Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.8321 OF 2010 [Arising out of SLP [C] No.11328/2010]

Alka Gupta … Appellant

Vs.

Narender Kumar Gupta … Respondent

O R D E R

R.V.RAVEENDRAN, J.

Leave granted. Heard. For convenience the appellant and respondent  

will  also  be  referred  to  by  their  ranks  in  the  suit,  as  ‘plaintiff’  and  

‘defendant’ respectively.  

2. The appellant and respondent entered into a partnership as per deed  

dated  5.4.2000 to  run  an  Institute  for  preparing  students  for  competitive  

examinations, under the name and style of ‘Takshila Institute’, at No.F-19,  

LSC, Bhera Enclave, Paschim Vihar, New Delhi.

1

3. On  29.6.2004,  the  appellant  entered  into  an  “agreement  to  sell”  

(Bayana Agreement) under which she agreed to sell the property described  

as follows:  

“An undivided half share, second floor (without roof rights) of built up  property bearing No.8, Pocket & Block C9, Sector-8, Rohini, Delhi – 110  085, built on a plot of land area measuring 158.98 Sq.m and 50% share of  M/s  Takshila  Institute  established  in  the  above  said  property  which  is  hereby agreed  to  be  sold  includes  all  rights,  titles,  interests,  goodwill,  electricity  equipment,  furniture,  fixtures  including  passages,  easements  facilities privileges etc., which attached thereto or connected therewith.”

Clause 13 of the said agreement clarified that the property agreed to be sold  

included the goodwill of the firm M/s Takshila Institute, having its office at  

C-9/8, Sector 8, Rohini, Delhi-85 in which the first party is also the partner  

of  50%  and  included  all  rights,  interest,  claims,  title,  fittings,  furniture,  

fixtures and all equipment.

4. Under  the  said  agreement,  the  total  consideration  agreed  was  

Rs.21,50,000/-  and  the  appellant  received  Rs.750,000/-  as  advance.  The  

appellant claimed that in pursuance of the said agreement, she executed a  

sale deed in regard to the immovable property for Rs.200,000/- and that the  

respondent promised to pay the balance of Rs.12 lakhs in regard to the other  

rights  and  interest  agreed  to  be  sold  under  agreement  of  sale  dated  

29.6.2004.  She  filed  Suit  No.16/2006  in  the  District  Court,  Delhi  for  

2

recovery of Rs.12 lakhs under the said agreement dated 29.6.2004, alleging  

that respondent had paid in all Rs.9.5 lakhs towards the agreed price. The  

said Suit No.16/2006 was decreed in favour of the appellant on 25.11.2006,  

directing respondent to pay Rs.12 lakhs with interest at 7% per annum with  

effect from 30.8.2004.  

5. Thereafter the appellant filed another suit - C.S. (O.S.)No.302/2007 –  

in the Delhi High Court against the respondent, for rendition of accounts for  

the  period  5.4.2000  to  31.7.2004,  in  regard  to  the  partnership  firm  of  

Takshila Institute constituted under deed of partnership dated 5.4.2000. In  

that suit, the appellant alleged that the said partnership was at will and it was  

dissolved  by  implication  on  31.7.2004,  when  respondent  filed  Suit  No.  

438/2004  against  the  appellant  (and  others)  for  an  injunction.  She  also  

sought a decree against the respondent for her share of profits in the said  

partnership and for a decree for Rs.25.28 lakhs or higher amount in regard to  

the share of plaintiff with interest thereon.  The said suit was resisted by the  

respondent. Three preliminary grounds of objections were raised in regard to  

the maintainability of the suit: (a) that the suit was barred by res judicata; (b)  

that the suit was barred under Section 69 of the Partnership Act, 1932, as it  

related to an unregistered partnership; and (c) that the suit was liable to be  

3

dismissed for material suppression of facts and approaching the court with  

unclean hands. It was alleged that parties were close relatives and appellant  

being a government servant, was only a sleeping partner. It was contended  

that by the agreement of sale dated 29.6.2004, the partnership under deed  

dated 5.4.2000 was dissolved and all claims of appellant were settled.  

