Gopal Krishna Kapoor & Ors vs R.S. Chhabra & Ors.
2009 Latest Caselaw 3269 Del

*       IN THE HIGH COURT OF DELHI AT NEW DELHI

+                        FAO(OS) 314/2009 & CM 10309/2009


                                                Reserved on: August 13, 2009.

%                                          Pronounced on: August 20, 2009.


#       GOPAL KRISHNA KAPOOR & ORS                        .... Appellants

!                       Through: Ms. Sonia Raina, proxy counsel

                versus

$       R.S. CHHABRA & ORS.                             ..... Respondents

^                       Through: Mr. Sanjeev Sachdeva, Advocate for
                        Respondent No. 5

CORAM:

HON'BLE MR. JUSTICE VIKRAMAJIT SEN
HON'BLE MR. JUSTICE V.K.JAIN


        1. Whether Reporters of Local newspapers may be allowed
           to see the Judgment? Yes.

        2. To be referred to the Reporter or not? Yes.

        3. Whether the Judgment should be reported in the Digest?
           Yes.

V.K.Jain, J.

This is an Appeal against the Order passed by the learned

Single Judge on 9.4.2009 in CS(OS) No.691/2007, whereby he

dismissed the application filed by the plaintiffs/Appellants under

Order XXXIX Rules 1 and 2 of the Code of Civil Procedure, seeking

Gopal Krishna Kapoor & Ors. v. R.S.Chhabra & Ors. injunction against execution of the decree passed in CS(OS)

No.353/2006, in favour of respondent No.1 and against them. The

brief facts giving rise to this Appeal are as under:-

2. The Appellant along with one Ms.Sanjogta Kapoor (since

deceased), who is the mother of Respondents No.3 to 6, jointly

owned property No.14-C, Bazar Marg, Old Rajinder Nagar, Delhi.

They entered into a Memorandum of Understanding with Shri

Rajesh Kumar, respondent No.2, whereby they agreed to sell the

aforesaid property to him, for a total consideration of Rs.5.2

crores. They also received earnest money amounting to Rs.1

crore, in three instalments. On 20.4.2005, Shri Rajesh Kumar

entered into a Memorandum of Understanding with Shri

R.S.Chhabra, Respondent No.1, agreeing to sell, transfer, convey

and assign the aforesaid property to Shri R.S.Chhabra for a

consideration of Rs.5.2 crores, on the terms and conditions as

contained in the Memorandum of Understanding dated 20.4.2005

executed between the Appellants, and late Smt. Sanjogta Kapoor

on the one hand and Respondent No.2, Shri Rajesh Kumar, on the

other hand. A sum of Rs.80 lakhs was paid by Respondent No.1,

Shri R.S.Chhabra to Respondent No.2, Shri Rajesh Kumar.

3. Since the property in question was a leasehold property, the

Appellants and deceased Smt. Sanjogta Kapoor applied for its

Gopal Krishna Kapoor & Ors. v. R.S.Chhabra & Ors. conversion into freehold property in November, 2005. When the

matter relating to conversion of the suit property from leasehold to

free hold was being processed in the office of L&D.O., respondent

No.1 made a complaint to L&D.O. in an effort to stop the

conversion. He also filed a Civil Suit being CS(OS) No.353/2006

on 24.2.2006 against the appellants and late Smt. Sanjogta Kapoor

as well as against Respondent No.2, Shri Rajesh Kumar, seeking

specific performance of the contract, being assignee of respondent

No.2, Shri Rajesh Kumar under the Memorandum of

Understanding dated 20.4.2005. The Appellants and Smt.

Sanjogta Kapoor entered appearance in that Civil Suit without

filing a Written Statement and compromised the matter with

Respondent No.1, Shri R.S.Chhabra. A joint application under

Order XXIII Rule 3 of Code of Civil Procedure was filed by the

Appellants, Smt. Sanjogta Kapoor and Respondent No.1 which was

followed by a decree in terms of the compromise on 20.3.2006.

