DAMODAR ROPEWAYS & CONSTRUCTION CO. (P) LTD.versusCHRISTOPHER MARTIN DASGRANGES MARTIN & ORS.

 DAMODAR ROPEWAYS & CONSTRUCTION CO. (P) LTD.
                                                                              A
                      v.
 CHRISTOPHER MARTIN DASGRANGES MARTIN & ORS.

                          OCTOBER 6, 1989

[RANGANATH MISRA AND M.N. VENKATACHALIAH, J.T.]                               B

     Code of Civil Procedure 1908: Order XXIII-Rule 3 Compro-
                                                                   0
mise-Acceptance of by Court-Question for consideration.

      Delay in filing compromise-Effect of.

      The Board of Governors of the respondent school en.,red into a          c
contract for the grant of permanent lease of immovable property of the
school to the petitioner-builder. An association of the old students of the
school resisted the agreement before the High Court but a learned
Single Judge accorded sanction which was later stayed. The petitioner
preferred an appeal before the Division Bench of the High Court which         D
made certain interim directions while disposing the appeal. Hence this
appeal by the petitioner.

       During the pendency of the appeal, the parties entered into a
compromise which was signed on behalf of all the parties, but the com-
promise deed was filed in this Court after a lapse of three years. The        E
Association of the old students resisted the compromise on the ground:
(i) that there was a lapse Of three years between the date of signing the
compromise and its filing in the court; (ii) the President of the Old
Association of students had no authority to enter the compromise.

      Disposing the appeal, this Court;                                       F

       HELD: (1) If the compromise is genuine and lawful, the delay' in
presentation in court could at the most be in the realm of equity and
would not be otherwise material.In the instant case the resolution of the
Board of the Association clarities the position that all parties had agreed
to the compromise and it was intended to be presented before this Court       G
for permission to enter into compromise. The President of the Old
Association of Students had been authhorised to associate himself for
the purpose. The agreement has been signed by the parties and is not
unlawful. The compromise is, therefore, in accordance with the provi-
sions of Order XXIII, rule 3 of thti Code of Civil Procedure and can be
acted upon. [448F-H]                                                          H

                                   445
    446          SUPREME COURT REPORTS                  [ 1989] Supp. 1 S.C.R.

           2. Before the compromise is accepted it is for the court to tie
A   satisfied that the terms are in the interests of the Trust. [449A]

          2.1 In the instant case, under the agreement forming the subject
    matter of compromise the school would have space available for expan·
    sion in the near future. It is not in the interest of the school to reject the
B   agreement on the ground that there was scope of receiving better offers
    if advertisement was made. [449E-C]

          2.2 It is appropriate that the compromise should be·accepted with
    certain variations viz. availability of extra area to the school, escalation
    of the ground rent and provision for automatic escalation of ground
C   rent of 10% once in every IO years. The permission is accordingly
    accorded to the Board of Governors to enter into compromise on behalf
    of the school. [449E & 4498; 450A-B]

          CIVIL APPELLATE JURISDICTION: I.A. No. 1of1989.
D
                                          IN

          Civil Appeal No. 3334 of 1982.

       From the Judgment and Order dated 16. 9.1982 of the Calcutta
E High Court in Appeal No. nil.

          Kapil Sibal, R.F. Nariman and Vineet Kumar for the Petitioner.

         Dr. Shankar Ghose, H.N. Salve, G. Joshi, A.K. Sil, Ms. Urmil
    Narang (N.P.), C.S. Vaidyanathan, Vivek Gambhir (N.P.) and
F   Praveen Kumar for the Respondents.

