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APP.109.2013

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY

ORDINARY ORIGINAL CIVIL JURISDICTION

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APPEAL NO.109 OF 2013

IN
NOTICE OF MOTION NO.2133 OF 2012
IN
SUIT NO.462 OF 2010
WITH
NOTICE OF MOTION (L) NO.3170 OF 2012

WITH
NOTICE OF MOTION NO.771 OF 2013
IN
APPEAL (L) NO.783 OF 2012
IN
NOTICE OF MOTION NO.2133 OF 2012
IN
SUIT NO.462 OF 2010
Appellant

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Kamlakant Natwarlal Shah

versus
Jagdishchandra Natwarlal Shah and others

Respondents

Mr.D.D.Madon, Sr.Advocate with Mr.Rahul Narichania and Mr.Anil

D'souza i/by Sandeep Waghmare for Appellant.
Mr.Anushok Daver with Mr.Bharat Vaishnava i/by Bharat Vaishnawa
and Co. for Respondents 2 and 3.
Mr.Yogeshwar S. Bhate for Respondent no.1 in both the appeals.
CORAM : DR.D.Y.CHANDRACHUD AND
M.S.SONAK, JJ.
DATE

: 20 September 2013

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1.

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JUDGMENT (PER : DR.D.Y.CHANDRACHUD, J.) :

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APP.109.2013

Admit. Learned counsel for the Respondents waive service.

The appeal is taken up for hearing and final disposal, by consent and
on the request of the learned counsel.

The appeal arises from a judgment of a learned Single Judge

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2.

dated 28 September 2012 by which a Motion for recording a

compromise in terms of the consent terms allegedly agreed upon

between the parties on 5 December 2011, has been made absolute. In

consequence, the learned Single Judge has decreed the suit for

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partition in terms of the consent terms.

3.

The Appellant and the First Respondent are brothers. The

Second Respondent is their mother. The Third Respondent is their

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sister. The Appellant instituted a suit for partition of two properties :

a residential flat situated at Himgiri Co-operative Society at Peddar
Road, Mumbai and another residential flat situated at Deccan
Chambers, Girgaum, Mumbai.
4.

The residential flat at Peddar Road (`the Himgiri flat')

originally belong to the Appellant and his father each having an equal
share. After the death of the father, the share of the father devolved
equally on four co-sharers who are parties to these proceedings. The
Appellant claims to have acquired besides his 12.5 per cent share in
the interest of the father, further interests of 12.5 per cent each of the

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mother and the sister upon a deed of relinquishment which is stated to

have been executed in 2009. The Appellant thus has an 87.5 per cent

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share in the residential flat at Himgiri while the First Respondent

holds the balance representing a 12.5 per cent share. In the flat at

Deccan Chambers, both the Appellant and the First Respondent hold
equal shares.
5.

The Appellant instituted a suit for partition in January 2010

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seeking a declaration in respect of his shares in the two residential

flats and for partition. The Second and the Third Respondents have
filed written statements supporting the claim of the Appellant. The

parties entered upon negotiations, during the course of which the First
Respondent paid over to the Appellant an amount of Rs.48.00 lakhs
by an RTGS entry on 12 November 2011. The case of the First

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Respondent is that on 1 December 2011 consent terms were signed by

the parties and their advocates. On 2 December 2011 the suit was
listed before Mr.Justice D.G.Karnik. There was litigation pending

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between the parties. Criminal complaints as well were lodged by each

against the other involving non compoundable offences. The consent
terms which were prepared on 1 December 2011 envisaged that the
civil litigation would be withdrawn and that similarly all the criminal
cases would also be withdrawn. On 2 December 2011, when the suit
appeared before Mr.Justice D.G.Karnik, it is common ground that the
consent terms were not taken on record and were returned back for
modification by the Court, since the learned Judge was of the view
that the provision made in the consent terms for withdrawal of the
cases involving non-compoundable offences, would have to be

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suitably modified. Thereafter, a second set of consent terms was

drawn up on 5 December 2011, which was signed by the parties and

Both sets of consent terms were

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by their respective advocates.

interpreted in Gujarati to the Second and the Third Respondents by

the Interpreter of this Court, who endorsed her signature at the foot,
and initialled each page of the consent terms in token of having
interpreted the consent terms. On 7 December 2011, when the suit
was on board before Karnik, J., the parties mentioned the proceedings

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which were thereafter directed to stand over to 4 January 2012. The

case of the First Respondent is that the original of the consent terms
was handed over to the Appellant, the original Plaintiff. On 4 January

2012, when the suit appeared before Karnik, J., the following order
was passed by the Court :

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"The matter has been kept on board under the caption

"For Filing Consent Terms". Counsel for the plaintiff
states that the consent terms are not ready. Hence
removed from board. To be placed on board according
to its turn."

