Decree on a compromise cannot be impeached on the ground that it was erroneous in law, because it is open to parties to decide both questions of law and of fact between themselves by consent in the manner they deem best. In this respect-a compromise decree resembles not so much an actual decision of a court after contest as an award by an arbitrator, whose decision cannot be impeached on the mere ground that he committed an error of law.
1. The suit in this case was instituted for the recovery of a sum of Rs. 10,929 10-0 with interest which the plaintiff alleges to hi due to him from the defendants from the 27th April, 1900. The plaintiff's case is that the villages mentioned in Schedules A and B appended to the plaint were mortgaged by the plaintiff to the defendants' father, Subbi Chetty, on the 21st of May 1890 tinier two documents for a sum of Rs. 100,000 and Rs. 51,5,00, respectively; that the first of these mortgage deeds, filed as Exhibit A in the suit, was void and unenforceable, being contrary to Section 257-A of the Code of Civil Procedure, and that the second deed, Exhibit B, was also void for the same reason with respect to Rs. 31,343-9-1 out of the total sum of Rs. 51,500; that the villages mortgaged under the two deeds passed into the possession of the mortgagee and continued to remain in his possession till July 1900, when they were taken possession of by the Court of Wards when the superintendence and management of the plaintiff's zemindari of Karvetnagar were assumed by it, and that the villages remained in the Court of Wards' possession till 1905, when the Court of Wards released its superintendence and handed over possession of the villages to the mortgagee. The plaintiff claims to be entitled to recover the entire profits of the villages in Schedule A and included in the mortgage-deed, Exhibit A. He claims also to be entitled to an account from the defendants of the incomes of the villages included in Exhibit B on the footing that the amount due to the defendants under Exhibit B was only Rs. 20,156-14-3 and estimates the amount that would be due to the plaintiff on such account being taken at Rs. 2,935-9-6.
2. Subbi Chetty had obtained two decrees against the plaintiff in Civil Suits Nos. 197 of 1882 and 117 of 1883 on the Original Side of this Court for large sums of money. These decrees were transferred for execution to the District Court of North Arcot. He took out execution of the decrees in the District Court, and while the execution proceedings were pending, the parties made an adjustment of all their disputes, and the result was the execution of four mortgage bonds by the plaintiff to Subbi Chetti, two of which are the bonds, Exhibits A and B, now sued on. The total amount found to be due to Subbi Chetti was Rs. 1,79,000 in which was included about Rs. 20,000 and odd on other accounts and the remainder w a the amount due on account of the two decrees The execution proceedings had previously been adjourned on several occasions in both cases, and the judgment-debtor had agreed, in consideration of the decree-holder consenting to the adjournments and giving him time for payment, to pay enhanced interest; the sanction of the District Court had been obtained by the parties for the agreements to pay enhanced interest but not the sanction of the High Court as required by Section 257-A of the Civil Procedure Code. The total amount thus added to the amount of the decree in C.S. No. 197 was about Rs. 40,000 and Rs. 4,000 was added to the amount due under C.S. No. 117. The four mortgage bonds were all executed on the same day and evidently represented a single transaction. Each of them refers to the amounts secured under the other bonds and purports to be for the remaining amount out of the total found due by the plaintiff. Exhibits A and B are both usufructuary mortgage-deeds. The period fixed for redemption was 15 years and the mortgagee was entitled to possession during the term, the entire usufruct being appropriated towards the interest due on the bonds. The plaint alleges that this Court which passed the decrees in the two Suits Nos. 197 of 1882 and 117 of 1883 not having sanctioned the arrangements made by the parties "for the payment of a larger sum than was legally due" under them, the mortgage Exhibit A and so much of the mortgage Exhibit B as went in satisfaction of the decree in C.S. No. 197 are void in law, and he institutes this suit on the footing that the defendants obtained and kept possession of the properties included in Exhibit A without any title at all and of those included in Exhibit B as a mortgagee only for the sum of Rs. 20,000 and odd. The defendants denied that the mortgage-deeds secured the payment of any sum in excess of the amounts legally due under the two decrees, and' contended inter alia that the bonds were, at any rate, valid for the amounts really due under the decrees and that they had in any event acquired by 12 years adverse possession a title to hold the properties comprised in the mortgages for the amounts secured by them respectively. They further pleaded that the question relating to the validity of the mortgage-deeds was res judicata by reason of the decree in O.S. No. 19 of 1893 on the file of the District Court of North Arcot, which was instituted against the plaintiff by Subbi Chetti in which he sought to enforce some of the obligations which the plaintiff was bound to perform under Exhibits A and B and the two other mortgage-deeds of the same date. Sixteen issues were framed by the lower court, of which the 4th issue referred to the question of res judicata and the 2nd issue raised the question whether the mortgages were invalid as contravening the provisions of Section 257-A. of the Civil Procedure Code. The Subordinate Judge held on the 2nd issue that the bonds were not invalid, as in his opinion Section 257-A only applies to execution proceedings. He decided the question of res judicata also against the plaintiff. We invited the learned Vakils on both sides to confine their arguments in the first instance to the question of res judicata raised by the 4th issue as, in case we agreed with the lower court on that issue, a consideration of the other issues in the case would be unnecessary. The facts required for the disposal of that issue may be very briefly stated. O.S. No. 19 of 1893 was instituted by Subbi Chetti against the plaintiff for the recovery of Rs. 3,843-1-4, which he claimed as due to him on the footing of the four mortgage deeds executed on the 21st of May 1890, including Exhibits A and B, and also to compel the plaintiff to provide Subbi Chetti with necessary documents of title to enable Subbi Chetti to recover during the currency of the mortgage-deeds, the rents due under various leases of trees, than gedu bark and other kinds of forest produce, which the plaintiff had executed in the years 1886, 1887, 1888 and 1889 to one Subbaraya Mudali, one Sesham Chetti and Mutaiya Mudali, one Rami Chetti, one Munisami Chetti, and one Chenga Reddi. The above amount was made up of Rs. 741-1-1, road cess paid by Subbi Chetti which the Zemindar ought to have paid and the proportionate rents which Subbi Chetti claimed as due to him out of the amounts collected by the plaintiff from the above-mentioned lessees under the leases referred to above which included villages not comprised in the mortgages. The plaint in that suit was dated the 30th June, 1893, It does not appear that the Zemindar put in any written statement. The suit was terminated by a compromise. Exhibit IX (a) dated the 10th April 1895, and a decree Exhibit IX dated the 17th April 1893 was passed in pursuance of the compromise. The terms of the compromise are very important for the decision of this appeal. Paragraph No. 1 provided for the payment to Subbi Chetti of an amount of Rs. 4,549-9-4 "towards the plaint amount, costs and interest." Paragraph No. 2 was to the effect that the plaintiff herein should pay to Subbi Chetti within six months for the period intervening from the date of plaint to the date of the decree at the rate of Rs. 200 per annum on account of the ijara amount of Chintam Sesham Chetti and others in respect of than gedu bark of the mortgage villages and at the rate of Rs. 280 per annum or the ijara amount of Rami Chetti and others. Paragraph No. 3 relating to the period subsequent to the Razinama is from this important and is in these terms : -"Within one month from this date the defendants should make arrangements so that the ijara amount should be paid directly to the plaintiff by the respective ijaradars at the abovementioned rates from the date of the razinama to the termination of the lease in respect of the above mentioned than gedu bark."
