Navratan Lal Sharma vs Radha Mohan Sharma

2024 INSC 970 REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 14328/2024 @ SLP (CIVIL) NO. 27723 OF 2024

NAVRATAN LAL SHARMA ...APPELLANT(S)

VERSUS

RADHA MOHAN SHARMA & ORS. …RESPONDENT(S)

JUDGMENT

PAMIDIGHANTAM SRI NARASIMHA, J.

1. Leave granted.

2. The appellant initially filed a suit for declaration and

injunction, which was dismissed by the Trial Court. The appellant

then filed a first appeal. During its pendency, the parties reached

a compromise, agreeing to dispose of the appeal based on its terms.

On 14.07.2022, the High Court decided the appellant’s application

under Order 23, Rule 3 of the Code of Civil Procedure, 19081 and

disposed of the first appeal in terms of the compromise. However,

when the respondent failed to comply with the compromise terms, Signature Not Verified

the appellant filed an application to restore the appeal. Digitally signed by INDU MARWAH Date: 2024.12.12 18:08:59 IST Reason: 1 Hereinafter “CPC”.

1 Unfortunately, this application was dismissed by the order

impugned before us, citing that the High Court had not granted

liberty for restoration of the appeal while recording the

compromise.

3. After careful consideration of the statutory framework and

Order 23, Rules 3 and 3A, as informed by relevant judicial

precedents, we have allowed the appeal. We have directed that, in

such circumstances, restoration is the sole remedy, which the

aggrieved party may exercise as a statutory right.

4. The short facts are that the appellant is the owner of the suit

property. He filed a suit against the respondents for cancellation

of the power of attorney dated 19.07.2010 and 27.07.2010, sale

deeds dated 31.08.2010 and 15.09.2010, and grant of permanent

and mandatory injunction on the ground that respondent no. 1

forged the abovementioned power of attorney and subsequently

entered into the abovementioned sale deeds for the suit property

in favour of respondent no. 2. The Trial Court dismissed the suit

on 17.02.2014, and the appellant preferred a first appeal before

the Rajasthan High Court.

5. During the pendency of the first appeal, the appellant and

respondent no. 2 entered into a compromise, recorded in deed

2 dated 18.05.2022 and corrigendum compromise dated

08.07.2022. The compromise contemplated development of the

suit property, as per which certain amounts were to be paid by

respondent no. 2 to the appellant. Paras 4 and 7 of the compromise

deed dated 18.05.2022 are relevant and extracted hereinbelow for

ready reference:

“(4) That there is a first appeal no. between the parties in the Honourable State High Court. 210/2014 is pending. The said compromise will be presented in other cases and both the parties will be able to get them resolved on the basis of the compromise, but if the terms of the compromise are violated then the second party will have the right to get the said appeal number 210/2014 reinstated by submitting an application.

*** (7) That the first party issued a check dated 18/5/22 to the second party, check no. 160711 amount of Rs 11,00,000/- has been given today itself, payment can be taken by presenting the check in the bank on the date written in it. After giving the lease of the developed land, an amount equal to the value of the said amount will be transferred to Khasra No. Out of 11, the second party will give it to the first party. If any check is dishonoured, the agreement will be considered void.”

6. The parties filed an application under Order 23, Rule 3 of the

CPC for disposal of the first appeal as per the compromise, wherein

it was stated that respondent no. 1 does not have any objection to

the compromise and that the appellant can file for restoration of

the appeal if the agreed payment is not completed and the cheques

are dishonoured.

7. By order dated 14.07.2022, the High Court disposed of the

first appeal by taking the compromise dated 18.05.2022 and the

3 corrigendum compromise dated 08.07.2022 on record and making

them a part of its order. However, it also held that the parties do

not have liberty to get the first appeal restored. The relevant

portion of the order reads:

“5. This Court, without entering into the merits of appeal but without giving any liberty to get restored the first appeal, is of considered opinion that when both parties have entered into the terms of compromise and have agreed to abide by the terms of compromise, this appeal deserves to be disposed of accordingly.

6. Hence the compromise dated 18.05.2022 along with corrigendum compromise dated 08.07.2022 is taken on record and the first appeal is disposed of in terms of compromise.

