BANWARI LALversusSMT. CHANDO DEVI (THROUGH L.R.) AND ANR.

A                                  .BANWARI LAL
                                            v.
              SMT. CHANDO DEVI (THROUGH L.R.) AND ANR.

                                 DECEMBER 11, 1992

·B                    [N.M. KASLIWAL AND N.P. SINGH, JJ.]

             Code of Civil Procedure, 1908: Order 23, Rule 3, Proviso and Explana-
      tion-Withdrawal and adjustment of suit by parties-Compromise recorded
      and suit dismissed by trial court on the basis of petition of Compromise filed
•C    on behalf of appellant:-Subsequently· on the basis of application filed by
      plaintiff alleging that compromise was obtained by fraud Subordinate Judge
      recalling his earlier order-Validity of-High Court setting aside Subordinate
      Judge's recall order and restoring suit-Justification of-Amendment of Order
      23, Rule 3--Effect of.
ID          Order 23, Rule 3, Rule 3-A, Order 43, Rule 1-A(2), Sections 96(1) and
      (3) and 151.,-Appeal against order recording compromise-Right to-Effect
      of amendment introduced by Amendment Act of 1976-Explained.

            A suit filed by the appellant-plaintiff was dismissed by the trial
      court on the basis of a petition of compromise filed on behalf of the
IE    appellant. Subsequently, an application was filed on behalf of the ap-
      pellant stating that no compromise had been filed by him and the
      Advocate engaged by him had colluded with one of the defendants and
      had played a fraud on him and that, as the alleged compromise itself
      was void, illegal and against the requirement of Rule 3 of Order 23 o.f
IF    the Code of Civil Procedure, the order recording such compromise be
      recalled and. suit restored and heard on merit.

           The Subordinate Judge, refering to different facts and circumstan-
      ces of the case, including that. the compromise petition filed had not
r-<   been signed by both the parties as required by Order 23, Rule 3 of the
J
      Code, recalled the order disposing of the suit in terms of the petition
      of compromise, and directed restoration of the suit to its original
      number.                                                                          -
           Aggrieved, the respondent filed a revision application before the
~     High Court, which set aside the Subordinate Judge's order, saying that the
                                            524
                   BANWARI LAL v. CHANDO DEVI                              525

petition filed as petition of compromise was really an application filed on A
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
                                                                         I
was no occasion to recall the order dismissing the suit, treating it to be an
order under Order 23, Rule 3 of the Code.

     Against the High Court's order, the appellant-plaintiff file«J an           E
appeal, by special leave, before this Court.

      On behalf of the respondent it was contended that the High Court
was justified in holding that the suit had been simply withdrawn by the
appellant under Rule 1 of Order 23 and it had not been compromised in            C
terms of Rule 3 of the said Order 23; as such, the Subordinate Judge could
not have recalled his earlier order and restored the suit to its original
number, for being beard on merit.

      Allowing the appeal, this Court
                                                                                 [
      HELD: 1.1. It is clear from the copy of the petition of compromise
that the terms and conditions of settlement and. agreement had been
mentioned saying that both the parties had entered into a compromise   1



because of which the appellant had thereafter no connection with the
disputed land and the respondent should be deemed to be in possession,
and the owner of the disputed land. The prayer made in the said petition I-
also says that the compromise may be ordered to be accepted. On basis of
that petition, the Court passed an order saying that the compromise had
been accepted. In the order it has been mentioned that the suit of the
appellant be "dismissed as per compromise deed". In view of these (acts
and circumstances, it is difficult to bold that the Court allowed the suit to 11
be withdrawn in terms of Rule 1 of Order 23. The order of the Subordinate
Judge on face of it purported to dismiss the suit of the appellant on the
basis of terms and conditions mentioned in the petition of comprom~se.
As such, the validity of that order has to be judge treating it to be an or;-der
deemed to have been passed in purported exercise of the power conferred
on the Court by Rule 3 of Order 23 of the Code. The Subordinate Judge (
should not have accepted the petition of compromise even if he bad no
knowledge of the fraud alleged to have been practis~d on the appellant by
his counsel, because, admittedly, the petition of compromise had not been
signed either by the respondent or his counsel. This fact should have been
discovered by the Court. The Court recorded the alleged agreement and }I
    526                SUPREME COURT REPORTS [1992] SUPP. 3 S.C.R.