3. Mr. Govindaraghava Aiyar, for the appellant, contends that the Razinama decree does not make the question of the validity of the mortgage-deeds res judicata. He urges that a compromise decree is not a judicial decision; that, although the parties to it cannot go behind the particular relief or reliefs granted or refused by it, it has no operation with respect to anything 1 beyond those reliefs. He contends also that such a decree, being passed on an arrangement between the patties to the compromise, is on the same footing as a contract; that an agreement for the payment of a sum exceeding the amount legally due under a decree being void under Section 257-A of the Civil Procedure Code unless sanctioned by the court which passed the decree, a decree passed on such agreement is also void; and that the question whether such an agreement is void being one of law, the compromise decree, taking it to involve a decision as to the validity of the mortgages, is not binding upon the plaintiff in this suit.
4. Mr. Srinivasa Aiyangar for the respondents, on the other hand, contends that & compromise decree is legally as valid and binding on the parties as one passed by the court after contest and that every question necessary for awarding relief to Subbi Chetti in O.S. No. 19 must be taken to have been decided against the plaintiff in this suit. Our attention has not been drawn to any reported decision of this Court where the question how far a decree passed upon a compromise between parties will constitute the questions raised or involved in the suit res judicata in future litigation between them was considered and decided. We have therefore to consider the nature of such a decree and the principles on which the law of estoppel is to be applied with respect to it.
5. The basis of a compromise decree is, of course, a contract between the parties to the litigation, and the principles applicable to contracts would often have to be considered in determining the rules of estoppel applicable to such decrees; at the same time such a decree cannot be regarded as a mere contract, and has got a sanction far higher than an agreement between parties. The arrangement between them is adopted by the court and passes into an adjudication of the court and acquires all the solemnity of a judicial pronouncement. The parties to the decree cannot therefore put an end to it at their pleasure in the manner that they could rescind a mere contract. This was decided in The Bellcairn (1885) L.R. 10 P.D. 161. There, the Assistant Registrar of the court, by the consent of the parties to a compromise decree rescinded it, but the rescission was held to be illegal by the Court of Appeal. Lord Esher, M.R. observed (page 165) : "I agree with Butt J. that when at a trial the court gives a judgment by the consent of the parties it is a binding judgment of the court, and cannot be set aside by a subsequent agreement between the solicitors, or the parties, even though it be placed in the form of an order by consent on a summons and taken to a Registrar or Master, and by him made as a matter of course. It is only the court, with full knowledge of the facts on which it is called on to act, which can set aside the first judgment, and I doubt whether, unless some fraud in regard to such judgment is shown, even the court would have jurisdiction to set aside its first judgment. It is clear then that the second consent order was absolutely void."
6. Again, it seems to be clear that a party to a consent decree cannot impeach it on the same grounds on which a mere contract could be impeached, such as absence of consideration or mistake - see BLACK on Judgments, 2nd Edition, Vol. I, page 16, footnote. Speaking of such judgments the learned author observes : "The judgment is not the agreement; it is the act of the law invoked by the parties in executing the agreement." He observes in an article in the American Cyclopedia of Law and Procedure, Vol. 23, page 729 : "A judgment by consent of the parties is more than a mere contract in pats; having the sanction of the court, and entered as its determination of the controversy, it has all the force and effect of any other judgment, being conclusive as an estoppel upon the parties and their privies, and not invalidated by subsequent failure to perform a condition on which the consent was based, although it maybe inquired into for fraud practised upon one of the parties, or as against other creditors of defendant." But while the agreement acquires in some respects greater force by a decree being passed in pursuance of it, the jurisdiction and powers of the court in passing such a decree are limited. The court does not decide the disputes between the parties. It only embodies the decision of the parties themselves and makes their decision its own, giving it the force and solemnity of its own adjudication.
7. Section 375 of the Civil Procedure Code (Order XXIII, Rule 3, of the present Code) lays down with respect to a compromise proved to the court's satisfaction that the compromise "shall be recorded, and the court shall pass a decree in accordance therewith so far as it relates to the suit." The jurisdiction of the court therefore is to record the agreement between the parties and to adopt it' as its own decree in so far as it relates to the suit. It has, however, the power and is bound to consider the question whether the compromise is a lawful one. It cannot record a compromise which is unlawful. As the jurisdiction of the court is limited to an enquiry into its lawfulness, the law relating to decrees generally does not necessarily apply in all cases to consent decrees and these are governed by the rules relating to contracts. Incidents relating to contracts often hold good with respect to such decrees. Rules relating to construction are the same with respect to them as with respect to contracts. It -has been held that a provision in a compromise decree that a lease shall be forfeited for nonpayment of rent may be relieved against in the same manner as such a provision could be in an instrument of lease - Krishna Bai v. Hargovind (1906) I.L.R. 31 B. 15; Nagappa v. Venkat Rao (1900) I.L.R. 24 M. 265; Lakshmanaswami Naidu v. Rangamma (1902) I.L.R. 26 M. 31. The reason is that the court being bound to adopt the agreement between the parties as its own adjudication, the interpretation to be placed upon such adjudication ought to be the same as that to be placed on the agreement itself. For the same reason a compromise decree may in some respects have a greater validity than one passed after the contest between the parties, as such a decree has all the force of a compromise, a species of contract which is highly favoured by the courts. Thus, if parties agree to settle their disputes in a certain manner, one of them cannot claim to set it aside merely because he misunderstood the law which would be applicable in a court for the determination of the dispute. The same principle would apparently be applicable to a compromise decree and the rule that estoppel by res judicata does not apply to a question of law, will not, we think, apply to decrees passed on compromise. Similarly legal defence to a claim which may be available to a party in a court of law may be waived by him in a compromise, and he would often not be competent to impeach a compromise on the ground that his opponent's claim was one which would not be recognised by the courts. The American author whom we have already cited says : "There are certain defences which the debtor has the option of waiving, if he chooses, and he does waive them by confessing judgment, for example, such a judgment is not invalidated by the fact that a part of the claim for which it is given would be barred by the statute of limitations, provided the debt be an honest one. So where a bankrupt, subsequent to his discharge, confesses judgment upon an old debt, the debt is a good consideration for the judgment, and the latter is not affected by the discharge." (Section 69.) Again he says : "A judgment by consent operates as a waiver of any defects in the process of pleadings, or irregularities in the previous proceedings, or grounds of objection which would have constituted errors in the judgment if rendered upon trial, provided they do not go to the jurisdiction." American Cyclopaedia, page 729.