Under the Compromise decree, it was agreed that the Appellants

and late Smt. Sanjogta Kapoor would execute a sale deed of the

suit property in favour of Respondent No.1 Shri R.S.Chhabra and

also hand over possession of the same to him on payment of

balance consideration of Rs.4,17,00,000/- to the vendors. The

Appellants/Plaintiffs thereafter filed Civil Suit bearing No.691

Gopal Krishna Kapoor & Ors. v. R.S.Chhabra & Ors. /2007 seeking a declaration to the fact that the compromise

Agreement dated 17.3.2006 in CS(OS) No.353/2006 was void and

for setting aside the decree dated 20.3.2006. They claimed that

Shri R.S.Chhabra and Shri Rajesh Kumar were in connivance and

in collusion with each other so as to deprive them from full

enjoyment of the property. It was alleged in the Plaint that in

CS(OS) No.353/2006, filed by him, Respondent No.1 Shri

R.S.Chhabra had concealed that the alleged assignment of M.O.U.

dated 28.2.2002 in his favour had in fact not taken place. It was

further alleged that Defendant No.1, Shri R.S.Chhabra, in fact did

not have financial capacity to pay the sale consideration.

Respondent No.2, Shri Rajesh Kumar, on the receipt of said

summons in Civil Suit No.353/2006 filed an application for setting

aside the compromise decree dated 20.3.2006. His application

was disposed of vide order dated 5.2.2008 holding that since he

was also a party in CS(OS) No.691/2007, the application did not

survive for any order.

4. In CS(OS) No.691/2007, Respondent No.2/Defendant No.2

Shri Rajesh Kumar also filed I.A. No.17543/2007 seeking stay of

operation of the judgment and decree dated 20.3.2006 passed in

CS(OS) No.353/2006. He also sought injunction against creation

of any third party interest in the suit property.

Gopal Krishna Kapoor & Ors. v. R.S.Chhabra & Ors.

5. The suit was contested by Defendant No.1 as well as

Defendant No.2. Defendant No.2, Shri Rajesh Kumar took the

stand that the Plaintiffs/Appellants were in collusion with

Defendant No.1, Shri R.S.Chhabra. He also filed a counter claim

seeking a declaration that the decree dated 20.3.2006 passed in

CS(OS) 353/2006 was inoperative and unenforceable. He also

sought a decree for specific performance of Agreement to Sell

(M.O.U. dated 28.2.2005) in his favour. Alternatively, he sought

damages to the tune of Rs.3.5 crores along with interest.

6. Since the learned Single Judge dismissed the applications

filed by the Plaintiffs/Appellants as well as the application filed by

Defendant No.2, separate Appeals were preferred by them. The

Appeal filed by Defendant No.2, Shri Rajesh Kumar was dismissed

by this Court vide Order dated 27.4.2009.

7. The only argument alleged before us was that though the

M.O.U. dated 28.2.2005 had not actually been assigned to

Defendant No.1, he made a false allegation in CS(OS) No.691/2007

that the M.O.U. had been assigned to him by Defendant No.2 and

this action of Defendant No.1 amounted to a fraud being played

upon the Plaintiffs and late Smt. Sanjogta Kapoor as well as upon

the Court.

Gopal Krishna Kapoor & Ors. v. R.S.Chhabra & Ors.

8. This is not the case of the Plaintiffs/Appellants that they had

not seen the Memorandum of Understanding dated 20.4.2005

executed between Defendants No.1 and 2. A bare perusal of the

Plaint in CS(OS) No.353/2006 filed by Respondent No.1 - Shri

R.S.Chhabra would show that the Memorandum of Understanding

dated 20.4.2005 was filed in original, along with the Plaint. This

document has been shown at Serial No.8 in the List of Documents

dated 24.2.2006 filed with the Plaint. The compromise application

was signed not only by the Appellants but also by their counsel

Ms.Megha Khatri. Vakalatnama dated 9.3.2006 in favour of

Ms.Megha Khatri was also filed in the Court.

9. A perusal of Writ Petition filed by the Plaintiffs/Appellants

against Union of India and Others would show that in paragraph

12 of the Petition, they specifically averred as under:

"The Respondent No.2, without any intimation to the Petitioners & Respondent No.4, proceeded to enter into a Memorandum of Understanding with the Respondent No.3 on 20.4.2005. Under the said MOU (hereafter referred to as the second MOU), THE Respondent No.2 transferred his rights under the original MOU to the Respondent No.3. A copy of the said second MOU is annexed hereto and marked as Annexure P-2.

