THE STATE OF MADHYA PRADESHversusSATISH JAIN (DEAD) BY LRS & ORS.

                 [2024] 4 S.C.R. 598 : 2024 INSC 315

                    The State of Madhya Pradesh
                                  v.
                   Satish Jain (Dead) by Lrs & Ors.
                       (Civil Appeal No. 6884 of 2012)
                                 18 April 2024
             [Vikram Nath* and K.V. Viswanathan, JJ.]

                           Issue for Consideration
       Issue arose that when there is an agreement based on ex-parte
       decree, and the ex-parte decree having been set aside, parties if
       could rely upon the agreement.

                                  Headnotes
       Suit – Ex-parte decree – Agreement based on ex-parte decree
       – Ex-parte decree having been set aside, parties if could
       rely upon the agreement – Suit property owned by the State,
       however, defendant No.1 perfected his rights by adverse
       possession and transferred all his rights in favour of the
       plaintiff as also handed over possession – Defendant No.1
       allegedly likely to transfer the said land again in favour of the
       third party and that some officers of the State tried to remove
       the fencing put up by the plaintiff on the suit land – Suit for
       declaration, permanent injunction and mandatory injunction by
       plaintiff, against defendant no. 1 and the State – Suit decreed
       ex-parte – Appellate court set aside the same and remanded
       the matter to the trial court – Suit pending before the trial
       court – Meanwhile agreement between the State Municipal
       Corporation and the plaintiff that the plaintiff would vacate
       the suit land, allowing the Corporation to construct the bus
       stand, in lieu of separate plots – Plots allotted but some were
       cancelled later – Thereafter arbitral award passed whereby
       plaintiff would pay the stipulated amount to the Corporation
       and in turn the Corporation would fulfil its obligation of
       allotment of land – Objections by the State to the award,
       allowed by the trial court – In revision filed by the plaintiff, the
       High Court set aside the order of the trial court – Correctness:
       Held: Ex-parte decree having been set aside, there was no
       occasion for the plaintiff to further act upon the agreement since

* Author
[2024] 4 S.C.R.                                                               599

   The State of Madhya Pradesh v. Satish Jain (Dead) by Lrs & Ors.


     no rights had crystallized to the parties – 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 State, the agreement would lose all
     its credibility assuming there was any semblance of any right
     to enter into the agreement – Agreement would not have any
     sanctity in the eye of law even inter se parties – Right created
     in the plaintiff under the ex-parte decree stood extinguished
     and, thus, the Corporation ought to have been careful enough
     of not placing any reliance any further on the said agreement
     – Application filed by the Corporation u/s 89 CPC was also not
     maintainable based on the agreement – There appears to be
     some kind of collusion between the Corporation and the plaintiff
     – Whether or not there was any condition in the agreement 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 – Suit land admittedly
     was owned by the State – Even if the State had allotted it to
     the Corporation for constructing a bus stand, the Corporation
     could not have dealt with it and treated it to be in the ownership
     or possession of the plaintiff by entering into the agreement –
     Corporation would be bound as an allottee of the State to utilise
     the said land for the purpose for which it was given – It ought to
     have taken appropriate steps for removal of possession of the
     plaintiff – Thus, the trial court justified in allowing the application
     by setting aside the award – High Court erred in not considering
     the relevant aspects and in placing reliance on the statement
     made by the State before the trial court that the State had no
     interest inasmuch as it had allotted the land to the Corporation
     to set up a bus stand – Impugned order passed by the High
     Court set aside. [Paras 4-7]

                                 List of Acts
     Code of Civil Procedure, 1908.

                              List of Keywords
     Suit; Ex-parte decree; Agreement; Adverse possession; Suit
     for declaration, permanent injunction and mandatory injunction;
     Arbitration award; Appointment of Arbitrator.
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                                        Case Arising From
       CIVIL APPELLATE JURISDICTION : Civil Appeal No. 6884 of 2012
       From the Judgment and Order dated 14.11.2005 of the High Court of
       Madhya Pradesh at Jabalpur in Civil Revision No. 201 of 2005
                                    Appearances for Parties
       Saurabh Mishra, A.A.G., Ms. Mrinal Gopal Elker, Abhinav Shrivastava,
       Advs. for the Appellant.
       Puneet Jani, Ms. Christi Jain, Mann Arora, Ms. Akriti Sharma, Lisha
       Bhati, Ms. Pratibha Jain, Ashwani Kumar, Sanjay K. Agrawal, Sarthak
       Nema, Ms. Ankita Khare, Yahsovardhan Jain, Ramsakha Kushwaha,
       Advs. for the Respondents.
                       Judgment / Order of the Supreme Court

