GURPREET SINGHversusCHATUR BHUJ GOEL

                                  GURPREET SINGH                                     A
    •                                   v.
                                 CHATUR BHUJ GOEL

                                   DECEMBER 15, 1987
                                                                                      B
 )I                         [A.P. SEN AND B.C. RAY, JJ.]

                 Civil .Procedure Code, 1908: Order XXJJJ Rule 3-Settlement
.
      .~   a"ived at between parties in appeal-Compromise not reduced in "writ-
           ing and signed by the parties"-Whether can be given effect to.

                 A suit filed by the respondent for the specific performance of a     c
""',       contract entered into between him and the father of the appellant was
           decreed by the trial court. A Single Judge of the High Court affirmed
           the decree.

                 During the bearing of the Letters Patent Appeal filed by the D
           appellant, a settlement was arrived at between the parties, and state-
           ments were made by them to that effect before the court. The case was
           adjourned to the date on which payment in terms of the compromise
           was to be made. Though the statements formed part of the proceedings,
~          the compromise was not reduced in writing and signed by parties.
           Taking advantage of this, the respondent tried to resile from the corn- E
           promise. When the case came up on the adjourned date, the Division
           Bench directed that since the respondent was not prepared to abide by
l '"       the proposed compromise, the appeal would be decided on merits and



,          that the case should be placed before another Bench.

                  In the appeal by special leave against the aforesaid decision, it was F
           contended on behalf of the appellant that the requirements of Order
           XXIII Rule 3 Civil Procedure Code were mandatory, that the claim in
           the suit for specific performance having been settled by a lawful corn-
           promise within the meaning of Rule 3, the High Court was not justified
           in directing that the appeal be placed before another Bench for decision
      r    on merits, that the word "in writing and signed by the parties" quali- G

,+         fied the words "any lawful agreement or compromise" appearing in the
           first part and, therefore, where the parties made a statement before the
            Court that the dispute between them bad been settled on certain terms,
            and the settlement so made formed part of the proceedings of the Court,
            there was no legal requirement to have an agreement in writing
           embodying the terms of the compromise.                                       H

                                              401
    402                   SUPREME COURT REPORTS            (1988] 2 S.C.R.

A         Dismissing the appeal,

         HELD: The whole object of the amendment of Rule 3 of the Civil
  Procedure Code, 1908 by adding the words "in writing and signed
  by the parties" is to prevent false and frivolous pleas that a suit
  has been adjusted wholly or in part by any lawful agreement or
B compromise, with a view to protract or delay the proceedings in the
  suit. [408C-D)
        Under Rule 3 as it now stands when a claim in suit has been
  adjusted wholly or in part by any lawful agreement or compromise, .:J.
  the compromise must be in writing and signed by the parties and there
  must be a completed agreement between them. To constitute an
C adjustment, the agreement or compromise must itself be capable of
  being embodied in a decree. When the parties enter into a compromise
  during the hearing of a suit or appeal, there is no reason why the
  requirement that the compromise should be reduced in writing in the
  form of an instrument signed by the parties should be dispensed with.
  The Court must, therefore, insist upon the parties to reduce the terms
0
  into writing. [408D-F]
         The present case clearly does not come within the ambit of the
  second part of Order XXIII Rule 3 of the Code. Under the terms of the
  proposed compromise, the appellant was required to pay Rs.2,25,000
  by a bank draft on March 17, 1987 but before the due date the respon-
E dent resiled from the promised compromise, saying that it was detri-
  mental to his interest. That being so, that appellant could only fall back
  on the first part. But, in the absence of an agreement in writing, the
  High Court had no other alternative but to direct that the appeal be
  listed for hearing on merits. [409C-D]

f         Manohar Lal & Anr. v. Surjan Singh & Anr., (1983] Punj. LJ
    402, overruled.

          CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2035
    of 1987.

G        From the Judgment and order dated 23.4.1987 of the High Court
    of Punjab and Haryana in C.M.P. No. 19 of 1987.                            +
          S.N. Kacker and R.S. Sodhi for the Appellant.

        Mrs. Shyamla Pappu, A.M. Ashri, K.S. Thaper and V.K. Jain
H for the Respondents.
                 GURPREET SINGH v. CHATUR BHUJ [SEN, J.I              403

          The Judgment of the Court was delivered by                         A

• aroundSEN,  J. The controversy in this appeal by special leave  centi•~s
          the words 'in writing and signed by the parties' added to Order
     XXIII, r. 3 of the Code of Civil Procedure, 1908 by the Code of Civil
     Procedure (Amendment) Act, 1976 and the precise question· is
     whether wheri a settlement is arrived at between the parties in appeal B
     before the Court, the compromise cannot be given effect to under·.
     Order XXIII, r. 3 of the Code unless the terms of the compromise are ·
     embodied in an agreement in writing.