6. The issues in the said suit were framed on 17.1.2008 with a direction  

that the first issue, extracted below,  be treated as a preliminary issue:

“Whether the suit is barred by the principle of res judicata as issue raised  in the Suit has been directly and substantially been adjudicated between  the plaintiff and the defendant in suit no.16/2006 titled as Alka Gupta vs.  Narender Kumar Gupta vide an order dated 25.11.2006 by a competent  court?  

By order dated 13.3.2009, the trial bench (learned Single Judge of the High  

Court)  held  that  the  suit  was  liable  to  be  dismissed  summarily  on  the  

following grounds: (i) The appellant had abused the process of court; (ii) the  

appellant was an unscrupulous person and the suit was based on falsehoods;  

(iii)  the  partnership  dated  5.4.2000  was  illegal  and  unenforceable  as  

appellant was a government servant; (iv) the suit was barred by Order 2 Rule  

2 of the Code of Civil Procedure (‘Code’ for short); and (v) the suit was  

barred by principle of constructive res judicata.  The suit was accordingly  

dismissed with costs of Rupees Fifty Thousand. In the preamble to the said  

4

order, the trial court observed that on 12.1.2009, when arguments were on  

the preliminary issue, it was clarified that arguments were being heard not  

only  on  the  said  preliminary  issue,  but  also  the  question  as  to  why  

independent of section 11 and Order 2 Rule 2 of the Code, the suit should  

not  be  dismissed  summarily  on  the  ground  of  re-litigation  and  abuse  of  

process  of  court.  It  is  further  stated  that  on  16.1.2009,  the  statement  of  

plaintiff (appellant herein) was recorded and arguments on various aspects  

were heard on 16.1.2009 and 21.1.2009.  

7. Feeling aggrieved, the appellant filed an appeal.  An appellate bench  

of the High Court, by the impugned judgment dated 7.9.2009, dismissed the  

appeal.  The  appellant  bench  affirmed  the  decision  of  the  trial  bench.  It  

however held that as it was agreeing with the learned Single Judge that the  

suit was barred by Order 2 Rule 2 of the Code and that the appellant had  

settled all her claims with the respondent under the Bayana Agreement dated  

29.6.2004, it was not necessary to decide upon the question as to whether the  

partnership deed dated 5.4.2000 could be enforced in a court or not. The said  

order is challenged in this appeal by special leave. For the reasons following,  

we  are  of  the  view that  the  orders  of  the  learned  Single  Judge  and  the  

5

Division  Bench  which  ignore  several  basic  principles  of  Code  of  Civil  

Procedure cannot be sustained.  

I. A suit cannot be dismissed as barred by Order 2 Rule 2 of the Code in  the absence of a plea by the defendant to that effect and in the absence of an   issue thereon.  

8. We  may  extract  Order  2  Rules  1  and  2  of  the  Code  for  ready  

reference:

“1. Frame of suit: Every suit shall as far as practicable be framed so as to  afford ground for final decision upon the subjects in dispute and to prevent  further litigation concerning them.

2. Suit to include the whole claim: (1) Every suit shall include the whole  of the claim which the plaintiff is entitled to make in respect of the cause  of action; but a plaintiff may relinquish any portion of his claim in order to  bring the suit within the jurisdiction of any Court.

(2)  Relinquishment of part of claim: Where a plaintiff omits to sue in  respect of, or intentionally relinquishes, any portion of his claim, he shall  not afterwards sue in respect of the portion so omitted or relinquished.

(3) Omission to sue for one of several reliefs: A person entitled to more  than one relief in respect of the same cause of action may sue for all or any  of such reliefs; but if he omits, except with the leave of the court, to sue  for all such reliefs, he shall not afterwards sue for any relief so omitted.”

The object of Order 2 Rule 2 of the Code is two-fold. First is to ensure that  

no defendant is sued and vexed twice in regard to the same cause of action.  

Second is to prevent a plaintiff from splitting of claims and remedies based  

on the same cause of action. The effect of Order 2 Rule 2 of the Code is to  

bar a plaintiff who had earlier claimed certain remedies in regard to a cause  

6

of action, from filing a second suit in regard to other reliefs based on the  

same cause  of  action.  It  does not  however bar  a second suit  based on a  

different and distinct cause of action.  