A compromise in a casual manner. [532-B-G]
          1.2. The Subordinate Judge was perfectly justified in entertaining
    the application filed on behalf of the appellant and considering the ques-
    tion as to whether there had been a lawful agreement or compromise on
    the basis of which the Court could have recorded such agreement or
B   compromise. Having come to the conclusion on the material produced
    that the compromise was not lawful within· the meaning of Rule 3, there
    was no option left except to recall that order. [534-H, 535-A]

          2.1. Rule 3 of Order 23 of the Code of Civil Procedure, 1908 does not
C require ,just a seal of approval from the Court to an alleged agreement or
    compromise said to have been entered into between the parties. The
    statD;te requires the Court to be first satisfied that the agreement or
    compromise which has been entered into between the parties is lawful
    before accepting the same. Court is expected to apply its judicial mind
    while examining the terms of the settlement before the suit is disposed of
D   in terms of· the agreement arrived at between the parties. Once such a
    petition of compromise is accepted, it becomes the order of the Court and
    acquires the sanctity of a judicial order. [533-D-F]

         Byram Pestonji Gariwala v. Union Bank of India, A.I.R. 1991 S.C.
    2234 and Gurpreet Singh v. Chatur Bhuj Goel, A.I.R. 1988 S.C. 400, relied
E
    on.

          2.2. In view of the proviso read with the explanation to Rule 3 of
    Order 23 of the Code, inserted by "the Amending Act of 1976, a Court which
    had entertained the petition of compromise has to examine whether the
F   compromise was void or voidable under the Indian Contract Act. Even
    Rule 1 (m) of Order 43 under which an appeal was maintainable against
    an order recording a compromise has been deleted by the Amending Act.
    As such, a party challenging a compromise can file a petition under
    proviso to Rote 3 of Order 23, or an appeal under Section 96(1) of the
G   Code, in which he can now question the validity of the compromise in .view
    of Rule IA of Order 43 of the Code. [534-B-C]

          2.3. The application for exercise of power under proviso to Rule 3
    of Order 23 can be labelled under Section 151 of the Code, but when by
    the amending Act specifically such power has been vested in"'the Court
H   before which the petition of compromise had been tiled, the power in
            BANWARI LAL v. CHANDO DEVI [N.P. SINGH, J.)                 527

appropriate cases had to be exercise under the said proviso to Rule 3. A
(534-D]

      2.4. The Court before which it is alleged by one of the parties to the
alleged compromise that no such compromise had been entered between
the parties has to decide whether the agreement or compromise in ques-
tion was lawful and not void or voidable under the Indian Contract Act.        B
If the agreement or the compromise itself is fraudulent then it shall be
deemed to be void within the meaning of the explanation to the proviso to
Rule 3 and as such not lawful. [534-G]

      Smt. Tara Bai v. V.S. Kr:ishnaswamy Rao, A.I.R. 1985 Karnataka 270; C
S.G. Thimmappa v. T. Anantha, A.I.R. 1986 Karnataka 1; Bindeshwari Pd.
Chaudhary v. Debendra Pd. Singh, A.I.R. 1958 Patna 618; Mangal Mahton
v. Behari Mahton, A.I.R. 1964 Patna 483 and Sri Sri Iswar Gopal Jew v.
Bhagwandas Shaw, A.l.R. 1982 Cal. 12, approved.

        CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5299 of                 D
1992.

     From the Judgment and Order dated 1.6.92 of the Punjab & Haryana
High Court in C.R. No. 3376of1991.          ·

     E.C. Agarwalla, Anant Vijay Palli and Mrs. Rekha Palli for the            E
Appellant.

        S.M. Ashri Advocate for the Respondents.

        The Judgment of the Court was delivered by
                                                                               F
        N.P. SINGH, J. Special leave granted.

