Calcutta High Court
Aditya Birla Finance Limited vs Williamson Financial Services Limited ... on 14 September, 2023
Author: Arindam Mukherjee
Bench: Arindam Mukherjee
IN THE HIGH COURT AT CALCUTTA
ORdINARy ORIGINAL CIvIL JURISdICTION
ORIGINAL SIdE
(COMMERCIAL dIvISION)
Present :
THE HON'BLE JUSTICE ARINDAM MUKHERJEE
IA No. GA 35 of 2023
With
CS 227 of 2022
IN THE MATTER OF :
ADITYA BIRLA FINANCE LIMITED
VS.
WILLIAMSON FINANCIAL SERVICES LIMITED & ORS.
For Plaintiff : Mr. Ratnanko Banerji, Sr. Adv.
Mr. Sakya Sen, Sr. Adv.
Mr. Rohit Das,
Mr. Dwaipayan Basu Mallick,
Ms. Suchismita Ghosh Chatterjee
Mr. Abhishek Kisku,
Mr. P. Paul,
Mr. Subhankar Das
...... Advocates
For the Petitioners/Defendants : Mr. Anirban Ray,
no.7 & 8 Mr. Sidhartha Sharma,
Mr. Rishav Dutt,
Mr. Varun Kothari,
Ms. Shalini Basu
...... Advocates
For Respondents no.23 : Mr. Rupak Ghosh,
Mr. Debanjan Mandal, Mr. Sanjiv Kumar Trivedi, Ms. Iram Hassan, Mr. Sanket Sarawgi, Ms. Mahima Cholene ...... Advocates For Respondents no.26 : Mr. Jishnu Chowdhury, Mr. Debanjan Mandal, Mr. Sanjiv Kumar Trivedi, Ms. Iram Hassan, Mr. Sanket Sarnawgi, Ms. Mahima Cholene ...... Advocates For Respondents no.25 : Mr. Victore Chatterjee, Mr. Aritra Basu, Mr. Debyan Sen ...... Advocates For Respondents no.10 to 12 : Mr. Dipendra Nath Chunder, Mr. Altamash Alin ...... Advocates For Respondent no.3 : Mr. Soumabho Ghose, Ms. Tiana Bhattacharya ...... Advocates For Defendants no. 1, 2, 4,5, 9 : Mr. Shwetank Ginodia, and 14 Mr. A. Kothari.
...... Advocates Page 2 of 14 For Defendant no.34. : Mr. Arunabha Das, Ms. Ashika Daga, Mr. Aayush Lakhotia, ...... Advocates For Defendant nos. 17 to 21 : Mr. Rajesh Upadhyay, Adv.
...... Advocates
Last Heard on : 17.08.2023.
Judgment on : 14th September, 2023.
Arindam Mukherjee, J:
G.A. 35 of 2023:
This is an application filed by Vedica Sanjeevani Projects Private Limited (in short 'Vedica') and Christopher Estates Private Ltd. (in short 'Christopher') respectively being the defendants no.7 and 8 in the suit being CS No.227 of 2022 inter alia praying the following relief(s):-
"a) An order of injunction be passed restraining the Defendant no. 1 to 6, 9, 14 and 24 and the Plaintiff from enforcing and/or giving effect and/or acting upon such terms of settlement.
b) Ad interim order in terms prayer above.
c) Such further and/or other order or orders as this Learned Court may deem fit and proper".
The background behind filing of this application can be enumerated briefly as follows:-
Page 3 of 14
In a suit for recovery of money said to have been lent and advanced to the defendant no.1 and other defendants allegedly having stood as guarantors or sureties with further prayer for declaration and cancellation, the plaintiff filed an application being G.A 1 of 2022 inter alia for directing the defendants to show cause as to why the entire estates and properties of the defendants/respondents be not attached with further prayer for injunction and appointment of receiver. This application was hotly contested by all the defendants/respondents in the said application. There are several applications for rejection of plaint.
While the applications for rejection of plaint and injunction application were heard, the plaintiff and the defendants no.1 to 6, 9, 14 and 24 entered into an out of Court settlement the terms whereof were subsequently recorded in a Terms of Settlement dated 7th June, 2023. The said Terms of Settlement was placed before the Court for being accepted and further for passing a decree in terms thereof. The defendants no.7 and 8 along with defendants no.10, 11 and 12 opposed the acceptance of the said Terms of Settlement. Although defendants no.7 and 8 had later on filed an application challenging the acceptance of settlement being G.A 35 of 2023 but the defendants no.10, 11 and 12 never filed any separate applications.
a) The main contention of defendant no.7 (Vedica) and the defendant no.8 (Christopher) is that the said Terms of Settlement dated 7 th June, 2023 is not a lawful agreement.
