THE HON'BLE MR JUSTICE V. ESWARAIAH
AND
THE HON'BLE MR JUSTICE VILAS V. AFZULPURKAR
CITY CIVIL COURT APPEAL No.66 of 2009
DATE OF JUDGMENT: 03.09.2009
BETWEEN
The Government of Andhra Pradesh, rep. by its Principal Secretary, I & CAD Department, Secretariat Buildings, Secretariat, Hyderabad and two others.
…APPELLANTS/DEFENDANTS
AND
Smt. M. Pratimareddy, W/o. late M. Mohan Reddy and two others.
…RESPONDNETS/PLAINTIFFS
THE HON'BLE MR JUSTICE V. ESWARAIAH
AND
THE HON'BLE MR JUSTICE VILAS V. AFZULPURKAR
CITY CIVIL COURT APPEAL No.66 of 2009
JUDGMENT: (per Hon’ble Sri Justice Vilas V. Afzulpurkar)
This appeal is filed by the State of Andhra Pradesh and two others against the judgment and decree of the learned Chief Judge, City Civil Court, Hyderabad in O.S.No.306 of 2008 dated 22.01.2009.
2. The appellants, who are defendants in the suit, are aggrieved by the judgment and decree aforesaid where under the defendants were directed to pay to the plaintiffs the suit claim of Rs.78,49,052/- within a period of 60 days from the date of judgment and in default to pay interest on the said sum at 6% per annum from 05.09.2007 till the date of realization. The parties are referred to herein as they are arrayed in the suit for the sake of convenience.
3. The facts, in brief, are as follows:
(a) The plaintiffs filed the aforesaid suit alleging that the second defendant acting on behalf of the first defendants entrusted three different works for excavation and formation Embankment at different stretches of kilometers of Kakatiya Canal under Sri Ram Sagar Project and during the execution of these works the first defendant cancelled the first set of work vide G.O.Ms.No.137 dated 22.06.1993. As per the said GO the Irrigation Department was permitted to recover 10% of the performance Bank Guarantee and the entire balance due to mobilization advance granted in the aforesaid contract works on furnishing bank guarantee through Vijaya Bank, M.G. Road, Secunderabad. As per the terms of contract the bank guarantee was 10% of the contract value towards performance security and mobilization advance was 15%, which would carry interest at 14% per annum to be recovered from the running bills. The said entire amount of mobilization advance was secured by bank guarantee.
(b) The plaintiffs allege that several bank guarantees were given concerning all the three works covering the performance bank guarantee and mobilization advance totaling to Rs.6,30,00,599/-.
It is further alleged that irrigation department invoked all the bank guarantees on 08.10.1993 and realized the total amount covered by the said bank guarantees. The aforesaid collected amount is alleged to be in excess by a sum of Rs.3,00,02,078/-. In fact, Late M. Mohan Reddy, the original contractor, who is now represented by the plaintiffs, as his legal representatives, filed W.P.No.19646 of 1994 and the bank also filed WP.No.7888 of 1993 for direction against the irrigation department to refund the sum of Rs.3,00,02,078/-. In the counter filed by the irrigation department though the receiving of the said excess amount was admitted, the quantum thereof was disputed. However, the refund of the said excess amount remained pending.
(c) It is further alleged that meanwhile the bank initiated recovery proceedings against the plaintiffs by approaching the Debts Recovery Tribunal, Hyderabad vide O.A.No.467 of 1999 and in view of the common judgment of this Court in batch of writ petitions referred to above dated 16.10.2003, the bank impleaded the irrigation department as a party to the said OA. Thereafter, the plaintiffs made several representations dated 02.07.2007 onwards requesting the Government to settle the issue, thereupon a sum of Rs.51,30,379/- was paid to the plaintiffs on 05.09.2007 by way of a cheque but no interest thereon was paid. Plaintiffs thereupon demanded the irrigation department by a representation dated 12.09.2007 to pay the interest inasmuch as for the bank guarantees, the bank has charged the plaintiffs 22% compound interest. The plaintiffs, therefore, demanded interest at least at 14% per annum from 1993 till the date of payment. The said representation was followed by subsequent representations dated 08.11.2007 and 01.12.2007 but the amount having been remained unpaid viz. the balance amount as well as the interest on the refunded amount, the plaintiffs issued a legal notice dated 07.03.2008 under Section 80 of the Code of Civil Procedure, 1908 and as there was a denial by the defendants vide their reply dated 27.03.2008, the plaintiffs filed the present suit for the a decree of Rs.99,89,703/- with interest at 18% per annum from the date of suit till realization.
(d) The defendants filed a written statement disputing the claim of the plaintiffs by alleging that there was no excess amount recovered by the Government and that the sum of Rs.51,30,379/- already refunded to the plaintiffs was in full and final settlement of the entire claim of the plaintiffs. It is also alleged that no liability of interest exists under law and that there was no fault on the part of the Government and in fact, the contractor never turned up for payment for fulfilling required formalities, such as acceptance of closing measurements recorded in measurement books and Release & Discharge certificates. It was also alleged that the plaintiffs have claimed for payment of interest only through letter dated 12.09.2007, which clearly shows that the claim of the plaintiffs is barred by time as it is made after more than three years. It was also alleged that the jurisdiction of the employer being within the district of Warangal, the Courts situated in the district of Warangal alone have territorial jurisdiction and the present suit filed in the Court in Hyderabad is not tenable.