      This appeal has been filed for setting aside an order passed by the
High Court on the revision application filed on behalf of the respondent.
By the impugned order the learned Judge has held that the Trial Court          G
could not have entertained the application filed on behalf of the appellant,
for recall of the order recording a compromise alleged to have been
entered between the appellant and the respondent.

      The suit in question had been filed on behalf of the appellant on
14.9.1990. It appears that on 27.2.1991 a petition of compromise was ftled,    H
     528               •SUPREME COURT REPORTS f1'992) SUPP. 3 S.C.R.

A    on behalf of the appellant, saying that both parties have entered into a
     compromise on the basis whereof the appellant had delivered the posses-
     sion of the disputed land to the respondent. A prayer was made that in
     view of the compromise arrived at between the parties the suit be dis-
     missed. It may be mentioned that the said petition had not been signed by
     the contesting respondent or by his counsel. It appears that one Shri Soran
B    Ram, Advocate, had made a note - 'Thumb impression has been marked
     in my presence' - meaning thereby that thumb impression had been given
     by the appellant in his presence. On the same day the learned Subordinate
     Judge passed the following order:-

c            "Compromise deed Ex. C, tendered by plaintiff Banwari
             LaL Statement of the Counsel for the plaintiff is also
             recorded to that effect. The Counsel for the plaintiff has
             stated that the suit of the plaintiff to be dismissed as
             withdrawn as per compromise deed Ex. C. The possession
             of the property has already been delivered to the defendant
D            and Defendant No. 2 Smt. Chando Devi is in possession of
             the disputed land as owner as per compromise deed. Hence
             the suit of the plaintiff is dismissed as per compromise deed
             Ex. C. Decree sheet be prepared accordingly."

E        On 3rd April, an application was filed on behalf of the plaintiff-ap- ·
   pellant in the said suit that he had engaged Shri Soran Ram, Advocate,
   Karnal, to appear on his behalf, who had told the appellant that the date
   fixed for the hearing of the suit was 5.3.1991. When the appellant went to
   him on 5.3.1991 the counsel informed him that the case had been adjourned
F to 2.4.1991. On 2.4.1991 the appellant leai:nt from the cause list that the
   case was not on the cause list. Then he approached his counsel aforesaid
  Shri Soran Ram along with Shri l.D. Swamy, a retired IAS Officer. His
  counsel informed him that the suit had been dismissed as withdrawn. The
  appellant got the records of the case inspected which revealed that Shri
  Soran Ram, Advocate of the appellant, in collusion with defendant No. 2
G of the said suit had played a fraud on the appellant by filing a fabricated
  petition of compromise although no compromise had been effected be-
  tween the appellant and the respondent. Further details of fraud were
  mentioned in the said petition and it was stated that as the alleged
  compromise itself was void, illegal and against the requirement of Rule 3
H of Order 23 of the Code of Civil Procedure (hereinafter referred to as "the
           BANWARI LAL v. CHANDO DEVI [N.P. SINGH, J.]                   529

Code"), the order recording such compromise be recalled and suit be A
restored and be heard on merit. About his counsel aforesaid Shri Soran
Ram, it was said that the appellant had learnt that he had cheated several
pers,ms and because of that a case had been registered again.st him.

       The learned Subordinate Judge, after hearing both the parties and
refering to different facts and circumstances of the case including that the B
compromise petition filed on 27.2.1991 had not been signed by both the
parties as required by Order 23, Rule 3 of the Code, recalled the order
disposing of the suit in terms of the petition of compromise. He directed
restoration of the suit to its original number. Against that order a revision
application was filed before the High Court on behalf of the respondent. C
A learned Judge, as already stated above, set aside the aforesaid order
passed by the learned Subordinate Judge saying that the petition which was
filed on 27.2.1991 as petition of compromise was really 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 D
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.

