Legal Effect Of Compromise Where A Party Did Not Sign: Kerala HC Explains
The Kerala High Court in a recent judgment explained the legal effect of a compromise where a party did not sign.
In this case, despite not signing the compromise, the Court held that the Appellant’s consent was inferred from subsequent conduct and was deemed binding.
The Bench of Justice A Badharudeen observed, “in law, nobody is allowed to approbate and reprobate. To put it differently, a person, who enjoys the benefit of a compromise, he did not sign, after filing an affidavit acting upon the same and obtained the money in terms of the compromise, cannot deviate from the said compromise on the ground that he or she did not sign the same after acting upon the same”.
Advocate KS Hariharaputhran appeared for the Appellant (First Defendant in the original suit) and Advocate Atul Sohan appeared for the Respondents (Plaintiff and Defendant no 5 to 8 and 10 to 11 in the original suit).
The Respondent had filed a lawsuit seeking the fixation of boundaries, recovery of possession, and consequential injunction. During the proceedings, a compromise was reached, leading to a decree on January 16, 2019. The Appellant challenged the compromise, arguing that the Appellant did not sign it, making it invalid and not binding on them. The Respondent argued that the compromise was signed by the Respondent, the Appellant (who is the husband of the Respondent), and legal representatives. Despite the Appellant not directly signing, they allegedly benefited from and acted upon the compromise. Therefore, the Respondents contended that the Appellant accepted the compromise and cannot now oppose its finality.
The Court framed the following issues: “(i) whether challenge against a compromise decree is permissible by way of an appeal? If so, on what grounds?
(ii) What is the legal effect of a compromise where a party did not sign?
(iii) If a party, who did not sign a compromise, if acts upon the same subsequently, can he avoid the compromise decree thereafter merely on the ground that he did not put his signature in the compromise?”
The Court noted that a compromise lacking a party's signature, exclusively signed by their lawyer without express authority or a specific vakalatnama (authorization), is unlawful. However, the Court noted, “the legality of such a compromise to be addressed by scanning the consent of the party from the attending circumstances, including the subsequent conduct of the party”.
Examining procedural rules, the Court emphasized that Order XLIII Rule 1A(2), permitted an Appellant to challenge a compromise-based decree in an appeal, juxtaposed with Section 96(3) of the CPC, which restricted appeals from consent decrees.
Delving into CPC amendments, particularly Order XXIII Rule 3, designed to curb litigation proliferation, the Court observed the importance of written and signed agreements. The Court noted that the insertion of Rule 3A, prevented separate suits contesting compromise-based decrees.
Addressing a potential conflict between Section 96(3) and Order XLIII Rule 1A(2), the Court adopted harmonious construction. “Thus the legal position can be summarised holding that after the amendments which have been introduced, neither an appeal against the order recording the compromise nor remedy by way of filing a suit is available in cases covered by R.3A of O.23. As such a right has been given under R.1A(2) of O.43 to a party, who challenges the recording of the compromise, to question the validity thereof while preferring an appeal against the decree. S.96(3) of the Code shall not be a bar to such an appeal because S.96(3) is applicable to cases where the factum of compromise or agreement is not in dispute”, the Court added.
Examining the scenario where a party, not signing a compromise leading to a decree, later acted upon it, the Court analyzed the party's conduct and the compromise terms. The agreement covered mutual property exchange, boundary construction, possession transfer, document execution, and financial settlements. It explicitly outlined responsibilities, rights, and restrictions related to the exchanged properties. Emphasizing the compromise petition's integral role in the decree, the Court highlighted the option for either party to seek remedies through execution proceedings in case of non-compliance.
The Court held that per the principle of approbate and reprobate, a person cannot both accept and reject the same matter. In simpler terms, someone who benefits from a compromise, even if they did not sign it, and later files an affidavit, acts upon it, and receives the benefits, cannot later disavow or go against the compromise on the basis that they did not sign it initially.
Accordingly, the Court dismissed the Appeal and upheld the validity of the compromise.
Cause Title: Ashiya Ummal v SN Sathy (2024:KER:19)
