Monday, 22 February 2021

Whether consent decree will operate as estoppel if fraud, misrepresentation, or mistake vitiate compromise?

This Court’s Analysis

18. Before adverting to the specific contentions raised by the

learned senior counsel for the Petitioner, it may be useful to briefly summarise the law governing consent decrees that shall inform our conclusions on the present matter. It is well settled

that consent decrees are intended to create estoppels by judgment against the

parties, thereby putting an end to further litigation between the

parties. Resultantly, this Court has held that it would be slow to

unilaterally interfere in, modify, substitute or modulate the terms of

a consent decree, unless it is done with the revised consent of all

the parties thereto. (Gupta Steel Industries v. Jolly Steel

Industries Pvt. Ltd. & anr., (1996) 11 SCC 678; Suvaran

Rajaram Bandekar & ors. v. Narayan R. Bandekar & ors.,

(1996) 10 SCC 255).

19. However, this formulation is far from absolute and does not

apply as a blanket rule in all cases. This Court, in Byram Pestonji Gariwala v. Union Bank of India & ors., (1992) 1 SCC 31, has held that a consent decree would not serve as an estoppel, where

the compromise was vitiated by fraud, misrepresentation, or

mistake. Further, this Court in the exercise of its inherent powers

may also unilaterally rectify a consent decree suffering from clerical

or arithmetical errors, so as to make it conform with the terms of

the compromise.

 REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

SPECIAL LEAVE PETITION (CIVIL) NOS. 2224-2225

OF 2021


COMPACK ENTERPRISES INDIA (P) LTD.  Vs BEANT SINGH 

Author: MOHAN M. SHANTANAGOUDAR, J. 

Dated: FEBRUARY 17, 2021


1. These petitions arise out of judgments of the High Court of

Delhi (hereinafter ‘High Court’) dated 14.02.2019 and 25.07.2019.

By the first impugned judgment dated 14.02.2019, the High Court

disposed of the regular first appeal RFA No. 253/2018 filed by the

Petitioner against judgment and order of the Ld. Additional District

Judge, Rohini (‘Trial Court’) dated 23.09.2017 in Suit No.


58395/2016 filed by the Respondent. Whereas by the second

impugned judgment dated 25.7.2019, the High Court disposed of

Review Petition No. 177/2019 filed by the Petitioner against the

judgment in RFA No. 253/2018.

I. Background Facts

2. These cases concern a suit for possession and mesne profits

filed by the Respondent/plaintiff against the Petitioner/defendant,

with respect to the ground floor of the property bearing No. B60,

Ground Floor, G.T. Karnal Road, Industrial Area, Delhi110033,

admeasuring 608 sq. yards (or, 5,472 sq. ft.) (hereinafter ‘suit

property’).

3. The Respondent, Beant Singh, is the owner of the suit

property. He, through M/s Channa Auto Agencies (P) Ltd. (of which

he is a Director), executed a license agreement dated 1.11.2000 in

respect of a portion of the suit property in favour of M/s Compack

Enterprises (the Petitioner’s predecessor), for a period of 30 months

in consideration for a monthly license fee of Rs. 28,000/(

hereinafter, ‘2000 Agreement’). On 1.04.2003, Compack

Enterprises merged with Compack Enterprises India (P) Ltd. (i.e.,


the Petitioner herein), and the 2000 Agreement continued with

mutual consent of parties. The license arrangement was renewed on

1.07.2003 for another 30 months, with a 10% increase in monthly

license fee to Rs.30,800/(

hereinafter, ‘2003 Agreement’). The 2003

Agreement was renewed for the last time effective from 1.04.2006

and expiring on 30.09.2008, with a further 10% increase in

monthly license fee to Rs.33,900/(

hereinafter, ‘2006 Agreement’).

