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Basudeo Ramgovind Vs. Vachha and Co. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtMumbai High Court
Decided On
Case NumberO.C.J. Appeal No. 12 of 1954
Judge
Reported inAIR1955Bom126; (1954)56BOMLR1136; ILR1954Bom1433
ActsCode of Civil Procedure (CPC), 1908 - Sections 35 and 145 - Order 8, Rule 6
AppellantBasudeo Ramgovind
RespondentVachha and Co.
Appellant AdvocateM.R. Parbia and ;C.C. Vaidya, Advs.
Respondent AdvocateH.M. Seervai, Adv.
Excerpt:
costs - attorney--lien--agreement between parties to settle suit with intent to deprive solicitor of his costs--equitable jurisdiction of court to protect solicitor when to be exercised--whether court can compel other side to pay costs of solicitor when payment made fraudulently by other side to solicitor's client--effect of notice by solicitor to other side that he has claim against his client for costs--whether court in exercising equitable jurisdiction, where agreement between parties to suit fraudulent, to consider whether solicitor could recover costs from his client. ;when an agreement is arrived at between the parties to a suit and the intention of the parties in arriving at the agreement is to deprive the solicitor of his costs, the court will interfere in its equitable.....facts one satyanarayanlal (plaintiff), who was carrying on business as a carpet merchant at bhadohi in banares filed a suit against basudeo (defendant) to recover rs. 35,000 odd in respect of certain consignments of carpets supplied by him to the defendant at bombay. the defendant by his written statement admitted a sum of rs. 6,000.on january 10, 1960, the plaintiff took cut a summons for attachment before judgment, and the property of the defendant, including certain carpets, was attached. on march 8, 1950, an order was made in chambers by bhagwati j. raising the attachment, the relevant portion of which was as follows:'i do by and with such consent order that upon the defendant depositing in court a sum of rs. 5,000 on or before the 10th day of march 1950 to the credit of this suit and.....
Judgment:

FACTS

One Satyanarayanlal (plaintiff), who was carrying on business as a carpet merchant at Bhadohi in Banares filed a suit against Basudeo (defendant) to recover Rs. 35,000 odd in respect of certain consignments of carpets supplied by him to the defendant at Bombay. The defendant by his written statement admitted a sum of RS. 6,000.

On January 10, 1960, the plaintiff took cut a summons for attachment before Judgment, and the property of the defendant, including certain carpets, was attached. On March 8, 1950, an order was made in chambers by Bhagwati J. raising the attachment, the relevant portion of which was as follows:

'I do by and with such consent order that upon the Defendant depositing in Court a sum of Rs. 5,000 on or before the 10th day of March 1950 to the credit of this suit and hereby further undertaking to hand over to the Court Receiver appointed Receiver herein as hereafter provided the carpets mentioned in List 'B' hereto by way of security for the Plaintiff's claim in suit.....And I do by and with such consent further order that the said Receiver be and he is hereby at liberty to sell the said carpets from time to time at the best rates with the consent of both the parties hereto or by order of this Hon'ble Court and I do by and with such consent further order that the said. Receiver do retain the net sale proceeds of thesaid carpets. In his hands and when the aggregate amount of the said net sale proceeds after deducting his costs, charges and expenses and commission comes to Rs. 8,000 or more the said Receiver to retain in his hands out of such net sale proceeds a sum of Rs. 8,000 to the credit of the above suit and do pay the excess of the net sale proceeds over the said sum of Rs. 8,000 and deliver the unsold carpets if any to the Defendant Immediately thereafter....'

Pursuant to this order the defendant deposited in Court the sum of Rs. 5,000.

On December 11, 1950, a consent order was taken out by the parties for discharging the Receiver, the relevant portion of which was as follows:

'.....Upon hearing Messrs. Vachha & Co.,attorneys for the Plaintiff who state that Seth Jaigopal Gangabishan has by his letter dated 28th November 1950 guaranteed payment to the Plaintiff of the amount of the Decree that may be passed against the Defendant in the above suit to the extent of Rs. 8,000 over and above the sum of Rs. 5,000 deposited in Court to the credit of the above suit the parties here have agreed that the Receiver appointed herein to take charge of the 145 carpets pursuant to the said consent order should be discharged.'

Before the plaintiff's suit came on for hearing, the plaintiff's attorneys, Vachha & Co. (applicants), and the defendant's attorneys, Benjamin & Co., received a letter dated September 23, 1953, signed by the plaintiff and the defendant to say that they had entered into an agreement to settle the suit. The agreement which was annexed to the letter was in the following terms:--

'This agreement made at Bombay this 23rd day of September 1953 between Satyanarayanlal Mahavirprasad Gupta (the sole proprietor of Carpet Museum of Bhadohi, Dist. Benares) hereinafter called the first party and Basudeo Ramgovind Misra (the sole proprietor of Misra Carpet Co., Bombay) hereinafter called the second party. Whereas the first party used to send carpets to the second party on consignment basis and had an account between the parties in respect of the aforesaid dealings. The first party was claiming from the second party about Rs. 36,000 (Rupees thirty-six thousand only) the second party disputed this liability to the first party about that alleged claim. Thereupon the first party filed a suit in the High Court of Judicature at Bombay against the second party being suit No. 36 of 1950. In the said suit a sum of Rs. 5,000 (Rupees five thousand only) were deposited by the second party in Court to the credit of the above suit and gave surety of Seth Sitaram Jaygopal for the sum of Rs. 8,000 (Rupees eight thousand only). At the request of both the parties Seth Narayandas intervened and brought about the settlement between the parties on the following terms and thus above suit is settled between the parties as follows:--

1. The second party to pay to the first party the sum of Rs. 14,500 (Rupees Fourteen thousand five hundred only) in full settlement of the claim of the first party against the second party in the said suit No. 36 of 1950.

