Full Judgment Text
REPORTABLE
2024 INSC 970
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 14328/2024
@ SLP (CIVIL) NO. 27723 OF 2024
NAVRATAN LAL SHARMA ...APPELLANT(S)
VERSUS
RADHA MOHAN SHARMA & ORS. …RESPONDENT(S)
J U D G M E N T
PAMIDIGHANTAM SRI NARASIMHA, J .
1. Leave granted.
2. The appellant initially filed a suit for declaration and
injunction, which was dismissed by the Trial Court. The appellant
then filed a first appeal. During its pendency, the parties reached
a compromise, agreeing to dispose of the appeal based on its terms.
On 14.07.2022, the High Court decided the appellant’s application
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under Order 23, Rule 3 of the Code of Civil Procedure, 1908 and
disposed of the first appeal in terms of the compromise. However,
when the respondent failed to comply with the compromise terms,
Signature Not Verified
the appellant filed an application to restore the appeal.
Digitally signed by
INDU MARWAH
Date: 2024.12.12
18:08:59 IST
Reason:
1
Hereinafter “CPC”.
1
Unfortunately, this application was dismissed by the order
impugned before us, citing that the High Court had not granted
liberty for restoration of the appeal while recording the
compromise.
3. After careful consideration of the statutory framework and
Order 23, Rules 3 and 3A, as informed by relevant judicial
precedents, we have allowed the appeal. We have directed that, in
such circumstances, restoration is the sole remedy, which the
aggrieved party may exercise as a statutory right.
4. The short facts are that the appellant is the owner of the suit
property. He filed a suit against the respondents for cancellation
of the power of attorney dated 19.07.2010 and 27.07.2010, sale
deeds dated 31.08.2010 and 15.09.2010, and grant of permanent
and mandatory injunction on the ground that respondent no. 1
forged the abovementioned power of attorney and subsequently
entered into the abovementioned sale deeds for the suit property
in favour of respondent no. 2. The Trial Court dismissed the suit
on 17.02.2014, and the appellant preferred a first appeal before
the Rajasthan High Court.
5. During the pendency of the first appeal, the appellant and
respondent no. 2 entered into a compromise, recorded in deed
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dated 18.05.2022 and corrigendum compromise dated
08.07.2022. The compromise contemplated development of the
suit property, as per which certain amounts were to be paid by
respondent no. 2 to the appellant. Paras 4 and 7 of the compromise
deed dated 18.05.2022 are relevant and extracted hereinbelow for
ready reference:
“ (4) That there is a first appeal no. between the parties in the
Honourable State High Court. 210/2014 is pending. The said
compromise will be presented in other cases and both the parties will
be able to get them resolved on the basis of the compromise, but if the
terms of the compromise are violated then the second party will have
the right to get the said appeal number 210/2014 reinstated by
submitting an application.
*
(7) That the first party issued a check dated 18/5/22 to the second
party, check no. 160711 amount of Rs 11,00,000/- has been given
today itself, payment can be taken by presenting the check in the
bank on the date written in it. After giving the lease of the developed
land, an amount equal to the value of the said amount will be
transferred to Khasra No. Out of 11, the second party will give it to
the first party. If any check is dishonoured, the agreement will be
considered void .”
6. The parties filed an application under Order 23, Rule 3 of the
CPC for disposal of the first appeal as per the compromise, wherein
it was stated that respondent no. 1 does not have any objection to
the compromise and that the appellant can file for restoration of
the appeal if the agreed payment is not completed and the cheques
are dishonoured.
7. By order dated 14.07.2022, the High Court disposed of the
first appeal by taking the compromise dated 18.05.2022 and the
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corrigendum compromise dated 08.07.2022 on record and making
them a part of its order. However, it also held that the parties do
not have liberty to get the first appeal restored. The relevant
portion of the order reads:
“ 5. This Court, without entering into the merits of appeal but without
giving any liberty to get restored the first appeal, is of considered
opinion that when both parties have entered into the terms of
compromise and have agreed to abide by the terms of compromise,
this appeal deserves to be disposed of accordingly.
6. Hence the compromise dated 18.05.2022 along with corrigendum
compromise dated 08.07.2022 is taken on record and the first appeal
is disposed of in terms of compromise.