            First as to the facts. The respondent herein Chatur ]Jhuj Goel, a
     practising advocate at Chandigarh first lodged a criminal complaint C
     against Colonel Sukhdev Singh, father of the appellant, under s. 420 of
     the Indian Penal Code, 1860 after he had served the respondent with a
     notice dated July 11, 1979 forfeiting the amount of Rs.40,000 paid by
     him by way of earnest money, alleging that he was in breach of the
     contract dated June 4, 1979 entered into between Colonel Sukhdev
     Singh, acting as guardian of the appellant, then a minor, and the D
     respondent, for the sale of a residential house at 1577, Sector 180,
     Chandigarh for a consideration of Rs.2,85,000. In terms of the agree-
     ment, the respondent was to pay a further sum of Rs.1,35,000 to the
     appellant's father Colonel Sukhdev Singh by July 10, 1979 when the
     said agreement of sale was to be registered and vacant possession of
     the house delivered to him, and the balance amount of Rs. 1, 10,000 on E
     or before January 31, 1980 when the deed of conveyance was to be
     executed. The dispute between the parties was that according to Col-
     onel Sukhdev Singh, there was failure on the part of the respondent to
      pay the amount of Rs.1,35,000 and get the agreement registered, while
      the respondent alleged that he had already purchased a bank draft in
      the name of the appellant for Rs. l,35,000 on July 7, 1979 but the F
      appellant's father did not tum up to receive the same. The respondent
      met him at his residence at Chandigarh on the morning of July 16, 1979
      when it was agreed that they would meet in the District Court precincts
      later in the day for the purpose of registration of the agreement, but
      again the appellant's father did not turn up. Although the learned
      Additional Chief Judicial Magistrate by order dated October 31, 1979 G
      dismissed the complaint holding that the dispute was of a civil nature
      and no process could iosue on the complaint, a learned Single Judge of
       the High Court by his order dated February 11, 1980 set aside the
      order of the learned Additional Chief Judicial Magistrate holding that
       the facts brought out clearly warranted an inference of dishonest inten-
      tion on the part of Colonel Sukhdev Singh and accordingly directed H
    404                   SUPREME COURT REPORTS             [1988] 2 S.C.R.

A him to proceed with the trial according to law. Aggrieved, Colonel
  Sukhdev Singh came up in appeal to this Court by special leave.

         This Court by its order in Criminal Appeal No. 595/80 dated
                                                                                   •
   September 2, 1980 reversed the judgment of the High Court on the
   ground that the dispute was purely of a civil nature and the criminal
B process could not have been employed for the purpose of coercing the
  11ppellant's guardian Colonel Sukhdev Singh to specifically perform
   the contract. It was directed that Colonel Sukhdev Singh should return
   the earn~st money of Rs.40,000 to the respondent on or before
  October 5, 1980 and in the meanwhile, the respondent was at liberty to ~
  file a suit for specific performance of the contract, if so advised. It was
  observed that the return of the said amount of Rs.40,000 by Colonel
c Sukhdev    Singh would be without prejudice to the rights and conten-
  tions of the parties, including the right of the respondent to claim
  specific performance of the contract, if he was in law otherwise so
  entitled. Pursuant thereto, the appellant's guardian Colonel Sukhdev
  Singh refunded the amount of Rs.40,000 to the respondent. On
D October 3, 1980 the respondent instituted the suit in the Court of the
  District Judge, Chandigarh, out of which this appeal arises, for specific
  performance of the contract and, in the alternative, claimed
  Rs.2,50,000 by way of damages. Both the learned District Judge as
  well as a learned Single Judge on a consideration of the evidence came
  to the conclusion that the breach of contract was on the part of the
E appellant's guardian Colonel Sukhdev Singh and not on the part of the
  respondent and accordingly decreed the suit for specific performance.
  Thereupon, the appellant preferred an appeal under cl. 10 of the Let-
  ters Patent.

          The hearing of the Letters Patent Appeal commenced before a
F   Division Bench on January 14, 1987 and continued for three days. On
    January 16, 1987, the appellant's counsel had not concluded and there-
    fore the hearing was adjourned to January 28, 1987. On that date,
    after the appellant's counsel had addressed the Court for a while, the
    parties took time to explore the possibility of a settlement. At the
    resumed hearing later in the day, the appellant's father Colonei Sukh-
                                                                              '(
G   dev Singh made a statement to the effect:

               "I make an offer that I shall personally pay Rs.2,25,000 to ...{_.
               the respondent Chatur Bhuj Goel by way of full and final
               settlement of the dispute between him and the appellant.
               The said amount shall be paid by a bank draft in Court on
H              17.3.87. In the event of failure on my part to pay the
                    GURPREET SINGH v. CHATUR BHUJ [SEN, J.I                405

                  amount as stipulated on that date, the Letters Patent           A
                  Appeal No. 734 of 1983 shall stand dismissed and the
                  appellant sha[l have no right to file an appeal against the
                  decision to the Supreme Court."