9. This Court in Gurbux Singh v. Bhoora Lal [AIR 1964 SC 1810] held :

“In order that a plea of a bar under O. 2, R. 2(3), Civil Procedure Code  should succeed the defendant who raises the plea must make out (1) that  the second suit was in respect of the same cause of action as that on which  the previous suit was based; (2) that in respect of that cause of action the  plaintiff was entitled to more than one relief; (3) that being thus entitled to  more than one relief the plaintiff without leave obtained from the Court  omitted to sue for the relief for which the second suit had been filed. From  this analysis it would be seen that the defendant would have to establish  primarily and to start  with, the precise cause of action upon which the  previous suit was filed for unless there is identity between the cause of  action on which the earlier suit was filed and that on which the claim in  the latter suit is based there would be no scope for the application of the  bar.”

Unless the defendant pleads the bar under Order 2 Rule 2 of the Code and an  

issue is framed focusing the parties on that bar to the suit,  obviously the  

court can not examine or reject a suit on that ground. The pleadings in the  

earlier suit should be exhibited or marked by consent or at least admitted by  

both  parties.  The  plaintiff  should  have  an  opportunity  to  explain  or  

demonstrate that the second suit was based on a different cause of action. In  

this case, the respondent did not contend that the suit was barred by Order 2  

Rule 2 of the Code. No issue was framed as to whether the suit was barred  

by Order 2 Rule 2 of the Code.  But the High Court (both the trial bench and  

7

appellate bench) have erroneously assumed that a plea of res judicata would  

include a plea of bar under Order 2 Rule 2 of the Code. Res judicata relates  

to the plaintiff’s duty to put forth all the grounds of attack in support of his  

claim, whereas Order 2 Rule 2 of the Code requires the plaintiff to claim all  

reliefs flowing from the same cause of action in a single suit. The two pleas  

are different and one will not include the other. The dismissal of the suit by  

the High Court under Order 2 Rule 2 of the Code, in the absence of any plea  

by  the  defendant  and  in  the  absence  of  an  issue  in  that  behalf,  is  

unsustainable.  

II. The  cause  of  action  for  the  second suit  being completely  different   from the cause of action for the first suit, the bar under order 2 Rule 2 of the   Code was not attracted.  

10. The first suit was for recovery of balance price under an agreement of  

sale.  The  agreement  dated  29.6.2004  was  not  an  agreement  relating  to  

dissolution of the firm constituted under deed of partnership dated 5.4.2000,  

or settlement of the accounts of the said partnership. The agreement of sale  

made it clear that it related to sale of the undivided half share in the second  

floor at Rohini, 50% (property bearing No.8, Pocket & Block C-9, Sector-8,  

Rohini, Delhi-110085) and 50% share of the business that was being run in  

that premises, that is premises at Rohini. The second suit was for rendition  

8

of accounts in pursuance of the dissolution of the firm of Takshila Institute  

constituted under deed of partnership dated 5.4.2000, carrying on business at  

Bhera  Enclave,  Paschim  Vihar,  Delhi-110087  and  for  payment  of  the  

amounts due on dissolution of the said firm.  

11. The  pleadings  in  the  two  suits  make  it  clear  that  both  parties  

proceeded  on  the  basis  that  the  partnership  between  appellant  and  

respondent under deed dated 5.4.2000 was only in regard to the business run  

under the name and style of ‘Takshila Insittue’ at Bhera Enclave, Paschim  

Vihar, Delhi–110087. The appellant proceeded on the basis that the property  

at  Rohini  and  the  business  carried  therein  under  the  name  of  Takshila  

Institute,  was  not  a  part  of  the  partnership  business  under  deed  dated  

5.4.2000.  Even  the  respondent  in  his  written  statement  in  the  first  suit  

asserted  that  the  partnership  dated  5.4.2000  between  appellant  and  

respondent did not extend to Takshila Institute at Rohini or other places. In  

fact appellant clearly contended that respondent was carrying on business  

under the same name of Takshila Institute at Janakpuri, Ashok Vihar and  

Kalu Sarai in Delhi and also at Dehradun and Palampur, but they were not  

partnership businesses. The respondent in his written statement asserted that  

he  alone  was  carrying  on  business  at  those  places  under  the  name  of  

9

Takshila Institute. Therefore, the court could not, before trial, assume that  

the sale of appellant’s share in the immovable property at Rohini and the  

goodwill and assets of the business carried on at Rohini under the name of  

Takshila  Institute  should  be  taken  as  relinquishment  or  retirement  or  

settlement of share in regard to the partnership business of Paschim Vihar  

Takshila Institute.  

