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LAW OF CIVIL PROCEDURE AND LIMITATION SEM-VII

INTRODUCTION

As it is evident from its name, the Code of Civil Procedure, 1908 mainly lays down the
procedure to be adopted in civil courts, and its principles may be applicable in other courts,
like writ courts, and Tribunals to the extent the enactments establishing the Tribunals provide
for it. It provides for a fair procedure for redressal of disputes. The other party may know
what is the dispute about, what defence it can take, and how both the parties may proceed to
prove their respective cases. Some of its provisions are substantive in nature and not
procedural at all. The other provisions are generally procedural in nature.

The purpose of the Civil Procedure Code, 1908 is to provide a litigant a fair trial in
accordance with the accepted principles of natural justice. The Code is mainly divided into
two parts, namely, Sections and Orders. While the main principles are contained in the
Sections, the detailed procedures with regard to the matters dealt with by the Sections have
been specified in the Orders.

The first Code of Civil Procedure was enacted in 1859 by the Committee headed by Mr. John
Romily. It was amended in 1877 and, subsequently, in 1882, however, those amendments did
not serve the purpose, therefore, the present Code of Civil Procedure was enacted in 1908. It
was drafted by the Committee headed by Sir Earle Richards. The Committee before
submitting the draft to the West Minister Parliament travelled India, read its history and
ancient texts and then knew the traditions and culture of this country, and draft legislation
was prepared keeping all such things in view.

The concerned project paper deals with the topic of compromise of suit. Order XXIII of the
Code of Civil Procedure, 1908 deals with the compromise of suit. Rules 3, 3A and 3B deal
with the provisions of compromise of suit, bar to suit and no agreement or compromise to be
entered in a respective suit without leave of Court respectively.

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COMPROMISE OF SUIT

Rule 3 of Order XXIII of the Code of Civil Procedure, 1908 states that:

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 when
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 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.

Rule 3 of Order XXIII provides for two things: Firstly, it enjoins the court to be satisfied that
a suit has been adjusted wholly or in part for a lawful compromise. Then after it is so
satisfied, it has to order that such agreement, compromise or satisfaction be recorded and then
it has to pass a decree in accordance therewith, so far as it relates to the suit. The words so
far as it relates to the suit clearly contemplate that though a court may record a compromise
but when it comes to the passing of a decree, the decree must be confined only to what relates
to the suit.1 In other words, matters extraneous to the suit are not to be incorporated in the
operative part of a decree. It should be confined to the actual subject-matter of the then
existing litigation. As regards execution of compromise decree to the extent the terms of any
compromise fall outside the limits of the suit, they are not to be incorporated in the decree
and even if they are so incorporated on account of the compromise as a whole having been
made a part of the decree, the decree will remain executable only to the extent it is within the
limits of the suit and no more.2

1 Chand Kaur v. Raj Kaur, AIR 1997 P&H 155.

2 K C Dora v. Annamanaidu, AIR 1974 SC 1069.

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The rule does not confer any discretion to the court. When it is established that a suit has been
adjusted either wholly or in part by a lawful compromise, it is the duty of the court to record
it and pass a decree in accordance therewith except that the court has an inherent power not to
allow the proceedings to be used to work a substantial injustice. But if the agreement or
compromise is unlawful as where it is opposed to public policy, the court has no jurisdiction
to pass a decree on the compromise even though both parties consent thereto.3

It is incumbent on the court to pass a decree in accordance with the agreement or


compromise, only if the agreement or compromise is lawful; in other words, it is enforceable
in law. One test may be applied to determine whether the agreement or compromise is lawful:
were the parties competent to enter into the full agreement or compromise in order to achieve
the purpose they had in view? Under Rule 3, once a plaintiff files an application withdrawing
a suit, the suit stands withdrawn, and becomes effective as soon as it is withdrawn. In the case
of Smt Raisa Sultana Begam v. Abdul Qadir,4 a Division Bench of the Allahabad High Court
observed as follows: Since withdrawing a suit is a unilateral act to be done by the plaintiff
requires no permission or order of the High Court and is not subject to any condition, it
becomes effective as soon as it is done just as a compromise does. The act is like a point and
not continuous like a line having a beginning and an end. Either it is done or not done; there
is nothing like its being done incompletely or ineffectively. The consequence of an act of
withdrawal is that the plaintiff ceases to be a plaintiff before the court.