6.

As the order of the learned Single Judge indicates, a statement

was made on behalf of the Appellant that "the consent terms are not
ready." Since this Court would have to proceed on the basis of the
record, as it stands, it is evident that the statement which was made on
behalf of the Appellant, was not controverted by the First Respondent
when the order dated 4 January 2012 came to be passed.
Consequently, the learned Single Judge directed that the suit was
removed from the board and shall be placed on board according to its
turn.

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After a lapse of about eight months, on 31 August 2012, the

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APP.109.2013

advocate appearing on behalf of the Appellant received a notice from

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the advocate of the First Respondent calling upon the Appellant to

produce the original of the consent terms dated 1 December 2011 and

5 December 2011 before Smt.Justice Roshan S. Dalvi "for necessary

orders on the consent terms". On 3 September 2012, a notice was
served by the advocate for the First Respondent stating that upon
mentioning the suit, it has been placed on 4 September 2012. On 11

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September 2012, the First Respondent filed a Notice of Motion 1 for

giving effect to the consent terms and for recording the terms of the
compromise.

An affidavit-in-reply was filed by the Appellant

opposing the relief.

8.

By the impugned order dated 28 October 2012, the learned

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Single Judge has allowed the Motion and has decreed the suit by
recording the terms of the compromise.

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9.

Learned Senior Counsel appearing on behalf of the Appellant

submits that :
(i)

Under Order XXIII Rule 3 of the Code of Civil

Procedure, 1908, the Court has to decide the question where it is

alleged by one party and denied by the other that an adjustment or
satisfaction has been arrived at;
(ii)

In the present case there was a serious dispute about

whether the parties had arrived at an adjustment by lawful agreement

1 Notice of Motion No.2133 of 2012

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or compromise within the meaning of Order XXIII Rule 3. The case

of the Appellant on affidavit is that in addition to the payment which

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was reflected in the consent terms in the amount of Rs.48.00 lakhs for

the equalization of shares, the First Respondent had agreed to pay an

amount of Rs.1.00 crore in cash to the First Appellant and to the
Second and the Third Respondents. An affidavit has been filed both
by the mother and by the sister which confirms the understanding

(iii)

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which was arrived at between the parties;

The fact that the consent terms were not to be acted upon

unless the private arrangement between the parties was fulfilled, is

borne out by the fact that even after the execution of the consent
terms on 5 December 2011, when the suit appeared before Karnik, J.
on 4 January 2012, an adjournment was granted on the statement of

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the Appellant that the consent terms were not ready.

The First

Respondent did not oppose the recording of that statement or to the

grant of an adjournment on that ground. Hence, it is evident that on 4

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January 2012, the parties proceeded on the basis that the consent
terms were not ready for being filed in Court as a basis of a decree on
compromise;
(iv)

Nearly eight months thereafter, a letter was addressed on

behalf of the First Respondent to the Appellant on 31 August 2012 for

the production of the consent terms and a Motion was thereafter filed
for recording the terms of the compromise;
(v)

In view of the serious contest between the parties in

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regard to the exact nature of the understanding that was arrived at

between them, the learned Single Judge ought to have decided the

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question within the meaning of the proviso to Order XXIII Rule 3 of

the CPC by allowing the parties to lead evidence;
(vi)

The procedure which was adopted by the learned Single

Judge in the present case is unknown to law. In order to determine as

to whether the payment which is reflected in the consent terms of

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Rs.48.00 lakhs by the First Respondent to the Appellant represented a

fair value of the share of the Appellant, the learned Single Judge suomotu called upon the parties during the course of hearing to produce

the ready reckoner which is prepared for the purposes of stamp duty.
The learned Single Judge allowed a depreciation of 60% in respect of
the value of the Himgiri flat computed at the value in the ready

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reckoner and 30% in respect of the Deccan Chamber flat.