12. The cause of action for the first suit was non-payment of price under  

the agreement of sale dated 29.6.2004, whereas the cause of action for the  

second  suit  was  non-settling  of  accounts  of  a  dissolved  partnership  

constituted under deed dated 5.4.2000. The two causes of action are distinct  

and different. Order 2 Rule 2 of the Code would come into play only when  

both suits are based on the same cause of action and the plaintiff had failed  

to seek all the reliefs based on or arising from the cause of action in the first  

suit without leave of the court. Merely because the agreement of sale related  

to an immovable property at Rohini and the business run therein under the  

name of ‘Takshila Institute’ and the second suit referred to a partnership in  

regard to business run at Pachhim Vihar, New Delhi, also under the same  

name of Takshila Institute, it cannot be assumed that the two suits relate to  

the same cause of action. Further, while considering whether a second suit  

10

by a party is barred by Order 2 Rule 2 of the Code, all that is required to be  

seen is whether the reliefs claimed in both suits arose from the same cause of  

action.  The court  is  not  expected to go into  the  merits  of  the  claim and  

decide the validity of the second claim. The strength of the second case and  

the conduct of plaintiff are not relevant for deciding whether the second suit  

is barred by Order 2 Rule 2 of the Code.  

III. The second suit was not barred by constructive res judicata.

13. The  learned  trial  bench  passed  the  order  on  13.3.2009  on  the  

preliminary issue (Issue No.1) relating to res judicata. But there is absolutely  

no discussion in the order of the learned Single Judge in regard to the bar of  

res judicata except the following observation at the end of the order: “Of  

course  it  cannot  be  said  that  the  present  suit  is  barred  by  res  judicata  

inasmuch as the said claims were not decided in that case. But the principle  

of constructive res judicata is applicable.” This was not interfered by the  

appellate bench. Both proceeded on the basis that the suit was not barred by  

res  judicata,  but  barred  by  principle  of  constructive  res  judicata  without  

assigning any reasons. Plea of res judicata is a restraint on the right of a  

plaintiff  to  have  an  adjudication  of  his  claim.  The  plea  must  be  clearly  

established,  more  particularly  where  the  bar  sought  is  on  the  basis  of  

11

constructive res judicata. The plaintiff who is sought to be prevented by the  

bar of constructive res judicata should have notice about the plea and have  

an opportunity to put forth his contentions against the same. In this case,  

there was no plea of constructive res judicata, nor had the appellant plaintiff  

an opportunity to meet the case based on such plea.

14. Res judicata means ‘a thing adjudicated’ that is an issue that is finally  

settled by judicial decision. The Code deals with res judicata in section 11,  

relevant portion of which is extracted below (excluding Explanations I to  

VIII):  

“11.  Res  judicata.—No Court  shall  try  any  suit  or  issue  in  which  the  matter  directly  and  substantially  in  issue  has  been  directly  and  substantially in issue in a former suit between the same parties, or between  parties under whom they or any of them claim, litigating under the same  title, in a Court competent to try such subsequent suit or the suit in which  such issue has been subsequently raised, and has been heard and finally  decided by such Court”  

Section  11  of  the  Code,  on  an  analysis  requires  the  following  essential  

requirements to be fulfilled, to apply the bar of res judicata to any suit or  

issue:

(i) The matter must be directly and substantially in issue in the former  suit and in the later suit.

(ii) The prior suit should be between the same parties or persons claiming  under them.

12

(iii) Parties should have litigated under the same title in the earlier suit.  

(iv) The matter in issue in the subsequent suit must have been heard and  finally decided in the first suit.  

(v) The  court  trying  the  former  suit  must  have  been competent  to  try  particular issue in question.  

To define and clarify the principle contained in Section 11 of the Code, eight  

Explanations have been provided. Explanation I states that the expression  

‘former suit’  refers  to a suit  which had been decided prior to the suit  in  

question whether or not it was instituted prior thereto. Explanation II states  

that the competence of a court shall be determined irrespective of whether  

any  provisions  as  to  a  right  of  appeal  from the  decision  of  such  court.  