4. Based on the above pleadings, the trial Court frame the following issues:
1. Whether the plaintiff is entitled for the claim of interest?
2. Whether the Court has jurisdiction to entertain the suit?
3. Whether the claim of the plaintiff is barred by limitation?
4. To what relief?
5. The plaintiffs examined P.W.1, who is the first plaintiff and the widow of the deceased contractor and marked Exs.A1 to A14.
While Ex.A1 is the office copy of the plaintiff’s representation dated 02.07.2007, Ex.A2 is the letter of the Irrigation Department dated 16.08.2007, Exs.A3 to A7 are office copies of various observations and letters whereas Ex.A8 is the office copy of the legal notice under Section 80 of the Code of Civil Procedure dated 27.03.2008,
Exs.A9 and A10 are the postal acknowledgements and Ex.A11 is the reply to the Ex.A8 notice, Exs.A12 to A14 are the certified copies of the affidavit, counter affidavit in WP.No.7888 of 1993 and copy of affidavit in WP.No.19646 of 1993. The defendants examined D.W.1, who is the in charge Executive Engineer and defendant No.3, and marked Exs.B1 to B16, which are attested and true copies of various notices, letters and orders. Ex.B1 is the final notice issued to the plaintiff dated 04.12.1991, Ex.B2 is another final notice dated 28.12.1991, Exs.B3 to B5 are the attested copies of the expulsion of the contractor from each of the package works, Ex.B6 is the copy of request for witnessing the closing measures dated 26.02.1992,
Ex.B7 is also a similar request dated 22.04.1992, Ex.B8 is the attested copy of G.O.Ms.No.137 dated 22.06.1993 and Ex.B10 is the attested copy of G.O.Ms.No.151 dated 09.12.1999, Ex.B9 is the attested copy of the Government Memo dated 04.08.1993, Exs.B11 and B12 are the attested copies of the final orders of this court in WP.No.19646 of 1993 dated 16.10.1993 and WP.No.7888 of 1993 dated 01.11.2004 respectively, Ex.B13 is the copy of the letter of the plaintiff addressed to defendant No.2 whereas Exs.B14 to B16 are the abstract of closing accounts and release and discharge certificate singed by the plaintiff; attested copy of Government Memo dated 11.01.2008 and attested copy of the letter of Administrator-cum-Chief Engineer, SRSP contesting plaintiff respectively.
6. On the basis of the aforesaid evidence, the trial Court considered the suit and by a brief judgment came to hold that the suit claim being basically for interest claiming 14%, it was also found that after taking the final measurements there is nothing on record to show that the contractor has been informed about the same. The judgment also records that during the course of the arguments, the learned counsel for the plaintiffs and the learned Government Pleader have agreed that a reasonable rate of interest may be awarded and both of them have agreed over the following judgment. Accordingly, the suit was decreed directing interest at 11% per annum on Rs.51,30,379/- from 08.10.1993 to 05.09.2007 i.e. the date of issuance of cheque, which works out to Rs.78,49,052/- as claimed in the suit. Two months time was granted for payment of the said amount failing which interest on the said amount was awarded. Questioning the aforesaid judgment and decree, this appeal is preferred by the defendants.
7. We have heard the learned Advocate General for the appellants and Sri P. Venugopal, learned counsel for the respondents.
8. The primary contention of the learned Advocate General is that the judgment and decree under appeal has not considered several crucial aspects including the issue as to the territorial jurisdiction, limitation and lack of cause of action etc., which are specifically raised in the written statement. He also contended that on 22.01.2009 the suit was posted for cross-examination of D.W.1 and as soon as the same was over, the arguments were heard and judgment was also passed without addressing or appreciation the pleadings or the issues or the evidence. He also strongly disputed that there was any concession given by the Government Pleader and even if there was one, the same is not binding on the State in view of the decision of the Apex Court in PERIYAR AND PAREEKANNI RUBBERS LTD. v. STATE OF KERALA[1]. He further submitted that when the appellant/State, during the pleadings as well as in the evidence, having emphatically denied its liability on merits and on legal issues, giving of any concession by the Government Pleader on facts does not arise. He has also relied upon the decision of the Supreme Court inGOVERNMENT OF TAMIL NADU v. BADRINATH[2] and particularly paragraphs 8 and 11 thereof.
9. Sri P. Venugopal, learned counsel for the respondents herein, however, raised a preliminary objection with regard to the maintainability of the appeal by placing reliance on Section 96(3) of the Code of Civil Procedure, 1908, by contending that the decree in question being a decree of consent, the appeal is not maintainable.
