L. Narasimha Reddy, J.
1. A matter, which is somewhat delicate on facts, but interesting from the point of view of law, arises for consideration in this petition. The sole respondent in S.A. No. 136 of 2002 filed this application, with a prayer to set aside the compromise decree passed by this court on 29-10-2003. The facts, which are relevant for the purpose of this petition, may briefly be stated, as under.
2. The petitioner herein filed O.S.No.3 of 1993, in the Court of Principal Senior Civil Judge, Tirupati, against one Sri A. Kannaiah, the father of the respondents, for the relief of specific performance of an agreement of sale, dated 22-8-1984. The suit was decreed by the trial court on 15-3-2000. Kannaiah filed A.S.No.37 of 2000, in the Court of III Additional District Judge, Tirupati. The appeal was dismissed, through judgment dated 14-12-2001. Kannaiah died, thereafter, and his legal representatives, the respondents herein, filed the present Second Appeal, against the petitioner herein.
3. C.M.P. No. 24676 of 2003 was filed, with a prayer to pass a decree, in terms of the Memorandum of Compromise. On 29-10-2003, a compromise decree was passed, to the effect that the decree passed b the trial court in O.S.No.3 of 1993 and affirmed in A.S.No.37 of 2000, is set aside, in consideration of the petitioner receiving a sum of Rs. 8,00,000/-. Certain other conditions were also spelt out.
4. Petitioner filed SLP (Civil) CC No. 5789 of 2004, before the Hon'ble Supreme Court, against the said decree. He pleaded that the consent for the compromise was expressed by him, on account of undue influence and exertion of pressure, and that the same deserves to be set aside. Through an order dated 26-7-2004, the Hon'ble Supreme Court permitted the petitioner, to withdraw the SLP and granted him liberty to file an application before this court, to set aside the compromise decree. Thereafter, the present petition was filed.
5. The Registry of this court raised an objection about the delay in presentation of the CMP for setting aside the decree in the second appeal. Thereupon, C.M.P. No. 12119 of 2004 was filed, with a prayer to condone the delay of 258 days. This Court refused to condone the delay and dismissed the CMP. The petitioner filed Civil Appeal No. 3903 of 2006, before the Hon'ble Supreme Court, against same. Through its order dated 4-9-2006, the Hon'ble Supreme Court took the view that the application is governed by Article 137 of the Limitation Act, and it cannot be said that there was delay in presentation of the CMP. A direction was issued to this Court, to decide the application filed for setting aside the compromise decree, on merits.
6. In the affidavit filed in support of the CMP, the petitioner gave a detailed account of the proceedings, that ensued between himself and the respondents, from the beginning, till the passing of decree in question. His grievance is mostly about the alleged treatment meted out to him, in this court. He submits that the cumulative effect of various reasons stated by him, is that his signature on the Memorandum of Compromise was obtained, under threat and undue influence, and that the procedure prescribed for recording the compromise, was not adhered to.
7. On behalf of the respondents, a counter affidavit was filed, denying the allegations of the petitioner. It is stated that the petitioner had invented the reasons placed by him, to overcome his obligation under the compromise decree.
8. A group of five persons, i.e. M. Muni Laxmamma and others, filed C.M.P.No.7470 of 2002, to implead them as respondents 2 to 6, in the Second Appeal. The petition is yet to be ordered. The said persons were shown as respondents 2 to 6 in C.M.P.No.24676 of 2003. They too have filed a counter affidavit in this CMP, almost reiterating the contentions, advanced on behalf of the respondents.
9. Sri Vedula Venkata Ramana, learned Counsel for the petitioner, submits that ever since the Second Appeal was listed for admission before this court, the petitioner was subjected to threat and undue influence of one form, or the other. He contends that though the petitioner extended all his cooperation for hearing of the second appeal, for the entire 18 months, at the admission stage itself, the situation became so severe for him, that he had to submit a representation to the Hon'ble the Chief Justice, with a prayer to post the matter before any other Court, and that the same has resulted in initiation of Contempt proceedings, against him. Learned Counsel submits that the second appeal was listed for judgment on 21-10-2003, and it was adjourned to 4-11 -2003, after initiation of suomotu contempt proceedings and issuance of arrest warrants, against the petitioner and his brother-in-law, and much before that, the respondents prepared the Compromise Memo and obtained signatures of his client, under duress and undue influence.