The

Himgiri flat in which the Appellant has an 87.5 per cent share is a sea
facing flat in a prime location at Peddar Road and it will be

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preposterous to allow a depreciation of 60 per cent in respect of such

valuable immovable property. The Appellant has now taken out a
Motion under Order XLI Rule 27 of the CPC for leading additional
evidence, if necessary, in the appeal to establish the sale instances in
respect of similar properties in the same building and an adjoining
building which would demonstrate the incorrectness of the
assumption of the learned Single Judge. Similarly, the learned Single
Judge suo-motu summoned the interpreter of this Court, posed
questions to her in Court and accepted the statement without allowing
any cross-examination.

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APP.109.2013

On these grounds, it has been urged that the procedure which has been

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adopted by the learned Single Judge is alien to Order XXIII Rule 3 of

the CPC and the impugned judgment would have to be set aside and
the Motion restored for a disposal afresh.
10.

On the other hand, it has been urged on behalf of the First

(i)

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Respondent that :
Both the consent terms dated 1 December 2011 and 5

December 2011 have admittedly been executed by the parties and

their advocates. The Interpreter had duly interpreted the consent

terms to the Second and Third Respondents and had appended her

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signature at the foot thereof and initialled every page;

(ii)

The consent terms were acted upon by the parties since

even prior to the execution of the terms, an amount of Rs.48.00 lakhs

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was paid over by the First Respondent to the Appellant on 12

November 2011;
(iii)

Between 4 January 2012 and 25 September 2012, the

Appellant did not set up any case to the effect that an amount of
Rs.1.00 crore was required to be paid in cash to secure the interest of
the Appellant and the Second and Third Respondents;
(iv)

The reason why the first set of consent terms were

returned by the learned Single Judge was because the Court had an

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objection to the parties seeking to withdraw criminal cases involving

non-compoundable offences and it was, therefore, that the parties

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were directed to recast the consent terms. The parties did so by

arriving at the second set of consent terms of 5 December 2011;
(v)

The learned Single Judge was in the circumstances

justified in proceeding with the matter in the manner that the Court
has proceeded because the Court found the basis of the terms to be

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just and equitable having regard to the valuation of the share of the
Appellant.

The rival submissions now fall for consideration.

12.

Order XXIII Rule 3 of the CPC provides as follows :

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11.

(1)

...

...

...

(2)

...

...

...

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"ORDER
XXIII
WITHDRAWAL
ADJUSTMENT OF SUITS :

AND

(3) Compromise of suit.- 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 parties, or
where the defendant satisfied 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, compromise or satisfaction is the same as

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the subject-matter of the suit :

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Provided that where it is alleged by one party and

denied by the other that an adjustment or satisfaction
has been arrived at, the Court shall decide the question;
but no 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."

The substantive part of Rule 3 of Order XXIII is in two parts. The

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first part is where it is proved to the satisfaction of the Court that a

suit has been adjusted wholly or in part by lawful agreement or
compromise in writing signed by the parties. The second part is

where a Defendant satisfies the Plaintiff in respect of the whole or any

part of the subject matter of the suit. The substantive part of Rule 3
requires proof to the satisfaction of the Court. In such an event, Rule

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3 mandates that the Court shall order such agreement, compromise or

satisfaction to be recorded and pass a decree in accordance therewith.
However, where it is alleged by one party and denied by the other that

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an adjustment or satisfaction has been arrived at, the Court has to

decide the question. The proviso to Rule 3 was introduced by the
Amending Act of 1976. Rule 3A, as it now stands, provides that no
suit can lie to set aside a decree on the ground that the compromise on
the basis of which the decree was passed, was not lawful.
Simultaneously, Order XLIII Rule 1(m) which provided for an appeal
against such an order of the Court has been deleted by the Amending
Act of 1976. Where a Court records an adjustment or compromise
within the meaning of Order XXIII Rule 3, it passes a decree. An
independent suit is not maintainable.