8. In considering the question of estoppel by res judicata the nature of a compromise decree, as partaking in large measure of the nature of an agreement of compromise and at the same time possessing the characteristics of a decree of court, has to be borne in mind. Section 13 of the Code of Civil Procedure, which deals with the rule of res judicata, is not perhaps strictly applicable to compromise decrees, as it applies in terms only to what has been "heard and finally decided" by a court Explanation I no doubt refers to matter alleged by one party and admitted expressly or impliedly by the other party to a suit. But this refers to some matter admitted by a party in a suit which is itself decided by the court. Scott J. held in Minalal Shadiram v. Kharsetji (1906) I.L.R. 30 B. 395 that Section 13, C.P.C., has no application to compromise decrees - see page 408. What then is the test for determining whether there is an estoppel in any particular case in consequence of a decree passed on a compromise? In our opinion the answer must depend on the answer to the question : "Did the parties decide for themselves the particular matter in dispute by the compromise? And was the matter expressly embodied in the decree of the court passed on the compromise or was it necessarily involved in, or was it the basis of, what was embodied in the decree?" For settling this point it would be legitimate, and sometimes necessary, to look into the pleadings between the parties in the suit terminated by the compromise decree. Even if the compromise was made before the defendant put in his written statement, it would still be proper to look at the allegations in the plaint to understand the terms of the compromise. It is, no doubt, open to the parties to agree to terminate a suit in a particular manner without any questions raised by the plaintiff or put in issue between the parties being determined, but whether a compromise in any particular case proceeds upon such an under' standing or is based upon an admission of some or all of the allegations made by either of the parties is a matter of construction in each case, and no hard and fast rule can be laid down applicable to all cases. It is stated in Halsbury's Laws of England, Vol. 13, paragraph No. 496 (page 357) "a defendant who has consented to judgment before delivery of any pleading is not estopped as against the plaintiff from subsequently setting up matters which might have constituted a defence, because they have never been in issue; but it is otherwise with a defendant who has consented to judgment after pleading in his defence the matters which he seeks to set up in the later proceeding. The question really dealt with in the above passage as shown by the cases cited in the footnote relates to what are known as judgments by default and not judgments based upon an agreement arrived at between the parties, which alone constitutes a, real compromise decree. The distinction between judgments by default and judgments passed on the mutual agreement of the parties is pointed out by Holmes, L.J. in Irish Land Commission v. Ryan (1900) Ir. Rep., Vol. 1, p. 565 at p. 584. In that case the plaintiff had obtained in the year 1891 a judgment by default against the defendants for a certain sum claimed as due as arrears of the rent charge for 6 years. In 1896 another action instituted for further arrears for 5 years was dismissed on the merits. The plaintiff then in 1899 sued the defendants for 2 years' arrears. The plaintiffs contended that the defendant was estopped by the judgment of 1891 from disputing the plaintiffs' claim to the tithe rent charge and the defendants contended that the dismissal of the action of 1896 estopped the plaintiffs from claiming the rent-charge. Both contentions were overruled. With respect to the judgment of 1896, the court held that it did not appear from that judgment on what ground it was based, and this absence of certainty made the rule of res judicata inapplicable. With respect to the judgment of 1891, the court held that the mere failure of the defendant to plead and the entering of judgment consequent thereon could not estop him from contesting the subsequent claim. He admitted nothing and the court therefore decided nothing. If the defendent did not appear and plead to the claim, the plaintiff was entitled to judgment by default according to the law of Scotland. It must be noted that in India the plaintiff is not entitled to such a judgment on the ground of defendant's failure to appear. He is still bound to prove his claim and judgment will be given for him only if he proves it to the satisfaction of the court, though the suit may be tried ex parte. It is pointed out in the judgment, of Holmes, L.J., that even the lands for which tithe was claimed were only imperfectly described by reference to the parish in which they were situated. The observations of Holmes, L,. J., with respect to compromise decrees are well worthy of attention. He says : "It is a principle in every system of jurisprudence that there should be finality in litigation. A judgment not appealed from binds the parties and privies for all time by what appears upon its face; and if it can be shown that, in the course of the action that resulted in the judgment, a certain definite and material issue not set forth in the Judgment itself was raised by the parties and determined judicially or by consent, it would be contrary to public policy to allow the same parties to re-agitate the same matter in subsequent legal proceedings. Estoppel by matter of record rests on this principle, and although it may be said in one sense to exclude the truth, it is essentially just and righteous." It would seem from the passage already cited from Halsbury that in England if judgment even by default is passed after the defendant has raised his contentions, he will be estopped from raising in a future litigation the contentions so raised by him.
9. A compromise decree must also be distinguished from a decree passed upon a confession of judgment or an admission made by the defendant that the plaintiff is entitled to a particular relief. The effect of such an admission must be judged solely from its terms. A defendant may admit the plaintiff's right to the relief claimed - say a right to a certain sum of money - while denying the particulars of the claim or the causes of action alleged in the plaint, and it would be a proper rule to construe an admission made by the defendant strictly, and not to stretch it beyond its terms. The judgment in such a case is the result of the admission of one of the parties to the suit, the defendant, and not of an agreement between the two parties to it. The principles applicable to the latter class of cases, that is, judgments based upon mutual agreement of the parties are not the same as those which would apply to judgments by default or judgments based on admissions of the defendant. What the court has to do in determining with respect to what matter each of the parties to a compromise decree is estopped, is to find out what it was thit the parties agreed to in the previous action; and for this purpose it would not be enough merely to see what was the relief granted in the decree of the court, but it would be necessary also to examine what was the basis on which it was granted. Whatever is necessarily involved in the decree pronounced cannot be re-opened by either party. To this extent there can be no doubt that the principle of Explanation II to Section 13 of the Civil Procedure Code is applicable to compromise decrees. If the relief granted by a compromise decree would be inconsistent with the allowing of a particular defence, the invalidity of that defence must be taken to be necessarily involved in the grant of the relief and it cannot to allowed to be set up in a subsequent suit. This is the principle laid down in In re South American and Maxican Co. (1895) 1 Ch. 37. There, a previous action by the Bank of England against a company to recover the 2nd installment of a debt alleged t J be due under an agreement which was denied by the company had been settled by compromise. It provided that the particular instalment sued for, the amount of which was 100,000 and costs, should be discharged if a um of 60,000 was paid in the manner prescribed by the agreement within the time fixed; but if the amount of 60,000 was not so paid, then the Bank "should be at liberty to issue execution for the full amount of the judgment-debt * * * and to enforce the payment of the further instalments claimed by them under the plaintiff's agreement with the defendants, set out in the statement of claim in this action." The court adjudged that in case of default the plaintiffs do recover from the defendants 100,000 and costs and that the defendants' counter-claim be dismissed. The counter-claim had reference to the amount paid by the company on account of the first instalment, and the further instalments mentioned in the compromise referred to a large sum of money which the Bank claimed would be due to them in future, but which was not due at the time they instituted the action before the court. When the further instalments fell due and the Bank instituted an action for them, the company denied its liability and the existence and validity of the agreement on which the claim was based. Vaughan Williams J., held that the company was estopped from denying the agreement by the consent decree in the previous action. The learned judge held that the previous suit was for an instalment due under the agreement which was the basis of the second action; that the compromise showed that it was for an instalment of the debt based on that agreement; that the company could not, therefore, be permitted to deny the existence of the agreement and that the court could not be asked to construe the decree as one merely to pay a sum of money equal in amount to that claimed under the agreement by the Bank and not for an instalment of what the agreement secured to the Bank. Lord Herschell, when the case went on appeal, observed : "It is said that, notwithstanding the agreement to give judgment for the claim, it was open to the defendants to make default in paying the 60,000, and then to say as regards all but this one instalment, for which you got judgment, the matter is at large; you have got judgment as for an instalment of a debt in respect of which you sued; but we are to be at liberty now to say there never was a debt at all; we cannot undo this 100,000 but we may dispute our liability to anything further. I do not think that is the meaning fairly to be gathered from the settlement arrived at or the order of the judge."