10. Learned Counsel points out that not only the acts and omissions, on the part of the respondents, but also the surrounding circumstances have taken away all the elements of free consent, from the petitioner, in the context of signing the compromise memo. He further submits that the Memo was not signed by the parties, as required under Rule 3 of Order XXIII C.P.C., and that it does not accord with the prescribed procedure. He contends that the petitioner did not encash the Demand Draft, nor any conditions of the Compromise Memo were adhered to, by any of the parties.
11. Sri M.S. Prasad, learned Counsel for the respondents, submits that the petitioner came forward voluntarily, to compromise the matter, and that there did not exist any pressure or undue influence, either from the respondents, or from any other quarter. He contends that the proposals for compromise were initiated, much prior to the filing of the CMP, and they have culminated in the decree, with the consent of the petitioner. Learned Counsel submits that it is only as an after thought, that too at a belated stage, that the petitioner had come forward with the present application. He submits that he was permitted by his clients to sign on the Compromise Memo, on their behalf, and it cannot be said that there was any non-compliance with the stipulated procedure. According to him, it is not necessary that the parties alone must sign the Compromise Memo. He submits that initiation of Contempt proceedings by the court is totally a different aspect, as it has no bearing or influence, on the consent of the petitioner for the compromise.
12. Sri P.R. Prasad, learned Counsel for the parties, who filed an implead petition in the second appeal, made submissions almost on the same lines, as did Sri M.S. Prasad. The counsel appearing on both the sides have relied upon the precedents, in support of their respective contentions.
13. The freedom of the parties to a suit, to settle and compromise the lis between them, has always been respected, and encouraged. The relevant procedure is prescribed under Order XXIII C.P.C. Before the CPC was amended through Act 104 of 1976, opinions differed among various High Courts, as regards the scope of such settlements, the nature of enquiry into them, and the grounds on which the compromise can be assailed. Some High Courts took the view that a compromise must be confined, only to the subject matter of the suit, and matters outside the scope of the suit, cannot constitute the subject matter of the compromise. Similarly, opinions varied as to the manner in which the claims and counter claims, or the scope of compromise, must be verified, particularly, when there is lack of unanimity, between the parties. Thirdly, some High Courts maintained a distinction, between agreements on the one hand, and compromises on the other hand, in requirement, as to their being lawful. The amendment to Rule 3 of Order XXIII C.P.C, through Act 104 of 1976, attempted to overcome this uncertainty. The amended provision reads as under:
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 Indian Contract Act, 1872 (9of 1872), shall not be deemed to be lawful within the meaning of this rule.
Another significant development is the addition of Rule-3-A, which bars suits to set aside the decree, on the ground that the compromise, on which the decree is based, was not lawful. It is almost akin to Section 47 C.P.C, which mandates that all the issues, relating to the execution of decree, must be resolved in the very proceedings, and not by way of a separate suit. Whether the requirement that agreement or compromise must be signed by all the parties, is mandatory or directory, would be dealt with, at a later stage. An aspect, which is beyond pale of controversy, is that it is the ultimate satisfaction of the court, about the lawfulness of agreement and compromise, that would entail in a decree, and the exercise under Rule 3, is neither mechanical nor perfunctory.
14. It has always been recognized that a Compromise Decree in a suit, is more a contract between the parties, than an adjudication by the court. Explanation added to Rule 3 has a significance of its own. Normally, the challenge to a compromise would be on the grounds of procedural lapses or defects. The explanation, however, brings about a situation, where the compromise recorded under Rule 3 is equated to a contract between the parties, in all respects. Thereby, all the attributes of a valid contract, apply to a Compromise Decree also. One significant aspect that needs to be taken note of is that, in the case of a contract, the factors mentioned in Section 14 of he Contract Act, are attributed to the parties, whereas, in case of the compromise decrees, such factors, though not squarely attributable to the parties, but have emanated in the proceedings themselves, may also arise for consideration.
15. An application to set aside a compromise, is almost akin to an application for review. A Judge faces a delicate situation, when he is required to review the order passed by another colleague. The situation becomes further confounded, when differences exist between the parties, as to what exactly happened in the court, when the Compromise Decree was passed.
