1. By order dated 21st August 1956, I called for a report from the District Munsif, Narasaraopet on the following two questions:
(1) Whether the agreement of sale was executed by the 1st respondent in the application (C.M.P 4747-56) and whether the petitioner was put in possession of the properties; and
(2) Whether the Compromise dated 30-7-56 entered into between the parties in the second appeal was a collusive and fraudulent one.
2. The learned District Munsif by his order dated 14th December 1956 held that the agreement of sale was executed by the first respondent in favour of the petitioner. In paragraph 10 he found that the petitioner was in possession of the suit properties in pursuance of the agreement of sale. He further held in paragraph 11 that the compromise entered into between the respondents Nos. 1 and 3 was a collussive and fraudulent one.
3. The finding on point No. 1 is not attacked before me. So far as point No. 2 is concerned, Sri Konda Kotayya, the learned advocate for the third respondent contended that the conclusion drawn by the District Munsif was wrong. Having carefully gone through the report I have no doubt that the conclusion arrived at by the District Munsif on point No. 2 is right. The first respondent succeeded in both the Courts. He was also entitled to recover mesne profits from the third respondent and in the circumstances there was no need for the first respondent to enter into compromise but for cheating the rights of the petitioner. The next question is whether the third respondent did not have a similar fraudulent intention to affect the rights of the petitioner. The facts discussed in the report clearly lead to the conclusion that the third respondent was also a party to the fraud. I, therefore, confirm the finding of the District Munsif on this question.
4. Sri Konda Kotayya, the learned advocate for the petitioner strenuously contended that the provisions of Order 1 Rule 10 and order 22 Rule 10 did not apply to the facts of this case, and that the petitioner ought not to be impleaded as a party to the second appeal for the purposes of opposing the compromise petition. Order 23 Rale 3 enacts that 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, the court shall older such agreement or compromise to be recorded and shall pass a decree in accordance therewith so far as it relates to the suit. The first question to be determined is whether by reason of the filing of the compromise petition on 30th June, the second appeal should be regarded as having come to an end and no application under Order 1 Rule 10 and order 22 Rule 10 should be entertained. In Lakhan Chunder Day v. Sm. Nikunjamoni Dassi . 27 Cal. weekly notes 755., a Bench of the Calcutta High Court held that as the decree has not been drawn up in terms of the compromise the suit should be regarded as pending at the time of the application. A contrary view has been taken by a single judge of the Madras High Court in B. Raja Rajeswara Muthuramalinga Sethupathi Acl v. Secretary of State fur India . 50 M.L.J 59.. Kumara swami Sastri J. states at page 61 that as the compromise between the Union Board and the plaintiff was a lawful and valid one, the District Munsif had no power to add any party but he had only power to pass a decree in terms of the compromise. This decision is referred to with approval in C. Narayana suamy Naidu v. N. Subbaramulu Naidu . 68 M.L.J 236., by Pakenham Walsh, J. In both the cases no reference is made to the decision of the Calcutta High Court. In Seetai Achi v. Meyyappa Chetti . 66 M.L.J 517., a Bench of the Madras High Court preferred the view of the Calcutta High Court to the decision in B. Raja Rajeswara Muthuramalinga Sethupathi avl v. Secretary of State of India. The same point arose for decision once again in Nanjammal v. Eswaramurthu Goundar . 1954 M.L.J 530.. The learned Judges stated that it was necessary for them to express any final opinion on the question. Having carefully perused the authorities on this question I am inclined to think that on principle the view laid down by the Calcutta High Court is right. Having regard to the terms of Order 23 Rule 3 Civil Procedure Code I hold that till a compromise decree is passed, the litigation cannot be regarded to have terminated.
5. The next question for consideration is whether the terms of Order 1 Rule 10 C.P.C apply to this case. Order 1 Rule 10, Sub-clause (2) provides that the court may at any stage of proceedings either upon or without the application of either party and on such terms as may appear to the Court to be just order that the name of any person who ought to have been joined whether as plaintiff or defendant or whose presence before the court is necessary in order to enable the court effectually and completely to adjudicate upon and settle all the questions involved in the suit, be added. The petitioner who claims under the first defendant would certainly be bound by the decision in the second appeal. He would, therefore be a proper party to the second appeal. This view was taken by Oldfield J. in Rajarathnam lyer Alias Bapuranjan v. Halasyaundaram Aiyar . 44 M.L.J 322..
