Anil M. Ahuja Vs Marvel Fragrances Pvt. Ltd. and 5 Ors.

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NM20642012.DOC

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Ars

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION NOTICE OF MOTION NO. 2064 OF 2012

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IN

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SUIT NO. 566 OF 2011

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…
Marvell Fragrances Pvt. Ltd. & Ors.
Applicants/Def
endants
In the matter between
Anil Madhavdas Ahuja…Plaintiff
 versus
Marvel Fragrances Pvt. Ltd. & Ors.…Defendants

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Mr.Ravi Kadam, Senior Advocate, a/w mr. Ashish Kamat i/b Ranjit & Co., for the Plaintiffs.

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Mr.Sanjay Jain, a/w Ms. Sonal Awasthi & Mr. Deepak Shukla i/b
Vinod Mistry & Co., for the Applicant / Original Defendants.

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CORAM:G.S. PATEL, J
DATED:June 18, 2014

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PC:-

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1.This is a Notice of Motion filed by Defendants Nos 2 to 6 to
the suit. It seeks that the Court do record that the suit has been
adjusted wholly by an agreement between the parties and that there

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has been a compromise, for a decree in those terms and a
consequent dismissal of the suit. The submission made by Mr. Jain,
learned Advocate for Defendants Nos. 2 to 6, is that under the
provisions of Order 23 Rule 3 of the Code of Civil Procedure, 1908
(“CPC”), where it is proved to the satisfaction of the Court that
there exists such an adjustment either in whole or in part by means
of lawful agreement or compromise, the Court must order that
agreement or compromise to be recorded and must pass a decree.
He invites attention to Order 23 Rule 3:

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O.23 R.3.Compromise of Suit.– Where it is
proved to the satisfaction of the Court that suit has been
adjusted wholly or in part by any lawful agreement or
compromise in writing and signed by the parties, or
where the defendant satisfies the plaintiff in respect of
the whole or any part of the subject-matter of the suit,
the Court shall order such agreement, compromise or
satisfaction to be recorded, and shall pass a decree in
accordance therewith so far as it relates to the parties to
the suit, whether or not the subject-matter of the
agreement, compromise or satisfaction is the same as
the subject-matter of the suit:

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Provided that where it is alleged by one party and
denied by the other that an adjustment or satisfaction
has been arrived at, the Court shall decide the question;
but no adjournment shall be granted for the purpose of
deciding the question, unless the Court, for reasons to
be recorded, thinks fit to grant such adjournment.

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Explanation.–An agreement or compromise
which is void or voidable under the Indian Contract Act,
1872 (9 of 1872), shall not be deemed to be lawful within
the meaning of this rule.

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2.Mr. Jain’s submission is that this rule is in two parts. The
first speaks of a situation where the existence of a lawful agreement
that has the effect of an complete or partial adjustment of the suit is
proved or established to the satisfaction of the Court. The second is
where the applicants satisfy the plaintiff in respect of the whole or
on part of the subject matter of the Suit. When either two of these
eventualities occur, the Court must record that agreement or
compromise and decree the suit in those terms. Crucial to this
submission are the last two lines which say that such an order must
be made even if the subject matter of the agreement, compromise,
or satisfaction is not the same as the subject matter of the Suit.

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3.The error in Mr. Jain formulation is, I think, in equating the
second part in first. In the first part of Order 23 Rule 3, it is the
Court that must be satisfied as to the existence of such adjustment,
whole or partial. The second part of Order 23 Rule 3 requires the
plaintiff’s claim to have been satisfied in whole or in part. These are
two different things. Mr. Jain’s submission falls under the first part,
not the second; for, according to him, there are, post-suit, several
agreements in writing that have the effect of adjusting the suit. The
proviso says that where there is dispute as to the adjustment, the
Court must decide the question (i.e., whether or not there is an
adjustment) and cannot adjourn a decision on that question without
recording reasons. Now the first part of the rule itself has two
implicit components. The applicant seeking an order under the rule
must show (a) the existence of a lawful agreement or compromise in
writing and signed by the parties concerned; (b) that this lawful
agreement has the effect of adjusting the plaintiff’s claim in suit;
and (c) that the agreement or compromise has been effected and

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implemented, resulting in an adjustment of the suit. All three must
be shown; it is not enough to show only one or even two of these
essential ingredients.