Explanation III states that the matter directly and substantially in issue in the  

former  suit,  must  have  been  alleged  by  one  party  or  either  denied  or  

admitted expressly or impliedly by the other party. Explanation IV provides  

that  any matter  which might  and ought  to  have  been made a  ground of  

defence or attack in such former suit shall be deemed to have been a matter  

directly and substantially in issue in such suit. The principle of constructive  

res judicata emerges from Explanation IV when read with Explanation III  

both of which explain the concept of “matter directly and substantially in  

issue”.

13

15. Explanation III clarifies that a matter is directly and substantially in  

issue, when it is alleged by one party and denied or admitted (expressly or  

impliedly)  by  the  other.  Explanation  IV  provides  that  where  any  matter  

which might and ought to have been made a ground of defence or attack in  

the former suit,  even if  was not  actually set  up as a ground of attack or  

defence,  shall  be  deemed and regarded  as  having  been  constructively  in  

issue directly and substantially in the earlier suit. Therefore, even though a  

particular ground of defence or attack was not actually taken in the earlier  

suit, if it was capable of being taken in the earlier suit, it became a bar in  

regard  to  the  said  issue  being  taken  in  the  second  suit  in  view  of  the  

principle of constructive res judicata.  Constructive res judicata deals with  

grounds of  attack and defence which ought to  have been raised,  but  not  

raised, whereas Order 2 Rule 2 of the Code relates to reliefs which ought to  

have  been  claimed  on  the  same  cause  of  action  but  not  claimed.  The  

principle  underlying  Explanation  IV  to  Section  11  becomes  clear  from  

Greenhalgh v. Mallard  [1947 (2) All ER 257] thus:  

“….it would be accurate to say that res judicata for this purpose is not  confined to the issues which the court is actually asked to decide, but that  it covers issues or facts which are so clearly part of the subject matter of  the litigation and so clearly could have been raised that  it would be an  abuse of the process of the court to allow a new proceeding to be started   in respect of them.

(emphasis supplied)

14

In  Direct  Recruit  Class  II  Engineering  Officers’  Association  v.  State  of   

Maharashtra [1990  (2)  SCC  715],  a  Constitution  Bench  of  this  Court  

reiterated  the  principle  of  constructive  res  judicata  after  referring  to  

Forward Construction Co. v. Prabhat Mandal [1986 (1) SCC 100) thus:  

“an adjudication is conclusive and final not only as to the actual matter  determined but as to every other matter which the parties might and ought  to  have  litigated  and  have  had  decided  as  incidental  to  or  essentially  connected with subject matter of the litigation and every matter coming  into the legitimate purview of the original action both in respect of the  matters of claim and defence.”

In this case the High Court has not stated what was the ground of attack that  

plaintiff-appellant ought to have raised in the first suit but had failed to raise,  

which she raised in the second suit, to attract the principle of constructive res  

judicata. The second suit is not barred by constructive res judicata.

IV. A suit  cannot  be  dismissed  without  trial  merely  because  the  court   feels dissatisfied with the conduct of the plaintiff.

16. Code of  Civil  Procedure  is  nothing but  an exhaustive compilation-

cum-enumeration  of  the  principles  of  natural  justice  with  reference  to  a  

proceeding in a court of law. The entire object of the Code is to ensure that  

an adjudication is conducted by a court of law with appropriate opportunities  

at appropriate stages.  A civil proceeding governed by the Code will have to  

be proceeded with and decided in accordance with law and the provisions of  

15

the Code, and not on the whims of the court. There are no short-cuts in the  

trial of suits, unless they are provided by law. A civil suit has to be decided  

after framing issues and trial permitting the parties to lead evidence on the  

issues, except in cases where the Code or any other law makes an exception  

or provides any exemption.  

