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Narayana Pillai Parameswaran Pillai and ors. Vs. Kudamaloor Regional Service Co-operative Society Ltd. and ors. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtKerala High Court
Decided On
Case NumberO.P. No. 1280 of 1964
Judge
Reported inAIR1967Ker51
ActsContract Act, 1872 - Sections 23; Constitution of India - Article 226; Arbitration Act, 1940 - Sections 11
AppellantNarayana Pillai Parameswaran Pillai and ors.
RespondentKudamaloor Regional Service Co-operative Society Ltd. and ors.
Appellant Advocate K. Velayudhan Nair and; M.C. Sen, Advs.
Respondent Advocate Govt. Pleader for Respondents (Nos. 2 and 3)
Cases ReferredProvincial Transport Services v. State Industrial Court
Excerpt:
.....- allegedly bond not enforceable being illegal and void and violative of section 23 because agreement for stifling prosecution - authorities decided issue disregarding , ignoring or misunderstanding law - error being error of law apparent on face of record entitling court to interfere - non consideration of important and material evidence by lower authority - writ allowed . - - 15,281.53 with interest thereon at 7 and half per cent per annum from 30-8-1961 till the date of realisation and costs from the writ applicants and their properties as well as from others who were defendants. it may quite well be that a prosecution only commences after a summons is issued, and that before that stage is reached a complainant cannol be said to have dropped a prosecution under the code:..........high court of kerala has pointed out that the question whether or not there was an agreement to stifle prosecution in any particular case, will always be question of fact. the burden of proving that exhibit a was executed pursuant to an agreement that criminal proceedings would be discontinued if the bond was executed, is on the defendants. on an analysis of the facts of the case i find that there has been no attempt to stifle prosecution and, therefore, the case does not come under the purview of section 23 of the contract act. in arriving at this decision, i am guided by the judgment of the high court of kerala reported on pages 777 to 790 of the ker lt 1959.'6. and the same question has been discussed by the revisional authority, the 3rd respondent to this writ application in ext......
Judgment:
ORDER

P. Govindan Nair, J.

1. The five writ applicants executed a document dated 16-7-1961 in favour of the first respondent, Society. To enfroce this document there was an arbitration reference, No. 704 of 1961 on the file of the Deputy Registrar of Co-operative Societies, the 2nd respondent to this writ application. He passed an award Ext. P-1 in favour of the first respondent that the first respondent shall recover a sum of Rs. 15,281.53 with interest thereon at 7 and half per cent per annum from 30-8-1961 till the date of realisation and costs from the writ applicants and their properties as well as from others who were defendants. There was a revision, from this award before the Joint Registrar of Co-operative Societies. The revision was dismissed by Ext. P-2 older

2. It appears that the document on the basis of which Ext. P-1 award was passed came to be executed because a close relation of the executants of the bond who was the Secretary of the Society had suddenly disappeared without the knowledge and consent of the President and without accounting for the amounts which should have been in his custody. The Secretary was therefore, suspended and it appears that certain steps were taken against him by the Society. The relevant part of the document dated 18-7-1961, Ext. A in the Arbitration Proceedings, reads as follows :

(After reproducing the relevant portion the judgment proceeds): This document, as I said earlier, was executed on the 16th of July 1961. On the same day, the executants of the document wrote a letter Ext. B in the Arbitration Proceedings to the President of the Society, the relevant part of it is in these terms.

3. (After reproduction of the portion the judgment proceeds) : The President was examined by the 2nd respondent in the Arbitration Proceedings and he has given evidence that information had been given to the police against the Secretary on 11-7-1961 and that after the Board met on 16-7-1961 a written communication was sent to the Police Station that no steps need be taken.

