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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 be  

challenged in a separate suit is the short question that falls  

for  determination  in  this  appeal.  It  arises  in  the following  

circumstances:

3. The appellant filed a suit for declaration to the effect  

that  gift-deed  dated  12th August,  1982  executed  by  one  

Ramaiah was void and for a permanent prohibitory injunction  

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restraining  the  defendant-respondent  from  alienating  the  

suit  schedule  property  or  interfering  with  the  peaceful  

possession and enjoyment of the same by the plaintiff.  By  

its  judgment  and  order  dated  25th March,  1991,  the  Trial  

Court decreed the suit holding the gift-deed in question to be  

null  and void, hence not binding on the plaintiff-appellant.  

Defendants No.2 and 3 in the said suit were also directed to  

demolish the building constructed in the schedule property  

and surrender possession thereof to the plaintiff.  Aggrieved  

by  the  judgment  and  decree  passed  against  him  the  

respondent filed RFA No.223 of 1991 before the High Court  

of Karnataka at Bangalore.  According to the respondent a  

compromise petition was in terms of Order XXIII  Rule 3 of  

Civil  Procedure  Code  filed  by  the  parties  before  the  High  

Court in the said appeal settling the dispute amicably.  The  

appellant stoutly disputes that position and asserts that no  

such comprise was either  needed nor  was the same ever  

entered into between the parties.  The appellant  describes  

the so-called compromise deed as a forged and fabricated  

document.   The appellant denies that he ever signed any  

such compromise petition or asked his advocate to file the  

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same  before  the  Court.  Even  so  the  High  Court  had  

proceeded on the basis that a compromise had indeed taken  

place between the parties in the light whereof the High Court  

set aside the judgment and decree of the Trial  Court and  

allowed the appeal filed by the respondents. The appellant’s  

case is that order dated 1st August, 1995 passed by the High  

Court in RFA NO. 223 of 1991 was the result of fraud played  

upon the High Court.  

4. Aggrieved by the judgment and order dated 1st August,  

1995 passed by the High Court,  the appellant  appears  to  

have filed OS No.5236 of  2005 before the Additional  City  

Civil  Judge,  Bangalore,  in  which  the  appellant  prayed  for  

setting aside of the compromise recorded in the High Court’s  

order dated 1st August, 1995 and the decree passed on the  

basis  thereof.   The  defendant-respondent  No.1  moved  an  

application in the said suit under Order VII Rule 11(d) read  

with Section 151 Code of Civil Procedure for rejection of the  

plaint on the ground that the suit in question was barred by  

Rule 3A of Order XXIII of the Code of Civil Procedure.   

5. By its  order dated 11th February,  2011,  the City Civil  

Court,  Bangalore,  allowed  the  application  filed  by  the  

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respondent  and  rejected  the  plaint  filed  by  the  plaintiff-

appellant.  The Court took the view that in the light of the  

proviso  to  Order  XXIII  Rule  3  of  the  CPC  inserted  w.e.f.  

1.2.1997, a party aggrieved of a decree on compromise had  

to approach the Court that passed the decree to establish  

that  no compromise had taken place between the parties  

which could provide a basis for the Court to act upon the  

same.   In  doing  so  the  Court  placed  reliance  upon  the  

decision of this Court in Pushpa Devi Bhagat v. Rajinder  

Singh and Ors. (2006) 5 SCC 566.

6. It was after the rejection of the plaint that the appellant  

filed miscellaneous application IA Nos. 1 and 2 of 2011 in  

RFA No.223 of 1991 praying for setting aside of order dated  

1st August, 1995 by which the High Court had allowed the  

appeal  filed by the respondents and set  aside the decree  

passed in OS No.5236 of 2005 on the basis of the alleged  

compromise  between  the  parties.  The  appellant's  case  

before the High Court  was  that  no  such compromise  had  

taken place nor was any compromise petition ever signed by  

him.  It  was also alleged that the appellant had given no  

instructions to his advocate for presenting any compromise  

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petition and that the alleged compromise petition was totally  

fraudulent and based on forged signature of the appellant  

apart from being unauthorised as the counsel engaged by  

him  had  no  authority  to  present  or  report  any  such  

compromise before the Court.  The appellant also prayed for  

condonation of delay in filing the application for setting aside  

the compromise decree passed by the High Court.  

7. The High Court of Karnataka has by its orders impugned  

in  this  appeal,  dismissed  IA  No.1  of  2011  filed  by  the  

appellant without even adverting to the provisions of Order  

XXIII Rule 3 CPC and in particular Rule 3A which bars a suit  

to have a compromise decree set aside on the ground that  

the compromise on which the decree had been passed did  

not  exist  or  take place.   The High Court  appears to  have  

taken the view that even if the compromise was fraudulent  

since the appellant had filed a suit for declaration he ought  

to pursue the same to its logical conclusion.  The High Court  

further held that even if the plaint in the suit filed by the  

appellant 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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to  consider  the  prayer  made  by  the  appellant  for  setting  

aside the compromise decree.  