10. Vaughan Williams J., in the Court of First Instance, distinguished the case Jenkins v. Robertson (1886) L.R.I.H.L. SC. 117 which was relied on by the company as showing that a compromise decree can only conclude the question of the right to the actual relief granted to a party in the previous litigation. That case was one in which the provost, bailees and councillors of a burgh and certain other individuals instituted an action for a declaration on behalf of the inhabitants and the public of a right of way for foot passengers and afterwards compromised the action with the owners of the land, through which the way was claimed, after a verdict had been given in their favour and a new trial granted on application by the defendant. The result of the compromise was that the benefit of the verdict was given up and the plaintiffs agreed to pay the defendant's expenses. Afterwards two persons commenced a fresh action to establish the right of way. The House of Lords held, reversing the decision of the Scotch Courts, that the decree in the former action did not constitute the question of the right of way res judicata. But the judgment was based, as explained in In re South, American and Mexican Co. (1895) 1 Ch. 37, on the ground that persons instituting a suit on behalf of the public had no right to bind the public by a compromise decree, though a decision passed against them on contest would bind the public. Lord Colonsay was disposed to think that even a compromise decree might bind other persons represented by the parties to a suit, but held that the compromise decree in the particular case was not binding on the public, because his Lordship came to the conclusion that it was to a certain extent 'purchased.' But no doubt was entertained by the House of Lords that a compromise decree would be as much binding on the actual parties to it and their privies in interest "in just the same way as if it had been a judgment arrived at after the case had been fought out." Lord Herschell no doubt thought that in In re South American and Mexican Co. (1895) 1 Ch. 37 the compromise decree itself provided for the payment of future instalments also in case the defendants failed to carry out the provision made with respect to the second instalment. But the principle enunciated by his Lordship as well as by Lindley, L.J., was that "a judgment by consent is intended to put a stop to litigation between the parties just as much as is a judgment which results from the decision of the court after the matter has been fought out to the end." The same view was held in Thomson v. Moore (1889) 23 L.R. Ir.
599.
11. The consent decree was one granting an injunction restra ning the defendant from infringing the right of a patentee. In a second action for injunction instituted in consequence of a fresh infringement by the defendant, he denied the validity of the patent on the ground that the alleged invention was not a new one. Both Porter, M.R. and the Court of Appeal held that the basis of the injunction granted by the compromise decree was that the plaintiff had a valid patent, although the decree made no declaration of its validity, and that therefore the question of validity was res judicata. Porter M.R., observed : "The effect of the consent and order is absolutely to preclude the defendant from disputing the validity of the plaintiffs' patent, and the only defence he can now raise is that what he has done since is not an infringement." Lord Ashbourne, L.J., said : "Other suitors might question these matters, but the defendant cannot." Jitz-Gibbon, L.J., observed : "The decree, to which the present defendant submitted on the 18th June, 1885, has put it out of his power to rely upon it, and we must start with the assumption that Sir William Thomson's compass is a well patented invention, of which the patentable characteristics must therefore be discoverable in his specification." On behalf of the appellant the decision in Goucher v. Clayton (1865) 34 L.J. 239 was relied on. But that judgment is not in point. That case also related to the infringement of a patent. The defendants in the first action for infringement submitted to a judgment for 40 shillings for damages and costs of the suit. But no pleadings had been entered on either side. The invalidity of the invention was disputed in the second action. In the second action there were other defendants than those who were parties to the first. After the termination of the first action the defendants to it had obtained a license from the plaintiff to work the patent for five years and the license had expired before the second action was brought. It did not appear that the defendants submitted to judgment in the previous action on the footing of the validity of the patent. Wood V. C, said : "The defendants might have submitted either to avoid litigation or because they thought it not worth their while to try the question." He went on to say : 'As a perpetual injunction was sought he could not hold that the defendants were estopped from denying the validity of the patent. In any case, he could not prevent the defendants, who were not parties to the action at law, from setting up this defence." The Vice-Chancellor did not in that case lay down any rule contrary to what was held to be the law in In re South American Mexican Co. (1895) 1 Ch. 37.
12. The judgment of this Court in S.A. 1351 of 1909 was also cited in support of the appellant's position. In that case there was an ex parte decree for rent in a suit by a landlord against his tenant. The second suit was for the recovery of the property and future instalments of rent and it was held that the defendant was not estopped from denying the plaintiff's title to recover the land or the rent claimed The judgment proceeds on the ground that it did not appear from the judgment in the first suit that it proceeded on any decision as to the plaintiff's title. The question was not one relating to estoppel by a compromise decree. In S.A. 1957 of 1908, Hukdar Syed Bacha Saheb v. Karuppanna Pillai (1895) 1 Ch. 37 on the other hand, cited by Mr. Srinivasa Aiyangar, the principle laid down in In re South American and Mexican Co. (1895) 1 Ch. 37 was accepted by Abdur Rahim and Krishnaswami Aiyar, JJ., although on the facts of the case the learned judges held that the consent decree did not involve an admission by the defendant with respect to the point contested in the second suit. The decision of the Bombay High Court in Minalal Shadiram v. Kharsetji (1906) I.L.R. 30 B. 395 followed the principle.
