Agreement Based On An Ex-Parte Order Which Was Already Set Aside Cannot Be Relied On By Parties: Supreme Court
The Supreme Court observed that an agreement cannot be relied on if the order which was the very basis of entering into agreement was set aside by the Court.
The Court was hearing an appeal by the State of Madhya Pradesh in a property dispute suit.
The bench of Justice Vikram Nath and Justice K V Vishwanathan observed, “There appears to be some kind of collusion between BMC and the plaintiff. Whether or not there was any condition in the agreement dated 30.07.1991 for appointment of Arbitrator, the very basis of entering into the agreement having been set aside, the agreement itself could not have been relied upon by any of the parties.”
Brief Facts-
The Plaintiff Satish Jain filed a civil suit against Rama and the State of Madhya Pradesh, seeking a declaration, permanent injunction, and mandatory injunction, based on the state's ownership of the disputed property. Despite Rama's 50-60 years of adverse possession, allegedly transferring rights to the plaintiff, there were fears of further transfer to a third party. The plaintiff also noted attempts by state officers to remove fencing, prompting the suit. The trial Court passed an ex parte decree in favour of plaintiff which was set aside by appeallate Court which also remanded the case for trial. Meanwhile an agreement with the Bhopal Municipal Corporation and the plaintiff for vacating the land in exchange for separate plots led to cancellations of some allotments later on. The plaintiff preferred an appeal against arbitral award. Aggrieved by the same, the plaintiff preferred a civil revision, which was allowed by the impugned order, giving rise to the present appeal.
The Court noted that it is an admitted position that the suit is still pending before the Trial Court and the plaintiff was not granted any declaration as such.
The Court further stated that the ex-parte decree having been set aside, there was no occasion for the plaintiff to further act upon the agreement which was entered by BMC and the Plaintiff since no rights had crystallised to the parties.
The division bench noted that the basis of that agreement was the ex-parte decree of declaration and injunction in favour of the plaintiff. Once the ex-parte decree has itself been set aside and the suit was to proceed further from the stage of filing of written statement by the Appellant-State, the agreement would lose all its credibility assuming there was any semblance of any right to enter into the agreement.
According to the Court, the plaintiff was claiming rights under the ex-parte decree and the dismissal of the First Appeal. When both the orders had been set aside and the suit itself was to proceed from the stage of the Appellant-State filing its written statement, the agreement itself would not have any sanctity in the eye of the law even inter se parties.
The Court stated that the right created in the plaintiff under the ex-parte decree stood extinguished and, therefore, BMC ought to have been careful enough not to place any reliance any further on the said agreement.
According to the division bench, the Trial Court was justified in allowing the application by setting aside the award. As per the Court, the High Court committed a grave error in not considering the relevant aspects and in placing reliance on the statement made by the Appellant-State before the Trial Court that the State had no interest since it had allotted the land to BMC to set up a bus stand and therefore, it should be deleted from the array of parties as defendant no.2.
Finally, the Court allowed the appeal and set aside the impugned judgment.
Cause Title: State of Madhya Pradesh v. Satish Jain (Neutral Citation: 2024 INSC 315)