Bhai Sarabjit Singh vs Indu Sabharwal & Ors
2014 Latest Caselaw 1542 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                        Date of decision: 24th March, 2014

+      CS(OS) 753/2014, IA No.4783/2014 (for exemption) & IA
       No.4782/2014 (u/O 39 R-1&2 CPC)

       BHAI SARABJIT SINGH                                    ..... Plaintiff
                    Through:           Mr. Raman Kapur, Sr. Adv. with Mr.
                                       Manish Kumar, Mr. Amit Kumar &
                                       Mr. Piyush Kaushik, Advs.

                                    Versus

    INDU SABHARWAL & ORS                        ..... Defendants
                  Through: Dr. Arun Mohan, Sr. Adv. with Mr.
                           Arvind Bhatt with defendant no.1
                           Indu Sabharwal in person.
                           Mr. Sanjiv Kakra & Mr. Sanjeev
                           Mahajan, Advs. for D-2&d-3.
CORAM:
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

1.

The plaintiff has instituted this suit for declaration of the Settlement

Agreement dated 6th August, 2010, entered into between the plaintiff and the

three defendants and on the basis of which CS(OS) No.1698/2007 was

decreed on 8th November, 2013, as null and void on account of fraud and

misrepresentation played upon the plaintiff by the three defendants,

pleading:-

(a) that the plaintiff and the defendant no.2 Ms. Nisha Singh and

the defendant no.3 Ms. Tara Sabharwal are the children of Bhai

Tirlochan Singh and Mrs. Manjit H. Singh;

(b) that the defendant no.1 claims to be the second wife of Bhai

Tirlochan Singh;

(c) that after the demise of Bhai Tirlochan Singh, disputes and

differences arose between the plaintiff and the defendants with

respect to his estate and which were the subject matter of

CS(OS) No.1698/2007 filed by the defendants no.2&3;

(d) that vide ex parte stay order dated 14th September, 2007 in the

said suit, the parties thereto were restrained from creating any

third party interest in the properties of Bhai Tirlochan Singh;

(e) that though the defendants no.2&3, immediately after the

demise of Bhai Tirlochan Singh, had withdrawn an amount of

approximately Rs.1 crore out of his bank account but did not

mention the same in the suit;

(f) that the defendant no.1, though initially in the said suit admitted

the validity and authenticity of the Will dated 23 rd March, 2006

of Bhai Tirlochan Singh but subsequently took a somersault;

(g) CS(OS) No.684/2008 was also filed by the plaintiff for

injuncting the defendant no.1 herein from interfering in the

enjoyment and peaceful possession of the plaintiff of property

No.9, Amrita Shergill Marg, New Delhi;

(h) Test. Case No.2/2008 was also filed by executor to the Will

dated 23rd March, 2006 aforesaid of Bhai Tirlochan Singh, for

probate thereof;

(i) that vide order dated 5th August, 2010 in FAO(OS) No.83/2007

arising from the aforesaid proceedings, the parties were referred

to the Mediation Cell of this Court;

(j) that the Settlement Agreement dated 6 th August, 2010 supra

was signed between the parties;

(k) that the plaintiff agreed to the said Settlement Agreement, to

buy peace and under a bona fide belief, (i) that on account of

the order dated 14 th September, 2007 of status quo, all the

movable assets pertaining to the estate of Bhai Tirlochan Singh,

either in his individual name or in the joint name of Bhai

Tirlochan Singh and the defendant no.1 or of a third party with

Bhai Tirlochan Singh, irrespective of any nomination therein,

were lying deposited in the respective accounts, untouched by

either of the parties; (ii) that the amounts as were lying

deposited in the form of bonds, investment etc. were intact and

none of the parties had withdrawn / misappropriated any

money out of the estate of Bhai Tirlochan Singh; (iii) that the

movable assets in the form of deposits, investment, bonds share

etc. of Bhai Tirlochan Singh which had fallen in the respective

shares of the parties would be released in implementation of the

Settlement Agreement and the monies would accordingly be

released / adjusted; (iv) that no formal decree shall be passed in

the suit as the same would have tax implications on overall

valuation of the assets and deposit of stamp duty; and, (v) that

the family properties bearing No.9, Amrita Shergil Marg, New

Delhi and 71, Jor Bagh, New Delhi would be retained and

divided amongst all, without selling, so that everyone gets a

place to live and some movable assets;

