The principle of apparent authority and estoppel played a crucial role in upholding the validity of the compromise settlement, despite the defendant's claims of lack of authority and manipulation of service of summons.

Manmohan, J.

I.A. 3831-3833/2017 in CS(COMM) 1074/2016

1. I.A. 3831/2017 has been filed by the defendant-applicant under Order XXIII Rules 3 & 3A of Code of Civil Procedure, 1908 (for short ‘CPC’) challenging the compromise settlement dated 11th November, 2016 arrived at between the plaintiff on one hand and the defendant on the other hand in terms of which the present suit was decreed. I.A. 3832/2017 has been filed for stay of operation of the judgment dated 23rd November, 2016 and I.A. 3833/2017 has been filed for exemption from filing true and typed copies of dim and illegible annexures.

2. Initially, this court wanted to hear the applications filed by the plaintiff in Execution Petition No.19/2017, including the one under Section 340, Cr.P.C. before pronouncing order in the applications filed by the defendant in the suit. But, as the reply-affidavit of Mr. O.P. Gupta was not filed in the execution petition for a long time and the court was closing for winter vacations, it was decided to reserve the order only in the present applications.

3. Mr. K.K. Sharma, learned senior counsel for defendant stated that Mr. O.P. Gupta was an old employee who in connivance with the plaintiff had defrauded the defendant company by entering into a settlement agreement dated 11th November, 2016, thereby, putting the defendant company not only to financial loss but also to loss of the suit property, which the defendant company is entitled to retain till 2026 by virtue of Agreement/Undertaking dated 09th June, 2011. He further stated that the defendant company never had any knowledge about the pendency of the suit, as the defendant company did not receive any notice of the suit and Mr. O.P. Gupta in connivance with the plaintiff company had manipulated the service by receiving the summons personally and without intimating it to the defendant company.

4. Mr. K.K. Sharma stated that undisputedly the above-mentioned settlement had been executed by Mr. O.P. Gupta purportedly acting on behalf of the defendant company on the basis of a Board Resolution dated 29th September, 2001 which was an authorization in his favour made almost fifteen years prior to the date on which the Deed of Settlement had actually been executed. He stated that in 2008 vide Resolution dated 02nd September, 2008, the previous authorisation in favour of Mr. O.P. Gupta had been revoked and Mr. O.P. Gupta was not supposed to act on the basis of Resolution dated 29th September, 2001.

5. He pointed out that the parties were sent for mediation vide order dated 10th November, 2016 to appear before the Mediation Centre on 11th November, 2016 and the settlement was arrived at on the very same date. He contended that there had been no occasion for Mr. O.P. Gupta to put the proposed terms of settlement before the Board of Directors of the company and therefore, there was no approval of the terms of settlement by the Board of Directors of the company.

6. According to Mr. Sharma, an authorization which was made almost fifteen years before cannot be considered as a continuous authority in favour of Mr. O.P. Gupta which had force/legal validity. He submitted that the general authorization by the company made fifteen years ago did not empower Mr. O.P. Gupta to agree to specific terms of settlement binding the company for financial liability. He also submitted that even if a person has a general authority, he cannot bind the company by the terms of a specific settlement which had never been put to the Board of Directors of the company. In support of his submission, he relied upon the following judgments:-

A. Banwari Lal Vs. Chando Devi (Smt.) (Through LRs.) & Anr., (1993) 1 SCC 581 wherein it has been held as under:-

"11. The present case depicts as to how on February 27, 1991 the court recorded the alleged agreement and compromise in a casual manner. It need not be impressed that Rule 3 of Order XXIII does not require just a seal of approval from the Court to an alleged agreement or comprom