Challenges to compromise decrees under Order XXIII Rule 3A lie before the court that recorded the compromise.

The petitioner/plaintiff instituted Title Suit No. 2398 of 2022 seeking declaration of her entitlement to a flat or, alternatively, refund of ₹16,00,000 with interest against M/s. Jaiswal Brothers and its representatives.

The parties filed a compromise application under Order XXIII Rule 3 read with Section 151 of the Code of Civil Procedure, 1908 (“CPC”), pursuant to which the suit was decreed on 3 April 2023 after examination of witnesses.

In execution of the compromise decree, possession of the flat was delivered to the petitioner with police assistance on 19 March 2025.

On 27 March 2025, Defendant No. 3, Jayanti Ghosh, filed an application alleging that the compromise decree had been obtained by fraud and seeking leave to file an appropriate application to set it aside.

The Chief Judge called for the suit records and, by order dated 3 April 2025, directed immediate restoration of possession to Jayanti Ghosh and her family by breaking open the lock, even though her application under Order XXIII Rule 3A read with Section 151 CPC had not been heard or decided.

The petitioner challenged that order under Article 227 of the Constitution.

The Court applied Article 227 of the Constitution, which empowers the High Court to supervise subordinate courts and correct jurisdictional and procedural errors.

Order XXIII Rule 3A CPC bars a separate suit to challenge a decree based on a compromise and requires such a challenge to be raised before the court that recorded the compromise, while Section 151 CPC preserves the inherent powers of the civil court.

The Court held that a compromise decree may be challenged where the underlying compromise was not lawful, including where it was allegedly procured by fraud, coercion, undue influence, misrepresentation or mistake.

It relied on S.P. Chengalvaraya Naidu v. Jagannath, (1994) 1 SCC 1, for the principle that a decree obtained by fraud or deception is void and non-est, and that a party approaching the court must do so with clean hands.

The Court further held that the court which accepted the compromise and passed the decree has jurisdiction to entertain and decide an application seeking its recall or setting aside under Order XXIII Rule 3A CPC.

The impugned order was procedurally and jurisdictionally unsustainable because the Chief Judge ordered dispossession and restoration of possession without hearing the petitioner and without deciding the pending application alleging fraud.

Since the compromise decree had been passed by the Judge, Bench-II, the Chief Judge had no occasion to retain the records of the already disposed suit under Section 10 of the City Civil Court Act, 1953; the challenge had to be placed before the court that recorded the compromise.

The High Court noted a prima facie discrepancy in the compromise petition: it was signed by the plaintiff and Defendant No. 2, but not by Defendant No. 1 or Jayanti Ghosh, and no express authority on their behalf was apparent from the record.

Nevertheless, as the fraud allegation remained pending and its merits had not been adjudicated, the High Court declined to finally determine the validity of the compromise decree.

Balancing the competing claims and the existing status quo, it set aside the Chief Judge’s order but directed that possession remain with Jayanti Ghosh until the competent court decided the Order XXIII Rule 3A application.

The application under Order XXIII Rule 3A read with Section 151 CPC was directed to be transmitted to the Judge, Bench-II, City Civil Court, Calcutta, who had passed the compromise decree, for expeditious decision in accordance with law.

Pending that decision, possession of the flat was to remain with Jayanti Ghosh and the parties were directed to maintain status quo regarding its nature, character and possession.

The competent trial court was directed to decide the application independently and without being influenced by the High Court’s prima facie observations.