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Whether a party can back out from mediation settlement after getting money under said settlement?

IN THE HIGH COURT OF DELHI

CS (OS) No. 2248/2010

Decided On: 01.09.2011

Naveen Kumar
Vs.
Khilya Devi and Ors.

Hon’ble Judges/Coram: A.K. Pathak, J.

1. Plaintiff has filed this suit for specific performance of Agreement to Sell dated 31st January, 2008 executed by the Defendant No. 1 in respect of her 1/3rd share in a piece of land admeasuring 18 bighas and 8 biswas, forming part of Khasra No. 27//14(4-13), 15/1(1-1), 16(4-16), 24(4-11), 33//20/2/2(3-7) in revenue estate of village Kharkahari Jatmal, Tehsil Najafgarh, New Delhi (hereinafter referred to as ‘suit property’). Defendant No. 2 has been impleaded in the suit as subsequent purchaser.

2. After service of summons upon them, Defendant Nos. 1 and 2 entered appearance in Court and have filed separate written statement(s). Defendant No. 1 admitted her thumb impression as also the receipt of `7 lakhs. She alleged that Plaintiff was a property dealer and had approached her for purchase of her property. She informed the Plaintiff that her husband was suffering from cancer and she being an illiterate lady was not in a position to fight with her brothers; Plaintiff represented that he will get all the formalities completed and on this representation she had agreed to sell the suit property to him and, in fact, rendered full cooperation. However, Plaintiff did not fulfill his part of obligation and did not pay the balance sale consideration. She further stated that she has already sold the suit property to Defendant No. 2.

3. On 5th May, 2011, at the request of counsel for the parties, matter was referred to Delhi High Court Mediation & Conciliation Centre to explore the possibilities of an amicable settlement between the parties. Both the parties along with their advocates participated in the mediation proceedings. Learned Mediator held the proceedings as many as on eight occasions between 23rd May, 2011 and 5th August, 2011. Ultimately, parties succeeded in arriving at an amicable settlement on certain terms and conditions which were incorporated by the learned Mediator in the Settlement Agreement dated 5th August, 2011. Settlement Agreement was duly signed by the Plaintiff and Defendant No. 2. As regards Defendant No. 1, she has affixed her thumb impression. Counsel for the parties have also signed the Settlement Agreement. The Settlement Agreement is marked as Mark C-1.

4. Terms and conditions on which parties have arrived at settlement reads as under:

a. It has been agreed between the parties that since Defendant No. 2 is the bonafide purchaser and registered owner of the suit property bearing 1/4th share of Khasra No. 27//14 (4-13), 15/1 (1-1), 16(4-16), 25(4-11), 33//20/2/2 (3-7) and 1/16th share of total land area measuring 5 biswas out of Khasra No. 27//28 (0-5) in the revenue estate of village Kharkhari Jatmal, Tehsil Najafgarh, New Delhi registered vide sale deed No. 10007 in Book No. 1 vol. 5841 Page 40-44 on 03.08.10 before the Sub Registrar- IX shall remain the registered owner of the said property and shall be entitled to retain the same to the exclusion of other parties.

b. It has been further agreed that since the Plaintiff was the first agreement holder i.e. Plaintiff was the first one to enter into agreement to sell with Defendant No. 1 even prior to Defendant No. 2, therefore, he cannot be made to suffer and therefore Defendant No. 2 has agreed to pay to the Plaintiff sum of `15,00,000/- which amount shall include `10,00,000/- paid by the Plaintiff to Defendant No. 1 at the time of agreement to sell dated 31.01.2008 and `5,00,000/- shall be an amount towards compensation of non fulfilment of the said agreement by Defendant No. 1.

c. It has been further agreed by the parties as well as Plaintiff that after receipt of the said amount of `15,00,000/-, the Plaintiff shall not claim any further amount whatsoever either from the Defendant No. 1 or the Defendant No. 2.

d. It has been further agreed that the Plaintiff shall also be entitled to withdraw an amount of `65,41,000/- which the Plaintiff has deposited in the court along with the interest, if any.