2. The second party has this day paid to the first party the said sum of Rs. 14,500 (Rupees fourteen thousand five hundred only) as follows:--

(a) Rs. 12,800 (Rupees twelve thousand eight hundred only) in cash through the said Seth Narayandas.

(b) Rs. 1,700 (Rupees seventeen hundred only) by pledging four sets of ornaments containing about twenty four tolas of gold a list where of is hereto annexed as Ex. 'A' by way of security of Rs. 1,100. The second partyagrees to repay to the first party the said sum of Rs. 1,700 within six months from the date hereof and the first party on payment of the said sum by the second party to return the said ornaments to the second party.

3. The first party has agreed and undertaken to get the said suit No. 36 of 1950 dismissed in Court for non-appearance of the parties immediately on the signing of this agreement and has also agreed to Inform his solicitor to act accordingly Immediately on signing of this term.

4. Save as aforesaid neither party has any claim against the other.

5. The first party has no claim in the sum of Rs. 5,000 deposited by the second party in the High Court in the credit of the above suit and the solicitor of the second party shall be at liberty on behalf of the second party to withdraw the said sum of Rs. 5,000 (Rupees five thousand only) from the Court deposited by the second party to the credit of the. above suit. The first party or his attorney or his solicitor will not object or stop the second party or his solicitor from withdrawing the said sum of Rs. 6,000 from the Court in any circumstances.

6. The guarantee, given by Seth Sitaram Jaygopal on behalf of the second party as suretyfor payment of the said sum of Rs. 8,000(Rupees eight thousand only) to the first partyin the above suit is hereby cancelled.

7. The first party has no claim whatsoever ' against the second party in respect of the above suit or any other proceedings and indemnifies the second party from all claims by the other party in respect of the above suit and other proceedings.

8. Each party to bear his own costs of thesuit and other proceedings.'

On October 5, 1953, the applicants (plaintiffs attorneys) took out a chamber summons, seeking 'inter alia' the following reliefs:--

'(a) That it may he declared that the applicants have a lien and charge on the sum of Rs. 5,000 deposited in Court by the defendant on or about the 8th day of March 1950; pursuant to the order herein dated the 8th day of March 1950 for payment of the balance of their taxed costs charges and expenses in the above suit between attorney and client as attorneys for the plaintiff abovenamed;

(b) That it may be declared that the applicants have a lien and charge on the sum of Rs. 1,700 payable by the defendant to the plaintiff under the agreement dated the 23rdday of September 1953 between the plaintiff and the defendant being part of Ex. B to the affidavit of N.B. Desai in support for paymentof the balance of their taxed costs charges and expenses in the above suit between attorney and client as attorneys for the plaintiff abovenamed;

(c) That the defendant do pay to the applicants the balance of the applicants' costs charges and expenses of the above suit between attorney and client as attorneys for the plaintiff abovenamed when taxed to the extent of Rs. 7,800;

(d) That pending the taxation of the applicants' bill of costs and the payment of the balance thereof by the plaintiff, to the applicants, the defendant may be restrained by an order and injunction of this Hon'ble Court from withdrawing from this Hon'ble Court Rs. 5,000 deposited by the defendant on the 8th day of March 1950 pursuant to the order herein, dated the 8th day of March 1950;

(e) That pending the taxation of the applicants' bill of costs and the payment of the balance thereof by the plaintiff to the applicants, the defendant and the plaintiff may be respectively restrained by an order and injunction of this Hon'ble Court from paying and receiving the aforesaid sum of Rs. 1,700.'

Coyajee, J.

1. This is a summons taken out by the applicants who are solicitors who had acted on behalf of the plaintiff in suit No. 36/1950 and the summons asks for a declaration that the applicants have a certain lien for costs on a sum of Rs. 5,000 that has been deposited in Court in the circumstances that I shall set out hereafter. They also ask for a declaration that they have a further lien on the sum of Rs. 1,700 which is payable by the defendant to the, plaintiff under a certain agreement dated September 23, 1953.

2. The circumstances in which this application arises are as follows: The plaintiff filed this suit against the defendant and claimed a sum of Rs. 35,000 odd and in the alternative he asked for accounts under the directions of the Court in connection with a certain consignment of carpets. In the meanwhile evidently an attachment before judgment was levied on the carpets in the hands of the defendant and an order was made which is rather important. That was an order made on March 8, 1950, and that order is a consent order. Under that consent order the defendant agreed to deposit Rs. 5,000 to the credit of [his suit and the Court Receiver was appointed receiver of the carpets.

The amount as well as the carpets, it does appear from the order drawn up, were by way of security for the plaintiff's claim in the suit and further it was directed that after the sale of the carpets by the receiver he should keep in hand a sum of Rs. 8,000 and pay over the balance if my to the defendant. Evidently this consent order came to be passed because the defendant first admitted that he owed the plaintiff a sum of Rs. 6,000 and subsequently admitted that heowed the plaintiff a further sum of Rs. 5,000. In these particular circumstances it is quite clear that Rs. 5,000 plus Rs. 8,000 were the deposits made against' the admission made by the defendant that he owed Rs. 13,000 in any event to the plaintiff.

It is attempted to be said that this is a deposit on account of the suit and this amount may toe returned by the Court at the end of the suit to either party. I can conceive of a position where that is done, but here clearly where the deposit is made on admission and it is equivalent to the sum admitted by the defendant and the order itself says that it is by way of security for the plaintiff's claim, there is no room to my mind for the argument that at the end of the suit in spite of this admission any amount from this could be returned to the defendant.

