Shankar Sitaram Sontakke And Another vs Balkrishna Sitaram Sontakke And Others

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeal No. 113 of 1953

Decision Date: 12 April 1954

Coram: Ghulam Hasan, Mehar Chand Mahajan, Vivian Bose

The judgment concerned the appeal titled Shankar Sitaram Sontakke and another versus Balkrishna Sitaram Sontakke and others, decided on the twelfth day of April, nineteen fifty-four. The matter was heard by the Supreme Court of India, with the bench composed of Justices Ghulam Hasan, Mehar Chand Mahajan, and Vivian Bose. The petitioners were Shankar Sitaram Sontakke and an additional applicant, while the respondents were Balkrishna Sitaram Sontakke together with other parties.

The citation for the decision is recorded as 1954 AIR 352 and 1955 SCR 99. The case is referenced in later reports under the citation C 1991 SC2234 (41). The legal issue addressed in the judgment related to the effect of a consent decree, particularly whether a compromise that is not vitiated by fraud, misrepresentation, misunderstanding or mistake gives the resulting decree the status of a decree passed by the court, and consequently whether it operates as res judicata. The judgment also examined the application of Order II, rule 2 (3) of the Civil Procedure Code, which deals with the relinquishment of a claim in an earlier suit and the bar on subsequent suits for relief that was omitted without the leave of the court.

The headnote summarised the Court’s settled position that a consent decree binds the parties as firmly as a decree rendered involuntarily. It further noted that when a plaintiff limits his claim to accounts up to a specific date, the plaintiff implicitly relinquishes the right to claim for the period thereafter, unless he expressly includes that period, because the procedural rule requires a party to seek all the relief to which he is entitled, failing which he may not later pursue the omitted relief.

The formal judgment was recorded under the civil appellate jurisdiction in Civil Appeal number one hundred thirteen of nineteen fifty-three. The appeal was taken from a judgment and decree dated the twenty-fifth of March, nineteen fifty-two, issued by the Division Bench of the High Court of Bombay, consisting of Justices Bavdekar and Dixit. That earlier decree had modified a judgment and decree dated the thirtieth of June, nineteen fifty-one, rendered by the Joint Civil Judge, Senior Division of Thana, in Special Suit number twelve of nineteen forty-nine.

The counsel for the appellants included K. S. Krishnaswamy Iyengar, assisted by J. B. Dadachanji, V. B. Rege and Ganpat Rai. The respondents were represented by counsel S. B. Jathar, R. B. Kotwal and Naunit Lal. The judgment was delivered on the twelfth of April, nineteen fifty-four by Justice Ghulam Hasan.

The Court explained that the present appeal had been filed by permission of the High Court of Bombay against the judgment and decree of a Division Bench of that court dated twenty-fifth March, nineteen fifty-two, which in turn modified the earlier judgment and decree of the Civil Judge dated thirtieth June, nineteen fifty-one. The dispute originated from a partition among six brothers belonging to a joint Hindu family. The family operated a collective business known as “Sontakke Brothers,” which included a grocery shop, liquor shops, a ration shop, a motor-bus service and money-lending activities. The brothers also owned various immovable and movable assets. Balkrishna Sitaram Sontakke, the eldest brother, was the plaintiff-respondent in the original proceedings and was therefore referred to in the judgment as the plaintiff-respondent.

In the appeal before this Court, the plaintiff is the eldest brother, Balkrishna Sitaram Sontakke. It was admitted that until the end of 1944 all six brothers lived together and that the income from the family enterprises was deposited with the plaintiff. From 14 April 1945 the circumstances altered; each brother began to retain the proceeds of the business that he individually managed. At that time the plaintiff continued to operate the liquor shops, the first and second defendants – the appellants – operated the motor-bus service, and the fourth defendant managed the grocery shop. The brothers attempted to achieve a partition through appointed arbitrators, but that effort was unsuccessful. Consequently, on 29 June 1945 the five surviving brothers instituted suit No. 39 of 1945 for partition of all joint family property, including the accounts of every business. A compromise was reached on 7 March 1946. The compromise stated that the accounts of all enterprises up to the year 1942 had been correctly kept and reflected. It further provided that the parties would have the Court appoint arbitrators to examine the accounts from 1942 through 31 March 1946 and to determine the sums due as of that date. The compromise required that each brother receive one-sixth of the cash balance as determined on 31 March 1946, and that all movable property of the joint family, including the stock-in-trade of each business, be divided equally among the brothers. Additionally, the compromise specified that the plaintiff was entitled to one-sixth of the motor garage and that defendants 1 and 2 were to pay him the price for that one-sixth share. These clauses constitute the essential terms of the compromise. Because one brother was a minor, the Court held that the compromise was beneficial to the minor and consequently issued a preliminary decree in accordance with the compromise on 25 July 1947. Had no further events intervened, the matter would have concluded with a final decree of partition. However, the plaintiff instituted a new suit on 23 February 1949, seeking only his share of the profits and assets of the motor-bus business carried on by defendants 1 and 2 after 31 March 1946. The plaintiff argued that the compromise had been hurried, that it failed to address the future operation of the motor business from 1 April 1946, that the motor business remained a joint family concern, and that he was entitled to obtain accounts for the period after 31 March 1946. In response, the defendants contended that the compromise was entered into after careful deliberation, that the accounts of the motor business and the grocery shop should have been examined only up to 14 April 1945, the date on which the joint family relationship was disrupted.