4. On the above facts it was contended that, the bond is not enforceable as it was illegal and void and violative of Section 23 of the Contract Act because the agreement was one for stifling prosecution. This contention has been dealt with in this manner by the 2nd respondent to this writ application in Ext. P-1 award :

' As to point 2, it has to be examined if under Section 23 of the Contract Act the bond becomes void. The advocate has argued that the bond was executed to stifle a prosecution and compound an offence which is not com-poundable by law. He has made an effort to show that in dropping the police complaint against defendant No. 1 after the bond was executed by defendants 2 to 7 prosecution lias been stifled and a non-compoundable offence compounded. The plaintiff has replied to the point that there were no criminal proceedings instituted against defendant No. 1 at the lime of executing the bond (Exhibit A) and, therefore, no prosecution has been stifled and that there had not been any compounding of any offence also. It has been further shown that prosecution was actually launched against the Secretary (defendant No. 1) at a later stage, but this was after the filing of the arbitration case. The defendants have not been able to establish that the bond was executed as a result of any agreement to discontinue criminal proceedings. The Honourable High Court of Kerala has pointed out that the question whether or not there was an agreement to stifle prosecution in any particular case, will always be question of fact. The burden of proving that Exhibit A was executed pursuant to an agreement that criminal proceedings would be discontinued if the bond was executed, is on the defendants. On an analysis of the facts of the case I find that there has been no attempt to stifle prosecution and, therefore, the case does not come under the purview of Section 23 of the Contract Act. In arriving at this decision, I am guided by the Judgment of the High Court of Kerala reported on pages 777 to 790 of the Ker LT 1959.'

6. And the same question has been discussed by the revisional authority, the 3rd respondent to this writ application in Ext. P-2 thus:

'(ii). Another ground alleged is that the bond is not valid as it is executed for 'withdrawing a criminal prosecution' On a perusal of the bond it is found that the only mention regarding a withdrawal of any action against the defendant No. 1 is that the executants say 'they are aware of action being taken against him departmentally and that they feel it their duty to save him from the same' But the bond is not executed for withdrawing any prosecution or criminal action, and the Society or the President have not agreed in the bond to withdraw the prosecution. I therefore, find that this objection will not stand.'

6. Counsel on behalf of the petitioner on the above facts has raised two contentions in support of his argument that this Court is entitled to interfere with the findings entered by the Deputy Registrar of Co-operative Societies in Ext. P-6 and by the Joint Registrar of Co-operative Societies in Ext. P-2. The first of these is that the Arbitrator and the Revisional authority have mis-conceived the law relating to an agreement to stifle prosecution and the second is that the findings have been entered by the two authorities by ignoring material evidence before those authorities.

7. The first of these points is sought to be supported by the reasoning of the Arbitrator as can be seen from Ext. P-1. Counsel particularly relied on the portion in the award Ext. P-1 wherein it is stated:

'The plaintiff has replied to the point that there were no criminal proceedings instituted against defendant No. 1 at the time of executing the bond (Exhibit A) and, therefore, no prosecution has been stifled and that there had not been any compounding of any offence also. .......'

And the further portion is

'The defendants have not been able to establish that the bond was executed as a result of any agreement to discontinue criminal proceedings. ......'

8. The Revisional authority, it is said, proceeded on the basis that the agreement to stifle prosecution must be seen from the face of the agreement. This also, it is said, is a clear mis-conception of law. I am inclined to accept this argument and I am supported by very high authority in coming to the conclusion that there is mis-conception of law. The Judicial Committee of the Privy Council had occasion to consider both these aspects as to whether at the time of the execution of an agreement there should have been a prosecution in existence in order that the mischief of Section 23 of the Contract Act may be attracted and also the further question as to whether it must be seen from the agreement itself that it was for stifling prosecution. The decision is Kamini Kumar v. Birendra Nath reported in AIR 1930 PC 100 and the relevant passage is this:

'It may quite well be that a prosecution only commences after a summons is issued, and that before that stage is reached a complainant cannol be said to have dropped a prosecution under the Code: See Golap Jan v. Bholanath, ( (1911) ILR 38 Cal 880) Their Lordships are not called upon to express any opinion on this poinl, nor are they doing so. The real question involved in this appeal on this part of the case is whether any part of the consideration of the reference or the ekarnama was unlawful, and not whether any prosecution within the meaning of the Criminal Procedure Code had been started or dropped. If it was an implied term of the reference or the ekarnama that the complaint would not be further proceeded with, then in their Lordships' opinion the consideration of the reference or the ekarnama as the case may be, is unlawful : See Jones v. Merionethsire Permanent Benefit Building Society ((1892) 1 Ch 173) and the award or the ekrarnama was invalid, quite irrespective of the fact whether any prosecution in law had been started.'

