Madras High Court
Xs Financial Services Ltd. And Megapro ... vs N. Devendran, Mrs. D. Navaneetham And ... on 31 January, 2003
Equivalent citations: AIR2003MAD369, (2003)1MLJ613, AIR 2003 MADRAS 369, (2003) 2 MAD LW 208 (2003) 1 MAD LJ 613, (2003) 1 MAD LJ 613
Author: D. Murugesan
Bench: D. Murugesan
JUDGMENT D. Murugesan, J.
1. This Original Side Appeal is directed against the order of the learned single Judge dated 03.12.1997 made in Application No. 2668 of 1997 in C.S. No. 269 of 1996.
2. The appellants are the plaintiffs and the respondents are the defendants in the suit and the parties are referred to in the order as arrayed in the appeal. Few facts, which are relevant for the disposal of the appeal may be summarized as follows:-
The appellants filed the suit against the respondents for a judgment and decree, directing the respondents jointly and severally to pay the appellants a sum of Rs.71,80,888/- together with interest thereof at the rate of 28% p.a. on Rs.56,00,000/- from the date of the plaint till the date of payment and in default thereof to pass a charge decree and order for sale of the 8.84 lakh bonus shares of the third respondent company.
3. While the suit was pending, Application No. 909 of 1997 was filed by the appellants to record the Memorandum of Compromise dated 30.04.1996 entered into between the first appellant and first and second respondents and for passing a compromise decree in the suit. In the said memorandum of compromise, first and second respondents agreed to repay a sum of Rs.69,58,048/- to the first appellant in installments towards full and final settlement of the claim. The learned Judge passed an order dated 10.03.1997, recording the Memorandum of compromise and consequently passed the compromise decree. After the said order was passed, the respondents, filed Application No. 2668 of 1997 under Order XIV Rule VIII of the Original Side Rules and Section 151 of Civil Procedure Code to set aside the order made in Application No. 909 of 1997, recording the memorandum of compromise and permit the respondents to file their written statements in the suit. The respondents also filed an Application No. 2669 of 1997 for a direction to stay the execution proceedings in the suit. Both the applications were filed alleging that the appellants brought the said memorandum of compromise on 30.04.1996 and made the first and second respondents to sign on the understanding that only if first and second respondents agree for the terms and conditions of the compromise memo, they could file the same into the Court. The first and second respondents though signed the memorandum of compromise, did not agree for the proposals. The original copy of the memorandum of compromise signed by the parties was with the first respondent only. It was further alleged in the affidavit, that respondents did not agree for the proposal as they were not liable to pay the suit claim and the respondents also did not have the intention to act on the memorandum of compromise. Hence, the order, recording the memorandum of compromise was bad in law.
4. Both the applications were resisted by the appellants herein on the ground that the memorandum of compromise was signed with clear understanding that the matter would be reported to the Court for recording the same for a decree in terms of memorandum of compromise.
5. By a common order dated 03.12.1997, learned Judge allowed the Application No. 2268 of 1997, by setting aside the order dated 10.03.1997 made in Application No. 909 of 1997, recording the memorandum of compromise. In view of the said order, learned Judge dismissed the Application No. 2669 of 1997 for stay of execution of the decree. Aggrieved by the said order, the appellants, who are the plaintiffs in the suit and the respondents in those applications have filed the present appeal.
6. Mr. A.L. Somayaji, learned Senior Counsel appearing for the appellants would contend that respondents 1 and 2 have signed the said memorandum of compromise only after knowing its contents fully well. Once the memorandum of compromise was signed, it must be presumed that there was clear understanding between the parties to file the memorandum of compromise before the Court for recording the same and for consequential compromise decree. Therefore, it does not lie in the mouth the respondents now to contend that though they have signed the said memorandum of compromise, they did not agree for the memorandum containing the terms of the compromise being filed into Court and go back to challenge the order recording the memorandum of compromise. Learned Senior Counsel would also submit that the memorandum of compromise was made in duplicate and that one of the copies was retained by the first respondent and the other copy was given to the appellants, which was filed into Court and on which basis, the memorandum of compromise was recorded by the Court by order dated 10.03.1997. Learned Senior Counsel would also contend that the respondents have not made out any grounds to set aside the order, recording the memorandum of compromise.
