SUPREME COURT REITERATES THAT CONSENT DECREES VITIATED BY FRAUD, MISREPRESENTATION, OR MISTAKE DO NOT BIND PARTIES

The Two Judge Bench of the Hon’ble #SupremeCourt of India comprising of Justices Mohan M. Shantanagoudar and Vineet Saran passed a Judgment dated 17.02.2021 in the case of Compack Enterprises India (P) Ltd. v. Beant Singh Special Leave Petition (Civil) Nos. 2224-2225 of 2021 (Arising out of SLP(C) Diary No. 38441 of 2019) and reiterated that a #Consent Decree will operate as an #estoppel in cases where the #compromise has been vitiated by #Fraud, #Misrepresentation or #Mistake.

In the present case, Beant Singh (hereinafter Respondent) had filed a suit for possession and mesne profits against Compack Enterprises India (P) Ltd. (hereinafter Petitioner) with respect to the ground floor of the property bearing No. B­60, Ground Floor, G.T. Karnal Road, Industrial Area, Delhi­110033, admeasuring 608 sq. yards (or, 5,472 sq. ft.)(hereinafter ‘suit property’).

The Respondent had executed a license agreement dated 1.11.2000 for a period of 30 months in respect of a portion of the suit property in favour of M/s Compack Enterprises (the Petitioner’s predecessor) in   consideration   for   a   monthly   license fee of Rs. 28,000/­ (hereinafter ‘2000 Agreement’). On 1.04.2003, Compack Enterprises merged with Compack Enterprises India (P) Ltd. Thereafter, the license agreement was renewed on 1.07.2003 for another 30 months in consideration for a monthly license fee of Rs. 30,800/-, (hereinafter ‘2003 Agreement’) and again on 1.04.2006 in consideration for a monthly license fee of Rs. 33,900/- (hereinafter ‘2006 Agreement’), which expired on 30.09.2008. However, even after the expiry of the 2006 Agreement the Petitioner continued to occupy the suit property.

As a consequence, the Respondent filed a Suit against the Petitioner on 13.02.2009 for recovering the possession of the suit property and and mesne profits thereon from 1.10.2008 till the vacation of the suit property. The Ld. Additional District Judge, Rohini (‘Trial Court’) vide Order dated 23.09.2017, held that the Respondent is entitled to license fee Rs. 37,290/­ per month. Furthermore, the Court ordered that for the period of unlawful possession the Petitioner shall pay mesne profits Rs.60,000/­ per month with 10% increase on the 1st  April of each alternate year, till the suit property is handed over to Respondent.

Aggrieved, by the said Order on mesne profits, both the Petitioner and the Respondent filed cross Appeals before the Hon’ble High Court of Delhi (the High Court). The High Court vide Order dated 14.02.2019 passed a Consent Decree and directed the Petitioner to pay to the Respondent by way of mesne profits,  an enhanced sum of Rs.1,00,000/- per month with a 10% increase after every 12 months till the date the Petitioner hands over actual possession of the suit property

The Petitioner, aggrieved by the said Order, filed a Review Petition, which was dismissed by the High court vide Order dated 25.07.2019.

Consequently, a Special Leave Petition was filed in the Hon’ble Supreme Court impugning the Judgments dated 14.02.2019 and 25.07.2019.

After taking into consideration the arguments advanced by the parties to the dispute, the Apex Court held that the Consent Decrees create an estoppel against the parties. This is done in order to put an end to further litigation between the parties and the terms of a Consent Decree can be modified, substituted or modulated only with the consent of all the parties thereto. However, the Court observed as follows:

 “19. However, this formulation is far from absolute and does not apply as a blanket rule in all cases. This Court, in Byram Pestonji Gariwala v.Union Bank of India &ors., (1992) 1 SCC 31, has held that a Consent Decrees would not serve as an estoppel, where the   compromise   was   vitiated   by   fraud,   misrepresentation,   or mistake. Further, this Court in the exercise of its inherent powers may also unilaterally rectify a Consent Decrees suffering from clerical or arithmetical errors, so as to make it conform with the terms of the compromise.”

While disposing of the Appeal, the Bench held that the High Court was correct in upholding the terms of the Consent Decrees directing Petitioner to hand over possession of the entire suit property. On the issue of mesne profits, the Apex Court held that “… the inconsistency in the underlined extract of the Consent Decrees is an error apparent on the face of the record. Hence we find that this is a fit case to exercise inherent the jurisdiction to correct the terms of the Consent Decrees, to bring it in conformity with the intended compromise.”

Suchitra Upadhyay

Associate

The Indian Lawyer & Allied Services