7. The compromise dated 18.05.2022 along with corrigendum compromise dated 08.07.2022 shall be treated as part of this order.” (emphasis supplied)

8. When the cheques issued by respondent no. 2, said to be in

furtherance of the compromise were dishonoured, the appellant

moved the High Court for restoration of the appeal alleging fraud

and illegal interference with his possession and attempts to get the

land converted without paying the agreed amounts. By the order

impugned before us, the High Court dismissed the application on

the only ground that in its order dated 14.07.2022, the Court

clearly recorded that the parties were not given liberty to restore

the appeal. The High Court observed that since the order dated

14.07.2022 was a consensual order and the parties were aware

that there was no liberty to get the first appeal restored, the

4 application for restoration was not entertainable even if the

compromise is not acted upon. The short order of the High Court

dated 19.10.2023 is extracted hereinbelow:

“1. Instant misc. application has been filed by the appellant-plaintiff seeking to restore S.B. Civil First Appeal NO.210/2014 by recalling the order dated 14.07.2022 whereby and whereunder the first appeal was disposed of in terms of compromise dated 18.05.2022 arrived at between parties.

2. It has been stated in the application that cheques issued by respondents in terms of the compromise have been dishonoured and respondents have not adhered to the terms of the compromise, hence the first appeal be restored to be heard on merits.

3. By perusal of the order dated 14.07.2022, more particularly para No.5, it stands clear that this Court while disposing of the first appeal in terms of the compromise has clearly observed that parties would be not at liberty to get restore this first appeal. The order dated 14.07.2022 is consensual order and both parties were well aware that no liberty to restore the first appeal is available, even though the compromise may or may not be acted upon. Therefore, the application for restoration of first appeal is not entertainable.

4. Thus, in view of above, the prayer for restoration of the first appeal is uncalled for. In case, the terms of the compromise dated 18.05.2022 have not been complied with, the applicant-plaintiff is at liberty to take appropriate steps in accordance with law.

5. With aforesaid observations, without recalling of the order dated 14.07.2022, the misc. application stands disposed of.

6. Stay application and any other pending application, if any, stand disposed of.”

9. We have heard the learned counsels for the parties.

10. The relevant provisions under the CPC that govern

compromise decrees are contained in Order 23, Rules 3 and 3A,

which are extracted hereunder:

“3. 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

5 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 be deemed to be lawful within the meaning of this rule.

3A. 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.”

11. This Court in Banwari Lal v. Chando Devi2 has laid down the

law on the disposal of a proceeding in accordance with a

compromise between the parties and on recall of a compromise

decree. It held that under Order 23, Rule 3, the Court must be

satisfied upon applying judicial mind that the agreement between

the parties is lawful before accepting the same and disposing the

suit. Further, the proviso and the Explanation to Order 23, Rule 3

mandate that the court must “decide the question” of whether an

adjustment or satisfaction has been arrived at, and it is clarified

that void and voidable agreements under the Indian Contract Act,

1872 3 shall be deemed to be not lawful.4 Upon such reading of the

provision, it held that the court recording the compromise can

examine the legality of the agreement, in accordance with the

2 (1993) 1 SCC 581.

3 Hereinafter “the Contract Act”.

4 Banwari Lal (supra), paras 11-13.

6 provisions of the Contract Act, even after the compromise decree

is passed and when a party moves an application for recall. 5

12. The law on the issue is summarised in Pushpa Devi Bhagat

v. Rajinder Singh6. In this case, the Court also took note of Section

96(3) of the CPC7 and the deletion of Order 43, Rule 1(m) of the

CPC by way of an amendment in 1976, as well as Order 23, Rule

3A. The consequence of these is that an appeal against a consent

decree and an order recording (or refusing to record) a compromise

is not maintainable, nor can a fresh suit be filed for setting aside

such decree. Hence, the only remedy available to the aggrieved

party is to approach the court that recorded the compromise under

the proviso to Order 23, Rule 3. The Court held:

“17. The position that emerges from the amended provisions of Order 23 can be summed up thus:

(i) No appeal is maintainable against a consent decree having regard to the specific bar contained in Section 96(3) CPC.

(ii) No appeal is maintainable against the order of the court recording the compromise (or refusing to record a compromise) in view of the deletion of clause (m) of Rule 1 Order 43.

(iii) No independent suit can be filed for setting aside a compromise decree on the ground that the compromise was not lawful in view of the bar contained in Rule 3-A.

(iv) A consent decree operates as an estoppel and is valid and binding unless it is set aside by the court which passed the consent decree, by an order on an application under the proviso to Rule 3 Order 23.

5 ibid, para 14.

6 (2006) 5 SCC 566.

7 Section 96(3) of the CPC reads:

“96. Appeal from original decree.— (3) No appeal shall lie from a decree passed by the Court with the consent of parties.”