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e. It has been further agreed that the Plaintiff shall be entitled to seek the refund of the court fee paid by him to the Hon’ble Court and the Plaintiff shall further not seek any other claim or shall not raise any other dispute on the suit property after entering into this settlement agreement against either of the Defendants.

f. That Defendant No. 1 has already transferred the documents of title regarding above mentioned property in the name of the Defendant No. 2, however, has received an amount of `6,35,000/- out of the entire sale consideration of `51,35,000/-. Therefore, the Defendant No. 2 further agrees to pay an amount of `45,00,000/- to Defendant No. 1.

g. The said sum of `45,00,000/- shall be paid by the Defendant No. 2 to the Defendant No. 1 in two instalments, one of `25,00,000/- payable by 04.03.2012 and other of `20,00,000/- payable by 04.09.2012.

h. That Defendant No. 2 has further agreed that as a security, Defendant No. 2 shall hand over two post dated cheques of `25,00,000/- and `20,00,000/- only to Defendant No. 1 which the Defendant No. 1 shall be entitled to encash on the said dates i.e. 04.03.2012 and 04.09.2012. The Defendant No. 1 has received two post dated cheques bearing No. 520237 dated 04.03.2012 of `25,00,000/- and No. 520238 dated 04.09.2012 of `20,00,000/- both drawn on Noble Co-Operative Bank Ltd. Noida from the account of Shri Pushpender Malik i.e. husband of the Defendant No. 2, Copy attached.

i. That in case, the Defendant No. 2 is in position to discharge the entire liability of Defendant No. 1 in one go, the Defendant No. 2 shall do so. However, payments in piece meal before the due date shall not be permissible. In case the Defendant No. 2 pays the amount(s) before the due date of cheque(s) as the case may be, the said cheque(s) shall be returned by Defendant No. 1 to the Defendant No. 2. The Defendant No. 2, if required on the due date of payment i.e. 04.03.2012 and 04.09.2012, shall be allowed to give fresh demand drafts of the like amount in lieu of the already given post dated cheques. In that event the said post dated cheques returned back to Defendant No. 2 by Defendant No. 1. However, in no circumstance, the aforesaid amount shall be paid by the Defendant No. 2 to the Defendant No. 1 in cash and the same shall be payable only by way of Demand Draft.

j. The demand draft of `15,00,000/- payable by Defendant No. 2 to the Plaintiff shall be handed over to the Plaintiff in the Hon’ble Court on the next date of hearing i.e. 30.08.2011.

k. The Defendant No. 1, after receipt of amounts of `25,00,000/- and `20,00,000/- respectively as mentioned above, shall not be having any claim against the Defendant No. 2 either on the property as mentioned above or qua sale consideration.

l. The parties undertake to make a prayer before the Hon’ble Court by way of joint application to pass a consent decree in terms of the present mediation settlement agreement.

m. After the parties comply with this Settlement Agreement, the Plaintiff and the Defendant No. 1 shall not be having any right, title or interest in the suit property as mentioned above and the same shall be exclusively belong to the Defendant No. 2.

5. However, by the time matter was taken up in the Court to consider ‘Settlement Agreement’, Defendant No. 1 has not only changed her lawyer but has also changed her mind. She is now opposing disposal of suit in terms of the settlement on the ground that she being an illiterate lady was not able to understand the proceedings held before the learned Mediator nor was she made aware of the terms of settlement before she affixed her thumb impression thereon. Learned Counsel for Defendant No. 1 submits that neither learned Mediator nor earlier counsel Ms. Gurkamal Hora explained the terms of settlement to Defendant No. 1 in vernacular Hindi and since document was in English, Defendant No. 1 could not go through the same and understand the import thereof before affixing her thumb impression thereon. Thus, it is contended that no decree can be passed, in terms of the settlement agreement.

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6. Counsel for the Plaintiff and Defendant No. 2 submit that the Defendant No. 1 was made to understand the terms of settlement in vernacular Hindi. Ms. Gurkamal Hora, Advocate, who had been representing the Defendant No. 1 earlier, also confirms this fact. She states that she explained the Defendant No. 1 terms of settlement agreement in vernacular Hindi and only thereafter she had affixed her thump impression thereon.

7. In my view, plea of ignorance as taken by the Defendant No. 1 is nothing but an afterthought, in order to back out from the settlement arrived at before the learned Mediator. It appears that she wants to wriggle out of the Settlement Agreement which has been entered into by her before the learned Mediator for obvious reasons. Mediator is an independent person. He has categorically mentioned in his proceeding that parties had voluntarily and of their own free will had arrived at an amicable settlement resolving their disputes. It has been specifically mentioned in the settlement agreement that parties have voluntarily and of their own free will arrived at this settlement agreement in the presence of Mediator/Conciliator. There is no reason as to why the Mediator would mention that the parties have voluntarily settled the matter had they not done so. Above all, Defendant No. 1 was assisted by her lawyer who has categorily stated that she had explained the terms of settlement to Defendant No. 1 in Hindi language.

8. Section 89 has been inserted by way of amendment act 1999 in the Code of Civil Procedure (Code of Civil Procedure for short). The object of newly inserted provision is obviously to promote alternate method of dispute resolution method. Relevant provisions of Section 89 Code of Civil Procedure relating to ‘mediation’ reads as under:

89 (1). Where it appears to the Court that there exist elements of a settlement which may be acceptable to the parties, the court shall formulate the terms of settlement and give them to the parties for their observations and after receiving the observations of the parties, the court may reformulate the terms of a possible settlement and refer the same for:

(a) ….
(b) ….
(c) ….
(d) Mediation.

