Sunday 2 April 2023

Must the court entertaining a compromise petition examine whether the compromise was void or voidable under the Indian Contract Act?


When the amending Act introduced a proviso along with an explanation to Rule 3 of Order 23 saying 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", the Court before which a petition of compromise is filed and which has recorded such compromise, has to decide the question whether an adjustment or satisfaction had been arrived at on basis of any lawful agreement.
To make the enquiry in respect of validity of the agreement or the compromise more comprehensive, the explanation to the proviso says that an agreement or compromise "which is void or voidable under the Indian Contract Act..." shall not be deemed to be lawful within the meaning of the said Rule. In view of the proviso read with the explanation, a Court which had entertained the petition of compromise has to examine whether the compromise was void or voidable under the Indian Contract Act. Even Rule 1(m) of Order 43 has been deleted under which an appeal was maintainable against an order recording a compromise. As such a party challenging a compromise can file a petition under proviso to Rule 3 of Order 23, or an appeal Under Section 96(1) of the Code, in which he can now question the validity of the compromise in view of Rule 1-A of Order 43 of the Code.

 {Para 13}


Civil Appeal Nos. 2913-2915 of 2018

Prasanta Kumar Sahoo and Ors.  Vs.  Charulata Sahu and Ors.

Hon'ble Judges/Coram:

A.S. Bopanna and J.B. Pardiwala, JJ.

Author: J.B. Pardiwala, J.

Decided On: 29.03.2023

Citation: MANU/SC/0326/2023.

Read full Judgment here: Click here

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