Posted On by &filed under Bombay High Court, High Court.


Bombay High Court
Exchange Bank Of India And Africa … vs Venkatesh B. Kulkarni And Ors. on 1 January, 1800
Equivalent citations: 1953 23 CompCas 474 Bom
Author: Tendolkar
Bench: Tendolkar


JUDGMENT

Tendolkar, J.

1. This is a notice of motion taken out on behalf of respondent 4 for recording a compromise of a misfeasance summons between the applicant on the one hand and respondents 2 to 6 and 8 on the other hand and for a defence in accordance therewith.

2. The compromise was of a misfeasance summons taken out by the official liquidator of the Exchange Bank of India and africa Ltd., against the directors and the auditors of the bank. It is alleged on behalf of respondents 2 to 6 and the liquidator that an offer of Rs. 20,00,000 was made on behalf of respondents 2 to 6 and 8 to the liquidator and accepted by the liquidators counsel, Mr. Seervai, subject to the sanction of the Court. It was a term of that offer that the amount of Rs. 20,00,000 shall be allocated between the respondents inter se by Sir Jamshedji Kanga. It was also a term of that offer that whatever amount may be allocated by Sir Jamshedji Kanga to respondent 3 would be guaranteed by respondents 8. It is the case of the liquidator as well as of respondents 2 top 6 that the compromise was duly sanctioned by the court and Sir Jamshedji allocated the sum of Rs. 20,00,000 between the six respondents concerned and this notice of motion has had to be taken out because thereafter respondent 8 sought to back out of the compromise.

3. Now, before dealing with the facts in greater detail, there are certain preliminary objections that have been raised on behalf of respondent 8 which have to be disposed of. Obviously, the notice of motion has been taken out under order XIII, rule 3, Civil Procedure Code and the first submission made on behalf of respondent 8 is that this rule has no application to misfeasance proceedings. Now, when one turns to order XXIII, rule, 3, it in terms to the compromise of a suit and what is urged is that a misfeasance summons is not a suit. However, when one turns to Section 141, Civil Procedure Code, that section provides that the procedure in regard to suits shall be followed as far it can be made applicable in all proceedings in a court of civil jurisdiction, Order XXIII, rule 3, will be applicable to such proceedings.

4. Mr. K.T.Desai on behalf of respondent 8 has relied on a decision of the Allahabad High Court in Liaqat Hussain v. Official liquidator in which Young J. held that misfeasance proceedings under Section 235, Companies Act, were not “a suit other legal proceedings” within the meaning of Section 280 of that Act. Now Section 280 deals with security for costs which a company may be called upon to give in any suit or legal proceedings on the ground that the company will be unable to pay the costs of the defendant if successful in the defence. YOUNG J., therefore, was merely concerned with the question as to whether proceedings for misfeasance are a suit or other legal proceedings for the purpose of security and on grounds of general policy it has always been held in england and also in this country that in such proceedings there could be no question of asking the liquidator to give any such security. The decision therefore, of the Allahabad High Court must be read as a decision holding that misfeasance proceedings are not a suit or other legal proceeding for the purpose of Section 280 only has no general application.

5. Similarly, Mr. Desai has drawn my attention to certain decision which hold that the provisions of Order XXIII, rule 3, civil Procedure Code, and Section 141, Civil Procedure Code, do not apply to proceedings under Section 153A. That section contains provision for faciliting arrangements and compromise, and whether proceedings under that section are not legal proceedings within the meaning of Section 141, Civil Procedure Code, is again a matter that will not enable me to determine whether misfeasance proceedings under Section 235, Companies Act, are legal proceedings in a court of law.

6. Reliance in next placed by Mr. Desai on a decision of BURKITT J. in Reference under Section 28 of Act VII of 1870. That decision was under Section 214, Indian Companies Act of 1882, which corresponds to Section 235 of the present Companies Act. BURKITT J. at the page 240 observes:

“It may be doubtful whether any `order’ in the strict sense of that word, as defined in the code Civil Procedure is passed by the winding up court under Section 214 of the Companies Act. That section seems to be the complement of Section 162 of the Act which gives to the winding up court large inquisitorial powers in order to enable it to get in the assets of the company under liquidation. when by virtue of these powers the court has satisfied itself that any director, manager, officer &c., has been guilty of malpractices, the court may then take action under Section 214, and on the application of a liquidator, creditor or contributory after examining into the conduct of the director, manager, &c., may compel the latter to repay money or to contribute to the summary power to compel defaulting directors and other officials to repay money misappropriated or contribute money to the assets of the company by way of compensation.

