THE BEYOND OBITER LAW BLOG: Legal News
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The Supreme Court has reaffirmed that a compromise decree under Order XXIII Rule 3 of the Code of Civil Procedure, 1908, must be founded on the voluntary and informed consent of the parties. Holding that a lawyer cannot bind a client to a compromise without express authorisation, the Court upheld the setting aside of a compromise decree after finding that the concerned party had neither signed the compromise nor authorised his counsel to do so.
The judgment was delivered by a Bench comprising Justice Sanjay Karol and Justice Nongmeikapam Kotiswar Singh, while dismissing an appeal filed by the legal heirs of the original plaintiffs and other co-sharers challenging the setting aside of a compromise decree passed nearly three decades earlier.
The dispute arose out of a partition suit instituted in 1989, wherein the plaintiffs sought a one-fourth share in the ancestral property of a common predecessor. During the pendency of the suit, a compromise petition was filed jointly by the parties and accepted by the trial court, which passed a final decree in terms of the settlement.
Nearly twenty-five years later, in 2022, the legal representatives of the fifth defendant approached the trial court seeking recall of the compromise decree, contending that it had been obtained without his signatures and by playing fraud. The trial court allowed the application, and the High Court affirmed the order, prompting the present appeal before the Supreme Court.
Examining the statutory framework, the Court referred to Order XXIII Rule 3 of the Code of Civil Procedure, which governs the compromise of suits. The Bench reiterated that following the 1976 amendment to the Code, a lawful compromise must not only be in writing but must also be signed by the parties themselves. The amendment, the Court noted, was intended to prevent false claims of settlement and ensure that compromise decrees are based on genuine consent.
Relying on earlier decisions, including Gurpreet Singh v. Chatur Bhuj Goel (1988), Som Dev v. Rati Ram (2005), Baldevdas Shivlal v. Filmistan Distributors (India) (P) Ltd. (1969), and Navratan Lal Sharma v. Radha Mohan Sharma (2024), the Court reiterated that a compromise decree derives its validity from the free and voluntary agreement of the parties and that a recall application is the appropriate remedy where such consent is absent.
On the facts of the case, the Court found that although the compromise recorded that the fifth defendant had no objection, the statement had been made solely through his counsel. There was no material on record showing that the defendant had expressly authorised his advocate to enter into the compromise or that any exceptional circumstances existed which justified the advocate acting without obtaining clear instructions.
The Bench observed:
“In the present case, there is no express authorisation by defendant no. 5 allowing Mr. Mehta to sign the compromise on his behalf, nor is there anything on record to demonstrate the exigent circumstances which prompted the counsel to act without seeking a clear approval from defendant no. 5. In absence of the aforesaid, the ‘voluntary’ aspect mandated by Order XXIII Rule 3 of the Code of Civil Procedure, 1908, which is essential for a compromise decree cannot be established on the record. As such, the requirements of Rule 3 have not been complied with. The resulting compromise is contrary to law.”
The Court also addressed the considerable delay in challenging the decree. While recognising that approximately twenty-five years had elapsed, it held that the passage of time could not legitimise a decree that directly affected a party's proprietary rights without his consent. The Bench clarified that such relaxation of delay would depend upon the peculiar facts of each case and should not be treated as a general principle.
Observing that the validity of the compromise itself stood vitiated, the Court held that the partition suit must now proceed to a full-fledged trial so that the rights of the parties can be determined on the basis of evidence, notwithstanding the practical difficulties arising from the age of the litigation.
Accordingly, the Supreme Court dismissed the appeal and upheld the orders setting aside the compromise decree.