13. Turning now to the facts of the present case, we think there can be no doubt that the compromise and decree in O.S. No. 19 of 1893 proceeded on the acceptance by the Zemindar of the validity of the mortgages executed in favour of Subbi Chetti. It provided for the payment by the Zemindar of a sum of Rs. 4,549 in discharge of the "plaint amount, interest and costs." The 'plaint amount' was clearly the amount which the plaintiff claimed on the basis of the provisions in the mortgage-deeds. The decree further went on to provide that the defendant should make further payments for the period between the date of the plaint and the date of the Razinama and for the future "the amounts that may become due at the above rates from date of this Razinama until the expiration of the terms of the aforesaid leases." The learned Vakil for the plaintiff was unable to suggest on what other footing than the validity of the mortgages the decree could be taken to have proceeded. We cannot accept his contention that the decree should be taken merely to have directed payment of a certain sum of money without any regard to the title of the plaintiff. We are entitled and bound to look to the Razinama itself, Exhibit IX (a), to understand the terms of the decree which was passed in pursuance of it. The parties expressly reserved one point in dispute between them, namely the question relating to the Zemindar's liability to pay road-cess; but they had definitely resolved that the mortgage-deeds themselves should be taken to be valid and binding on the Zemindar. The appellant's contention that, as the validity of the mortgages with reference to Section 257-A of the Civil Procedure Code should be regarded as a question of law and that therefore the plaintiff in this suit is entitled to re-agitate the question, must also be disallowed. In the first place, the question is not purely one of law, but one of mixed fact and law, depending as it does on the point whether as a fact the Zemindar did agree by the mortgage deeds to pay any sum in excess of the amounts due under the decrees in C.S. Nos. 197 and 117. But even were the question purely one of law, we are disposed to think that a decree on a compromise cannot be impeached on the ground that it was erroneous in law, because it is open to parties to decide both questions of law and of fact between themselves by consent in the manner they deem best. In this respect-a compromise decree resembles not so much an actual decision of a court after contest as an award by an arbitrator, whose decision cannot be impeached on the mere ground that he committed an error of law. See Butta v. Municipal Committee of Lahore (1902) I.L.R. 29 C. 854.
14. We are also unable to accept the argument that an agreement in contravention of Section 257-A is one opposed to public policy. We do not decide the question whether such an agreement is invalid at all when the parties agree that the decree should no longer be executed, and that the rights under the agreement should supersede the decree and be enforceable only by a suit upon the agreement. Such an agreement would more probably be an adjustment of the decree coming within Section 258 of the Civil Procedure Code and not one for the satisfaction of a judgment-debt. We also abstain from deciding the question whether Section 257-A, Clause (2), prohibits anything more than the recognition of the kind of agreement referred to therein in execution proceedings. Nor is it necessary to consider the exact scope of the rule that the doctrine of estoppel by decision of the courts does not apply to questions of law. But it is clear to our minds that the prohibition in Section 257-A is not based on any rule of public policy rendering such agreements illegal; it is merely unenforceable in execution proceedings, or by a fresh suit as the case may be. The rule is merely enacted for the benefit of the individual judgment-debtor and one reason for the rule was probably that litigant parties should not have the right to interfere with the decrees of courts, a reason which would probably indicate that the rule is applicable only to execution proceedings. A judgment-debtor is, in our opinion, entitled to waive the benefit of the rule. The compromise was a lawful compromise and was accepted by the court as lawful and embodied in its decree. We, therefore, hold that the plaintiff in the present suit is estopped from contesting the validity of the mortgages. In the view we have taken on issue No. 4, it is unnecessary to consider the other. questions in the case.
15. In the result the appeal is dismissed with costs.
Print Page
Madras High Court
Raja Kumara Venkata Perumal Raja ... vs Thatha Ramaswmi Chetty And Ors. on 13 February, 1911
Equivalent citations: (1911) 21 MLJ 709
1. The suit in this case was instituted for the recovery of a sum of Rs. 10,929 10-0 with interest which the plaintiff alleges to hi due to him from the defendants from the 27th April, 1900. The plaintiff's case is that the villages mentioned in Schedules A and B appended to the plaint were mortgaged by the plaintiff to the defendants' father, Subbi Chetty, on the 21st of May 1890 tinier two documents for a sum of Rs. 100,000 and Rs. 51,5,00, respectively; that the first of these mortgage deeds, filed as Exhibit A in the suit, was void and unenforceable, being contrary to Section 257-A of the Code of Civil Procedure, and that the second deed, Exhibit B, was also void for the same reason with respect to Rs. 31,343-9-1 out of the total sum of Rs. 51,500; that the villages mortgaged under the two deeds passed into the possession of the mortgagee and continued to remain in his possession till July 1900, when they were taken possession of by the Court of Wards when the superintendence and management of the plaintiff's zemindari of Karvetnagar were assumed by it, and that the villages remained in the Court of Wards' possession till 1905, when the Court of Wards released its superintendence and handed over possession of the villages to the mortgagee. The plaintiff claims to be entitled to recover the entire profits of the villages in Schedule A and included in the mortgage-deed, Exhibit A. He claims also to be entitled to an account from the defendants of the incomes of the villages included in Exhibit B on the footing that the amount due to the defendants under Exhibit B was only Rs. 20,156-14-3 and estimates the amount that would be due to the plaintiff on such account being taken at Rs. 2,935-9-6.
2. Subbi Chetty had obtained two decrees against the plaintiff in Civil Suits Nos. 197 of 1882 and 117 of 1883 on the Original Side of this Court for large sums of money. These decrees were transferred for execution to the District Court of North Arcot. He took out execution of the decrees in the District Court, and while the execution proceedings were pending, the parties made an adjustment of all their disputes, and the result was the execution of four mortgage bonds by the plaintiff to Subbi Chetti, two of which are the bonds, Exhibits A and B, now sued on. The total amount found to be due to Subbi Chetti was Rs. 1,79,000 in which was included about Rs. 20,000 and odd on other accounts and the remainder w a the amount due on account of the two decrees The execution proceedings had previously been adjourned on several occasions in both cases, and the judgment-debtor had agreed, in consideration of the decree-holder consenting to the adjournments and giving him time for payment, to pay enhanced interest; the sanction of the District Court had been obtained by the parties for the agreements to pay enhanced interest but not the sanction of the High Court as required by Section 257-A of the Civil Procedure Code. The total amount thus added to the amount of the decree in C.S. No. 197 was about Rs. 40,000 and Rs. 4,000 was added to the amount due under C.S. No. 117. The four mortgage bonds were all executed on the same day and evidently represented a single transaction. Each of them refers to the amounts secured under the other bonds and purports to be for the remaining amount out of the total found due by the plaintiff. Exhibits A and B are both usufructuary mortgage-deeds. The period fixed for redemption was 15 years and the mortgagee was entitled to possession during the term, the entire usufruct being appropriated towards the interest due on the bonds. The plaint alleges that this Court which passed the decrees in the two Suits Nos. 197 of 1882 and 117 of 1883 not having sanctioned the arrangements made by the parties "for the payment of a larger sum than was legally due" under them, the mortgage Exhibit A and so much of the mortgage Exhibit B as went in satisfaction of the decree in C.S. No. 197 are void in law, and he institutes this suit on the footing that the defendants obtained and kept possession of the properties included in Exhibit A without any title at all and of those included in Exhibit B as a mortgagee only for the sum of