1. The dispute in this appeal haw arisen out of the proceedings in the winding up of a Company known as Shri Baldeo Mills Limited of Hathras. The said Company was indebted to Sham Lai and Ors., the appellants in the present case, to the extent of about two lakhs of rupees on the basis of promissory notes. The appellants brought - a suit on the 9th of October 1909 in the Court of the Subordinate Judge of Aligarh for the recovery of the money due on the, said pro-notes. During the pendency of the suit on the 5th of February 1910 Babu Hari Das, Pleader for .the defendant Mills, filed a petition under Order XXIII, Rule 3, Civil Procedure Code, in the Court of the Subordinate Judge stating that the parties had come to terms, and that the compromise was embodied in a registered deed dated the 16th of November 1909, which was produced in Court. A week after, on the 12th of February 1910, the Pleader for the appellants filed a counter-petition saying that no compromise had been entered into by his clients and that the so-called compromise tiled on behalf of the defendant Mills was no compromise at all, inasmuch as the plaintiffs-appellants had not consented to it and the agent of the Mills had repudiated it. Before the Court could decide the question as to whether a compromise6 C.W.N. 877.had been entered into by the parties, the defendant Company went into liquidation. at the instance of one of its creditors'. The Court of the District Judge appointed an Official Liquidator who began the proceedings of the winding up of the Mills.
2. On the 17th of March 1911 the appellants put in their claim before, the Official Liquidator based on the original pro-notes in respect of which the suit in the Court of the Subordinate Judge was pending. While the claim of the appellants was still under consideration they put in a fresh claim before the Official Liquidator on the 20th of September 1911, that is six months after the first claim, for the same amount but on the basis of a mortgage said to have been given by the defendant Mills to them on the 16th of November 1909. The Official Liquidator took exception to the new claim and referred, the matter to the District Judge for disposal. In his reference the Official Liquidator requested the Judge to issue notices to some of the larger creditors to attend and show cause. The notices were accordingly issued and the creditors appeared and objected to the claim of the appellants based on the alleged mortgage of the 16th of November 1909. The learned District Judge rejected the new claim, of the appellants on four grounds, namely, that there was a partial failure of consideration on the deed of the 16th of November 1909, that the appellants had repudiated the transaction of the 16th of November 1909, that the deed in question was not under the seal of the Company and, lastly, that the deed was not registered in the books of the Company. The appellants challenge the order of the learned District Judge by contending that none of the reasons given in support of that -order is a valid, one. On the other hand, the respondents, that is, the other creditors of the Shri Baldeo Mills, repeat their objections to the second claim of the appellants. Their principal objection is that no mortgage was given to the appellants by the defendant Mills, but a compromise had been entered into between the appellants and the defendant Mills on the 16th of November 1909, under which a mortgage right was created in favour of the former on certain conditions. That compromise was not carried out and in fact was repudiated by both parties, namely, the appellants and the defendant Mills. The appellants cannot, therefore, maintain their claim on the mortgage created by the compromise of the 16th of November 1909. For the appellants the rejoinder is that they objected to the application of the 5th of February 1910 under a misapprehension of their legal position. They should not suffer for their mistake. Besides the mortgage given by the deed of the 16th November 1909 is quite separate from the other covenants of the deed and the non-observance of the latter does not vitiate or render inoperative the mortgage transaction. In order to decide the issue raised by the parties it is necessary to give an account of how the deed of the 16th of November 1909 came to be written. One of the appellants, namely, Kishun Lal was also a Director of the defendant Mills. An extraordinary meeting of the share-holders was convened on the 16th of November 1909 at which a proposal was made by one of them to the effect that the suit pending against the defendant Mills be compromised with the appellants by giving them a mortgage of the Mills' property and obtaining from them an agreement to enable the Mills to continue the work. The mortgage was to be given and the agreement was to be obtained under certain conditions which were recited in the drafts of the two documents and the drafts were put up with the proposal. The proposal was carried in the form of a resolution approving of the drafts of the two documents. A further resolution was passed authorizing two of the Directors, namely, Keshab Deo and Ghansam Das, to get the two deeds executed in accordance with the first resolution. The same day a deed was executed and registered by which the entire property of the Mills was mortgaged to the appellants in lieu of two lakhs, and the latter undertook to have their suit pending in the Court of the Subordinate Judge dismissed. They further agreed to allow the Mills to repay the debt in three years, and to let the Mills borrow a sum of Rs. 1,25,000 on the security of the property already mortgaged to them, such second mortgage to have precedence over their mortgage. It was in accordance with this deed that the Pleader for the defendant Mills applied to the Court of the Subordinate Judge on the 5th of February 1910, about three months after its execution, to have the case disposed of in terms of the deed. It has already been mentioned above that the application was opposed by the appellants, who denied the validity of the deed of the 16th of November 1909 and repudiated it. Six months after the repudiation of the deed they put forward their second claim based on that very deed before the Official Liquidator. What we have, therefore, to see is whether the appellants can set up the deed of the 16th of November 1909 in support of their fresh claim made on the 20th of September 1911. The answer depends on the character of the deed, apart from any question of repudiation. The contention of the appellants is simply a deed of mortgage, or at least the transaction of mortgage recorded by it, is separable from and independent of the other covenants mentioned in it. We have examined the deed carefully and we cannot agree with the appellants. In our opinion . the deed of the 16th of November 1909 does not contain a unilateral contract : nor can the transaction of mortgage mentioned in it be separated from, or considered to be independently of, the other parts of the deed. It is in effect and in reality a bilateral contract, that is, a compromise which is obvious from the language of the deed and the covenants contained in it. It was, moreover, executed by both parties to it. The deed opens by saying that there are two parties to it and lays obligations on both the .parties. It recites among other covenants certain conditions which were to be fulfilled by the appellants and in consideration of which the mortgage was given. The plaintiffs-appellants failed to carry out the said conditions, that is, their part of the contract. In fact they repudiated it when it was formally presented to Court by the defendant Mills and ignored it in their first statement of claim to the Official Liquidator. They cannot now be allowed to enforce the deed as against the other creditors in respect to the conditions which were to be fulfilled by the defendant Mills in consideration of those which were to be observed by the appellants' and which they deliberately refused to, and did not, perform. We, therefore, uphold the order of the learned District Judge and dismiss the appeal with two sets of costs, one to the clients of Dr. Sunder Lal and Mr. Gokul Prasad and the other to be divided among the other creditors who have appeared to oppose the appeal. Costs in this Court will include fees on the higher scale.