The court cannot interfere or re-schedule by way of modification the payment of amounts
under consent decree unless both parties give consent thereto. The amendment as well as
substitution made in Order XXIII by the Amendment Act, 1976 shall not apply to any suit or
proceeding pending before the commencement of the Amendment Act, 1976. The effect of
amendment is prospective and has no application to pending suits and proceedings. An

3 Apani Devi v. P C Nayak, AIR 1998 Ori. 145.

4 AIR 1966 All 318.

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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 the rule.5

In the case of Govindrajan v. K.N. Srinivasa Chetty6, it was seen that if a compromise was in
fact arrived at though it may be voidable at the instance of one of the parties on the ground of
fraud or misrepresentation when the compromise is filed under Order XXIII, Rule 3 with a
request to record the same by the opposite party, the Court could not go into the question of
fraud or undue influence. The only ground on which the court could refuse to record the
compromise is on the ground that the compromise itself is opposed to public policy.
Therefore, the party could not be permitted to question the compromise on the ground of
fraud or undue influence.

The compromise could not also be questioned on the ground that the advocate had executed
the compromise on behalf of his client as the advocate always has an implied authority to
enter into a compromise on behalf of his client unless there is written prohibition or
limitation. In a suit for eviction by the landlord, the parties entered into a compromise on the
basis of which a decree was passed. Under clause 1 of the compromise the tenant had agreed
that the landlords suit for ejectment should be decreed with a condition that the decree shall
not be executed for a period of 17 months and if he failed to vacate the premises by that time
it would be open to the landlord to execute the decree. Under clause 6 of the compromise
both the parties agreed that if the petitioner failed to vacate the premises he will be liable to
pay rent at the rate of Rs. 50 per mensem instead of Rs. 28. The tenants contention was that
the landlords agreement to allow the tenant to remain in possession of the disputed premises
at enhanced rent indicated that a fresh tenancy was created between the parties under clause 6
of the compromise as a result of which the tenant could not be ejected.

It was held by the High Court at Allahabad that while construing the terms of the compromise
the intention of the parties had to be ascertained and for the purpose it was necessary that the
compromise as a whole had to be considered. It was not permissible to read clause 6 in
5 L Devi v. Sita Ram, (1957) ILR Assam 820.

6 AIR 1977 Mad. 402.

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isolation of clause 1. On a reading of both the clauses it was clear that the tenant agreed that a
decree for ejectment be passed against him. The intention of the parties appeared to be that in
case the tenant failed to vacate the premises within 17 months, he would be liable to pay
damages for use and occupation of the same. There was no question of creating a fresh
tenancy. It was not permissible to interpret a document in a manner as to render one of the
clauses nugatory.

Under Rule 3, as it now stands, when a claim in suit has been adjusted wholly or in part by
any lawful agreement or compromise, the compromise must be in writing and signed by the
parties and there must be a complete agreement between them. To constitute an adjustment,
the agreement or compromise must itself be capable of being embodied in a decree. When the
parties enter into a compromise during the hearing of a suit or appeal, there is no reason why
the requirement that the compromise should be reduced in writing in the form of an.
instrument signed by the parties should be dispensed with. The court must therefore insist
upon the parties to reduce the terms into writing.

GENERAL PRINCIPLE

After the institution of the suit, it is open to the parties to compromise, adjust or settle it by an
agreement or compromise7. The general principle is that all matters which can be decided in a
suit can also be settled by means of a compromise. Rule 3 of Order 23 lays down that

(i) where the court is satisfied that a suit has been adjusted wholly or in part by any
lawful agreement in writing and signed by the parties; or
(ii) Where the defendant satisfies the plaintiff in respect of the whole or any part of
the subject-matter of the suit, the court shall record such agreement, compromise
or satisfaction and pass a compromise decree accordingly.8

7 Motilal v. Mohd. Maharaj Kumar, AIR 1968 SC 1087.

8 Gurpreet Singh v. ChaturBhuj, AIR 1998 SC 400. See also Byram Pestoni v.
Union Bank of India, AIR 1991 SC 2234.

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RECORDING OF COMPROMISE
A compromise, adjustment or satisfaction may be recorded by the Court where the
proceedings are pending. In case of suit, it can be recorded by the Trial Court. In case of
appeal or revision, such action can be taken by Appellate or Revisional Court. Where
Compromise has been arrived at in execution proceedings, it is the executing Court which
can record such compromise.