        The above statement was duly endorsed by Shri V.K. Sharma, learned
        counsel appearing for the appellant and stated:                           B

                   "The appellant makes an offer that in full and final settle-
                   ment of the dispute between the parties, the appellant
                   Gurpreet Singh in his personal capacity or through his
                   father Colonel Sukhdev Singh shall pay Rs.2,25,000 to the
                   respondent on 17 .3.87 by a bank draft payable at Chandi-
                   garh, if the respondent agrees to the Letters Patent Appeal
                                                                                  c
                   No. 734 of 1983 being allowed and that in the event of
                   non-payment of the amount on the stipulated date, the said
y                  appeal shaHstand dismissed and the appellant shall have no
                   right to file an appeal in the Supreme Court."
                                                                                  D
        The respondent Chatur Bhuj Goel who, as already stated, is a practis-
        ing advocate, was respondent by Shri Bhagirath Dass, a senior advo-
        cate practising at Chandigarh. Apparently, the respondent on· mature
        deliberation made the following statement in the presence of his
~       counsel:
                                                                                  E
                   "I accept the offer made by Colonel Sukhdev Singh and
                   Shri V .K. Sharma, counsel for the appellant Gurpreet
                   Singh."

              Thereupon, the learned Judges adjourned the appeal to March
        17, 1987 i.e. the date on which the payment of Rs.2,25,000 was to be      F
        made. The aforesaid statements form part of the proceedings of the
        Court. Admittedly, the compromise was not reduced in writing and
        signed by the parties.Taking advantage of this fact, the respondent on
        February 9, 1987 made an application by which he tried to resile from
        the compromise stating:
    >                                                                             G
                   "On 28th January 1987, the offer of compromise was made
                   by the appellant, which was recorded. The statement of the
                   respondent was also recorded. The respondent however
                   did not sign the statement. That the statement was made by
                   the respondent without thinking of the repercussions of his
                   statement. He was influenced by the stand, which was           H
    406                    SUPREME COURT REPORTS             I •9&;] 2 S.C.R.    ~
A               adopted by his Senior Advocate Shri Bhagirath Dass. If the
                statement recorded by the Court which has not been signed
                by the respondent is given effect to, the respondent would '
                suffer a tremendous loss."

        On the adjourned date i.e. March 17, 1987, the learned Judges
B directed that in view of the fact that the respondent was not prepared
  to abide by the proposed compromise, the appeal would now be heard )'
  and decided on merits, with a further direction that it be placed before
  another Bench. Hence, this appeal by special leave.


C        In support of the appeal Shri S.N. Kacker, learned counsel for
   the appellant, contends that the requirements of Order XXIII, r. 3 of         J.
   the Code are mandatory and the claim in the suit for specific perfor-
   mance having been settled by a lawful compromise within the meaning
                                                                                 >
   of r. 3, the learned Judges were not justified in directing that the
   appeal be placed before another bench for decision on merits. The
D learned counsel submits that Order XXIII, r. 3 of the Code is in two
   parts. According to him, the words 'in writing and signed by the
  parties' qualify the words 'any lawful agreement or compromise' ap-
  pearing in the first part and these words cannot obviously be read into
  the second part at all. It is urged that the first part of Order XXIII, r. 3
  of the Code refers to an adjustment on settlement of the claim in suit         ,...!;
E by a lawful agreement or compromise outside the Court, meaning
  thereby that where the partie~ make a statement before the Court that
  the dispute between them has been settled on certain terms and the
  statements so made form part of the proc.eedings of the Court, there is
  no legal requirement to have an agreement in writing embodying the
  terms of the compromise.
F
         For a proper appreciation of the contentions advanced, it is
  necessary to set out the Statement of Objects and Reasons which is in
  these terms:

               "Cl. 77-Sub-cl(iii). It is provided that an agreement or
G              compromise under rule 3 should be in writing and signed by ~
               the parties. This is with a view to avoiding the setting up of • .
               oral agreements or compromises to delay the progress of
               the suit.