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4.Mr. Jain points out that suit was filed as a derivative action by
the Plaintiff for the benefit of 1st Defendant. The allegation was
that the 1st Plaintiff’s valuable assets a trade mark known as
“Marvel Fragrance” was being diluted and infringed and damage
was being caused to the 1st Defendant, these being the impugned
acts of Defendant Nos. 2 to 6. From the record, it appears that
there were also proceedings in the Company Law Board. The
Plaintiff’s application for interim relief was rejected by a learned
Single Judge. Ad-interim reliefs seem to have been granted by the
appeal court thereafter. That appeal was admitted and is still
pending.

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5.In the meantime, and this is central to Mr. Jain’s present
application, a deed of family arrangement was admittedly executed
on 31st January 2012, as was a shareholders’ agreement of the same
date and a later deed of family arrangement dated 1st March 2012
between all the contesting parties. Mr. Jain’s submission, as I
understand it, is that every one of the operative clauses of these two
family arrangements and the shareholders’ agreement either have
been implemented already, or, in any case, the applicant is willing to
perform his obligation under those clauses that have not yet been
fully performed. For the purposes of Order 23 Rule 3, Mr. Jain
submits, actual implementation is not a necessity. It is enough to
show that there exists a lawful agreement or compromise by which
the entire suit is adjusted. Once that is shown, the Court must, in

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his submission record that adjustment and pass a decree. In this
context, he asserts that there are clauses that require the inter-se
exchange of certain sums, evidently on some form of accounts
having been taken. The plaintiff has been given additional
shareholding in the 1st defendant company, apart from other
entitlements. The shareholders’ agreement was itself in
implementation of a clause of the family arrangement of 31st
January 2012. That shareholders’ agreement was admittedly
executed. Clauses 2 and 2.1 of the shareholders’ agreement deal
with the exclusive use of the trade mark in suit. Finally, the
arrangements and agreement record that this suit itself “stands
withdrawn”. Therefore, according to Mr. Jain, an order or decree
under O.23 R.3 of the CPC must follow; nothing further remains in
the suit.

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6.I have considered the Notice of Motion and the affidavits
filed by the contesting parties. That there were these family
arrangements and shareholders agreement does not seem to be in
dispute. What Mr. Kadam, learned Senior Counsel for the Plaintiff,
is at pains to point out is that Order 23 Rule 3 cannot be over-
simplified in this fashion. In the affidavit in reply the Plaintiff has
specifically alleged, among other things, that certain meetings
required to be called of the Board of Directors of Defendant No.1
were illegal, null and void; that there has ever been any sort of
adjustment in whole or in part or any part of the claim in suit; that
the 5th Defendant has not satisfied or complied with all his
obligations; the 5th defendant has not met his obligations of
payment of various amounts to different specified entities; and that
the 5th Defendant has shown no apparent anxiety to comply with or

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fulfull his obligations. While, therefore, the documents may not be
disputed, their implementation most certainly is. The second limb
of the first part of O 23 R 3, i.e., establishing that there has, as a
matter of fact, been such an adjustment of the claim in suit, is not
accepted by the plaintiff. It is yet to be demonstrated.

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7.Mr. Kadam makes a compelling case. It would indeed be
extremely strange if suits were to be disposed of in this fashion.
Indeed every defendant might then be very agreeable to entering
into an agreement or compromise that ostensibly adjusts the suit
with no intention whatsoever of honouring of his obligations under
that agreement. That cannot be surely be the intention of Order 23
Rule 3. To my mind the rules requires it to be shown and proved not
only that there exists a written, signed, lawful agreement or
compromise but also that that agreement or compromise has
resulted in an adjustment of the suit. I do not think it is possible to
accept Mr. Jain’s interpretation that actual implementation need
not be shown, but only the existence of an agreement or
compromise that has the effect, be it as yet unrealised and
unfulfilled, of adjusting the suit; in other words, an agreement that,
when fully implemented, would adjust the suit. That adjustment
cannot be inchoate. It cannot be a matter to be done in future. The
adjustment must be proved to have already happened before an
order or decree is taken under O.23 R.3 of the CPC. Mr. Kadam is,
in my view, correct in saying that where implementation of such an
agreement or compromise is disputed, no such order or decree can
be passed. An applicant under this rule must hew to its
requirements in full.

