SUPREME COURT HOLDS THAT A COMPROMISE DECREE MUST BE IN COMPLIANCE WITH ORDER XXIII, RULE 3 OF THE CODE OF CIVIL PROCEDURE, 1908.

A two-Judge Bench of the Hon’ble Supreme Court comprising of Justice Vikram Nath and Justice Prashant Kumar Mishra passed a Judgment dated 15-07-2024 in the matter of Amro Devi & Ors vs. Julfi Ram (Deceased)Thr.Lrs. & Ors., Special Leave Petition (Civil) No.14690 of 2015 and observed that when a Compromise is to be recorded and a decree has to be passed, Rule 3 of Order XXIII of the Code of Civil Procedure, 1908 (CPC) (Compromise of suit) mandates that the terms of the compromise must be documented in writing and signed by the Parties. Furthermore, mere statements made by the Parties before the Court about the Compromise do not fulfil the requirements of Order XXIII Rule 3 of the CPC.

FACTS:

1)  That the aforesaid Appeal was filed before the Apex Court by one, Amro Devi & Ors (Appellants / Defendants) against one, Julfi Ram (Deceased) Thr.Lrs. & Ors (Respondents / Plaintiffs), who challenged the decision of the Hon’ble High Court of Himachal Pradesh (High Court) in RSA-55-2002 which, vide, Order dated 15.12.2014 (Order), whereby confirmed the Decree on 21.12.2001, stating that the Plaintiffs’ rights to half of the land remained intact due to the Doctrine of Lis Pendens affecting the Sale Deed.

2) On 27.12.1979, Mansha Ram, Dev Raj, Khazana Ram, Ramji Das, and Bihari Lal (collectively referred to as “Mansha Ram and others”) filed Civil Suit No. 43 of 1983. They sought a Declaration and Permanent Injunction against Julfi Ram, Tihru Ram, Bakshi Ram (all three sons of Khajana), Prem Chand (son of Julfi Ram), Kartar Chand (son of Bakshi Ram), and Dharam Singh (son of Nighu).

3) The Plaintiffs, as landowners, sought recognition of their ownership and possession of the Suit Land measuring 7 Kanals, 9 marlas and a permanent injunction to restrain the Defendants (Co- Tenants) from interfering with the land. The Defendants contested the Suit, claiming to be in cultivatory possession as tenants on payment, and thus asserting ownership by virtue of tenancy.

4) On 11.04.1983, the Trial Court decreed the Suit in favour of the Plaintiffs, granting both the declaration and permanent Injunction, confirming their ownership and possession of the land. Aggrieved, all six Defendants appealed to the District Judge. During the Appeal, Dev Raj, one of the Plaintiffs, passed away, leading to his widow Asha Devi and his son Suresh Kumar being added as Respondents in the First Appeal.

6) During the Appeal, on 22.08.1983, Mansha Ram and others executed a Sale Deed in favour of Kartar Chand, Sansar Chand, and Rajinder Kumar (three sons of Bakshi Ram) for Rs. 12,500/-(Twelve Thousand and Five Hundred).

7) On 20.08.1984, the first Appellate Court allowed the Appeal and set aside the Trial Court’s Decree based on the Plaintiffs’ statements that they had compromised and wished to dismiss the Suit. The Court noted that Julfi Ram, Tihru Ram, Bakshi Ram, Prem Chand, and Kartar Singh had jointly stated that they had reached a settlement, paid the Plaintiffs, and would hold possession of the land. Similar statements were made by other Parties, leading to the dismissal of the suit.

8) Bakshi Ram’s three sons claimed exclusive possession and mutation in revenue records by virtue of the Sale Deed dated 22.08.1983. However, the Respondents contended that, based on the Compromise Decree by the first Appellate Court, all four brothers (Julfi, Tihru, Bakshi, and Nighu) became owners, and the Sale Deed to Bakshi Ram’s sons was subject to this compromise.

9) On 23.02.1988, Julfi Ram, Prem Chand, Dharam Singh, Premi Devi, Atmi Devi, Asha Devi, Subhash Chand, and Gian Chand (represented by their mother Premi Devi) filed Civil Suit No. 41 of 1988 against Bakshi Ram (since deceased), Tihru Ram, Amro Devi (wife of Bakshi Ram), Sansar Chand, Kartar Chand, Rajinder Kumar (minor son of Bakshi Ram), Mansha Ram, Khazana Ram, Ramji Das, Bihari Lal, and Asha Devi (widow of Suresh Kumar).

