KIRAN ARORA v. RAM PRAKASH ARORA — 1979 DIGILAW 204 (DEL)

( 1 ) IN a suit for dissolution of partnership and rendition of accounts, against four defendants an application, (I. A. No. 2431 of 1979) under 0. 23, R. 3, Civil Procedure Code has been filed on behalf of the plaintiffs and defendants 1 and 2, for passing a final decree for Rs. 1,95,000. 00 against defendant No. 1. ( 2 ) THE question for decision is whether the compromise between the plaintiffs and some of the defendants is lawful. The relevant facts are as under: Ram Parkash, defendant No. 1 and his two sons Kanwal Kishore (defendant No. 3) and the deceased Chand Kiran Arora entered into partnership on 1st April, 1964 which firm is alleged to have been dissolved by a deed dated 31st March, 1971 and another firm is alleged to have been constituted between defendant No. 1 and his son Chand Kiran Arora vide deed dated 1st April, 1971. Chand Kiran Arora died on 3rd Jan. , 1974 and another new firm is alleged to have come into existence on 4th Jan. , 1974 in terms of a deed dated 19th March, 1974 between defendant No. l and his daughter defendant No. 2. In this firm minor plaintiff No. 2 is alleged to have been admitted to the benefits of the partnership firm. According to the plaintiffs the balance sheet of the partnership firms as on 31st March, 1974 showed a sum of Rs. 63,365. 88 due to Chand Kiran Arora and vide another balance sheet minor plaintiff No. 2 was shown entitled to Rs. 26,119. 81. The name of partnership business has been ram Prakash Kanwal Kishore with its branch styled as prakash Steel Industries at Loha Mandi, New Delhi. Subsequently the firm is alleged to have acquired considerable immovable and moveable properties, steel quotas, etc. and now the partnership firm carries on business at B-87, Mayapuri Industrial Area, New Delhi. Chand Kiran Arora who died on 3rd Jan. , l974 left behind plaintiff No 1 his widow, plaintiff No. 2 his minor son, plaintiff No. 3 his minor daughter and defendant No. 4 Smt. Phoolwati, his mother. There is also a property on leasehold plot BF-27, Najafgarh Road Residential Scheme known as Tagore Garden, New Delhi. This plot was initially owned by Chand Kiran Arora and Kanwal Kishore, defendant No. 3. There is also a property on leasehold plot BF-27, Najafgarh Road Residential Scheme known as Tagore Garden, New Delhi. This plot was initially owned by Chand Kiran Arora and Kanwal Kishore, defendant No. 3. After the death of Chand Kiran, the plaintiffs and defendant No. 4 being heirs inherited the share of the deceased in the said property. The share of defendant No. 3 in this property was transferred to his wife Mrs. Madhu Manchanda. The names of the plaintiffs, defendant No. 4 and Mrs. Madhu Manchanda are alleged to have been recorded as owners in the records of Delhi Development Authority. After the death of Chand Kiran Arora this house became the subject of a suit for partition filed by Mrs. Madhu Manchanda wife of defendant No. 3. The preliminary decree for partition was passed on 22nd May, 1976 in Suit No. 483 of 1975 in Madhu Manchanda v. Smt. Kiran Arora etc. by Shri S. M. Chopra, Sub-Judge, Delhi. The plaintiffs further allege that defendant No. I with a view to deny their share and rights in the estate left by Chand Kiran Arora, forged a Will dated 26-12-1973 of Chand Kiran. This Will was got attested by defendant No. l from his two daughters including defendant No. 2 and it was produced in proceedings under the Indian Succession Act where the same was held to be false and forged. An appeal filed in this court was dismissed by B. C. Misra, J. who also held the Will to be a forged one. A complaint was filed under Sec. 340 Criminal Procedure Code for prosecution of defendant No. 1 and a complaint has been filed by the Registrar of this court against defendant No. l forging the said Will etc. which is pending. The defendants failed to render accounts and therefore the plaintiffs by this suit claim dissolution and rendition of accounts. A complaint was filed under Sec. 340 Criminal Procedure Code for prosecution of defendant No. 1 and a complaint has been filed by the Registrar of this court against defendant No. l forging the said Will etc. which is pending. The defendants failed to render accounts and