Page 4 of 14
b) By entering into the Terms of Settlement, the defendants no.1 to 6, 9, 14 and 24 had infringed the third party rights that is the rights of the defendants no.7 and 8.
c) The plaintiffs and the defendants no.1 to 6, 9, 14 and 24 upon entering into an agreement between themselves are making a declaration that the immovable property of the defendants no.7 and 8 at Neemrana, Rajasthan has been mortgaged by the defendants no.7 and 8 in favour of Vistra ITCL (India) Limited (Defendant no.35) and pledged for the benefit of the plaintiff and others the shares of the said defendants no.7 and 8.
d) The defendants no.7 and 8 have drawn notice of this Court to paragraphs-
6, 8, 9, 16, and 21 of their application being G.A 35 of 2023 in particular to support their contention that the rights of third parties like the said defendants no.7 and 8, standing outside the compromise are also affected and are indirectly encompassed within the ambit of the said Terms of Settlement.
e) The defendants no.7 and 8 also say that by agreeing and/or declaring that the immovable property at Neemrana, Rajasthan belonging to the said defendants is mortgaged and the shares are pledged, the plaintiffs and defendants no.1 to 6, 9, 14 and 24 are in effect taking away the rights of the said defendants no.7 and 8, to challenge the allegation that Neemrana property at Rajasthan is mortgaged to the plaintiff which is the case of the said defendants. Similarly the pledge which is disputed by the said Page 5 of 14 defendants no.7 and 8 is being confirmed by the plaintiffs and defendants no.1 to 6, 9, 14 and 24.
f) The defendants no.7 and 8 also say that the Terms of Settlement if accepted by this Court and a decree passed in accordance thereof will put an official seal thereto including the declaration and an agreement with regard to Neemrana property and the shares. The defendants no.7 and 8 will, therefore, have no opportunity to assert that the immovable property at Neemrana is not mortgaged or the shares are not pledged.
g) Moreover, the Terms of Settlement on culminating into a decree will be an enforceable one which will take away the right of the defendants no.7 and 8 to ventilate their grievances against the assertion of mortgage and pledge. The defendants no.7 and 8 will be precluded from filing a suit to challenge the decree on compromise in view of the provisions of Order 23 Rule 3A read with the provisions of Section 96 (3) of the Code of Civil Procedure, 1908 (in short CPC) and the suit and/or proceedings already filed by the defendants no.7 and 8 to a great extent will become infructuous. In view of a decree on compromise between the plaintiff and the defendants no.1 to 6, 9, 14 and 24 right and/or equity will be created in favour of banks, financial institutions and other entities to proceed against the defendants no.7 and 8 on the strength of the decree contending that the property is mortgaged or shares are pledged with them and obtain orders against the defendants no.7 and 8. The defendants no.7 and 8 will, therefore, be remediless. Even if they make an application for Page 6 of 14 setting aside of the decree that may be passed in the suit itself, then also the sting of such challenge will be a blunt one as the compromise decree will be staring at the face of the defendants no.7 and 8 on having been passed in their presence.
h) The defendants no.7 and 8 in support of their argument have cited the following judgments:
(1974) 1 SCC 242 [Nagindas Ramdas vs. Dalpatram Ichharam alias Brijram & Ors.] AIR 1980 Del 99 [Smt. Kiran Arora & Ors. vs. Ram Prakash Arora & Ors.] (1988) 1 SCC 270 [Gurpreet Singh vs. Chatur Bhuj Goel] (1993) 4 SCC 6 [Lohia Properties (P) Ltd., Tinsukia, Dibrugarh, Assam vs. Atmaram Kumar] (1993) 1 SCC 581 [Banwari Lal vs. Chando Devi (SMT) (Through LRS.) & Anr.] (2021) 9 SCC 114 [R. Janakiammal vs. S.K. Kumarasamy (Deceased) through Legal Representatives & Ors.] AIR 2014 Pat 239 [Awadhesh Prasad Sharma vs. Prahlad Prasad Sharma & Ors.] 2022 SCC OnLine J&K 728 [Abdul Majeed Ganie vs. Abdul Rahim Bhat & Ors.] The sum and substance of these judgments is that a contract which is either void or voidable under the provisions of Indian Contracts Act, 1872 cannot be Page 7 of 14 construed to be a lawful agreement under the provisions of Order 23 Rule 3A of CPC and a compromise should not affect any third party right or create any right or equity in favour or against anyone who is not a party to the compromise and a compromise decree cannot be challenged by filing a separate suit.