3. it appears that pending the suit the plaintiff entered into an agreement on January 18, 1S5I, whereby he agreed to give a lien and a charge on this sum of Rs. 5,000 deposited in Court in favour of his solicitors. It is contended on behalf of the defendant before me that he was not aware of the existence of this document and I am quite prepared to proceed on the footing that the defendant was not aware of the existence of this document. It is argued in the affidavit in reply that this is a mere agreement.

4. Now, the case on behalf of the applicants is as follows: It is stated that pending this suit the parties came to a certain agreement and under that agreement which is dated September 23, 1953, the parties agreed that the defendant was to pay cash down to the extent of Rs. 12,800 and pay a further sum of Rs. 1,700 by pledging four sets of ornaments. It is also agreed that each party should bear his own costs of the suit and other proceedings but the important part of the agreement is that the defendant is to pay the plaintiff the said amount and it is the defendant's solicitors under the agreement who are to withdraw the sum of Rs. 5,000 deposited in Court.

I do not understand this circuitous manner of paying the costs of the defendant's solicitors. I can understand the defendant paying this amount less Rs. 5,000 already deposited in Court by him but I cannot understand the defendant paying the whole amount agreed upon in cash or partly cash and partly by security and allowing the defendant's solicitors to withdraw the amount of Rs. 5,000 deposited in Court.

5. It may be noted that on the very day that this transaction was put through certain documents were executed by a certain advocate called Badiani and on the same day, viz. September 23, 1953, a letter was written both by the plaintiff and by the defendant addressed to their solicitors fn which peremptory directions are given that the suit be placed on the board immediately and dismissed, and it is stated in that letter that it Is agreed that the plaintiff has no claim in the sum of Rs. 5,000 deposited by the defendant to the credit of the suit.

6. Now, it is contended on behalf of the defendant that this was a genuine settlement and a bona fide transaction add in these circumstances the Court should not give the declaration asked for, I may say that Mr. parpia has argued that this summons is misconceived as where allegations of fraud and collusion are made the Court should not proceed in this summary -manner but should refer the applicants to a regular suit. I may say that as pointed out by Corderoy on Solicitors, 4th Edn., p. 483:

'To make out a case of collusion it must appear that the object of the compromise is that the plaintiff should get more, while his solicitor . would get less, than each would otherwise receive. The collusion must be clearly established; but It may be inferred from the mere facts, or made out on respondent's own evidence.'

Applying common sense I have no hesitation in drawing the inference Corderoy 'refers to that this arrangement was deliberately made for the purpose of depriving the plaintiff's solicitors of the fruits of their efforts of having obtained this deposit of Rs. 5,000 into Court. Although I am drawing this inference on facts I may say that strictly speaking an inference, is not necessary, It is not necessary for the applicants' solicitors to establish this collusion and fraud, because even in the absence of such collusion and fraud once a plaintiff obtains a deposit from the defendant and that deposit Is made in Court,-under the Common Law of England applicable to the solicitors in Bombay that is sufficient notice even to third parties who have had no notice, of such deposit, and that has been clearly laid down in the case of -- 'Tyabji Dayabhai & Co. v. Jetha Devjl & Co.. (A)'. There a-series of English decisions were referred to and it was held that the English Common Law governed the rights and duties of attorneys in 'Bombay and that an attorney had at Common Law a lien for his costs over property recovered or preserved or the proceeds of any judgment obtained for the client by his exertions. A party attaching a decree whether for a sum of money or for costs attached it subject to a lien of the solicitor by whose efforts the decree had been obtained, and where a party attached a decree which directed payment of the costs to the plaintiff he had notice by that very fact that the plaintiff's solicitors might be entitled to an attorney's lien on that fund for the amount of their costs. In fact the mere fact of there being a fund in Court was sufficient to give notice to a third party of the possibility of the solicitor being entitled to a lien for his costs. So long as the Court had control over the fund, the lien was not liable to be defeated by a third party such as an assignee of a decree or an attaching creditor of the solicitor's, client even though the third party had no express notice of the lien. The authorities reviewed here need not be gone through, but it is clearly laid' down that where a fund is deposited in Court, it is sufficient notice of the fact that there would be a possibility of the solicitors' lien and even to third parties who have no express notice. In this particular Instance before me the amount was deposited by the defendant himself and it would be absurd on the part of the defendant to contend that he had no notice of the possibility of a lien by the applicants.

7. Mr. Kharabatta has referred me to. one. decision which I should like to refer to and that Is tlie case of -- 'Price v. Cronch (B)' where it was held that where a plaintiff and defendant compromise an action with the knowledge that they were so acting as to deprive the plaintiff's solicitors of their costs, such solicitors are entitled to have payment of their taxed costs of the action or for the continuance of the action for the recovery of such costs.

8. This brings me to the one argument advanced on behalf of the defendant by Mr. Parpia and that is as regards the nature of the proceedings that should be taken for the purpose of enforcing such claim. For that purpose he has referred me to a decision of the Calcutta High Court being a Judgment of Mr. Justice Bale in the case of -- 'Ramdoyal Serowgie v. Ramdeo (C)'. But I may at once point out that in the case before Mr. Justice Sale there was no fund in' Court at all and the solicitors applied for a declaration of a claim in the absence of any such fund and in fact during the argument the application for lien was in fact given up.

In that case the attorney applied for an order that the plaintiff and the defendant or either of them should pay him his taxed costs on the ground that they had fraudulently deprived him of his costs. It was held that in an action of the kind where charges of fraud are made it would be inconvenient to dispose of the issues on affidavits alone. Mr. Justice Sale pointed out that the claim so far as it rested on the alleged breach of lien was not pressed but the applicant relied on the facts which it was contended disclosed fraudulent collusion. Then he said that in those particular circumstances it was the practice of that particular Court not to dispose of the matter in a summary manner. In these circumstances this particular authority to my mind has no direct bearing on the question before me.

