting respondents are juxtaposed with the
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contradiction highlighted by the appellants, it would only be reasonable to conclude that the aforesaid circumstances overwhelm the contradiction. As such, this Court concludes that the agreement as per the compromise petition accepted on 10.04.2002 is shown to be vitiated on the ground of fraud.
For the foregoing, the order dated 10.04.2002 is recalled allowing the applications in Civil Petition Nos.949/2002 and 950/2002 filed by the contesting respondents. Consequentially, the appeal is restored for hearing on merits with the pending applications, including the applications for impleadment.
SD/-
JUDGE nv Ct:sr