SATISFACTION OF COURT

It is the duty of the court to satisfy itself with regard to the terms of agreement. The court
must be satisfied that the agreement is lawful and it can pass a decree in accordance with it.
The court should also consider whether such a decree can be enforced against all the parties
to the compromise. A court passing a compromise .decree performs a judicial act and not a
ministerial act. Therefore, the court must satisfy itself by taking evidence or on affidavits or
otherwise that the agreement is lawful. If the compromise is not lawful, an order recording
compromise can be recalled by the court.9 In case of any dispute between the parties to the
compromise, it is the duty of the court to inquire into and decide whether there has been a
lawful compromise in terms of which the decree should be passed. 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 Rule 3. The court in recording compromise
should not act in a casual manner. Where it is alleged by one party that a compromise has not
been entered into or is not lawful, it is the duty of the court to decide that question.10

COMPROMISE ON BEHALF OF MINOR

No next friend or guardian of a minor shall, without the leave of the court, enter into any
agreement or compromise on behalf of the minor with reference to the suit, unless such leave
is expressly recorded in the proceedings.

9 Banwari Lal v. Chando Devi, AIR 1993 SC 1139.

10 Ruby Sales Ltd. v. State of Maharashtra, (1994) 1 SCC 531.

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COMPROMISE BY PLEADER

A pleader stands in the same position as his client with regard to his authority to compromise
the suit. An advocate appearing for a party, therefore, has always an implied authority to enter
into a compromise on behalf of his client.

AUTHORISED REPRESENTATIVE OR COUNSEL

The words in writing and signed by the parties inserted in Rule 3 of Order XXIII, by the Civil
Procedure Code (Amendment) Act, 1976, necessarily mean and include duly authorised
representative and counsel. Thus a compromise in writing and signed by counsel representing
the parties, but not signed by the parties in person, is valid and binding on the parties and is
executable even if the compromise relates to matters concerning the parties, but extending
beyond the subject-matter of the suit. A judgment by consent is intended to stop litigation
between the parties just as much as a judgment resulting from a decision of the court at the
end of a long drawn out fight. A compromise decree creates an estoppel by judgment. After
the amendment of 1976, a consent decree is executable in terms thereof even if it
comprehends matters falling outside the subject-matter of the suit, but concerning the
parties.11

INSTRUCTIONS TO COUNSEL AND IMPLIED AUTHORITY

The statements which were recorded by the court and which were duly signed by the parties
and their counsel constitute a written instrument of compromise, as contemplated by Rule 3. 12
In such a case, the party cannot take up the plea that no proper instructions had been given by
him to his counsel for making the statement in court and he also did not understand the
implication of the statement recorded by the court when the statement was recorded in the
court proceedings in the presence of his counsel which he signed and which were also signed
by his counsel. Where in suit for recovery of possession, statement was made by counsel for
defendant expressing desire to enter into understanding with plaintiff, it was alleged by
defendant that her counsel had acted without instructions. However, it was indicated by
11 Mohanbai v. Jai Krishna, AIR 1983 Raj. 240.

12 Jamilabai v. Sankirlal, AIR 1975 SC 2202.

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material on record that counsel for defendant had acted on behalf of his client, on instructions
and in their best interest. Authority of counsel was not shown to have been countermanded by
defendant. The allegation by defendant that the counsel had acted without instructions was
given up at later stage. It was held that counsel for defendant could be said to have authority
to enter into compromise.13

COMPROMISE DECREE

It is well-settled that a decree passed on the basis of a compromise by and between the parties
is essentially a contract between the parties, which derives sanctity by the Court super-adding
the seal to the contract. But all the same the consent terms retain all the elements of a contract
to which the Courts imprimatur is affixed to give the sanctity of an executable court order.
The Court will not add its seal to the compromise terms unless the terms are consistent with
the relevant law. But, if the law vests exclusively jurisdiction in the Court to adjudicate on
any matter, e.g. fixation of standard rent, the Court will not add its seal to the consent terms
by which the parties have determined the standard rent unless it has applied its mind to the
question and has satisfied itself that the rent proposed by consent is just and reasonable.14