It is at least doubtful whether the result of proceedings under Section 214 can be considered to be an `order’. The proceedings leading up to such an order, if it be an order are not in the strict and technical sense judicial proceedings at all. No procedure is imposed at any stage, no person need be formally cited, no plaint need be filed no party has a right to prove his case in such a way as he chooses. The whole power is in the court, which may examine into the conduct of the person complained by way of compensation. The word `compel’ seems to contemplate an order entirely distinct from an order adjudication upon the rights of parties. It presupposes, not a formal adjudication, but simply a conviction in the mind of the court that such order as it is going to make is just. The Act contemplates no order by way of formal adjudication upon the matter of right. That which it authorities is a compulsory, that is to say, an executive, order. But it by no means follows that it is an order having the force of a decree. It certainly is not a decree.”

7. Now with the outmost respect to the learned Judge, I find it quite impossible to follow the reasoning or logic of this judgment to to accept what is laid down. the proposition that there can be in a court of law any such thing as an executive order is to my mind startling in the extreme, and any proceedings instituted in a court of law under any law, and certainly under Section 235, Companies Act, are in my opinion, “legal proceedings in a court of civil jurisdiction” within the meaning of that expression in Section 141, Civil Procedure Code. The fact that the word “compel” appears in Section 235, Companies Act, cannot render the order made by the court under that section an executive order because every decree or order of a competent court has a compelling effect and does not by reason of that fact become an executive order. I cannot also agree that the court is not bound to follow any procedure or to observe any rules in relation to proceedings under Section 235. The normal procedure of the court would undoubtedly apply, although the power given to the court under this section may be of a summary character. I am therefore, quite unable with respect to the learned Judge, to treat this case as any authority for the proposition that proceedings for misfeasance are no judicial proceedings and that the order resulting from such proceedings is an executive order, I am quite unable to see. I may also point out that this judgment of BURKITT J. has been expressly dissented from by the Lahore High Court in Mulk Raj v. Official Liquidator, Peoples bank in which MONROE J. after citing the passage from the judgment of BURKITT J. which I have have referred to,observe at page 662:

“With great respect, I dissent from almost every proposition contained in this passage. I venture to assert that since this section was passed in 1862 as section 165, Companies Act, 1862, proceedings taken under it have been judicial proceedings-and the authority for this assertion is to be found in almost every reported case.”

8. I am, therefore, not prepared to treat the decision of BURKITT J. in Reference under Section 28 of the Act VII of 1870 as an authority for the proposition which Mr. Desai wishes to canvas that proceedings under Section 235, Companies Act, are not legal proceedings in a civil court.

9. There is, on the other hand, authority for the proposition that they are legal proceedings. In Kanshi Ram v. Hindustan National Bank TEKCHAND J. held that a court can levy an attachment before judgment in a misfeasance summons. What was urged was that order XXXVIII, rule, 5 Civil Procedure Code, which deals with attachment before judgment was inapplicable to proceedings under Section 235, Companies Act. this was a point No. 1 raised by Mr. Mool Chand who argued the case, and this point was disposed of by the learned Judge by stating:

“In my opinion there is no force in points Nos. 1 and 2 taken by Mr. Mool Chand. Under Section 141, Civil Procedure Code, the procedure provided in the Civil Procedure Code in regard to suits the procedure as far as it can be made applicable, to all proceedings in all courts of civil jurisdiction. Now it cannot be denied that proceedings under the Companies Act are proceedings in a court of civil jurisdiction. A liquidation court has, therefore, in a proper case, power to make an order of attachment before judgment in accordance with the provision of order XXXVIII, rule 5, civil Procedure Code.”