                                               Judgment
       Vikram Nath J.
1.     The Appellant-State of Madhya Pradesh1-Defendant in the Original
       Suit filed by Satish Jain (Respondent No.1), since deceased,
       represented by his legal heirs, is in appeal assailing the correctness
       of the judgment and order dated 14.11.2005 passed by the Madhya
       Pradesh High Court allowing Civil Revision No. 201 of 2005, titled
       “Satish Jain versus Rama & Ors.”, whereby the High Court set aside
       the order of the Trial Court dated 22.12.2004, and further directed
       the Trial Court to proceed in accordance with law to implement the
       award of the Arbitrator. It also rejected the objections of the appellant
       dated 09.11.2004, and further the order rejecting the report of the
       Arbitrator was also set aside. The operative part of the impugned order
       as contained in the paragraph 27 thereof is reproduced hereunder:
               "27. Therefore, the order under revision is set aside. The
                    objection dated 09.11.2004 filed by respondent no.2
                    stands dismissed. The order rejecting the report of
                    the arbitrator is also set aside. The Trial Court shall
                    proceed further according to law for implementing
                    the award.”


1    Hereinafter referred to as the, “State-Appellant”
[2024] 4 S.C.R.                                                               601

     The State of Madhya Pradesh v. Satish Jain (Dead) by Lrs & Ors.


2.    The relevant facts giving rise to the filing of the present appeal are
      briefly stated hereunder:
      (i).      Satish Jain s/o Dayanand Jain instituted a civil suit impleading
                one Rama s/o Parasram as defendant No.1 and State of
                Madhya Pradesh through Collector, Bhopal as defendant No.2
                praying for a decree of declaration, permanent injunction and
                mandatory injunction. It was registered as C.S. No. 65A of
                1990. The basis of the claim was that the property in dispute
                being Khasra Nos. 48 & 49 area 3.53 acres situated in Village
                Halalpur, Tehsil Huzur, District Bhopal was owned by the State
                of Madhya Pradesh. However, defendant No.1 was enjoying
                continuous and peaceful adverse possession over the suit land
                for the last 50-60 years and as such has perfected his rights
                by adverse possession and had become the owner of the land.
      (ii).     It was further alleged that defendant No.1 has transferred all
                his rights, title, and interest over the suit land in favour of the
                plaintiff and had also handed over possession of the suit land
                on 05.09.1988.
      (iii).    Thereafter the plaintiff had erected wired fencing on 06.09.1988,
                and had been enjoying possession of the suit land.
      (iv).     It is further alleged in the plaint that defendant No.1 was likely
                to transfer the said land again in favour of the 3rd party and
                he also came to know that some officers and employees of
                the State (defendant No.2) had visited the suit land and tried
                to remove the fencing. In such circumstances, the plaintiff
                was compelled to institute the suit for declaration, permanent
                injunction and mandatory injunction.
      (v).      According to the plaintiff, the cause of action arose on
                07.10.1988, and again on 11.10.1988 when the officers/
                employees of the State tried to remove the fencing.
      (vi).     The Trial Court decreed the suit ex-parte vide judgement and
                order dated 22.06.1990.
      (vii). The State preferred an appeal under Section 96 of the Code
             of Civil Procedure, 19082 which was dismissed on the ground


2    In short, “CPC”
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               of delay of 8 days only by the IVth Additional District Judge,
               Bhopal.
       (viii). The State preferred a civil revision before the High Court
               which was registered as Civil Revision No. 300 of 2002. The
               said revision was allowed by the High Court vide order dated
               13.08.2003. It set aside the order of the Appellate Court dated
               11.05.1991, rejecting the application under Section 5 of the
               Limitation Act. It also condoned the delay of 8 days after
               allowing the application for condonation of delay, and further
               directed the Appellate Court to hear the parties on merits and
               decide the appeal in accordance with law.
       (ix).   The said appeal was allowed vide order dated 09.01.2004
               and the case was remanded to the Trial Court for deciding the
               same on merits after providing reasonable time to the State to
               file its written statement. The said suit is still pending before
               the Trial Court.
       (x).    It would be worthwhile to mention that the State has filed its
               written statement after remand by the Appellate Court.
       (xi).   In the meantime, it appears that the suit land was allotted to
               the Bhopal Municipal Corporation3 for constructing a bus stand.
               There is an agreement dated 30.07.1991 entered between
               BMC and the plaintiff that the plaintiff would vacate the suit
               land, allowing the BMC to construct the bus stand, and in lieu,
               separate plots would be allotted to the plaintiff.
       (xii). It is also alleged that some allotments were made by BMC in
              favour of the plaintiff but they were later on cancelled.
       (xiii). After remand, written statement was filed by the State. Further,
               BMC was impleaded as defendant No.3 by order of Trial Court
               dated 13.03.2004.
       (xiv). The appellant filed an application under Order VII Rule 11
              CPC and also under Order VI Rule 17 CPC on 17.08.2004.
       (xv). Further BMC filed an application under Section 89 of the
             CPC stating that under the agreement of 30.07.1991 plaintiff