A decree passed on the basis of compromise is essentially a contract between the parties. The
court is not to fix its seal to the compromise unless the terms are consistent with the relevant
law. The compromise decree between the parties provided that the defendants would be liable
to be evicted from suit property after expiry of ten years by appropriate action in court of law.
The plaintiffs cannot eject the defendants by applying for execution of the compromise
decree. The defendants can be ejected by plaintiffs only by filing a suit for ejectment or in
any other manner as, may be permissible by law. Where the compromise decree created
relationship of landlord and tenant and provided that tenants would be liable to be ejected by
taking appropriate action in a court of law.15

13 Raghuram v. Vasundhara, AIR 1983 AP 32.

14 Sailendra Narayan v. State of Orissa, AIR 1956 SC 346.

15 Mohanlal Goenka v. Binoy Krishna, AIR 1953 SC 65.

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COMPROMISE DECREE AND RES JUDICATA

A compromise decree is not a decision of the court. It is acceptance by the court of something
to which the parties had agreed. A compromise decree merely sets the seal of the court on the
agreement of the parties. The court does not decide anything. Nor can it be said that a
decision of the court is implicit in it. Hence, a compromise decree cannot operate as res
judicata16. In some cases, however, it is held that a consent decree would also operate as res
judicata17.It is submitted that the former view is correct since, in a consent decree, it cannot
be said that a suit is heard and finally decided by the court on merits. Such a decree, however,
may create an estoppel between the parties.

COMPROMISE DECREE AND ESTOPPEL

A compromise decree is not a decision on merits as it cannot be said that the case was "heard
and finally decided". Nevertheless, it is based on consent or compromise of parties and,
therefore, will operate as an estoppel.18

EXECUTION OF COMPROMISE DECREE

A consent decree is executable in the same manner as an ordinary decree. But if the decree
gives effect to an unlawful compromise or is passed by the court having no jurisdiction to
pass it, it is a nullity and its validity can be set up even in the execution. The underlying
principle is that a defect of jurisdiction strikes at very authority of the court to pass a decree
and such a defect cannot be cured even by the consent of parties. 19 Prior to the Amendment
Act of 1976, a compromise decree could be passed only so far as it related to the suit, but, by
the Amendment Act, it is specifically provided that whether or not the subject-matter of the

16 Subba Rao v. Jagannadha Rao, AIR 1967 SC 591.

17 Shankar Sitaram v. Balkrishna Sitaram, AIR 1954 SC 352.

18 Shankar v. Balkrishna, AIR 1954 SC 352.

19 Motilal Banker v. Mohd. Maharaj Kumar, AIR 1968 SC 1087.

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agreement, compromise or satisfaction is identical with the subject-matter of the suit, if it is


between the parties and the compromise is a lawful one, the court can pass such a decree.20

CHALLENGE TO COMPROMISE

A party challenging a compromise can file a petition under proviso to Rule 3 of Order XXIII,
or an appeal under Sec. 96 (1) of the Code, in which he can now question the validity of the
compromise in view of Rule 1A of Order XLIII of the Code. If the agreement or the
compromise itself is fraudulent then it shall be deemed to be void within the meaning of the
explanation to the proviso to Rule 3 and as such not lawful.

A party to a compromise may challenge it inter alia on the ground that there is no
compromise or agreement, or it is not in writing or signed by him. The Court recording the
compromise must decide such question. In the instant case the plaintiff challenged the order
recording compromise on the ground that his counsel in collusion with the defendant of the
said suit had played a fraud on him by filing a fabricated petition of compromise although no
compromise had been effected between him and the defendant.21

Further, details of fraud were mentioned in the said petition and it was stated that the alleged
compromise itself was void, illegal and against the requirement of Order XXIII, Rule 3.
Therefore, the entertaining of the application filed on behalf of the plaintiff and considering

20 Feroji Lal Jain v. Manmal, (1970) 3 SCC 181.

21 BDM Rao v. Co-op Industries Ltd., AIR 1975 AP 308.

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the question as to whether there had been a lawful agreement or compromise on the basis of
which the Court could have recorded such agreement or compromise, by the trial court was
proper. Since the material produced on the record showed that the compromise was not
lawful within the meaning of Rule 3, the order recording compromise could be recalled.22

An admission by the tenant about the existence of a statutory ground, expressly or impliedly,
will be sufficient and there need not be any evidence before the Court on the merits of the
grounds before the compromise order is passed. If there is an admission of the tenant it will
not be open to him to challenge its correctness as the admission made in judicial proceedings
are absolutely binding on the parties. At any rate the decree cannot be called a nullity to
enable the executing court to go behind it.

