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Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.10755 OF 2013 (Arising out of S.L.P. (C) No. 36694 of 2013)

(CC No. 19728 of 2013)

Daljit Kaur and another ...  Appellants

Versus

Muktar Steels Pvt. Ltd. and others          ...Respondents

J U D G M E N T

Dipak Misra, J.

Delay condoned.

2. Leave granted.

3. This  appeal,  by  special  leave,  is  directed against  the  

judgment and decree dated 7.3.2013 passed in Second  

Appeal No. 285 of 2008 by the High Court of Andhra  

Pradesh whereby the learned single Judge has affirmed  

the judgment and decree passed by the first appellate  

court concurring with the view that the decree being a

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consent  decree  was  not  assailable  in  appeal,  and  

further giving the stamp of approval to the conclusion  

that  the  learned  trial  Judge,  after  conducting  due  

enquiry as envisaged under the proviso to Order XXIII  

Rule 3 of the Code of Civil Procedure (CPC), had passed  

a consent decree.

4. The broad essential facts giving rise to the appeal are  

that the first respondent instituted OS No. 2261 of 1988  

in the Court of IVth Additional Judge, City Civil  Court,  

Hyderabad  for  declaration  to  the  effect  that  the  

agreements and arrangements between the parties are  

in the nature of “Industrial Licence” and not “Leave and  

Licence”  in  respect  of  the  suit  premises  situate  in  

private industrial  estate  Sanathnagar,  Hyderabad and  

also for permanent injunction.  The suit was originally  

filed against the defendant No. 1, the Managing Partner  

of the firm but after his death defendant Nos. 2 to 6  

were brought on record.

5. The firm filed  its  written  statement  contending,  inter  

alia,  that  the terms and conditions of  the agreement  

entered into  between the  plaintiff  and the  defendant  

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clearly  indicate  that  the  parties  had  entered  into  a  

“Leave and Licence” agreement and the licensor is the  

absolute owner.  It is worthy to mention here that the  

facts with regard to the stand put forth in the plaint and  

the stance taken in the written statement may not be  

stated in detail, because the real fulcrum of the lis is  

whether  the  parties  had  entered  into  a  lawful  

compromise  and whether  the  learned trial  Judge had  

followed the mandate as postulated under Order XXIII  

Rule 3 of the CPC.   

6. Suffice it to state that during the pendency of the suit at  

the  intervention  of  the  elders  both  the  parties,  as  

alleged, entered into a compromise.  As noted by the  

trial court as well as by the appellate court, the parties  

entered into a settlement  which  were reflectible from  

Exts. A-8, A-9 and A-14.  I.A. No. 966 of 2001 was filed  

before  the  learned  trial  Judge  for  recording  the  

compromise  and  passing  a  decree  in  terms  of  the  

settlement.  It was urged before the trial court that as  

the  defendant  had  disputed  the  compromise,  it  was  

imperative to conduct an enquiry.  For the said purpose  

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I.A. No. 490 of 2002 was filed by the plaintiff.  The said  

application was resisted by the defendant on many a  

ground.   The  learned  trial  Judge  rejected  the  said  

application solely on the base that the plaintiff had not  

carried out the amendments in the plaint by complying  

with  the  order  passed  in  I.A.  No.  1015  of  1998  for  

amendment and hence, his claim for getting an enquiry  

done was not maintainable.   

7. After completion of due formalities the suit was taken  

up and evidence was adduced.  The learned trial Judge,  

at that juncture, adverted to the oral and documentary  

evidence brought on record, including Exts. A-8 and A-

9.   The  learned  trial  Judge,  relying  on  the  letters  

exchanged between the parties, namely, Exts. A-15, A-

16 and A-25 and discussing the contents of the letters  

in extenso,  came to hold that the compromise deeds  

Ext. A-8, A-9 and A-14 had been acted upon with the  

understanding  between  plaintiff  and  defendant  No.4  

because  the  defendant  No.  4  had  sold  away  the  

portions  of  the  land  to  different  persons  under  sale  

deeds, Exts. B-3, B-12 and B-22, which apparently took  

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place subsequent to Ext.  A-8 and A-9 and A-14.  The  