9. I am answering this question on two grounds: one is that on the admitted facts of the case the Court is entitled to draw an inferenee that this was an arrangement arrived at for the purpose of depriving the solicitors pf the costs. Secondly, I have come to the conclusion that even if that allegation was not there, there was sufficient notice that this fund was deposited for the purpose of satisfying the claim of the plaintiff and that these are the fruits of the solicitors' exertions and therefore I am satisfied that even in the absence of any allegation of collusion I would have passed the same order as I propose to pass.

The only other point is that apart from these Rs. 5,000 the applicants claim a lien on a certain amount of Rs. 1,700 which is part of the agreement. Now, it is contended by Mr. Parpia that although originally the sum was Rs. 12,800 to be paid and security in the sum of Rs. 1,700 in ornaments was to be given in fact the full payment has been made which is endorsed at the foot of the agreement which is handed over to me and this acknowledgment has been signed by the plaintiff. It appears that this is on the same day as on the day on which the agreement was arrived at, but since this endorsement isthere I do not propose to go into evidence whether this is collusive or not, and in those circumstances I will not allow the second prayer of the summons. I will, therefore, make the summons absolute in terms of prayer A. No order as-regards prayer B. I am allowing prayer C because logically on the footing of the authorities that were cited if the defendant has been in-strumental in depriving the plaintiff's solicitors of their costs in law he is liable to pay the balance of the costs. No order as regards prayer E. Order in terms of prayer D. The defendant will pay the applicants' costs of the summons. Counsel certified. Interim Injunction dissolved.

The defendant appealed against the order of the lower Court.

Chagla, C.J.

10. A very interesting question arises in this appeal as to the right of a solicitor to recover his costs not from his client but from the opposite party. The plaintiff filed a suit against the defendant for recovery of Rs. 35,000 odd and in the alternative for accounts from the defendant in respect of certain consignments of carpets-supplied by him to the defendant. The defendant by his written statement admitted a sum of Rs. 6,000 and his contention was that certain carpets were left with him and till they had-been sold full accounts could not be made up but he was prepared to hand over these carpets to the plaintiff thereby suggesting that the ownership of this property was of the plaintiff.

On March 8, 1950, an order was made in chambers by Mr. Justice Bhagwati. This order was on a summons taken out by the plaintiff for attachment before judgment. The carpets in suit had been attached and the defendant appeared to show cause and wanted the attachment to be' raised and the order that was taken on March 8, 1950, was that upon the defendant depositing in Court a sum of Rs. 5,000 on or before March 10, 1950, to the credit of the suit and further undertaking to hand over to the Court Receiver appointed Receiver herein the carpets mentioned in the list by way of security for the plaintiff's claim in suit the attachment before Judgment be raised. Now, pursuant to this order the defendant deposited in Court the sum of Rs. 5,000. With regard to the carpets this order further provided that the carpets should be sold by the Receiver to the extent of Rs. 8,000 and the sale proceeds should be retained by the Receiver as security for any decree that might be passed in favour of the plaintiff. If the carpets realised more than Rs. 8,000, the balance was to-be returned to the defendant.

Now, this order with regard to the Receiver taking possession of the carpets and selling them was varied on December 11, 1950, and it was provided by that order that upon one Jaigopal Gangabishan guaranteeing payment to the plaintiff of the amount of the decree that may be-passed against the defendant in the suit to the extent of Rs. 8,000 over and above the sum of Rs. 5,000 deposited in Court to the credit of the suit the parties agreed that the Receiver appointed to take charge of the carpets pursuant to the consent order should be discharged.Therefore, in substance the position was that the plaintiff was secured to the extent of Rs, 5,000 lying in Court and to the extent of Rs. 8,000 he had no longer the security of the sale proceeds of the carpets but he had security of the guarantee given by Jaigopal Gangabishan.

11. Now, it appears that in July 1953 the euit appeared on the warned list of Mr. justice Coyajee .and the plaintiff's solicitor gave plaintiff intimation of the fact and asked him to come down to Bombay. It may be stated that the plaintiff is a resident of Bhadohi in Benares. The plaintiff came down to Bombay in July 1953 but the suit did not reach hearing till the end of August. Thereupon an application was made by the plaintiff's attorneys to Mr. Justice Coyajee to expedite the hearing of the suit. This application was refused by the learned Judge.

On September 23, 1953, the plaintiff's attorneys received a letter signed by the plaintiff and the defendant, that they had entered into an agreement to settle the suit. The terms of the agreement were annexed to the letter and the agreement was that the plaintiff's claim was settled for Rs. 14,500. Rs. 12,800 were to be paid in cash by the defendant to the plaintiff and the liability for the balance of Rs. 1,700 under this settlement was to be discharged by the defendant by pledging his ornaments with the plaintiff and the defendant agreed to pay this sum by instalments and the sum being paid the pledged ornaments were to be returned by the plaintiff to the defendant. It was also provided by this agreement that the solicitors of the defendant were at liberty to withdraw the sum of Rs. 5.000 deposited in Court as already mentioned and the agreement also provided that the guarantee given by Jaigopal with regard to the payment of Rs. 8,000 was discharged.

It may be pointed out that ultimately instead of pledging the ornaments with the plaintiff the defendant paid to the plaintiff the sum of Rs. 1,700 in cash. Therefore, in substance the agreement came to this, that the defendant settled the plaintiff's claim which was for Rs. 36,000, for Rs. 14,500. He paid the sum of Rs. 14,500 in cash and the sum of Rs. 5,000 which had been deposited in Court was agreed to be withdrawn by the defendant's solicitors.