7. The compromise dated 18.05.2022 along with corrigendum
compromise dated 08.07.2022 shall be treated as part of this order .”
(emphasis supplied)
8. When the cheques issued by respondent no. 2, said to be in
furtherance of the compromise were dishonoured, the appellant
moved the High Court for restoration of the appeal alleging fraud
and illegal interference with his possession and attempts to get the
land converted without paying the agreed amounts. By the order
impugned before us, the High Court dismissed the application on
the only ground that in its order dated 14.07.2022, the Court
clearly recorded that the parties were not given liberty to restore
the appeal. The High Court observed that since the order dated
14.07.2022 was a consensual order and the parties were aware
that there was no liberty to get the first appeal restored, the
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application for restoration was not entertainable even if the
compromise is not acted upon. The short order of the High Court
dated 19.10.2023 is extracted hereinbelow:
“ 1. Instant misc. application has been filed by the appellant-plaintiff
seeking to restore S.B. Civil First Appeal NO.210/2014 by recalling
the order dated 14.07.2022 whereby and whereunder the first
appeal was disposed of in terms of compromise dated 18.05.2022
arrived at between parties.
2. It has been stated in the application that cheques issued by
respondents in terms of the compromise have been dishonoured and
respondents have not adhered to the terms of the compromise, hence
the first appeal be restored to be heard on merits.
3. By perusal of the order dated 14.07.2022, more particularly para
No.5, it stands clear that this Court while disposing of the first appeal
in terms of the compromise has clearly observed that parties would
be not at liberty to get restore this first appeal. The order dated
14.07.2022 is consensual order and both parties were well aware
that no liberty to restore the first appeal is available, even though the
compromise may or may not be acted upon. Therefore, the application
for restoration of first appeal is not entertainable.
4. Thus, in view of above, the prayer for restoration of the first appeal
is uncalled for. In case, the terms of the compromise dated
18.05.2022 have not been complied with, the applicant-plaintiff is at
liberty to take appropriate steps in accordance with law.
5. With aforesaid observations, without recalling of the order dated
14.07.2022, the misc. application stands disposed of.
6. Stay application and any other pending application, if any, stand
disposed of.”
9. We have heard the learned counsels for the parties.
10. The relevant provisions under the CPC that govern
compromise decrees are contained in Order 23, Rules 3 and 3A,
which are extracted hereunder:
“ 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 satisfied the plaintiff in respect to 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
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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 not 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. ”
2
11. This Court in Banwari Lal v . Chando Devi has laid down the
law on the disposal of a proceeding in accordance with a
compromise between the parties and on recall of a compromise
decree. It held that under Order 23, Rule 3, the Court must be
satisfied upon applying judicial mind that the agreement between
the parties is lawful before accepting the same and disposing the
suit. Further, the proviso and the Explanation to Order 23, Rule 3
mandate that the court must “decide the question” of whether an
adjustment or satisfaction has been arrived at, and it is clarified
that void and voidable agreements under the Indian Contract Act,
3 4
1872 shall be deemed to be not lawful. Upon such reading of the
provision, it held that the court recording the compromise can
examine the legality of the agreement, in accordance with the
2
(1993) 1 SCC 581.
3
Hereinafter “the Contract Act”.
4
Banwari Lal (supra), paras 11-13.
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provisions of the Contract Act, even after the compromise decree
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is passed and when a party moves an application for recall.
12. The law on the issue is summarised in Pushpa Devi Bhagat
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v . Rajinder Singh . In this case, the Court also took note of Section
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96(3) of the CPC and the deletion of Order 43, Rule 1(m) of the
CPC by way of an amendment in 1976, as well as Order 23, Rule
3A. The consequence of these is that an appeal against a consent
decree and an order recording (or refusing to record) a compromise
is not maintainable, nor can a fresh suit be filed for setting aside
such decree. Hence, the only remedy available to the aggrieved
party is to approach the court that recorded the compromise under
the proviso to Order 23, Rule 3. The Court held:
“ 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 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.
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ibid, para 14.
6
(2006) 5 SCC 566.