trial  court  further  held  that  had  there  been  no  

compromise  between  the  plaintiff  and  the  defendant  

No.  4,  there could have been any scope entitling the  

defendant No. 4 to sell portions of the land to the third  

parties under Exts. B-3, B-8, B-12 and B-22 during the  

pendency of the suit.  The court also took note of the  

fact that possession had been handed over to the third  

parties.  The learned trial Judge analyzing the oral and  

documentary evidence recorded a finding to the effect  

that in the compromise deed the terms and conditions  

contained  about  the  sharing  of  the  amount,  taking  

possession  of  the  machinery  by  defendant  No.  4  

through  Gate  passes  and  Exts.  A-18  to  A-23  clearly  

showed  that  the  machinery  was  in  the  shed  of  the  

plaintiff  who  was  put  in  possession  of  the  schedule  

property  in  the  year  1980.   The  learned  trial  Judge  

further  opined that  the  defendants  had no access  or  

possibility to enter into the plaintiff’s premises as there  

was  an  injunction  operating,  but  because  of  the  

compromise  deed  between  the  parties  it  could  

materialize without any obstruction.  For arriving at the  

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said  conclusion  the  learned  trial  Judge  took  support  

from Exts. A-15, A-16 and A-25 written by the counsel  

for D.W. 1 to the plaintiff and his counsel.  This position  

was admitted by P.W.3, the counsel then defending the  

defendants. It also weighed with the trial court that the  

defendants had continued P.W.3 as their advocate for  

about 2 years after the compromise without making any  

allegations against him.  That apart, it observed that it  

was evident from Exts. A-18 to A-22 that the defendant  

No.4  took  away  the  machinery  and  plaintiff  installed  

new  furnace  after  taking  over  the  suit  schedule  

premises and selling the old furnace under Ext.  A-27  

after  effecting  the  compromise  in  the  presence  of  

defendant  No.  4  who  was  a  witness  to  the  sale  

document Ex. A-27.  On the basis of aforesaid reasoning  

the learned trial Judge opined that the compromise had  

been legally entered into between the parties and the  

same had been acted upon by both the parties  to  a  

major extent.  Being of this view, he accepted the deed  

of compromise and decreed the suit accordingly.

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8. On appeal being preferred, the learned Additional Chief  

Judge,  City  Civil  Court,  Hyderabad,  reappreciated the  

evidence and came to hold that both the parties had  

entered into a compromise vide agreements,  namely,  

Exts.  A-8  and  A-9  and  the  learned  trial  Judge  had  

correctly  placed  reliance  on  the  same.   The  learned  

appellate Judge opined that as it was a consent decree,  

no appeal would lie under Section 96(3) of the CPC.   

9. Being  grieved  by  the  dismissal  of  the  appeal  the  

appellant  preferred  a  second  appeal.   The  learned  

single  Judge  addressed  the  following  two  substantial  

questions of law: -

“1. Whether the appellate Court was justified  in  holding  that  the  appeal  against  a  consent/  compromise  decree  is  not  maintainable in view of bar created under  Section  96(3)  of  CPC,  Order  23 Rule  3-A  while ignoring Order 43 Rule 1-A which is  inserted  simultaneously  while  deleting  Order 43 Rule 1(m).

2. Whether  the  law  laid  down  by  this  Honourable  Court  in  AIR 2006 SCC 2626 is  contrary to Order 43 Rule 1A?  If so, what is  

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the  effect  of  the  law  laid  down  by  the  Supreme Court?”

10. Analyzing Section 96(3) of the CPC, Order XLIII Rule  

1A  and  placing  reliance  on  Pushpa  Devi  Bhagat  

(dead) through LR. Sadhna Rai (Smt.) v. Rajinder  

Singh and others1, the learned single Judge came to  

hold that the decree in question was a consent decree  

and hence, the appeal was not maintainable.  However,  

it  adverted to the facts and eventually dismissed the  

appeal.

11. We  have  heard  Mr.  P.  Vishwanath  Shetty,  learned  

senior counsel appearing for the appellants and Mr. D.  

Rama Krishna Reddy, learned counsel appearing for the  

respondents.