7. Mr. T. Ramalingam, learned counsel appearing for the respondents would however contend that mere signing of the memorandum of compromise would not by itself amount to acceptance as to its contents and consequently for being filed into the Court for recording the same and for passing a compromise decree. At no point of time, the respondents agreed for the memorandum of compromise being filed into the Court as they disputed the very claim of the appellants for recovery of the money. To sustain the said submission, learned counsel for the respondent drew our attention to the fact that the original copy of the memorandum of compromise was with the first respondent and in the absence of the same, the appellants could not have filed the original copy before the Court for recording the memorandum of compromise. In the absence of original copy, the court ought not to have recorded the memorandum of compromise. Learned counsel would further submit that the application to set aside the order recording memorandum of compromise was rightly allowed by the learned Judge.
8. We have considered the above submissions of the respective counsel. It is not in dispute that both the first and second respondents have signed the memorandum of compromise on 30.04.1996. The execution of the said compromise memo by the parties, more particularly by respondents is in fact admitted. The defence taken by respondents to the memorandum of compromise is more specific as in the affidavit filed in support of the petition, it is only stated that though the first and second respondents have signed the memorandum of compromise, they did not agree for the memorandum of compromise being filed into the Court. How far the said averment could be accepted by the courts in an application to set aside the order, recording the memorandum of compromise is a matter to be considered in this appeal.
9. The respondents do not challenge the power of the Court in passing orders recording the memorandum of compromise and consequently decreeing the suit in terms of the memorandum of compromise. The challenge is only to the extent that the respondents did not agree for the memorandum of compromise being filed into Court for recording the same. When once memorandum of compromise is signed and is produced before the Court, unless there is any acceptable challenge to the same by anyone of the parties, the Court shall presume that the compromise memo is entered and executed by the parties with full understanding as to the terms of the compromise and with further understanding that the same could be filed into the Court for recording the same. When once the Court records the memo, on its being produced and filed through an application, the matter reaches its finality and parties cannot be allowed to challenge such orders as a matter of course unless strong grounds are made out. The order recording compromise memo was challenged on the following grounds:
1. The respondents did not agree for the terms of the memorandum of compromise being filed into Court.
2. The original copy of the memorandum of compromise was not filed into Court.
3. There was no intention on their part to act upon the memorandum of compromise.
Let us now consider whether the order recording memorandum of compromise could be assailed on these grounds in the given facts and circumstances of the case.
10. The first ground of challenge in filing the memorandum of compromise by the respondents was that they did not agree for the memorandum containing the terms and conditions of compromise being filed into the Court. In this regard, it may be relevant to refer the following passage in the memorandum of compromise:
"Whereas in respect of monies due and payable by the second parties to XSFS certain disputes had arisen which the parties have decided to amicably settled as detailed in this memorandum".
From a reading of the above clause, it is manifestly clear that the said memorandum of compromise was entered only in order to settle the dispute as to the money claim of the first appellant with first and second respondents. Both of them were very much aware that the same was entered into only for buying peace by amicable settlement. In this context, it would also be relevant to refer to the fact that the suit was filed, claiming a sum of 71,80,888/- together with interest thereof at the rate of 28% p.a. on Rs.56,00,000/- from the date of the plaint till the date of payment. When such a huge claim is made in the plaint, in the memorandum of compromise, the total amount arrived and agreed between the parties was only Rs.69,58,048/- as on 30.04.1996 and the said amount shall also be payable in installments. The quantum of amount so arrived and agreed, compared to the claim made in the plaint would also indicate the minds of the parties to amicably settle the dispute by arriving a fixed quantum without reference to the actual claim made in the plaint. It could therefore be hold that the respondents were fully aware of the terms of the compromise memo and its implication as to the payment by a quantified amount in installments.
11. One more paragraph of the memorandum of compromise is also worth mentioning. In paragraph 4 of the compromise memo, it is stated as follows:
"This memorandum of compromise shall be filed by both parties in C.S. No. 269 of 1996 and a compromise decree will be requested to be passed by the Honorable Court."