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These principles have been elucidated in a judgment of the

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APP.109.2013

Supreme Court in Pushpa Devi Bhagat Vs. Rajinder Singh and

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others2 as follows :

"12. The position that emerges from the amended

provisions of Order 23, can be summed up thus :

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(i)
No appeal is maintainable against a consent
decree having regard to the specific bar contained in
Section 96(3) CPC.

(ii) No appeal is maintainable against the order

of the court recording the compromise (or refusing to
record a compromise) in view of the deletion of clause
(m) Rule 1, Order 43.

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(iii) No independent suit can be filed for setting

aside a compromise decree on the ground that the
compromise was not lawful in view of the bar contained
in Rule 3A.

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(iv) A consent decree operates as an estoppel and

is valid and binding unless it is set aside by the court
which passed the consent decree, by an order on an
application under the proviso to Rule 3 of Order 23.
Therefore, the only remedy available to a party to a
consent decree to avoid such consent decree, is to
approach the court which recorded the compromise and
made a decree in terms of it, and establish that there was
no compromise. In that event, the court which recorded
the compromise will itself consider and decide the
question as to whether there was a valid compromise or
not. This is so because a consent decree, is nothing but
contract between parties superimposed with the seal of
approval of the court. The validity of a consent decree
depends wholly on the validity of the agreement or
compromise on which it is made.
...
...
..."

2 Air-2006-SC-2628

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Now, in the present case, consent terms were initially executed

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14.

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between the parties and their advocates on 1 December 2011. The

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consent terms stipulated that the First Respondent who held a half
share in the residential flat at Deccan Chambers, would relinquish his
share. Similarly, the Appellant-Plaintiff who held an 87.5 per cent
share in the Himgiri Flat at Pedder Road, would relinquish his share
to the First Respondent. The First Respondent was to pay an amount

of Rs.48.00 lakhs to the Appellant (which, it is not in dispute, has

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been paid). The consent terms also stipulated that two properties at
Kumbhat in the State of Gujarat would be allocated, one to each of
the two brothers, after the lifetime of the mother. On 2 December

2011 the consent terms were admittedly not taken on record by the
Court. The case of the First Respondent is that the learned Single
Judge declined to accept the consent terms since one of the clauses

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providing for withdrawal of the non-compoundable criminal cases

required recasting. The contention of the Appellant is that though the
consent terms made the provision for a payment of an amount of

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Rs.48.00 lakhs by the First Respondent to the Appellant, that did not
reflect the true value of his interest which was approximately Rs.1.50
crores. According to the Appellant, at the relevant point of time, the
First Respondent had agreed with all the members of the family
including the Second and the Third Respondents that over and above
the amount mentioned in the consent terms, a payment of Rs.1.00
crore would be made to the Appellant which would be shared between
the Appellant and the Second and the third Respondent (the mother
and the sister).

Moreover, according to the Appellant, the First

Respondent agreed that since he did not immediately have the funds

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necessary to make the payment by cheque, the amount would be paid

by cash on the date of signing of the terms. However, the First

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Respondent allegedly failed to do so. An affidavit has been filed by

the mother and the sister in the course of the proceedings before the
learned Single Judge. The relevant part of the affidavit reads as
follows :

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"3. We say that despite the said facts, no provision

has been made in the consent terms for our benefits. We
say that in fact, we were removed to the Honble High
Court at Mumbai by the Defendant No.1 and though,
the consent terms were sought to be explained, in fact,
what was agreed was altogether different. We say that
the Defendant No.1 had specifically represented that
since he is unable to make the payment by cheque, he
shall be making payments of Rs.1 crore by cash in the
courts itself immediately upon the consent terms being
accepted and the said Rs.1 crore shall be divided
between the Plaintiff and the Defendants No.2 and 3."

15.

Now, admittedly, after the second set of consent terms was

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executed on 5 December 2011, the suit was adjourned on 7 December

2011 to 4 January 2012. On 4 January 2012 the learned Single Judge
noted that the suit had been placed on board for filing consent terms.
However, the Court noted the statement of the Appellant that the
consent terms "are not ready". The suit was, therefore, directed to be
removed from the board and was to be placed on board according to
its turn. The order of the learned Single Judge dated 4 January 2012
has held the field.