The judgment recorded that, although the parties had agreed by compromise to limit the accounting of all family businesses to the period ending on 31 March 1946, the plaintiff also pleaded that the claim was barred by the doctrine of res judicata. The Civil Judge, addressing the issues framed, held that the present suit was not barred on the ground of the earlier decree in suit No. 39 of 1945, observed that the earlier decision had not been procured by fraud or misrepresentation, and found that the compromise in that suit had not arisen from any mistake or misunderstanding. Notwithstanding these findings, the Judge observed that the motor business continued after the partition and, although it no longer qualified as a joint family undertaking, it was being conducted by members of the same family. He likened their position to that of partners who continue a partnership after its dissolution and, applying the principle underlying section 37 of the Partnership Act, held that the two brothers who were operating the motor business were liable to render accounts. Accordingly, a preliminary decree was issued directing that the accounts of the motor business be taken from 31 March 1946 up to the date on which a final decree for the payment of the amount found due would be made. A Commissioner was appointed to prepare the accounts and to ascertain the profits earned by the use of capital belonging to the shares of the brothers who were not engaged in the motor business. On appeal, the appellate judges, with one Judge concurring, modified the trial Court’s decree by directing that the accounts be taken only up to the date when the businesses ceased, rather than up to the date of the final decree. The appellate judges held that the cause of action for the present suit differed from that of the earlier suit and therefore the suit was not barred by res judicata or by Order II, rule 2 of the Code of Civil Procedure. After noting several conflicting observations, which will be discussed later, the judges concluded that the consent decree did not expressly negate the right to account for the motor transport business. Finally, the judges recorded that, irrespective of the pleadings, defendants No. 1 and No. 2 had utilized joint family property, stood in the position of co-owners, and, as contemplated in section 90 of the Indian Trusts Act, were liable to render accounts for profits attributable to the use of assets owned jointly. Counsel for the appellants contested the High Court’s view on all points, arguing that the cause of action in a partition suit is the family’s desire to separate, that the causes of action in the two suits are identical and not distinct, and that therefore the suit should be barred by res judicata and by Order II, rule 2 of the Civil Procedure Code. The counsel also challenged the High Court’s application of section 90 of the Indian Trusts Act.

The appellant’s counsel argued that the suit was separate and distinct from the earlier proceedings and therefore should be dismissed on the ground of res judicata as well as under Order II, rule 2 of the Code of Civil Procedure. The counsel also questioned the High Court’s decision that section 90 of the Indian Trusts Act applied to the case. The Court observed that a careful reading of the compromise reached by the parties under the circumstances then existing leads to the only reasonable conclusion that the parties had agreed to limit the accounting of profits to the period ending on 31 March 1946 and to refuse any reopening of the accounts after that date. The Court noted that the trial Court had found the compromise to have been arrived at after full and informed consideration by the parties and that it was not tainted by fraud, misrepresentation, mistake or misunderstanding, a finding that the High Court had not disturbed. Consequently, the Court held that a matter once finally settled between parties dealing at arm’s length could not be reopened. To explain why the parties chose to fix the accounting date at 31 March 1946 and to stop further accounting that otherwise would have continued until the final decree, the Court turned to the surrounding facts. The plaintiff was aware that his licence for the liquor shops would terminate on 1 April 1946 and he was determined to operate the liquor business thereafter solely on his own and not in partnership with his brothers. On 12 December 1945 the plaintiff, through his pleader, served a notice on his brothers stating, in part, that the licence would expire at the end of March 1946 and that after that date he had no desire to conduct the liquor business jointly or in partnership with them. He declared that he would acquire one or more liquor shops at a government auction, finance the purchase by borrowing from third parties on his own responsibility, and keep the money completely separate from the properties and cash presently in dispute and from the profits of those businesses. He further informed the brothers that the shops purchased would belong exclusively to him, that they would be run independently, and that the brothers would have no legal right to interfere with or meddle in those shops. He warned that any malicious attempt by the brothers to interfere would make them fully liable for any harm, damages or expenses suffered by him and that he would take severe legal action against them.

