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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 10416-10417 OF 2014
(Arising out of S.L.P. (C) Nos. 13942-13943 of 2012)
R. Rajanna …Appellant
Versus
S.R. Venkataswamy & Ors. …Respondents
J U D G M E N T
T.S. THAKUR, J.
1. Leave granted.
2. Can the validity of a decree passed on a compromise bechallenged in a separate suit is the short question that fallsfor determination in this appeal. It arises in the followingcircumstances:
3. The appellant filed a suit for declaration to the effectthat gift-deed dated 12th August, 1982 executed by oneRamaiah was void and for a permanent prohibitory injunction
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Page 2restraining the defendant-respondent from alienating thesuit schedule property or interfering with the peacefulpossession and enjoyment of the same by the plaintiff. Byits judgment and order dated 25th March, 1991, the TrialCourt decreed the suit holding the gift-deed in question to benull and void, hence not binding on the plaintiff-appellant.Defendants No.2 and 3 in the said suit were also directed todemolish the building constructed in the schedule propertyand surrender possession thereof to the plaintiff. Aggrievedby the judgment and decree passed against him therespondent filed RFA No.223 of 1991 before the High Court
of Karnataka at Bangalore. According to the respondent acompromise petition was in terms of Order XXIII Rule 3 ofCivil Procedure Code filed by the parties before the HighCourt in the said appeal settling the dispute amicably. Theappellant stoutly disputes that position and asserts that nosuch comprise was either needed nor was the same everentered into between the parties. The appellant describesthe so-called compromise deed as a forged and fabricateddocument. The appellant denies that he ever signed anysuch compromise petition or asked his advocate to file the2Page 3same before the Court. Even so the High Court hadproceeded on the basis that a compromise had indeed takenplace between the parties in the light whereof the High Courtset aside the judgment and decree of the Trial Court andallowed the appeal filed by the respondents. The appellant’scase is that order dated 1st August, 1995 passed by the HighCourt in RFA NO. 223 of 1991 was the result of fraud playedupon the High Court.4. Aggrieved by the judgment and order dated 1st August,1995 passed by the High Court, the appellant appears tohave filed OS No.5236 of 2005 before the Additional CityCivil Judge, Bangalore, in which the appellant prayed forsetting aside of the compromise recorded in the High Court’sorder dated 1st August, 1995 and the decree passed on thebasis thereof. The defendant-respondent No.1 moved anapplication in the said suit under Order VII Rule 11(d) readwith Section 151 Code of Civil Procedure for rejection of theplaint on the ground that the suit in question was barred byRule 3A of Order XXIII of the Code of Civil Procedure.5. By its order dated 11th February, 2011, the City CivilCourt, Bangalore, allowed the application filed by the
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Page 4respondent and rejected the plaint filed by the plaintiffappellant.The Court took the view that in the light of theproviso to Order XXIII Rule 3 of the CPC inserted w.e.f.1.2.1997, a party aggrieved of a decree on compromise hadto approach the Court that passed the decree to establishthat no compromise had taken place between the partieswhich could provide a basis for the Court to act upon thesame. In doing so the Court placed reliance upon thedecision of this Court in Pushpa Devi Bhagat v. RajinderSingh and Ors. (2006) 5 SCC 566.
6. It was after the rejection of the plaint that the appellantfiled miscellaneous application IA Nos. 1 and 2 of 2011 inRFA No.223 of 1991 praying for setting aside of order dated1st August, 1995 by which the High Court had allowed theappeal filed by the respondents and set aside the decreepassed in OS No.5236 of 2005 on the basis of the allegedcompromise between the parties. The appellant's casebefore the High Court was that no such compromise hadtaken place nor was any compromise petition ever signed byhim. It was also alleged that the appellant had given noinstructions to his advocate for presenting any compromise4
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petition and that the alleged compromise petition was totallyfraudulent and based on forged signature of the appellantapart from being unauthorised as the counsel engaged byhim had no authority to present or report any suchcompromise before the Court. The appellant also prayed forcondonation of delay in filing the application for setting asidethe compromise decree passed by the High Court.7. The High Court of Karnataka has by its orders impugnedin this appeal, dismissed IA No.1 of 2011 filed by theappellant without even adverting to the provisions of OrderXXIII Rule 3 CPC and in particular Rule 3A which bars a suitto have a compromise decree set aside on the ground thatthe compromise on which the decree had been passed didnot exist or take place. The High Court appears to havetaken the view that even if the compromise was fraudulentsince the appellant had filed a suit for declaration he oughtto pursue the same to its logical conclusion. The High Courtfurther held that even if the plaint in the suit filed by theappellant had been rejected in terms of Order VII Rule 11(d)of CPC, the appellant ought to seek redress against any such
order of rejection. The High Court has on that basis declined
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Page 6to consider the prayer made by the appellant for settingaside the compromise decree.8. The precise question that falls for determination in theabove backdrop is whether the High Court was right indirecting the appellant to seek redress in the suit havingregard to the provisions of Order XXIII rule 3 and Rule 3A of
CPC.9. Order XXIII Rule 3 and Rule 3A of CPC may at this stagebe extracted for ready reference:“3. Compromise of suit. – Where it is proved to thesatisfaction of the Court that a suit has beenadjusted wholly or in part by any lawful agreementor compromise [in writing and signed by the parties],or where the defendant satisfies the plaintiff inrespect of the whole or any part of the subjectmatterof the suit, the Court shall order suchagreement, compromise or satisfaction to berecorded, and shall pass a decree in accordance
