Law Web: Supreme Court: Stranger is barred from challenging compromise decree by filing separate suit

Finality of decisions is an underlying principle of all

adjudicating forums. Thus, creation of further litigation should

never be the basis of a compromise between the parties. Rule 3A of

Order 23 CPC put a specific bar that 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 scheme of Order 23 Rule 3 CPC is to

avoid multiplicity of litigation and permit parties to amicably come

to a settlement which is lawful, is in writing and a voluntary act on

the part of the parties.

18. It can be further noticed that earlier under Order 43 Rule

1(m), an appeal which recorded the compromise and decide as to

whether there was a valid compromise or not, was maintainable

against an order under Rule 3 of Order 23 recording or refusing to

record an agreement, compromise or satisfaction. But by the

amending Act, aforesaid clause has been deleted, the result whereof

is that now no appeal is maintainable against an order recording or

refusing to record an agreement or compromise under Rule 3 of

Order 23. Being conscious of this fact that the right of appeal

against the order recording a compromise or refusing to record a

compromise was being taken away, a new Rule 1A was added to

Order 43 which is as follows:“

1A.

Right to challenge nonappealable

orders in appeal

against decree.— (1) Where any order is made under this

Code against a party and thereupon any judgment is

pronounced against such party and a decree is drawn up,

such party may, in an appeal against the decree, contend

that such order should not have been made and the

judgment should not have been pronounced.

(2) In an appeal against a decree passed in a suit after

recording a compromise or refusing to record a compromise,

it shall be open to the appellant to contest the decree on the

ground that the compromise should, or should not, have

been recorded.”

19. Thus, after the amendment which has been introduced,

neither any appeal against the order recording the compromise nor

remedy by way of filing a suit is available in cases covered by Rule

3A of Order 23 CPC. As such, a right has been given under Rule

1A(2) of Order 43 to a party, who denies the compromise and invites

order of the Court in that regard in terms of proviso to Rule 3 of

Order 23 CPC while preferring an appeal against the decree.

Section 96(3) CPC shall not be a bar to such an appeal, because it

is applicable where the factum of compromise or agreement is not

in dispute.

20. In the present case, the partition suit was filed in 1978 and

after the decision of the trial Court, the matter went in first appeal

and eventually, Second Appeal No. 495/86 before the High Court.

During the pendency of first appeal being continuation of the suit

as stated, one of the parties to the pending proceedings, namely,

Sampatiya allegedly entered into a sale deed with the appellant on

6th January, 1984. Indubitably the issue regarding right, title and

interest in respect of the land which was the subject matter of sale

deed dated 6th January, 1984, was still inchoate and not finally

decided. In that sense, the claim of the appellant was to be

governed by the decision in favour of or against Sampatiya in the

pending appeal. It must follow that the alleged transaction effected

in favour of the appellant by a sale deed dated 6th January, 1984

ought to abide by the outcome of the said proceedings which

culminated with the compromise decree passed by the High Court

in Second Appeal No. 495/86 dated 15th September, 1994.

21. Indeed, the appellant was not a party to the stated

compromise decree. He was, however, claiming right, title and

interest over the land referred to in the stated sale deed dated 6th

January, 1984, which was purchased by him from Sampatiyajudgment

debtor and party to the suit. It is well settled that the

compromise decree passed by the High Court in the second appeal

would relate back to the date of institution of the suit between the

parties thereto. In the suit now instituted by the appellant, at the

best, he could seek relief against Sampatiya, but cannot be allowed

to question the compromise decree passed by the High Court in the

partition suit. In other words, the appellant could file a suit for

protection of his right, title or interest devolved on the basis of the

stated sale deed dated 6th January, 1984, allegedly executed by one

of the party(Sampatiya) to the proceedings in the partition suit,

which could be examined independently by the Court on its own

merits in accordance with law. The trial Court in any case would

not be competent to adjudicate the grievance of the appellant herein

in respect of the validity of compromise decree dated 15th

September, 1994 passed by the High Court in the partition suit.

22. In other words, the appellant can only claim through his

predecessorSampatiya,

to the extent of rights and remedies

available to Sampatiya in reference to the compromise decree.

Merely because the appellant was not party to the compromise

decree in the facts of the present case, will be of no avail to the

appellant, much less give him a cause of action to question the

validity of the compromise decree passed by the High Court by way

of a substantive suit before the civil Court to declare it as

fraudulent, illegal and not binding on him. Assuming, he could

agitate about the validity of the compromise entered into by the

parties to the partition suit, it is only the High Court, who had

accepted the compromise and passed decree on that basis, could

examine the same and no other Court under proviso to Rule 3 of

Order 23 CPC. It must, therefore, follow that the suit instituted

before the civil Court by the appellant was not maintainable in view

of specific bar under Rule 3A of Order 23 CPC as held in the

impugned judgment.