        The experience of the courts has been that on many occasions parties
having filed petitions of compromise on basis of which decrees are
prepared, later for one reason or other challenge the validity of s~ch E
compromise. For setting aside such decrees suits used to be filed which
dragged on for years including appeals to different courts. Keeping in view
the predicament of the courts and the public, several amendments have
been introduced in Order 23 of the Code which contain provisions relating
 to withdrawal and adjustment of suit by Civil Procedure Code (Amend- F
 ment) Act, 1976. Rule 1 of Order 23 of the Code prescribes that at any
 time after the institution of the suit, the plaintiff may abandon his suit or
 abandon a part of his claim. Rule 1 (3) provides that where the Court is
satisfied (a) that a suit must fail by reason of some formal defect, or (b)
 that there are sufficient grounds for allowing the plaintiff to institute a fresh
 suit for the subject-matter of a suit or part of a claim, it may, on such terms G
 as it thinks fit, grant the plaintiff permission to withdraw such suit with
 liberty to institute a fresh suit. In view of Rule 1 (4) if plaintiff abandons
Jtis suit or withdraws such suit without permission referred to above, he
 shall be precluded from instituting any such suit in respect of such subject-
 matter. Rule 3 of Order 23 which contained the procedure regarding H
     536                SUPREME COURT REPORTS [1992] SUPP. 3 S.C.R.

A compromise of the suit was also amended to curtail vexatious and tiring
     litigation while challenging a compromise decree. Not only in Rule 3 some
     special requirements were introduced before a compromise is recorded by
     the Court including that the lawful agreement or a compromise must be in
     writing and signed by the parties, a proviso with an explanation was also
     added which is as follows:-
B
             "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
c            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 (9 of
             1872), shall not be deemed to be lawful within the meaning
D            of this rule."

            By adding the proviso along with an explanation the purpose and the
                                                                                    \-
     object of the amending Act appears to be to compel the party challenging
     the compromise to question the same before the Court which bad recorded
E    the compromise in question. That Court was enjoined to decide the con-
     troversy· whether the · parties have arrived at an adjustment in a lawful
     manner. The explanation made it clear that an agreement or-a compromise
     which is void or voidable under the Indian Contract Act shall not be
     deemed to be lawful within the meaning of the said Rule. Having intro-
     duced the proviso along with the explanation in Rule 3 in order to avoid
F    multiplicity of suit and prolonged litigation, a specific bar was prescribed
     by Rule 3A in respect of institution of a separate suit for setting aside a
     decree on basis of a compromise saying :-

             "3A. Bar to suit - No suit shall lie to set aside a decree on
             the ground that the compromise on which the decree is
G            based was not lawful."

            Earlier under Order 43, Rule l(m), an appeal was maintainable
     against an,order under Rule 3 of Order 23 recording or refusing to record
     an agreement, compromise or satisfaction. But by the. amending Act
Ii   af01 esaid that clause has been deleted; the result whereof is that now no
           .BANWARI LAL v. CHANDO DEVI [N.P. SINGH, J.)                . 531

  appeal is maintainable against an order recording or refusing to record an A
  agreement or compromise under Rule 3 of Order 23. Being conscious that
  the right of appeal against the order recording a compromise or refusing
  to record a compromise was being taken away, a new Rule lA has been
· added to Order 43 which is as follows:-

         "lA. Right to challenge non-appealable orders in appeal               B
         against decrees.-

         (1) Where any order is made under this Code against a
         party and thereupon any judgment is pronounced against
         such party and a d_ecree is drawn up, such party may, in an
         appeal against the decree, contendthat such order should              c
         not have been made and the judgment should not ha~e been
         pronounced.

         (2) In an appeal against a decree passed in ~ suit after
         recording a compromise or refusing to record a com-                   D
         promise, it shall be open to the appellant to contest the
         decree on the ground that the compromise should, or
         should not, have been recorded."

        Section 96(3) of the Code says that no appeal shall lie from a decree
 passed by the Court with the consent of the parties. Rule 1A(2) has been E
 introduced saying that against a decree passed in a suit after recording a
 compromise, it shall be open to the appellant to contest the decree on the
 ground that the compromise should not have been recorded. When Section
 96(3) bars ari appeal against decree passed with the consent of parties, it
 implies that such decree is valid and binding on the parties unless set aside F
 by the procedure prescribed or available to the parties. One such remedy
 available was by filing the appeal under Order 43, Rule 1 (m). If the order
 recording the compromise was set aside, there was no necessity or o~casion
 to file an appeal against the decree. Similarly a suit used to be filed for
 setting aside such decree on the groWid that the decree is based on an
 invalid and illegal compromise not binding on the plaintiff of the second G
 suit. But after the amendments which have been introduced, neither ~
 appeal against the order recording the compromise nor remedy by way of
 filing a suit is available in cases covered by Rule 3A of Order 23. As such
 a right has been given under Rule 1A(2) of Order 43 to a party, who
 challenges the recording of the compromise, to question the validity thereof H
    532                 SUPREME COURT REPORTS [1992) SUPP. 3 S.C.R.