therewith [so far it relates to the parties to the suit,whether or not the subject-matter of the agreement,compromise, or satisfaction is the same as thesubject-matter of the suit]:[Provided that where it is alleged by one party anddenied by the other that an adjustment orsatisfaction has been arrived at, the Court shalldecide the question; but no adjournment shall begranted for the purpose of deciding the question,unless the Court, for reasons to be recorded, thinksfit to grant such adjournment.]Explanation – An agreement or compromise which isvoid or voidable under the Indian Contract Act, 1872shall not be deemed to be lawful within the meaningof this rule.”6
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10. It is manifest from a plain reading of the above that interms of the proviso to Order XXIII Rule 3 where one partyalleges and the other denies adjustment or satisfaction ofany suit by a lawful agreement or compromise in writing andsigned by the parties, the Court before whom such questionis raised, shall decide the same. What is important is that interms of Explanation to Order XXIII Rule 3, the agreement orcompromise shall not be deemed to be lawful withinmeaning of the said rule if the same is void or voidable
under Indian Contract Act, 1872. It follows that in every casewhere the question arises whether or not there has been alawful agreement or compromise in writing and signed bythe parties, the question whether the agreement orcompromise is lawful has to be determined by the Courtconcerned. What is lawful will in turn depend upon whetherthe allegations suggest any infirmity in the compromise andthe decree that would make the same void or voidable underthe Contract Act. More importantly, Order XXIII Rule 3Aclearly bars a suit to set aside a decree on the ground thatthe compromise on which the decree is based was not7
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lawful. This implies that no sooner a question relating tolawfulness of the agreement or compromise is raised beforethe Court that passed the decree on the basis of any suchagreement or compromise, it is that Court and that Courtalone who can examine and determine that question. TheCourt cannot direct the parties to file a separate suit on thesubject for no such suit will lie in view of the provisions ofOrder XXIII Rule 3A of CPC. That is precisely what hashappened in the case at hand. When the appellant filed OSNo.5326 of 2005 to challenge validity of the compromisedecree, the Court before whom the suit came up rejected theplaint under Order VII Rule 11 CPC on the application madeby the respondents holding that such a suit was barred bythe provisions of Order XXIII Rule 3A of the CPC. Having thusgot the plaint rejected, the defendants (respondents herein)could hardly be heard to argue that the plaintiff (appellantherein) ought to pursue his remedy against the compromisedecree in pursuance of OS No.5326 of 2005 and if the plaintin the suit has been rejected to pursue his remedy againstsuch rejection before a higher Court.8
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11. The upshot of the above discussion is that the HighCourt fell in a palpable error in directing the plaintiff to takerecourse to the remedy by way of separate suit. The HighCourt in the process remained oblivious of the provisions ofOrder XXIII Rules 3 and 3A of the CPC as also orders passedby the City Civil Court rejecting the plaint in which the TrialCourt had not only placed reliance upon Order XXIII Rule 3Abut also the decision of the Court in Pushpa Devi’s case(supra) holding that a separate suit was not maintainableand that the only remedy available to the aggrieved partywas to approach the Court which had passed thecompromise decree. The following passage from the decisionof Pushpa Devi (supra) case is, in this regard, apposite:
“17. ..Therefore, the only remedy available to a partyto a consent decree to avoid such consent decree, is to approach the court which recorded thecompromise and made a decree in terms of it, andestablish that there was no compromise. In thatevent, the court which recorded the compromise willitself consider and decide the question as to whetherthere was a valid compromise or not. This is sobecause a consent decree is nothing but contractbetween parties superimposed with the seal ofapproval of the court. The validity of a consentdecree depends wholly on the validity of theagreement or compromise on which it is made. Thesecond defendant, who challenged the consentcompromise decree was fully aware of this positionas she filed an application for setting aside theconsent decree on 21-8-2001 by alleging that there9
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was no valid compromise in accordance with law.Significantly, none of the other defendantschallenged the consent decree. For reasons bestknown to herself, the second defendant within a fewdays thereafter (that is on 27-8-2001) filed an appealand chose not to pursue the application filed beforethe court which passed the consent decree. Such anappeal by the second defendant was notmaintainable, having regard to the express barcontained in Section 96(3) of the Code.”12. We may also refer to the decision of this Court inBanwari Lal v. Chando Devi (1993) 1 SCC 581 wherealso this Court had observed:“As such a party challenging a compromise can file apetition under proviso to Rule 3 of Order XXIII, or anappeal under S. 96(1) of the Code, in which he cannow question the validity of the compromise in viewof Rule 1-A of Order 13 of the Code.”
13. In the light of the above, we allow these appeals, setaside the order passed by the High Court and remit thematter back to the High Court for disposal of IA Nos.1 and 2of 2011 in accordance with law in the light of theobservations made hereinabove. In the peculiar facts andcircumstances of the case, we leave the parties to bear theirown costs. We make it clear that we have expressed noopinion as to the merits of the application seeking setting
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Page 11aside of the compromise decree which aspect is left for theHigh Court to examine in accordance with law.…………………………..…….…..…J.
(T.S. THAKUR)
…………………………..……………..J.
(R. BANUMATHI)
New Delhi;
November 20, 2014
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