16. The factors pleaded by the petitioner in his affidavit, are somewhat uncommon. He does not dispute the fact that he put his signature on the Compromise Memo. But he narrates the circumstances that led to it, in four paragraphs. They are reproduced here, lest any inaccuracy steps, in the attempt to make them precise. In fact, these allegations constitute the whole basis, and if any of them are untrue, he will be running the risk of facing further proceedings, apart from losing the present petition. The relevant portion reads as under:
It is relevant to narrate the events which transpired the learned Judge (His Lordship Justice B.S.A. Swamy) who was hearing the Second Appeal final hearing.
(a) The Second Appeal was from Chittoor District and the learned Judge was the portfolio Judge and hence the Second Appeal came up for admission before the learned Judge and it was kept at the admission stage for (18) months and since there was a Caveat on my behalf, from the date of admission of the Second Appeal, the learned Judge has commenced hearing of the Second Appeal.
(b) The learned Jude has been making unwarranted comments against the conduct in filing the suit for specific performance and the learned Judge was appearing to be partisan in favour of the sole defendant.
(c) The learned Judge has adjourned the Second Appeal on various dates during the course of about (18) months and the learned Judge has been making serious comments against my conduct in filing the suit and obtaining a decree.
(d) When I became sensitive to the observations of the learned Judge during the hearing of the Second Appeal, I have submitted a letter to the Hon'ble Chief Justice for transfer of the Second Appeal to the Bench of another Judge since I apprehended that justice may not be done to me by the learned Judge who appeared to be prejudice against me all through. Unfortunately, the Chief Justice has directed that the appeal should be heard by the same learned Judge and my request for transfer of the Second Appeal to another learned Judge of the Hon'ble Court was rejected by the Hon'ble Chief Justice, I was subjected to more harsh treatment by the learned Judge, which has resulted in observation in the open Court on 21 -10-2003 that unless I compromise the matter and give up claim on the suit land, by receipt of money as compensation, I will be committed to criminal contempt and the Second Appeal was posted to 4-11-2003.
(e) The respondents herein i.e. appellants in the Second Appeal and Legal Representatives of the original defendant have drafted the Compromise Memorandum as they wanted and since I was in an unstable mental condition due to fear psychosis that the learned Judge may initiate contempt against me and my brother-in-law, I have signed the Compromise Memorandum on the same day when the compromise was recorded on 29-10-2003 i.e. before the adjourned date of 4-11-2003. In the normal course, the Second Appeal should have appeared in the Cause List only on 4-11 -2003 but the compromise was recorded on 29-10-2003 on a mention made by the appellants in the Second Appeal on 28-10-2003, by which date, I have not seen and I have not signed Memorandum of Compromise. When my Advocate has informed about the mention made on 28-10-2003,1 attended the Court on 29-10-2003 and my signature on the compromise was taken in the Court hall in the present and the supervision of the learned Judge and I have no opportunity to protest or avoid from signing the Compromise Memorandum since on 29-10-2003, the appellants in the Second Appeal have brought a Demand Draft/Pay Order dated 28-10-2003 for Rs. 8.00 lakhs drawn in my favour and at the time when the Pay Order was obtained and I did not know that they are taking a Pay Order in my name in connection with the Second Appeal. My Advocate who also suffered rough treatment before the learned Judge, has left the Court hall without signing the Compromise Memorandum but the learned Judge has proceeded to record the compromise and in accordance with the compromise, the specific decree of the trial court and judgment of the lower appellate court confirming the judgment and decree were set aside and my suit for specific performance was decreed only for compensation amount of Rs. 8.00 lakhs as against the claim for land cost, which is not less than Rs. 40,00 lakhs. Thus, the memorandum of compromise is not lawful within the meaning of Order XXIII (3) of the Code.
This court is not sitting in an appeal, nor it is permissible to pronounce upon the correctness or otherwise of the procedure adopted by a learned Judge of this court. The consideration is confined only to see whether the freedom of the consent of the petitioner, in accepting for the terms of contract, was impeded, in any way.
17. The mere fact that the matter was pending before the learned Judge for 18 months, does not present, an extraordinary situation, nor can it be a factor, having any bearing on the Compromise Decree. Instances are not lacking, where the courts endeavour to dispose of the second appeals, at the stage of admission, particularly when the opposite party has filed caveat. The early or delayed disposal depends upon the nature of co-operation, extended by the parties, and the time available to the court, for disposal of the case.
