1. By order dated 21st August 1958. I called for a report from the District Munsif, Narasaraopet, on the following two questions:--
1. Whether the agreement of sale was executed bv the 1st respondent in the application (C. M. P. No. 4747 of 1956) and whether the petitioner was put in possession of the properties; and
2. Whether the compromise dated 30-7-56 entered into between the parties in the second appeal was a collusive and fraudulent one.
The learned District Munsif by his order dated 14th December, 1956, held that the agreement of sale was executed by the first respondent in favour of the petitioner. In paragraph 10 he found that the petitioner was in possession of the suit properties in pursuance of the agreement of sale. He further held in paragraph 11 that the compromise entered into between the respondents Nos. 1 and 3 was a collusive and fraudulent one.
2. The finding on point No. 1 is not attacked before me. So far as point No. 2 is concerned, Sri Konda Kotayya, the learned advocate for the third respondent contended that the conclusion drawn by the District Munsif was wrong. Having carefully gone through the report I have no doubt that the conclusion arrived at by the District Munsif on point No. 2 is right. The first respondent succeeded in both the Courts. He was also entitled to recover mesne profits from the third respondent and in the circumstances there was no need for the first respondent to enter into compromise but for cheating the rights of the petitioner. The next question is whether the third respondent did not have a similar fraudulent intention to affect the rights of the petitioner. The facts discussed in the report clearly lead to the conclusion that the third respondent was also a parly to the fraud. I, therefore, confirm the finding of the District Munsif on this question.
3. Sri Konda Kotayya, the learned advocate for the petitioner strenuously contended that the provisions of Order 1 Rule 10 and Order 22 Rule 10 did not apply to the facts of this case, and that the pelitioner ought not to be impleaded as a party to the second appeal for the purpose of opposing the compromise petition. Order 23 Rule 3 enacts that where it is proved to the satisfaction of the Court that a suit has been adjusted wholly or in part by any lawful agreement or compromise, the court shall order such agreement or compromise to be recorded and shall pass a decree in accordance therewith so far as it relates to the suit.
The first question to be, determined is whether by reason of the filing of the compromise petition on 30th June, the second appeal should be regarded as having come to an end, and no application under Order I Rule 10 and Order 22 Rule 10 should be entertained. In Lakshsn Chunder Dey v. Sin. Nikunjamoni Dassi, 27 Cal WN 755; (AIR 1924 Cal 188), a Bench of the Calcutta High Court held that as the decree has not been drawn up in terms of the compromise the suit should be regarded as pending at the time of the application.
A contrary view has been taken by a single Judge of the Madras High Court in Muthurama-linga Sethupathi v. Secretary of State, 50 Mad LJ 59: (AIR 1926 Mad 341). Kumaraswamy Sastry, J., states at p. 61 (of Mad LJ): (at pp. 341-342 of AIR) that as the compromise between the Union Board and the plaintiff was a lawful and valid one, the District Munsif had no power to add any party but he had only power to pass a decree in terms of the compromise. This decision is referred to with approval in Narayana Swamy Naidu v. N. Subbaramulu Naidu, 68 Mad LJ 236: (AIR 1935 Mad 394), by Pakenham Walsh, J.
In both the cases no reference is made to the decision of the Calcutta High Court. In Seethai Achi v. Meyappa Chettiar, 66 Mad LJ 517: (AIR 1934 Mad 337), a Bench of the Madras High Court preferred the view of the Calcutta High Court to the decision in 50 Mad LJ 59: (AIR 1926 Mad 341). The same point arose for decision once again in Nanjammal v. Eswaramurthi Goundar, 1954-1 Mad LJ 530: (AIR 1954 Mad 592). The learned Judges stated that it was unnecessary for them to express any final opinion on the question. Having carefully perused the authorities on this question I am inclined to think that on principle the view laid down by the Calcutta High Court is right. Having regard to the terms of Order 23 Rule 3 C. P. C. I hold that till a compromise decree is passed, the litigation cannot be regarded to have terminated.
4. The next question for consideration is whether the terms of Order I Rule 10 C.P.C. apply tc this case. Order 1 Rule 10, Sub-clause (2) provides that the court may at any stage of proceedings either upon or without the application of either party and on such terms as may appear to the Court to be just order that the name of any person who ought to have been joined whether as plaintiff or defendant or whose presence before the Court is necessary in order to enable the court effectually and completely to adjudicate upon and settle all the questions involved in the suit, be added. The petitioner who claims under the first defendant would certainly be bound by the decision in the second appeal. He would, therefore, be a proper parry to the second appeal. This view was taken by Oldfield, J. In Rajaratnam Iyer v. Kalasyasundaram Iyer, 44 Mad LJ 322: (AIR 1923 Mad 521).