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Section 96(3) of the CPC reads:
“ 96. Appeal from original decree.—
(3) No appeal shall lie from a decree passed by the Court with the consent of parties. ”
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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… ”
(emphasis supplied)
13. In the present case, the appellant has alleged fraud by the
respondents in his recall application, which he bears the burden
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to prove. The Explanation to Order 23, Rule 3 clearly states that
void and voidable agreements under the Contract Act shall not be
deemed to be lawful. By alleging fraud in his recall application, the
appellant is effectively impugning the legality of the compromise as
proving the same would render the agreement voidable under the
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Contract Act. When the court disposes of a proceeding pursuant
to a compromise under Order 23, Rule 3, it bears the duty to
examine this issue and be satisfied that the agreement or
compromise is lawful. The proviso explicitly obligates the court
that entertains the petition of compromise to determine this issue,
Banwari Lal
and as per the law laid down by this Court in (supra),
8
Shanti Budhiya Vesta Patel v. Nirmala Jayprakash Tiwari , (2010) 5 SCC 104; K. Srinivasappa v. M. Mallamma ,
(2022) 17 SCC 460.
9
Section 19 of the Contract Act provides that when consent to an agreement is caused by fraud, it is voidable at
the option of the party whose consent was so caused.
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this issue can be agitated by way of a recall application even after
the compromise decree has been passed.
14. By the impugned order, the High Court dismissed the
application solely on the ground that the order dated 14.07.2022
recording the compromise does not grant liberty to restore the
appeal. We are of the opinion that this is not the correct approach,
as it defeats the statutory right and remedy available to the
appellant under the CPC. This Court in Pushpa Devi Bhagat
10
(supra), as well as several other cases, has held that only the
court that entertains the petition of compromise can determine its
legality, at the time of recording the compromise or when it is
questioned by way of a recall application. No other remedy is
available to the party who is aggrieved by the compromise decree
as an appeal and fresh suit are not maintainable under the CPC.
15. In view of this legal position, the High Court was not correct
in curtailing the statutory remedy available to the appellant in the
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first place. In fact, when there is a statutory remedy available to
a litigant, there is no question of a court granting liberty to avail of
such remedy as it remains open to the party to work out his
10
R. Rajanna v. S.R. Venkataswamy , (2014) 15 SCC 471, para 11; Triloki Nath Singh v. Anirudh Singh , (2020) 6
SCC 629, paras 17 and 18; R. Janakiammal v. S.K. Kumaraswamy , (2021) 9 SCC 114; Sree Surya Developers &
Promoters v. N. Sailesh Prasad, (2022) 5 SCC 736, para 9; Basavaraj v. Indira , (2024) 3 SCC 705, para 9.
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See Bhanu Kumar Jain v. Archana Kumar , (2005) 1 SCC 787, paras 28 and 36.
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remedies in accordance with law. Therefore, there was no
occasion for the court to deny liberty to file for restoration by its
order dated 14.07.2022 and the consequent dismissal of the recall
application by the impugned order on this ground alone does not
arise. Further, as a matter of public policy, courts must not curtail
statutorily provisioned remedial mechanisms available to parties.
16. It is also relevant that para 4 of the compromise deed dated
18.05.2022 recognises the appellant’s right to file for restoration
of appeal in case of non-compliance. Further, para 7 stipulates
that the compromise will be considered void in case of non-
payment. Reading these clauses together, it is clear that the
compromise deed itself recognises the parties’ right to approach
the court to question its validity in certain circumstances. These
clauses are in line with the public policy consideration of access to
justice reflected in Section 28 of the Contract Act that stipulates
that agreements which restrain a party from enforcing his rights
through legal remedies are void.
17. In this view of the matter, we allow the appeal, set aside the
impugned order dated 19.10.2023, and remand the matter to the
High Court to decide the application for recall on its own merits.
12
See Shiv Shakti Coop. Housing Society, Nagpur v. Swaraj Developers , (2003) 6 SCC 659, para 36.
10
Needless to say that we have not expressed any opinion on the
merits of the matter.
18. No order as to costs. Pending applications, if any, stand
disposed of.
………………………………....J.
[PAMIDIGHANTAM SRI NARASIMHA]
………………………………....J.
[MANOJ MISRA]
NEW DELHI;
DECEMBER 12, 2024.
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