3   In short, “BMC”
[2024] 4 S.C.R.                                                            603

     The State of Madhya Pradesh v. Satish Jain (Dead) by Lrs & Ors.


            be directed to pay Rs. 30,00,000/- (Rupees Thirty lacs only)
            against the value of the allotted land. It was further stated
            that in case the full amount is deposited, BMC is ready to
            fulfil its obligations. It therefore prayed that the parties may be
            relegated to a Mediator/Arbitrator for settlement of the dispute
            under Section 89 CPC. This application is dated 27.08.2004.
      (xvi). The Trial Court, by order dated 17.09.2004, referred the
             matter to Shri Hemant Kumar. The said Arbitrator/Mediator in
             less than a month gave an award/report dated 14.10.2004.
             In brief, the said award was to the effect that the plaintiff
             would pay Rs. 30,00,000/- to BMC and such lease rent
             as maybe determined, and in turn the BMC would fulfil its
             obligation of allotment of land, as per the agreement dated
             30.07.1991.
      (xvii). The Appellant-State of Madhya Pradesh filed objections dated
              09.11.2004 to the award of the Arbitrator dated 14.10.2004
              praying for setting aside the same on various grounds. It was
              specifically stated in the objections that the ownership of the
              land still remains with the State of Madhya Pradesh and that
              BMC had no business or right to deal with such land without
              the written consent or approval of the State.
      (xviii). The Trial Court, after inviting objections to the application of
               the State dated 09.11.2004, allowed the same by order dated
               22.12.2004. Aggrieved by the same, the plaintiff preferred a
               civil revision, which has since been allowed by the impugned
               order, giving rise to the present appeal.
3.    We have heard learned counsels for the parties and perused the
      material on record.
4.    It is an admitted position that the suit is still pending before the Trial
      Court. The plaintiff has not been granted any declaration as such
      till date. The ex-parte decree having been set aside, there was no
      occasion for the plaintiff to further act upon the agreement dated
      30.07.1991 since no rights had crystallized to the parties. 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 dated
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       30.07.1991 would lose all its credibility assuming there was any
       semblance of any right to enter into the agreement. The application
       filed by BMC under Section 89 CPC was also not maintainable based
       on the agreement of 30.07.1991. 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.
5.     The suit land admittedly was owned by the Appellant-State. Even if
       the State had allotted it to BMC for constructing a bus stand, BMC
       could not have dealt with it and treated it to be in the ownership
       or possession of the plaintiff by entering into the agreement dated
       30.07.1991. BMC would be bound as an allottee of the State to
       utilise the said land for the purpose for which it was given. It ought
       to have taken appropriate steps for removal of possession of the
       plaintiff which under law was totally unauthorised and illegal.
6.     A perusal of the agreement dated 30.07.1991 clearly mentions that
       the plaintiff was claiming right under the ex-parte decree dated
       22.06.1990 and the dismissal of the First Appeal on 11.05.1991.
       Later on 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 law even inter se parties. The right created in the plaintiff under
       the ex-parte decree stood extinguished and, therefore, BMC ought
       to have been careful enough of not placing any reliance any further
       on the said agreement. The Trial Court was justified in allowing the
       application by setting aside the award. 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 inasmuch as 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. In any case, all
       the applications are still pending before the Trial Court if not already
       disposed off or withdrawn by the State.
7.     In view of the above, the appeal deserves to be allowed and is
       accordingly allowed. The impugned order passed by the High Court
       is set aside.
[2024] 4 S.C.R.                                                     605

     The State of Madhya Pradesh v. Satish Jain (Dead) by Lrs & Ors.


8.    The Trial Court will proceed with the suit and decide the same on
      merits on the basis of evidence which may be led before it.
9.    There shall be no order as to costs.
10. Pending applications, if any, also stand disposed of.

      Headnotes prepared by: Nidhi Jain               Result of the case:
                                                         Appeal allowed.