Court That Entertains Petition of Compromise Can Determine Its Legality When It Is Questioned By Filing Recall Application: SC
The Supreme Court clarified 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.
The appeal before the Apex Court challenged the judgment of the Rajasthan High Court whereby the appellant’s application for restoration of first appeal was dismissed citing that the High Court had not granted liberty for restoration of the appeal while recording the compromise.
The Division Bench comprising Justice Pamidighantam Sri Narasimha and Justice Manoj Misra said, “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”.
AOR Varinder Kumar Sharma represented the Appellants while AOR Surabhi Guleria represented the Respondents.
The appellant, in this case, is the owner of the suit property. He filed a suit against the respondents for cancellation of the power of attorney, sale deeds and grant of permanent and mandatory injunction on the ground that respondent no. 1 forged the above mentioned power of attorney and subsequently entered into the sale deeds for the suit property in favour of the second respondent. The Trial Court dismissed the suit and the appellant preferred a first appeal before the Rajasthan High Court.
During its pendency, the parties reached a compromise, agreeing to dispose of the appeal based on its terms. The High Court decided the appellant’s application under Order 23, Rule 3 of the Code of Civil Procedure, 1908 and disposed of the first appeal in terms of the compromise.However, when the cheques issued by respondent, said to be in furtherance of the compromise were dishonoured,comply the second respondent in furtherance of the compromise were dishonoured, the appellant filed an application to restore the appeal.This application was dismissed by the order impugned before the Apex Court, citing that the High Court had not granted liberty for restoration of the appeal while recording the compromise.
The Bench, at the outset, explained that the relevant provisions under the CPC that govern compromise decrees are contained in Order 23, Rules 3 and 3A. Reference was also made to the judgment in Pushpa Devi Bhagat v. Rajinder Singh, (2006) 5 SCC 566 wherein it has been held 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.
In the present case, the appellant alleged fraud by the respondents in his recall application, which he bears the burden to prove. 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. As per the Bench, 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.
Noting that by the impugned order, the High Court dismissed the application solely on the ground that the order recording the compromise did not grant liberty to restore the appeal, the Bench observed, “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.”
The Bench clarified, “This Court in Pushpa Devi Bhagat (supra), as well as several other cases, 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.”
As per the Bench, 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 remedies in accordance with law. Therefore, there was no occasion for the court to deny liberty to file for restoration. “Further, as a matter of public policy, courts must not curtail statutorily provisioned remedial mechanisms available to parties”, it added.
The Bench also observed, “...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.”
In such circumstances, the Bench observed that restoration is the sole remedy, which the aggrieved party may exercise as a statutory right.Thus, allowing the appeal and setting aside the impugned order, the Bench remanded the matter to the High Court to decide the application for recall on its own merits.
Cause Title: Navratan Lal Sharma v. Radha Mohan Sharma & Ors. [Neutral Citation: 2024 INSC 970]
Appearance:
Appellants: AOR Varinder Kumar Sharma, Advocates Shantanu Sharma, Deeksha Gaur
Respondents: AOR Surabhi Guleria, AOR Megha Karnwal, Advocates Aaditya Thorat, Adv. Mr. Lalit Rajput, Adv.