therefore the plaintiffs by this suit claim dissolution and rendition of accounts. ( 3 ) DEFENDANT No. 3 in his written statement pleads that he continues to be a partner of the firm in suit under the deed dated 1st April, 1964, that there was no dissolution on 31st March 1971, that the alleged dissolution deed dated 31st March, l971s a forged and fabricated one, that defendant No. 2 daughter of defendant No. 1 has no concern with the partnership firm, that defendant No. 1 is avoiding to render accounts; that the three partners, name Chand Kiran Arora, defendant No. 1 and defendant No. 3 agreed to share the profits and losses equally in terms of deed dated 1st April, 1964, that according to term No. 5 thereof death of a partner does not have the effect of dissolving the partnership firm that his father defendant No. l wants to grab the assets of his two sons-partners in the firm, and also the residential house No. BF-27 Tagore Garden, New Delhi, that defendant No. 1 involved the family in litigation by putting a forged Will of Chand Kiran Arora, that his father defendant No. 1 wants to grab his share in the partnership by entering into this unlawful compromise with the plaintiffs. The defendant No. 1 did not file written statement but filed an application under Section 34 of the Arbitration Act tor stay of suit, which is still pending. ( 4 ) UNDER the compromise (I. A. No. 2431 of 1979) defendant No. 1 agreed to pay Rs. 1,95,000. 00 to the plaintiffs and in fact has paid Rs. 1,50,000. 00 by Bank Drafts in lieu of (i) plaintiff s share in the partnership firm Ram Parkash Kanwal Kishore with Branch Prakash Steel Industries, at B-87. ( 4 ) UNDER the compromise (I. A. No. 2431 of 1979) defendant No. 1 agreed to pay Rs. 1,95,000. 00 to the plaintiffs and in fact has paid Rs. 1,50,000. 00 by Bank Drafts in lieu of (i) plaintiff s share in the partnership firm Ram Parkash Kanwal Kishore with Branch Prakash Steel Industries, at B-87. Mayapuri Industrial Area, Phase I, New Delhi including all assets, quotas factories, land and buildtag, (ii) plaintiffs claim for past and future maintenance including educational and marriage expenses, (iii) plaintiffs claim with respect to immovable and movable properties and assets of defendant No. 1 Ram Parkash Arora and Smt. Phool Wati Arora, defendant No. 4, (iv) plaintiff s claim on account of utilisation of assets of the firm by defendant No. 1 and (v) plaintiffs share in property at BF-27, Tagore Garden, New Delhi, factories, land and building at B-87, Mayapuri Industrial Area, Phase I, New Delhi, This a goodwill, stocks, goods finished, semi-finished and raw stocks with a further declaration by the plaintiffs that these immoveable properties were and shall remain under the sole ownership of defendant No. 1. These are the main terms of the compromise. ( 5 ) DEFENDANT No. 3 by way of objections and his reply to the compromise filed application (I. A. No. 2563 of 1979) wherein he alleges that the interest of plaintiff No. 1, mother of minors is adverse to his children plaintiffs Nos. 2 and 3. that the assets of the partnership firm in suit which include factory building built on a plot measuring 2500 sq. yards are worth more than 20 lacs besides goodwill worth Rs. 10 lacs, and rental income from the factory building at Rupees 56,400. 00 per annum. Defendant No. 3 thus alleges that the share of the plaintiffs in the assets of the firm is worth not less than Rs. 10 lacs. yards are worth more than 20 lacs besides goodwill worth Rs. 10 lacs, and rental income from the factory building at Rupees 56,400. 00 per annum. Defendant No. 3 thus alleges that the share of the plaintiffs in the assets of the firm is worth not less than Rs. 10 lacs. He further asserts that the property at BF-27, Tagore Garden, New Delhi is not the subject matter of the present suit but according to the compromise terms defendant No. 1 wants to get himself declared as the sole owner of this property although the plaintiffs and defendant No. 4 have been held to be owners of one half share of this property and that the wife of defendant No. 3 has been held to be owner of the other half share vide the preliminary decree for partition dated 22nd May, 1976 passed by Shri S. M. Chopra, Sub Judge, Delhi in Re: Madhu