10. Again in Mulk Raj v. Official Liquidator, Peoples bank to which I have already referred earlier, the question whether an application under Section 235, Companies Act, is in the nature of appellant, and therefore the provision in the Civil Procedure Code relating to a plaint apply to such an application. the Division Bench held that the application was in the nature of a plaint and the proceedings under Section 235, companies Act, were judicial proceedings, but they held that the provisions of the code relating to the plaints did not apply to a petition under Section 235 because express provision for the contents of that petition were to be found in the Companies Act itself and the rules made thereunder. As i have pointed out earlier, MONROE J., who tried the case in the first instance expressly dissented from the view of BURKITT J.,and TEK CHAND J., who delivered the judgment of the Division bench proceeded on the footing that the proceedings under Section 235 were judicial proceedings in a civil court. In my opinion the view taken in the last two cases to which i have referred is the correct view of the proceedings under Section 235, Companies Act, and they are judicial proceedings in a court of civil jurisdiction which attract the provisions, of section 141, Civil Procedure Code, and therefore order XXIII, rule, 3, Civil Procedure Code, is applicable to such proceedings.

11. It is next urged on behalf of respondent 8 that assuming that order XXIII, rule 3 applies, there must be a lawful agreement by which a suit or legal proceeding has been adjusted and it is urged that there is no such lawful agreement in the present case because firstly, a liquidator cannot compromise a misfeasance claim, and, secondly, because if he can he can only do so with sanction of the court, and the requisite sanction has not been obtained in the present case. Now, with regard to the first of these contention, it is no doubt true that proceedings under Section 235 are not in all respects analogous to a suit. If in such proceedings the liquidator succeeds in establishing that a particular amount of damage has been caused by reason of the conduct of any of the persons against whom the summons is taken out, the court is not bound to make na order that such damage should be ordered to be paid by such parties. the court has to make such order as it thinks just and my order no payment or may order any amount to be paid up to the maximum; but it does not necessarily follow therefrom that a liquidator is not a litigating party in these proceedings. He may have na order for costs made in his favour if the misfeasance summons succeeds and he may have an order for costs made against him and in some cases even against him personally if he fails. But of course the powers of a liquidator are circumscribed by the provision of the Indian Companies act and he is not free, as a private litigant would be to compromise any legal proceedings as he deems best. Section 234(1)(iii) provides inter alia that :

“The liquidator may, with the sanction of the court,….compromise…al claims present or future, certain or contingent subsisting or supposed to sussist between the company and a contributory or alleged contributory or other debtor or person apprehending liability to the company and all question in any way relating to or affecting the assets or the winding up of the company, on such terms as may be agreed, and take any security for the discharge of any such call, debt, liability or claim, and give a complete discharge in respect thereof.”

12. This section is, in my opinion, wide enough to cover compromise of claims in the nature of misfeasance which are claims against a “person apprehending liability to the company” and which in any event are “questions relating t or affecting the assets or winding up of the company”. It is, however, urged that the marginal note to this section is “General scheme of liquidation may be sanctioned” and the provisions of the section which I have set out above ought to read in the context of the marginal note. That I fear ion sanctuary to the cardinal rules of interpretation of statues, a marginal note cannot control the meaning of the plain words of a section and indeed in this case it is pertinent to point out that the provisions of this section are a substantial reproduction of the English Companies Act, 1948, Section 245 (1) (d), (e) and (f). The marginal note of english Act is “Powers of liquidator”. the powers which are set out in that Section under sub-section (a), (b) and (c) have been separated in our Act and are to be found under Section 1179 which retains the marginal note under the English Act, viz., “Powers of official liquidator”. Apparently, when the English section was split up into two,a new marginal note was given to Section 234, but it is in any event apparent that the provisions contained in Section 234(1) of our Act are consistent with the marginal note “Powers of liquidator”, which occurs as the marginal note to the section in which corresponding provisions appear under the English Companies Act. In my opinion, therefore, there is power in the liquidator to compromise a misfeasance claim, subject to the sanction of the court. This is also borne out by two two forms to be found in Palmer’s Company Precedents, 16th Edn., Part 2. Form 646 at page 598, is a form of an order by consistent compromising misfeasance claims, and the form of the order inter alia contains the following:

“And the court being of opinion that the compromise is in the interest of the creditors of the above named company both hereby sanction such a compromise.”

13. There is another form viz., form NO. 761 at page 615 under the heading “liberty receiver to compromise misfeasance claim against two respondents and abandon against another”. It is clear, therefore, that a misfeasance summons is capable of being compromised by the liquidator, subject to the sanction of the court.

