Understanding A Compromise Decree In The Light Of Banwari Lal Vs Chando Devi (1993)

Coverage of this Article

KEY TAKEAWAYS

-A compromise decree is not a court order but it is only the court's approval over something that the parties had agreed on themselves. 

INTRODUCTION

-Section 2(2) of the Civil Procedure Code, 1908 (CPC) defines decree as a formal expression that determines the interests of both parties in a decisive manner but excludes any dismissal order for a default committed or any adjudication from which an appeal arises. 

COMPROMISE DECREE AND CONSENT DECREE 

-The general rule is that a suit is filed before the court and on hearing the case and arguments put forth by the parties, the court gives a judgment based on the merits of the case.

LEGAL PROVISIONS GOVERNING COMPROMISE DECREE

-The Civil Procedure Code of 1908 contains the provisions relating to compromise decrees and for a better understanding, a summary of the sections, orders, and rules is provided below.

LANDMARK JUDGMENTS

-The most important judgment to cite under compromise decree referring to the above provisions as already stated while seeing the provisions was the case of Banwari Lal vs. Chando Devi (1993).  

CONCLUSION

-To conclude, according to the aforementioned cases, particularly the landmark case of Banwari Lal vs. Chando Devi, it is clear that parties to a dispute have the discretion to compromise or settle their dispute without recourse to the court of law.

KEY TAKEAWAYS

A compromise decree is not a court order but it is only the court's approval over something that the parties had agreed on themselves. 

Prior to the amendment of the Civil Procedure Code in 1976, a compromise decree could only be issued concerning the suit.

But with, the amendment stated that whether or not the subject matter of the agreement, compromise, or satisfaction is identical to the subject matter of the suit, the court can issue a decree if it is between the parties and the compromise made is lawful.

INTRODUCTION

Section 2(2) of the Civil Procedure Code, 1908 (CPC) defines decree as a formal expression that determines the interests of both parties in a decisive manner but excludes any dismissal order for a default committed or any adjudication from which an appeal arises. After knowing what a decree is, the question of what a compromise decree is and how it differs from an actual decree arises. It is seen that the court shall record statements, agreements, compromises, or satisfactions and pass a compromise decree if the court is satisfied that the parties are willing to mutually settle up wholly or in part by any lawful agreement in writing and signed by both parties, or if the defendant fulfills the demand of the plaintiff in respect of the subject matter of the suit. This article would go through the concept of a compromise decree in detail, citing the landmark cases and legal provisions.

COMPROMISE DECREE AND CONSENT DECREE 

The general rule is that a suit is filed before the court and on hearing the case and arguments put forth by the parties, the court gives a judgment based on the merits of the case. But in certain cases, a situation might arise where there is a compromise between the parties themselves after the institution of the case but before the judgment has been passed. This is referred to as a compromise decree. There are various provisions that deal with the concept of compromise decree under the Civil Procedure Code, 1908 which would be discussed subsequently. To give a brief, Order 23 Rule 3 of the CPC is related to compromise decree and establishes the procedure for settlements reached by the parties, to enact a decree through the court as per the terms of the settlement. 

Further, there arises a question of whether the consent and compromise decree are the same or not. Here, it is to be noted that the difference between a consent decree and a compromise decree is that a consent decree is issued under the provisions of order 12 rule 6, whereas a compromise decree is issued under the provisions of order 23 rule 3 of the Code of Civil Procedure, 1908.

In the case of Harinath vs Ram Pratap Singh and Anr. (1968),it was observed that the compromise is integrated into the decree and cannot exist or be identified apart from the decree. Thus, if a decision for eviction is issued as a result of a compromise rather than a contest, it is still a decree and not merely a compromise. In terms of efficacy or force, the law does not distinguish between a consent or compromise decree and one enacted after a contest.

The only difference between a consent decree or a compromise decree and a decree after the contest is that in the former case, the suit is decided and a decree is issued based on a compromise or consent, whereas in the latter case, it is issued after the court has recorded its findings based on the evidence. In both circumstances, the court renders a decision keeping in mind the parties' rights and therefore, the decree in the first example is just as valid as the decree in the second.

LEGAL PROVISIONS GOVERNING COMPROMISE DECREE

The Civil Procedure Code of 1908 contains the provisions relating to compromise decrees and for a better understanding, a summary of the sections, orders, and rules is provided below.

SECTION 96(3) – Section 96 deals with appeals from original decrees, and subsection (3) stipulate that no appeal shall lie from a decree issued by the Court where the consent of the parties is present. 

ORDER 23 RULE 1: The procedures governing a plaintiff's withdrawal of a lawsuit are mentioned under Order 23 of the CPC. Firstly, referring to order 23 rule 1(1) it is seen that, a plaintiff may withdraw his suit or a part of his claim at any time after it is filed and the withdrawal of the suit would be considered to be complete as soon as an application is made under this sub-rule, and it is not dependent on the court's order. Therefore, the court's approval is only required if the plaintiff decides to file a new complaint about the same cause of action.

ORDER 23 RULE 3: According to this provision, the parties in a suit may come to a settlement that is written and voluntary for any part of the subject matter of the suit. The point to note here is that irrespective of the fact that the subject matter that the parties compromise and the subject matter of the suit are the same or not, the court can order an agreement, compromise, or satisfaction to be recorded and pass a decree provided it is related to the parties of the suit. But, if one party denies the compromise made, the court could look into the issue but no adjournment could be granted over the same unless there is a sufficient reason for it to be recorded. 