In paragraphs 18 and 19, they inter alia averred as under:-

Gopal Krishna Kapoor & Ors. v. R.S.Chhabra & Ors.

18. That to the utter stock of the Petitioner & Respondent No.4, the Respondent No.2 proceeded to file a suit on or about 24.2.2006 against the Petitioner & Respondent No.4 before this Hon‟ble Court.

The suit was numbered as CS(OS) 353 of 2006.

19. Therefore, after consultation with their legal counsel, they agreed to the suggestion of the counsel of Respondent No.3 to move a settlement application.

10. If the Plaintiffs/Appellants were aware of the contents of the

Memorandum of Understanding dated 20.4.2005 as is evident

from the fact that the original document was annexed to the plaint

in CS(OS) No.353/2006 and a copy of the same was filed by them

as AnnexureP-2 to the Writ Petition, it cannot be said that a

material fact was withheld from them or a fraud was played upon

them. Whether the Memorandum of Understanding dated

20.4.2005 executed between Defendant No.1 and Defendant No.2

amounted to assignment of the M.O.U. dated 20.4.2005 in favour

of Defendant No.1 or it only gave a right to Defendant No.1 to get

it assigned in his favour at a later date is a matter of interpretation

of document. If the Plaintiffs/Appellants after considering the

Memorandum of Understanding dated 20.4.2005 and consulting

their Advocate agreed with the contention of Defendant No.5 that

by virtue of Memorandum of Understanding dated 20.4.2005, the

earlier M.O.U. dated 28.2.2005 stood assigned in his favour. It

Gopal Krishna Kapoor & Ors. v. R.S.Chhabra & Ors. cannot be said that a fraud was played upon them by Defendant

No.1. There can be a genuine difference of opinion on the legal

interpretation of a document. But since long as the document

itself was made available to them, it cannot be said that there was

a fraud upon the Plaintiffs/Appellants merely because Defendant

No.1 interpreted it to mean as assignment of the first M.O.U. in

his favour and the Plaintiffs/Appellants agreed with him and that

too after consulting their Advocate. In such circumstances,

neither there was any concealment nor any fraud.

11. As noted by us, while dismissing the appeal filed by

respondent No. 2, Rajesh Kumar, Clause 7 of the Memorandum of

Understanding dated 28th February, 2005 executed between him,

on the one hand, and the appellant and late Smt. Sanjogta Kapoor,

on the other hand, shows that Respondent No. 2 Shri Rajesh

Kumar was specifically granted right to nominate and assign

Memorandum of Understanding in favour of any nominee(s) and

assignee(s). As further noted by us, since Shri Rajesh Kumar had

divested all his rights in favour of Shri R.S. Chhabra (Respondent

No. 1, herein). The Memorandum of Understanding dated 20th

April, 2005 specifically stipulated that he (Respondent No. 1, Shri

R.S. Chhabra) shall be entitled to get the sale deed executed in his

favour, balance payment was to be made directly to the sellers and

Gopal Krishna Kapoor & Ors. v. R.S.Chhabra & Ors. the possession was also to be handed over by them to Shri R.S.

Chhabra. After execution of the second Memorandum of

Understanding, Respondent No. 2 Shri Rajesh Kumar was not

entitled, either in law or in equity, to get the suit property sold to

him under the Memorandum of Understanding dated 28th

February, 2005. Therefore the appellants having compromised

with respondent No. 1, after examining the terms and conditions

of Memorandum of Understanding dated 20th April, 2005 and after

consulting their advocate, it cannot be said that a fraud was played

upon them by respondent No. 1 by claiming that the Memorandum

of Understanding dated 28th February, 2005 had been assigned in

his favour. Respondent No. 1 may have bonafidely interpreted the

Memorandum of Understanding dated 20th April, 2005 to mean

that the earlier Memorandum of Understanding dated 28th

February, 2005 stood assigned in his favour. But that by itself

would not constitute a fraud upon the appellants, particularly,

when the Memorandum of Understanding was very much in the

knowledge of the appellants. In fact, we failed to appreciate what

difference it would have made to the appellants had the

Memorandum of Understanding dated 20th August, 2005, actually

assigned the previous Memorandum of Understanding dated

28.2.05 to Respondent No.1, instead of only giving him a right to

Gopal Krishna Kapoor & Ors. v. R.S.Chhabra & Ors. get the previous Memorandum of Understanding assigned in his

