Skip to main content

Compromise/Consent decree can only be challenged before the decree issuing court

In R. JANAKIAMMAL vs S.K. KUMARASAMY(DECEASED), a decree issued on a compromise settlement was challenged through a separate suit before various courts and after being rejected by the lower courts, finally reached the Supreme Court.

The objection raised by the plaintiff was that the compromise settlement was fraudulent and should be rejected while the defendants claimed that the suit was barred under Order XXIII Rule 3A of the CPC and that the only remedy open for the plaintiff was to either file an application in suit No.37 of 1984 or file an appeal against the Compromise decree.

Agreeing with the Respondents, the Supreme Court observed that Order XXIII Rule 3 provides for compromise of suit. In Rule 3 amendments were made by Act No. 104 of 1976 by which a proviso and an explanation was added. Order XXIII Rule 3 as amended is to the following effect:- 

Compromise of suit. - Where it is proved to the satisfaction of the Court that a 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 is 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: 

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. 

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; 

By the same amendment Act No.104 of 1976, a new Rule, i.e., Rule 3A was added providing Bar to suit. - No suit shall lie to set aside a decree on the ground that the compromise on which the decree is based was not lawful. 

The experience of the courts has been that on many occasions parties having filed petitions of compromise on basis of which decrees are prepared, later for one reason or other challenge the validity of such compromise. For setting aside such decrees suits used to be filed which dragged on for years including appeals to different courts. Keeping in view the predicament of the courts and the public and to avoid multiplicity of litigation, several amendments have been introduced in Order 23 of the Code which contain provisions relating to withdrawal and adjustment of suit by Civil Procedure Code (Amendment) Act, 1976. 

Reading Rule 3 with Proviso and Explanation, it is clear that an agreement or compromise, which is void or voidable, cannot be recorded by the Courts and even if it is recorded the Court on challenge of such recording can decide the question. The Explanation refers to Indian Contract Act. The Indian Contract Act provides as to which contracts are void or voidable.

And a conjoint reading of Sections 10, 13 and 14 of the Indian Contract Act indicates that when consent is obtained by coercion, undue influence, fraud, misrepresentation or mistake, such consent is not free consent and the contract becomes voidable at the option of the party whose consent was caused due to coercion, fraud or misrepresentation.

Referring to judgment in Banwari Lal Vs. Chando Devi (Smt.) Though LRs. And Anr., (1993) 1 SCC 581, and Pushpa Devi Bhagat (Dead) Through LR. Sadhna Rai (Smt.) Vs. Rajinder Singh and Ors., (2006) 5 SCC 566, observed that - 

The position that emerges from the amended provisions of Order 23 can be summed up thus: 

(i) No appeal is maintainable against a consent decree having regard to the specific bar contained in Section 96(3) CPC. 

(ii) No appeal is maintainable against the order of the court recording the compromise (or refusing to record a compromise) in view of the deletion of clause (m) of Rule 1 Order 43. 

(iii) No independent suit can be filed for setting aside a compromise decree on the ground that the compromise was not lawful in view of the bar contained in Rule 3-A. 

(iv) A consent decree operates as an estoppel and is valid and binding unless it is set aside by the court which passed the consent decree, by an order on an application under the proviso to Rule 3 Order 23. 

Therefore, the only remedy available to a party to a consent decree to avoid such consent decree, is to approach the court which recorded the compromise and made a decree in terms of it, and establish that there was no compromise. In that event, the court which recorded the compromise will itself consider and decide the question as to whether there was a valid compromise or not. This is so because a consent decree is nothing but contract between parties superimposed with the seal of approval of the court. The validity of a consent decree depends wholly on the validity of the agreement or compromise on which it is made.



Comments

Post a Comment

Most viewed this month

One Sided Clauses In Builder-Buyer Agreements Is An Unfair Trade Practice

In CIVIL APPEAL NO. 12238 OF 2018, Pioneer Urban Land & Infrastructure Ltd. vs Govindan Raghavan, an appeal was filed before the Supreme Court  by the builder against the order of the National Consumer Forum. The builder had relied upon various clauses of the Apartment Buyer’s Agreement to refute the claim of the respondent but was rejected by the commission which found the said clauses as wholly one-sided, unfair and unreasonable, and could not be relied upon. The Supreme Court on perusal of the Apartment Buyer’s Agreement found stark incongruities between the remedies available to both the parties. For example, Clause 6.4 (ii) of the Agreement entitles the Appellant – Builder to charge Interest @18% p.a. on account of any delay in payment of installments from the Respondent – Flat Purchaser. Clause 6.4 (iii) of the Agreement entitles the Appellant – Builder to cancel the allotment and terminate the Agreement, if any installment remains in arrears for more than 30 da...
Post a Comment
Read more

Inherited property of childless hindu woman devolve onto heirs of her parents

In Tarabai Dagdu Nitanware vs Narayan Keru Nitanware, quashing an order passed by a joint civil judge junior division, Pune, the Bombay High Court has held that under Section 15 of the Hindu Succession Act, any property inherited by a female Hindu from her father or mother, will devolve upon the heirs of her father/mother, if she dies without any children of her own, and not upon her husband. Justice Shalini Phansalkar Joshi was hearing a writ petition filed by relatives of one Sundarabai, who died issueless more than 45 years ago on June 18, 1962. Article referred:http://www.livelaw.in/property-inherited-female-hindu-parents-shall-devolve-upon-heirs-father-not-husband-dies-childless-bombay-hc-read-judgment/
Post a Comment
Read more

Court approached in the early stages of arbitration will prevail in all other subsequent proceedings

In National Highway Authority of India v. Hindustan Steelworks Construction Limited, the Hon'ble Delhi High Court opined that once the parties have approached a certain court for relief under Act at earlier stages of disputes then it is same court that, parties must return to for all other subsequent proceedings. Language of Section 42 of Act is categorical and brooks no exception. In fact, the language used has the effect of jurisdiction of all courts since it states that once an application has been made in Part I of the Act then ―that Court alone shall have jurisdiction over arbitral proceedings and all subsequent applications arising out of that agreement and arbitral proceedings shall be made in that Court and in no other Court. Court holds that NHAI in present case cannot take advantage of Section 14 of the Limitation Act, 1963 for explaining inordinate delay in filing present petition under Section 34 of this Act in this Court.
Post a Comment
Read more