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Ravi Constructions Co. v. Somvanshi Arya Kshatriya Samaj And Others
Factual and Procedural Background
On 7 July 1985, Somavanshi Arya Kshatriya Samaj (“the Trust”) entered into an agreement with Viraj Construction (Respondent 9) for construction of a multi-purpose community hall, in return for which Viraj Construction would receive development rights over a portion of the Trust’s land. On 3 July 1987, Viraj Construction assigned its development rights to the appellant, who agreed to construct the hall upon payment of Rs 3,00,000.
The Trust, acting through its Chief Trustee (Respondent 2), instituted Civil Suit No. 190 of 1988 seeking a declaration and injunction to prevent breach of the 1985 agreement. On 10 June 1988 that suit was compromised: a compromise pursis and map were filed, and the Trust accepted Rs 1,10,000. The Chief Trustee’s authority to settle derived from a prior resolution signed by all trustees, which identified three alternative modes of compromise.
On 26 February 1990 the Trust filed Civil Suit No. 101 of 1990 to set aside the consent decree, contending that the earlier suit was invalid because all trustees had not been made parties and because the Chief Trustee lacked authority to compromise. The appellant and Respondent 9 defended the decree, relying on the resolution.
The trial court dismissed the 1990 suit on 11 January 1991, holding that the Chief Trustee had authority and that Order 23 Rule 3-A of the Code of Civil Procedure, 1908 (“CPC”) barred the challenge to the consent decree. An appeal (Appeal No. 59 of 1991) was dismissed on 11 December 1992 by the Additional District Judge, Thane.
The Trust and seven other respondents then filed Second Appeal No. 289 of 1994 before the Bombay High Court under Section 100 CPC. A learned Single Judge allowed the appeal without framing any substantial question of law, holding that the original suit was not maintainable because all trustees had not been joined, and therefore the consent decree could be questioned. The present Supreme Court appeal challenges that decision.
Legal Issues Presented
- Whether a High Court can allow a second appeal under Section 100 CPC without first formulating a substantial question of law.
- Whether Civil Suit No. 101 of 1990, seeking to set aside a consent decree, was barred by Order 23 Rule 3-A CPC.
- Whether the consent decree dated 10 June 1988 was invalid because all trustees were not parties to the earlier suit and because the Chief Trustee allegedly lacked authority to compromise.
Arguments of the Parties
Appellant's Arguments
- The Chief Trustee was expressly authorised by a resolution signed by all trustees to file and compromise the 1988 suit in any of three alternatives; that resolution was produced before the trial court.
- Both the trial court and first appellate court recorded factual findings that the earlier suit and compromise were with full knowledge and consent of all trustees; these findings were not challenged.
- The High Court violated Section 100 CPC by deciding the second appeal without framing a substantial question of law.
Respondents' Arguments
- The original (1988) suit was non est because all trustees had not been impleaded; consequently, the compromise decree had no legal effect.
- The High Court’s interference was justified on the ground that the earlier decree was void.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Gian Dass v. Gram Panchayat, (2006) 6 SCC 271 | High Court must frame a substantial question of law before deciding a second appeal under Section 100 CPC. | Cited to demonstrate that the Bombay High Court’s failure to frame such a question rendered its judgment untenable. |
| Joseph Severance v. Benny Mathew, (2005) 7 SCC 667 | Same principle regarding mandatory framing of substantial questions of law. | Relied upon for the same proposition. |
| Sasikumar v. Kunnath Chellappan Nair, (2005) 12 SCC 588 | Reiterates the requirement under Section 100 CPC. | Used to buttress the conclusion that the High Court’s approach was contrary to statute. |
| Chadat Singh v. Bahadur Ram, (2004) 6 SCC 359 | Reinforces mandatory nature of framing substantial question of law. | Cited as supporting authority. |
| Kanhaiyalal v. Anupkumar, (2003) 1 SCC 430 | Same statutory requirement. | Referenced to emphasise settled law. |
| Roop Singh v. Ram Singh, (2000) 3 SCC 708 | Necessity of substantial question of law in second appeals. | Invoked for consistency with prior case-law. |
| Ishwar Dass Jain v. Sohan Lal, (2000) 1 SCC 434 | Same principle under Section 100 CPC. | Forms part of the chain of authorities relied upon. |
Court's Reasoning and Analysis
The Supreme Court first noted that the High Court allowed the second appeal without framing any substantial question of law, which is contrary to the express mandate of Section 100 CPC. A series of earlier Supreme Court decisions (listed above) were cited to underscore this procedural defect.