5. It was strongly contended on behalf of the third respondent that the provisions of Order 22 Rule 10 would not apnly to the case as no registered sale deed had been executed in favour of the petitioner by the first respondent. In support of his contention reliance was placed on the decision of the Privy Council in Basant Singh v. Mahabir Prasad, ILR 35 All 27.3 (P.C.) and to Nellianna Pillai v. Sethurnmalingam Pillai, 1940-2 Mad LT 337: (AIR 1940 Mad 918). There can be no doubt that an agreement of sale by Itself does not create an interest in the Immovable property, under Section 54 of the Transfer of Property Act, and the petitioner cannot therefore claim that an Interest has been created in his favour by reason of the agreement of sale. Sri Rajeswara Rao, however, contended on behalf of the petitioner that as his client has been put in possession of the suit property under the agreement of sale it must be held that there was sufficient creation of interest in his favour, so as to attract the terms of Order 22 Rule 10 C.P.C. It is found by the court below that in pursuance of the agreement of sale the petitioner was put in possession of the suit property. Under those circumstances he is entitled to invoke the provisions of Section 53A of the Transfer of Property Act. His possessory title is, in my opinion, sufficient interest within the meaning of Order 22 Rule 10 C.P.C. This view receives support from the decision of a Bench of the Madras High Court reported in Mrs. Saradambal Ammal v. Kandaswamy Goundar, 1947-2 Mad LJ 374: (AIR 1949 Mad 23). At page 375 (of Mad LJ): (at p. 24 of AIR) are the relevant observations and are as follows:--
'The words 'any interest' in this rule include, in our opinion, any transferable 'right to sue' spoken of in the earlier rules of the order which provide for its devolution in cases of death. The contention, therefore, that the 'assignment, creation or devolution of any interest' referred in rule 10 mean an assignment, creation or devolution of an interest in tangible property cannot be accepted.' The possessory right created on favour or die petitioner is heritable and assignable. I am clearly of opinion that the right conferred upon him by putting him in possession falls within terms of Order 22 Rule 10 C.P.C. Even assuming that this view is not right I have no doubt that the application under Order 1 Rule 10 is maintainable and the petitioner is a proper party to the second appeal.
6. The further question that arises for consideration is whether it is open to the petitioner to attack the compromise and contend that no decree should be passed in terms thereof. In Veeraraghava Reddy v. Subba Reddy, ILR 43 Mad 37: (AIR 1920 Mad 391) it was held that an alienee pen-dente lite who had been added as a party to the litigation was entitled to object to a decree being passed in terms of a compromise arrived at between an alienor and the opposite party and the same principle would apply to the facts, of this case.
Sri Konda Kotayya strongly relied upon the decision of the Allahabad High Court in Laraiti v. Ch. Shiam Sunder Lal, AIR 1932 All 478. It was held therein that an application by a third party that the compromise between the parties to sue should not be accepted as it affected his rights acquired by purchase pendente lite and that he should be made a party to the suit should be rejected and a decree in terms of the compromise should be passed. No reference is made therein to the terms of Clauses (c) and (d) of Section 23(3) of the Indian Contract Act. toe application would be a property and no compromise decree could be passed. The view taken in the above decision has also not been followed by the Madras High court in 66 Mad LJ 517: (AIR 1934 Mad 337).
7. The next question that remains to be considered is whether the compromise entered into between defendants 1 and 3 is a lawful one within the terms of Order 23 Rule 3. Section 23 of the Contract Act provides that the consideration of object of an agreement is not lawful if it is fraudulent or involves or implies injury to the person or property of another. It is found in this case that the object of the compromise was fraudulent and was intended to injure the rights of the petitioner in the suit property.
There can, therefore, be no doubt that the contract is unlawful and is consequently void. Sri Konda Kotayya contended that as the object of the agreement in the instant case was not unlawful, in entirety but only partially the terms of Section 23 do not apply but I do not agree with this contention. Even if the object of the first and third respondents was unlawful, in part, the compromise would be affected under Section 23 of the Contract Act. In this view no decree can be passed in terms of the compromise,
8. For the reasons aforesaid I order C.M.P.No. 4747 of 1956 and dismiss C.M.P. No. 4748of 1956 and I proceed to hear the second appeal.