Manchanda v. Smt. Kiran Arora and others. He, therefore, contends that the compromise is unlawful and court under O. 23, Rule 3 Civil P. C. would not accept the compromise and pass a decree on the terms contained therein. Rules 3 and 3-A of Order 23, Civil P. C. as amended by the Civil P. C. (Amendment) Act, 1976 read. thus: "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 singed by 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, Court shall decide the question but no adjournment shall be granted tor the purpose of deciding the question, unless the court, for reasons to be recorded, thinks fit to grant such adjournment. Provided that where it is alleged by one party and denied by the other that an adjustment or satisfaction has been arrived at, Court shall decide the question but no adjournment shall be granted tor 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 Indian Contract Act, 1872 (9 of 1872) shall not be deemed to be lawful within the meaning of this rule. " "3-A. 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. "under Rule 3 the Court must be satisfied that there has been a lawful agreement or compromise. Under this rule an agreement or compromise which is void or voidable under the Indian Contract Act shall not be deemed to be lawful. Under the amended Rule 3 of Order 23, Civil P. C. the court can pass and decree in terms of the agreement even though it includes matters not forming the subject-matter of the suit provided that such extraneous matters relate to the parties to the suit. Rule 3-A of Order 23, Civil P. C. bars a suit to set aside a decree on the ground that the compromise on which the decree is passed was not lawful. Thus it will be seen that the court has to be very cautious and should determine whether the compromise arrived between the parties to the suit is lawful or not. ( 6 ) IN the present case the compromise is only between the plaintiffs and defendants 1 and 2. Defendant No. 3 who alleges still to be a partner in the firm and defendant No. 4 who is only one of the heirs of the deceased partner are not parties to this compromise, if the compromise as arrived at between the plaintiffs and some of the defendants is accepted, the claim of defendant No. 3 and defendant No. 4 shall remain unadjudicated. In a suit for rendition of accounts if all the plaintiffs and defendants are not parties to the compromise, it does not decide the suit. and it may prejudice the rights of other parties to the suit and thus it would not be a lawful compromise. In a suit for rendition of accounts if all the plaintiffs and defendants are not parties to the compromise, it does not decide the suit. and it may prejudice the rights of other parties to the suit and thus it would not be a lawful compromise. The said compromise with defendants 1 and 2 would be prejudicial to the interest of defendant No. 3 as he claims that he still continues to be a partner under the deed dated 1st April, 1964. It is also in dispute whether there was dissolution of the partnership on 31st Mar. 1971 as alleged by defendant No. l and denied by defendant No. 3. In a suit for rendition of accounts where a preliminary decree for accounts is passed, the accounts are generally gone into between all the partners before a local commissioner. He is to determine what amount is due to one partner from the other. In this way the amount may be found due to a defendant against the plaintiff and amount may be found due to the plaintiff against the defendant in such a suit for accounts. Thus in a suit for rendition of accounts every plaintiff is a defendant and every defendant is a plaintiff. I am, therefore, of the view that unless there is settlement regarding accounts of the partnership firm in suit amongst all the partners including the heirs of a deceased partner there would be no lawful agreement. ( 7 ) UNDER this compromise it is declared that defendant No. 1 shall be the sole owner of the factories land and building at B-87 Mayapuri Industrial Area, New Delhi, and also residential property at BF-27, Tagore Garden, New Delhi. As regards the property at BF-27, Tagore Garden, New Delhi there is a preliminary decree for partition dated 22nd May 1976 in Suit No. 483 of 1975 of the court of Shri S. M. Chopra, Sub-Judge, 