(l) that it was never the spirit of the Settlement Agreement to get a

decree which would result in heavy taxation due to the high

value of the suit properties;

(m) that however immediately after the Settlement Agreement, the

behavior of the defendant no.1 changed and the defendant no.1,

without awaiting the valuation, started breaching the terms of

the Settlement Agreement, firstly by not providing support to

the plaintiff in the probate case of his grandmother being Test.

Case No.108/2008, as agreed to by her and subsequently by not

permitting the plaintiff to withdraw his share of money in terms

of the Settlement Agreement or in quick valuation of property

No.9, Amrita Shergill Marg, New Delhi;

(n) that the defendant no.1 also started pressing for a decree in

terms of the Settlement Agreement, in contravention of the term

thereof for withdrawal of the suit;

(o) that the plaintiff also learnt that huge sums of money as were

lying in the form of investment in bonds, shares, debentures,

mutual funds etc. were illegally withdrawn / misappropriated

by the defendant no.1 in violation of orders dated 14 th

September, 2007 and 22 nd May, 2008 in CS(OS) No.1698/2007

directing the parties to maintain status quo;

(p) that from all the aforesaid acts of the defendant no.1, the

plaintiff felt that the defendant no.1 had no real intention to

settle the matter;

(q) that though the defendant no.1 subsequently offered that

whatever anybody had taken from the estate of Bhai Tirlochan

Singh can be accounted for but the said offer also showed that

the defendant no.1, after misappropriating the monies, was

causing impediments to the plaintiff getting his share;

(r) that vide order dated 9 th July, 2013 in FAO(OS) No.83/2007 a

decree was directed to be drawn up in terms of the Settlement

Agreement dated 6th August, 2010;

(s) that the defendant no.1 also filed IA No.14651/2013 in CS(OS)

No.1698/2007 for sale of all the assets of Bhai Tirlochan Singh

and which was also in negation of the Settlement Agreement;

(t) that the defendant no.1 by her deliberate acts of fraud and

misrepresentation, got the plaintiff to sign the Settlement

Agreement by concealing and suppressing the material fact that

the defendant no.1 had already withdrawn the entire money

from the estate of Bhai Tirlochan Singh; had the plaintiff

known so, the plaintiff would have never agreed to the

Settlement Agreement; that owing to the defendant no.1 having

already withdrawn the money she now has no benefit in

implementation of the Settlement Agreement; and,

(u) that as the Settlement Agreement dated 6th August, 2008 was

entered upon by playing fraud upon the plaintiff, the plaintiff is

entitled to have the same declared as null and void.

2. The suit came up first before this Court on 14 th March, 2014 when the

senior counsel for the defendant no.1 as well as the counsel for the

defendants no.2&3, though not on caveat, appeared; owing to applications

filed in CS(OS) No.1698/2007 pending before this Bench, this suit was

ordered to be listed before this Bench.

3. The senior counsel for the defendant no.1 and the counsel for the

defendants no.2&3 have contended that the suit is not maintainable.

4. I have also on perusal of the plaint with the allegations aforesaid,

invited attention of the senior counsel for the plaintiff to Order 23 Rules 3

and 3A of the CPC, which are as under:-

"3. Compromise of suit. - 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, or where the defendant satisfies the plaintiff in respect of the whole or any part of the subject-matter of the suit, the Court shall order such agreement, compromise or satisfaction to be recorded, and shall pass a decree in accordance therewith so far as it relates to the parties to the suit, whether or not the subject-matter of the agreement, compromise or satisfaction is the same as the subject - matter of the suit:

Provided that where it is alleged by one party and denied by the other that an adjustment or satisfaction has been arrived at, the Court shall decide the question; but no adjournment shall be granted for the purpose of deciding the question, unless the Court, for reasons to be recorded, thinks fit to grant such adjournment.