17. The Code enumerates the circumstances in which a civil suit can be  

dismissed without trial. We may refer to them (not exhaustive):  

(a) Dismissal as a consequence of rejection of plaint under Order 7 Rule  

11 of the Code in the following grounds : (i) where it does not disclose a  

cause of action; (ii) where the relief in the plaint is undervalued and plaintiff  

fails to correct the valuation within the time fixed; (iii) where the court fee  

paid is insufficient and plaintiff fails to make good the deficit  within the  

time fixed by court: (iv) where the suit appears from the statement in the  

plaint to be barred by law; (v) where it is not filed in duplicate and where the  

plaintiff fails to comply with the provisions of Order 7 Rule 9 of the Code.  

(b) Dismissal under Order 9 Rule 2 or Rule 3 or Rule 5 or Rule 8 for non-

service  of  summary  or  non-appearance  or  failure  to  apply  for  fresh  

summons.

 (c) Dismissal under Order 11 Rule 21 for non-compliance with an order  

to answer interrogatories, or for discovery or inspection of documents.  

16

(d) Dismissal under Order 14 Rule 2(2) where issues both of law and fact  

arise in the same suit and the court is of opinion that the case or any part  

thereof may be disposed of on an issue of law only and it tries such issue  

relating to jurisdiction of the court or a bar to a suit created by any law for  

the time being in force first and dismisses the suit if the decision on such  

preliminary issue warrants the same.  

(e) Dismissal under Order 15 Rule 1 of the Code when at the first hearing  

of the suit it appears that the parties are not at issue on any question of law  

or fact.  

(f) Dismissal under Order 15 Rule 4 of the Code for failure to produce  

evidence.

(g) Dismissal under Order 23 Rules 1 and 3 of the Code when a suit is  

withdrawn or settled out of court.

18. The  following  provisions  provide  for  expeditious  disposal  in  a  

summary manner :  

(i) Order V Rule 5 of the Code requires the court to determine, at the  time of issuing the summons, whether it shall be for the settlement of issues  only, or for the final disposal of the suit (and the summons shall have to  contain a direction accordingly).  In suits to be heard by a court  of small  causes, the summons shall be for the final disposal of the suit.  

(ii) Order 15 Rule 3 of the Code provides where the parties are at issue on  some question of law or of fact, and issues have been framed by the court as  hereinbefore provided, if the court is satisfied that no further argument or  evidence than the parties can at once adduce is required upon such of the  issues as may be sufficient for the decision of the suit, and that no injustice  

17

will result from proceeding with the suit forthwith, the court may proceed to  determine  such  issues,  and,  if  the  finding  thereon  is  sufficient  for  the  decision, may pronounce judgment accordingly, whether the summons has  been issued for the settlement of issues only or for the final disposal of the  suit. (But where the summons has been issued for the settlement of issues  only, such a summary course could be adopted only where the parties or  their pleaders are present and none of them objects to such a course).

(iii) Order 37 Rule 1 read with Rules 2& 3 of the relating to summary  

suits.  

19. But where the summons have been issued for settlement of issues, and  

a suit is listed for consideration of a preliminary issue, the court cannot make  

a roving enquiry into the alleged conduct of the plaintiff, tenability of the  

claim, the strength and validity and contents of documents, without a trial  

and on that basis dismiss a suit. A suit cannot be shortcircuited by deciding  

issues of fact merely on pleadings and documents produced without a trial.  

In this case, the learned Single Judge has adjudicated and decided questions  

of  fact  and  rendered  a  judgment,  without  evidence  tested  by  cross-

examination.  We  extract  below  some  of  the  reasonings,  findings,  

assumptions  and  conclusions  of  the  learned  Single  Judge  leading  to  the  

dismissal  of  the  suit  when  hearing  a  preliminary  issue  relating  to  res  

judicata, thereby demonstrating assumption of a jurisdiction not vested in it  

18

and also acting in the exercise of its jurisdiction illegally and with material  

irregularity:  

“What  emerges  from the  aforesaid  is  that  the  plaintiff  at  the  time  of  inception of the partnership and till date is a government teacher and under  the terms of her employment was not entitled to enter into the partnership  and was not entitled to earn any profits  therefrom. Not only under the  terms of her employment,  the plaintiff before the Service Tax Authorities   also represented that she had only academic interest. It can only mean   that she had no profit interest in the partnership. Though the plaintiff has  denied  that  she  has  filed  the  clearance  certificate  aforesaid  with  the  government school in which she is employed but the purpose of plaintiff  obtaining the said clearance certificate from the defendant can only be to  use  the  same  in  the  event  of  any  complaint  of  breach  of  terms  of  employment being made against her.    

x x x x x x x x x

The  question which arises for adjudication is whether a litigant can be  permitted to take a stand in the court, diametrically opposite to the stand of  that  litigant  elsewhere.  Can  there  be  different  stands  before  the  government as employer and before the Taxation Authorities and before  the court. Should the courts permit such stand to be taken in the course of  judicial proceedings and should the courts come to the rescue of such a  litigant in recovering dues which that litigant elsewhere has represented  are not due to her.