4. However, even after the expiry of the 2006 Agreement on

30.9.2008, and nonrenewal

of the same, the Petitioner continued

to occupy the suit property. Consequently, the Respondent brought

O.S. No. 58395/2016 against the Petitioner on 13.02.2009 for

recovering possession of the entire suit property and mesne profits

thereon from 1.10.2008 till the vacation of the suit property.

Petitioner/Defendant’s Arguments in Original Suit No. 58395 /2016

5. On the question of vacating possession, the Petitioner

admitted to having been in possession of only a portion of the suit

property measuring 2,200 sq. ft., averring that it was only this

portion, not the entire suit property admeasuring 5,427 sq. ft., that

was licensed to them by the Respondent.


6. Petitioner further contended that its continued possession of

this portion of the suit property was lawful, since the Respondent

had concealed the material fact of having entered into an agreement

dated 11.6.2008 to sell the suit property to one Mr. Ajay Gosain for

a sum of Rs. 4 crores, of which the Respondent had already

received a sum of Rs. 65 lakhs. The suit property was agreed to be

sold to, and was thus in lawful possession of, Mr. Gosain before the

expiry of the 2006 Agreement on 30.09.2008. Mr. Gosain is the

husband of one of the Petitioner’s Directors, and also the brother of

another Director.

7. On the question of mesne profits, Petitioner contended that

it had been in possession of only 2,200 sq. ft. of the suit property

and had been paying license fee for it till July, 2015 as per the

interim order passed by the Trial Court; and that they vacated the

premises in July, 2015 and handed over possession to Mr. Gosain,

to whom the Respondent had allegedly transferred possession of the

suit property pursuant to the agreement to sell. Thus, the Petitioner

claims that it is not liable to pay any further sum to the

Respondent.


Trial Court’s Judgment dated 23.09.2017

8. On the question of vacating possession, the Trial Court held

that the issue had already been decided by the High Court in C.M.

(M) No. 193/2013 by judgment dated 12.11.2014, and could not be

reopened.

9. The Respondent had earlier filed an application before the

Trial Court under Order XII, Rule 6, of the Code of Civil Procedure,

1908 (hereinafter, ‘CPC’), praying for a judgment on admission

decreeing the suit for possession in favour of the Respondent. Upon

the Trial Court’s dismissal of this application, the Respondent

approached the High Court under Article 227 of the Constitution in

C.M.(M) No. 193/2013 praying for the aforesaid relief. Therein, the

High Court by its judgment dated 12.11.2014 reversed the Trial

Court’s dismissal, and held that the admissions made by the

parties justify decreeing the Respondent’s suit for possession. It had

thus directed that the possession of the entire suit property

measuring 5,472 sq. ft. be handed over to the Respondent by the

Petitioner.

5

10. On the question of mesne profits, the Trial Court noted that

it is an admitted fact between the parties that the possession of the

suit property has still not been handed over to the Respondent

despite the High Court’s order dated 12.11.2014. Instead, the

Petitioner claimed to have handed over possession to Mr. Gosain in

July, 2015. The following further observations of the Trial Court are

relevant for our purposes:

a. What is the area of the suit property for which Petitioner is

liable?

The High Court’s order dated 12.11.2014 had settled the dispute

qua the area that was in possession of the Petitioner, decreeing the

Respondent’s suit for possession for the entire suit property area of

5,472 sq. ft (and not only the 2,200 sq. ft. portion claimed to be

possessed by the Petitioner). The view taken by the aforesaid order

has attained finality as far back as on 12.11.2014 and is binding.

b. What is the quantum of compensation payable?

For the period between 1.10.2008 to 27.04.2009, the Respondent is

entitled to license fee @ Rs. 37,290/p.

m., i.e., the license fee

agreed upon in the 2006 Agreement (Rs. 33,900/)

with a hike of

6

10%. For the period of unlawful possession between 28.04.2009 till

vacation of possession, Petitioner shall pay mesne profits @

Rs.60,000/p.

m. with 10% increase on the 1st April of each

alternate year, till the suit property is handed over to Respondent.