BAR TO SUIT

Rule 3A of Order XXIII of the Code of Civil Procedure, 1908 states 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 object of the rule is to bar a second suit on the ground that the compromise on which the
decree in the first suit is based was not lawful. It will be noticed that the explanation to Rule 3
also introduced by the Amendment Act, 1976, deals with agreements or compromises which
are not to be deemed to be lawful if they are void or voidable under the Indian Contract Act,
1872. The Court cannot record such an agreement or compromise or pass a decree based on
such compromise, or agreements since such compromise or agreement is not to be deemed to
be lawful. Such void or voidable agreements having been dealt with under Rule 3, the
agreements or compromises dealt with in Rule 3A must be agreement or compromises other
than those dealt with in the explanation or Rule 3, Rule 3A makes clear, when a compromise
is entered into between parties it is not open for either of the parties to maintain a suit on the
ground that the compromise was not lawful. Thereby, filing of a suit to set aside or
compromise decree is not maintainable in view of the provisions of Rule 3A of Order XXIII

22 Sambhu Mada v. Rama Ishwar, AIR 1970 Mys. 97.

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23 of the Code of Civil Procedure, 1908. It was seen that where a suit filed for setting aside a
compromise decree on the ground of it being was obtained fraudulently, it was dismissed as
barred and the order of the dismissal attained finality, it was held that no application under
Rule 3 of Order XXIII read with Section 151 of the Code can be maintained.23

But violation of Rules 3 and 7 of Order XXXII of the Code of Civil Procedure, 1908 read
with Rule 3 of Order XXIII has the effect of rendering the decree based on compromise
marred by non-appointment of guardian-ad-litim for the minor defendant on lawful for want
of jurisdiction. Therefore, Rule 3A does not bar a suit or proceeding to protect the interest of
minor who with be within his right to challenge the decree on the ground of fraud.24

NO COMPROMISE WITHOUT LEAVE OF COURT

Rule 3B of Order XXIII of the Code of Civil Procedure, 1908 states that:

(1) No agreement or compromise in a representative suit shall be entered into without the
leave of the court expressly recorded in the proceedings; and any such agreement or
compromise entered into without the leave of the court so recorded shall be void.

(2) Before granting such leave the court shall give notice in such manner as it may think fit to
such persons as may appear to it to be interested in the suit.

In this rule, representative suit means a suit under Sec. 91 or Sec. 92 of the Code of Civil
Procedure, 1908, or a suit under Rule 8 of Order I, or a suit in which the manager of an
undivided Hindu family sues or issued as representing the other members of the family, or
any other suit in which the decree passed may, by virtue of the provisions of the Code of
Civil Procedure, 1908 or of any other law for the time being in force, bind any person who is
not named as party to the suit.

23 Kalipada v. Danpati, AIR 2003 Gau. 64.

24 Ghulam Rasool v. Ghulam Hasan, AIR 2003 J&K 6.

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In a suit of representative character, the Court is obliged to give notice of the institution of the
suits to all persons so interested either by personal service or whereby the reason of the
number of persons or any other cause, such service is not reasonably practicable, by public
advertisement as the Court in each case may direct. The provision of Rule 3B of Order XXIII
of the Code of Civil Procedure, 1908 are applicable only to the suits which are of
representative nature, as mentioned.25 In view of Sec. 112 of the Code of Civil Procedure,
1908, the Supreme Courts power under Art. 136 is not affected by Rule 3B of Order XXIII
of the Code of Civil Procedure, 1908. 26 In a representative suit, if the Court issues notices to
persons interested in the suit (who are not parties to the suit) and hears them before deciding
whether leave should be granted to enter into a compromise, then such person also becomes a
party to the suit and shall be entitled to all the remedies available to a party to challenge a
compromise decree which is unlawful.

CASE STUDY:

Banwari Lal v. Chando Devi

(AIR 1993 SC 1139)

BENCH

Honble Justice N Kasliwal & Honble Justice N Singh.

ISSUES

1. Whether appeal is maintainable against an order recording or refusing to record an


agreement or compromise under Rule 3 of Order 23?