ORDER 23 RULE 3A – This provision addresses the possibility of a bar to suit and states that no suit will be filed solely on the basis that the compromise decree was not lawful.

ORDER 43 RULE 1A (2) – This provision was included as a result of an amendment and states that an appellant could challenge a decree entered in a matter after a compromise was recorded because the compromise should not have been recorded in the first place. To name a few instances here where the compromise should not have been recorded are – if the person was misled, there was an act of fraud, or any other instance where the person suggesting for the compromise has an evil intention. 

The important point to note here is that with reference to the above provisions, firstly it is clear that section 96(3) bars appeal for a decree passed by the court with consent of the parties and a similar remedy was available earlier under Order 43 rule 1(m) as well but after the 1976 amendment Order 43 rule 1(m) was repealed and it was made clear that neither an appeal against the order recording the compromise nor remedy by way of filing a suit is available in cases covered as per Order 23 Rule 3A. Further, Order 43 Rule 1A(2) which has been mentioned above gives the power to challenge the validity thereof while preferring an appeal against the decree. Therefore,the crux of this particular amendment that needs to be understood here is that Section 96(3) does not apply to the compromise decree itself, but it only applies in cases where the factum of compromise itself is in dispute. This was discussed in the case of Banwari Lal vs. Chando Devi (1993) which will be examined subsequently in a detailed manner.

Having referred to the legal provisions, it is clear that for a compromise decree to be valid, there are three essential conditions to be looked into. They are as follows; 

i.    The parties' settlement or compromise should be recorded in writing and signed by both parties. 

ii.    The written agreement recording the compromise must be lawful. 

iii.    The court must record this lawful written agreement when passing the compromise decree.

Apart from this, the other point to note under compromise decree is that it must be filed in the same court where the lawsuit was pending before the settlement. This means that a trial court may record a compromise decree in the context of a lawsuit, and an appellate or revisional court may do so if the lawsuit has been appealed or presented to a higher court for revision. But this was not the rule followed in the recent case of Mohammade Yusuf & Ors V. Rajkumar & Ors (2020), before the Hon’ble Supreme Court. In this particular case, it was held that a compromise decree does not need to be registered if it does not take in property that is not the subject of the dispute.

LANDMARK JUDGMENTS

The most important judgment to cite under compromise decree referring to the above provisions as already stated while seeing the provisions was the case of Banwari Lal vs. Chando Devi (1993).  As per the facts of the case, it was seen that a compromise petition was filed on 27.2.1991 but had not been signed by both the parties as required under Order 23 Rule 3 of the Code. The court disposed of the suit on the grounds of it being a compromise and directed the restoration of the suit. On being aggrieved, the defendant filed a revision application before the High Court citing Section 96(3) and Order 23 Rule 3A of CPC.

The court had observed that as petition of compromise was an application filed on behalf of the appellant for withdrawal of the suit under Order 23, Rule 1 of the Code, and as the appellant had voluntarily withdrawn the suit there was no occasion to recall the order dated 27.2.1991 treating it to be an order under Order 23, Rule 3 of the Code.Later, the matter went before the Hon’ble Supreme Court and the Supreme Court had confirmed the findings of the High Court and observed that although the suit is barred as per order 23 rule 3A for setting aside the decree on the ground of Compromise is not lawful and appeal is also barred under Section 96(3) against the Decree passed with the consent of parties. Therefore, referring to the provisions under CPC, it was held that the compromise was not lawful within the meaning of Rule 3 which led to recall the order and further stated that an appeal under Order 43, Rule 1-A is only maintainable depending on the fact that compromise should or should not have been recorded in the suit.

The other important cases to cite here are Hiralal Moolchand vs, Barot Raman Lal (1993),where the court had held that all matters as decided in a suit can be decided in the matters of agreement or compromise as well. Further, it's worth noting that a compromise decree isn't on a higher level than a contract between two parties, and the same was discussed in the case of Ganganand Singh and Ors. v. Rameshwar Singh Bahadur (1927).  The court stated that the court has the authority to set aside a compromise decision if the essence of the decree is invalidated and in the absence of any such reason, the parties are bound entirely by the compromise decree.

Another case is Daljit Kaur and Ors. Vs. Muktar Steels Pvt. Ltd. and Ors. (2013), where the court clarified the appeals to a compromise decree passed by the court, stating that a party to the decree's sole remedy is to approach the court in which the decree was submitted and establish that the consent decree was made without a compromise. In this case, it was seen that the court will have to examine the compromise and decide whether or not the decree is lawful because as discussed above the compromise decree is a settlement between parties that is been approved by the court and therefore the decree's validity and legality are entirely dependent on the compromise upon which it was initially formed. 

CONCLUSION

To conclude, according to the aforementioned cases, particularly the landmark case of Banwari Lal vs. Chando Devi, it is clear that parties to a dispute have the discretion to compromise or settle their dispute without recourse to the court of law. But in circumstances when a suit has already been filed in court to resolve a dispute, the parties would still have the option of reaching a settlement or compromise, or the defendant could settle with the plaintiff, in whole or in part, outside of court parallel with the court proceedings. The only important aspect to note from the above-mentioned provisions is that after the 1976 amendment, there are a few conditions that must be met for a compromise decree to be completed, and once they are met, the court may pass the same decree in the suit that would bind the parties.