Supreme Court of India (Division Bench (DB)- Two Judge)

Appeal (Civil), 10416-10417 of 2014, Judgment Date: Nov 20, 2014

                                                                    REPORTABLE

                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION
                 CIVIL APPEAL NOS.   10416-10417     OF 2014
            (Arising out of S.L.P. (C) Nos. 13942-13943 of 2012)



R. Rajanna                                                       ...Appellant

                                    Versus

S.R. Venkataswamy & Ors.                                       ...Respondents



                               J U D G M E N T

T.S. THAKUR, J.

1.    Leave granted.

2.    Can the validity of a decree passed on a compromise be  challenged  in
a separate suit is the short question that falls for determination  in  this
appeal. It arises in the following circumstances:

3.    The appellant filed a suit for declaration to the  effect  that  gift-
deed dated 12th August, 1982 executed by one Ramaiah  was  void  and  for  a
permanent prohibitory injunction restraining the  defendant-respondent  from
alienating the suit schedule  property  or  interfering  with  the  peaceful
possession and enjoyment of the same by the plaintiff.  By its judgment  and
order dated 25th March, 1991, the Trial Court decreed the suit  holding  the
gift-deed in question to  be  null  and  void,  hence  not  binding  on  the
plaintiff-appellant. Defendants No.2 and  3  in  the  said  suit  were  also
directed to demolish the building constructed in the schedule  property  and
surrender possession thereof to the plaintiff.  Aggrieved  by  the  judgment
and decree passed against him  the  respondent  filed  RFA  No.223  of  1991
before  the  High  Court  of  Karnataka  at  Bangalore.  According  to   the
respondent a compromise petition was in terms  of  Order  XXIII  Rule  3  of
Civil Procedure Code filed by the parties before the High Court in the  said
appeal settling the dispute amicably.  The appellant stoutly  disputes  that
position and asserts that no such comprise was either  needed  nor  was  the
same ever entered into between the parties. The appellant describes the  so-
called compromise deed as a forged and fabricated document.   The  appellant
denies that he ever  signed  any  such  compromise  petition  or  asked  his
advocate to file the same before the Court.  Even  so  the  High  Court  had
proceeded on the basis that a compromise had indeed taken place between  the
parties in the light whereof the High  Court  set  aside  the  judgment  and
decree of the Trial Court and allowed the appeal filed by  the  respondents.
The appellant's case is that order dated 1st  August,  1995  passed  by  the
High Court in RFa No. 223 of 1991 was the result of fraud  played  upon  the
High Court.

4.    Aggrieved by the judgment and order dated 1st August, 1995  passed  by
the High Court, the appellant appears to  have  filed  OS  No.5236  of  2005
before the Additional City Civil Judge, Bangalore, in  which  the  appellant
prayed for setting aside of the compromise  recorded  in  the  High  Court's
order dated 1st August, 1995 and the decree passed  on  the  basis  thereof.
The defendant-respondent No.1 moved an application in the  said  suit  under
Order VII Rule 11(d) read with Section  151  Code  of  Civil  Procedure  for
rejection of the plaint on the ground that the suit in question  was  barred
by Rule 3A of Order XXIII of the Code of Civil Procedure.

5.    By its  order  dated  11th  February,  2011,  the  City  Civil  Court,
Bangalore, allowed the application filed by the respondent and rejected  the
plaint filed by the plaintiff-appellant.  The Court took the  view  that  in
the light of the proviso to Order XXIII Rule 3 of the  CPC  inserted  w.e.f.
1.2.1997, a party aggrieved of a decree on compromise had  to  approach  the
Court that passed the decree to  establish  that  no  compromise  had  taken
place between the parties which could provide a basis for the Court  to  act
upon the same.  In doing so the Court placed reliance upon the  decision  of
this Court in Pushpa Devi Bhagat v. Rajinder Singh and  Ors.  (2006)  5  SCC
566.

6.    It was after the rejection of the  plaint  that  the  appellant  filed
miscellaneous application IA Nos. 1 and 2 of 2011  in  RFA  No.223  of  1991
praying for setting aside of order dated 1st August, 1995 by which the  High
Court had allowed the appeal filed by the  respondents  and  set  aside  the
decree passed in OS No.5236 of 2005 on the basis of the  alleged  compromise
between the parties. The appellant's case before the High Court was that  no
such compromise had taken place nor was any compromise petition ever  signed
by him.  It was also alleged that the appellant had  given  no  instructions
to his advocate for presenting any compromise petition and that the  alleged
compromise petition was totally fraudulent and based on forged signature  of
the appellant apart from being unauthorised as the counsel  engaged  by  him
had no authority to present or report any such compromise before the  Court.
  The  appellant  also  prayed  for  condonation  of  delay  in  filing  the
application for setting aside the  compromise  decree  passed  by  the  High
Court.

