Delhi High Court
Jagdish Prasad Gupta vs C.L. Jain And Ors. on 5 January, 1996
Equivalent citations: 61(1996)DLT321
Author: Manmohan Sarin
Bench: Manmohan Sarin, M.J. Rao
JUDGMENT Manmohan Sarin, J.
(1) The main plank of the appellant's argument is that the compromise decree was based on a partnership which stood frustrated and any compromise based on a frustrated contract of partnership, was a nullity and could not be enforced.
(2) For a proper appreciation of the contentions raised in appeal, the facts culminating in the present appeal may be briefly noted :-
(I)The applicant Sh. J.P. Gupta and his father and Sh. Dal Chand Gupta, had entered into a registered partnership with Sh. Chaman Lal Jain, Arun Kumar Jain, Naveen Kumar Jain and Sumat Prasad Jain, respondent herein.
(II)Sh. Dal Chand Jain had contributed to! he partnership his property and land No. 4378/4 Ansari Nagar, Daryaganj admeasuring 407 sq.yds valued at Rs. 3,25,000.00 to the partnership. The applicant had contributed property No. 4378/4 admeasuring 517 sq.yds., valued at Rs. 5,00,000.00, to the partnership. The other partners i.e. the respondents, who may for convenience sake be refer red to as Jain Group, had agreed to invest money for constructions on the above land. The firm was to carry on the business and complete construction under the name and style of Rajdhani Nirman Udyog.
(III)The Jain Group was to contribute the funds required for raising the construction. The building was to be rented out after completion of construction. The Jain Group was required to submit the plans for construction to the Municipal Corporation of Delhi. The shares in profit of the appellant and his father were 28% and 12% respectively, while the shares of the Jain Group was 30% and of Shri. N.K. Jain and 10 per cent each of the remaining partners.
(IV)The plans submitted to the Municipal Corporation of Delhi were rejected on 10.12.1979. The joint representation submitted by the parties on 20.3.1980 against the rejection of plan was also rejected on 22.4.1980.
(V)In these circumstances, Shri Dal Chand . Jain, sold the plot admeasuring 407 sq. yards vide a registered sale deed dated 30.5.1980, duly signed by the other partners as consenting party, and opted out of the partnership.
(VI)Finally in April 1986, Shri Chaman La, Jain, respondent herein filed a . suit for dissolution of partnership and rendition of accounts. This suit was contested by the appellant who filed a written statement raising several objections on the maintainable of the suit. A specific preliminary objection was also raised that the partnership between the parties had come to an end especially when Shri Dal Chand Gupta father of the appellant was permitted to sell the property, which had been pooled in partnership for the purpose of raising construction thereon. It was contended that the partnership which was for specific purpose has thus come to an end. The very purpose of the partnership stood frustrated. The written statement was filed in November, 1987. It was in December 1988, that the parties settled the disputes between them and an application under Order Xxiii Rule 3 Civil Procedure Code was filed. The compromise application was duly signed by Counsel for the parties. Statement of the parties was recorded and the appellant admittedly in terms of the compromise received a sum of Rs. 2 lacs (VII)The salient terms of the compromise may also be briefly noted. The partnership was dissolved w.e.f. the date of the filing of the suit i.e. 1st May, 1986 and the Registrar of the Firm was to be notified of the dissolution. Accounts of the partnership were taken and settled between the parties. The divisible assets of the firm were divided and dues of each partner were ascertained. The. compromise deed provided that each of the parties assigned, released and relinquished interest in the property not allotted to it. The appellant would have no right, title or interest or any concern with half portion of the property shown in the map as blue and allotted to the Jain Group who would be the absolute owners of the said portion. The appellant further undertook to sign or execute any document in connection with the mutation of the property, which fell to the share of the other parties. A decree in terms of the above compromise was passed on 20th December, 1988. The application filed by appellant was a malafide and dishonest one to extract more money from respondents.
(VIII)It is the respondent's case that pursuant to the compromise decree mutation of the plot in the name of the parties was got done. Further the parties submitted a joint application in : he year 1989 for sanction of plan. The demolition of the old and existing structure on one side of the plot was got carried out. Parties have .acted in furtherance of the compromise and various sanctions as listed in para 3 of the reply of appellants (at page 126 of the paper book were obtained.
(IX)The appellant then filed Ia No. 1784 of l997 for setting aside the decree dated 20th December, 1988, on which the impugned order was passed.