He also contends that the trial Court passed the aforesaid decree only when the learned Government Pleader agreed for a reasonable rate of interest and it is not open for the State to turn around and file the present appeal against the said decree. He also submitted that the said consent of the learned Government Pleader was recorded by the trial Court and as such, the appeal is not maintainable. He has relied upon a decision of the Full Bench of this Court in VENKATESWARLU v. NARASI REDDY[3]; judgment of the Supreme Court in SAROJ ANAND v. PRAHLAD RAI ANAND[4] as well as other judgments of the Supreme Court in BSNL V. SUBASH CHANDRA KANCHAN[5]; PUSHPA DEVI BHAGAT v. RAJINDER SINGH[6] and BYRAM PESTONJI GARIWALA v. UNION BANK OF INDIA[7]
10. Learned counsel, further, contends that the respondents had admittedly given the bank guarantee covering much more than which could have been recovered by the State and by invocation of bank guarantee the State has already recovered excess amount, out of which with great difficulty and after lot of persuasion they have refunded only a sum of Rs.51,30,379/- on 05.09.2007 and While no interest is being paid by the State while refunding the said amount, the balance amount also has to be refunded. Learned counsel, therefore, submits that the respondents had admittedly incurred huge expenditure on interest at 22% which the bank had charged for the aforesaid bank guarantees and when the said bank guarantees were unjustly invoked, even after far excess amount was recovered than what is due to the State, there is no reason as to why the State is not liable to pay the interest over the said amount at the same rate at which the respondents had paid to the bank. He, therefore, submits that the claim of the respondents in the suit was just and reasonable and in the nature of a reimbursement of the interest incurred by the respondents and during the hearing of the suit, the learned Government Pleader agreed for a reasonable rate of interest, which accordingly, has been granted by the trial Court. The liability, therefore, being purely contractual and easily established by the facts of the case, even otherwise, there are no merits in the appeal and as such, the same deserves to be dismissed.
11. We have considered the aforesaid submissions and in the light of the said submission the following questions arise for consideration.
(i) Whether the decree under appeal is a consent decree and if so, whether the appeal is maintainable under Sections 96(3) of the Code of Civil Procedure, 1908?
(ii) Whether the judgment under appeal is sustainable under Order XX Rules 2 and 5 of CPC?
12. Under the points for consideration framed above, we shall also consider the preliminary objection raised by the learned counsel for the respondents insofar as the maintainability of the appeal as it is covered by question No.1 framed above.
13. It is evident from the written statement of the appellants in the suit that the claim of the respondents/plaintiffs is disputed by the appellants on more than one ground including the ground as to jurisdiction and limitation and the entitlement of the respondents to the said claim in view of the receipt of part of the amount as a full and final settlement as alleged by the appellants. Keeping in view,
the aforesaid rival pleadings, the trial Court had framed three issues, which are mentioned as above. Further, the parties went for trial by leading evidence on their respective case and as P.W.1 was examined in support of the respondents and several documents were marked through P.W.1, the appellants herein also examined D.W.1 and marked several documents in support of their case. The judgment under appeal, unfortunately, does not show any discussion on the issues framed nor there is any discussion with regard to the material evidence on record. We have also noted that the further chief examination of D.W.1 with reference to his evidence filed in lieu of chief examination was recorded on 22.01.2009 and on the same day his cross-examination was also recorded. Further, on the same day, the judgment under appeal was passed decreeing the suit with interest at 11%. The judgment, therefore, proceeds as if during the arguments both the learned counsel agreed for a reasonable rate of interest and agreed to pass the judgment, which is ultimately passed by the trial Court.
the aforesaid rival pleadings, the trial Court had framed three issues, which are mentioned as above. Further, the parties went for trial by leading evidence on their respective case and as P.W.1 was examined in support of the respondents and several documents were marked through P.W.1, the appellants herein also examined D.W.1 and marked several documents in support of their case. The judgment under appeal, unfortunately, does not show any discussion on the issues framed nor there is any discussion with regard to the material evidence on record. We have also noted that the further chief examination of D.W.1 with reference to his evidence filed in lieu of chief examination was recorded on 22.01.2009 and on the same day his cross-examination was also recorded. Further, on the same day, the judgment under appeal was passed decreeing the suit with interest at 11%. The judgment, therefore, proceeds as if during the arguments both the learned counsel agreed for a reasonable rate of interest and agreed to pass the judgment, which is ultimately passed by the trial Court.
14. As rightly pointed out by the learned Advocate General,
the appellants had contested the suit on various grounds and even after the cross-examination of D.W.1 on the date of judgment,
the claim of the plaintiffs was denied. When and how the appellants consented to the judgment is, therefore, not discernible from the record. The affidavit in lieu of chief examination of D.W.1 places reliance on the full and final discharge certificate issued on behalf of the plaintiffs, which is marked as Ex.B14 and the concluding portion of the said affidavit specifically prays that the ‘Hon’ble court may be pleased to dismiss the above suit with exemplary costs in the interest of justice as the delay purely rests on the plaintiff and as such the claim for interest from 08.10.1993 to 05.09.2007 is not tenable’.
It is, therefore, difficult to accept that the appellants had consented to the judgment when they are contesting the claim of the respondents even on the day of the judgment itself. Further, the impugned judgment records that “During the course of the arguments, the counsel for the plaintiff and the learned Government Pleader have agreed that a reasonable rate of interest may be awarded”, which at the most may show that on rate of interest the Government Pleader agreed that reasonable rate of interest may be allowed. The aforesaid, however, has no relation to the suit claim regarding which there is no mention that there was any consent by the learned Government Pleader. The trial Court, therefore, recorded that it is passing an agreed judgment.
the appellants had contested the suit on various grounds and even after the cross-examination of D.W.1 on the date of judgment,
the claim of the plaintiffs was denied. When and how the appellants consented to the judgment is, therefore, not discernible from the record. The affidavit in lieu of chief examination of D.W.1 places reliance on the full and final discharge certificate issued on behalf of the plaintiffs, which is marked as Ex.B14 and the concluding portion of the said affidavit specifically prays that the ‘Hon’ble court may be pleased to dismiss the above suit with exemplary costs in the interest of justice as the delay purely rests on the plaintiff and as such the claim for interest from 08.10.1993 to 05.09.2007 is not tenable’.