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO(S). 3961 OF 2010

TRILOKI NATH SINGH Vs ANIRUDH SINGH

Ajay Rastogi, J.

Dated: MAY 06, 2020.

Citation:(2020) 6 SCC 629,2021(1) MHLJ 55

1. The question arises in the appeal for our consideration is as to

whether the decree passed on a compromise can be challenged by

the stranger to the proceedings in a separate suit.

2. The seminal facts which are relevant for the present purpose

and the circumstances in which it arises for our consideration are

that the appellantplaintiff

filed suit before 4th subjudge,

Chapra

seeking a declaration that the compromise decree dated 15th

September, 1994 passed in Second Appeal No. 495/86 by the High

Court is illegal, inoperative and obtained by fraud and

misrepresentation and also prayed for injunction against the

respondentsdefendants

restraining them from entering into

peaceful possession of the suit property.

3. The case in shorn of the appellantplaintiff

is that the land

described in Schedule 1 of the plaint originally belonged to Lakhan

Singh who died leaving behind three sons, namely, Din Dayal

Singh, Jalim Singh and Kunjan Singh. Din Dayal Singh is said to

have died issueless during lifetime of his father and his other

brother, namely, Jalim Singh also died leaving behind a son Ram

Nath Singh and two daughters Sampatiya and Soniya. As regards

the third son Kunjan Singh, he is said to have died issueless but

prior to his death he gifted the land of his share to Sampatiya on

the basis of a gift deed dated 10th July, 1978 which came on

possession over her.

4. The further case of the appellant is that one Salehari wife of

Satyanarayan Prasad claiming herself to be the daughter of late

Kunjan Singh filed a partition suit 13/78 in the Court of Munsif,

Chapra for setting aside the aforesaid gift and for partition of her

share in the ancestral property. In that suit, Sampatiya, Dulari

Devi, Ram Nath and Soniya were impleaded as party respondentsdefendants.

Ram Nath died during pendency of the proceedings

and only Sampatiya contested the suit. It was further stated that

suit was dismissed and it was held that Salehari was not the

daughter of Kunjan Singh and have no right in the properties.

5. Salehari filed T.A. No. 19/84 which was dismissed on 7th April,

1986. The further case is that a total of 3 Bigha 6 Katha 3 Dhurs

was sold by Sampatiya to appellantplaintiff

for a sum of Rs.

25,000/by

a registered sale deed dated 6th January, 1984 and put

the appellantplaintiff

in possession over the suit property. In July,

1995, when respondentsdefendants

started making interference in

possession of the suit property of the appellantplaintiff

and on

query it revealed that it was claimed on the strength of a

compromise decree entered between Sampatiya and Salehari which

was filed in second appeal before the High Court of Patna.

6. The case of the appellantplaintiff

is that the said compromise

decree was obtained by fraud and misrepresentation concealing the

salient fact from the High Court that the sale deed was executed

much prior to the compromise being executed between the parties

to the proceedings and as such the said compromise was liable to

be declared to be void which was obtained by fraud and

misrepresentation.

7. The respondentsdefendants

contested the suit on the ground

that the suit was not maintainable. It was also alleged that the suit

was hit by the provisions of Section 34 of the Specific Relief Act and

Order 23 Rule 3A Code of Civil Procedure(hereinafter being referred

to as “CPC”). It also urged that the appellantplaintiff

has no right

to file the suit in the Court of SubJudge

rather he ought to have

filed an application before the High Court which passed the

compromise decree and the appellantplaintiff

has no right to seek

relief of injunction. That apart, it was stated to be barred by

Section 52 of Transfer of Property Act. The specific plea of the

respondentsdefendants

in the written statement was that Kunjan

Singh has not died issueless rather he had a daughter namely

Salehari being his sole heir. It was also denied that he had

executed a deed of gift in favour of Sampatiya and has delivered

possession of the gifted land to her. It was, however, conceded that

Salehari filed a partition suit no. 13/79 in which she lost,

whereafter she filed First Appeal No. 19/84 which was dismissed.

In Second Appeal No. 495/86 before the High Court, at her

instance, a compromise was executed between the parties and

accordingly, the compromise decree was passed by the High Court

dated 15th September, 1994. The extract of the terms of

compromise is reproduced ad infra:“

That the said compromise has been reached on following

terms and conditions:(

i) That the respondent no. 1(Sampatiya D/o Late

Jalim Singh) accepts that the plaintiffappellant

Salehari Devi is the daughter of Kunjan Mahto.