10) The Plaintiffs sought a declaration and permanent prohibitory injunction, claiming ownership and possession of half the suit land (3 kanals 15 marlas) as per the compromise in the 1984 Civil Appeal. They asserted continued possession and cultivation until the Defendants interfered in June 1987, leading to the discovery of disputed mutation entries.

11) On 28.01.1992, the Defendants claimed no formal compromise had been executed in the earlier proceedings and that they had spent Rs. 9,000 on land improvements. The Trial Court dismissed the suit on 19.12.1992, emphasizing the necessity of a written and signed compromise for Order XXIII Rule 3 CPC proceedings. The court, citing a Supreme Court ruling, held that the Plaintiffs’ statements before the District Court did not constitute a valid agreement or compromise. The Plaintiffs also failed to prove their possession and cultivation of the land.

FIRST APPELLATE COURT:

On 21.12.2001, the District Judge allowed the Plaintiffs’ Appeal, decreeing the Suit. The Judge stated that the Trial Court should not have questioned the legality of the Compromise as it had not been challenged under Order 43 Rule 1-A of CPC (Right to challenge non-appealable orders in appeal against decrees), thus operating as res judicata. Further, the Sale Deed executed during the pending Civil Appeal was deemed to be concealed and therefore invalid due to the doctrine of lis pendens.

SECOND APPELLATE COURT:

The Defendants’ Regular Second Appeal No. 55 of 2002 was dismissed by the High Court. The High Court confirmed the Decree dated 21.12.2001 passed by the first Appellate Court, holding that the Sale Deed did not alter the Plaintiffs’ rights to half of the Suit land. The Sale Deed was invalidated by the doctrine of lis pendens, thereby maintaining the Plaintiffs’ Ownership.

SUPREME COURT:

Dissatisfied with the opinion of both the Court Orders dated 21.12.2001 and 15.12.2014 of the High Court, the Appellant filed a Civil Appeal before the Apex Court.

ISSUE:

The main issue before the Supreme Court is to determine the status and validity of the so-called Compromise Order dated 20.08.1984 in the first round of litigation.

OBSERVATIONS:

1)  The Supreme Court noted that the initial Suit for declaration and permanent injunction was decided in favour of Mansha Ram and others by the Trial Court. However, during the pendency of an Appeal, Mansha Ram and others executed a sale deed in favour of the present Appellants on 22.08.1983.

2) The first Appellate Court set aside the Trial Court’s judgment and dismissed the suit based on statements from the Parties indicating a settlement. The Supreme Court observed, that these statements, were not part of a formal written compromise, which is required by law.

3) The Apex Court emphasized that Order XXIII Rule 3 CPC mandates a written and signed agreement to validate a compromise. Since no such document existed in this case, the alleged compromise did not satisfy legal requirements. Mere oral statements before the court were insufficient.

4) The Supreme Court found that the doctrine of lis pendens, which restricts property transfers during litigation, did not apply here. The Sale Deed from 22.08.1983 remained valid as the Plaintiffs’ later statements were considered collusive and dishonest, not affecting the sale.

CONCLUSION:

Based on the above facts, the Apex Court concluded that the Order dated 20.08.1984 was not a valid Compromise under Order XXIII Rule 3 CPC, the Supreme Court held that the Appeal before them had merit. Consequently, the Court allowed the Appeal, set aside the Judgments of the High Court and the first Appellate Court, and reinstated the Trial Court’s Judgment dated 19.12.1992, which dismissed the Suit. The Court reinforced that a lawful compromise must be properly documented and verified to be enforceable.

 

Sakshi Raghuvanshi

Senior Legal Associate

The Indian Lawyer

 

Editor’s Comments:

The Law is very clear that in the event parties agree to compromise the matter such parties must enter into a written agreement stating that they want to settle the subject matter of the suit by way of compromise. Such compromise must always be recorded and in writing. It must be signed by the parties entering into the agreement. The terms in the said consent agreement must always be lawful. It must also indicate how the parties have decided to settle or adjust their dispute. The court, only after being satisfied, that the agreement is lawful and made with free consent will pass a decree based on the said consent terms. Readers are cautioned that the terms must be clearly mentioned while entering into such an agreement. It is to be noted that there is no appeal once the decree is passed by consent.

 

Edited by:

Sushila Ram (Advocate)

The Indian Lawyer & Allied Services