12. Courts are bound to give effect to the real meaning of the terms of the compromise as the terms and conditions expressed therein reflect the intentions of the parties. The intention of the parties is to be judged by various clauses in the agreement. When the parties have specifically expressed their intention while settling the dispute to place the memorandum of compromise into Court in order to get a compromise decree, it would be only proper to hold that the parties have understood that the compromise memo could be filed before the Court for passing a decree in terms of the compromise. Therefore, it is beyond acceptance that respondents 1 and 2 though singed the compromise memo, did not agree for the same being filed into the Court.
13. Coming to the second ground that the original copy of the memorandum of compromise memo is only with the first respondent and therefore, the appellants could not have filed the original copy into the Court to invite an order, recording the memorandum of compromise and consequential decree in terms of the same, it is to be noted that in the last paragraph of the compromise memo, it is stated as follows:
"In witness whereof the parties thereto have signed this Memorandum (in duplicate) on the date, month and year first above written".
From the above paragraph, it is clear that the memorandum of compromise was prepared in duplicate, one to be kept by the appellants and another to be kept by respondents. Therefore, the contention that there was only one original copy, which was kept by the first respondent and therefore, the appellants could not have filed the original copy of the compromise memo into the Court cannot be accepted, as the other copy was admittedly with the appellants, which was filed into the Court for recording the memorandum of compromise.
14. In so far as the third ground viz., there was no intention on the part of the respondents to act upon the memorandum of compromise is concerned, it is seen that the memorandum of compromise was dated 30.04.1996. While agreeing for a settlement of Rs.69,58,048/- payable as of 30.04.1996, the parties have agreed the following schedule of payment.
"An amount of Rs.9,58,048 will be paid by the second parties to XSFS in the following manner:
1. Rs.4,08,048/- by way of pay order bearing No. 636965 dated 30.04.1996 issued by State Bank of India, Guindy Branch, Madras drawn in favour of XSFS.
2. Rs.3,00,000/- by way of pay order bearing No. 636937 dated 30.04.1996 issued by State Bank of India, Guindy Branch, Madras drawn in favour of XSFS at the time of signing of this memorandum.
3. Rs.2,50,000/- by way of cheque bearing No. 848874 dated 30.04.1996 in favour of XSFS and handed over to XSFS today."
In compliance of the above clause, two bankers cheques dated 30.04.1996 representing a sum of Rs.4,08,048/- and Rs.3,00,000/- by State Bank of India, Guindy Branch, Madras in favour of the first appellant were issued at the instance of the respondents. The Chairman and Managing Director of the third respondent has also issued an Account Payee cheque dated 30.04.1996 drawn in favour of the first appellant for a sum of Rs.2,50,000/-. Xerox copies of these cheques find a place at Page No. 55 of the typed set of papers filed by the appellants. These cheques were honoured on 03.05.1996, 03.05.1996 and on 04.05.1996 respectively. The first respondent L. Devendran addressed a letter to the first appellant on 03.05.1996 enclosing a banker's cheque bearing No. 637003 dated 03.05.1996 for a sum of Rs.2,50,000/-. The said letter reads as under:-
N. Devendran, PILCO House, 3,10th Avenue, Ashok Nagar, Madras-600 083.
Phone:423382 May 3, 1996 M/s. XS Financial Services Limited, 2/1, Crescent Part St., T. Nagar, Madras - 600 017.
ATTN: Mr. S.G. Prabhakaran Dear Sir, Please find enclosed Bankers Cheque bearing No. 637003 dated 03.05.1996 for Rs.2,50,000/- drawn on State Bank of India, payable as per Memorandum of compromise. Kindly acknowledge receipt and return the cheque 848874 dated 30.04.1996 for Rs.2,50,000/- issued earlier. Thanking you, Yours faithfully,
- Sd -
(N. Devendran) Encl.: As above.