Explanation. - An agreement or compromise which is void or voidable under the India Contract Act, 1872 (9 of 1872), shall not be deemed to be lawful within the meaning of this rule.

3A. Bar to suit. - No suit shall lie to set aside a decree on the ground that the compromise on which the decree is based was not lawful."

5. Attention of the senior counsel for the plaintiff has also been invited

to my judgment in Smt. Rajwanti. Vs. Sh. Kishan Chand Shehrawat

MANU/DE/1685/2009.

6. Attention of the senior counsel for the plaintiff is also invited to

Section 22 of the Indian Contract Act, 1872 which provides that a contract is

not voidable merely because it was caused by one of the parties to it being

under a mistake as to a matter of fact.

7. It has further been enquired from the senior counsel that if as per the

Settlement Agreement, the estate of Bhai Tirlochan Singh was to be divided

/ distributed as provided therein and even if the defendant no.1 has already

taken a share therein, why the remedy of the plaintiff is not to execute the

said Settlement Agreement in terms whereof a decree has already been

passed in CS(OS) No.1698/2007 and in said execution of the decree,

contend that the monies already received / withdrawn by the defendant no.1

are liable to be accounted for/adjusted.

8. I may notice that the senior counsel for the defendant no.1 states that

the defendant no.1 is willing therefor and has already taken the said stand in

the applications filed in CS(OS) No.1698/2007.

9. The senior counsel for the plaintiff however states that once the

plaintiff was made to sign the Settlement Agreement on the premise that the

movable assets forming part of the estate of Bhai Tirlochan Singh and as

described in Annexure - „C‟ to the said Settlement Agreement exist, and the

same were found to be not existing, a case of the consent of the plaintiff to

the said Settlement Agreement having been obtained fraudulently is made

out and the plaintiff has become entitled to have the said Settlement

Agreement voided and the offer of the senior counsel for the defendant no.1

to have the monies withdrawn by the defendant no.1 (in her capacity as

nominee in the said movable assets) accounted for in implementation of the

said Settlement Agreement, is of no avail and cannot come in the way of the

plaintiff having the said Settlement Agreement voided. It is argued that if the

same were to be permitted, every person, after indulging in fraud would be

entitled to ward off the liability by making such an offer.

10. I have considered the aforesaid contention.

11. Section 17 of the Contract Act defines fraud as an act committed by a

party to the contract with the intent to deceive another party or to induce him

to enter into the contract, either by making a suggestion as a fact, of that

which is not true or by active concealment inspite of having knowledge or

belief of the fact or by making a promise without any intention of

performing it or by any other act fitted to deceive. However Explanation

thereto provides that mere silence as to facts likely to affect the willingness

of a person to enter into a contract is not fraud, unless it is the duty of the

person keeping silence to speak or unless silence is in itself equivalent to

speech.

12. Though the plaintiff in the plaint has pleaded fraud but finding that the

plaintiff, in the plaint, has not pleaded that the defendant No.1 had made any

suggestion or representation to the plaintiff that the movable assets of Bhai

Tirlochan Singh and as described in Annexure-„C‟ to the Settlement

Agreement had not been withdrawn or encashed by her or that the defendant

No.1 had the duty to speak or that her silence in this respect was equivalent

to speech, I have asked the senior counsel for the plaintiff to show from the

Settlement Agreement any representation of the defendant no.1, of the

monies which she is alleged to have withdrawn, continuing to exist.

13. Though the senior counsel for the plaintiff has not been able to show

any clause of the Settlement Agreement in this regard but by reference to

Annexure - „C‟ thereto contends that the same amounts to a representation

of the said monies continuing the exist.

14. However a perusal of Annexure-„C‟ to the Settlement Agreement

shows the same to be containing a description of the movable assets of Bhai

Tirlochan Singh and the value thereof, with the total value being of

Rs.8,98,63,320.74p.

15. The parties, in the Settlement Agreement, agreed to divide all the

assets, movable and immovable of Bhai Tirlochan Singh in the ratio of 40%

by the plaintiff and 20% each by the three defendants, after valuation

thereof.