12. When the plaintiff's solicitors got intimation of this agreement they took out a chamber summons on October 5, 1953, and the relief they sought was first a declaration that they had a lien and charge on the sum of Rs. 5,000 deposited in Court, for payment of the balance of taxed costs. They also asked for a Hen and charge on Rs. 1,700 payable by the defendant to the plaintiff. They asked for this relief because looking to the terms of the agreement they were under the impression that Rs. 1,700 had not yet been paid by the defendant to the plaintiff. They also asked for the attorney client costs as plaintiff's ..solicitors to the extent of Rs. 7,800. Therefore, in effect they asked in all for Rs. 14,500 the sum which the defendant had paid to the plaintiff, as the plaintiff would be liable to pay to his attorneys this sure for costs of the suit.

13. The summons came before the learned Judge Mr. Coyajee and he granted relief to the attorneys with regard to Rs. 5,000, which was prayer A in the summons and also with regard to the payment by the defendant, of costs to the extent of Rs. 7,800. He refused relief with regard to prayer B dealing with the sum of Rs. 1,700, as that sum had already been paid, by the defendant to the plaintiff. It is against this order that the defendant has come in appeal.

14. Now, before we deal with the facts of this case it is necessary perhaps to reiterate certain principles with regard to the rights of solicitors which we think by now are fairly well-settled. A solicitor is undoubtedly entitled to proceed against his own client for the costs to which the solicitor is entitled in respect of the work done by the solicitor for his client. The Court gives many facilities to the solicitor to recover his costs from his client. He can get his costs taxed and on the issue of an allocatur he can get a pay-order from the Chamber Judge which he can execute as a decree. Therefore, the important facility that the Court affords him is that he need not file a suit against his client to re-cover his costs.

But there is one other facility which is equally important and that is- that the solicitor is entitled to come to this Court and claim equitable Interference by this Court on his behalf, and what we have to consider in this case is under what circumstances and within what limitations will the Court exercise its equitable jurisdiction in favour of the solicitor, because It must be borne in mind that prima facie it may seem rather unusual that a solicitor should come to this Court and ask the opposite party to pay him his costs although the solicitor has not worked for the opposite party and in a sense there is no privity between him and the opposite party.

Now, a solicitor is entitled to a lien on the fruits of his exertion. If anything is recovered in the litigation as a result of the exertion of the solicitor, the solicitor is entitled to a lien on that fund. If the fund is in Court and the solicitor approaches the Court, the Court would declare a lien on that fund and would prevent that fund from leaving the Court because the fund has come to Court as a result of the work done by the solicitor and the solicitor would have a right to that fund prior to his own

But here we are dealing with a case where there is an agreement between the parties. Now, this agreement was arrived at behind the backs of the respective solicitors. It was an agreement to settle the matter out of Court. Now, the ordinary proposition of law is that litigants have every right to settle their litigation without the assistance of the lawyers and even behind the backs of the lawyers. One must not overlook the primary fact that the litigation is that of the clients and not of the solicitors.

One must not also overlook the fact that costs are subsidiary to the merits of litigation. But what the authorities have laid down is that when an agreement is arrived at between theparties and the intention, of the parties in arriving at the agreement is to deprive the solicitor of his costs, the Court will interfere in its equitable jurisdiction and prevent the fraud being perpetrated. The Court will interfere either by declaring a lien on the fund if that fund is in Court or the Court will even go to the length of compelling the other, side to pay the costs of the solicitor if the Court is satisfied that the other side made payment to the solicitor's client with a view to deprive the solicitor of his costs and his conduct was fraudulent.

Now, in this case there is another way in which the solicitor can protect himself. A solicitor can always give a notice to the opposite party intimating to him that he has a claim for costs, against his own client. If such an intimation or notice is given, then however bona fide the agreement between the parties, the opposite party would pay to the client of the solicitor at his own peril because he had notice that the solicitor has a lien on the fruits of his exertion and the amount should not be paid to the other side because the solicitor has a prior claim for his costs. Therefore; the equitable Jurisdiction of the Court would only be exercised in two cases: (1) where there is collusion between the parties fraudulently to deprive the solicitor of his claim for costs, and (2) where the solicitor gives notice to the other party of the fact that he has a claim for costs against his own client. Now, in this case no question of notice arises, because the solicitors never gave notice to the defendant that they had a claim for costs against their client.

15. The question that we have to consider in this case is the question of collusion. Now, that question must be approached under two different heads: collusion with regard to Rs. 5,000 deposited in Court and collusion with regard to the payment of the balance toy the defendant to the plaintiff. The plaintiff's solicitors' case is that there was collusion with regard to the whole of the agreement and that they have a right to proceed against the defendant in respect of the amount of Rs. 14,500 paid by the defendant to the plaintiff, and inasmuch as the defendant paid this sum to the plaintiff in order to defraud the plaintiff's solicitors, to the extent of Rs. 5,000 deposited in Court they are entitled to a Hen on that sum and to the extent of the balance, inasmuch as those moneys are lost because the plaintiff has gone away with those moneys, the plaintiff's solicitors are entitled to call upon the defendant to pay the amount to them.

Now, in our opinion, as far as the question of collusion with regard to Rs. 5,000 is concerned, the matter is very simple. In our opinion it is difficult to conceive of a clearer and perhaps a grosser case than the one we have before us where a deliberate attempt was made to prevent the solicitors from taking away Rs. 5,000 deposited in Court in satisfaction of their claim for costs against their client. Even Mr. Parpia' who has done his best to urge upon us on behalf of his client that the whole agreement was bona fide and not tainted by any fraud or collusion had to concede that the agreement arrived at is of a most unusual and extraordinary character.