A while prefering an appeal against the decree. Section 96(3) of the Code·
    shall not be a bar to such an appeal because Section 96(3) is applicable to
    cases where the factum of compromise or agreement is not in dispute.

            The learned counsel appearing for the respondent took a stand that
  the High Court was justified in taking the view that the suit had been simply
B withdrawn by the plaintiff-appellant under Rule 1 of Order 23 and it had
  not been compromised in terms of Rule 3 of the said Order 23; as such
  there was no occasion for the appellant to file an application for recall of
  the said order and for restoration of the suit in question for being heard
   on merit. From the copy of the petition which was filed on 27.2.1991 it
C appears that the terms and conditions of settlement and agreement had
  been mentioned saying that both parties had entered into a compromise
  because of which the plaintiff-appellant had thereafter no connection with
  the disputed land and defendant- respondent shall be deemed to be in ·
  possession and the owner of the said disputed land. The prayer made in
  the said petition also says that the compromise may be ordered to be
  accepted. On basis of that petition, as already mentioned above, the Court
  passed an order saying that the compromise had been accepted; In the
  order it has been mentioned that the suit of the plaintiff be "dismissed as
  per compromise deed Ex. C". In view ofthe aforesaid facts and circumstan-
  !'.=es; it is difficult to hold that by order dated 27.2.1991 the Court allowed
E the suit to be withdrawn in terms of Rule 1 of Order 23. The order on face
  of it purportedto dismiss the suit of the plaintiff on basis of the terms and
  conditions mentioned in the petition of compromise. As such, the validity
  of that order has to be judged treatingit to be an order deemed to have
  been passed in purported exercise of the power conferred on the Court by
F Rule. 3 of Order 23 of the Code. The learned Subordinate Judge should
  not have accepted the said petition cf compromise even if had no
  knowledge of t~e fraud alleged to have been practised on the appellant by
  his counsel, because .admittedly the petition of compromise had not been
  signed either by the respondent or his counsel. This fact should have been
  discovered by the Court. In the case of Gurpreet Singh v. Chatur Bhuj Goel,
G AIR 1988 SC 400, it has been said:-

             "Under R.3 as it now stands, when a claim in suit has been
             adjusted wholly or in part by any lawful agreement or
             compromise, the compromise must be in writing and signed
H            by the parties and there must be a completed agreement

                                                                                    ('
                                                                                    \

                                                                                        \...)!
                                                                                          .
          BANWARI LAL v. CHANDO DEVI [N.P. SINGH, J.]                    533

        between them. To constitute an adjustment, the agreement                A
        or compromise must itself be capable of being embodied
        in a decree. When the parties enter into a compromise
        during the hearing of a suit or appeal, there is no reason
        why the requirement that the compromise should be
        reduced in writing in the form of an instrument signed by
        the parties should be dispensed with. The court must                    B
        therefore insist upon the parties to reduce the terms into
        writing."

      The requirement of the petition of compromise being signed by the
parties concerned has been considered also in the case of Byram Pestonji        C
Gariwala v. Union Bank of India, AIR 1991 SC 2234. It appears the
attention of learned Judges was not drawn to the aforesaid case of this
Court in Gurpreet Singh v. Chatur Bhuj Goel (supra).·