Turning to the merits, the Court observed that both the trial court and the first appellate court had made categorical findings of fact that:
- All trustees, by a formal resolution, authorised the Chief Trustee to institute and compromise Civil Suit No. 190 of 1988 in any of three specified modes.
- The resolution and the trustees’ consent were placed before the court that recorded the consent decree.
- The trustees’ knowledge of, and participation in, the compromise was implicit in their adoption of the resolution.
These factual findings had not been upset by the High Court, nor had the trust deed been produced to contradict them. Consequently, the Supreme Court held that the High Court’s conclusion—that the earlier suit was not maintainable in the absence of all trustees—was unsustainable.
Given that the consent decree was entered with due authority, any challenge to it via a separate suit was barred by Order 23 Rule 3-A CPC. The High Court therefore erred in holding the 1990 suit maintainable.
Holding and Implications
Appeal Allowed; High Court judgment set aside. The Supreme Court restored the concurrent findings of the trial court and first appellate court, thereby upholding the validity of the consent decree dated 10 June 1988.
As a voluntary gesture recorded during the hearing, the appellant is to pay Rs 3,00,000 to the Trust within three months. No order as to costs.
Implications: The decision reiterates that a High Court must strictly comply with Section 100 CPC by framing a substantial question of law before deciding a second appeal, and that challenges to consent decrees are barred under Order 23 Rule 3-A. The ruling primarily affects the parties and affirms existing procedural principles rather than setting new precedent.
Arijit Pasayat, J.— The appellant calls in question legality of the judgment rendered by a learned Single Judge of the Bombay High Court in the second appeal filed by the respondents.
2. Background facts, as projected by the appellant in a nutshell are as follows:
An agreement was entered into between Viraj Construction, Respondent 9 in this appeal and Respondent 1 Somavanshi Arya Kshatriya Samaj (hereinafter referred to as “the Trust”) on 7-7-1985 for construction of a multi-purpose community hall free of charges. The Trust agreed simultaneously to surrender certain portions of the Trust land to Respondent 9 for development. On 3-7-1987, an agreement was entered into between the appellant and Respondent 9 in respect of the right to develop the plot of the Trust in terms of the agreement dated 7-7-1985. It was agreed that the appellant will be the sub-developers of the plot and would construct the community hall. A sum of Rs 3,00,000 was payable as consideration to Respondent 9. On 26-4-1988 Respondent 1 Trust filed a civil suit (Civil Suit No. 190 of 1988) for declaration and injunction in the Court of Civil Judge, Junior Division, Kalyan praying inter alia for the following reliefs:
A. Declaration that the defendants cannot commit breach of the agreement dated 7-7-1985.
B. Permanent injunction restraining the defendants from carrying out any construction on the suit land in breach of the agreement.
The said suit was filed by Respondent 2, Nilkanth Mahadeo Kamble as the Chief Trustee of the Trust.
3. On 10-6-1988 the aforesaid civil suit was compromised between the parties and a compromise pursis was filed by them along with the map which highlighted the compromise agreed between the parties. A sum of Rs 1,10,000 was also paid to the Trust as consideration for the compromise which was accepted by the Trust. It is to be noted here that by a resolution of Respondent 1, Chief Trustee i.e Respondent 2 was authorised to compromise the suit in any one of the three alternatives indicated. All the other trustees were signatories to the resolution. According to the appellant, one of the alternatives was adopted. On 26-2-1990 another civil suit (Civil Suit No. 101 of 1990) was filed by Respondent 1 Trust for setting aside the consent decree passed on 10-6-1988. The primary stand was that the earlier suit could not have been filed by the Chief Trustee, Respondent 2 on behalf of the Trust (Respondent 1) without joining the other trustees as plaintiffs. It was further stated that Respondent 2 had no authority to compromise the suit. On 5-4-1990 the appellant and Respondent 9 filed written statement taking the stand inter alia that Respondent 2 the Chief Trustee was authorised by the other trustees by a resolution to compromise Civil Suit No. 190 of 1988. In fact the resolution authorised Respondent 2 to enter into the compromise and the same was produced in the court before the final order was passed and reference was made to the resolution in the order regarding compromise. The suit was not really filed by Respondent 2 in his personal capacity, but as the Chief Trustee representing the Trust. On 11-1-1991, the civil suit was dismissed by the judgment and order of the learned Civil