18. It is not necessary to refer to the developments that have taken place up to 17-10-2003. On that date, it appears that the proposal that emanated from the respondents for a settlement, in the form of offering a plot, or in the alternative, a sum of Rs. 6,00,000/-to the petitioner, did not fructify, and the matter was adjourned to 21-10-2003, for the response of the petitioner. Thereafter, certain developments have taken place.
19. The petitioner filed a representation to the Hon'ble the Chief Justice of the High Court, alleging that the learned Judge, who was hearing the matter, was insisting that the matter should be compromised for Rs. 6,00,000/-, in lieu of suit property, whose value is said to be Rs. 40,00,000/-, and expressed the view that he may not get justice in that court. The complaint was circulated to the learned Judge, who was hearing the second appeal. On his direction, it was made part of the record of the court. From a perusal of the same, it is evident that the Hon'ble the Chief Justice made an endorsement on 20-10-2003, as under:
File seen. This letter be shown to Hon'ble Judge
On the next day, i.e. 21 -10-2003, the second appeal was listed as directed, on the previous day of hearing. Two developments have taken place, on that day. The first is that the counsel for the petitioner reported to the court that he was instructed by his client not to make any submissions and to leave it to the Hon'ble court, to pass any order. The learned Judge insisted that the Advocate must file an affidavit to that effect. Accordingly, an affidavit was filed by the counsel, which reads as under;
1. I am the respondent's Advocate in the present case and as such I am well acquainted with the facts of the case.
2. I humbly submit that the said case has posted before this Hon'ble court on 21 10-2003 in the Judgment caption. It is further submitted the case was adjourned from 17-10-2003. On that day the court directed both the parties to appear before this Hon'ble court on 21-10-2003. It is submitted that my client C. Balakrishnaiah instructed me not to argue the case the court may pass any orders on this matter. The same fact was brought to notice of this Hon'ble court, and this Hon'ble court directed me to file an Affidavit to that extent. Accordingly, I am filing this affidavit.
Another development is that the learned Judge took exception to the complaint, submitted by the petitioner to the Hon'ble the Chief Justice, and initiated suo-motu contempt proceedings. A detailed order was passed. The relevant portion of the order reads as under:
On a consideration of the material placed before the Hon'ble the Chief Justice, the second appeal was ordered to be posted before this Court.
In pursuance of the same, today, when the case is taken up, the respondent did not appear before this court. On the other hand, Sri Kamalakar, the learned Counsel appearing on behalf of the respondent submitted across the Bar, that the respondent instructed him not to argue the second appeal saying that let any orders be passed by the Court.
Under the above circumstances, this Court feels that the conduct and attitude of the respondent and his brother in law viz., Sri P. Kumar, in attributing motives by way of representations, amounts to meddling with the administration of justice and as well as name and fame of the Institution and the Judge.
In this view of the matter, I am of the considered opinion it is a fit case wherein criminal contempt proceedings can suo motu be launched against the respondent as well as his brother in law Sri P. Kumar.
Accordingly, issue notice to the respondent C.Balakrishnaiah, S/o. Chengaiah, R/o. 19-7-104/A7, Gopala Raju Colony, Royal Cheruvu Road, Tirupathi, Chittoor District and also to P.Kumar with the same address of C.Balakrishnaiah, directing them to show cause as to why this court should not initiate criminal contempt proceedings against them in exercise of its suo motu powers. The Superintendent of Police, Chittoor District is directed to secure the presence of the above two individuals and ensure that they are present before this Court on 4-11-2003.
The Registry was also directed to issue notice to the petitioner, to make necessary arrangements, since his counsel expressed reluctance to appear. The endorsement on the cause list is as under:
suo-motu criminal contempt. Two weeks -4-11-2003.