It is, therefore, difficult to accept that the appellants had consented to the judgment when they are contesting the claim of the respondents even on the day of the judgment itself. Further, the impugned judgment records that “During the course of the arguments, the counsel for the plaintiff and the learned Government Pleader have agreed that a reasonable rate of interest may be awarded”, which at the most may show that on rate of interest the Government Pleader agreed that reasonable rate of interest may be allowed. The aforesaid, however, has no relation to the suit claim regarding which there is no mention that there was any consent by the learned Government Pleader. The trial Court, therefore, recorded that it is passing an agreed judgment.
15. Code of Civil Procedure provides that under Order XII Rule 6, the judgment on admissions can be made whenever such admissions are made either in the pleadings or otherwise, whether orally or in writing at any stage of the suit. The admission referred to in Order XII Rule 6 CPC, therefore, is that of an admission of any party to a suit, which is the very basis of Order XII CPC. The consent or admission of a counsel, therefore, is not contemplated under Order XII CPC.
The suit may also be determined by the settlement or compromise or adjustment as provided under Order XXIII CPC. The compromise of a suit under Order XXIII Rule 3 CPC is required to be proved to the satisfaction of the Court that a suit is adjusted wholly or in part by any lawful agreement or compromise in writing and signed by the parties.
In the present case, admittedly, there is no agreement or compromise between the parties much less in writing and signed by the parties. The consent by the learned Government Pleader as recorded in the impugned judgment appears to be the only basis for the said impugned judgment. However, as consent was recorded in the judgment by the learned Government Pleader, we will have to proceed on that basis and examine as to whether the said consent binds the State. The judgment of the Supreme Court relied upon by the learned Advocate General in BADRINATH’scase (2 supra) held in Para 11 as follows:
The suit may also be determined by the settlement or compromise or adjustment as provided under Order XXIII CPC. The compromise of a suit under Order XXIII Rule 3 CPC is required to be proved to the satisfaction of the Court that a suit is adjusted wholly or in part by any lawful agreement or compromise in writing and signed by the parties.
In the present case, admittedly, there is no agreement or compromise between the parties much less in writing and signed by the parties. The consent by the learned Government Pleader as recorded in the impugned judgment appears to be the only basis for the said impugned judgment. However, as consent was recorded in the judgment by the learned Government Pleader, we will have to proceed on that basis and examine as to whether the said consent binds the State. The judgment of the Supreme Court relied upon by the learned Advocate General in BADRINATH’scase (2 supra) held in Para 11 as follows:
“11. We have no manner of doubt that the appellants are not bound by the concession made by the learned Advocate General before the learned Single Judge. It is unfortunate that the State Government was not properly advised at the earlier stages of the proceedings in insisting upon the view that such permission was required under Rule 17 and that it was justified in refusing to grant the permission prayed for. The concession made by the learned Advocate General being on a matter of law is not binding. That apart, Sri Ashoke Sen, learned counsel for the appellants has very fairly accepted the point of view put forth by respondent 1 in the writ petition that no such permission was required.”
16. Further, in a decision relied upon by the learned Advocate General in PERIYAR’s case (1 supra) it is laid down in the relevant portion of Para 19 as follows:
“19…Any concession made by the government pleader in the Trial Court cannot bind the Government as it is obviously, always, unsafe to rely on the wrong or erroneous or wanton concession made by the counsel appearing for the State unless it is in writing on instructions from the responsible officer. Otherwise it would place undue and needless heavy burden on the public exchequer. But the same yardstick cannot be applied when the Advocate General has made a statement across the bar since the Advocate General makes the statement with all responsibility. In those circumstances we have no hesitation to accept the statement of Learned Advocate General and hold that the market value of the lands would be fixed at Rs.18 per cent…”
17. So far the decisions relied upon by the learned counsel for the respondents are concerned, the first of the decisions in VENKATESWARLU’scase (3 supra) relates to a case where both the parties filed a joint memo agreeing to abide by the decision of the trial Court where it is held that such decision would be a decision in the nature of a consent order and general right of appeal would be barred. In the present case, it is nobody’s case that joint memo was filed by the parties. The aforesaid decision, therefore, does not apply to the facts of the present case. In the second decision in SAROJ ANAND’s case (4 supra) particularly Para 15 is relied upon. On the facts of that case, it is evident that in that particular case in the presence of the parties before the court a concession was made by their counsel and the parties acted upon it without contraverting the same and only much later that the parties tried to take a contra stand that there was misunderstanding by the counsel. The Honourable Supreme Court, therefore, held that having regard to the fact that the parties were present in the Court and also having full knowledge of the statement made by their counsel, it was for them to spell out what could be the purported misunderstanding between them and their counsel. In the present case, the appellants have preferred an appeal against the decree within time and have specifically raised the ground Nos.14 and 15, which are extracted as under, in support of their contention that there was, in fact, no question of giving any consent by the appellants as it is contrary to the evidence let in by the appellants and even if any such concession is given by the Government Pleader the same does not bind the State.