(ii) That respondent no. 1 accepts the alleged deed

of gift dated 10.7.1987 executed by Kunjan

Mahto in favour of respondent no. 1 is illegal,

void and inoperative

and that respondent no. 1

derived neither title nor possession on account

of the said deed of gift.

(iii) That it is accepted by the respondent no. 1 that

the plaintiff appellant Salehari Devi after the

death of her father Kunjan Mahto came in

possession of his properties as she was the sole

surviving legal heir of her father,

(iv) That the plaintiffappellant

accepts that she has

got only half share in the entire suit properties

and other half share belongs to respondent no. 1

Sampatiya Devi.

(v) That to remove vagueness as to which suit

properties will go to whose share, it is made

clear that scheduleI

property of the plaint

which is made annexure1

containing

exhaustive details of properties will go to the

share of plaintiff appellant and the rest of the

suit properties as described in scheduleII

of the

plaint will go to the share of respondent no. 1,

(vi) That according to their respective shares the

appellant and respondent nos. 1 and 2 have

come in possession thereof.”

8. On the basis of pleadings of the parties, the learned trial

Judge in all framed 9 issues. The same are reproduced as under:1.

Is the plaintiff got any valid cause of action?

2. Is the suit as framed maintainable?

3. Is the Court fee paid sufficient?

4. Is the suit barred by limitation?

5. Is the suit u/s 34 S.R. Act.

6. Is the compromise dated 30th May, 1994 and order dated

15th September, 1994 in 2nd appeal 495/95 of the Hon’ble

High Court is illegal, inoperative and inaffective due to

fraud.

7. Is the plaintiff got right, title and interest in the suit

property?

8. Is the plaintiff entitle for decree as claimed

9. To what over relief and reliefts plaintiff to?

9. It is relevant to notice that issue nos. 4 & 5 were not pressed

and rest of the issues were decided against the appellantplaintiff

after due appreciation of the evidence on record on merits by the

trial Judge by its judgment and decree dated 31st July, 1998 which

was challenged by the appellantplaintiff

in appeal before the

learned District Judge in Title Appeal No. 80/98(3/99). On due

appreciation of evidence on record, the appeal came to be dismissed

by the Court of Appeal by its judgment dated 5th May, 2003 that

came to be challenged by the appellant in Second Appeal No. 153 of

2003 before the High Court which came to be dismissed at the

motion stage by judgment dated 20th April, 2009 which is a subject

matter in appeal before us.

10. Learned counsel for the appellantplaintiff

submits that

provision of Order 23 Rule 3A CPC is applicable only to the parties

to the suit and the said provision does not apply to a stranger to the

compromise decree, therefore, the remedy is always open to a

stranger to the compromise decree to file a separate suit to ventilate

his grievance in the appropriate proceedings. In the given

circumstances, the High Court has committed a manifest error in

dismissing the appeal at the motion stage to nonsuit

the appellantplaintiff

and make him remediless in questioning the compromise

decree which has seriously affected his right over the subject

property in question and the only remedy available with the

appellantplaintiff

was to file a suit claiming his right over the

subject land in question which was created on the basis of a sale

deed executed by one of the party to the proceedings dated 6th

January, 1984 much before the compromise decree was passed by

the High Court.

11. Learned counsel further submits that when the previous suit

filed by Salehari was dismissed on merits on 30th December, 1983,

thereafter on 6th January, 1984, Sampatiya sold the suit property to

the appellantplaintiff

on the basis of the gift deed executed in her

favour. It was not open for Sampatiya to enter into the compromise

against her pleadings without any consideration and such an act of

Sampatiya clearly implies her collusion with Salaheri in order to

dishonestly and fraudulently defeat the rights of her vendor/the

appellant/plaintiff for no forceable reason whatsoever.

12. Per contra, learned counsel for the respondentsdefendants

while supporting the findings recorded by the High Court under the

impugned judgment submits that at least the compromise decree

which was executed between the parties was not open to question

even by the stranger to the proceedings although suit could have

been filed by the appellantplaintiff

for the protection of his own

rights admissible under the law but, in the instant proceedings, suit

was filed seeking a declaration that a compromise decree dated 15th

September, 1994 passed in Second Appeal by the High Court of

Patna be declared to be illegal which was obtained by fraud and

misrepresentation and that was not open to the civil court for

adjudication in view of bar under Order 23 Rule 3A CPC. That

apart, the learned trial Judge on the basis of pleadings of the

parties specifically framed issue nos. 6 & 7 and recorded a finding

regarding the effect of the compromise decree dated 15th September,

1994 passed by the High Court against the appellant. Even the

finding in reference to issue no. 7 with regard to right, title and

interest in the suit property of the appellant has been decided

against him on merits. In the given circumstances, their appears no

substance in the present appeal and deserve to be dismissed.