20. Thereafter, C.M.P.No.24673 of 2006, was moved before the Court on 29-10-2003. The compromise memo provided inter alia that the petitioner had agreed to receive a sum of Rs. 8,00,000/-, in lieu of an agreement of sale, and in full and final settlement thereof (The date and number of the Demand Draft is mentioned). He was also permitted to withdraw the amount deposited by him, to the credit of O.S.No.3 of 1993. He was placed under obligation to withdraw O.S.No.38 of 2000 filed by him against the proposed respondents. The compromise memo runs into fives pages. Pages 1 to 4 were signed by the counsel for the respondents, petitioner and his brother-in-law. In the concluding page 5, the counsel for the respondents, the petitioner and his counsel, and the counsel for the proposed respondents 2 to 6 signed. In the resultant order, the satisfaction recorded by this court, on the compromise memo is reflected in the following paragraphs:
Both the parties voluntarily entered into a compromise and filed Memorandum of compromise, which is signed by the parties as well as their Advocates in the court. The respondent and his brother-in-law, who is conducting the case on behalf of the respondent and attending the court regularly, were present in the court. Once again, I made things clear that the court is not at all compelling the parties to enter into a compromise. If they are interested to get the matter settled and live in peace, it is for them to enter into compromise or the matter will be decided on merits. Both the respondent and his brother-in-law stated in the open court that they entered into the compromise voluntarily, on their own volition and there is noduress or influence by any one. The respondent also admitted that he received the Pay Order for Rs. 8,00,000/- (Rupees eight lakhs only) as agreed by him.
The only other paragraph in the order reflects the result. It is in the light of these circumstances that the contention of the petitioner, that his consent to the compromise memo was not free, needs to be examined. Before dealing with the same, certain procedural aspects need to be considered.
21. Admittedly, the respondents did not sign the agreement, and it was signed by their counsel. Several High Courts, and in some cases, the Supreme Court held that the conditions incorporated under Rule 3 of Order XXIII CPC, are mandatory. Learned Counsel for the respondents placed reliance upon the judgment of the Supreme Court in Byram Pestonji Gariwala v. Union of lndia In that judgment, it was held that the practice of authorizing the counsel, to compromise the matter, on behalf of his clients, that prevailed before 1976, remained unaltered, even after the amendment. In that case also, the compromise memo was not signed by one of the parties, and on their behalf, their counsel signed. From the judgment, it is not clear as to whether any special power or authorization was given to the counsel by his clients, for this purpose, or whether he did it, under the implied authority.
22. Learned Counsel for the petitioner places reliance upon the judgment of the Supreme Court inGurpreet Singh v. Chatur Bhuj Goel In that judgment, the Supreme Court held in
paragraphs 9 and 10, as under:
9...Under the rule prior to the amendment, the agreement compromising the suit could be written or oral and necessarily the Court had to enquire whether or not such compromise had been effected. It was open to the Court to decide the matter by taking evidence in the usual way or upon affidavits. The whole object of the amendment by adding the words 'in writing and signed by the parties' is to prevent false and frivolous pleas that a suit had been adjusted wholly or in part by any lawful agreement or compromise, with a view to protract or delay the proceedings in the suit.
10. Under R-3 as it now stands, when a claim in suit has been adjusted wholly or in part by any lawful agreement or compromise, the compromise must be in writing and signed by the parties and there must be a completed agreement between them.
It does not appear that the attention of the Supreme Court, when it decided Byram Pestonji Gariwala's case (1 supra), was drawn to its judgment in Gurpreet Singh's case Both the judgments were rendered by the Benches of the same strength.
23. In the instant case, learned Counsel for the respondents, stated that he was specially authorized by his clients, to sign the Memorandum of Compromise, on their behalf. The record, however, does not contain any special Vakalat. Be that as it may, before it proceeds to pass the compromise decree, the court must be certain as to whether the parties to the compromise, appeared before it directly, or through their counsel, or both. The order passed by this court reads that the parties and their counsel appeared. The fact is that except the petitioner, no other party appeared. The other person, whose presence was noted, is not a party. Therefore, there is material factual inaccuracy in the order passed by the court, while passing the compromise decree.
24. Another point urged by the learned Counsel for the respondents is that the grievance, in this regard, if at all, must be from the respondents, and the petitioner cannot complain about it. Whatever be the acceptability of such a contention, in the matter of enforcement of contracts simpliciter, the effect of absence of the signature of one of the parties to a compromise, would be slightly different. While a party to a contract can waive any benefit that had accrued to him, the requirements in law cannot be either waived, or be contracted out. This, however, is only one aspect of the matter.
25. As observed earlier, compromise decrees stand on the same footing as agreements, and they partake all the characteristics of a typical agreement. As a result, such decrees are also liable to be tested, on the same touchstone, if challenged.