The aforesaid circumstances leave no manner of doubt that the plaintiff in   contravention of the terms of her employment was carrying on business as   a partner with the defendant. The question is of enforcement of such a   partnership and or the terms thereof by the court.

x x x x x x x x x

In the present case the condition in the term of the employment  of the  plaintiff as a government teacher, admittedly prohibit her from carrying on  any business activity or other vocation for profits. Such condition has been  imposed to ensure that the teachers of the government school devote their  full energy and time to developing the young minds, rather than treating  the government service as a mere source of income and utilizing their time  and skill  in earning/making money elsewhere.  The plaintiff  by entering  into the agreement of partnership with the defendant had clearly violated  her terms of employment and this Court cannot come to her assistance to  enable her to earn profits which she otherwise is not entitled. The plaintiff  

19

has admitted to having not shown any profits whatsoever in her Income  Tax return. It is inconceivable that the plaintiff who has claimed to be in  partnership since the year 1999 or 2000 would not have earned any profits  from the  partnership  and/or  if  would  not  have  earned  would  have  sat  quietly for four years. The plaintiff cannot be permitted to take different  stands  before  different  fora.  The  condition/term  of  employment  prohibiting the plaintiff from entering into partnership is found to be in  public interest  and the action of the plaintiff  of breaching/violating the  same is found to be immoral and opposed to public policy. The breach is  not  found  to  be  trivial  or  venial.  Further,  the  conduct  of  the  plaintiff  thereafter also, as noted above is found to be of subterfuge and plaintiff  has  been found to  be  misstating  facts.  The plaintiff  is  found to  be  an   unscrupulous person and her case is found to be based on falsehood. This   Court refuses to come to the aid of plaintiff and her case is liable to be   dismissed summarily.

That even on the facts of this case, I have no doubt that the plaintiff has  abused the process of the court. The plaintiff in the Bayana Agreement  aforesaid had clearly agreed to the sum of Rs. 21.50 lacs towards her share  in the partnership firm inclusive of the value of the Rohini property where  the partnership business was being carried on. As far as the Paschim Vihar  property is concerned, the issue with respect whereto was raised, the same  also finds mention in the said Bayana  Agreement  and the receipt.  The  conduct of the plaintiff also shows that all accounts had been settled and  no accounts remained to be taken and for which purpose the suit had been  filed.  Had  the  accounts  not  been  settled,  the  question  of  the  plaintiff   instructing the bank to delete her name from the account in the name of  the firm and of receiving the original Bayana Agreement and of obtaining  the clearance certificate aforesaid would not have arisen. The case set up  by the plaintiff is contrary to all the admitted documents.

x x x x x x x x x

I  find  the  present  case  to  be  clear  beyond  all  reasonable  doubts.  The  Bayana Agreement and Receipt admittedly executed by plaintiff and the  averments of plaintiff in plaint in earlier suit instituted by plaintiff, permit  of no controversy. The consideration mentioned therein was in settlement  of  all  claims  of  plaintiff  with  respect  to  her  share  in  partnership.  The  contemporaneous conduct of plaintiff, of statement on 13th August, 2004  in  suit  No.  438/2004  instituted  by  defendant;  of  taking  clearance  certificate dated 13th August, 2004 from defendant, of having her name as  signatory deleted from the bank account of firm are also in consonance  with said documents. The facts of this case do not require any opportunity   for leading evidence to be given to the plaintiff. This Court cannot put a   case  contrary  to  such  documents  and  conduct  to  be  put  to  trial. The  

20

explanations now given during arguments do not form the basis of suit and  pleadings.”

