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PETITIONER: DAMODAR ROPEWAYS & CONSTRUCTION CO. (P) LTD.

       Vs.

RESPONDENT: CHRISTOPHER MARTIN DASGRANGES MARTIN & ORS.

DATE OF JUDGMENT06/10/1989

BENCH: MISRA RANGNATH BENCH: MISRA RANGNATH VENKATACHALLIAH, M.N. (J)

CITATION:  1989 SCR  Supl. (1) 445  1989 SCC  Supl.  (2) 477  JT 1989 (4)    53        1989 SCALE  (2)808

ACT:     Code  of Civil Procedure 1908: Order XXIII--Rule 3  Com- promise--Acceptance of by Court--Question for consideration. Delay in filing compromise--Effect of.

HEADNOTE:     The Board of Governors of the respondent school  entered into a contract for the grant of permanent lease of  immova- ble  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 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 compromise deed was filed in  this  Court after  a  lapse of three years. The 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  Presi- dent of the Old Association of students had no authority  to enter the compromise. Disposing the appeal, this Court;     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 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. The President of  the Old Association of Students had been  authorised  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 provisions  of  Order XXIII,  rule  3 of the Code of Civil Procedure  and  can  be acted upon. [448F-H] 446     2. Before the compromise is accepted it is for the court to  be satisfied that the terms are in the interests of  the Trust. [449A]

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   2.1 In the instant case, under the agreement forming the subject  matter  of compromise the school would  have  space available for expansion in the near future. It is not in the interest of the school to reject the agreement on the ground that  there was scope of receiving better offers  if  adver- tisement 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 provi- sion for automatic escalation of ground rent of 10% once  in every  10 years. The permission is accordingly  accorded  to the Board of Governors to enter into compromise on behalf of the school. [449E & 449H; 450A-B]

JUDGMENT: CIVIL APPELLATE JURISDICTION: I.A. No. 1 of 1989.                        IN Civil Appeal No. 3334 of 1982.     From  the  Judgment  and Order dated  16.9.1982  of  the Calcutta High Court in Appeal No. nil. Kapil Sibal, R.F. Nariman and Vineet Kumar for the Petition- er.     Dr.  Shankar Ghose, H.N. Salve, G. Joshi, A.K. Sil,  Ms. Urmil Narang (N.P.), C.S. Vaidyanathan, Vivek Gambhir (N.P.) and 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 Governors of the La Martiniere School at  Cal- cutta 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 Calcutta and upon his death  the  will  was probated and the executors 447 set  up  the school. The Board of Governors  of  the  School (hereinafter  ’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  Mar- tinians Association (hereinafter ’Association’) being a body of  the old students of the School resisted the  request  of the School before the High Court when it applied for accept- ance  of  the agreement of lease of 1981. A  learned  Single Judge  while agreeing on principle to accord sanction  asked for further details. The Division Bench made certain  direc- tions in an appeal taken to it by the builder and the inter- im  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 Association is also a  party.  Under the  agreement  more favourable terms for  the  School  were stipulated,  such as--(1) 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  recur- ring  annual payment of about Rs.50 lakhs; and (3)  built-in area of 60,000 square feet to enable extension 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 construct-

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ed. The builder under the 1986 agreement took the  responsi- bility  of dealing with the prospective  lessees--either  by refunding the money or providing 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  construc- tion  agreed  to  be raised by the builder  under  the  1986 agreement.  Parties decided to file an application for  com- promise  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. Bhattacharya’,  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  his  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, for 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 448 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 Associ- ation  dated 11th September, 1986--a day before the  compro- mise  was signed. The resolution of the Association’s  Board reads thus:               "RESOLVED  that  in view  of  finalisation  of               pending case at Supreme Court of India regard-               ing  dispute arising out of Property  Develop-               ment  at La Martinique for Boys,  Calcutta  as               petitioned  by  Developer/Contractor   Damodar               Ropeways & Construction Co. Pvt. Ltd. with one               of  the  parties being Mr. Anjan Dey  and  Old               Martinians  Association, Mr. Anjan Dey be  and               is  hereby authorised to act on behalf 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." The  proceedings  were signed by Mr.  Shankar  Kar,  General Secretary,  Ms.  Joyita Sen, Treasurer, Messrs  Amit  Bikram Roy,  Vice-President, Ashoke Paul, Anjan Dey, President  and Ms. Raktima Dutt.     Objection of the Association to the petition of  compro- mise  is  mainly  on two grounds (1) lapse  of  three  years between the date of 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 Court could at the most, if at all, be in the realm of equity and would not be otherwise materi- al.  The resolution of the Board of the Association of  11th 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 been authorised to  associate himself  for  the purpose. It is not the contention  of  the Association  that the whole or any part of the agreement  is

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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 he Code of Civil Procedure and can be acted upon. 449     Before the compromise is accepted it is for the Court to be  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, therefore, not be sacrificed by allowing it to enter into the compromise. When we suggested to Dr. Ghosh that the Association could provide a guarantee to accept and work out the  ten, as 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  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  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 expan- sion  in the near future. Keeping these aspects in view,  we have  thought it appropriate that the compromise  should  be accepted but with certain variations.     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 tenability of  such claim)  who had entered into arrangements with  the  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 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 consent 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 escalation of ten per cent in the annual ground rent beginning from 1990 450 should  be  provided. These three terms in our  view  suffi- ciently  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  rent to Rs.40,000 from Rs.22,000 and  provision  for automatic escalation of ten per cent once on very ten  years

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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  par- ties  to transmit the matter to the Calcutta High  Court  as that  would protract the matter and the order of the  Single Judge  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. T.N.A.                                Appeal disposed of. 451