Holding

A party may file a recall application to restore a first appeal when a compromise decree is alleged to be void or voidable, and the court cannot deny this statutory remedy merely because the compromise order did not expressly grant liberty for restoration.

Summary

The appellant, Navratan Lal Sharma, filed a suit for declaration and injunction which was dismissed, leading him to file a first appeal. During the pendency of the appeal, the parties executed a compromise deed that provided for the restoration of the appeal if the respondents failed to honor payment obligations. The High Court disposed of the appeal based on the compromise but held that the parties were not entitled to seek restoration of the appeal. When the respondents' cheques were dishonoured, the appellant filed a recall application alleging fraud, which the High Court dismissed solely on the ground that no liberty to restore the appeal was recorded. The Supreme Court held that under Order 23 Rule 3 of the CPC, a court must examine the legality of a compromise and may entertain a recall application even after a compromise decree is passed, and that the statutory right to restoration cannot be curtailed by the lower court. Consequently, the Supreme Court set aside the High Court’s order and remanded the matter for the recall application to be decided on its merits, allowing the appeal.

Issues considered

The right of a party to seek restoration of a first appeal when a compromise decree does not expressly grant such liberty.
Whether a recall application can be entertained to challenge the legality of a compromise decree on grounds of fraud or voidability under the Contract Act.
Whether the High Court erred in denying liberty to restore the appeal solely on the basis of its earlier order.

Legislation cited

Code of Civil Procedure, 1908s. 96(3)
Contract Act, 1872s. 19, s. 28

Subjects

Right of party to get the first appeal restoredCompromise decreeCompromise of suitVoid and voidable agreementsFraud in recall applicationStatutory right and remedyRestorationRemedial mechanismsCompromise deed

Judgment

[2024] 12 S.C.R. 453 : 2024 INSC 970

Navratan Lal Sharma
v.
Radha Mohan Sharma & Ors.
(Civil Appeal No. 14328 of 2024)
12 December 2024
[Pamidighantam Sri Narasimha* and Manoj Misra, JJ.]

Issue for Consideration
Issue arose as regards the right of a party to get the first appeal
restored if compromise decree specifically does not give such liberty.

Headnotes†
Code of Civil Procedure, 1908 – Ord.23 r.3 – Compromise of
suit – Suit for declaration and injunction by the appellant –
Dismissed by trial court – Appellant filed first appeal – During
pendency, compromise reached between parties and in terms
thereof, the High Court disposed the first appeal – However,
failure of the respondent to comply with compromise terms –
Application to restore the appeal filed by the appellant alleging
fraud – High Court dismissed the same on the ground that
parties not given liberty to restore the appeal while recording
compromise – Correctness:
Held: Explanation to Ord.23 r.3 clearly states that void and voidable
agreements under the Contract Act shall not be deemed to be
lawful – 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 – When the court disposes of a proceeding pursuant to a
compromise u/Ord.23, r.3, it bears the duty to examine this issue
and be satisfied that the agreement or compromise is lawful – Said
issue can be agitated by way of a recall application even after the
compromise decree has been passed – High Court dismissed
the application solely on the ground that the order recording the
compromise does not grant liberty to restore the appeal – This
is not the correct approach, as it defeats the statutory right and
remedy available to the appellant under the CPC – Only the court
that entertains the petition of compromise can determine its legality,

* Author
454 [2024] 12 S.C.R.

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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 appeal
or fresh suit not maintainable – High Court not correct in curtailing
the statutory remedy available to the appellant – When there is
a statutory remedy available to a litigant, no question of a court
granting liberty to avail of such remedy – No occasion for the court
to deny liberty to file for restoration and the consequent dismissal
of the recall application by the impugned order on this ground
alone does not arise – As a matter of public policy courts must
not curtail statutorily provisioned remedial mechanisms available
to parties – Compromise deed itself recognises the parties’ right
to approach the court to question its validity – Order of the High
Court set aside – Matter remanded to High Court for deciding
application for recall. [Paras 13-17]

Case Law Cited
Banwari Lal v. Chando Devi [1992] Supp. 3 SCR 524 : (1993) 1
SCC 581; Pushpa Devi v. Rajinder Singh [2006] Supp. 3 SCR
370 : (2006) 5 SCC 566 – relied on.
Bhanu Kumar Jain v. Archana Kumar [2004] Supp. 6 SCR 1104 :
(2005) 1 SCC 787; Shiv Shakti Coop. Housing Society, Nagpur
v. Swaraj Developers [2003] 3 SCR 762 : (2003) 6 SCC 659;
R. Rajanna v. S.R. Venkataswamy [2014] 14 SCR 535 : (2014)
15 SCC 471; Triloki Nath Singh v. Anirudh Singh [2020] 4 SCR
650 : (2020) 6 SCC 629; R. Janakiammal v. S.K. Kumaraswamy
[2021] 6 SCR 333 : (2021) 9 SCC 114; Sree Surya Developers
& Promoters v. N. Sailesh Prasad [2022] 3 SCR 1081 : (2022) 5
SCC 736; Basavaraj v. Indira [2024] 2 SCR 935 : (2024) 3 SCC
705 – referred to.

