A compromise-based reduction of an original claim does not create a fresh cause of action.

The plaintiff paid ₹1.5 crore to the first defendant under a construction agreement dated 10 November 2014.

After the proposed construction was abandoned, the defendants repaid ₹15 lakh, and subsequent repayment cheques were dishonoured.

While the plaintiff’s suit for recovery was pending, the plaintiff and the first defendant entered into two memorandums of compromise on 14 September 2019: one fixed the settlement principal at ₹1.25 crore, with ₹70 lakh payable by cheque, and the other recorded ₹45 lakh as interest.

The plaintiff received ₹55 lakh toward the principal and the interest amount, but the cheque for the remaining ₹70 lakh was dishonoured.

The plaint was amended in 2023 to claim ₹1,10,24,520.54, including interest, and damages.

The defendants disputed limitation, liability and the plaintiff’s compliance with the compromise terms.

1. Whether the amended claim for recovery of money was barred by limitation

2. Whether the plaintiff was entitled to recover the claimed amount and whether defendants 2 and 3 were liable as proper or necessary parties

3. Whether the plaintiff’s failure to withdraw the suit breached the compromise terms and defeated her claim

4. Whether the plaintiff was entitled to damages for alleged loss and whether that claim was time-barred

The Court relied on Order VI Rule 17 of the Code of Civil Procedure, under which pleadings may be amended to determine the real questions in controversy.

It treated a cause of action as a bundle of facts and considered whether the amended recovery claim arose from the original transaction or introduced a distinct cause of action.

The defendants invoked the three-year limitation period and the Supreme Court’s pandemic-related extension of limitation, but the judgment did not identify a specific provision or article of the Limitation Act as the basis of its decision.

The Court also considered the parties’ obligations under the memorandums of compromise, including the payment and withdrawal terms.

The Court found that the compromise arose from the same construction-agreement transaction underlying the original suit and reduced, rather than enlarged, the recovery claim.

It therefore treated the amended money claim as a continuation of the original cause of action, not a fresh time-barred claim; it separately held that the newly introduced damages claim was barred by limitation.

Although the plaintiff had not withdrawn the suit as required by the compromise, the Court held that the defendants could not rely on that failure after defaulting on their own obligation to pay the remaining ₹70 lakh.

It found the settlement amount and dishonoured cheque established the first defendant’s outstanding liability, held defendants 1 to 3 liable, and absolved defendant 4 because he was no longer a director when the compromise was made.

It dismissed the damages claim and dismissed the suit against defendant 4.

Defendants 1 to 3 were ordered to pay the costs of the suit.