“14. The lower Court swayed away by the concession reported to have given by the Government Pleader for appellants. As a matter of fact, when the party/the appellants through their evidence categorically denied the liability, on merits and on legal points, the lower court ought not to have considered concession reported to have given by the Government Pleader on facts, which is contrary to the evidence let in by the appellants. Thus, the lower Court went wrong in passing the decree against the appellants.
15. The Court below ought to have seen that concession given by Government Pleader in the trial Court is not binding on the State, as held by the Apex Court in AIR 1990 SC 2192 and as such should have disposed of the suit on merits.”
The facts and circumstances of the present case, therefore, are different from those, which were subject matter of the aforesaid decision of the Supreme Court.
18. Further, the decision in BSNL’s case (5 supra) relates to a case where consent for appointment of an Arbitrator was given by party through its counsel. The same was disputed before the Supreme Court on the ground that the said consent was given by the junior counsel, who had no instructions. It was also noticed by the Supreme Court that after the said consent order appointing an Arbitrator was made, the said Arbitrator entered on reference, the parties appeared before him and participated in the proceedings and one of the parties filed a claim settlement and the appellants had sought time to file their written statement and while so, after about ten months thereafter,
the appellants had moved an application under Section 151 CPC to delete the no objection recorded in the order, which the High Court declined. It is in that context that the Honourable Supreme Court rejected the aforesaid contention that even before the High Court it was not contended that the counsel had no authority to make such concession. The said decision and the ratio thereof is, therefore, wholly inapplicable to the present case.
the appellants had moved an application under Section 151 CPC to delete the no objection recorded in the order, which the High Court declined. It is in that context that the Honourable Supreme Court rejected the aforesaid contention that even before the High Court it was not contended that the counsel had no authority to make such concession. The said decision and the ratio thereof is, therefore, wholly inapplicable to the present case.
19. The last of the cases relied upon by the learned counsel for the respondents in PUSHPA DEVI’s case (6 supra), in fact, very elaborately analyses the provisions of Order XXIII Rule 3 CPC and clearly points out distinction between the first part and the second part of Rule 3. It is apt to extract the relevant portions of paragraphs 18 and 19 thereof, where Rule 3 of Order XXIII is analysed by the Honourable Supreme Court.
“18. …The said Rule consists of two parts. The first part provides that where it is proved to the satisfaction of the court that a suit has been adjusted wholly or in part by any lawful agreement or compromise in writing and signed by the parties, the court shall order such agreement or compromise to be recorded and shall pass a decree in accordance therewith…”
19. What is the difference between the first part and the second part of Rule 3? The first part refers to situations where an agreement or compromise is entered into in writing and signed by the parties. The said agreement or compromise is placed before the court. When the court is satisfied that the suit has been adjusted either wholly or in part by such agreement or compromise in writing and signed by the parties and that it is lawful, a decree follows in terms of what is agreed between the parties. The agreement/compromise spells out the agreed terms by which the claim is admitted or adjusted by mutual concessions or promises, so that the parties thereto can be held to their promise/s in future and performance can be enforced by the execution of the decree to be passed in terms of it. On the other hand, the second part refers to cases where the defendant has satisfied the plaintiff about the claim. This may be by satisfying the plaintiff that his claim cannot be or need not be met or performed. It can also be by discharging or performing the required obligation. Where the defendant so 'satisfies' the plaintiff in respect of the subject-matter of the suit, nothing further remains to be done or enforced and there is no question of any 'enforcement' or 'execution' of the decree to be passed in terms of it…
…The difference between the two parts is this: Where the matter falls under the second part, what is reported is a completed action or settlement out of court putting an end to the dispute, and the resultant decree recording the satisfaction, is not capable of being enforced by levying execution. Where the matter falls under the first part, there is a promise or promises agreed to be performed or executed, and that can be enforced by levying execution. While agreements or compromises falling under the first part, can only be by an instrument or other form of writing signed by the parties, there is no such requirement in regard to settlements or satisfaction falling under the second part. Where the matter falls under second part, it is sufficient if the plaintiff or plaintiff's counsel appears before the court and informs the court that the subject matter of the suit has already been settled or satisfied.”
(emphasis supplied)
Further, the Supreme Court also considered the meaning of the words ‘in writing and singed by the parties’ used in Rule 3 vide paragraphs 22 to 25, which are as under:
“22. The next question is where an agreement or compromise falls under the first part, what is the meaning and significance of the words 'in writing' and 'signed by the parties' occurring in Rule 3? The appellant contends that the words 'in writing' and 'signed by the parties' would contemplate drawing up of a document or instrument or a compromise petition containing the terms of the settlement in writing and signed by the parties. The appellant points out that in this case, there is no such instrument, document or petition in writing and signed by the parties.