No application has been made by the First

Respondent to the learned Single Judge for speaking to the minutes,

if, according to the First Respondent, the order did not contain a

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correct record of what had transpired in the Court. The order of the
Court, it is well settled, must be regarded and treated as reflecting a

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correct record of what has transpired during the course of the hearing

before the Court. Hence, on 4 January 2012, the parties proceeded on

the basis that the consent terms were not ready and it was on that
basis that the suit was directed to be removed from the caption of
proceedings for the filing of consent terms and was directed to be
placed on board "as per its turn". `According to its turn' meant that

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the suit now would have to proceed in the normal course for the
purpose of adjudication. The First Respondent took out a Motion
before the learned Single Judge for recording the terms of the

compromise in September 2012 nearly nine months after the order of

the Court dated 4 January 2012.
The facts which have emerged would indicate that there was

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indeed a serious contest between the parties as to whether the consent

terms which were executed initially on 1 December 2011 and

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subsequently on 5 December 2011, were intended to be acted upon as

mutually agreed terms of settlement. We find merit in the contention
of the Appellant that the procedure which was followed by the learned
Single Judge was not consistent with Order XXIII Rule 3 of the CPC.
Order XXIII Rule 3 mandates that the question as to whether an
adjustment or satisfaction has been arrived at has to be decided by the
Court, where it is alleged by one party but denied by the other that
such an adjustment or satisfaction has been arrived at. Even the
substantive part of Rule 3 stipulates that it has to be proved to the
satisfaction of the Court that there has been an adjustment or

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satisfaction in the terms as noted in the provision. The learned Single

Judge, in order to determine as to whether the payment of Rs.48.00

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lakhs reflected a just reflection of the share of the Appellant, called

upon the parties to produce the Ready Reckoner. All this admittedly
took place during the course of the hearing on 28 September 2012
when the order was passed by the Court allowing the Motion. In fact,
the learned Single Judge has recorded in paragraph 25 that the Court
called upon the parties to show the Ready Reckoner of 2011 for the

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purposes of determining whether the valuation is reasonably accurate.

The observations of the learned Single Judge are as follows :

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"25. It was also argued that the amount paid off was
only a pittance and did not represent the Plaintiff's share
at all. The Plaintiff contends that he is entitled to a
much larger share. At 2 separate places in his affidavitin-reply he has stated that the value of his share is
Rs.1.5 crores and Rs.3 crores. It, therefore, required the
Court to consider the valuation of the two properties
which the parties decided to partition in the aforesaid
mode by buy-off/sell-off mode. The court, therefore,
called upon the parties to show the ready reckoner of
2011 to see whether the valuation is even reasonably
accurate as per the market rate determined by the
Stamp authority. Defendant No.1 has not only
produced the ready reckoner, but Counsel on behalf of
Defendant no.1 has meticulously set out the precise
valuation as per the rules of the stamp authority set out
in the ready reckoner for both the properties of the
parties in Mumbai."
(emphasis supplied)

The learned Single Judge thereafter proceeded to apply the rates as

stipulated in the Ready Reckoner as determinative of the market value

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of both the flats namely of the Himgiri flat and the Deccan Chamber
flat. The value of the Himgiri flat was determined at Rs.2.11 crores
the building has been constructed in 1962.
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on which a depreciation of 60 per cent was applied on the ground that

There is merit in the grievance of the Appellant that in respect

of a prime property which is situated at Peddar Road (admittedly a sea

facing residential flat) the learned Single Judge was not justified in

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suo-motu applying depreciation, much less to the extent of sixty per

cent of the ready reckoner value. Whether in a given case an
immovable property should be valued by considering its depreciated

value and the rate of depreciation, if any, are matters of valuation and
hence of evidence. This is not an exercise which can be carried out
suo motu by the Court without evidence under Order XXIII Rule 3 of

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the CPC. Absent evidence, the exercise becomes hypothetical. That

apart, it is now a well settled principle of law that the ready reckoner
is prepared by the State Government for the purposes of computing

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the stamp duty payable on transactions. The ready reckoner cannot be

regarded as an accurate reflection of market value when the valuation
itself is in dispute. A depreciation of thirty per cent was applied by
the learned Single Judge in respect of the residential flat at Deccan
Chambers on the ground that the building has been constructed in
1982. On this basis the learned Single Judge arrived at a conclusion
that the share of the Appellant in the Himgiri flat was Rs.73.97 lakhs
and in Deccan chambers was Rs.35.84 lakhs.