          The following Order of the Court was delivered by

        MISRA, J. This civil appeal by special leave is at the instance
  of a builder who had entered into a contract with the Board of
G Governors of the La Martiniere School at Calcutta in respect of
  certain immovable property of the School to be taken by the builder
  on permanent lease.
         Christopher Martin Desgranges Martin left behind a will which
 · stipulated the setting up of a school for the benefit of the city of
H Calcutta and upon his death the will was probated and the executors
          DAMODAR ROPEWAYS v. C.M.D. MARTIN !MISRA, J.]             447

 set up the school. The Board of Governors of the School (hereinafter
                                                                           A
 'Board') among others has the reverend Bishop of the city of Calcutta
 as its Chairman and a retired Major-General of the Indian Army as a
 member. The Old Martinians Association (herinafter 'Association')
 being a body of the old students of the School resisted the request cif
 the School before the High Court when it applied for acceptance of the
 agreement of lease of 1981. A learned Single Judge while agreeing on      B
 principle to accord sanction asked for further details. The Division
 Bench made certain directions in an appeal taken to it by the builder
 and the interim directions form the basis of subject-matter of this
 appeal.

       · During the pendency of the appeal in this Court the builder and
  the School entered into a fresh agreement on 12.9.1986 to which the c
  Association is also a party. Under the agreement more favourable
  terms for the School were stipulated, such as-(l)annual payment of
  ground rent of Rs.22,000 ·during the period of lease; (2) as against a
  one-time payment of Rs.31 lakhs in the 1981 agreement, a recurring
  annual payment of about Rs.50 lakhs; and (3) built-in area of 60,000 D
· square feet to enable extansion of the School and earning of rental
  income. Apart from these, it is stated that under the 1981 agreement
  the .School had entered into arrangements with prospective lessees and
  had received a substantial sum of money by way of advance from them
  in respect of approximately 53,000 square feet to be. constructed. The
  builder under the 1986 agreement took the responsibility ·of dealing E
  with the prospective le.ssees-either by refunding the money or provid-
  ing leasehold area from out of its share.

      · It is not disputed that a total area of about 1,80,000 square feet
would be available as a result of the construction agreed to be raised
by the builder under the 1986 agreement. Parties decided to file an F
application for compromise before this Court in the pending appeal
and .the petition was duly drawn up on 12.9.1986. It was signed on
behalf of the Board by the Chairman and Major General B.M. Bhat-
tacharya, Anjan Dey in his personal capacity and as President of the
Association and the builder. Mr. Anjan Dey's signature in his personal
capacity was duly attested by Mr. P .L. Agarwal, his Advocate and pis G
signature as ·President of the Association was duly witnessed by
Mr. Bhankar Kar, Secretary of the Association. This application was,
however, not presented in this Court until some time in May, 1989, tor
difficulties which have been attempted to be explained by the School.
After this application was made the Association represented by.
Mr. Amit Bikram Roy resisted it. Rejoinders have been filed on behalf H
    448         SUPREME COURT REPORTS               [1989] Supp. 1 S.C.R.

    of the School and the builder to the objection. The original
    compromise petition has been produced. The builder has also placed
    on record the proceedings of the Board of the Association dated 11th
    September, 1986-a day before the compromise was signed. The re-
    solution of the Association's Board reads thus:

B              "RESOLVED that in view of finalisation of pending case
               at Supreme Court of India regarding dispute arising out of
               Property Development at La Martiniere for Boys, Calcutta
               as petitioned by Developer/Contractor Damodar Rope-
               ways & Construction Co. Pvt. Ltd. with one of the parties
               being Mr. Anjan Dey and Old Martinians Association,
               Mr. An jan Dey be and is hereby authorised to act on behalf
c              of the Association for the compromise solution as drawn
               up by the Association's Solicitors M/s. Khaitan & Co. and
               as already approved by all parties concerned subject to
               permission by the Hon'ble Supreme Court."

D   The proceedings were signed by Mr. Shankar Kar, General Secretary,
    Ms. Joyita Sen, Teasurer, Messrs Amit Bikram Roy, Vice-President,
    Ashoke Paul, Anjan Dey, President and Ms. Raktima Dutt.

        Objection of the Association to the petition of compromise is
  mainly on two grounds (I) lapse of three years between the date of
E signature of the petition by the parties and its filing; and (2) want of
  authority of Mr. Anjan Dey to enter into the compromise.