Here is the defendant who agrees to pay to the plaintiff a sum of Rs. 14,500. He has already paid Rs. 5,000 to the credit of the suit and which amount is lying in Court. He is so hard up that he can only pay Rs. 12,800 and for the balance of Es. 1,700 he agrees to pledge his ornaments, and yet instead of telling the plaintiff,

'I will pay you Rs. 9,500, the balance ofRs. 5,000 is already paid and which is lyingin Court and that would make up Rs. 14,500and my liability will be discharged'.

which is the obvious thing to do, he goes out ofhis way and agrees to pay the full amount ofRs. 14,500, ignoring arid overlooking the factthat he has already made the payment ofRs. 5,000. We should not say 'ignoring and overlooking' because with a touching considerationfor his own solicitor he provides in the agreement that liberty should be given to his ownsolicitor to withdraw the sum of Rs. 5,000 deposited in Court, intending to. deprive the plaintiff's solicitor of the lien on the sum of Rs. 5,000.

Now, Mr. Parpia has contended that there was nothing collusive in this agreement. The plaintiff had stayed for a long time in Bombay. He was tired of waiting in Bombay and he wanted to settle the suit and go back to his native place. Therefore, what he wanted was, as Mr. Parpia chose to call, spot cash. That is exactly what the plaintiff wanted. He wanted to walk away from Bombay with Rs. 14,500 leaving his solicitor to whistle for his costs, and that was exactly the arrangement to defraud the plaintiff's solicitors to which the defendant had agreed. It is obvious that the plaintiff must have told the defendant,

'Do not pay me Rs. 9,500 and make my solicitor withdraw the sum of Rs. 5.000 because I will never get the sum of Rs. 5,000. Give me Rs. 14-500 and you can take away Rs. 5,000.'

We, therefore, entirely agree with the learned Judge below that with regard to this withdrawal of Rs. 5,000 by the defendant's solicitors it was clearly intended both by the plaintiff and the defendant to defraud the plaintiff's solicitors.

16. Mr. Parpia says that when serious charges like collusion and fraud are preferred against a party the Court Should be reluctant to permit the solicitor to enforce his lien by a summary procedure and that the solicitor should be relegated to a suit. Now, Mr. Parpia is quite right that if allegations of fraud and collusion require evidence to be taken and the matter is of some complexity then the Court will not allow the solicitor to avail himself of the summary procedure.

But in our opinion we have here a case of 'res ipsa loquitur'. The agreement is so patent that the parties intended, to defraud' the plaintiff's solicitors and no useful purpose would have been served by compelling the solicitors to file a suit and therefore in our opinion the learned Judge was right when he refused to countenance the defendant's application that this matter should not be disposed of in a summary manner.

It has then been urged by Mr. Parpia that an opportunity should have been given to him tolead evidence' against the serious charge of collusion and fraud. Now, there was nothing to prevent the defendant from leading evidence. He never applied to the Court that evidence should be led or called. The practice is well known on the Original Side that where evidence is to be heard on a summons, the summons Is adjourned to Court and witnesses are called and the issue is decided by oral evidence. But here the parties obviously agreed to have this matter decided on affidavits and the learned Judge has decided the matter on affidavits, and it must be pointed out that merely looking to the terms of the agreement and considering its implications the only irresistible conclusion to which a Court would come is that the parties wanted to defraud the plaintiff's solicitors with regard to the sum of Rs. 5,000 deposited in Court.

17. Now, Mr. Parpia has contended that even if collusion is established, a solicitor is hot entitled to a lien unless he satisfies the Court that he is not in a position to recover the costs from his client. Mr. Parpia says that the result of making the order in favour of the plaintiff's solicitors would be to penalise the defendant by compelling him to pay over and above the sum of Rs. 14,500, for which the suit was settled, a further sum of Rs. 5,000. Mr. Parpia has drawn our attention to the averments made in the affidavit on behalf of the applicants in support of the summons that the solicitors had taken from the brother of the plaintiff a surety-bond and the brother was liable to pay the costs if the plaintiff failed to do so, and in his own affidavit the defendant has alleged that the plaintiff is a man of --substance and so is the plaintiff's brother.

Mr. Parpia says that it would be wrong to exercise our equitable jurisdiction to compel a party to pay the costs of the other side when the solicitors can recover the costs from his own client. Mr. Parpia says that the primary right of the solicitor is to recover the costs from his own client. Now, in putting this argument what is overlooked is that the reason why the Court exercises its equitable jurisdiction in a case where an agreement is arrived at between the parties in order to defraud the solicitors is to prevent the fraud being perpetrated.

Therefore, the consideration as to whether the solicitor can recover his costs from his own client or not will not weigh with the Court in exercising the jurisdiction. The Court is satisfied that an agreement is arrived at collusively with a view to defraud the solicitor and the solicitor comes to Court and tells the Court, 'prevent this fraud being perpetrated', and it is in order to prevent the fraud being perpetrated that the Court Interferes. If the defendant's solicitor was allowed to take away Rs. 5,000 the plaintiff and the defendant would succeed in carrying out their intention of defrauding the plaintiff's solicitor and therefore the Court Intervenes and prevents the sum of Rs. 5,000 from being taken away and declares a lien in favour of the plaintiff's solicitor.

18. Mr. Parpia has cited various decisions of this Court and also of other Courts to satisfy usthat before the Court exercises its equitable jurisdiction the Court must be satisfied that the solicitor cannot recover his costs from his own client. We have looked into those decisions and in none of those decisions was collusion or fraud proved. The matter would have been on a different footing if the agreement was a bona fide agreement and the solicitor came to claim a lien on the sum of Rs. 5,000. No decision has been pointed out to us where the collusion or fraud was established and the Court refused to help the solicitor and permitted the fraud to be committed.

19. Now, with regard to the question of the balance of costs, the matter stands on an entirely different footing. As we have pointed out, there is no law nor any principle which would prevent parties from settling their own disputes or litigation out of Court and behind the back of the solicitors. Prim a facie the settlement which the defendant succeeded in obtaining was a very favourable settlement. For all practical purposes the defendant had admitted that- he was liable to pay to the plaintiff a sum of Rs. 13,000.