23. We will first consider the meaning of the words "signed by parties". Order 3 Rule 1 of CPC provides that any appearance, application or act in or to any Court, required or authorized by law to be made or done by a party in such Court, may, except where otherwise expressly provided by any law for the time being in force, be made or done by the party in person, or by his recognized agent, or by a pleader appearing, applying or acting, as the case may be, on his behalf. The proviso thereto makes it clear that the Court can, if it so desires, direct that such appearance shall be made by the party in person. Rule 4 provides that no pleader shall act for any person in any Court, unless he has been appointed for the purpose by such person by a document in writing signed by such person or by his recognized agent or by some other person duly authorized by or under a power-of-attorney to make such appointment. Sub-rule (2) of Rule 4 provides that every such appointment shall be filed in Court and shall, for the purposes of sub-rule (1), be deemed to be in force until determined with the leave of the Court by a writing signed by the client or the pleader, as the case may be, and filed in Court, or until the client or the pleader dies, or until all proceedings in the suit are ended so far as regards the client. The question whether 'signed by parties' would include signing by the pleader was considered by this Court in Byram Pestonji Gariwala v. Union Bank of India [1992 (1) SCC 31] with reference to Order 3 of CPC:
"30. There is no reason to assume that the legislature intended to curtail the implied authority of counsel, engaged in the thick of proceedings in court, to compromise or agree on matters relating to the parties, even if such matters exceed the subject matter of the suit. The relationship of counsel and his party or the recognized agent and his principal is a matter of contract; and with the freedom of contract generally, the legislature does not interfere except when warranted by public policy, and the legislative intent is expressly made manifest. There is no such declaration of policy or indication of intent in the present case. The legislature has not evinced any intention to change the well recognized and universally acclaimed common law tradition …
x x x x x
35. So long as the system of judicial administration in India continues unaltered, and so long as Parliament has not evinced an intention to change its basic character, there is no reason to assume that Parliament has, though not expressly, but impliedly reduced counsel's role or capacity to represent his client as effectively as in the past…
x x x x x
37. We may, however, hasten to add that it will be prudent for counsel not to act on implied authority except when warranted by the exigency of circumstances demanding immediate adjustment of suit by agreement of compromise and the signature of the party cannot be obtained without undue delay. In these days of easier and quicker communication, such contingency may seldom arise. A wise and careful counsel will no doubt arm himself in advance with the necessary authority expressed in writing to meet all such contingencies in order that neither his authority nor integrity is ever doubted…
38. Considering the traditionally recognized role of counsel in the common law system, and the evil sought to be remedied by Parliament by the C.P.C. (Amendment) Act, 1976, namely, attainment of certainty and expeditious disposal of cases by reducing the terms of compromise to writing signed by the parties, and allowing the compromise decree to comprehend even matters falling outside the subject matter of the suit, but relating to the parties, the legislature cannot, in the absence of express words to such effect, be presumed to have disallowed the parties to enter into a compromise by counsel in their cause or by their duly authorized agents…
39. To insist upon the party himself personally signing the agreement or compromise would often cause undue delay, loss and inconvenience, especially in the case of non-resident persons. It has always been universally understood that a party can always act by his duly authorized representative. If a power-of-attorney holder can enter into an agreement or compromise on behalf of his principal, so can counsel, possessed of the requisite authorization by vakalatnama, act on behalf of his client…
If the legislature had intended to make such a fundamental change, even at the risk of delay, inconvenience and needless expenditure, it would have expressly so stated."
If the legislature had intended to make such a fundamental change, even at the risk of delay, inconvenience and needless expenditure, it would have expressly so stated."
(emphasis supplied)
The above view was reiterated in Jineshwardas v. Jagrani [2003 (11) SCC 372]. Therefore, the words 'by parties' refer not only to parties in person, but their attorney holders or duly authorized pleaders.
24. Let us now turn to the requirement of 'in writing' in Rule 3. In this case as noticed above, the respective statements of plaintiffs' counsel and defendants' counsel were recorded on oath by the trial court in regard to the terms of the compromise and those statements after being read over and accepted to be
correct, were signed by the said counsel. If the terms of a compromise written on a paper in the form of an application or petition is considered as a compromise in writing, can it be said that the specific and categorical statements on oath recorded in writing by the court and duly read over and accepted to be correct by the person making the statement and signed by him, can be said to be not in writing? Obviously, no. We may also in this behalf refer to Section 3 of the Evidence Act which defines document as any matter expressed or described upon any substance by means of letters, figures or marks or by more than one of those means intended to be used or which may be used for the purpose of recording the matter. The statements recorded by the court will, therefore, amount to a compromise in writing.
25. Consequently, the statements of the parties or their counsel, recorded by the court and duly signed by the persons making the statements, would be 'statement in writing signed by the parties'. The court, however, has to satisfy itself that the
terms of the compromise are lawful. In this case we find from the trial court records that the second defendant had executed a vakalatnama empowering her counsel Sri Dinesh Garg to act for her in respect of the suit and also to enter into any compromise. Hence there can be no doubt that Sri Dinesh Garg was authorized by the second defendant to enter into a compromise. We also find that the counsel for the plaintiffs and counsel for the defendants made solemn statements on oath before the trial court specifying the terms of compromise, which were duly recorded in writing and signed by them.
The requirements of the first part of Rule 3 of Order XXIII are fully satisfied in this case.”
The requirements of the first part of Rule 3 of Order XXIII are fully satisfied in this case.”
(emphasis supplied)
It is evident from the above passages that the statement of the counsel is relied upon and the same was found to be expressly agreed by the parties and further the parties had made solemn statements of oath before the trial Court specifying the terms of the compromise, which were duly recorded in writing and singed by them and it is in that view that the words ‘in writing and signed by the parties’ used under Rule 3 was held to be satisfied. None of those circumstances are applicable to the present case and as such, it is difficult to accept the contention of the learned counsel for the respondents that there was a consent as contemplated under Order XXIII Rule 3 CPC by the appellants and that they are bound by what the learned Government Pleader is said to have stated before the trial Court.