16. The senior counsel for the plaintiff has contended that the investments

of Bhai Tirlochan Singh, as mentioned in Annexure - „C‟, were found to not

exist as the defendant no.1 prior to the signing of the Settlement Agreement

had withdrawn nearly 50% of the monies in the said investments, taking

advantage of being a nominee of Bhai Tirlochan Singh therein and is now

sitting over the said monies and causing impediments in valuation of the

other properties and in implementation of the Settlement Agreement.

17. The senior counsel for the defendant no.1 states that the defendant

no.1 has merely re-invested the monies which were due therefor and such re-

investment axiomatically could not be in the name of Bhai Tirlochan Singh

and is in the name of the defendant no.1 or along with others and the

defendant no.1 is ready to account therefor and no loss or prejudice has been

caused to the plaintiff thereby.

18. Else, on a perusal of the terms of the Settlement Agreement, I do not

find any clause therein which can be said to be a representation by the

defendant no.1 to the plaintiff, of the investments as mentioned in Annexure

- „C‟ existing in the same form. Rather Annexure - „C‟ lists the value of

movable assets which were agreed to be divided.

19. Though the senior counsel for the plaintiff to support his case that the

defendant no.1 had committed fraud argues that the conduct of the defendant

no.1 is akin to the Illustration (a) to Section 17 of the Contract Act but the

said Illustration is of what is not fraud and not of what is fraud.

20. Not only from the Settlement Agreement, but even from the pleadings

in the plaint, no case of fraud is made out. The plaintiff has nowhere pleaded

that the defendant no.1 represented to the plaintiff that the said investments

were existing in the old form only; rather what the plaintiff has pleaded is

that „he bona fide believed so in his mind at the time of signing the

Settlement Agreement‟. A plea of such belief by the plaintiff as to a matter

of fact, without any representation by the defendant no.1, would be a plea of

the plaintiff being under a mistake of fact rather than a plea of fraud.

Mistake of fact under which one of the parties entered into a contract, does

not make the contract voidable.

21. Even though the senior counsel for plaintiff has not argued, but no

case of the defendant No.1 having acted fraudulently, for the reason of

having promised to do anything without having any intention of doing it, is

also made out/pleaded. Rather the plaintiff, in the plaint itself admits the

offer of the defendant No.1 to have the monies withdrawn by her adjusted.

22. Rather, I have enquired, whether the plaintiff has applied for

execution of the Settlement Agreement, even if the defendants were refusing

to perform their obligations thereunder.

23. No execution is stated to be filed. No other steps also, for

implementation of the Settlement Agreement are informed to have been

taken by the plaintiff.

24. Thus, no case for having the Settlement Agreement and decree in

terms thereof voided on the ground of consent of plaintiff therefor having

been obtained fraudulently is made out. It cannot also be lost sight of that

the Settlement Agreement was arrived at before the Mediation Cell of this

Court through the aegis of trained professional mediator and if challenge to

such Settlement Agreements arrived at before the Mediation Cell of this

Court were to be entertained on such pleadings, the same will severely

hamper the efficacy and faith in mediation which has been statutorily

recognised as a dispute resolution method.

25. Even though the plaint does not contain the ingredients required to be

pleaded to make out a case of fraud but even if it were to be held that a case

of fraud is made out, it has been enquired from the senior counsel for the

plaintiff, whether not the suit would still be barred by Order XXIII Rule 3A

of the CPC, the Court in which the compromise contained in the Settlement

Agreement was filed, having recorded a satisfaction of the same being

lawful and having passed a decree in terms thereof. Attention of senior

counsel for plaintiff was also invited to the Explanation to Rule 3 and it is

enquired, whether in this suit, the compromise contained in Settlement

Agreement can be held to be fraudulent and axiomatically void, when the

Court which passed decree in terms thereof is deemed to have satisfied itself

that the same is lawful i.e. not voidable under the Contract Act.

