### Mediation Settlement Without Judicial Approval Does Not Bind Parties Under Order XXIII Rule 3 CPC

The respondent filed a suit for recovery of Rs. 17,76,971/- against the appellants.

During pendency, the Trial Court referred the parties to mediation, where a Settlement Agreement (SA) was signed on 25.09.2019.

The SA stated that the parties resolved all disputes and the respondent would withdraw the suit.

However, when the matter returned to the Trial Court, the respondent refused to record a formal statement, alleging that the appellants had not complied with the settlement terms and no money had been received.

The appellants filed an application under Order XXIII Rule 3 read with Section 151 of the CPC seeking disposal of the suit in terms of the SA, which the Trial Court dismissed on 07.03.2020.

The appellants challenged this dismissal before the High Court.

Whether a Settlement Agreement reached in mediation, in respect of which no judicial order has been passed or statements recorded in court, is binding on the parties under Order XXIII Rule 3 CPC.

The Court applied Order XXIII Rule 3 of the CPC, which requires a suit to be adjusted by a "lawful agreement or compromise in writing" proved to the "satisfaction of the Court".

It relied on Rules 24 and 25 of the Mediation and Conciliation Rules, 2004, which mandate that a signed settlement be submitted to the Court for the passing of a decree.

The Court further cited the Supreme Court decision in Salem Advocate Bar Association v. Union of India, emphasizing that a court must record the settlement to create a public record.

The Delhi High Court Division Bench ruling in Dayawati v. Yogesh Kumar Gossain, which held that without a judicial order binding the parties to the settlement, the Trial Court must proceed with the trial.

The Court reasoned that for a settlement to be enforceable under Order XXIII Rule 3 CPC, the court must be satisfied that the suit has been adjusted and subsequently pass a decree.

In the present case, although an SA was drafted, it never attained the "force of law" because no judicial order recording the terms or binding the parties was ever passed.

The Court noted that the respondent objected to the settlement at the very first instance before the Trial Court, citing non-compliance.

The Court distinguished the appellants’ reliance on Naveen Kumar v. Khilya Devi, noting that in that instance, parties had admitted terms before the court and partly acted upon them, whereas here, the respondent withdrew before the settlement was judicially accepted.

It held that a mediation settlement is not binding if a party withdraws from it before it is judicially recorded or if the court has not passed an order/decree in terms of the agreement.

All pending applications were closed.