26. In N. Somasekhara Rao v. Y. Rama Lakshml 1998 (1) ALT 225 : 1998 (1) APLJ (HC) 182 Justice P.A. Choudary, in a decent analysis of the provision, and the precedents, and held as under:
Order 23, Rule 3, requires the court to record a lawful compromise. A compromise is lawful so long as it is not unlawful. A compromise becomes unlawful only if it is contrary to the provision of a statute or opposed to public policy. A compromise vitiated by undue influence is only voidable and is not unlawful. These decisions have turned upon the dichotomy drawn between lawful and unlawful agreements under the Contract Act. As an invalid compromise is not an unlawful agreement within the meaning of the Contract, the above cases have held that a compromise, which is merely invalid without being unlawful, cannot be arrested of operation under Order 23, Rule 3 and should, therefore, be recorded by the court. I venture to believe that these decisions show an excessive reliance upon the textual meaning of the word "lawful" in Order 23, Rule 3 to the total and regrettable exclusion of the purpose of Order 23, Rule 3. In my opinion, there is no justification for importing the dichotomy between lawful and unlawful agreement drawn in the realm of the Contract Act into the realm of Order 23, Rule 3.
The same view was taken by the Supreme Court in Gurpreet Singh's case (2 supra), and the distinction sought to be maintained between the lawfulness of agreements, on the one hand, and lawfulness of compromises, recorded in the court, on the other hand, was negatived.
27. It is apt to refer to the observation made by this court in N. Somasekhara Rao's case (3 supra), on the importance of free consent, in applications for compromise decrees. It reads as under:
Obtaining of free consent becomes necessary for the purpose of Order 23, Rule 3 CPC because once a legal action is started by a suitor it cannot be brought to an end without his consent or alternatively by the adjudication of the matter by the court.
28. It merits repetition that free consent is the hallmark and foundation of any agreement. Substantial portion of the Law of Contract, is devoted to this aspect. Legislature made an effort to identify the factors that tend to vitiate free consent. Section 14 of the Indian Contract Act, identifies five factors in this regard, viz; coercion, undue influence, fraud, misrepresentation and mistake. The consequences that flow from these factors, however, are different. The three factors, viz. coercion, fraud and misrepresentation, are dealt with under Section 19 of Contract Act. The phrase 'undue influence' is defined under Section 16, and it is not necessary to go into details thereof. Undue influence, which too was initially roped in Section 19, was deleted through amendment in the year 1899, and was independently dealt with under Section 19-A. The exceptions, which were carved out in cases of contract vitiated by coercion, fraud and misrepresentation, were not extended to those vitiated by undue influence. A comparison of Section 19, on the one hand, and Section 19-A, on the other hand, would demonstrate the difference, to a large extent. They read as under:
Sec.19. Voidability of agreements without free consent:- When consent to an agreement is caused by coercion, fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused.
A party to a contract, whose consent was caused by fraud, or misrepresentation, may, if he thinks fit, insist that the contract shall be performed, and that he shall be put in the position in which he would have been if the representations made had been true.
Exception:- If such consent was caused by misrepresentation or by silence, fraudulent within the meaning of Section 17, the contract, nevertheless, is notvoidable, if the party whose consent was so caused had the means of discovering the truth with ordinary diligence.
Explanation:- A fraud or misrepresentation which did not cause the consent to a contract of the party on whom such fraud was practiced, or to whom such misrepresentation was made, does not render a contract voidable.
(illustrations omitted)
"Sec.19-A.Powertoset aside contract induced by undue influence:- When consent to an agreement is caused by undue influence, the agreement is a contract voidable at the option of the party whose consent was so caused.
Any such contract may be set aside either absolutely or, if the party who was entitled to avoid it has received any benefit there under, upon such terms and conditions as to the Court may seem just.
Illustrations:
(a) A's son has forged B's name to a promissory note. B, under threat of prosecuting A's son, obtains a bound from A for the amount of the forged note. If B sues on this bond, the Court may set the bond aside.
(b) A, a money-lender, advances Rs. 100 to B; an agriculturist, and, by under influence, induces B to execute a bond for Rs. 200 with interest at 6 per cent, per month. The Court may set the bond aside, ordering B to repay the Rs. 100 with such interest as may seem just.
Illustrations appended to Section 19-A, also provide proper guidance in understanding the scope of the section.