12. Assailing the defensibility of the judgment passed by  

the  High  Court  affirming  the  view  expressed  by  the  

courts  below,  the  learned  senior  counsel  for  the  

appellants has contended that an erroneous conclusion  

has  been  arrived  at  that  the  appeal  was  not  

maintainable on the assumption that it was a consent  

decree.   It  is  urged  that  the  decision  rendered  in  1 (2006) 5 SCC 566

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Pushpa  Devi  Bhagat (supra)  had  not  considered  

Order  XLIII  Rule  1A  of  the  CPC  and  hence,  the  said  

decision could not have been placed reliance upon.  It is  

contended that Section 96(3) and Order XLIII Rule 1A of  

the CPC should have been harmoniously construed by  

the High Court as it is open to the appellant to take a  

stand  that  the  compromise  should  not  have  been  

recorded.   It  is  his  further  submission  that  the  High  

Court  has  failed  to  appreciate  the  perversity  of  

approach by the courts below and concurred with the  

findings  recorded by  them baldly  stating  that  it  is  a  

question of fact and such an approach has resulted in  

miscarriage of justice, and, more so, when the learned  

single Judge had already opined that  the appeal  was  

not maintainable.

13. Mr. D. Rama Krishna Reddy, learned counsel for the  

respondents, resisting the aforesaid submissions, urged  

that  the  appellants  had  entered  into  a  lawful  

compromise with  the respondents and the same had  

been duly acted upon to a great extent and hence, the  

acceptance of the same by the learned trial Judge on  

the basis of material brought on record cannot be found  

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fault with.  It is further submitted that because of the  

said conclusion, the decree had earned the status of a  

consent decree and hence, the conclusion arrived at by  

the High Court is absolutely impeccable.

14. The  pivotal  issue  that  arises  for  consideration  is  

whether  in  the  present  case  the  appeal  could  have  

been  preferred  against  the  judgment  and  decree  

passed by the learned trial Judge.  As is evincible, the  

lower  appellate  court  as  well  as  the  High  Court  has  

placed  reliance  on  Pushpa Devi  Bhagat  (supra)  to  

come to hold that the appeal was not maintainable.  In  

Pushpa  Devi  Bhagat (supra)  a  two-Judge  Bench,  

dealing with a contention canvassed for the first time  

before  this  Court  that  the  appeal  before  the  first  

appellate  court  or  before  the  High  Court  was  not  

maintainable as there was a consent decree, permitted  

the contention to be raised and heard both parties on  

that score.  In the context, it referred to Rules 3 and 3-A  

of  Order  XXIII  and  analyzing  the  said  provisions  

summed up the statement of law emerging from Order  

XXIII  that  (i)  no  appeal  is  maintainable  against  a  

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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 XLIII;  

(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;  

and (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  XXIII.  

Thereafter the learned Judges proceeded to state thus:  

-

“...  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.  The second  defendant,  who  challenged  the  consent  

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compromise  decree  was  fully  aware  of  this  position as she filed an application for  setting  aside  the  consent  decree  on  21.8.2001  by  alleging that there was no valid compromise in  accordance with law.  For reasons best known  to herself,  the second defendant within a few  days thereafter (that is on 27.8.2001) filed an  appeal and chose not to pursue the application  filed before the court which passed the consent  decree.   Such  an  appeal  by  the  second  defendant was not maintainable, having regard  to the express bar contained in Section 96(3) of  the Code.”

15. The analysis made in the aforesaid decision and the  

dictum  laid  down  therein  has  to  be  appositely  

understood.   In  fact,  the  Court  was  adjudicating  a  

controversy  pertaining  to  assail  of  a  consent  decree  

where the parties  concerned had filed an application  

before the Court that had passed the consent decree  

alleging that there was no valid compromise but chose  

not to pursue the same and filed an appeal.   In that  

factual context the Court had ruled that in view of the  

express  bar  under  Section  96(3)  the  appeal  was  not  

maintainable.  Thus, we are inclined to think that the  

view expressed therein only conveys the principle that  

a consent decree is not appealable being barred under  

Section 96(3) of CPC.  Be it noted, what weighed with  

the court was that the application filed for setting aside  

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the compromise was not pursued.  Therefore, the said  

decision  has  to  be  confined  to  the  facts  exposited  

therein, for the fundamental factum was that the facet  

of consent was not contested.  

