SUPREME COURT HOLDS THAT A DECREE PASSED BY COMPROMISE OF PARTIES CANNOT BE CHALLENGED

Recently, in the matter of Rehan Ahmed (D) Thr. LRs Vs. Akhtar Un Nisa (D) Thr. LRs, Civil Appeal No. 5218 / 2024 arising out of SLP (Civil) No.18772 of 2014, a two Judge Bench of the Hon’ble Supreme Court comprising of Justice Vikram Nath and Justice Satish Chandra Sharma passed a Judgment dated 22-04-2024 and observed that a decree that is passed based on a duly verified compromise agreement, cannot be challenged.

Facts

i) In the present case, an Agreement to Sell dated 04-10-1967 was executed in respect of a property being Municipal No. 52- 57, Maniharon Ka Rasta, Jaipur (Suit Property) between the Defendant No. 1, Mr. Saeeduddin, who was the Power of Attorney Holder of the Defendant No. 1, Mr. Ghulam Mohiuddin, the owner of the Suit Property and the Appellant-Plaintiff, Mr. Rehan Ahmed. The total sale consideration was Rs. 40,000/-, out of which the Plaintiff had paid Rs. 15,000/- to the Defendant No. 1.

ii) But as the Defendant No. 1- Vendor was not executing the Sale Deed, hence, the Plaintiff-Buyer instituted a Civil Suit seeking specific performance of Contract in Suit No. 13 / 72 before the Ld. Additional District and Sessions Judge, Class-1, Jaipur (Trial Court) against both Defendants No. 1 and 2.

iii) During the pendency of the Suit, the Defendant No. 1 and the Plaintiff entered into a Compromise Agreement dated 11-05-1978, whereby, it was agreed as follows:

a) That the Plaintiff would pay the balance Rs. 25,000/-.

b) Thereafter, the Defendant No. 1 and/or 2 would execute the Sale Deed and get it registered by 01-07-1978.

c) Failing which, the Plaintiff would be entitled to get the Sale Deed executed and registered through Court.

d) It was also clarified that the Agreement to Sell executed by the Defendant No. 2 in favor of the Plaintiff was admitted and accepted by the Defendant No. 1.

e) The Plaintiff agreed to withdraw the Suit in view of the Compromise Agreement.

iv) The said Compromise Agreement was produced before Trial Court. Based on such Compromise, the Trial Court passed a Decree dated 09-05-1979 and dismissed the Suit against the Defendants.

v) However, the Defendant(s) did not execute the Sale Deed. Aggrieved, the Plaintiff-Decree Holder filed Execution Proceedings before the Executing Court.

vi) The Defendant No. 1 filed objections under Section 47 of the Code of Civil Procedure 1908 (CPC) (Questions to be determined by the Court executing decree) stating that the Plaintiff did not pay the balance sale consideration after the Compromise Agreement was executed. Further, due to a delay of about 6-7 years in payment of the balance sale consideration, the market value of the Suit Property had increased. Hence, the Defendant No. 1 claimed that the Decree could not be executed, on account of the default of the Plaintiff-Decree Holder.

vii) The Executing Court rejected the Defendant No. 1’s objections, vide Order dated 09-12-1998 on the grounds that the Defendants failed to fulfil their part of the obligations under the Compromise Agreement. It was further observed that there was no default on the part of the Plaintiff.

viii) In the meantime, the Defendant No. 1 passed away and his Legal Representatives (LRs) challenged the Executing Court’s Order dated 09-12-1998 in B. Civil Revision Petition No.55 of 1999 before the Hon’ble Rajasthan High Court, Jaipur Bench. The same was dismissed, vide Order dated 02-06-2006.

ix) Aggrieved, the LRs filed L.P.(C) No.12463 of 2006 before the Hon’ble Supreme Court, which was dismissed, vide Order dated 11-08-2006.

x) Thereafter, the Defendant No. 2’s wife, Mrs. Akhtar Un Nisa, the Respondent herein filed new round of objections under Section 47 CPC before the Executing Court, stating as follows:

(a) That the Decree dated 09-05-1979 was passed without jurisdiction and hence, is null and void,

(b) That when the Suit Property is a joint family property, the Compromise Agreement could not have been executed only between Defendant No. 1 and Plaintiff,

(c) Hence, as such the Trial Court could not have accepted such Compromise Agreement,

(d) Lastly, the Decree could not have been passed against Defendant No. 2, when the Compromise was executed between Defendant No. 1 and Plaintiff.