(2) Where a dispute has been referred –

(a) ….
(b) ….
(c) ….
(d) for mediation, the Court shall effect a compromise between the parties and shall follow such procedure as may be prescribed.

9. In exercise of its powers under Part X of Code of Civil Procedure read with Section 89(2)(d) of Code of Civil Procedure, High Court of Delhi has framed the Mediation and Conciliation Rules, 2004 (hereinafter referred to as ‘Rules’). Rule 24(b) and 25(a) of the Rules reads as under:

Rule 24: Settlement Agreement

(b) The agreement of the parties so signed shall be submitted to the mediator/conciliator who shall, with a covering letter signed by him, forward the same to the Court in which the suit or proceeding is pending.

Rule 25 (a) reads as:

Rule 25: Court to fix a date for recording settlement and passing decree-

on receipt of any settlement, the court shall fix a date of hearing normally within seven days but in any case not beyond a period of fourteen days. On such date of hearing, if the court is satisfied that the parties have settled their dispute, it shall pass a decree in accordance with terms thereof.

10. A conjoint reading of afore-quoted rules in no uncertain terms indicate that where the parties arrive at an agreement with regard to the issues in dispute between them in a suit or proceeding, the same shall be reduced in writing and signed by the parties or their constituted attorney; the agreement so signed shall be submitted to the Mediator/Conciliator who shall, with a covering letter signed by him, forward the same to the court in which the suit or proceeding is pending whereupon the court shall pass a decree in accordance with the terms so recorded, if it is satisfied that the parties have settled their disputes. Section 89(1)(d) and 2(d) of Code of Civil Procedure read with Rule 24 (b) and 25(a) cast a mandate upon the court to pass a decree after the Court is satisfied that the parties have arrived at a settlement.

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11. In this case, disputes involved in the suit had been referred to the Delhi High Court Mediation & Conciliation Centre vide order dated 5th May, 2011 within the meaning of Section 89(1)(d) and the settlement has been arrived at before the learned Mediator after comprehensive mediation sessions held as many as on eight occasions in the presence of the counsel for the parties and thereafter, parties had reached an amicable settlement, which has been reduced in writing by the learned Mediator and has been duly signed by not only the parties but their counsels as well on 5th August, 2011. Thereafter, Mediator has sent the ‘Settlement Agreement’ to the court. No such objection was raised either by Defendant No. 1 or her counsel immediately after the settlement was drawn and signed by the parties on 5th August, 2011. It is only when the matter has been taken up by the Court after about fifteen days the new counsel for Defendant No. 1 has tried to assail the settlement on flimsy grounds, even though Settlement Agreement had been acted upon, inasmuch as, Defendant No. 1 had accepted two post dated cheques bearing Nos. 520237 and 520238 from Defendant No. 2; Defendant No. 2 has also paid pay order for `15 lakhs to the Plaintiff in Court on 30th August, 2011.

12. In my view, if such pleas are sustained the very sanctity and purpose of an amicable settlement through the process of mediation, would stand totally eroded. In Double Dot Finance Limited v. Goyal MG Gases Ltd. 2005 (2) AD Del 534 though that case arose out of the arbitration proceedings, a Single Judge of this Court has observed as under:

If such pleas are sustained, the sanctity and purpose of ‘amicable settlements’ between the parties would stand totally eroded. Amicable resolution of disputes and negotiated settlements is ‘public policy in India’. Section 89 of the Code of Civil Procedure, Arbitration and Conciliation Act, 1996 as well as Legal Services Authorities Act, 1995 call upon the Courts to encourage settlements of legal disputes through negotiations between the parties. If amicable settlements are discarded and rejected on flimsy pleas, the parties would be wary of entering into negotiated settlements and making payments thereunder as a shrewed party after entering into a negotiated settlement, may pocket the amount received under it and thereafter challenge the settlement and reagitate the dispute causing immeasurable loss and harassment to the party making payment thereunder. This tendency has to be checked and such litigants discouraged by the Courts. It would be in consonance with public policy of India.
13. For the foregoing reasons a decree, in terms of Mark C-1, is passed. Mark C-1 shall form part of the decree.

I.A. No. 13061/2011 (u/Section 151 Code of Civil Procedure)

A sum of `65,41,000/- was deposited by the Plaintiff with the Registrar General of this Court pursuant to orders of this Court. Let this amount, together with interest, if any, accrued thereon, be returned to the Plaintiff.

Application is disposed of in the above terms.

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