In this case the plaintiff issued a notice stating that any interference by his brothers with the liquor-shop business he intended to run independently would make the brothers fully responsible for any harm, damages or expenses he might suffer, and that he would take severe legal action against them. The notice therefore demonstrated that the plaintiff’s intention was to operate the liquor shops solely for himself and to retain the profits without being accountable to his brothers. Although the plaintiff claimed he would finance the auction purchase by borrowing, he actually possessed Rs 13,000 in cash, which was considerably more than the Rs 3,000 held by his brothers, indicating a position of advantage. The notice also clarified the importance of the compromise clause that limited the accounting of the family businesses to the period ending on 31 March 1946. Because the plaintiff did not want his brothers to interfere with his exclusive management of the liquor business after that date, he had to agree to sever his connection with the other enterprises run by his brothers. The brothers regarded this arrangement as fair, reasonable and without undue advantage to any party. According to this construction of the compromise, the plaintiff’s later decision to file a fresh suit concerning only the motor-business was dishonest and contrary to the agreed terms. The earlier suit had left no doubt that the plaintiffs in that action sought a complete division of all family property, both movable and immovable, and a final determination of the accounts of the family businesses. After the compromise, the plaintiff, identified as Balkrishna, filed an application before the Civil Judge on 22 November 1947, alleging that his agreement to limit the accounts to 31 March 1946 was based on a misapprehension of his legal rights. He asserted that he believed the joint family property after that date would not be allowed to be used by certain members for personal profit, and that the joint family business would either cease altogether after 31 March 1946 or be managed by arbitrators or Commissioners, with any profits deposited in Court for distribution according to each party’s share. However, on 6 April 1948 his counsel stated that the application was abandoned because the plaintiff wished to pursue an independent suit for the grievance raised in the application. The Court accordingly disposed of the application, noting that it was not pressed further.

The application was disposed of on the basis that it was “as it is not pressed.” The learned judges of the High Court, in referring to that application, observed that the idea of obtaining profits from several businesses after 1 April 1946 was clearly present in the minds of the parties, yet the parties did not request that accounts of the other businesses be taken up after that date. One of the businesses was a liquor enterprise, which was admittedly to cease on 31 March 1946; another business was a modest kirana shop that continued to exist. The court noted that the appellants’ contention was not that the parties had merely overlooked the continuation of the businesses, but that the parties were aware that the businesses might persist and, if they did, the parties did not specifically desire that the compromise decree provide for accounts of those businesses after 1 April 1946. The judges recorded a conclusion that the compromise did not expressly deny the plaintiff’s right to an account of the motor business. The present Court was unable to accept that conclusion. The observations quoted above, the Court held, undermined the plaintiff’s argument of mistake or misunderstanding regarding the true effect of the compromise and demonstrated that the plaintiff had abandoned the right to an account after the crucial date, thereby altering the parties’ relationship to that of tenants in common. The Court further reasoned that if the plaintiff truly intended that accounts of the motor business—or indeed of all other businesses—be taken up to the date of the final decree, there would have been no reason to mention 31 March 1946. Normally, after a preliminary decree, the court would divide the property by metes and bounds and award monies based on the examination of accounts up to the final decree date. Because the compromise limited the period for accounting, the plaintiff prevented the natural course of events and barred accounts from being taken after 31 March 1946. The Court observed that the plaintiff had no real grievance, for although defendants 1 and 2, who continued to operate the motor business, may have earned some profit with the help of two old motor buses, the plaintiff, whose eagerness to run the liquor business was evident from the notice, was not precluded from enjoying the fruits of that business. It is hard

The Court observed that it was unreasonable to suppose the plaintiff would have consented to share any loss had the motor business remained profitable. Consequently, the Court held that the compromise conclusively resolved every dispute concerning the accounting of the joint family enterprises, including the motor business, for any period after 31 March 1946, and that the plaintiff remained bound by the terms of that compromise and the consent decree that followed. The Court explained that this finding meant the plaintiff was prohibited, by the doctrine of res judicata, from raising the same question again in the present suit. It affirmed the well-established principle that a consent decree binds the parties with the same force as a decree rendered ex parte. Since the compromise was not tainted by fraud, misrepresentation, misunderstanding or mistake, the decree issued on its basis possessed the same res judicata effect. The Court additionally opined that the plaintiff’s claim was barred by Order II, rule 2(3) of the Code of Civil Procedure. By limiting his claim to an account only up to 31 March 1946, the plaintiff—whether expressly or by implication—surrendered any entitlement to an account for the period thereafter. The Court cited sub-rule 3, which provides that a person who, without the Court’s leave, omits to sue for any relief to which he is entitled, may not later pursue that omitted relief. The Court disagreed with the High Court’s view that the cause of action in the later suit differed from that in the earlier suit. It explained that the original suit arose from the plaintiff’s desire to separate from his brothers and to partition the entire joint family property, a suit that covered the whole property without reservation and was ultimately settled by compromise, whereby the plaintiff abandoned his claim to account for the motor business after 31 March 1946. The later suit, which sought to enforce a portion of that relinquished claim, was founded on the same cause of action that the plaintiff had deliberately given up. Accordingly, the Court concluded that because the causes of action in both suits were identical, the later suit was barred under Order II, rule 2(3) of the Code of Civil Procedure, as well as by the doctrine of res judicata. As a result, the Court held that no issue could arise concerning the applicability of section 90 of the Indian Trusts Act. The final order allowed the appeal, dismissed the suit with costs throughout, and recorded that the appeal was allowed.