29. Under English Law, a distinction is maintained, as regards 'undue influence', in relation to its application between the same to Common Law, on the one hand, and Law of Equity, on the other hand. In the former, It is known as duress, and in the latter, as undue influence. In either case, the predominant factor is to identify the extent to which the independence of the concerned party, in the matter of taking a decision about the contract, was substantially undermined or impeded. Further, it is also not necessary that a special relation must exist between the parties. It is not necessary to prove the abuse of the confidence, which one party reposes in the other. Another aspect, which needs to be taken note of, is that the factors, such as, coercion, fraud and misrepresentation, are capable of being directly attributed to the party, who derived benefit out of the contract. Undue influence, however, is a factor, which brings about a situation, to restrict the free consent of the other party, on account of the acts and omissions, which need not be attributed to the other party alone. It can be the result or combination of several elements operating in tandem, or otherwise. Such elements may emanate directly, from the party deriving the benefit, or they may be result of the situations created by him, directly or indirectly. The focus would be more upon the emergence of situation as such, than on the origin thereof. This distinction is clearly manifested in Section 19-A.
30. In his treatise on 'Law of Contract', Anson observes as under:
(a) Domination by one party over the other:- If it can be shown that one party exercised such domination over the mind and will of the other that his independence of decision was substantially undermined, the party whose will was overborne will be entitled to relief on the ground of undue influence.
Similarly, Cheshire & Fifoot observed inter alia on Contract, as under:
The courts have never attempted to define undue influence with precision, but it has been described as 'some unfair and improper conduct, some coercion from outside, some overreaching, some form of cheating and generally, though not always, some personal advantage obtained by the guilty party.
31. Reverting to the facts of the case, there is no dispute that the petitioner signed the agreement, but his complaint is that it was not out of his free will, but was on account of undue influence, under which he reeled. The mere fact that the proposal for settling the claim for Rs. 6,00,000/- or 8,00,000/-, emanated from the respondents, cannot be treated as a basis, leading to undue influence. However, circumstances under which the proposal came to be accepted become relevant.
32. The record discloses that as late as on 17-9-2003, the court did not receive the acceptance by the petitioner, on the proposal of the respondents. What followed thereafter was the subject matter of a representation by the petitioner to the Hon'ble the Chief Justice about his apprehension. This led to not only initiation of criminal contempt, against the petitioner, but also a direction to the Superintendent of Police, Chittoor, to cause production of the petitioner, as well as, of his brother-in-law. They were to have been produced before the court on 4-11-2003. Another important factor is that the court recognized the detachment of his counsel, from the petitioner.
33. The situation obtaining as on 29-10-2003, on which date the compromise was filed, was that the arrow of contempt, aimed at the petitioner and his brother-in-law, left the bow of the court, and was on the way to hit them. The petitioner was also put on notice to engage another counsel or to take necessary steps. The state of his mind is not difficult to analyse. Even where contempt proceedings are initiated, be it civil or criminal, Form-I notices require the parties to appear before the Court, on specified date. Issuance of warrant becomes necessary, if the contemnor fails to appear on the stipulated date. The gravity of the situation from the point of view of the petitioner, can be assessed from the fact that on the day of initiation of contempt proceedings itself, the High Court issued a direction to the highest functionary of Police Administration in the district, to cause production of the petitioner and his brother-in-law. Even a highly informed and highly placed citizen, not to speak of an ordinary litigant in a Civil Court, who in turn figured as a respondent in a Second Appeal, would shiver, if not vibrate, in fear, on account of this development. To save from this horrifying situation, he would be agreeable to any terms. If it comes to that, he may even forego the entire benefit of the litigation that accrued to him so far, if he is assured of his being extricated from the contempt proceedings. The effect of these factors on the free consent for compromise, is not difficult to imagine.
34. An attempt is made by the learned Counsel for the respondents, to impress upon this court that contempt proceedings are totally different, from those in the second appeal, and the petitioner cannot plead that he was forced to sign the compromise memo, in view of the contempt proceedings and the consequences thereof. The submission of the learned Counsel does not derive any support from the record. After initiation, if the contempt proceedings were to have been closed or terminated, at a subsequent date, after appearance of the parties and through a separate order, whether before, or after the compromise, independently, the submission made on behalf of the respondents would have gained acceptance. The proceedings sheet of the second appeal discloses that on 29-10-2003 itself, the contempt proceedings were closed, through the following order:
After issuance of show-cause notice for initiation of contempt proceedings in exercise of suo-motu powers of this court, the party through his counsel approached the court and requested to pardon him for addressing a letter to the Hon'ble the Chief Justice, making allegation against the court. Accepting his apology, the notice sought to be issued is recalled.