11. Aggrieved by the decision on mesne profits, both the Petitioner

and Respondent filed crossappeals

before the High Court against

the judgment of the Trial Court dated 23.09.2017, seeking,

respectively, reduction and enhancement in the quantum of mesne

profits.

First Impugned Judgment of the High Court dated 14.02.2019 in the

above crossappeals

12. The High Court passed a consent decree, directing that the

Petitioner shall pay to the Respondent, by way of mesne profits, an

enhanced sum of Rs.1,00,000/p.

m., with a 10% increase “after

every 12 months, i.e. from 1.10.2009, 1.10.2011 etc etc” w.e.f.

1.10.2008 (i.e., the date on which the 2006 Agreement expired) till

the date the Petitioner hands over actual possession of the suit

property measuring 5,472 sq. ft. to the Respondent.


13. Aggrieved that the terms of the consent decree were recorded

incorrectly in the aforesaid order, the Petitioner filed Review Petition

No. 177/2019, which was dismissed by the High Court.

Second Impugned Judgment of the High Court in the above review

petition dated 25.07.2019

14. The Petitioner contended in its review petition that the High

Court in the first appeal had erred in recording the terms of the

consent decree agreed to by the Petitioner. First, the judgment

records that the mesne profits be increased by 10% every 12

months, instead of recording a 10% increase every 24 months.

Second, the judgment erroneously records that the Petitioner will

hand over possession of the entire suit property measuring 5,472

sq. ft., when the documents on record would show that the

Petitioner was only ever in possession of 2,200 sq. ft.

15. The High Court, rejecting the Petitioner’s contentions, held that

there was no error apparent on the face of the record to justify its

review jurisdiction, and that the Petitioner was dishonestly trying to

wriggle out of the consent decree by attempting to overreach the


Court. The review petition was dismissed with exemplary costs of

Rs.1,00,000/payable

by the Petitioner to the Respondent.

II. Submissions made by the Petitioner in the present SLP

16. Shri Mukul Rohatgi, learned senior counsel for the Petitioner,

contends that the High Court ought to have, while recording the

terms of the consent decree, recorded a 10% increase in mesne

profits every 24 months, instead of 12 months. As per him, this

typographical error is borne out by the fact that a 10% increase

every 24 months closely mirrors the terms of the license agreements

where the license fee was increased by 10% every 30 months. The

reference to a 10% increase “after every 12 months, i.e. from

1.10.2009, 1.10.2011 etc etc” in the first impugned judgment of the

High Court dated 14.02.2019 (supra) also corroborates this.

17. The learned senior counsel for the Petitioner has also

contended that the first impugned judgment dated 14.02.2019

erred in recording that the Petitioner has consented to handing over

possession of the entire suit property area of 5,472 sq.ft., when the

Petitioner has consistently maintained that only 2,200 sq.ft. was

licensed to him and in his possession. Both these submissions are


vehemently opposed by Shri Basava Prabhu S. Patil, learned senior

counsel for respondent.

III. This Court’s Analysis

18. Before adverting to the specific contentions raised by the

learned senior counsel for the Petitioner, it may be useful to briefly

summarise the law governing consent decrees that shall inform our

conclusions on the present matter. It is well settled

that consent

decrees are intended to create estoppels by judgment against the

parties, thereby putting an end to further litigation between the

parties. Resultantly, this Court has held that it would be slow to

unilaterally interfere in, modify, substitute or modulate the terms of

a consent decree, unless it is done with the revised consent of all

the parties thereto. (Gupta Steel Industries v. Jolly Steel

Industries Pvt. Ltd. & anr., (1996) 11 SCC 678; Suvaran

Rajaram Bandekar & ors. v. Narayan R. Bandekar & ors.,

(1996) 10 SCC 255).