FACTS OF THE CASE


25 Surendra Theatres v. Allahabad Bank, AIR 1999 All. 14.

26 Union Carbide Corp. v. Union of India, AIR 1992 SC 248.

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This appeal was filed for setting aside an order passed by the High Court on the revision
application filed on behalf of the respondent. By the impugned order the learned Judge has
held that the Trial Court could not have entertained the application filed on behalf of the
appellant, for recall of the order recording a compromise alleged to have been entered
between the appellant and the respondent.

The suit in question had been filed on behalf of the appellant on 14.9.1990. On 27.2.1991 a
petition of compromise was filed, on behalf of the appellant, saying that both parties have
entered into a compromise on the basis whereof the appellant had delivered the possession of
the disputed land to the respondent. A prayer was made that in view of the compromise
arrived at between the parties the suit be dismissed. It may be mentioned that the said petition
had not been signed by the contesting respondent or by his counsel. It appears that one Shri
Soran Ram, Advocate, had made a note - 'Thumb impression has been marked in my
presence' - meaning thereby that thumb impression had been given by the appellant in his
presence. On the same day the learned Subordinate Judge passed the following order:-

Compromise deed Ex. C, tendered by plaintiff Banwari Lal. Statement of the Counsel for the
plaintiff is also recorded to that effect. The Counsel for the plaintiff has stated that the suit of
the plaintiff to be dismissed as withdrawn as per compromise deed Ex. C. The possession of
the property has already been delivered to the defendant and Defendant No. 2 Smt. Chando
Devi is in possession of the disputed land as owner as per compromise deed. Hence the suit
of the plaintiff is dismissed as per compromise deed Ex. C. Decree sheet be prepared
accordingly.

On 3rd April, an application was filed on behalf of the plaintiff-appellant in the said suit that
he had engaged Shri Soran Ram, Advocate, Karnal, to appear on his behalf, who had told the
appellant that the date fixed for the hearing of the suit was 5.3.1991. When the appellant went
to him on 5.3.1991 the counsel informed him that the case had been adjourned to 2.4.1991.
On 2.4.1991 the appellant learnt from the cause list that the case was not on the cause list.
Then he approached his counsel aforesaid Shri Soran Ram along with Shri I.D. Swamy, a
retired IAS Officer. His counsel informed him that the suit had been dismissed as withdrawn.
The appellant got the records of the case inspected which revealed that Shri Soran Ram,
Advocate of the appellant, in collusion with defendant No. 2 of the said suit had played a
fraud on the appellant by filing a fabricated petition of compromise although no compromise
had been effected between the appellant and the respondent. Further details of fraud were
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mentioned in the said petition and it was stated that as the alleged compromise itself was
void, illegal and against the requirement of Rule 3 of Order 23 of the CPC (hereinafter
referred to as "the Code"), the order recording such compromise be recalled and suit be
restored and be heard on merit. About his counsel aforesaid Shri Soran Ram, it was said that
the appellant had learnt that he had cheated several persons and because of that a case had
been registered against him.

The learned Subordinate Judge, after hearing both the parties and referring to different facts
and circumstances of the case including that the compromise petition filed on 27.2.1991 had
not been signed by both the parties as required by Order 23, Rule 3 of the Code, recalled the
order disposing of the suit in terms of the petition of compromise. He directed restoration of
the suit to its original number. Against that order a revision application was filed before the
High Court on behalf of the respondent. A learned Judge, as already stated above, set aside
the aforesaid order passed by the learned Subordinate Judge saying that the petition which
was filed on 27.2.1991 as petition of compromise was really an application filed on behalf of
the appellant for withdrawal of the suit under Order 23, Rule 1 of the Code and as the
appellant had voluntarily withdrawn the suit there was no occasion to recall the order dated
27.2.1991 treating it to be an order under Order 23, Rule 3 of the Code.

RATIO DECIDENDI

According to Rule 1A Order 43, parties have right to challenge non-appealable orders in
appeal against decrees.-

(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.