7 Therefore, the only remedy available to a party to a consent decree to avoid such consent decree, is to approach the court which recorded the compromise and made a decree in terms of it, and establish that there was no compromise. In that event, the court which recorded the compromise will itself consider and decide the question as to whether there was a valid compromise or not. This is so because a consent decree is nothing but contract between parties superimposed with the seal of approval of the court. The validity of a consent decree depends wholly on the validity of the agreement or compromise on which it is made…” (emphasis supplied)

13. In the present case, the appellant has alleged fraud by the

respondents in his recall application, which he bears the burden

to prove.8 The Explanation to Order 23, Rule 3 clearly states that

void and voidable agreements under the Contract Act shall not be

deemed to be lawful. By alleging fraud in his recall application, the

appellant is effectively impugning the legality of the compromise as

proving the same would render the agreement voidable under the

Contract Act.9 When the court disposes of a proceeding pursuant

to a compromise under Order 23, Rule 3, it bears the duty to

examine this issue and be satisfied that the agreement or

compromise is lawful. The proviso explicitly obligates the court

that entertains the petition of compromise to determine this issue,

and as per the law laid down by this Court in Banwari Lal (supra),

8 Shanti Budhiya Vesta Patel v. Nirmala Jayprakash Tiwari, (2010) 5 SCC 104; K. Srinivasappa v. M. Mallamma, (2022) 17 SCC 460.

9 Section 19 of the Contract Act provides that when consent to an agreement is caused by fraud, it is voidable at the option of the party whose consent was so caused.

8 this issue can be agitated by way of a recall application even after

the compromise decree has been passed.

14. By the impugned order, the High Court dismissed the

application solely on the ground that the order dated 14.07.2022

recording the compromise does not grant liberty to restore the

appeal. We are of the opinion that this is not the correct approach,

as it defeats the statutory right and remedy available to the

appellant under the CPC. This Court in Pushpa Devi Bhagat

(supra), as well as several other cases,10 has held that only the

court that entertains the petition of compromise can determine its

legality, at the time of recording the compromise or when it is

questioned by way of a recall application. No other remedy is

available to the party who is aggrieved by the compromise decree

as an appeal and fresh suit are not maintainable under the CPC.

15. In view of this legal position, the High Court was not correct

in curtailing the statutory remedy available to the appellant in the

first place. 11 In fact, when there is a statutory remedy available to

a litigant, there is no question of a court granting liberty to avail of

such remedy as it remains open to the party to work out his

10 R. Rajanna v. S.R. Venkataswamy, (2014) 15 SCC 471, para 11; Triloki Nath Singh v. Anirudh Singh, (2020) 6 SCC 629, paras 17 and 18; R. Janakiammal v. S.K. Kumaraswamy, (2021) 9 SCC 114; Sree Surya Developers & Promoters v. N. Sailesh Prasad, (2022) 5 SCC 736, para 9; Basavaraj v. Indira, (2024) 3 SCC 705, para 9. 11 See Bhanu Kumar Jain v. Archana Kumar, (2005) 1 SCC 787, paras 28 and 36.

9 remedies in accordance with law. 12 Therefore, there was no

occasion for the court to deny liberty to file for restoration by its

order dated 14.07.2022 and the consequent dismissal of the recall

application by the impugned order on this ground alone does not

arise. Further, as a matter of public policy, courts must not curtail

statutorily provisioned remedial mechanisms available to parties.

16. It is also relevant that para 4 of the compromise deed dated

18.05.2022 recognises the appellant’s right to file for restoration

of appeal in case of non-compliance. Further, para 7 stipulates

that the compromise will be considered void in case of non-

payment. Reading these clauses together, it is clear that the

compromise deed itself recognises the parties’ right to approach

the court to question its validity in certain circumstances. These

clauses are in line with the public policy consideration of access to

justice reflected in Section 28 of the Contract Act that stipulates

that agreements which restrain a party from enforcing his rights

through legal remedies are void.

17. In this view of the matter, we allow the appeal, set aside the

impugned order dated 19.10.2023, and remand the matter to the

High Court to decide the application for recall on its own merits.

12

See Shiv Shakti Coop. Housing Society, Nagpur v. Swaraj Developers, (2003) 6 SCC 659, para 36.

10 Needless to say that we have not expressed any opinion on the

merits of the matter.

18. No order as to costs. Pending applications, if any, stand

disposed of.

………………………………....J. [PAMIDIGHANTAM SRI NARASIMHA]

………………………………....J. [MANOJ MISRA] NEW DELHI;

DECEMBER 12, 2024.

11