8. The precise question that falls for determination in the  

above  backdrop  is  whether  the  High  Court  was  right  in  

directing  the  appellant  to  seek redress  in  the  suit  having  

regard 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 stage  

be extracted for ready reference:

“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  satisfies  the  plaintiff  in   respect  of  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 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  no  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   shall not be deemed to be lawful within the meaning  of this rule.”   

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10. It is manifest from a plain reading of the above that in  

terms of the proviso to Order XXIII Rule 3 where one party  

alleges and the other denies adjustment or  satisfaction of  

any suit by a lawful agreement or compromise in writing and  

signed by the parties, the Court before whom such question  

is raised, shall decide the same. What is important is that in  

terms of Explanation to Order XXIII Rule 3, the agreement or  

compromise  shall  not  be  deemed  to  be  lawful  within  

meaning  of  the  said  rule  if  the  same is  void  or  voidable  

under Indian Contract Act, 1872. It follows that in every case  

where the question arises whether or not there has been a  

lawful  agreement or compromise in writing and signed by  

the  parties,  the  question  whether  the  agreement  or  

compromise  is  lawful  has  to  be  determined  by  the  Court  

concerned.  What is lawful will in turn depend upon whether  

the allegations suggest any infirmity in the compromise and  

the decree that would make the same void or voidable under  

the  Contract  Act.   More  importantly,  Order  XXIII  Rule  3A  

clearly bars a suit to set aside a decree on the ground that  

the  compromise  on  which  the  decree  is  based  was  not  

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lawful.  This  implies  that  no  sooner  a  question  relating  to  

lawfulness of the agreement or compromise is raised before  

the Court that passed the decree on the basis of any such  

agreement or compromise,  it  is  that Court and that Court  

alone who can examine and determine that question.  The  

Court cannot direct the parties to file a separate suit on the  

subject for no such suit will lie in view of the provisions of  

Order  XXIII  Rule  3A  of  CPC.  That  is  precisely  what  has  

happened in the case at hand.  When the appellant filed OS  

No.5326  of  2005  to  challenge validity  of  the  compromise  

decree, the Court before whom the suit came up rejected the  

plaint under Order VII Rule 11 CPC on the application made  

by the respondents holding that such a suit was barred by  

the provisions of Order XXIII Rule 3A of the CPC.  Having thus  

got the plaint rejected, the defendants (respondents herein)  

could hardly be heard to argue that the plaintiff  (appellant  

herein) ought to pursue his remedy against the compromise  

decree in pursuance of OS No.5326 of 2005 and if the plaint  

in the suit has been rejected to pursue his remedy against  

such rejection before a higher Court.

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11. The upshot  of  the  above  discussion  is  that  the  High  

Court fell in a palpable error in directing the plaintiff to take  

recourse to the remedy by way of separate suit. The High  

Court in the process remained oblivious of the provisions of  

Order XXIII Rules 3 and 3A of the CPC as also orders passed  

by the City Civil Court rejecting the plaint in which the Trial  

Court had not only placed reliance upon Order XXIII Rule 3A  

but also the decision of the Court in  Pushpa Devi’s  case  

(supra)  holding that  a separate suit  was not  maintainable  

and that the only remedy available to the aggrieved party  

was  to  approach  the  Court  which  had  passed  the  

compromise decree. The following passage from the decision  

of Pushpa Devi (supra) case is, in this regard, apposite:

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

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was  no  valid  compromise  in  accordance  with  law.   Significantly,  none  of  the  other  defendants  challenged  the  consent  decree.  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.”

12. We  may  also  refer  to  the  decision  of  this  Court  in  

Banwari Lal v. Chando Devi (1993) 1 SCC 581  where  

also this Court had observed:

“As such a party challenging a compromise can file a   petition under proviso to Rule 3 of Order XXIII, or an   appeal under S. 96(1) of the Code, in which he can   now question the validity of the compromise in view  of Rule 1-A of Order 13 of the Code.”

13. In the light of the above, we allow these appeals, set  

aside  the  order  passed  by  the  High  Court  and  remit  the  

matter back to the High Court for disposal of IA Nos.1 and 2  

of  2011  in  accordance  with  law  in  the  light  of  the  

observations made hereinabove.  In the peculiar facts and  

circumstances of the case, we leave the parties to bear their  

own  costs.  We make  it  clear  that  we have  expressed no  

opinion as to the merits of the application seeking setting  

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aside of the compromise decree which aspect is left for the  

High Court to examine in accordance with law.    

…………………………..…….…..…J. (T.S. THAKUR)

     …………………………..……………..J.         (R. BANUMATHI)

New Delhi; November 20, 2014

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