6. It was strongly contended on behalf of the third respondent that the provisions of Order 22 rule 10 would not apply to the case as no registered sale deed had been executed in favour of the petitioner by the first respondent. In support of his contention reliance was placed on the decision of the Privy Council in Basant Singh v. Mahabir Prasad, and in S.V.S Nelleappa Pillai v. Sethuramalingam Pillai. There can be no doubt that an agreement of sale by itself does not create an interest in the immoveable property under Section 54 of the Transfer of Property Act and the petitioner cannot therefore claim that an interest has been created in his favour by reason of the agreement of sale.
7. Sri Rajeswararao, however, contended on behalf of the petitioner that as his client has been put in possession of the suit property under the agreement of sale it must be held that there was sufficient creation of interest in his favour so as to attract the terms of Order 22 Rule 10 C.P.C It is found by the court below that in pursuance of the agreement of sale the petitioner was put in possession of the suit property. Under those circumstances he is entitled to invoke the provisions of Section 53(a) of the Transfer of Property Act. His possessory title is, in my opinion, sufficient interest within the meaning of Order 22 Rule 10 C.P.C This view receives support from the decision of a Bench of the Madras High Court reported in Mrs. Saradambal Ammal v. E.R Kandaswamy Goundar. At page 375 are the relevant observations and are as follows:—
“The words ‘any interest’ in this rule include, in our opinion, any transferable ‘right to sue’ spoken of in the earlier rules of the order which provides for its devolution in cases of death. The contention, therefore, that the ‘assignment, creation or devolution of any interest’ referred in rule 10 mean an assignment, creation or devolution of an interest in tangible property cannot be accepted.”
8. The possessory right created in favour of the petitioner is heritable and assignable. I am clearly of opinion that the right, conferred upon him by putting him in possession falls within the terms of Order 22 Rule 10 C.P.C Even assuming that this view is not right I have no doubt that the application under Order 1 Rule 10 is maintainable and the petitioner is a proper party to the second appeal.
9. The further question that arises for consideration is whether it is open to the petitioner to attack the compromise and contend that no decree should be passed in terms thereof. In Veeraraghava Reddy v. Subba Reddy it was held that an alienee pendente lite who had been added as a party to the litigation was entitled to object to a decree being passed in terms of a compromise arrived at between an alienor and the opposite party and the same principle would apply to the facts of this case. Sri Konda Kotayya strongly relied upon the decision of the Allahabad High Court in Laraiti v. Ch. Sham Sunder Lal. It was held therein that an application by a third party that the compromise between the parties to sue should not be accepted as it affected his, rights acquired by purchase pendente lite and that he should be made a party to the suit should be rejected and a decree in terms of the compromise should be passed. No reference is made therein to the terms of clauses (c) and (d) of Section 23(3) of the Indian Contracts Act. If the compromise is void under the terms of Section 23 of the Indian Contract Act, the applicant would be a proper party and no compromise decree could be passed. The view taken in the above decision has also not been followed by the Madras High Court in Seetai Achi v. Meyyappa Chetti.
10. The next question that remains to be considered is whether the compromise entered into between defendants 1 and 3 is a lawful one within the terms of Order 23 Rule 3. Section 23 of the Contract Act provides that the consideration of object of an agreement is not lawful if it is fraudulent or involves or implies injury to the person or property of another. It is found in this case that the object of the compromise was fraudulent and was intended to injure the rights of the petitioner in the suit property. There can, therefore, be no doubt that the contract is unlawful and is consequently void. Sri Konda Kotayya contended that as the object of the agreement in the instant case was not unlawful, in entirety but only partially the terms of section 23 do not apply but I do not agree with this contention. Even if the object of the first and third respondents was unlawful, in part, the compromise would be affected under Section 23 of the Contract Act. In this view no decree can be passed in terms of the compromise.
11. For the reasons aforesaid I order C.M.P No. 4747 of 1956 and dismiss C.M.P No. 4748 of 1956 and I proceed to hear the second appeal.
Ch. R.
12. Petition ordered.