1st Class, Delhi between Madhu Manchanda, wife of present defendant No. 3, plaintiffs and defendant No. 4 wherein it has been held that wife of defendant No. 3 is the owner of one half share and the plaintiffs along with defendant No. 4 are owners of the other half share. This compromise thus implies injury to the rights of the wife of defendant No. 3 as well as defendant No. 4, both of them are not parties to the compromise. This compromise thus implies injury to the rights of the wife of defendant No. 3 as well as defendant No. 4, both of them are not parties to the compromise. The agreement or compromise cannot affect a third party. If this compromise is accepted and a decree is passed decree cannot be challenged subsequently on the ground that the compromise was not lawful as such a suit is barred by R. 3-A of O. 23 Civil Procedure Code. ( 8 ) SECTION 23 of the Indian Contract Act. 1872 is as under: "s. 23. The consideration or object of an agreement is lawful, unless. It is forbidden by law; or is of such a nature that if permitted it would defeat the provisions of any law or is fraudulent; or involves or implies injury to the person or property of another or the court regards it as unmoral, or opposed to public policy. In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful, is void. "the purpose of the present compromise is that defendant No. 1 was and will-be the owner of immovable property at BF-27, Tagore Garden, New Delhi. It ignores the partition decree passed by Shri S M. Chopra. Sub-Judge. Delhi on 22nd May, 1976. Section 23 of the Contract Act states that the consideration or object of an agreement is lawful unless it involves or implies injury to the person or property of another. In the instant case the object of the agreement is to deprive defendant No. 4 and wife of defendant No. 3 of their rights in the immovable property under the partition decree and it affects their rights. The compromise is thus hit by Section 23 of the Indian Contract Act. ( 9 ) FURTHER defendant No. 1 agreed to pay Rs. 1,95,000. 00 to the plaintiffs in consideration of all the matters detailed in the compromise. All these matters are not separable. The matters included in the compromise relate not only to the parties to the suit but to others also. The terms affecting the wife of defendant No. 3 who is admittedly not a party to the suit cannot be separated and therefore the court cannot hold a portion of the compromise to be unlawful. All these matters are not separable. The matters included in the compromise relate not only to the parties to the suit but to others also. The terms affecting the wife of defendant No. 3 who is admittedly not a party to the suit cannot be separated and therefore the court cannot hold a portion of the compromise to be unlawful. ( 10 ) PRIOR to the amendment of Order 23, Civil P. C. by 104 of 1976, the court was required to pass a decree with respect to the matters in suit only. But after the amendment it appears that the court has to pass a decree in accordance with the compromise provided it is lawful. In Dooly Chand Srimaly v. Mohanlal Srimali, AIR 1924 Cal 722 it has been held that the court before recording compromise must be satisfied that the suit has been adjusted by a lawful agreement or compromise and that a compromise which purports to govern the rights and liabilities of persons not parties to the suit, is not a lawful agreement or compromise and it cannot be recorded. In Chanda Ram v. Hari Chand (1936) 38 Pun LR 283, it has been held that a compromise is not lawful unless all the parties interested have consented to it and that it is not permissible to a court to record a compromise where one of the interested parties has not consented to it and is not a party to the compromise. I am, therefore of the view that the compromise application (I. A. No. 2431 of 1979) is not a lawful agreement or compromise between the plaintiffs and defendants 1 and 2 and as such the same cannot be recorded and a decree cannot be passed in accordance therewith, pertaining to the plaintiffs and defendants 1 and 2 only. The application of the plaintiffs and defendants 1 and 2 (I. A. No. 2431 of 1979) is therefore, dismissed and the objec 2563 of 1979) are allowed with no order as to costs.