What the plaintiff claimed was Rs. 36,000 and therefore by obtaining this settlement the defendant got himself freed from this litigation by paying of Rs. 1,500 and by providing, in the agreement that there was to be no order as to costs. If the defendant, instead of agreeing to pay the full amount of Rs. 14,500 to the plaintiff and allowing his (defendant's) solicitor to withdraw the sum of Rs. 5,000, had entered into a simple, honest and straightforward agreement to pay to the plaintiff a sum of Rs. 9,500, and giving credit for the sum of Rs. 5,000 deposited in Court, it would have been very difficult for the plaintiff's solicitors to attack the agreement.

There is hardly any suggestion in the affidavit of the applicants that there was anything fraudulent or collusive in the agreement between the parties with regard to the settlement of the suit for Rs. 14,500. The real grievance of the plaintiff's solicitors is that the defendant should not have paid the sum to the plaintiff because the defendant knew that the solicitors had a claim for costs against their client. Now, in- the first place we do not accept the contention that the defendant necessarily had notice. The solicitors might well have insisted upon proper advances being made by the plaintiff instead of very small advances as has happened in this case. Therefore, the defendant was under no obligation not to pay the amount.

That, obligation would only have arisen if the plaintiff's solicitors had given him notice, and the plaintiff's solicitors not having taken the precaution of giving notice to the defendant not to pay the amount to the plaintiff, he had every right to settle the suit and pay the amount bona fide to the other side. If notice had been given, then undoubtedly any payment made by the defendant would have been at his peril.

20. Now, Mr. Seervai has relied on certain circumstances as suggesting that the whole of the agreement was fraudulent and not merely the agreement with regard to Rs. 5,000. Mr.Seervai says that there was an admission of liability on the part of the defendant with regard to the sum of Rs. 13,000, that a Receiver was appointed, the carpets were to be handed over to him, he was to sell the carpets and to the extent of Rs. 8,000 keep the moneys with him. In other words the plaintiff would have been secured by having funds actually in Court to the extent of Rs. 13,000 and undoubtedly the plaintiff's solicitors would have a lien on that amount.

Mr. Seervai says that that order was varied by somebody giving a guarantee to the extent of Rs. 8,000, but the result of the guarantee was that the plaintiff could have enforced that guarantee under Section 145 of the Civil Procedure Code. Therefore, according to Mr. Seervai in substance the plaintiff's claim was secured to the extent of Rs. 13,000.

Now, there is all the difference in words between Rs. 8,000 being in Court and a lien of the solicitors attaching to it and the sum of Rs. 8.000 still to be recovered by proper process under Section 145 of the Civil Procedure Code. In the first place the right to recover Rs. 8,000 from the surety was the right of the plaintiff and not of the plaintiff's solicitors.

But Mr. Seervai says that the defendant should have known that to the extent of Rs. 13,000 it was intended to secure the plaintiff's solicitors by having the money in Court and with that knowledge he should not have paid the amount. Now, as we have pointed out before, it may have been unfortunate for the solicitors that instead of the original order with regard to the appointment of a Receiver being carried out a fresh order was substituted; but the result of the substitution of that order was that the plaintiff failed to get any fund in Court from the defendant to which the plaintiffs solicitors' Hen could be attached.. The defendant may have known that if Rs. 8,000 had been paid into Court the solicitors would have been secured. But there is no reason why it was not open to him to provide in the agreement that the surety should be discharged and he would pay Rs. 8,000 himself to the plaintiff.

After ail, the primary liability with regard to Rs. 8,000 was his own and not of the surety, and as we have already pointed out there is nothing in law which would prevent the defendant from paying RS. 8,000 to the plaintiff towards settlement of the claim. Therefore, Mr. Seervai has failed to point out to us any circumstance which would lead us to hold that the whole agreement was fraudulent and not bona fide. Even the learned Judge in his judgment has come to the conclusion with regard to the collusive nature of the agreement only with regard to the sum of Rs. 5,000. With respect to the learned Judge, he has not applied his mind to the question as to whether the agreement was collusive with regard to the rest of the claim.

Mr. Seervai says that if we hold that the agreement was collusive with regard to. Rs. 5,000, we must draw an inference that it was collusive with regard to the whole claim. Now, the matter of collusion or fraud is hot a matter inwhich the Court should lightly Infer that the party is guilty of fraud or collusion. It is true that ordinarily it is a matter of inference, but the inference must be such as is irresistible from the facts established. In our opinion on the facts established it is impossible to draw the inference that the object of the plaintiff or the defendant was to defraud the plaintiff's solicitors when, the defendant agreed to settle the claim for Rs. 14,500 and agreed to pay the amount to the plaintiff.

It might further be pointed out that it is very likely that when the plaintiff wanted cash from the defendant, he might have intended that his. solicitors should be deprived of their costs. But it is unnecessary to emphasise the fact that the collusion and the fraud contemplated by the authorities is collusion between the parties and the fraud intended to be practised by both the parties and not merely one party to the litigation. We refuse to draw the inference upon the facts established in this case that not only the plaintiff but the defendant had the intention to defraud the solicitors.

21. The result, therefore, is that the appeal will partly succeed and we will vary the order of the learned Judge by making the summons absolute only with regard to prayer A of the summons. No order as to costs throughout.

22. Liberty to the appellant's attorneys to withdraw the sum of Rs. 5,000 deposited in Court.

Shah, J.

23. In view of the importance of the question debated before us I propose briefly to state my reasons for the decision we have arrived at. Solicitors of this Court have always been regarded as officers entitled to special protection in respect of recovery of their costs from their clients. The jurisdiction exercised by this Court in that behalf has been inherited from the Supreme Court of Judicature at Bombay.