(emphasis supplied)

The observation of the learned Single Judge that “the facts of this case do  

not require any opportunity for leading evidence to be given to the plaintiff”  

violates Order 15 Rule 3 of the Code. Where summons have been issued for  

settlement of issues and where issues have been settled, unless the parties  

agree, the court cannot deny the right of parties to lead evidence. To render a  

final decision by denying such opportunity would be highhanded, arbitrary  

and illegal.  

20. Even the division bench committed the same error. We extract below  

para 14 of the impugned order which shows that the decision was based on  

assumption without basis and in the absence of evidence freely referring to  

and relying upon unexhibited documents :  

“This  is  not  the  case  of  the  plaintiff/appellant  that  the  firm  was  maintaining  separate  accounts,  one for  the  business  being run  by it  in  Rohini  and  the  other  for  the  business  being  run  in  Paschim  Vihar.  Ordinarily, when there is a Settlement between the partners of the firm  whereby they agree to part ways, the Settlement effected between them  would  cover  accounts  of  the  entire  business  being  run  by  them  in  partnership and it would not be confined only to one part of the business.  This is more so when the document executed between the parties at the  time of parting ways and setting the disputes does not reserve any right in  favour of the outgoing partner, to receive any further payment from the  partner  who retains  the  business  of  the  erstwhile  firm.  In  none  of  the  documents executed between the parties,  there is  an averment  that  the   accounts of business being run in Paschim Vihar had not been settled or   that the plaintiff/appellant would not, in addition to the sum referred in   the document, also be entitled to share of the profit earned by the firm  

21

from its business in Paschim Vihar. Vide endorsement made on the receipt  dated 29.6.2004, the husband of the appellant recorded that Paschim Vihar  Institute Deed would be settled in the name of Dr.Rashmi Gupta for the  consideration of Rs.15 lakhs. This is yet another proof of the fact that the   matter relating to Paschim Vihar Institute had also been finally settled   between the parties.  During the  course  of  arguments before us,  it  was  contended by learned counsel for the appellant that the endorsement was  made by the husband of the appellant without authority from her. Since we  noticed  a  gentleman  giving  instructions  to  the  learned  counsel  for  the  appellant, during the course of the hearing before us, we asked her as to  who the gentleman was and we were told that he was none other than the  husband  of  the  appellant.  This  leaves  no  doubt  in  our  mind  that  the   husband of the appellant was acting on authority from her when he made   endorsements on the Bayana Agreement and Receipt dated 29.6.2004. The  shifting stands taken before him have been noted in detail, by the learned  Single Judge.  

(emphasis supplied)

21. The  High  Court  recorded  factual  findings  on  inferences  from  the  

plaintiff’s (appellant) conduct and branded her as an unscrupulous person  

who abuses the process of court and as a person who utters falsehoods and  

manipulates documents without there being a trial and without there being  

an opportunity to the plaintiff to explain her conduct. To say the least, such a  

procedure  is  opposed to  all  principles  of  natural  justice  embodied in  the  

Code of Civil Procedure. At all events, the alleged weakness of the case of  

the plaintiff  or unscrupulousness of plaintiff  are not grounds for dismissal  

without trial.  

22

22. We also fail to understand how costs of Rs.50,000/- could be levied.  

This Court has repeatedly stated that in dealing with civil suits, courts will  

have to follow the provisions of Code of Civil Procedure in levying costs.

23. This order should not be construed as a finding on the conduct of the  

appellant one way or the other. We have examined the matter only for the  

limited purpose of  finding out  whether  the High Court  had proceeded in  

accordance with law and the provisions of Code of Civil Procedure. If on  

evidence,  the  conduct  of  the  plaintiff  or  the  defendant  is  found  to  be  

unscrupulous or unbecoming, it is open to the court at that stage to decide  

upon the consequences that should be visited upon her or him.

24. We therefore allow this appeal,  set  aside the order  of the Division  

Bench of the High Court dated 7.9.2009 affirming the order dated 13.3.2009  

of the learned Single Judge and restore the suit to the file of the High Court  

with a direction to decide the same in accordance with law, after giving due  

opportunity to the parties to lead evidence.

____________________J. [R.V. RAVEENDRAN]

NEW DELHI ___________________J. SEPTEMBER 27, 2010 [H.L. GOKHALE]

23