The plaintiff on the other hand submits that the defendants no.7 and 8 or defendants no.10, 11 and 12 who are shareholders of defendants no.7 and 8 cannot stand in the way of the plaintiff entering into an out of Court settlement with defendants no.1 to 6, 9, 14 and 24 to compromise the suit inter se between themselves.
The compromise does not touch in any way the rights or the interest of any of the defendants including defendants no.7 and 8 who stand outside the compromise. It also does not create any right or equity in favour of any entity including the banks and financial institutions. The compromise will not have any impact on any pending litigation by and against the defendants no. 7, 8, 10, 11 and 12. The compromise is valid and lawful, it satisfies all the parameters of a valid agreement to come into existence and is in no manner either void or voidable under the provisions of Indian Contracts Act, 1872. The compromise is recorded in writing in Terms of Settlement dated 7 th June 2023, the terms are clear and specific and leaves no manner of ambiguity to contend that the decree, if any, passed in terms thereof will be vague, unworkable and unenforceable Page 8 of 14 The facts relating to Neemrana property and the pledge which are correct according to the plaintiff and the defendants no.1 to 6, 9 ,14 and 24 have been stated in the compromise and as such it cannot be also deleted from the settlement at the instance of the defendants no.7, 8, 10, 11 and 12. In any event on the basis of such factual statement the plaintiff and the defendants no.1 to 6, 9,14 and 24 have entered in the compromise. The plaintiff therefore prays for the Terms of Settlement be accepted and a decree in terms thereof be passed.
On behalf of defendants no.1 to 6, 9, 14 and 24, it is submitted after rounds of discussion, the plaintiff and the defendants no.1 to 6, 9, 14 and 24 who were hotly contesting the suit and the prayer for ad interim reliefs made by the plaintiff have entered into the compromise which is recorded in writing in terms of settlement dated 7th June 2023. At the time of discussion, these issues regarding the immovable property at Neemrana, Rajasthan and pledge agreement came for detailed consideration. The facts which are agreed by and between the plaintiff and the defendants no.1 to 6, 9, 14 and 24 has been recorded correctly and placed before the Court with the signature of the parties to the compromise and their respective advocates. The Terms of Settlement is a valid document fulfilling all terms required to be met for a document to qualify as a valid contract. The defendants no.7 and 8 cannot in any manner object to the said compromise being recorded and a decree passed in terms thereof as none of the terms contained therein effects the right of the defendants no.7, 8, 10, 11 and 12. The said defendants no.1 to 6, 9, 14 and 24 Page 9 of 14 also agree to the submissions made by the plaintiff and seek for a decree to be passed in Terms of Settlement.
After hearing the parties and considering the materials on record, I find that the parties to a suit can agree at any stage to resolve the disputes between them to bring the suit in respect of such agreed issues to an end with the passing of a decree. It is also well-settled in law that partial decree in a suit can be passed as also a decree can be passed at different stages of the suit. Although, the out of court settlement can be made orally but the terms thereof as mandated under the provisions of Order 23 Rule 3A of CPC are required to be recorded in writing and placed before the Court, so that a decree can be passed which will not only bind the parties but will have the strength of being enforced. This position of law has been classified in a recent judgment of the Hon'ble Supreme Court reported in 2022 (5) SCC 736 [Sree Surya Developers and Promoters vs. N. Sailesh Prasad & Ors.] by taking into consideration many earlier judgments.
After reading the Terms of Settlement as a whole, I do not find any unlawful agreement to be recorded therein. It satisfies the test for a lawful agreement as envisaged under the provisions of Indian Contracts Act, 1872. At the same time, the Court cannot be unmindful that there will be a mandate on a decree being passed on the compromise which cannot be ordinarily challenged. It is also necessary to bear in mind while accepting the Terms of Settlement that the same does not affect the interest of any party standing outside the compromise. Thus on one hand the Court while accepting a Terms of Page 10 of 14 Settlement for passing a decree on compromise has to ensure minimizing the chance of such decree taking away anyone's right who is not part of the compromise or make the decree vague and unworkable or that the same does not create a right or equity in favour of any other entity as against the persons standing outside the compromise.