On this basis the

learned Single Judge observed that the difference in the valuation for
by-off/sell-off was Rs.38.12 lakhs, against which the Appellant had

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been paid off Rs.48.00 lakhs. The whole basis on which this part of
the reasoning has been arrived at is to say the least conjectural and

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hypothetical. The learned Single Judge has proceeded without any

evidence at all and we find merit in the contention that there has been
a serious miscarriage of justice when the Appellant has been deprived

of an opportunity to lead evidence which would establish the real

value of the Himgiri and Deccan Chambers flats. The Appellant has
now taken out a Motion under Order XLI Rule 27 in the appeal for

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permission to lead additional evidence of sale instances in the same

building and in the adjacent building.

Since, in our view, the

procedure which has been adopted by the learned Single Judge is

contrary to Order XXIII Rule 3 of CPC, it is not necessary for this

Court to entertain the Motion, since we are inclined to remand the

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proceedings back to the learned Single Judge for consideration afresh.

18.

Similarly, it was in our view inappropriate for the learned

Single Judge to suo-motu call the Interpreter to the Court, to put

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questions to the interpreter and to act on the basis of the replies given
by her without giving the parties an opportunity to cross-examine the
witness.
19.

For these reasons, we have come to the conclusion that the

Motion under Order XXIII Rule 3 would have to be determined on

the basis of evidence by the learned Single Judge and cannot be
disposed of in the summary manner in which the impugned order has
proceeded to deal with the Motion. In the circumstances, the appeal
would have to be allowed and the impugned order of the learned

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set aside.

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Single Judge dated 28 September 2011 would have to be quashed and

We accordingly allow the appeal and set aside the

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impugned order dated 28 September 2011. However, in view of what

we have indicated above, we restore the Notice of Motion No.2133 of

2012 to the file of learned Single Judge for a decision afresh after
permitting parties to lead evidence on the question as to whether a
lawful compromise was arrived at between them, as reflected in the

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consent terms dated 5 December 2011.

At this stage the learned counsel for the Appellant has stated

that in terms of the statement which has been made in the memo of

appeal, the Appellant is ready and willing to return the amount of

Rs.48.00 lakhs to the First Respondent. The learned counsel for the
First Respondent states on instructions and without prejudice to the

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rights and interest of the First Respondent that in that event, it would
be appropriate that the amount be deposited in the Court with interest
in view of the fact that the amount was paid over to the Appellant on

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12 November 2011. The counsel for the Appellant states that the
money has been invested in a fixed deposit carrying interest at the rate
of 9.5 per cent per annum. We accordingly direct that the Appellant
shall, in terms of the statement made before the Court, deposit
Rs.48.00 lakhs together with interest accrued thereon till date with the
Prothonotary and Senior Master within a period of two weeks from
today. The amount so deposited shall be invested by the Prothonotary
and Senior Master in fixed deposit of a nationalized bank to abide by
further orders of the learned Single Judge.

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The appeal shall stand disposed of in the aforesaid terms.

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21.

APP.109.2013

22.

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There shall be no order as to costs.

In view of the disposal of the appeal, Notice of Motion No.771

of 2013 seeking stay of the impugned order of learned Single Judge

does not survive and is accordingly disposed of.

Similarly, no

separate orders are required to be passed on the Motion under Order

XLI Rule 27 and the Appellant would be at liberty to make a suitable

23.

ig
h

application before the learned Single Judge.

On the conclusion of the judgment, the learned counsel for the

First Respondent applies for stay of the operation of this judgment to

enable the First Respondent to take recourse to his remedies in appeal.
The learned counsel for the Appellant has opposed the prayer. We

ba
y

direct that in consequence of the order of remand that has been passed
today, further proceedings before the learned Single Judge shall be

om

deferred for a period of four weeks from today.

(DR.D.Y.CHANDRACHUD, J.)

(M.S.SONAK, J.)

MST

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