(e) Thus, the Plaintiff cannot claim right to obtain possession of the third floor of the Suit Property which is in possession of the Defendant No. 2.

xi) But the Executing Court dismissed the Respondent’s objections, vide Order dated 03-05-2007.

xii) Aggrieved, the Respondent filed a Revision Petition in B. Civil Revision Petition No. 95 / 2007, Smt. Akhtar Un Nisa vs. Rehan Ahmed, before the High Court, which was allowed, vide Order dated 21-03-2014. As a result, the Executing Court’s Order dated 03-05-2007 was set aside and the Trial Court’s Decree dated 09-05-1979 was declared null and void.

Supreme Court Observations

Aggrieved by the High Court Order dated 21-03-2014, the Plaintiff-Appellant filed SLP (Civil) No.18772 of 2014 before the Supreme Court, which was registered as Civil Appeal No. 5218 / 2024. The Apex Court, vide Order dated 22-04-2024, made the following observations:

1) That the High Court erred in overlooking the fact that although the initial Compromise Agreement dated 11-05-1978 was signed only by Defendant No. 1, but as the original Agreement was misplaced, later, on 09-05-1979, a fresh Compromise Application containing identical terms was submitted before the Trial Court and the same was duly signed by both Defendants. The Trial Court then correctly recorded and verified the said Compromise, thereby, fulfilling the requirements of Order XXIII, Rule 3 of CPC (Compromise of suit).[1]

2) Further, the delay between the first Compromise Agreement dated 11-05-1978 and the subsequent Compromise Application of 09-05-1979 was owing to non-appearance of Defendant No. 1 before the Trial Court and hence, the procedural requirement of verification of Compromise Agreement under Order XXIII, Rule 3 of CPC got delayed.

3) Thus, the Trial Court had passed the Decree dated 09-05-1979 after duly verifying the Compromise, the signatures of all Parties, etc and is as such valid under law.

4) Further, the High Court and the Supreme Court had already rejected the objections filed by the LRs of Defendant No. 1 in earlier proceedings and therefore, similar objections raised by the Defendant No. 2’s wife would not be maintainable and would in fact, amount to abuse of process of law.

Conclusion

Thus, based on the aforesaid observations, the Apex Court held that the High Court erred in observing that the Trial Court failed to properly verify the Compromise. Further, the Supreme Court held that the Defendant No. 2 cannot raise objections against a Decree that has been passed based on a duly verified Compromise Agreement, which was executed between the Defendants No. 1 and 2 and the Plaintiff.

As a result, the Appeal filed by the Plaintiff was allowed, the Executing Court’s Order dated 03-05-2007 that dismissed the Defendant No. 2’s objections, was restored and accordingly, the High Court Order dated 21-03-2014 that allowed the Defendant No. 2’s objections, was set aside.

Editor’s Comments

The Civil Procedure Code that regulates civil litigation has a specific provision pertaining to compromise by the parties. As per the said Code, parties are free to come to a settlement at any point of the litigation. However, the Code states at Order 23 that such compromises or consent decrees obtained by the parties cannot be subsequently or set aside for any reason. This is to ensure that if a party compromises, there should be a finality to the litigation and not allow one of the parties to reopen the case and restart the process. Basically, the principle of estoppel binds these consenting parties and they cannot subsequently state that they have changed their minds. Hence, readers, who are interested in settling matters, are advised to carefully think over the matter before entering into a compromise.

 

 

Harini Daliparthy

Senior Associate

The Indian Lawyer

 

Edited by

Sushila Ram Varma

Chief Consultant

The Indian Lawyer

 

[1] Order XXIII, Rule 3 of CPC. Compromise of suit

Where it is proved to the satisfaction of the Court that a suit has been adjusted wholly or in part by any lawful agreement or compromise in writing and signed by the parties or where the defendant satisfied the plaintiff in respect to the whole or any part of the subject-matter of the suit, the Court shall order such agreement, compromise or satisfaction to be recorded, and shall pass a decree in accordance therewith so far as it relates to the parties to the suit, whether or not the subject matter of the agreement, compromise or satisfaction is the same as the subject-matter of the suit:

Provided that where it is alleged by one party and denied by the other that an adjustment or satisfaction has been arrived at, the Court shall decide the question; but not adjournment shall be granted for the purpose of deciding the question, unless the Court, for reasons to be recorded, thinks fit to grant such adjournment.

Explanation.— An agreement or compromise which is void or voidable under the Indian Contract Act, 1872 (9 of 1872), shall not he deemed to be lawful within the meaning of this rule.

Order XXIII, Rule 3A of CPC. Bar to suit.— No suit shall lie to set aside a decree on the ground that the compromise on which the decree is based was not lawful.