14. The next question, however, that is raised is whose sanction must the liquidator obtain. there is no doubt that under Section 234 (1), to which I have referred the sanction is that of “the court”, and “court” has been defined in the Indian Companies Act as the court is the High Court of Bombay. But it has been possible to advance an argument as to who should sanction this compromise by Chief Justice which provides that a misfeasance summons shall be heard by a Judge other than the Judge who deals with the winding up of the particular company, whilst all applications and matters arising in the course of the winding up of the company including applications made by the official liquidator for directions are heard by the Judge who makes the winding up order. The result has been that in this case whilst the winding up order was made by my learned brother COYAJEE J. and all proceedings in the winding up are heard by him and directions to the liquidator are given by him, the misfeasance summons was heard by me, it having been assigned to me by the Chief Justice for disposal. This compromise was placed before COYAJEE J. and it is the case of all the respondents other than respondent 8 that it has received the sanction of COYAJEE J. But what is urged by Mr. Desai is that even if such a sanction has been received, the only court that could give the sanction is the court that heard the misfeasance summons, because Mr. Desai urges that under Section 235 a liquidator cannot come up to a compromise with the persons against whom the misfeasance summons is satisfied that a such a compromise is just and ought to be sanctioned, the power of the court under Section 281(1) Indian Companies Act, being to make a such order as it deems just. Mr. Desai also relied on the provision of Section 281(1), Indian companies Act which gives power to the court to grant certain duty or breach of trust. Mr. Desai, therefore argues that Section 235 and Section 281 should be reas together and the only court that can give the sanction is the court hearing the misfeasance summons. this matter becomes of some importance because if there is no concluded compromise until the sanction is received, then, no sanction having been so far obtained from the court which heard the matter, there would not be a lawful compromise and respondent 8 can back out of it.

15. Now, after the administrative order to which I have made reference was made, there was an occasion on which a compromise such as the present one had to be sanctioned. In the case of the A.B.C. Bank of the company was ordered to be wound up by me and all the proceedings including any directions to the liquidator were taken before me but the misfeasance summons was assigned by the chief Justice to SHAH J. When it was sought to compromise that misfeasance summon a question arose as to who would give the sanction and when the liquidator came to me for directions, I referred him to chief Justice to ascertain to whom this particular matter of granting a sanction should be referred, whether to me or to my brother SHAH J. Accordingly the liquidator’s counsel obtained directions from the Chief Justice which were to the effect that I should deal with the application for sanction of the compromise. I heard the liquidator’s counsel on a report made by the liquidator need not proceed further with the misfeasance summons, the liquidator need not proceed further with the misfeasance summons against the parties. That precedent was followed in the present proceedings and therefore the liquidator went to COYAJEE J. for sanction

16. Now, of course there is nothing in the companies Act to indicate that the court referred to in the different section can be different courts in the sense of two different Judges dealing with the proceedings arising out of and in connection with the liquidation and therefore the sections as they stand cannot, in my opinion have, contemplated one Judge dealing with the misfeasance summons and another Judge being in a position at the same time to give directions to the liquidator, to proceed or not to proceed with the misfeasance summons or to accept a compromise thereof. However, that position exists by reason of the administrative order, and I am therefore bound to determine which court, viz., the company judge who deals with the liquidation or the Judge dealing with the misfeasance summons, is the proper court to grant the sanction.

17. Now, in the case of an ordinary suit of proceeding by a liquidator he cannot compromise that it without the sanction of the court and that sanction is quite obviously to be obtained by way of directions from the company Judge who deals with all applications including applications made by the official liquidator for direction. One such direction have been obtained, the court lying the suit will not be concerned with any compromise effected in that suit nor would it be the duty of such court to satisfy itself that the compromise was for the benefit of the creditors, that function having already been performed by the company Judge directions to the liquidator. The question is whether the position is the same under Section 235. Now, as i have pointed out earlier, the power of the liquidator to compromise proceedings under Section 235 is to be gathered from Section 234(1)(iii), and if that is so, the sanction that the liquidator wants to compromise of the misfeasance summons is the sanction of the court which gave him direction as to the compromise. those directions can, in my opinion, be validly given by the Judge assigned as the company Judge with the power and the duty to give the directions to the official liquidator. When a judge of the High Court which is the court under the companies Act has once applied his mind to the facts of a case and come to the conclusion that the compromise is for the benefit of creditors and contributories and sanctions it, and Judge trying the misfeasance summons is not called upon to determine whether the compromise is just and need to apply his mind afresh to the same question, although of course if there was no court other than the court which tried the misfeasance summons which give directions to the liquidator, it would be the duty of the court trying the misfeasance summons to apply its mind to the compromise and to determine whether or not it was just and whether it was for the benefit of the general body of creditors and contributories. In my opinion, therefore, the sanction that was required was not the sanction of the court trying the misfeasance summons as that court happened to the presided over by a different individual than the court which had been assigned the duty to give directions to the liquidator. therefore, the preliminary submission of Mr. Desai that there was no authority in the liquidator to compromise and that he had in hay event not obtained sanction from the requisite court is in my opinion, unsustainable and must fail.