List of Acts
Contract Act, 1872; Code of Civil Procedure, 1908.

List of Keywords
Right of party to get the first appeal restored; Compromise decree;
Compromise of suit; Void and voidable agreements; Fraud in recall
application; Statutory right and remedy; Restoration; Remedial
mechanisms; Compromise deed.
[2024] 12 S.C.R. 455

Navratan Lal Sharma v. Radha Mohan Sharma & Ors.

Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 14328
of 2024
From the Judgment and Order dated 19.10.2023 of the High Court
of Judicature for Rajasthan at Jaipur in SBCMA No. 162 of 2022

Appearances for Parties
Varinder Kumar Sharma, Adv. for the Appellant.
Ms. Surabhi Guleria, Ms. Megha Karnwal, Advs. for the Respondents.

Judgment / Order of the Supreme Court

Judgment

Pamidighantam Sri Narasimha, J.

1. Leave granted.
2. The appellant initially filed a suit for declaration and injunction, which
was dismissed by the Trial Court. The appellant then filed a first
appeal. During its pendency, the parties reached a compromise,
agreeing to dispose of the appeal based on its terms. On 14.07.2022,
the High Court decided the appellant’s application under Order 23,
Rule 3 of the Code of Civil Procedure, 19081 and disposed of the first
appeal in terms of the compromise. However, when the respondent
failed to comply with the compromise terms, the appellant filed an
application to restore the appeal. Unfortunately, this application was
dismissed by the order impugned before us, citing that the High Court
had not granted liberty for restoration of the appeal while recording
the compromise.
3. After careful consideration of the statutory framework and Order 23,
Rules 3 and 3A, as informed by relevant judicial precedents, we have
allowed the appeal. We have directed that, in such circumstances,
restoration is the sole remedy, which the aggrieved party may exercise
as a statutory right.
4. The short facts are that the appellant is the owner of the suit
property. He filed a suit against the respondents for cancellation of

1 Hereinafter “CPC”.
456 [2024] 12 S.C.R.

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the power of attorney dated 19.07.2010 and 27.07.2010, sale deeds
dated 31.08.2010 and 15.09.2010, and grant of permanent and
mandatory injunction on the ground that respondent no. 1 forged
the abovementioned power of attorney and subsequently entered
into the abovementioned sale deeds for the suit property in favour of
respondent no. 2. The Trial Court dismissed the suit on 17.02.2014,
and the appellant preferred a first appeal before the Rajasthan High
Court.
5. During the pendency of the first appeal, the appellant and respondent
no. 2 entered into a compromise, recorded in deed dated 18.05.2022
and corrigendum compromise dated 08.07.2022. The compromise
contemplated development of the suit property, as per which certain
amounts were to be paid by respondent no. 2 to the appellant. Paras 4
and 7 of the compromise deed dated 18.05.2022 are relevant and
extracted hereinbelow for ready reference:
“(4) That there is a first appeal no. between the parties in
the Honourable State High Court. 210/2014 is pending.
The said compromise will be presented in other cases
and both the parties will be able to get them resolved
on the basis of the compromise, but if the terms of the
compromise are violated then the second party will have
the right to get the said appeal number 210/2014 reinstated
by submitting an application.
***
(7) That the first party issued a check dated 18/5/22 to the
second party, check no. 160711 amount of Rs 11,00,000/-
has been given today itself, payment can be taken by
presenting the check in the bank on the date written in it.
After giving the lease of the developed land, an amount
equal to the value of the said amount will be transferred
to Khasra No. Out of 11, the second party will give it to
the first party. If any check is dishonoured, the agreement
will be considered void.”
6. The parties filed an application under Order 23, Rule 3 of the CPC
for disposal of the first appeal as per the compromise, wherein it
was stated that respondent no. 1 does not have any objection to
the compromise and that the appellant can file for restoration of the
[2024] 12 S.C.R. 457

Navratan Lal Sharma v. Radha Mohan Sharma & Ors.