20. In another decision of the Supreme Court in BYRAM PESTONJI’s case (7 supra) the role of counsel was analysed by the Honourable Supreme court and it would be useful to extract paragraphs 9 to 11, 15, 16 and 37 and ultimately Para 40.
9. The role of counsel in Court in England is described in Halsbury’s Laws of England, 4th Ed. Vol.3, paras 1181 & 1183, as follows: -
"1181. Counsel’s authority. At the trial of an action, counsel’s authority extends, when it is not expressly limited, to the action and all matters incidental to it and to the conduct of the trial, such as withdrawing the record, challenging a juror, calling or not calling witnesses, cross-examining or not cross-examining witnesses, consenting to a reference to arbitration, a compromise, or a verdict, undertaking to appear, or, on the hearing of a motion for a new trial, consenting to a reduction of damages.
The client’s consent is not needed for a matter which is within the ordinary authority of counsel: thus if, in court, in the absence of the client, a compromise or settlement is entered into by counsel whose authority has not been expressly limited, the client is bound. If an action is settled in court in the presence of the client, his consent will be inferred, and he will not be heard to say that he did not understand what was going on ... "
10. The implied authority of counsel in England is, however, confined to matters failing within the subject matter of the suit. In the absence of express authority, counsel cannot enter into compromise on collateral matters.
"The authority of counsel to compromise is limited to the issues in the action: a compromise by counsel affecting collateral matters will not bind the client, unless he expressly assents; and it may be that a barrister has no authority to reach a binding settlement or compromise out of court."
11. A compromise is, however, not binding and is liable to be set aside in circumstances which would invalidate agreements between the parties.
"A compromise by counsel will not bind the client,
if counsel is not apprised of facts the knowledge of which is essential in reference to the question on which he has to exercise his discretion, for example that the terms accepted had already been rejected by the client. Where counsel enters into a compromise in intended pursuance of terms agreed upon between the clients, and, owing to a misunderstanding, the compromise fails to carry out the intentions of one side, the compromise does not bind the client, and the court will allow the consent to be withdrawn. Where, acting upon instructions to compromise, counsel consents under a misunderstanding to certain terms which do not carry into effect the intentions of counsel and the terms are thought by one party to the more extensive than the other party intends them to be, there is no agreement on the subject-matter of the compromise, and the court will set it aside. But a person who has consented to a compromise will not be allowed to withdraw his consent because he subsequently discovers that he has a good ground of defence.”
if counsel is not apprised of facts the knowledge of which is essential in reference to the question on which he has to exercise his discretion, for example that the terms accepted had already been rejected by the client. Where counsel enters into a compromise in intended pursuance of terms agreed upon between the clients, and, owing to a misunderstanding, the compromise fails to carry out the intentions of one side, the compromise does not bind the client, and the court will allow the consent to be withdrawn. Where, acting upon instructions to compromise, counsel consents under a misunderstanding to certain terms which do not carry into effect the intentions of counsel and the terms are thought by one party to the more extensive than the other party intends them to be, there is no agreement on the subject-matter of the compromise, and the court will set it aside. But a person who has consented to a compromise will not be allowed to withdraw his consent because he subsequently discovers that he has a good ground of defence.”
* * *
15. If this is the position of counsel in England, Scotland and Ireland, is his position the same in India in the conduct of cases in Court? That the answer is affirmative, there is high judicial authority.
16. In (Babu) Sheonandan Prasad Singh & Ors. v. Hakim Abdul Fateh Mohammad Reza (AIR 1935 PC 119, 121,) Lord Akin, speaking for the Board, states: (AIR p. 121)
"...... As was laid down by this Board in Sourendra Nath Mitra v. Tarubala Dasi (57 IA 133:AIR 1930 PC 158) counsel in India have the same implied authority to compromise an action as have counsel in the English Courts. But if such authority is invoked to support an agreement of compromise the circumstances must be carefully examined. In the first instance the authority is an actual authority implied from the employment as counsel. It may however be withdrawn or limited by the client: in such a case the actual authority is destroyed or restricted; and the other party if in ignorance of the limitation could only rely upon ostensible authority. In this particular class of contract however the possibility of successfully alleging ostensible authority has been much restricted by the authorities as Neale v. Gordon Lennox (Lady) [(1902) AC 465] and Shepherd v. Robinson [(1919) 1 KB 474] which make it plain that if in fact counsel has had his authority withdrawn or restricted the Courts will not feel bound to enforce a compromise made by him contrary to the restriction even though the lack of actual authority is not known to the other party."
* * *
37. We may, however, hasten to add that it will be prudent for counsel not to act on implied authority except when warranted by the exigency of circumstances demanding immediate adjustment of suit by agreement or compromise and the signature of the party cannot be obtained without undue delay. In these days of easier and quicker communication, such contingency may seldom arise. A wise and careful counsel will no doubt arm himself in advance with the necessary authority expressed in writing to meet all such contingencies in order that neither his authority nor integrity is ever doubted. This essential precaution will safeguard the personal reputation of counsel as well as uphold the prestige and dignity of the legal profession.
(emphasis supplied)
* * *
40. Accordingly, we are of the view that the words ’in writing and signed by the parties’, inserted by the C.P.C.(Amendment) Act, 1976, must necessarily mean, to borrow the language of Order II1 rule 1 C.P.C.:
"any appearance application or act in or to any court, required or authorized by law to be made or done by a party in such court, may except where otherwise expressly provided by any law for the time being in force, be made or done by the party in person, or by his recognized agent, or by a pleader, appearing, applying or acting as the case may be, on his behalf:
Provided that any such appearance shall, if the court so directs, be made by the party in person".