18. That brings me to facts of the notice of motion. the misfeasance summons was actually being heard before as on 4th November, 1952, when an offer was made on behalf of Respondents 2 to 6 and 8 to Mr. Seervai on behalf of the liquidator that these respondents shall between them a pay a sum of Rs. 20,00,000 to be allocated between them by sir Jamshedji Kanga. When this offer was communicated to Mr. Seervai he was willing to accept it provided the responsibility of all the respondents concerned was joint and several, as he had some doubts as to the ability of respondent 3 to pay whatever amount that might be allocated to him. thereupon respondent 8 came forward to guarantee the amount that may be ultimately payable by respondent 3 and Mr. Seervai accepted this compromise subject to the sanction of the court, and indeed applied to me in court for an adjournment of the hearing on the ground that he had accepted the compromise subject to the sanction of COYAJEE J. Thereafter on 5th November, Sir Jamshedji heard all the parties in his chambers, but he did not give any decision as to the allocation and deferred it until COYAJEE J. had sanctioned the compromise. That sanction was given on the morning of the 6th November, and was communicated to the attorneys of the parties and to Sir Jamshedji. thereupon Sir Jamshedji on the 7th of November in the morning gave his decision making the allocations. On that very day at 3-30 p.m. respondents 8 told Dr. Banaji, who was then liquidator that he did not wish to abide by the guarantee.

19. On the same day the liquidator’s attorney’s addressed a letter to the attorney’s of all the respondents concerned intimating to them that the compromise had been sanctioned on the 6th instant and the allocations made by sir Jamshedji on the 7th. the letter further intimated that as the parties wanted to apply to the company judge for instalments, his LOrdships had fixed 11th November at 11 a.m. for the purpose. It appears that for some reason the appointment made for 11th November, 1952, was not adhered to, but the parties then appeared in the chambers of the learned Judge on the 17th November, 1952. Minutes of this meeting have been kept and initialled by the learned Judge. I will refer to them latter in connection with the allegation that no sanction was in fact given. At this meeting it was intimated to the learned Judge that Messrs. Amarchan & Mangaldas proposed to take out a notice of motion without fixing any date. this notice of motion was subsequently taken out.

20. On the affidavits that have been on this notice of motion, the several points that have been urged on behalf of respondent 8 are; (1) that the compromise or rather the offer for a compromise was subject to instalments being agreed upon between the liquidator and the respondents concerned in respect of the amounts allocated by Sir Jamshedji; (2) that the offer was not in fact accepted by Mr. Seervai but wa only to be placed before the learned judge; (3) that the offer was not sanctioned by the learned Judge; (4) that the guarantee which respondent 8 agreed to at one time was withdrawn by him on 5th November, 1952, at the meeting held in the chambers of Sir Jamshedji; and (5) that the sanction by COYAJEE J. if any was not communicated to respondent 8 before in any event he withdrew the guarantee at 3-30 p.m. on the 7th.

21. As these question were questions of fact and as numerous affidavits have been made by the parties and their attorneys, contrary to the usual practice, I thought it best to have issues raised on this notice of motion so that the matters in dispute between the parties were crystalised and on the basis of these issues. Mr. Maneksha led the evidence of three counsel, Sir Jamshedji Kanga, Mr. Joshi who appeared with Mr. Seervai for the liquidator, and Mr. Mohanlal Shah who appeared for respondent 8. He also led the evidence of Mr. Mangaldas, Mr. Thakkar and of Mr. Indravadan, solicitor. As against this case of evidence the eight respondent did no think fit either to go into the witness box himself or to call his attorney Mr. Parekh who is supposed to have been present at all material occasions. I do not, therefore, propose to deal at any length with the evidence recorded, as it is all one-sided and of people whose credit has not been challenged in any manner whatsoever. I will therefore, shortly state what the position is on this evidence with regard to the several defences that have been raised on behalf of respondent 8.