JUDGMENT

The apex court in this case held that the experience of the courts has been that on many
occasions parties having filed petitions of compromise on basis of which decrees are
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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, 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. Rule
1 of Order 23 of the Code prescribes that at any time after the institution of the suit, the
plaintiff may abandon his suit: or abandon a part of his claim. Rule 1(3) provides that where
the Court is satisfied (a) that a suit must fail by reason of some formal defect, or (b) that there
are sufficient grounds for allowing the plaintiff to institute a fresh suit for the subject-matter
of a suit or part of a claim, it may, on such terms as it thinks fit, grant the plaintiff permission
to withdraw such suit with liberty to institute a fresh suit. In view of Rule 1(4) if plaintiff
abandons his suit or withdraws such suit without permission referred to above, he shall be
precluded from instituting any such suit in respect of such subject-matter. Rule 3 of Order 23
which contained the procedure regarding compromise of the suit was also amended to curtail
vexatious and tiring litigation while challenging a compromise decree. Not only in Rule 3
some special requirements were introduced before a compromise is recorded by the Court
including that the lawful agreement or a compromise must be in writing and signed by the
parties, a proviso with an explanation was also added which is as follows:-

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.

The present case depicts as to how on 27.2.1991 the Court recorded the alleged agreement
and compromise in a casual manner. It need not be impressed that Rule 3 of Order 23 does
not require just a seal of approval from the Court to an alleged agreement or compromise said
to have been entered into between the parties. The statute requires the Courts to be first
satisfied that the agreement or compromise which has been entered into between the parties is
lawful, before accepting the same. Court is expected to apply its judicial mind while
examining the terms of the settlement before the suit is disposed of in terms of the agreement
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arrived at between the parties. It need not be pointed out that once such a petition of
compromise is accepted, it becomes the order of the Court and acquires the sanctity of a
judicial order.

The application for exercise of power under proviso to Rule 3 of Order 23 can be labeled
under Section 151 of the Code but when by the amending Act specifically such power has
been vested in the Court before which the petition of compromise had been filed, the power
in appropriate cases has to be exercised under the said proviso to Rule 3. It has been held by
different High Courts that even after a compromise has been recorded, the Court concerned
can entertain an application under Section 151 of the Code, questioning the legality or
validity of the compromise. Application under Section 151 of the Code is maintainable. The
Court before which it is alleged by one of the parties to the alleged compromise that no such
compromise had been entered between the parties that Court has to decide whether the
agreement or compromise in question was lawful and not void or voidable under the Indian
Contract Act. If the agreement or the compromise itself is fraudulent then it shall be deemed
to be void within the meaning of the explanation to the proviso to Rule 3 and as such not
lawful. The learned Subordinate Judge was perfectly justified in entertaining the application
filed on behalf of the appellant and considering the question as to whether there had been a
lawful agreement or compromise on the basis of which the Court could have recorded such
agreement or compromise on 27.2.1991. Having come to the conclusion on the material
produced that the compromise was not lawful within the meaning of Rule 3, there was no
option left except to recall that order.

Accordingly the appeal was allowed. The order passed by the High Court was set aside.

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COMPROMISE OF SUIT

CONCLUSION

The Fundamental principle of English Law that wherever there is a right, there is a remedy
(ubi jus ibi remedium) has been adopted by the Indian legal system also. In fact, right and
remedy are but the two sides of the same coin and they cannot be dissociated from each other.
Accordingly, a litigant having a grievance of a civil nature has a right to institute a civil suit
in a competent civil court unless its cognizance is either expressly or impliedly barred by any
statute. A suit for its maintainability requires no authority of law and it is enough that no
statute bars it. The Code of Civil Procedure is a codification of the principles of natural
justice. Natural justice means justice to be done naturally which is adopted naturally by the
habits of every individual. It does not mean godly-justice or justice of nature. It simply means
an in built habit of a person to do justice.

However, the term suit has not been defined in the Code of Civil Procedure, 1908.
According to the dictionary meaning, suit is a generic term of comprehensive signification
referring to any proceeding by one person or persons against another or others in a court of
law wherein the plaintiff pursues the remedy which the law affords him for the redress of any
injury or the enforcement of a right, whether at law or in equity.

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LAW OF CIVIL PROCEDURE AND LIMITATION SEM-VII

The rule of compromise of suit gives a mandate to the Court to record a lawful adjustment or
compromise and pass a decree in terms of such compromise or adjustment. The conditions
which normally must be satisfied for validity invoking the provisions of Rule 3 of Order
XXIII of the Code of Civil Procedure, 1908 and for passing of such a decree, are that; there
should be a lawful agreement or compromise. This compromise has to be in writing and
signed by the parties. The compromise must be recorded by the Court and a decree on such
compromise can be passed so far it relates to the parties to the suit but may extend to a
special matter which is not the subject matter of the suit.

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