19. However, this formulation is far from absolute and does not

apply as a blanket rule in all cases. This Court, in Byram Pestonji

Gariwala v. Union Bank of India & ors., (1992) 1 SCC 31, has

held that a consent decree would not serve as an estoppel, where

the compromise was vitiated by fraud, misrepresentation, or

mistake. Further, this Court in the exercise of its inherent powers

may also unilaterally rectify a consent decree suffering from clerical

or arithmetical errors, so as to make it conform with the terms of

the compromise.

20. The present Petitions thus must be answered in light of the

abovestated

position of law. It is relevant at this juncture to note

that the first impugned judgment of the High Court dated

14.2.2019 recorded the terms of the compromise that the Petitioner

had agreed to; and that the same Court has subsequently upheld

the validity of that consent decree in the second impugned

judgment dated 25.07.2019. Thus, keeping in line with this Court’s

jurisprudence, we would be cautious in exercising our inherent

power to interfere in this consent decree, except where there is any

exceptional or glaring error apparent on the face of the record. We

now refer to and answer the specific contentions raised by the

parties.


On the question of area of possession:

21. Having undertaken a close perusal of the License Agreements

executed between the Petitioner and Respondent, we reject learned

senior counsel Mr. Rohatgi’s contention that the Petitioner was only

in possession of and licensee to a 2,200 sq.ft. portion of the suit

property. It is evident that, unlike the 2000 Agreement and 2003

Agreement, the 2006 Agreement, which is the relevant agreement

for the present purposes, pertains to the entire suit property, and

does not delimit the licensed area to a 2,200 sq. ft. portion. Thus,

the 2006 Agreement effective from 1.04.2006 to 30.09.2008,

licensed the total area of 5,472 sq. ft. to Petitioner. Hence, the

material on record discloses that the Petitioner is presently in illegal

possession of the entire suit property admeasuring 5,472 sq. ft.

22. Further, this question has already been settled by the High

Court judgment dated 12.11.2014 (supra) in the earlier litigation

between the parties, decreeing the Respondent’s suit for possession

for the entire area of 5,472 sq. ft (and not only the 2,200 sq. ft.

portion claimed to be possessed by the Petitioner). In that order, the

High Court had taken note of an admitted document on the record

12

wherein the Petitioner was stated to be in possession of the entire

suit property. The Petitioner’s challenge to this judgment dated

12.11.2014 before the Supreme Court has been dismissed in SLP(C)

No. 7531/2015, and R.P.(C) No. 1494/2015 in SLP(C) No.

7531/2015, by orders dated 16.03.2015 and 15.07.2015

respectively. Thus, this view has attained finality, and the

Petitioner’s efforts to reagitate

this question in the present

proceedings is a waste of this Court’s time and an abuse of the

process of law. In any case, since the Petitioner claims no right or

interest in the remaining 3,272 sq. ft. of the suit property, there is

no prejudice caused to the Petitioner by the order to vacate the

entire suit property since he is not the owner of property to that

extent also.

23. It is further an admitted position, as recorded by the Trial

Court, that the Petitioner has not handed over possession to the

Respondent – having claimed to have handed over possession to Mr.

Gosain instead in July, 2015. This is despite the High Court’s

judgment dated 12.11.2014 decreeing the suit for possession in

favour of the Respondent. Mr. Gosain’s right in the suit property is


a question pending in separate specific performance proceedings

filed by him. Thus, at this stage, the Respondent is entitled to get

possession of the suit property, pending adjudication of Mr.

Gosain’s claims. This view attained finality as far back as on

12.11.2014, and it is high time that the Petitioner stops making

efforts to circumvent delivering possession of the suit property to

the Respondent.

24. Thus, the High Court was correct in upholding the terms of the

consent decree directing Petitioner to hand over possession of the

entire suit property of 5,472 sq. ft. to the Respondent, and we see

no reason to interfere with this part of the consent decree.

