CRP/6364/2009 of National Hydro-Electric Power Corporation Limited, Vs M/s. Nagarjuna Finance Limited, Rep. by Manager on 31 December 2009

-JUDGMENT:

This C.M.A. is filed challenging the order and decreedated 05.12.1994 passed by the II Additional Judge, CityCivil Court, I.A.No.753 of 1993 in O.S.No.563 of 1992Hyderabad.

2. The petition which was dismissed by the impugnedorder was filed under Order 21 Rule 58 C.P.C. andSection 151 C.P.C to declare that the decree ofcompromise dated 18.11.1992 passed in O.S.No.563 of1992 between the first respondent and the respondents 2and 3 as void against the appellant (petitioner) and to setaside the same and also to recall the said decreetransmitted to the Court at Nainital in the State of UttarPradesh for execution.

3. I have heard the learned counsel appearing for theappellant (petitioner). None appears for the respondents.

4. Upon hearing the learned counsel for the appellant (petitioner) and on perusing the material papers availableon record, I am of the view that against the impugnedorder C.M.A. does not lie and only revision lies. However,in view of the fact that there is no legal impediment to treatthe C.M.A. as C.R.P., having to the facts andcircumstances of the case, this Court treated the C.M.A.as revision.

5. For the sake of convenience parties will be referredas petitioner and respondents i.e. as they were arrayed inthe I.A.No.753 of 1993 in O.S.No.563 of 1992 before thetrial court.

6. The brief facts leading to filing of the C.M.A. (treatedas C.R.P.) may be stated as follows:

7. The petitioner a Government of India undertakingincorporated under the companies Act, was entrusted withthe work of construction of Tanakpur Hydro ElectricProject at Banbassa in Nainital District of Uttar PradeshState. The estimated cost of the said project is Rs.379crores. The petitioner entrusted the contract work ofconstruction of silt ejector and power channel from RD250M including escape channel to the second respondentfor a sum of Rs.8,58,99,000/- under an agreement dated30.03.1988. As per the terms of the agreement, thesecond respondent has to comply the work within thestipulated period, but it failed to do so, and the agreementin such an event provided for termination of contract andto take possession of the site and machinery belonging to the second respondent on which the petitioner had lien forrecovery of losses. There is also an arbitration clause inthe agreement, but contrary to the said arbitration clausethe second respondent filed O.S.No.158 of 1991 on thefile of the Civil Judge of Nainital and obtained temporaryinjunction regarding the work and use of machinery. Thepetitioner took the matter in revision to the High Court,which was dismissed. Thereafter, it carried the matter tothe Supreme Court and the Supreme Court in Civil AppealNo.3672 of 1991 set aside the orders of the High courtand appointed Justice H.N.Seth, retired Chief Justice ofPunjab and Haryana High Court as an arbitrator anddirected that the work site shall continue without anyinterference.

8. Pursuant to the orders of the Supreme Court, thearbitrator commenced the proceedings in the course ofwhich the second respondent filed a claim petition on20.1.1992 seeking release of machinery. While the saidpetition was pending before the Arbitrator, the 1[st]respondent filed O.S.No.563 of 1992 on 17.6.1992 statingthat the machinery belongs to the first respondent and thesame was leased out to the second respondent under alease deed. As per the version of the petitioner the saidsuit is a collusive suit filed apprehending that themachinery might be handed over by the arbitrator to thepetitioner since the arbitrator by that time had alreadyappointed technical surveyor to work out the value of theequipment. Subsequently, the first respondent and thesecond respondent filed a compromise petition and the suit was decreed in terms of compromise on 21.01.1993.

9. Subsequently, the second respondent got thedecree transmitted to the District Judge Nainital, whomade over the same to the IV Additional Judge, Nainitalfor execution and the executing Court in E.P.No.2 of 1993appointed the Commissioner to take possession of themachinery. When the Commissioner appointed thereinissued notice to the petitioner on2.7.1993, the petitionercame to know about the filing of the suit by the secondrespondent and the compromise decree passed therein.Thereafter, on5.7.1993 the petitioner filed a claim petitionbefore the executing court and initially obtained an ordergranting stay. However, thinking it to be appropriate thepetitioner filed I.A.No.753 of 1993 to set aside thecompromise decree in O.S.No.563 of 1992 on the groundthat the said decree is vitiated by fraud and suppressionof fact in not disclosing the orders passed by the SupremeCourt and also appointment of the arbitrator by theSupreme Court. However, the learned II Additional Judge,City Civil Court, Hyderabad dismissed the said I.A. againstwhich the present appeal (treated as C.R.P.) is filed.

10. According to the petitioner the first respondentobtained a collusive decree on 18.11.1992 against therespondents 2 and 3. but the contention of the firstrespondent is that the entire plant/machinery installed atTanakpur, Uttar Pradesh State belongs to it and it was leased out to the respondents 2 and 3 under anagreement dated 7.7.1988 on condition of their payingmonthly rentals of Rs.1,86,420/- commending from5.7.1988 for 36 months and that the lease period hadexpired on 5.6.1991, the respondents 2 and 3 paid onlyan amount of Rs.40,740/- on 5.9.1989, but committed thebreach thereafter and subsequently, the first respondentinstituted the suit which ultimately ended in compromise.

11. It was contended by the petitioner before the Courtbelow that the alleged compromise entered into betweenthe respondent and the respondents 2 and 3 is collusiveand with a view to defeat the rights of the petitioner overthe machinery, but, the learned Court below withoutconsidering the totality of the circumstances and withoutcomprehensively understanding the back drop of theevents held that the compromise decree was not theresult of collusion and fraud practiced by the respondentsand subsequently dismissed the application filed by thepetitioner to set aside the compromise decree.

12. Having gone through the submissions made bythe learned counsel appearing for the appellant (revisionpetitioner) and considering the entire material available onrecord the crucial aspects which were not considered bythe learned trial Court are that the respondents thoughfiled the compromise petition followed by a memorandumof compromise before the trial Court did not bring it it’snotice about the order passed by the Supreme Court on 18.09.1991 in civil Appeal No.3672 of 1991 setting asidethe orders of the High court and appointing JusticeH.N.Seth as arbitrator and also the arbitrator initiatingproceedings pursuant to the orders passed by theSupreme Court. All the events which ultimatelyculminated in the order passed by the Supreme Courtwere well within the knowledge of the respondents 2 and3. But they have not disclosed the said facts in theircompromise petition. It is well settled that suppression ofa material fact before the Court is nothing but fraud playedon the Court. The respondents 3 and 4 obviously allowedthe compromise decree to be passed by the trial Court tohave an unfair advantage over the petitioner. The mannerin which the suit was filed by the first respondent and thecircumstances under which it was filed clearly indicate thatit is a collusive suit. All the material facts have not beenplaced before the learned Court below. Under thesecircumstances I have no hesitation to hold that thecompromise decree passed by the trial Court is the resultof suppression of material facts and playing fraud by theparties to the suit, which is evident from the method andmanner in which the compromise decree was obtained. The said decree and judgment are liable to be set aside inthis revision.

13. In the result, the compromise decree passed in O.S.No.563 of 1992 is set aside. I.A.No.753 of 1993 inO.S.No.563 of 1992 is allowed. The C.R.P. is allowedwith costs.

Date:31.12.2009kvrm

__________________R. KANTHA RAO,J

DATED: 31.12.2009