The special protection which is afforded to the solicitors in respect of costs takes several forms. A solicitor is entitled to a lien on a fund which has been collected or recovered by his exertions in any litigation. He is also entitled to an order from the Court for recovery of costs payable to him by his client and that order is enforceable as a decree of the Court, and he is not required to file a suit for recovery of costs payable to him by his client.

If by reason of his exertions a fund is recovered and that fund is lying in Court, the solicitor may obtain an order from the Court that the fund be paid over to him and if after his lien has attached his client seeks to assign the whole or a part of the fund, that assignment Will not operate to defeat the solicitor of his right to the fund. Similarly when costs have become payable to a solicitor by his client and the costs are not paid, the solicitor is entitled to ask the Court to pass a summary order against his client for recovery of his costs.

If a party to a suit with notice of the lien of a solicitor over a fund lying in Court colludeswith the party liable to pay costs with intent to deprive the solicitor of that Hen, the Court will not permit the lien to be defeated and will passsuch orders as may be necessary to effectuate the lien.

Again, if with notice of liability incurred by a party in favour of his solicitor for payment of costs the other party to a suit or proceeding pays an amount payable under a decree or order passed by the Court which may be regarded as fruits of the solicitor's exertions, the Court may order that party again to pay even the full amount to the solicitor to secure the solicitor's rights in respect of his costs.

24. In the present case an amount of Rs. 5,000 was lying in Court over which the applicants had a lien. That lien could not be defeated under any attempted diversion of the fund under the consent decree in the suit. It is true that parties to a litigation may compromise a litigation, and they may do so without the acquiescence - or even the knowledge of their solicitors; but a compromise entered into not for the bona fide purpose of ending a litigation butwith the object of defeating the right of the solicitor to recover his costs will not be permitted to have that effect.

The applicants lien attached to the fund as soon as it was brought into Court and the defendant must be deemed to have notice that when the fund was brought into Court, if the costs were not paid by the plaintiff to their solicitors the fund would be liable for those costs.

Now, the consent terms between the plaintiff and the defendant - on which the decree was passed were indisputably very unusual'. When the liability of the defendant for the claim of the plaintiff was settled at Rs. 14,500 and the defendant had already deposited Rs. 5,000 to the credit of the suit under the order dated March 8, 1950, a further payment of Rs. 9.500 would have fully satisfied the plaintiff's claim. But the parties chose to make an unusual provision that the defendant should pay Rs. 14,500 a part whereof was initially intended to be paid by pledging the ornaments of the defendant -- and the defendant's solicitors were then to have liberty to withdraw the amount deposited in Court.

No rational explanation consistent with good faith of the contracting parties is given for making that provision in the consent terms, and from the terms of the decree an inference can readily be drawn that the circuitous provision for payment by the defendant of the full amount in the first instance and the defendant's solicitor withdrawing the amount of Rs. 5,000, which initially was security for the plaintiff's claim, was made for effectuating the design of the plaintiff to defeat his solicitor's lien, and the defendant participated therein with full knowledge of that design. This Court is in the circumstances entitled to protect the applicants from being defeated in exercising their Hen on the amount of Rs. 5,000 lying in Court.

25. But in respect of the balance of costs payable to the applicants by the plaintiff, theapplicants are in my view not entitled to look to the defendant. There was no fund in Court on which their lien attached. The applicants had certainly a right to proceed against their client for recovery of the costs due to them: They could do so by obtaining a 'pay order' against the plaintiff. It need hardly be emphasised, that the liability for payment of costs is of the plain-tiff and not of the defendant, and the applicants must look to their client -- the plaintiff -- for payment of the costs due to them.

Undoubtedly if by collusion between the plaintiff and the defendant an attempt is made to defeat the applicants of their right against the plaintiff to recover costs which are payable to them, the Court may pass an order in the exercise of its summary jurisdiction directing the defendant to pay the amount, which he has paid over collusively or fraudulently to the plaintiff with a view to deprive the applicants of the costs. That is because the Court will not permit its officers to be deprived of their costs by collusive devices. But an order against a party other than the client of the solicitor will be passed where collusion or fraud is clearly established and not otherwise.

It cannot be said in the present case on the affidavits, filed that in paying the balance of Rs. 9,500 the defendant intended to assist the plaintiff in defeating the applicants' right to satisfy their claim out of the fruits of their exertions. Even in the absence of collusion or fraud in making the payment, an order can, it is true, be made where with clear notice that costs have not been paid or secured to the solicitor and that the solicitor claims the same out of the amount payable, the party liable to pay the amount pays it over to the client of the solicitor, the solicitor may be entitled to go against the party liable to pay that amount and to recover it. But such an order is made not because the third party is liable for the costs of the solicitor but because in equity the debt due by the third party is assigned or encumbered in favour of the solicitor and when notice is given the claim of the solicitor is paramount to that of his client.

The Court may, therefore, make an order for payment against a party other than the client of the solicitor where it is established that the party making payment to the client of the solicitor had clear notice that the solicitor's costs had not been paid and the solicitor was claiming costs due to him and the party liable had been called upon not to pay the amount to any one except the solicitor. When no such notice is given and payment is made which is not shown to be made collusively or with a view to defeat the right of the solicitor, the Court will not make an order against the party liable to pay the amount over again to the solicitor of the other party.

In the present case the amount of Rs. 7,800 claimed in paragraph C of the summons does not appear to have been paid after notice by the applicants to the defendant demanding that amount from the defendant. Nor is it established on the evidence that in paying the amount of Rs. 7,800 the defendant was acting either collusively or fraudulently.

26. In that view, I agree with the order proposed by my Lord the Chief Justice.

27. Order accordingly.


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