appeal if the agreed payment is not completed and the cheques
are dishonoured.
7. By order dated 14.07.2022, the High Court disposed of the first appeal
by taking the compromise dated 18.05.2022 and the corrigendum
compromise dated 08.07.2022 on record and making them a part of
its order. However, it also held that the parties do not have liberty to
get the first appeal restored. The relevant portion of the order reads:
“5. This Court, without entering into the merits of appeal but
without giving any liberty to get restored the first appeal, is
of considered opinion that when both parties have entered
into the terms of compromise and have agreed to abide
by the terms of compromise, this appeal deserves to be
disposed of accordingly.
6. Hence the compromise dated 18.05.2022 along with
corrigendum compromise dated 08.07.2022 is taken on
record and the first appeal is disposed of in terms of
compromise.
7. The compromise dated 18.05.2022 along with
corrigendum compromise dated 08.07.2022 shall be treated
as part of this order.”
(emphasis supplied)
8. When the cheques issued by respondent no. 2, said to be in furtherance
of the compromise were dishonoured, the appellant moved the High
Court for restoration of the appeal alleging fraud and illegal interference
with his possession and attempts to get the land converted without
paying the agreed amounts. By the order impugned before us, the
High Court dismissed the application on the only ground that in its
order dated 14.07.2022, the Court clearly recorded that the parties
were not given liberty to restore the appeal. The High Court observed
that since the order dated 14.07.2022 was a consensual order and
the parties were aware that there was no liberty to get the first appeal
restored, the application for restoration was not entertainable even if
the compromise is not acted upon. The short order of the High Court
dated 19.10.2023 is extracted hereinbelow:
“1. Instant misc. application has been filed by the
appellant-plaintiff seeking to restore S.B. Civil First Appeal
NO.210/2014 by recalling the order dated 14.07.2022
458 [2024] 12 S.C.R.

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whereby and whereunder the first appeal was disposed
of in terms of compromise dated 18.05.2022 arrived at
between parties.
2. It has been stated in the application that cheques
issued by respondents in terms of the compromise have
been dishonoured and respondents have not adhered to
the terms of the compromise, hence the first appeal be
restored to be heard on merits.
3. By perusal of the order dated 14.07.2022, more particularly
para No.5, it stands clear that this Court while disposing
of the first appeal in terms of the compromise has clearly
observed that parties would be not at liberty to get restore this
first appeal. The order dated 14.07.2022 is consensual order
and both parties were well aware that no liberty to restore
the first appeal is available, even though the compromise
may or may not be acted upon. Therefore, the application
for restoration of first appeal is not entertainable.
4. Thus, in view of above, the prayer for restoration of
the first appeal is uncalled for. In case, the terms of the
compromise dated 18.05.2022 have not been complied
with, the applicant-plaintiff is at liberty to take appropriate
steps in accordance with law.
5. With aforesaid observations, without recalling of the order
dated 14.07.2022, the misc. application stands disposed of.
6. Stay application and any other pending application, if
any, stand disposed of.”
9. We have heard the learned counsels for the parties.
10. The relevant provisions under the CPC that govern compromise
decrees are contained in Order 23, Rules 3 and 3A, which are
extracted hereunder:
“3. Compromise of suit. — Where it is proved to the
satisfaction of the Court that a suit has been adjusted
wholly or in part by any lawful agreement or compromise
in writing and signed by the parties or where the defendant
satisfied the plaintiff in respect to the whole or any part of
the subject-matter of the suit, the Court shall order such
[2024] 12 S.C.R. 459

Navratan Lal Sharma v. Radha Mohan Sharma & Ors.

agreement, compromise or satisfaction to be recorded, and
shall pass a decree in accordance therewith so far as it
relates to the parties to the suit, whether or not the subject
matter of the agreement, compromise or satisfaction is the
same as the subject-matter of the suit:
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 not
adjournment shall be granted for the purpose of deciding
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 of this rule.
3A. Bar to suit.—No suit shall lie to set aside a decree
on the ground that the compromise on which the decree
is based was not lawful.”
11. This Court in Banwari Lal v. Chando Devi 2 has laid down the law
on the disposal of a proceeding in accordance with a compromise
between the parties and on recall of a compromise decree. It held
that under Order 23, Rule 3, the Court must be satisfied upon
applying judicial mind that the agreement between the parties is
lawful before accepting the same and disposing the suit. Further,
the proviso and the Explanation to Order 23, Rule 3 mandate that
the court must “decide the question” of whether an adjustment or
satisfaction has been arrived at, and it is clarified that void and
voidable agreements under the Indian Contract Act, 1872 3 shall be
deemed to be not lawful.4 Upon such reading of the provision, it held
that the court recording the compromise can examine the legality
of the agreement, in accordance with the provisions of the Contract
Act, even after the compromise decree is passed and when a party
moves an application for recall.5

2 [1992] Supp. 3 SCR 524 : (1993) 1 SCC 581
3 Hereinafter “the Contract Act”.
4 Banwari Lal (supra), paras 11-13.
5 ibid, para 14.
460 [2024] 12 S.C.R.