(emphasis supplied)
21. It will also be useful to refer to another decision of the Supreme Court in UNION OF INDIA v. MOHANLAL LIKUMAL PUNJABI[8].Relevant paragraphs 8 and 9 are as follows:
“8. We shall first deal with the effect of concession, if any, made by learned counsel appearing for the present appellants before the High Court. Closer reading of the High Court's order shows that the High Court took the view that in view of the revocation of the order on 19thDecember, 1994 and the order passed by the High Court on 11th January, 1995, no further order could have been passed under Section 7 of SAFEMA. After having expressed this view, the so-called concession is recorded. In our view the concession, if any, is really of no consequence, because the wrong concession made by a counsel cannot bind the parties when statutory provisions clearly provided otherwise. It was observed by Constitution Bench of this Court in Sanjeev Coke Manufacturing Company v. M/s Bharat Coking Coal Limited(1983 (1) SCC 147) that courts are not to act on the basis of concession but with reference to the applicable provisions. The view has been reiterated in Uptron India Ltd. V. Shammi Bhan (1988 (6) SCC 538) and Central Council for Research in Ayurveda & Siddha v. Dr. K. Santhakumari (2001 (5) SCC 60). In para 12 of Central Council's case (supra) it as observed as follows:
"12. In the instant case, the selection was made by the Departmental Promotion Committee. The Committee must have considered all relevant facts including the inter se merit and ability of the candidates and prepared the select list on that basis. The respondent, though senior in comparison to other candidates, secured a lower place in the select list, evidently because the principle of "merit-cum-seniority" had been applied by the Departmental Promotion Committee. The respondent has no grievance that there were any mala fides on the part of the Departmental Promotion Committee. The only contention urged by the respondent is that the Departmental Promotion Committee did not follow the principle of "seniority-cum-fitness". In the High Court, the appellants herein failed to point out that the promotion is in respect of a "selection post" and the principle to be applied is "merit-cum-seniority". Had the appellants pointed out the true position, the learned Single Judge would not have granted relief in favour of the respondent. If the learned counsel has made an admission or concession inadvertently or under a mistaken impression of law, it is not binding on his client and the same cannot enure to the benefit of any party."
(emphasis supplied)
9. In Uptron (India) Ltd. V. Shammi Bhan (1998 (6) SCC 538), it was held that a case decided on the basis of wrong concession of a counsel has no precedent value. That apart, the applicability of the statute or otherwise to a given situation or the question of statutory liability of a person/institution under any provision of law would invariably depend upon the scope and meaning of the provisions concerned and has got to be adjudged not on any concession made. Any such concessions would have no acceptability or relevance while determining rights and liabilities incurred or acquired in view of the axiomatic principle, without exception, that there can be no estoppel against statute.”
22. The analysis of the above legal position clearly shows that the appellants cannot be said to be bound by the consent as recorded in the judgment. It is also to be remembered that the appellant is not a private party but is a State and is represented by a Government Pleader. During the hearing, it is alleged that the Government Pleader had no such authority and is inconsistent with the stand of the appellants throughout the suit and as such, we are not in a position to accept the contention of the learned counsel for the respondents that the same binds the appellant.
The first question framed above, therefore, is answered against the respondent and in favour of the appellant. In view of the answer to question No.1, therefore, the question No.2 does not survive inasmuch as the decree cannot be said to be a consent decree, more so, the decree filed along with the appeal does not show that it is a decree on consent. The bar under Section 96(3) CPC, therefore, does not apply and the appeal is clearly maintainable.
23. As discussed above, the judgment under appeal does not refer to any of the issues, does not assess the evidence on record, both oral and documentary, and none of the issues are answered as required under Order XII.
In the absence of any consideration by the Court below on any of the issues, this Court, as a first appellate Court does not have the benefit of the views and findings of the trial Court on each of the issues.
The judgment under appeal cannot be, therefore, said to be a judgment as envisaged under Order XII CPC.
The judgment and decree under appeal, therefore, are liable to be set aside and the appeal deserves to be allowed.
The judgment and decree under appeal, therefore, are liable to be set aside and the appeal deserves to be allowed.
24. However, it is contended that pending this appeal, as per the condition imposed by this court while
granting stay under Order XLI Rule 5 CPC the appellants have deposited half of the amount awarded and as the respondents were permitted to withdraw the same without furnishing any security, the same has been withdrawn by the respondents.
In view of our answer to the questions referred to above, We allow this appeal and set aside the impugned judgment and remand the suit for fresh consideration to the trial Court.
The trial Court shall consider and determine the suit on merits in accordance with law and without being influenced by the observations, if any, on merits, made herein.
Further, keeping in view the facts and circumstances, We direct the trial Court to hear and determine the suit afresh preferably within a period of three (3) months from the date of receipt of a copy of this order.
The amounts deposited by the appellant and withdrawn by the respondents pending this appeal shall, however, abide by the result of the judgment of the trial Court on this remand.
The appeal is accordingly allowed. There shall be no order as to costs.
______________
V. ESWARAIAH, J
_____________________
VILAS V. AFZULPURKAR, J
September 3, 2009
Note: LR Copy to be marked
(B/o)
DSK
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