35. The learned Judge may not have intended any compulsion for the petitioner, to agree for the compromise, when he observed;
If they are interested to get the matter settled and live in peace, it is for them to enter into compromise, or the matter will be decided on merits.
However, viewed in the context of the fact that the petitioner was the only party that attended the court, and that his brother-in-law, P. Kumar, was also brought into the scene, the fear expressed by the petitioner cannot be dismissed as unwarranted, or baseless. It is to be noted that the contempt proceedings were initiated against the petitioner and his brother-in-law. On 29-10-2003, the said Kumar did not enter appearance, in the contempt proceedings, nor was he produced before the court, in pursuance of the warrant issued by it. The proceedings did not remain thereafter.
36. Therefore, it becomes evident that the petitioner agreed for the terms of compromise, with the sole object of extricating himself and his brother-in-law from the contempt proceedings. The precedents concerning the complaints on free consent, attributable to the developments in the courts, are not readily available, obviously because the situations did not arise. To a large extent, the situation resembles the First Illustration, appended to Section 19-A. On the same lines in the judgment of the House of Lords decided in the year 1866 in Williams v. Bayley (1866) LR 1 HL 200 The case was summed up as under:
A son gave to his bank several promissory notes upon which he had forged the endorsements of his father. At a meeting between the three parties, the banker made it reasonably evident that if some arrangement were not reached the son would be prosecuted. This impression was conveyed in such expressions as: 'We have only one course to pursue; we cannot be parties to compounding a felony': "This is a serious matter, a case of transportation for life.' The effect of these expressions upon the father is shown by his somewhat despairing words: 'What be I to do? How can I help myself? You see these men will have their money.' In the result the father agreed in writing to make an equitable mortgage to the bank in consideration of the return of the promissory notes.
When challenged in a court of law, the agreement was held to be the result of undue pressure and exploitation of the fears of the father, for the safety of his son and was ultimately set aside.
(See Cheshire & Fifoot on Contract -10th Edition page 279)
37. The very fact that the parties were litigating for a cause, is evident from filing of suit or initiation of proceedings before the courts. By the time the matter reaches the High Court, the proceedings undergo almost two adjudications. The consent of the party to forego the benefit of such adjudication, through compromise must be free.
38. The endeavour of the courts is to ensure that the freedom of the parties, to give consent for a compromise, is not subjected to any external or internal forces. The reason is that the contract, in the form of a compromise, takes place, right under the nose of the court. It would, by no means, be an honour or credit to the court, if a party feels that his consent was forced, on account of the developments that took place in the court. Whatever be the stringency with which the courts examine the allegations about the factors that affected the free consent attributable to the other party, slightly different approach is warranted, when the grievance is about the impression gained by the party in relation to the proceedings in the court itself. Therefore, this court is of the view that the consent of the petitioner for the compromise recorded by this court was far from free.
39. It is not as if the petitioner derived any benefit or gained out of the compromise, or changed his position, and thereafter came forward with the present application. Two important aspects have flown from the compromise. The first was that the petitioner was to receive a sum of Rs. 8,00,000/-, in lieu of his claim over the suit schedule property, and he was to withdraw O.S.No.38 of 2000 filed by him. None of these two contingencies have occurred. The petitioner did not encash the Demand Draft for Rs. 8,00,000/-. He addressed a letter, in this regard, to the respondents. O.S.No.38 of 2000 filed by the petitioner was decided on merits on 17-8-2006 and A.S.No.544 of 2006 is filed before this court. He did not withdraw the amount deposited by him towards the balance of sale consideration. At any rate, the result of allowing this petition would be that the matter would be decided on merits, and nothing more. It cannot be said that either the petitioner, or the respondents, would be subjected to any hardship, if the matter is decided on contest. If at all anything, it would only enhance the confidence of the parties in the court.
40. For the foregoing reasons, the CMP is allowed, and the Compromise Decree, dated 29-10-2003, passed in the second appeal, is set aside. The Registry is directed to list the Second Appeal before the concerned Bench.