(3) At the hearing of the appeal, we were addressed at length by Bawa Shiv Charan Singh, Senior Advocate in support of the appeal. Counsel for the appellant Mr. Sarat Chandra, who was assisting the Senior Alvocate, however, felt that certain additional submissions needed to be made. He was permitted to address us separately. Subsequently the appellant through Mr. Sarat Chandra again filed an application (CM 2393/95) for addressing us once again. The prayer for further oral hearing was rejected.
(4) Learned Counsel for the appellant laid considerable stress on his submission that the compromise decree, was illegal being allegedly based on a frustrated contract of partnership, could not be enforced and deserved to be set aside. He argued that the partnership was non-est and illegal and could not be enforced. The conduct of the parties in acting upon the same was irrelevant. The learned Single Judge according to the appellant went wrong in holding that the compromise decree was based on new terms or contract. It is urged that he failed to notice the decree was in relation to the suit for rendition of account and the dissolution of firm. It referred to the divisible assets of the firm and could not be divorced from the partnership firm.
(5) We are unable to appreciate the submission made. The appellant in defense to the suit for rendition of accounts and dissolution of the partnership had taken the ground of the partnership being frustrated and being non-est in the eye of law. It was submitted by him that suit was barred under Section 56 of the Indian Contract Act. Having given up that defense, the parties entered into the agreement as recorded in Ia 9396/88. The appellant therefore had given up its earlier pleas and grounds. The terms were agreed de-novo between the parties. Simply because a mention or reference is made in the recital of the compromise to the partnership deed and its clauses and the firm is dissolved, the accounts are settled and assets are divided, the same docs not negate novation.
(6) Besides this is not a case, where the object of the contract or consideration was unlawful or opposed to public policy within the meaning of Section 23 of the Indian Contract Act. This is a case where the parties took into account the subsequent events and change of circumstances from the date of entering into partnership and therefore entered into a settlement regarding terms between them.
(7) Learned Counsel for the appellant has relied oil .1954 (5) Scr 310, Satyabrata Ghose v. Mugneeram Bangur & Co. And Another, , Union Carbide Corporation etc. etc. v. Union of India, etc. etc. as well as 1895(2) Chancery Division 273 at page 276 Hudders Field Banking Company Ltd. v. Henry lister & Son in support of his contention that a consent order or decree based on an unlawful agreement could be set aside. That such a decree or order can be set aside on any ground that would invalidate such an agreement is not in dispute. The learned Single Judge has noted and considered these authorities in the impugned order which need not be adverted to. It is sufficient to notice that the instant case is not one where the object of the contract or the consideration were unlawful or opposed to public policy. The argument of the learned Counsel for the appellant that there would be no dissolution of a non-est partnership or rendition of account is devoid of merits. Merely because plans or the joint representation was rejected, the partnership did not become non-est, moreover as observed earlier parties with a view to resolve the deadlock and to settle their disputes which had arisen under the partnership agreement entered into the settlement evidenced by Exhibit PW-1/1. The compromise decree being based on such an agreement is not unlawful. The agreement exhibit PW-1 arrived at between the parties provided for transfer/ relinquishment of the appellants rights on its land. The learned Single Judge rightly observed that this was not a case where the agreement was either fraudulent or opposed to public policy.
(8) The respondent has set out in the reply to the application, how parties have acted in pursuance to and furtherance of the compromise in getting mutation done submitting the plans for sanction in 1989. These negate Hie argument of frustration or the agreement being non-est and unlawful.
(9) Learned Counsel for the appellant also urged that the compromise was bad inasmuch as the consent decree passed was illegal and in contravention of Section 17 of the Registration Act since the decree concerned immovable property and was required to be compulsorily registered. Learned Counsel for the respondent has submitted that the compromise agreement as well as the decree has since then been got registered and has placed on record a copy of the same. Accordingly this objection also does not survive (10) The learned Counsel for the appellant also submitted that at page 15 of the judgment the learned Single Judge had accepted that the agreement stood frustrated. This we are afraid a misreading of the judgment The learned Single Judge has only recorded the submission of Mr. Satish Chandra, the Advocate of the appellant that the agreement stood frustrated. The learned Single Judge has further gone on to observe that even if it was assumed that the partnership stood frustrated, it would not make a difference since the compromise agreement was not based on the frustrated agreement.
(11) The further submission that fraud had been practised on the appellant and the agreement was entered into hurriedly on 20th December, 1988 only, deserves only to be stated to be rejected. The application had been signed not only by the appellant but by his Counsel. It was supported with the affidavit of the appellant.
(12) The appeal has no merit and. deserves to be dismissed and is accordingly dismissed.