Applying these parameters to the facts of the instant case, I'm inclined to accept the Terms of Settlement with certain restrictions and clarifications to ensure that the rights of the defendants no.7, 8, 10, 11 and 12 are not affected or that the compromise does not create any right or equity in favour of any other entity as against the said defendants by virtue of the compromise decree. The Terms of Settlement and the decree to be passed thereon shall not in any manner be construed as a declaration from this Court that the immovable property at Neemrana, Rajasthan had been mortgaged by the defendants no.7, 8, 10, 11 and 12 in favour of the plaintiff and shall mean to be only an understanding between the plaintiff and the defendants no.1 to 6, 9,14 and 24 which will estop them from contending in a different manner subsequently. The Terms of Settlement and decree to be passed thereon shall not be construed as a declaration of pledge of any shares by defendants no.7, 8, 10, 11 and 12 in favour of the plaintiff or to any of the defendants. The Terms of Settlement and decree to be passed thereon shall not be meant that of any dispute has been resolved through the same in the suit between the plaintiff and the defendants no.1 to 6, 9, 14 and 24 with the defendants no.7, 8, 10, 11 and 12.
Page 11 of 14 No Court or any authority shall accept and implement any right, equity or interest against the defendants no.7, 8, 10, 11 and 12 with regard to the Neemrana property and the pledge of shares as contained in the Terms of Settlement. Any Court or authority in seisin of any matter between the plaintiffs and the defendants no.1 to 6, 9,14 and 24 and the defendants no.7, 8 10, 11 and 12 or between the defendants no.1 to 6, 9, 14 and 24 and the said defendants no.7, 8, 10, 11 and 12 shall hold only on the basis of this compromise or a decree passed thereon as to a mortgage of the Neemrana property at Rajasthan by defendants no.7 and 8 in favour of the plaintiff or as to the pledge of shares in favour of the plaintiff and others. The Court or the authority shall however, be free to come to an independent finding as to the mortgage of Neemrana property and pledge of shares on the basis of the materials available before them.
The application being G.A No. 35 of 2023 is accordingly disposed of. Urgent photostat certified copy of this judgment and order, if applied for, be supplied to the parties on priority basis after compliance with all necessary formalities.
In re : CS 227 of 2022 The Court : The suit being C.S No.227 of 2022 is decreed between the plaintiff and defendants no.1 to 6, 9, 14 and 24 on the basis of the terms of Page 12 of 14 settlement dated 7th June 2023 which has been placed before the Court and taken on record with the following restrictions and/or clarifications. The Terms of Settlement and the decree to be passed thereon shall not in any manner be construed as a declaration from this Court that the immovable property at Neemrana, Rajasthan had been mortgaged by the defendants no.7, 8, 10, 11 and 12 in favour of the plaintiff and shall mean to be only an understanding between the plaintiff and the defendants no.1 to 6, 9,14 and 24 which will estop them from contending in a different manner subsequently. The Terms of Settlement and decree to be passed thereon shall not be construed as a declaration of pledge of any shares by defendants no.7, 8, 10, 11 and 12 in favour of the plaintiff or to any of the defendants. The Terms of Settlement and decree to be passed thereon shall not be meant that of any dispute has been resolved through the same in the suit between the plaintiff and the defendants no.1 to 6, 9, 14 and 24 with the defendants no.7, 8, 10, 11 and 12.
No Court or any authority shall accept and implement any right, equity or interest against the defendants no.7, 8, 10, 11 and 12 with regard to the Neemrana property and the pledge of shares as contained in the Terms of Settlement. Any Court or authority in seisin of any matter between the plaintiffs and the defendants no.1 to 6, 9,14 and 24 and the defendants no.7, 8 10, 11 and 12 or between the defendants no.1 to 6, 9, 14 and 24 and the said defendants no.7, 8, 10, 11 and 12 shall hold only on the basis of this compromise or a decree passed thereon as to a mortgage of the Neemrana Page 13 of 14 property at Rajasthan by defendants no.7 and 8 in favour of the plaintiff or as to the pledge of shares in favour of the plaintiff and others. The Court or the authority shall however, be free to come to an independent finding as to the mortgage of Neemrana property and pledge of shares on the basis of the materials available before them.
The suit shall, however, continue as against the defendants who are not party to the compromise and Terms of Settlement.
Urgent photostat certified copy of this judgment and order, if applied for, be supplied to the parties on priority basis after compliance with all necessary formalities.
(ARINDAM MUKHERJEE, J.) Page 14 of 14