On the question of mesne profits:

25. As referred to supra, Shri Mukul Rohatgi, learned senior

counsel for the Petitioner has contended that the High Court ought

to have, while recording the terms of the consent decree, recorded a

10% increase in mesne profits every alternate year, instead of every

year.

26. On the contrary, Shri Basava Prabhu S. Patil, learned senior

counsel for the Respondent wants us to construe the observations


of the late learned Single Judge appearing in para 1 of the first

impugned judgment dated 14.02.2019 to mean that the mesne

profits payable are to be increased by 10% every year.

27. The learned Single Judge, in noting that “this figure of mesne

profits of Rs.1 lakh will be increased by 10% after every 12 months,

i.e from 1.10.2009, 1.10.2011 etc etc” (emphasis supplied), has

confused not only himself, but also the parties to the litigation.

There is an inconsistency in so far there is a gap of every alternate

year, i.e. from 2009 to 2011, in the example used by the learned

Single Judge even though the decree notes an increase of 10% in

mesne profits after every 12 months. The aforementioned

inconsistency in the underlined extract of the consent decree is an

error apparent on the face of the record. Hence we find that this is a

fit case to exercise inherent the jurisdiction to correct the terms of

the consent decree, to bring it in conformity with the intended

compromise.

28. At this stage, it is relevant to note that even the judgment dated

23.09.2017 and the final decree dated 15.11.2017 passed by the

Trial Court also awards a 10% increase only on each alternative

15

year, i.e. 01.04.2011, 01.04.2013, 01.04.2015 and so on. Further,

the original terms of the license agreement between the parties also

incorporated a 10% increase in license fee once every 30

months/2.5 years. Thus, the learned Single Judge’s order dated

14.02.2019 has given rise to a lot of confusion. Given this

background, and looking at the preponderance of probabilities, we

are inclined to give benefit of doubt to the Petitioner. Therefore, we

hold that the intention of the compromise between the parties was

that there should be a 10% increase in mesne profits every

alternate year. The recording of a 10% increase after every 12

months in the consent decree was an inadvertent error, which we

have now rectified.

29. To this limited extent, the second impugned judgment dated

25.07.2019 is overturned, and the consent decree recorded by the

learned Single Judge’s judgment dated 14.02.2019 stands modified.

III. Final Conclusions

30. At this stage, this Bench would like to register its displeasure

at the Petitioner’s repeated and persistent efforts to reagitate

the

question of delivery of possession to the Respondent, in an attempt


to circumvent complying with the view taken by the High Court in

the judgment dated 12.11.2014, which has now attained finality.

Despite the clear direction in that judgment to vacate possession in

favour of the Respondent, pending any adjudication on the separate

proceedings for possession and specific enforcement initiated by Mr.

Gosain, the Petitioner handed over possession to Mr. Gosain in

July, 2015. Possession has to this date not been handed over to the

Respondent, who has been dragged to the court time and again due

to the Petitioner’s conduct. This is an instance of blatant disregard

for the Court’s orders, and an abuse of judicial process.

31. Hence the present petitions are disposed of, with direction to

the Petitioner to take steps for handing over possession of the suit

property measuring 5,472 sq. ft. to the Respondent within eight

weeks from today, without fail. Further, the Registry is directed to

expeditiously release the arrears of mesne profits, if any, already

deposited by the Petitioner before this Court to the Respondent.

The Petitioner is further directed to pay to the Respondent all

arrears as directed in order dated 14.2.2019, with the limited

modification that the mesne profits are to be treated as increasing

17

by 10% every alternate year, from 2009 till the date of handover of

possession.

32. The Petitioner is additionally directed to pay costs of Rs. 1 lakh

to the Respondent as stated in the impugned order dated

25.7.2019.

33. The Special Leave Petitions stand disposed of accordingly.

…..…………................................J.

(MOHAN M. SHANTANAGOUDAR)

.……………………………...............J.

(VINEET SARAN)

NEW DELHI,

FEBRUARY 17, 2021


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