22. So far as the plea that the offer was subject to instalments being agreed upon is concerned, it appears that all parties contemplated that they would apply for instalments to the learned Judge. But everyone of the witness who was asked whether this was a condition of the offer burden was on respondent 8 to show that it was either a condition of the offer or that the offer was subject to instalments being agreed upon subsequently, and, in my opinion, respondent 8 has filed to discharge that burden.

23. With regard to the acceptance of this offer by Mr. Seervai it is on affidavit that it was stated in court before me at the hearing of the Chamber Summons that Mr. Seervai had accepted the offer made subject to the sanction of the court and it was upon such statement being made that I adjourned the matter. The fact is not denied even by counsel for respondent 8 who was present in court when the statement was made. But since the matter had been put in issue, Mr. Joshi who appeared for the liquidator and Mr. Indravadan who was the solicitor for the liquidator have both given evidence to show that the offer had been accepted by Mr. Seervai on behalf of the liquidator subject to the sanction of the court. I accept their evidence and I have no hesitation in holding that the offer was so accepted.

24. Reliance is, however, placed by counsel for respondent 8 on the report made by the liquidator for obtaining the sanction of the learned Judge in which it is stated that the offer has been made, that the liquidator has been advised by counsel that the offer is reasonable and should be accepted and the liquidator asked for directions of the court. Now, it has always been the practice for the liquidator when he accepts an offer subject to the sanction of the court to make a report setting out the offer and ask for the directions of the court. It does not follow therefrom that the liquidator had not accepted the offer subject to the sanction of the court and this report, therefore in my opinion, does not prove that what Mr. Joshi and Mr. Indravadan stated in the evidence and what Mr. Seervai stated in open court before me was not the truth.

25. turning next to the sanction by COYAJEE J. it is true that the usual practice is for a Judge to endorse the sanction on the report of the liquidator. In this case there is no such endorsement and the reason assigned is that as it was known to the learned Judge that some parties intended to apply for instalments he intimated that he would make a final order after he had heard the parties regarding instalments. But he authorised Mr. Seervai to communicate to Sir Jamshedji that the compromise had been sanctioned. This is borne out by the evidence both of Mr. Joshi and of Mr. Indravadan and is further supported by the minutes of the meeting before COYAJEE J. on 17th November in which the learned Judge in terms states:

“P.C.-I have sanctioned the terms viz., that the six directors were to pay Rs. 20 lakhs and on that sanction Sir Jamshedji Kanga was to proceed to allocate the amounts between the six directors and on the statement that Anandji Govindji shah’s amount was guaranteed by Vadilal.”

26. there is therefore no doubt in my mind that the learned Judge did give his sanction as deposed to by Mr. Joshi and Mr. Indravadan. this sanction according to the respondents other than respondent 8 was communicated 8 on the morning of the 6th soon after it was actually given. the fact is denied. But Mr. Parekh is the only attorney of the parties who has not made any affidavit in this case nor he has gone into the witness box to deny that he was informed about this sanction. Mr. Mohanlal Shah and Mr. Indravadan have both deposed to the fact that Mr. Parekh was in the corridor near Sir Jamshedji’s chambers and informed those who were present that the sanction had been given. Mr. Thakkar also has given the same evidence. I have no hesitation in accepting the evidence of these three witness and I hold that the sanction was in fact communicated to Mr. Parekh on the morning of the 6th.

27. Then lastly, respondent 8 alleged that at the meeting before Sir jamshedji Kanga o the 5th he stated in terms to Sir Jamshedji that he had withdrawn the guarantee which he had offered on behalf of respondent 3. Sir Jamshedji in the witness box has denied that any such statement was made and so have the other attorneys who were present and who have given evidence. In addition to this, Sir Jamshedji deposed to the fact that Mr. Khandawala who appeared for respondent 2 in the course of his arguments stated that in allocating the amounts between the different respondents, sir Jamshedji should not to take into account their ability to pay because the only person whose ability was suspected was respondent and 3 and payment had been guaranteed on his behalf be respondents 8. This statement was made in the presence of all the parties. sir jamshedji does not Himself remember particularly whether Mr. Parekh or respondent 8 Vadilal evidence deposed to the fact that when this statement was made by Mr. Khandalawala, Mr. Parekh and vadilal were present and neither of them protested against this statements. I have therefore, no hesitation in holding that the guarantee was not withdrawn it later on at 3-30 p.m. on the 7th when he told Mr. Banaji that he had withdrawn it. But that was a withdrawal after not only the sanction of the court had been obtained but after even the allocation had been made by Sir Jamshedji kanga. and the withdrawal, in my opinion, is of no effect. therefore on all question of fact which were sought to be disputed be respondent 8 I must hold against respondent 8.