9. In regard to the other aspect as to whether an agreement to compound a non-compoundable offence or an agreement to stifle prosecution must be seen from the face of the agreement, Their Lordships observed:

'In a case of this description it is unlikely that it would be expressly stated in the ekrarnama that a part of its consideration was an agreement to settle the criminal proceedings. It is enough for the defendants to give evidence from which the inference necessarily arises that part of the consideration is unlawful.'

To the same effect is the observation of this Court in Catholic Union Bank Ltd. v Poulo reported in 1959 Ker LT 777

'Remembering that such an agreement will seldom be set out on paper and perhaps will more often than not be only an implied one, the Court will always have a difficult task in arriving at a decision on the point'

Justice Raman Nayar termed a case in which such an agreement is seen on the face of the document 'a very rare one'

'This is one of those very rare cases where an agreement to stifle prosecution is set out on paper, for, the very mortgage deed on which the claim is based expressly states that the mortgage was executed by the 1st respondent for the sum of Rupees 2,400 misappropriated by his son, the 3rd respondent, and as a compromise of the police prosecution pending against the latter.' ((1960'' Ker LJ 111)

10. It is therefore, clear that there has been a complete mis-conception of the law so far as the authorities who decided this matter are concerned Though the question as to whether there was an agreement to stifle prosecution or to compound a non-compoundable offence is a question of fact, the determination of that question of fact must be on the basis of established principles of law. If the authorities decided disregarding, ignoring or misunderstanding the law they had mis-guided themselves and in the case of arbitrators, it will amount to this conduct, and the error being apparent, it is an error of law apparent on the face of the record entitling this Court to interfere.

11. Apart from this I am also of the view that the above misconception had led to a non-consideration of important and material evidence. There has not been any advertence to Ext B which is not only material but appears to me to afford conclusive proof that the purpose for which the bond was executed was that police to whom information has been given should be told not to proceed with any investigation. It is stated in Ext B specifically that the bond be accepted and a communication be sent to the police that no further action need be taken And the President who has been examined in the case has stated in his deposition that the very next day after the bond was executed viz., on 17th July, 1961, he wrote to the police station saying that no further steps need be taken These are material factors which should have been taken into account.

In cases where a conclusion has been reached by a judicial or a quasi-judicial authority which no person properly instructed in law and acting judicially could have reached the Court may proceed on the assumption that misconception of law has been responsible for the wrong decision. In such circumstances the High Court will be entitled to interfere under Article 226 of the Constitution. A passage from the decision of the Supreme Court in Provincial Transport Services v. State Industrial Court, Nagpur, reported in AIR 1963 SC 114 will make this clear:

'While it would certainly have been better if the Enquiring Officer had also put his signature on the paper containing the statements, that omission cannot possibly be a ground for thinking that he did not hold the enquiry The conclusion of the Assistant Labour Commissioner that 'there are sufficient grounds to doubt whether an enquiry was really made must therefore, be held to be perverse. It has often been pointed out by eminent judges that when it appears to an appellate Court that no person properly instructed in law and acting judicially could have reached the particular decision the Court may proceed on the assumption that misconception of law has been responsible for the wrong decision. '

12. In the light of the above, I have no alternative but to quash Exts P-1 and P-2. I do so. The 2nd respondent will take back the Arbitration Proceedings in his file and write a fresh award after considering the materials in the case and in the light of what is stated in this judgment.

13. This writ application is ordered onthe above terms. There will be no directionregarding costs.


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