favour at a later date. For them what was material was that they

had entered into a Memorandum of Understanding with

respondent No. 2 Rajesh Kumar on 28th February, 2005 and under

that documents they had given special right to him to assign his

rights under the Memorandum of Understanding in favour of any

nominee or assignee and Respondent No.2, Shri Rajesh Kumar, by

signing the Memorandum of Understanding dated 20.4.05 with

respondent No.1, has already divested him of all his rights under

the MOU dated 28.2.2005. For them what is material is that they

are getting agreed consideration from respondent No. 1 and are

not committing any breach of the terms and conditions contained

in the Memorandum of Understanding executed on 28th February,

2005 between them and Respondent No. 2, Rajesh Kumar. They

have nothing to lose by executing the sale deed in favour of

Respondent No. 1. It is more so when not only the application

filed by Shri Rajesh Kumar for grant of interim injunction against

execution of the compromise decree dated 28th March, 2006

passed in CS (OS) No. 353 of 2006 has been dismissed, the appeal

filed by him has also been dismissed by this court.

12. The learned counsel for the appellant has referred to S.G.

Thimmappa -vs- T. Anantha and others; AIR 1986 Karnataka 1,

Gopal Krishna Kapoor & Ors. v. R.S.Chhabra & Ors. where a learned Single Judge of Karnataka High Court inter alia

held as under:

"The above statement makes it clear that the party who challenges the compromise on the basis of fraud, undue influence or coercion, has two remedies open to him firstly by filing a suit, secondly, making an application under Section 151 C.P.C. The fact that the Courts can exercise their inherent powers under Section 151 does not mean that there is a bar for filing a suit which remedy is available to the party."

"A contract or agreement may be lawful but it can still be challenged on the ground that it was entered into or achieved by exercising fraud, undue influence or coercion and can be avoided. This aspect of the matter is not covered by the words „not lawful‟ occurring in Rule 3A of O.23 C.P.C. Therefore, to hold that the compromise decree cannot be challenged on the ground of fraud, undue influence or coercion under R.3A would not be correct."

He has also referred to the decision of learned Single Judge

of this Court in IA No. 1868 and 1869/2007 in CS(OS) No.

2885/1989 wherein the learned Single Judge noted an apparent

conflict in the decisions of Hon‟ble Supreme Court in the case of

Pushpa Devi Bhagat (D) through LR. Smt. Sadhan Rai V. Rajinder

Singh and Ors., JT 2006 (6) SC 235 and its decision in Dadu Dayal

Gopal Krishna Kapoor & Ors. v. R.S.Chhabra & Ors. Mahasabha V. Sukhdev Arya and Anr., (1990) 1 Supreme Court

Cases 189.

13. In Pushpa Devi Bhagat‟s case, the Hon‟ble Supreme Court

held that no independent suit can be filed for setting aside

compromise decree on the ground that the compromise was not

lawful in view of the bar contained in Order XXIII of Code of Civil

Procedure and the only remedy available to a party to a consent

decree to avoid such consent decree is to approach the court

which recorded the compromise and made a decree in terms of it,

and establish that there was no compromise. It was further held

that in that event the court which recorded the compromise will

itself consider and decide the question as to whether there was a

valid compromise or not.

14. On the other hand, in the case of Dadu Dayal Mahasabha

(Supra), the Hon‟ble Supreme Court held that if a party makes an

application before the court for setting aside the decree on the

ground that he did not give his consent, the court has the power

and duty to investigate the matter and to set aside the decree if it

is satisfied that the consent as a fact was lacking and the court

was induced to pass the decree on a fraudulent representation

made to it that the party had actually consented to it. The Hon‟ble

Supreme Court further held that if the case of the party

Gopal Krishna Kapoor & Ors. v. R.S.Chhabra & Ors. challenging the decree is that he was in fact a party to the

compromise petition filed in the case but his consent has been

procured by fraud, the court cannot investigate the matter in the

exercise of its inherent power and the only remedy to the party is

to institute a suit.