28. That still leaves some submission of law made on behalf of respondent 8 to be considered. the first submission that is made is that what is sought to be recorded as a compromise is not what COYAJEE J. sanctioned, viz., that the 6 respondents between them were to pay Rs. 20,00,000 the amount to be allocated by Sir Jamshedji and the amount payable by respondent 3 to be guaranteed by respondent but what is sought to be recorded is the actual amounts as allocated by Sit Jamshedji which have never received the sanction of COYAJEE J. Now it is true that after the allocation the matter did not go back to COYAJEE J. for sanction. But in my opinion, it was not necessary the compromise a term of which was that the amount of Rs. 20,00,000 was to be allocated by Sir Jamshedji, the moment such allocation is made, such allocation attracts to itself the sanction which was given by the learned Judge to the allocation being made by Sir Jamshedji. the fact that sanction was given in advance does not make it any the less an effective sanction.

29. Reliance has been placed by Mr. Maneksha in this connection on a decision of the Allahabad High Court in Himachal Singh v. Jatwar Singh. In that case there was an agreement between the parties that a certain person shall hear the matter and that the parties shall accept any statement that he may make before the court. A sworn statement was made by the said individual and a decree in accordance with such statement was duly passed. On an appeal against such decree, a Division bench of the Allahabad High Court held that the parties could not be permitted to realise from the agreement entered into by them and the decree must stand. In the course of the judgment of the Division Bench consisting of SULAIMAN Kanhaiya Lal JJ. their Lordships inter alia observed at page 712:

“It may also be said that the parties really compromised their dispute in this manner that they agreed that the decree of the court shall be in accordance with the statement to be made by their nominee thereafter. there is nothing to prevent the parties from compromising the suit and agreeing to a decree being passed in terms to be stated by a person named. such an agreement, therefore, would be an adjustment of the suit and it is difficult to see how any party could be allowed to go back on it.”

30. My answers to the issue, therefore will be: (1) In the negative. (2) In the affirmative. (3) In the affirmative. (4) In the negative. (5) and (6). they have not been argued before me, but prima facie I do not see why either the Exchange Bank or the respondents other than those who are concerned with the compromise should have been parties to this notice of motion. I therefore answer the two issues in the negative. (7) In the affirmative. (8) In the affirmative. (9) In the negative. (10) In the negative. (11) this issue has been raised on the footing that respondent 8 in any event had made the offer with the condition that instalments would have to be agreed upon and therefore if other parties looked upon the offer or accepted it on any other understanding the parties were not ad idem. As I have told in my judgment respondent 8 has given no evidence whatever to prove that he made this offer with this reservation. The answer to the issue, therefore, will be in the negative. (12) In the negative. (13) does not arise. (14) In the affirmative. (15) In the affirmative. (16) In the affirmative.

31. The notice of motion will, therefore, be made absolute. As regards costs, respondent 8 will pay to respondent 4 the costs of the notice of motion. He will also pay another set of costs to the official liquidator. As regards respondent 2,3,5,and 6, they are all in the same interest and although they might have been represented by different attorneys and were justified in making separate affidavits of themselves and their attorneys, in my opinion, except as to respondent 3 with whose case I will presently deal, respondent 2,5,and 6 were not entitled to brief separate counsel, because their interest were one and they should have appeared in court through one counsel only. therefore costs will be allowed to them only on that footing. so far as respondent 3 is concerned,he also stands in the same position as respondents 2,5 and 6, but in these proceedings respondent 8 has thought it fit to allege that respondent 3 has promised to give security in order to induce respondent 8 to stand guarantee and as respondent 3 had ultimately failed to give security respondent 8 had to withdrawal his guarantee as he alleges he did. respondent 3 was therefore entitled to appear be separate counsel to protect his own interest against this allegation. Respondent 8 will, therefore, pay one set of costs to respondent 3 and he will also pay the costs of respondents 2,5, and6 in separate sets only with those reservation that costs will be taxed on the footing that one counsel shall be allowed between the three respondents. Costs to be taxed.

32. Order accordingly.


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