Judge, Junior Division, Kalyan. It was held that the respondents had not proved that Respondent 2 was not authorised to enter into the compromise which culminated into a consent decree. Further it was held that it could not be shown by Respondents 1 to 8 that Respondent 2 was not authorised to file a suit on behalf of the Trust. Reference was made to Order 23 Rule 3-A of the Code of Civil Procedure, 1908 (in short “CPC”) to hold that the challenge to the consent decree was barred. Appeal filed by Respondents 1 to 8 (Appeal No. 59 of 1991) was dismissed by an order dated 11-12-1992 passed by the Additional District Judge, Thane. It was held that the respondents had filed a copy of the resolution authorising Respondent 2 to compromise the suit. Compromise was entered into between the appellant and Respondent 2 representing the Trust and Respondent 9 in conformity with the resolution and with full knowledge and consent of the other trustees. Therefore, the civil suit was not maintainable. Second Appeal No. 289 of 1994 in terms of Section 100 CPC was filed before the Bombay High Court by Respondents 1 to 8. By the impugned judgment the second appeal was allowed even without framing a substantial question of law. The High Court held that the earlier suit was not maintainable in law in the absence of all the trustees being made parties. Therefore, Order 23 Rule 3-A CPC has application and the suit was maintainable. Conclusions recorded by the courts below were set aside.
4. In support of the appeal learned counsel for the appellant submitted that the High Court lost sight of the fact that the earlier suit was compromised by the Chief Trustee in terms of the resolution to which all the trustees were signatories. Filing of the earlier suit was within the knowledge of all the trustees. They had in fact authorised the Chief Trustee to enter into a compromise in any of the three alternative modes indicated. The factual finding recorded that the earlier suit was filed with their knowledge and consent and was compromised was not challenged before the High Court and in any event the High Court has not recorded finding on that factual aspect. Therefore, the High Court was not justified in allowing the second appeal. In any event the second appeal could not have been dealt with without framing a substantial question of law.
5. In response, learned counsel for Respondents 1 to 8 submitted that the High Court's judgment is in order. The earlier suit was non est in the eye of the law. Therefore, any compromise recorded therein had no legal effect.
6. At the outset it is to be indicated that the second appeal was allowed without framing a question of law which is clearly contrary to the mandate of Section 100. This position has been highlighted in several decisions. (See Gian Dass v. Gram Panchayat (2006) 6 SCC 271, JT (2006) 7 SC 102, Joseph Severance v. Benny Mathew (2005) 7 SCC 667, JT (2005) 8 SC 509, Sasikumar v. Kunnath Chellappan Nair (2005) 12 SCC 588, JT (2005) 9 SC 171, Chadat Singh v. Bahadur Ram (2004) 6 SCC 359, JT (2004) 6 SC 296, Kanhaiyalal v. Anupkumar (2003) 1 SCC 430, JT (2002) 10 SC 98, Roop Singh v. Ram Singh (2000) 3 SCC 708, JT (2000) 3 SC 474 and Ishwar Dass Jain v. Sohan Lal (2000) 1 SCC 434, JT (1999) 9 SC 305.)
7. Further both the trial court and the first appellate court categorically observed that the resolution adopted by all the trustees including the Chief Trustee and the advocate for the Trust who was himself a trustee clearly established that the earlier suit was filed within the knowledge and consent of all the trustees and on behalf of all the trustees. Significantly the trust deed was not produced. It could have shown, as rightly contended by learned counsel for the appellant, that the Trust could be sued or can sue in the name of the Chief Trustee. In any event the categorical factual finding recorded that the suit was filed with the knowledge and consent of all the trustees has not been disturbed and in fact no reference has been made in the impugned judgment to this aspect. If the trustees had no knowledge of the suit they could not have adopted a resolution for compromise in a particular mode indicating three alternatives. They specifically authorised the Chief Trustee and the advocate who was also a trustee to enter into a compromise. In that view of the matter the High Court was not justified in holding that the suit was maintainable.
8. Looked at from any angle the High Court's judgment is indefensible and is set aside. Learned counsel for the appellant during the course of hearing had stated that as a matter of genuine gesture, the appellant shall pay to Respondent 1 Trust a sum of Rs 3,00,000. Notwithstanding the fact that the appeal has been allowed, let the statement made by learned counsel for the appellant be translated into reality and the amount be paid within three months.
9. The appeal is allowed. No order as to costs.
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