                    The words 'lawful agreement or compromise' in rule            ·
H              3 have given rise to a conflict in the matter of interpreta-
          GURPREET SINGH v. CHATUR BHUJ (SEN, J.)                   407

         tion. One view is that agreements which are voidable under A
         s. 19A of the Contract Act are not excluded. While this
         stand is taken by the High Courts of Allahabad, Calcutta.
         Madras and Kerala, a contrary view has been ex;iressed by
         the High Courts of Bombay and Nagpur. An Explanation
         has, therefore, been added to the rule to clarify the posi-
         tion. A proviso has been added to clarify that no adjourn- B
         ment should ordinarily be granted where a decision is
         necessary as to whether an adjustment or satisfaction has
         or has not been arrived at.

               In view of the words 'so far as it relates to the suit' in
         rule 3, a question arises whether decree which refers to the
         terms of a compromise in respect of matters beyond the
                                                                            c
         scope of the suit is executable or whether the terms of the
         decree relating to the matters outside the suit can be
         enforced only by a separate suit. The amendment seeks to
         clarify the position."
                                                                            D
The provision contained in Order XXIII, r. 3 of the Code, as
amended, provides:

          "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             E
          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,         F
          compromise or satisfaction is the same as the subject-
          matter of the suit.

                Provided that where it is alleged by one party and
          deni.ed by the other that an adjustment or satisfaction has
          been arrived at, the Court shall decide the question; but no      G
          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 ll)\lian ·Contract Act, 1872 (9 ef          H
     408                   SUPREME COURT REPORTS            [1988] 2 S.C.R.

A               1872), shall not be deemed to be lawful within the meaning
                of this rule."

          According to the grammatical construttion, the word 'or' makes
    the two conditions disjunctive. At first blush, the argument of the
    learned counsel appears to be plausible but that is of no avail. In our.
B opinion, the present case clearly falls within the first pad and not the
   second. We find no justification to confine the applicability of the first
   part of Order XXIII, r. 3 of the Code to a compromise effected out of
   Court. Under the rule prior to the amendment, the agreement com-
   promising the suit could be written or oral and necessarily the Court J
   had to enquire whether or not such compromise had been effected. It \
c was   open to the Court to decide the matter by takirig 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.
D
         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. To constitute an
   adjustment, the agreement or compromise must itself be capable of          ~
E being embodied in a decree. When the parties enter into a compromise
   during the hearing of a suit or appeal, there is no reason why the
   requirement that the compromise should be reduced in writing in the
  form of an instrument signed by the parties should be dispensed with.
  The Court i.mst therefore insist upon the parties to reduce the tenns
  into writing.
F
          In our considered opinion, the view to the contrary expressed by
    the High Court in Manohar Lal & Anr. v. Surjan Singh & Anr., [1983]
    Punj. LJ 402 that the first part relates to a lawful agreement or com-
    promise arrived at by the parties out of Court, does not seem to be
    correct. Sandhawalia, CJ speaking for himself and Tewatia, J.
G   observes that the word 'or' makes the two parts disjunctive and they
    visualise two distinct and separate classes of compromise. According
    to the learned Judges, the first part relates to a lawful agreement or
    compromise ;irrived at by the parties out of Court, while the second is
    applicable where the defendant satisfies the plaintiff in respect of the
    whole or any part of the subject'matter of the·suit. Such a restricted
H   construction is not warranted by the language used in r. 3. The word
              GURPREET SINGH v. CHATUR BHUJ [SEN, J.I                  409

 'satisfies' denotes satisfaction of the claim of the plaintiff wholly or in   A
·part, and for this there need not be an agreement in writing signed by
 the parties. It is open to the defendant to prove such satisfaction by the
 production of a receipt or payment through bank or otherwise. The
 satisfaction of the claim could also be established by tendering of
 evidence. It is for the Court t9 decide the question upon taking evi-
                                                                               B
 dence or by affidavits as to whether there has in fact been such satisfac-
 tion of the claim and pass a decree in accordance with Order XXIII, r.
 3 of the Code.

      In any event, the present case clearly does not come within the
ambit of the second part of Order XXIII, r. 3 of the Code. Under the
terms of the proposed compromise, the appellant was required to pay            c
Rs.2,25,000 by a bank draft on March 17, 1987, but the fact remains
that the respondent before the due date resiled from the proposed
compromise saying that it was detrimental to his interest. That being
so, the appellant could only fall back on the first part. But in the
absence of an agreement in writing, the learned Judges had no other
alternative but to direct that the appeal be listed for hearing on merits.     D

     In the result, the appeal must fail and is dismissed. The High
Court is directed to hear and decide the appeal on merits. There shall
be no order as to costs.                              '

 N.P.V.                                                  Appeal dismissed.