15. The contention of the learned senior counsel for the

appellants was that since the consent of the appellants to the

compromise deed dated 28.3.2006 was obtained by playing a fraud

upon them, on account of a misrepresentation that the

Memorandum of Understanding dated 28th February, 2005 had

been assigned by Respondent No. 2 Shri Rajesh Kumar in favour of

Respondent No. 1 Shri R.S. Chhabra, a suit for setting aside the

compromise decree is competent.

16. Even if we proceed on the proposition that a party whose

consent to the compromise resulting in passing of compromise

decree was obtained by fraud, is entitled to file a suit for setting

aside such a compromise decree, we find that in the facts and

circumstances of the present case, no fraud actually appears to

have been played upon the appellants. Therefore the appellants

have failed to make out a prime facie case in favour of setting

aside the compromise decree dated 28th March, 2006.

Gopal Krishna Kapoor & Ors. v. R.S.Chhabra & Ors.

17. Even at the stage of granting ad interim injunction during

the pendency of the suit, the court is not expected to accept every

allegations made in the plaint to be true, where the documents

available on record and the facts and circumstances of the case

clearly point to the contrary. In fact, in every application for grant

of primary injunction in a pending suit it is necessary for the court

to enter, to a limited extent, into the merit of the case, in order to

determine whether there exists a prima facie case or not. It would

not be necessary for a party to prove its case to the hilt, at least at

this stage, but, it is obligatory for him to make out a fair question

for determination during trial. The balance of equity and balance

of convenience also does not appear to be in favour of the

appellants in this case. They have already received Rs. 1.00 crore

from Respondent No. 2 Shri Rajesh Kumar, who has already

entered into a subsequent Memorandum of Understanding dated

20th April, 2005 in favour of Respondent No. 1 Shri R.S.Chhabra.

Respondent No. 1 Shri R.S. Chhabra claims that he has always

been and is still ready and willing to pay the balance sale

consideration to the appellants. A compromise, on legal advice,

was entered into by the appellants with Respondent No. 1, which

resulted in a compromise decree being passed on 28th March,

2006. We see no reason for allowing the appellants to back out of

Gopal Krishna Kapoor & Ors. v. R.S.Chhabra & Ors. the compromise and thereby deprive Respondent No. 1 from

execution of the decree passed in his favour. The appellants stand

nothing to lose by executing the sale deed in favour of Respondent

No. 1, on payment of balance consideration. As noted earlier, the

application of Respondent No. 2, Shri Rajesh Kumar for grant of

injunction against execution of decree has already been dismissed

and appeal filed by him has also been rejected. The Respondent

No. 1 paid Rs. 80.00 lacs to Respondent No. 2 way back in April,

2005 and has got nothing in return, whereas the appellants

continue to enjoy the possession of the suit property. The relief of

injunction is a equitable relief and the equity certainly is in favour

of respondent No. 1 and not in favour of the appellants. In the

facts and circumstances of the case, we see little likelihood of the

appellants ultimately succeeding on merits. Therefore, we find no

reasonable ground for grant of injunction to the appellants. This is

more so when the order passed by learned Single Judge is a

discretionary relief and it cannot be said that the view taken by

him in the matter is not a reasonable or plausible view. This court

would not be justified in interfering with the exercise of discretion

by learned Single Judge even if it feels that a view contrary to that

taken by the learned Single Judge is equally possible in the facts

and circumstances of the case.

Gopal Krishna Kapoor & Ors. v. R.S.Chhabra & Ors.

For the reasons given in the aforesaid paragraphs, we find

no merit in the appeal and the same is, hereby, dismissed.

(V.K.JAIN) JUDGE

(VIKRAMAJIT SEN) JUDGE

AUGUST 20, 2009 sn/acm

Gopal Krishna Kapoor & Ors. v. R.S.Chhabra & Ors.