13. The precise question that falls for our determination is as to

whether the suit filed by the appellantplaintiff

in seeking a

declaration against the decree of compromise dated 15th September,

1994 passed by the High Court of Patna in Second Appeal was

maintainable in view of the provisions of Order 23 Rule 3 and Rule

3A CPC. Order 23 Rule 3 and Rule 3A CPC may at this stage be

extracted for ready reference:“

3.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

subjectmatter

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 it relates

to the parties to the suit, whether or not the subjectmatter

of the agreement, compromise, or satisfaction is the same as

the subjectmatter

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.

3A. 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.”

14. What is emerged as a legislative intent has been considered in

extenso by this Court in Pushpa Devi Bhagat(Dead) Through LR

Sadhna Rai(Smt) Vs. Rajinder Singh and Others 1, after taking

note of the scheme of Order 23 Rule 3 and Rule 3A added with

1 2005(5) SCC 566

effect from 1st February, 1977. The relevant paragraphs are as

under:“

17. 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 3A.

(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. The second

defendant, who challenged the consent compromise decree

was fully aware of this position as she filed an application for

setting aside the consent decree on 2182001

by alleging

that there was no valid compromise in accordance with law.

Significantly, none of the other defendants challenged the

consent decree. For reasons best known to herself, the

second defendant within a few days thereafter (that is on 2782001)

filed an appeal and chose not to pursue the

application filed before the court which passed the consent

decree. Such an appeal by the second defendant was not

maintainable, having regard to the express bar contained in

Section 96(3) of the Code.

(Emphasis supplied)

15. The scope of intent of Order 23 Rule 3 and Rule 3A was

further considered by this Court in R. Rajanna Vs. S.R.

Venkataswamy and Others 2 wherein this Court held as under:“

11. It is manifest from a plain reading of the above that in

terms of the proviso to Order 23 Rule 3 where one party

alleges and the other denies adjustment or satisfaction of any

suit by a lawful agreement or compromise in writing and

signed by the parties, the Court before whom such question

is raised, shall decide the same. What is important is that in

terms of Explanation to Order 23 Rule 3, the agreement or

compromise shall not be deemed to be lawful within the

meaning of the said Rule if the same is void or voidable under

the Contract Act, 1872. It follows that in every case where the

question arises whether or not there has been a lawful

agreement or compromise in writing and signed by the

parties, the question whether the agreement or compromise is

lawful has to be determined by the court concerned. What is

lawful will in turn depend upon whether the allegations

suggest any infirmity in the compromise and the decree that

would make the same void or voidable under the Contract

Act. More importantly, Order 23 Rule 3A

clearly bars a suit

to set aside a decree on the ground that the compromise on

2 2014(15) SCC 471

which the decree is based was not lawful. This implies that

no sooner a question relating to lawfulness of the agreement

or compromise is raised before the court that passed the

decree on the basis of any such agreement or compromise, it

is that court and that court alone who can examine and

determine that question. The court cannot direct the parties

to file a separate suit on the subject for no such suit will lie in

view of the provisions of Order 23 Rule 3A

CPC. That is

precisely what has happened in the case at hand. When the

appellant filed OS No. 5326 of 2005 to challenge the validity

of the compromise decree, the court before whom the suit

came up rejected the plaint under Order 7 Rule 11 CPC on

the application made by the respondents holding that such a

suit was barred by the provisions of Order 23 Rule 3A

CPC.

Having thus got the plaint rejected, the defendants

(respondents herein) could hardly be heard to argue that the

plaintiff (appellant herein) ought to pursue his remedy

against the compromise decree in pursuance of OS No. 5326

of 2005 and if the plaint in the suit has been rejected to

pursue his remedy against such rejection before a higher

court.”

(Emphasis supplied)

16. By introducing the amendment to the Civil Procedure

Code(Amendment) 1976 w.e.f. 1st February, 1977, the legislature

has brought into force Rule 3A to Order 23, which create bar to

institute the suit to set aside a decree on the ground that the

compromise on which decree is based was not lawful. The purpose

of effecting a compromise between the parties is to put an end to

the various disputes pending before the Court of competent

jurisdiction once and for all.

17. Finality of decisions is an underlying principle of all

adjudicating forums. Thus, creation of further litigation should

never be the basis of a compromise between the parties. Rule 3A of

Order 23 CPC put a specific bar that 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 scheme of Order 23 Rule 3 CPC is to

avoid multiplicity of litigation and permit parties to amicably come

to a settlement which is lawful, is in writing and a voluntary act on

the part of the parties. The Court can be instrumental in having an

agreed compromise effected and finality attached to the same. The

Court should never be party to imposition of a compromise upon an

unwilling party, still open to be questioned on an application under

the proviso to Rule 3 of Order 23 CPC before the Court.