Rs. 20,000 and odd. The defendants denied that the mortgage-deeds secured the payment of any sum in excess of the amounts legally due under the two decrees, and' contended inter alia that the bonds were, at any rate, valid for the amounts really due under the decrees and that they had in any event acquired by 12 years adverse possession a title to hold the properties comprised in the mortgages for the amounts secured by them respectively. They further pleaded that the question relating to the validity of the mortgage-deeds was res judicata by reason of the decree in O.S. No. 19 of 1893 on the file of the District Court of North Arcot, which was instituted against the plaintiff by Subbi Chetti in which he sought to enforce some of the obligations which the plaintiff was bound to perform under Exhibits A and B and the two other mortgage-deeds of the same date. Sixteen issues were framed by the lower court, of which the 4th issue referred to the question of res judicata and the 2nd issue raised the question whether the mortgages were invalid as contravening the provisions of Section 257-A. of the Civil Procedure Code. The Subordinate Judge held on the 2nd issue that the bonds were not invalid, as in his opinion Section 257-A only applies to execution proceedings. He decided the question of res judicata also against the plaintiff. We invited the learned Vakils on both sides to confine their arguments in the first instance to the question of res judicata raised by the 4th issue as, in case we agreed with the lower court on that issue, a consideration of the other issues in the case would be unnecessary. The facts required for the disposal of that issue may be very briefly stated. O.S. No. 19 of 1893 was instituted by Subbi Chetti against the plaintiff for the recovery of Rs. 3,843-1-4, which he claimed as due to him on the footing of the four mortgage deeds executed on the 21st of May 1890, including Exhibits A and B, and also to compel the plaintiff to provide Subbi Chetti with necessary documents of title to enable Subbi Chetti to recover during the currency of the mortgage-deeds, the rents due under various leases of trees, than gedu bark and other kinds of forest produce, which the plaintiff had executed in the years 1886, 1887, 1888 and 1889 to one Subbaraya Mudali, one Sesham Chetti and Mutaiya Mudali, one Rami Chetti, one Munisami Chetti, and one Chenga Reddi. The above amount was made up of Rs. 741-1-1, road cess paid by Subbi Chetti which the Zemindar ought to have paid and the proportionate rents which Subbi Chetti claimed as due to him out of the amounts collected by the plaintiff from the above-mentioned lessees under the leases referred to above which included villages not comprised in the mortgages. The plaint in that suit was dated the 30th June, 1893, It does not appear that the Zemindar put in any written statement. The suit was terminated by a compromise. Exhibit IX (a) dated the 10th April 1895, and a decree Exhibit IX dated the 17th April 1893 was passed in pursuance of the compromise. The terms of the compromise are very important for the decision of this appeal. Paragraph No. 1 provided for the payment to Subbi Chetti of an amount of Rs. 4,549-9-4 "towards the plaint amount, costs and interest." Paragraph No. 2 was to the effect that the plaintiff herein should pay to Subbi Chetti within six months for the period intervening from the date of plaint to the date of the decree at the rate of Rs. 200 per annum on account of the ijara amount of Chintam Sesham Chetti and others in respect of than gedu bark of the mortgage villages and at the rate of Rs. 280 per annum or the ijara amount of Rami Chetti and others. Paragraph No. 3 relating to the period subsequent to the Razinama is from this important and is in these terms : -"Within one month from this date the defendants should make arrangements so that the ijara amount should be paid directly to the plaintiff by the respective ijaradars at the abovementioned rates from the date of the razinama to the termination of the lease in respect of the above mentioned than gedu bark."
3. Mr. Govindaraghava Aiyar, for the appellant, contends that the Razinama decree does not make the question of the validity of the mortgage-deeds res judicata. He urges that a compromise decree is not a judicial decision; that, although the parties to it cannot go behind the particular relief or reliefs granted or refused by it, it has no operation with respect to anything 1 beyond those reliefs. He contends also that such a decree, being passed on an arrangement between the patties to the compromise, is on the same footing as a contract; that an agreement for the payment of a sum exceeding the amount legally due under a decree being void under Section 257-A of the Civil Procedure Code unless sanctioned by the court which passed the decree, a decree passed on such agreement is also void; and that the question whether such an agreement is void being one of law, the compromise decree, taking it to involve a decision as to the validity of the mortgages, is not binding upon the plaintiff in this suit.
4. Mr. Srinivasa Aiyangar for the respondents, on the other hand, contends that & compromise decree is legally as valid and binding on the parties as one passed by the court after contest and that every question necessary for awarding relief to Subbi Chetti in O.S. No. 19 must be taken to have been decided against the plaintiff in this suit. Our attention has not been drawn to any reported decision of this Court where the question how far a decree passed upon a compromise between parties will constitute the questions raised or involved in the suit res judicata in future litigation between them was considered and decided. We have therefore to consider the nature of such a decree and the principles on which the law of estoppel is to be applied with respect to it.
5. The basis of a compromise decree is, of course, a contract between the parties to the litigation, and the principles applicable to contracts would often have to be considered in determining the rules of estoppel applicable to such decrees; at the same time such a decree cannot be regarded as a mere contract, and has got a sanction far higher than an agreement between parties. The arrangement between them is adopted by the court and passes into an adjudication of the court and acquires all the solemnity of a judicial pronouncement. The parties to the decree cannot therefore put an end to it at their pleasure in the manner that they could rescind a mere contract. This was decided in The Bellcairn (1885) L.R. 10 P.D. 161. There, the Assistant Registrar of the court, by the consent of the parties to a compromise decree rescinded it, but the rescission was held to be illegal by the Court of Appeal. Lord Esher, M.R. observed (page 165) : "I agree with Butt J. that when at a trial the court gives a judgment by the consent of the parties it is a binding judgment of the court, and cannot be set aside by a subsequent agreement between the solicitors, or the parties, even though it be placed in the form of an order by consent on a summons and taken to a Registrar or Master, and by him made as a matter of course. It is only the court, with full knowledge of the facts on which it is called on to act, which can set aside the first judgment, and I doubt whether, unless some fraud in regard to such judgment is shown, even the court would have jurisdiction to set aside its first judgment. It is clear then that the second consent order was absolutely void."
6. Again, it seems to be clear that a party to a consent decree cannot impeach it on the same grounds on which a mere contract could be impeached, such as absence of consideration or mistake - see BLACK on Judgments, 2nd Edition, Vol. I, page 16, footnote. Speaking of such judgments the learned author observes : "The judgment is not the agreement; it is the act of the law invoked by the parties in executing the agreement." He observes in an article in the American Cyclopedia of Law and Procedure, Vol. 23, page 729 : "A judgment by consent of the parties is more than a mere contract in pats; having the sanction of the court, and entered as its determination of the controversy, it has all the force and effect of any other judgment, being conclusive as an estoppel upon the parties and their privies, and not invalidated by subsequent failure to perform a condition on which the consent was based, although it maybe inquired into for fraud practised upon one of the parties, or as against other creditors of defendant." But while the agreement acquires in some respects greater force by a decree being passed in pursuance of it, the jurisdiction and powers of the court in passing such a decree are limited. The court does not decide the disputes between the parties. It only embodies the decision of the parties themselves and makes their decision its own, giving it the force and solemnity of its own adjudication.