       The present case depicts as to how on 27.2.1991 the Court recorded
the alleged agreement and compromise in. a casual manner. It need not be D
impressed that Rule 3 of Order 23 does not require just a seal of approval
from the Court to an alleged agreement or compromise said to have been
entered into between the parties. The statute requires the Courts to be first
satisfied that the agreement or compromise which has been entered into
between the parties is lawful, before accepting the same. Court is expected E
to apply its judicial mind while examining the terms of the settlement
before the suit is disposed of in terms of the agreement arrived at between
the parties. It need not be pointed out .that once such a petition of
compromise is accepted, it becomes the order of the Court and acquires
the sanctity of a judicial order.
                                                                                F
       On behalf of the respondent a stand was taken that the learned
Subordinate Judge by his order dated 20.9.1991 could not have recalled the
order dated 27.2.1991 and restored the suit to its original number. It cannot
be disputed that the respondent can support the order of the High Court
setting aside order dated 20.9.1991 on any other reason than the reason         G
given by the High Court.

       When the amending Act introduced a proviso along with an explana-
tion to Rule 3 of Order 23 saying that where it is alleged by one party and
denied by other that an adjustment or satisfaction has been arrived at, "the
Court shall decide the question", the Court before which a petition of H
    534                 SUPREME COURT REPORTS [1992] SUPP. 3 S.C.R.

A   compromise is filed and which has recorded such compromise, has to
    decide the question whether an adjustment or satisfaction had been arrived
    at on basis of any lawful agreement. To make the enquiry in respect of
    validity of the agreement or the compromise more comprehensive, the
    explanation to the proviso says that an agreement or compromise "which
    is void or voidable under the Indian Contract Act ..." shall not be deemed
B   to be l~wful within the meaning of the said Rule. In view of the proviso
    read with the explanation, a Court which had entertained the petition of
    compromise has to examine whether the compromise was void or voidable
    under the Indian Contract Act. Even Rule l(m) of Order 43 has been
    deleted under which an appeal was maintainable against an order record-
C   ing a compromise. As such a party challenging a compromise can file a
    petition under proviso to Rule 3 of Order 23, or an appeal under Section
    96 (1) of the Code, in which he can now question the validity of the
    compromise in view of Rule lAof Order 43 of the Code.

D          The application for exercise of power under proviso to Rule 3 of
    Order 23 can be labeled under Section 151 of the Code but when by the
    amending Act specifically such power has been vested in the Court before
    which the petition of compromise had been filed, the power in appropriate
    cases has to be exerci~ed under the said proviso to Rule 3. It has been held
    by different High Courts that even after a compromise has been recorded,
E   the Court concerned can entertain an application under Section 151 of the
    Code, questioning the legality or validity of the compromise. Reference in
    this connection may be made to the cases Smt. Tara Bai v. V.S. Krishna-
    swamy Rao, AIR 1985 Karnataka 270, S.G. Thimmappa v. T. Anantha, AIR
     1986 Karnataka 1, Bindeshwari Pd. Chaudltary v. Debendra Pd. Singh, AIR
F    1958 Patna 618, Mangat Mahton v. Behari Mahton, AIR 1964 Patna 483 and
    Sri Sri Iswar Gopal Jew v. Bhagwandas Shaw, AIR 1982 Cal. 12, where it
    has been held that application under Section 151 of the Code is main-
    tainable. The Court before which it is alleged by one of the parties to the
    alleged eompromise that no such compromise had been entered between
    the parties that Court has to decide whether the agreement or compromise
G   in question was lawful and not void or voidable under the Indian Contract
    Act. If the agreement or the compromise itself is fraudulent then it shall
    be deemed to be void within the meaning of the explanation to the proviso
    to Rule 3 and as such not llp.wful. The learned Subordinate Judge was
    perfectly justified in entertaining the application filed on behalf of the
H   appellant and considering the question as to whether there had been a


                                                                                       )
                                                                                   '
          BANWARI LAL v. CHANDO DEVI fN.P. SINGH, J.                 535

lawful agreement or compromise on the basis of which the Court could A
have recorded such agree~ent or compromise on 27.2.1991. Having come
to the conclusion on the material produced that the compromise was not
lawful within the meaning of Rule 3; there was no option left except to
recall that order.

      Accordingly the appeal is allowed. The order passed by the High B
Court is set aside. In the circumstances of the case, ther~ shall be no order
as to costs.

N.P.V .                                                  Appeal allcwed.




•