7.    The High Court of  Karnataka  has  by  its  orders  impugned  in  this
appeal, dismissed IA No.1 of  2011  filed  by  the  appellant  without  even
adverting to the provisions of Order XXIII Rule  3  CPC  and  in  particular
Rule 3A which bars a suit to have a  compromise  decree  set  aside  on  the
ground that the compromise on which the  decree  had  been  passed  did  not
exist or take place.  The High Court appears to have  taken  the  view  that
even if the compromise was fraudulent since the appellant had filed  a  suit
for declaration he ought to pursue the same to its logical conclusion.   The
High Court further held that even if the plaint in the  suit  filed  by  the
appellant had been rejected in terms of Order VII Rule  11(d)  of  CPC,  the
appellant ought to seek redress against any such  order  of  rejection.  The
High Court has on that basis declined to consider the  prayer  made  by  the
appellant for setting aside the compromise decree.

8.    The precise  question  that  falls  for  determination  in  the  above
backdrop is whether the High Court was right in directing the  appellant  to
seek redress in the suit having regard to  the  provisions  of  Order  XXIII
rule 3 and Rule 3A of CPC.

9.    Order XXIII Rule 3 and Rule 3A of 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 subject-matter 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 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 shall not be deemed to be  lawful  within  the
meaning of this rule."


10.   It is manifest from a plain reading of the above that in terms of  the
proviso to Order XXIII 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 XXIII Rule 3, the agreement or compromise shall not  be
deemed to be lawful within meaning of the said rule if the same is  void  or
voidable under Indian 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
XXIII Rule 3A clearly bars a suit to set aside a decree on the  ground  that
the compromise on 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 XXIII Rule 3A  of  CPC.  That  is  precisely
what has happened in the case at hand.  When the appellant filed OS  No.5326
of 2005 to challenge validity of the compromise  decree,  the  Court  before
whom the suit came up rejected the plaint under Order VII  Rule  11  CPC  on
the application made by the respondents holding that such a suit was  barred
by the provisions of Order XXIII Rule 3A of the 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.

11.   The upshot of the above discussion is that the High Court  fell  in  a
palpable error in directing the plaintiff to take recourse to the remedy  by
way of separate suit. The High Court in the process  remained  oblivious  of
the provisions of Order XXIII Rules 3 and 3A  of  the  CPC  as  also  orders
passed by the City Civil Court rejecting  the  plaint  in  which  the  Trial
Court had not only placed reliance upon Order XXIII Rule  3A  but  also  the
decision of the Court in Pushpa Devi's case (supra) holding that a  separate
suit was not  maintainable  and  that  the  only  remedy  available  to  the
aggrieved party was to approach the Court which had  passed  the  compromise
decree. The following passage from the decision of Pushpa Devi (supra)  case
is, in this regard, apposite:

"17. ..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  21-8-
2001 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 27-8-2001) 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."


12.   We may also refer to the decision of this  Court  in  Banwari  Lal  v.
Chando Devi (1993) 1 SCC 581 where also this Court had observed:

"As such a party challenging a compromise can file a petition under  proviso
to Rule 3 of Order XXIII, or an appeal under S. 96(1) of the Code, in  which
he can now question the validity of the compromise in view of  Rule  1-A  of
Order 13 of the Code."


13.   In the light of the above, we  allow  these  appeals,  set  aside  the
order passed by the High Court and remit the matter back to the  High  Court
for disposal of IA Nos.1 and 2 of 2011 in accordance with law in  the  light
of  the  observations  made  hereinabove.   In  the   peculiar   facts   and
circumstances of the case, we leave the parties to bear their own costs.  We
make it clear that we have expressed no opinion as  to  the  merits  of  the
application seeking setting aside of the compromise decree which  aspect  is
left for the High Court to examine in accordance with law.



                           ...............................................J.
                                           (T.S. THAKUR)



                         .................................................J.
                                          (R. BANUMATHI)

New Delhi;
November 20, 2014