16. In Kishun alias Ram Kishun (dead) through LRs.   

v. Behari (dead) by LRs2.,  a three-Judge Bench was  

dealing the maintainability of appeal in the backdrop of  

Section 96 (3) of the Code which provide that no appeal  

shall  lie from a decree passed by the Court with the  

consent of the parties.  In that case, the High court had  

allowed  the  second  appeal  holding  that  the  first  

appellate court could not have entertained an appeal  

against a compromise decree.  In the said case, one of  

the facets that arose for consideration whether the High  

Court was justified in holding that the appeal preferred  

against  the  decree  under  Section  96  (3)  was  

maintainable.   After discussing the factual matrix the  

court opined thus :-

“When on a dispute in that behalf being raised,  an enquiry is made (now it has to be done in  view of the proviso to Order 23 Rule 3 of the  Code added by Act 104 of 1976) and the suit is  decreed on the basis of a compromise based on  

2 (2005) 6 SCC 300

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that enquiry, it could not be held to be a decree  passed  on  consent  within  the  meaning  of  Section  96  (3)  of  the  Code.   Section  96  (3)  contemplates  non-appealability  of  a  decree  passed by the court with the consent of parties.  Obviously,  when one of  the parties  sets  up a  compromise and the other disputes it and the  court is forced to adjudicate on whether there  was a compromise or not and to pass a decree,  it could not be understood as a decree passed  by the court with the consent of the parties.  As  we have noticed earlier, no appeal is provided  after  1.2.1977,  against  an  order  rejecting  or  accepting a compromise after an enquiry under  the proviso to Order 23 Rule 3, either by Section  104 or by Order 43 Rule 1 of the Code.  Only  when  the  acceptance  of  the  compromise  receives  the  imprimatur  of  the  court  and  it  becomes  a  decree,  or  the  court  proceeds  to  pass  a  decree  on  merits  rejecting  the  compromise  set  up,  it  becomes  appealable,  unless  of  course,  the  appeal  is  barred  by  Section 96 (3) of the Code.  We have already  indicated that when there is  a contest on the  question  whether  there  was  a  compromise  or  not,  a  decree  accepting  the  compromise  on  resolution of that controversy, cannot be said to  be  a  decree  passed  with  the  consent  of  the  parties.  Therefore, the bar under Section 96 (3)  of the Code could not have application.”  

[Emphasis added]

17. The ratio laid down in the aforesaid case applies on  

all  fours  to  the  case  at  hand.   The  defendants-

respondents had raised a dispute with regard to validity  

of  the  compromise  and  the  concerned  court  had  

conducted an enquiry.  Thus, a decree had been passed  

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on the basis of the compromise based on that enquiry  

and,  therefore,  it  cannot  be  said  to  be  a  consent  

decree.  The decision in Pushpa Devi Bhagat (supra)  

has  to  be  understood  that  when  a  decree  is  passed  

without any dispute being raised or  contested in  the  

court  of  first  instance,  the  decree  being  passed  on  

consent cannot be appealed against.   As the present  

controversy  is  covered  by  the  decision  rendered  in  

Kishun (supra), we are not required to dwell upon the  

applicability of Order XLIII, Rule 1A of the CPC.

18. Next aspect, that is highlighted by Mr. Shetty, is that  

the  High  Court  has  really  not  dwelled  upon  the  

perversity  of  approach  of  the  courts  below  and  

cryptically  given  the  stamp  of  approval  to  the  

conclusion  and  it  is  manifest  as  the  fundamental  

premise,  the Court  was concerned with,  pertained to  

the  issue  of  maintainability  of  appeal.   We  have  

discussed the analysis of the learned trial  Judge who  

has  discussed  the  evidence  while  dealing  with  the  

dispute raised by the defendants in the suit pertaining  

to entering of compromise.  We have also noticed the  

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analysis made by the first appellate court.  On a careful  

perusal  of  the  judgment  of  the  High  Court,  it  is  

noticeable  that  it  has,  at  the  commencement  of  the  

judgment, adverted to the facts relating to the manner  

in which the compromise decree had been passed and  

opined that the enquiry conducted by the learned trial  

Judge related to the evidence brought on record had  

been  rested  on  proper  application  of  oral  and  

documentary evidence. On the aforesaid analysis, the  

High  Court  has  concurred  with  the  conclusion  of  the  

first appellate court that the decree in question was a  

consent  decree.    To  satisfy  ourselves,  we  have  

discussed the approach of the learned trial Judge and  

that of the first  appellate court and we find that the  

High Court, after stating the facts and referring to the  

documents by which it has been recorded and further  

taking note of the fact how the settlement had been  

acted  upon  by  both  the  parties,  has  expressed  its  

opinion and hence, it cannot really be found fault with.

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19. In view of the aforesaid analysis, we do not find any  

merit in this appeal and, accordingly, the same stands  

dismissed without any order as to costs.

……………………………….J. [Anil R. Dave]

……………………………….J. [Dipak Misra]

New Delhi; November 19, 2013.

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