The Court power to decree a compromise requires a written, signed agreement and unequivocal bilateral consent.

HUDCO (Appellant) allotted guest house blocks, restaurants, and shops to Tomorrow Land (Respondent) in 1994 at ‘HUDCO Place,’ New Delhi

Due to payment defaults by the Respondent, HUDCO cancelled the allotments and forfeited the paid amounts in 1996

The Respondent filed a suit for specific performance and damages in 1997

During the proceedings in 2016, the learned Single Judge suggested a settlement

HUDCO’s Board passed a resolution to refund the first installment, subject to No Objection Certificate (NOC) from the Ministry of Urban Development (MoUD)

The MoUD refused to grant a formal NOC, claiming HUDCO must bear its own liabilities

Despite HUDCO’s objection regarding lack of funds and absence of government clearance, the Single Judge passed a decree on 13.01.2017, treating the matter as partially settled and directing refund of ₹35.75 Crores with interest

HUDCO’s subsequent recall and execution objections were dismissed

Section 5 of the Limitation Act, 1963, emphasizing that "sufficient cause" should be construed liberally to advance substantial justice, especially when the delay is not due to gross negligence

Order XXIII Rule 3 of the CPC, which mandates that a compromise must be "in writing and signed by the parties"

The court followed Gurpreet Singh v. Chatur Bhuj Goel [(1988) 1 SCC 270] and Pushpa Devi Bhagat v. Rajinder Singh [(2006) 5 SCC 566], which establish that courts must insist on written, signed terms before recording a compromise

Section 96(3) of the CPC, which bars appeals against consent decrees, but clarified that this bar does not apply if the "consent" itself is disputed or legally non-existent

The Court found that the 620-day delay was justified because HUDCO was actively pursuing alternative remedies, including seeking government funds and filing a recall application after the MoUD’s refusal

On merits, the Court observed that the Single Judge erred in treating the 13.01.2017 order as a consent decree. There was no signed compromise deed as required by Order XXIII Rule 3

HUDCO’s "consent" was conditional upon MoUD’s NOC and fund release, which never materialized; thus, there was no "unequivocal consent"

Furthermore, the Respondent had also challenged the decree via review/SLP, proving that both parties were dissatisfied with the terms

The Court reasoned that a judge cannot act as an "amiable compositeur" to bridge gaps in a failed negotiation and must instead adjudicate the suit on merits through evidence if a settlement is not reach in writing

It held that the decree dated 13.01.2017 was not a valid consent decree under Order XXIII Rule 3 CPC and was passed without following the prescribed adjudicatory process

The Court allowed the appeals, set aside the decree dated 13.01.2017 and the execution order dated 29.10.2018, and restored the original suit [CS(OS) 1551/2005] for trial on merits. Parties were directed to appear before the Roster Bench on 22.05.2026 for further proceedings