7. Section 375 of the Civil Procedure Code (Order XXIII, Rule 3, of the present Code) lays down with respect to a compromise proved to the court's satisfaction that the compromise "shall be recorded, and the court shall pass a decree in accordance therewith so far as it relates to the suit." The jurisdiction of the court therefore is to record the agreement between the parties and to adopt it' as its own decree in so far as it relates to the suit. It has, however, the power and is bound to consider the question whether the compromise is a lawful one. It cannot record a compromise which is unlawful. As the jurisdiction of the court is limited to an enquiry into its lawfulness, the law relating to decrees generally does not necessarily apply in all cases to consent decrees and these are governed by the rules relating to contracts. Incidents relating to contracts often hold good with respect to such decrees. Rules relating to construction are the same with respect to them as with respect to contracts. It -has been held that a provision in a compromise decree that a lease shall be forfeited for nonpayment of rent may be relieved against in the same manner as such a provision could be in an instrument of lease - Krishna Bai v. Hargovind (1906) I.L.R. 31 B. 15; Nagappa v. Venkat Rao (1900) I.L.R. 24 M. 265; Lakshmanaswami Naidu v. Rangamma (1902) I.L.R. 26 M. 31. The reason is that the court being bound to adopt the agreement between the parties as its own adjudication, the interpretation to be placed upon such adjudication ought to be the same as that to be placed on the agreement itself. For the same reason a compromise decree may in some respects have a greater validity than one passed after the contest between the parties, as such a decree has all the force of a compromise, a species of contract which is highly favoured by the courts. Thus, if parties agree to settle their disputes in a certain manner, one of them cannot claim to set it aside merely because he misunderstood the law which would be applicable in a court for the determination of the dispute. The same principle would apparently be applicable to a compromise decree and the rule that estoppel by res judicata does not apply to a question of law, will not, we think, apply to decrees passed on compromise. Similarly legal defence to a claim which may be available to a party in a court of law may be waived by him in a compromise, and he would often not be competent to impeach a compromise on the ground that his opponent's claim was one which would not be recognised by the courts. The American author whom we have already cited says : "There are certain defences which the debtor has the option of waiving, if he chooses, and he does waive them by confessing judgment, for example, such a judgment is not invalidated by the fact that a part of the claim for which it is given would be barred by the statute of limitations, provided the debt be an honest one. So where a bankrupt, subsequent to his discharge, confesses judgment upon an old debt, the debt is a good consideration for the judgment, and the latter is not affected by the discharge." (Section 69.) Again he says : "A judgment by consent operates as a waiver of any defects in the process of pleadings, or irregularities in the previous proceedings, or grounds of objection which would have constituted errors in the judgment if rendered upon trial, provided they do not go to the jurisdiction." American Cyclopaedia, page 729.
8. In considering the question of estoppel by res judicata the nature of a compromise decree, as partaking in large measure of the nature of an agreement of compromise and at the same time possessing the characteristics of a decree of court, has to be borne in mind. Section 13 of the Code of Civil Procedure, which deals with the rule of res judicata, is not perhaps strictly applicable to compromise decrees, as it applies in terms only to what has been "heard and finally decided" by a court Explanation I no doubt refers to matter alleged by one party and admitted expressly or impliedly by the other party to a suit. But this refers to some matter admitted by a party in a suit which is itself decided by the court. Scott J. held in Minalal Shadiram v. Kharsetji (1906) I.L.R. 30 B. 395 that Section 13, C.P.C., has no application to compromise decrees - see page 408. What then is the test for determining whether there is an estoppel in any particular case in consequence of a decree passed on a compromise? In our opinion the answer must depend on the answer to the question : "Did the parties decide for themselves the particular matter in dispute by the compromise? And was the matter expressly embodied in the decree of the court passed on the compromise or was it necessarily involved in, or was it the basis of, what was embodied in the decree?" For settling this point it would be legitimate, and sometimes necessary, to look into the pleadings between the parties in the suit terminated by the compromise decree. Even if the compromise was made before the defendant put in his written statement, it would still be proper to look at the allegations in the plaint to understand the terms of the compromise. It is, no doubt, open to the parties to agree to terminate a suit in a particular manner without any questions raised by the plaintiff or put in issue between the parties being determined, but whether a compromise in any particular case proceeds upon such an under' standing or is based upon an admission of some or all of the allegations made by either of the parties is a matter of construction in each case, and no hard and fast rule can be laid down applicable to all cases. It is stated in Halsbury's Laws of England, Vol. 13, paragraph No. 496 (page 357) "a defendant who has consented to judgment before delivery of any pleading is not estopped as against the plaintiff from subsequently setting up matters which might have constituted a defence, because they have never been in issue; but it is otherwise with a defendant who has consented to judgment after pleading in his defence the matters which he seeks to set up in the later proceeding. The question really dealt with in the above passage as shown by the cases cited in the footnote relates to what are known as judgments by default and not judgments based upon an agreement arrived at between the parties, which alone constitutes a, real compromise decree. The distinction between judgments by default and judgments passed on the mutual agreement of the parties is pointed out by Holmes, L.J. in Irish Land Commission v. Ryan (1900) Ir. Rep., Vol. 1, p. 565 at p. 584. In that case the plaintiff had obtained in the year 1891 a judgment by default against the defendants for a certain sum claimed as due as arrears of the rent charge for 6 years. In 1896 another action instituted for further arrears for 5 years was dismissed on the merits. The plaintiff then in 1899 sued the defendants for 2 years' arrears. The plaintiffs contended that the defendant was estopped by the judgment of 1891 from disputing the plaintiffs' claim to the tithe rent charge and the defendants contended that the dismissal of the action of 1896 estopped the plaintiffs from claiming the rent-charge. Both contentions were overruled. With respect to the judgment of 1896, the court held that it did not appear from that judgment on what ground it was based, and this absence of certainty made the rule of res judicata inapplicable. With respect to the judgment of 1891, the court held that the mere failure of the defendant to plead and the entering of judgment consequent thereon could not estop him from contesting the subsequent claim. He admitted nothing and the court therefore decided nothing. If the defendent did not appear and plead to the claim, the plaintiff was entitled to judgment by default according to the law of Scotland. It must be noted that in India the plaintiff is not entitled to such a judgment on the ground of defendant's failure to appear. He is still bound to prove his claim and judgment will be given for him only if he proves it to the satisfaction of the court, though the suit may be tried ex parte. It is pointed out in the judgment, of Holmes, L.J., that even the lands for which tithe was claimed were only imperfectly described by reference to the parish in which they were situated. The observations of Holmes, L,. J., with respect to compromise decrees are well worthy of attention. He says : "It is a principle in every system of jurisprudence that there should be finality in litigation. A judgment not appealed from binds the parties and privies for all time by what appears upon its face; and if it can be shown that, in the course of the action that resulted in the judgment, a certain definite and material issue not set forth in the Judgment itself was raised by the parties and determined judicially or by consent, it would be contrary to public policy to allow the same parties to re-agitate the same matter in subsequent legal proceedings. Estoppel by matter of record rests on this principle, and although it may be said in one sense to exclude the truth, it is essentially just and righteous." It would seem from the passage already cited from Halsbury that in England if judgment even by default is passed after the defendant has raised his contentions, he will be estopped from raising in a future litigation the contentions so raised by him.