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12. The law on the issue is summarised in Pushpa Devi Bhagat v. Rajinder
Singh.6 In this case, the Court also took note of Section 96(3) of
the CPC7 and the deletion of Order 43, Rule 1(m) of the CPC by
way of an amendment in 1976, as well as Order 23, Rule 3A. The
consequence of these is 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. The Court held:
“17. The position that emerges from the amended
provisions of Order 23 can be summed up thus:
(i) No appeal is maintainable against a consent decree
having regard to the specific bar contained in Section 96(3)
CPC.
(ii) No appeal is maintainable against the order of the
court recording the compromise (or refusing to record
a compromise) in view of the deletion of clause (m) of
Rule 1 Order 43.
(iii) No independent suit can be filed for setting aside a
compromise decree on the ground that the compromise
was not lawful in view of the bar contained in Rule 3-A.
(iv) A consent decree operates as an estoppel and is
valid and binding unless it is set aside by the court which
passed the consent decree, by an order on an application
under the proviso to Rule 3 Order 23.
Therefore, the only remedy available to a party to a consent
decree to avoid such consent decree, is to approach the
court which recorded the compromise and made a decree
in terms of it, and establish that there was no compromise.
In that event, the court which recorded the compromise
will itself consider and decide the question as to whether

6 [2006] Supp. 3 SCR 370 : (2006) 5 SCC 566
7 Section 96(3) of the CPC reads:
“96. Appeal from original decree.—
(3) No appeal shall lie from a decree passed by the Court with the consent of parties.”
[2024] 12 S.C.R. 461

Navratan Lal Sharma v. Radha Mohan Sharma & Ors.

there was a valid compromise or not. This is so because
a consent decree is nothing but contract between parties
superimposed with the seal of approval of the court. The
validity of a consent decree depends wholly on the validity
of the agreement or compromise on which it is made…”
(emphasis supplied)
13. In the present case, the appellant has alleged fraud by the
respondents in his recall application, which he bears the burden
to prove.8 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. 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.9 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. The proviso explicitly obligates the court that entertains the
petition of compromise to determine this issue, and as per the law
laid down by this Court in Banwari Lal (supra), this issue can be
agitated by way of a recall application even after the compromise
decree has been passed.
14. By the impugned order, the High Court dismissed the application
solely on the ground that the order dated 14.07.2022 recording the
compromise does not grant liberty to restore the appeal. 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.
This Court in Pushpa Devi Bhagat (supra), as well as several other
cases,10 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

8 Shanti Budhiya Vesta Patel v. Nirmala Jayprakash Tiwari (2010) 5 SCC 104; K. Srinivasappa v. M.
Mallamma (2022) 17 SCC 460.
9 Section 19 of the Contract Act provides that when consent to an agreement is caused by fraud, it is
voidable at the option of the party whose consent was so caused.
10 R. Rajanna v. S.R. Venkataswamy (2014) 15 SCC 471, para 11; Triloki Nath Singh v. Anirudh Singh
(2020) 6 SCC 629, paras 17 and 18; R. Janakiammal v. S.K. Kumaraswamy (2021) 9 SCC 114; Sree
Surya Developers & Promoters v. N. Sailesh Prasad (2022) 5 SCC 736, para 9; Basavaraj v. Indira
(2024) 3 SCC 705, para 9.
462 [2024] 12 S.C.R.

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compromise decree as an appeal and fresh suit are not maintainable
under the CPC.
15. In view of this legal position, the High Court was not correct in curtailing
the statutory remedy available to the appellant in the first place.11 In
fact, 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.12 Therefore, there was no occasion for the court to deny
liberty to file for restoration by its order dated 14.07.2022 and the
consequent dismissal of the recall application by the impugned
order on this ground alone does not arise. Further, as a matter of
public policy, courts must not curtail statutorily provisioned remedial
mechanisms available to parties.
16. It is also relevant that para 4 of the compromise deed dated 18.05.2022
recognises the appellant’s right to file for restoration of appeal in case
of non-compliance. Further, para 7 stipulates that the compromise will
be considered void in case of non-payment. Reading these clauses
together, 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.
17. In this view of the matter, we allow the appeal, set aside the impugned
order dated 19.10.2023, and remand the matter to the High Court to
decide the application for recall on its own merits. Needless to say
that we have not expressed any opinion on the merits of the matter.
18. No order as to costs. Pending applications, if any, stand disposed of.

Result of the case: Appeal allowed.

†
Headnotes prepared by: Nidhi Jain

11 See Bhanu Kumar Jain v. Archana Kumar (2005) 1 SCC 787, paras 28 and 36.
12 See Shiv Shakti Coop. Housing Society, Nagpur v. Swaraj Developers (2003) 6 SCC 659, para 36.