        The delay in filing the compromise petition in Court has been
  attempted to be explained on behalf of the School and the builder. If
  the compromise is genuine and lawful, the delay in presentation in
F Court could at the most, if at all, be in the realm of equity and would
  not be otherwise material. The resolution of the Board of the Associa-
  tion of I Ith September, 1986, extracted above is a complete answer to
  the second ground as it clarifies the position that all parties had agreed
  to the compromise and it was intended to be presented before this
  Court for permission to enter into compromise. Mr. Anjan Dey had
G been authorised to associate himself for the purpose. It is not the
  contention of the Association that the whole or any part of the agree-
  ment is unlawful; nor is it the contention of any of the parties that the
  petition has not been signed by him or them. The compromise is,
  therefore, in accordance with the provisions of Order XXIII, rule 3 of
  the Code of Civil Procedure and can be acted upon.
H
         DAMODAR ROPEWAYS v. C.M.D. MARTIN !MISRA, J.]              449

       Before the compromise is accepted it is for the Court to be
                                                                            A
satisfied that the terms are in the interests of the Trust. Dr. Ghosh for
 the Association strenuously contended that the property was very
 valuable even as vacant site in view of the recent escalation of price of
land in Calcutta and if a genuine attempt is made there was possibility of
 a higher offer being made and the interest of the School should, there·
 fore, not be sacrificed by allowing it to enter into the compromise. B
 When we suggested to Dr. Ghosh that the Association could provide a
guarantee to accept and work out the terms in the compromise in the
event of the response to the advertisement not being as favourable, he
was not willing to do so. We do not think that it is in the interest of the
School to reject the agreement on the representation of Dr. Ghosh
that there was scope of receiving better offers if advertisement was C
made. A solemn agreement has been entered' into. The builder has
already spent substantial sums of money on the property. The plan has
been sanctioned by the Corporation and we are told that under the
changed regulations it would be difficult for the School to obtain a
fresh sanction. Three years have now been lost on account of the
compromise not having been placed before the Court and following D
the course suggested by Dr. Ghosh involves an element of uncertainty
to which the School should not be exposed. Under the agreement
forming the subject-matter of compromise the School would have
space available for expansion in the near future. Keeping the.se aspects
in view, we have thought it appropriate that the compromise should be
accepted but with certain variations.                                       E

      As we have already stated, built in area of 1,80,000 square feet
would be available under the agreement and excluding about 50,000
square feet of built in area which may be set apart for the purpose of
meeting the prospective lessees (we express no opinion about the tena-
bility of such claim) who had entered into arrangements with ·the F
School, 1,30,000 square feet would be available. Out of it the School
has been given 60,000 square feet and the builder is to take 70,000
square feet. We suggested to Mr. Nariman for the builder that the
constructed area of 1,30,000 square feet should be equally divided
between the School and the builder and on instructions from his client
(present in Court) Mr. Nariman has fairly agreed to do so. Since the G
annual ground rent had been fixed at Rs.22,000 three years back, we
indicated to Mr. Nariman that the sum should be escalated and he has
agreed to have it enhanced to Rs.40,000 per year after receiving con-
sent of his client. We are of the view that there should be an escalation
clause in regard to the ground rent and once in every ten years escala-
tion of ten per cent in the annual ground rent beginning from 1990 H
    450         SUPREME COURT REPORTS               [1989] Supp. 1 S.C.R.

A   should be provided. These three terms iri our view sufficiently protect
    the interests of the School and the Trust. We accordingly accord
    permission to the Board of Governors to enter into compromise on
    behalf of the School. The civil appeal is disposed of and the terms of
    compromise with the three modifications indicated as to availability of
    extra area of 5 ,000 square feet to the School, escalation of the ground
B . rent to Rs.40,000 from Rs.22,000 and provision for automatic escala-
    tion of ten per cent once on very ten years shall be incorporated in the
    decree while the other terms as agreed to by the parties shall also form
    part of the decree to be drawn up in the appeal.

          We have not considered it in the interests of the parties to trans-
C   mit the matter to the Calcutta High Court as that would protract the
    matter and the order of the Single J11\lge might be challenged in appeal
    and ultimately the dispute may again be brought before this Court.
    Another round of such litigation would be time-consuming and would
    not at all be in the interest of anyone.
D   T.N.A.                                              Appeal disposed of.