26. The senior counsel for the plaintiff in this regard has invited attention

to Dadu Dayal Mahasabha Vs. Sukhdev Arya (1991) 1 SCC 189, in para 7

whereof it has been held that the Court which passed the consent decree has

a jurisdiction to set aside the same on the ground that a party thereto did not

give his consent thereto, and the said Court has power and duty to

investigate this aspect; however if the case of the party challenging the

decree is that, though he was a party to the compromise but his consent had

been procured by fraud, the Court in which the compromise was recorded

cannot investigate the said aspect in exercise of its inherent power and the

only remedy of the party is to institute a suit. On the basis thereof, it is

argued that a separate suit, as this, is maintainable.

27. Finding, that the compromise recorded in the dicta aforesaid is of

prior to 1st February, 1977, from which date the Explanation to Rule 3 and

Rule 3A supra were incorporated in Order XXIII of the CPC and which were

not considered in the said judgment, it was enquired from the senior counsel

for plaintiff, whether the same would still be good law.

28. The senior counsel for the plaintiff then invites attention to Ramji

Gupta Vs. Gopi Krishan Agrawal (2013) 9 SCC 438 where Dadu Dayal

Mahasabha supra has been cited and has contended that the same view has

been followed even after the insertion of the Explanation to Rule 3 and Rule

3A.

29. The senior counsel for the plaintiff is however unable to tell, whether

the question far for decision in Ramji Gupta supra was the same as with

which we are concerned. On perusal of the said judgment, it is found that

Dadu Dayal Mahasabha supra was cited therein in the context of discussion

on inherent powers of the Civil Court and Ramji Gupta supra was otherwise

not concerned with maintainability of a suit for setting aside of a

compromise. Thus, the reliance by the senior counsel for the plaintiff on

Ramji Gupta supra, without even adverting to what was for decision therein,

is mechanical and of no avail.

30. Though the senior counsel for the plaintiff has handed over

photocopies of a number of other judgments also but without citing the

same, except the judgment of the Division Bench of this Court in Gopal

Krishna Kapoor Vs. R.S. Chhabra MANU/DE/1790/2009 (para 16).

However, the same also on a demurrer observes that even if such a suit is

maintainable, no case of fraud was found to have been made out in that case.

31. I may mention that I have in Smt. Rajwanti supra, on a conspectus of

the case law in this regard have concluded that Rule 3A of Order XXIII of

the CPC is unequivocal in this regard and does not permit any distinction to

be made between suits where challenge to compromise decree is on the plea

of fraud having been played on the Court as distinct from cases where plea is

of fraud having been played by one party on the other and have found the

law to be, that no independent suit lies and the only remedy is by way of an

application before the Court passing the consent decree.

32. In any case, the matter is placed beyond any pale of controversy by

the judgment of the Supreme Court in Horil Vs. Keshav (2012) 1 SCALE

525 cited by the counsel for the defendants No.2&3, laying down that a

compromise forming the basis of a decree can only be questioned before the

same Court that recorded the compromise and a fresh suit for setting aside

the compromise decree is expressly barred by Rule 3A supra. It was further

held that the expression "not lawful" used in Rule 3A, also covers a decree

based on a fraudulent compromise and hence a challenge to a compromise

decree on the ground that it was obtained by fraudulent means also falls

under the provisions of Rule 3A.

33. The counsel for the defendants No.2&3 in this regard has also invited

attention to Banwari Lal Vs. Chando Devi (1993) 1 SCC 581 and Shyam

Sunder Kalra Vs. Ravinder Kumar Jain 196 (2013) DLT 84 (CN) to the

same effect.

34. The conduct of the plaintiff, of filing this suit inspite of clear as sky

position in law, is only indicative of the plaintiff searching reasons for

reneging from the Settlement Agreement and to put spokes in

implementation thereof.

35. I may record that the plaintiff present in person in the Court also

wanted an opportunity to address and the senior counsel for the plaintiff had

no objection thereto and the plaintiff also has been heard. He has given

reasons why he entered into the compromise. However, in view of the legal

position aforesaid, the suit would in any case be not maintainable and is

barred by law and is dismissed.

In the facts, no costs. Decree sheet be drawn up.

RAJIV SAHAI ENDLAW, J.

MARCH 24, 2014 pp/bs..