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8.Given the nature of the defence to this application, and on a
fair consideration of the rival pleadings, it seems to me that this is a
matter that must be taken to trial. At this stage all that can be said
was that there were family arrangements and a shareholders’
agreement. Whether or not these constituted a sufficient
compromise or adjustment of the suit, and whether or not these
were implemented, and whether or not the non-implementation of
these would result in the suit not being adjusted, especially given
the admitted fact that the 5th Defendant has not yet complied with
all his obligations under those arrangements, is not matter that can
be decided at this stage in this manner. These are not questions that
can be decided in a summary manner on affidavits. In the face of
denials by the Plaintiff, and the more so given there his specific
assertion that 5th Defendant has not complied with his obligations
under the family arrangements, I do not see how I can possibly
record the kind of compromise Mr. Jain would have me do.
Evidence will undoubtedly required to be lead as to whether the
various facets of the family arrangement have been complied with
and if not who or which is the defaulting party. Unless a proper
enquiry is made, I do not see how the Plaintiff can be unseated in
this fashion. If that was the intention of the law, it would be a
fearsome weapon in the hands of the dishonest Defendants.

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9.Mr. Kadam relies on a decision of learned single Judge of this
Court in Shri Purshottam Pandurang Nipane Vs. Tarachand
Pandurang Nipane & Ors.,1 one that indicates that the fullest
enquiry is mandated under Order 23 Rule 3. This seems to me to
fortify my own reasoning. Mr. Kadam submits that what Order 23

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1 1997 99 BLR 259

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Rule 3 and its proviso require or contemplate is an enquiry that is
complete.An adjournment to decide whether there is a compromise
or agreement in existence is not permitted. But that surely cannot
mean that even where the agreement is an undisputed, the Court
cannot make an enquiry as to the effect of that agreement, its
implementation and the consequences of non-implementation by
any particular parties, i.e., whether or not there is an adjustment. It
would, in my view, be more appropriate to require the applicant to
lead evidence. Defendants Nos.2 to 6 must establish by cogent
evidence that the suit has been adjusted, and that the compromise
or agreement is complete. It is this question, whether or not there is
in fact an adjustment of the suit claim (and not only that
agreements have been signed that might on implentation and
fulfilment of all reciprocal obligations of have the effect of such an
adjustment), that is covered by Order 23 Rule 3.

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10.Finally, I do not think it is correct to say that such an enquiry
can never be adjourned, or that a Court is bound to put all else aside
and take up that question immediately. The proviso says that “no
adjournmentshall be grantedfor the purpose of deciding the
question, unless the Court, for reasons to be recorded, thinks fit to
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grant such adjournment” The key words here are “adjournment”
and “granted”, with their grammatical variations. Taken together,
they mean that the matter cannot ordinarily be deferred on the
application for an adjourment of one or the other party. This is not
the same thing as saying that a Court cannot post the trial on the
issue to a subsequent date. That is not an adjournment; it is a
scheduling by the Court having regard to what is on its docket at
any given time. The word “granted” clearly shows that the

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prohibition is on allowing, without recording reasons, of a party’s
application for adjournment. Ineed, a court could always grant such
an application, if made (and which it is not today), provided reasons
are given. It is not possible to accept the submission that an enquiry
into the issue or question under Order 23 Rule 3 cannot be posted
to some date convenient to the court.

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11.Prayer (b) of the Notice of Motion, for an immediate
dismissal of the suit, is rejected. The following issue is framed in
relation to prayer (a) of the Notice of Motion:

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1. Whether Defendant Nos. 2 to 6 prove that the suit has been adjusted wholly by virtue of the Family Arrangement dated 31st January 2012 read with the Shareholders’ Agreement dated 31st January 2012 and the Family Arrangement dated 1st March 2012?

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12.I do not propose to allow parties to waste the court’s time by
allowing parties to lead evidence in instalments. For that reason,
the hearing of the Notice of Motion on the issue framed above is
adjourned to court for recording evidence, to be heard along with
the suit. It is made clear that I have not ‘granted’ any ‘adjournment’
for decision on the issue framed. I have scheduled the trial or
enquiry on that issue to a convenient time and propose to direct this
to be done in an orderly manner. It is also clarified that this issue is
a mixed question of fact and law. It cannot, therefore, be decided as
a preliminary issue. It will also not be necessary for the contesting
defendants to amend their written statement for raising the plea of
such an adjustment. It is also clarified that a decision on the issue
will dispose of prayer (a) of the Notice of Motion.

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13.List the Suit for framing issues on 26th June 2014. The issue
framed above will be added to the list of issues framed on that date.

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(G. S. PATEL, J.)

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Anil M. Ahuja v. Marvel Fragrances Pvt. Ltd. and 5 Ors.

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Anil M. Ahuja v. Marvel Fragrances Pvt. Ltd. and 5 Ors.

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