15. From the above, it is clear that the respondents have acted upon the terms of the memorandum of compromise. Further, it is to be noted that the first appellant had also communicated the memorandum of compromise to the Chief General Manager, Industrial Development Bank of India, the Regional Manager, Securities and Exchange Board of India, the Branch Manager, State Bank of India, Guindy Branch by letters dated 04/05/1996. Subsequent to the above, a cheque for Rs.5,00,000/- bearing No. 848875 dated 15.05.1996 was also issued by the first respondent in favour of the appellants. This could be seen from the communication of the first appellant to the first respondent dated 18.07.1996, which finds a place at page No. 62 of the typed set of papers. Confirmation as to the above communication has also been filed in the typed set of papers. For the reasons known to the respondents, the subsequent payments as agreed in the memorandum of compromise were not made, which forced the appellants to approach the Court for recording the compromise. From the details narrated above, it is clear that the parties to the memorandum of compromise have acted upon the said memorandum of compromise and hence, the contention that the respondents did not have the intention to act upon the memorandum of compromise cannot be accepted.
16. Coming to the reasoning of the learned Judge, it is seen that the learned Judge has mainly proceeded that the original copy of the memorandum of compromise was with the first respondent and only a copy has been filed before the Court for recording the compromise. Learned Judge has also proceeded on the basis that neither the respondents nor their counsel were present at the time when the memorandum of compromise was recorded. We do not find any materials to support the above findings. In so far as the first finding is concerned, it is to be noted that the memorandum of compromise was prepared in duplicate and one copy was retained by the appellant and the another copy was retained by the first respondent. Both the copies are originals in so far as the respective parties are concerned. Merely because the copy retained by the first respondent was not filed into the Court, it cannot be contended that the court cannot act on the basis of the copy filed by the appellant to record the memorandum of compromise. The reasoning of the learned Judge to the contrary is unsustainable.
17. Equally, the second reasoning that the memorandum of compromise was recorded in the absence of the respondents and their counsel also cannot be sustained as we find that the said reasoning is also not supported by any material. On the contrary, we find in the decretal portion of the order dated 10.03.1997, the respondents have represented through an Advocate by name S. Vijayakumar. That apart, it is not even the case of the respondents that they were not present either in person or through counsel when the memorandum of compromise was recorded. We do not find any such averment in the affidavit filed in support the petition to set aside the order recording the memorandum of compromise. In the absence of any pleadings, placing reliance on the above reasoning to set aside the order, recording memorandum of compromise also cannot be accepted.
18. Learned Judge has also relied upon the judgment of the Apex Court reported in BANWARI LAL ..VS.. CHANDO DEVI AND ANOTHER to hold that the party who was not present or represented at the time when the compromise was presented and whose wishes has not been heard can always file a petition under Rule 3 Order 23 of C.P.C. The facts of the case before the Apex Court was entirely different from the facts of the case before us. In our considered view, the judgment relied upon by the learned Judge is not applicable to the facts of this case. In that case, it was the specific case of the petitioner that he did not enter into compromise and he has not signed the same. Thumb impression in the document was sought to be fixed by one of the petitioners therein and hence, the petitioner contended that fraud has been played on the court in securing a compromise memo. Factually in that case, neither the petitioner nor his counsel were present before the Court when the compromise memo was recorded. Only under the said circumstances, their Lordships of the Apex Court recalled the memorandum of compromise recorded by the Court and consequently restored the suit on file to be heard on merits. However, in the case on hand, the fact that compromise was entered into between the parties is not disputed as the respondents, who were the petitioners before the learned Judge seeking to set aside the order of compromise memo have admitted the execution of the compromise memo. The compromise memo has also been acted upon to the extent indicated by us in the earlier portion of the order. The ground pleaded is that the said compromise memo was not intended to be filed into Court. We had not agreed with the said submission since the very clause 4 of the memorandum of compromise enables the parties to produce the compromise memo before the Court. We have also found on facts that the respondents have represented by counsel before the compromise memo was recorded by the Court, as evidenced from the decree. In view of the above facts, the judgment relied upon is of no help for the respondents herein to assail the order of the learned Judge in recording the compromise memo. Except the above reasonings, we do not find any other reason of the learned single Judge to set aside the order, recording the memorandum of compromise.
19. For all the above reasons, we find every force in the grievance of the appellants in this appeal. Accordingly, we find that the order under challenge in this appeal cannot be sustained as the order dated 10.03.1997 recording the compromise memo dated 30.04.1996 is in accordance with law and is in accordance with the understanding between the parties to the terms and conditions of the memorandum of compromise. We find every merit to allow the appeal and accordingly, the same is allowed, however without costs.