9. A compromise decree must also be distinguished from a decree passed upon a confession of judgment or an admission made by the defendant that the plaintiff is entitled to a particular relief. The effect of such an admission must be judged solely from its terms. A defendant may admit the plaintiff's right to the relief claimed - say a right to a certain sum of money - while denying the particulars of the claim or the causes of action alleged in the plaint, and it would be a proper rule to construe an admission made by the defendant strictly, and not to stretch it beyond its terms. The judgment in such a case is the result of the admission of one of the parties to the suit, the defendant, and not of an agreement between the two parties to it. The principles applicable to the latter class of cases, that is, judgments based upon mutual agreement of the parties are not the same as those which would apply to judgments by default or judgments based on admissions of the defendant. What the court has to do in determining with respect to what matter each of the parties to a compromise decree is estopped, is to find out what it was thit the parties agreed to in the previous action; and for this purpose it would not be enough merely to see what was the relief granted in the decree of the court, but it would be necessary also to examine what was the basis on which it was granted. Whatever is necessarily involved in the decree pronounced cannot be re-opened by either party. To this extent there can be no doubt that the principle of Explanation II to Section 13 of the Civil Procedure Code is applicable to compromise decrees. If the relief granted by a compromise decree would be inconsistent with the allowing of a particular defence, the invalidity of that defence must be taken to be necessarily involved in the grant of the relief and it cannot to allowed to be set up in a subsequent suit. This is the principle laid down in In re South American and Maxican Co. (1895) 1 Ch. 37. There, a previous action by the Bank of England against a company to recover the 2nd installment of a debt alleged t J be due under an agreement which was denied by the company had been settled by compromise. It provided that the particular instalment sued for, the amount of which was 100,000 and costs, should be discharged if a um of 60,000 was paid in the manner prescribed by the agreement within the time fixed; but if the amount of 60,000 was not so paid, then the Bank "should be at liberty to issue execution for the full amount of the judgment-debt * * * and to enforce the payment of the further instalments claimed by them under the plaintiff's agreement with the defendants, set out in the statement of claim in this action." The court adjudged that in case of default the plaintiffs do recover from the defendants 100,000 and costs and that the defendants' counter-claim be dismissed. The counter-claim had reference to the amount paid by the company on account of the first instalment, and the further instalments mentioned in the compromise referred to a large sum of money which the Bank claimed would be due to them in future, but which was not due at the time they instituted the action before the court. When the further instalments fell due and the Bank instituted an action for them, the company denied its liability and the existence and validity of the agreement on which the claim was based. Vaughan Williams J., held that the company was estopped from denying the agreement by the consent decree in the previous action. The learned judge held that the previous suit was for an instalment due under the agreement which was the basis of the second action; that the compromise showed that it was for an instalment of the debt based on that agreement; that the company could not, therefore, be permitted to deny the existence of the agreement and that the court could not be asked to construe the decree as one merely to pay a sum of money equal in amount to that claimed under the agreement by the Bank and not for an instalment of what the agreement secured to the Bank. Lord Herschell, when the case went on appeal, observed : "It is said that, notwithstanding the agreement to give judgment for the claim, it was open to the defendants to make default in paying the 60,000, and then to say as regards all but this one instalment, for which you got judgment, the matter is at large; you have got judgment as for an instalment of a debt in respect of which you sued; but we are to be at liberty now to say there never was a debt at all; we cannot undo this 100,000 but we may dispute our liability to anything further. I do not think that is the meaning fairly to be gathered from the settlement arrived at or the order of the judge."
10. Vaughan Williams J., in the Court of First Instance, distinguished the case Jenkins v. Robertson (1886) L.R.I.H.L. SC. 117 which was relied on by the company as showing that a compromise decree can only conclude the question of the right to the actual relief granted to a party in the previous litigation. That case was one in which the provost, bailees and councillors of a burgh and certain other individuals instituted an action for a declaration on behalf of the inhabitants and the public of a right of way for foot passengers and afterwards compromised the action with the owners of the land, through which the way was claimed, after a verdict had been given in their favour and a new trial granted on application by the defendant. The result of the compromise was that the benefit of the verdict was given up and the plaintiffs agreed to pay the defendant's expenses. Afterwards two persons commenced a fresh action to establish the right of way. The House of Lords held, reversing the decision of the Scotch Courts, that the decree in the former action did not constitute the question of the right of way res judicata. But the judgment was based, as explained in In re South, American and Mexican Co. (1895) 1 Ch. 37, on the ground that persons instituting a suit on behalf of the public had no right to bind the public by a compromise decree, though a decision passed against them on contest would bind the public. Lord Colonsay was disposed to think that even a compromise decree might bind other persons represented by the parties to a suit, but held that the compromise decree in the particular case was not binding on the public, because his Lordship came to the conclusion that it was to a certain extent 'purchased.' But no doubt was entertained by the House of Lords that a compromise decree would be as much binding on the actual parties to it and their privies in interest "in just the same way as if it had been a judgment arrived at after the case had been fought out." Lord Herschell no doubt thought that in In re South American and Mexican Co. (1895) 1 Ch. 37 the compromise decree itself provided for the payment of future instalments also in case the defendants failed to carry out the provision made with respect to the second instalment. But the principle enunciated by his Lordship as well as by Lindley, L.J., was that "a judgment by consent is intended to put a stop to litigation between the parties just as much as is a judgment which results from the decision of the court after the matter has been fought out to the end." The same view was held in Thomson v. Moore (1889) 23 L.R. Ir.
599.
11. The consent decree was one granting an injunction restra ning the defendant from infringing the right of a patentee. In a second action for injunction instituted in consequence of a fresh infringement by the defendant, he denied the validity of the patent on the ground that the alleged invention was not a new one. Both Porter, M.R. and the Court of Appeal held that the basis of the injunction granted by the compromise decree was that the plaintiff had a valid patent, although the decree made no declaration of its validity, and that therefore the question of validity was res judicata. Porter M.R., observed : "The effect of the consent and order is absolutely to preclude the defendant from disputing the validity of the plaintiffs' patent, and the only defence he can now raise is that what he has done since is not an infringement." Lord Ashbourne, L.J., said : "Other suitors might question these matters, but the defendant cannot." Jitz-Gibbon, L.J., observed : "The decree, to which the present defendant submitted on the 18th June, 1885, has put it out of his power to rely upon it, and we must start with the assumption that Sir William Thomson's compass is a well patented invention, of which the patentable characteristics must therefore be discoverable in his specification." On behalf of the appellant the decision in Goucher v. Clayton (1865) 34 L.J. 239 was relied on. But that judgment is not in point. That case also related to the infringement of a patent. The defendants in the first action for infringement submitted to a judgment for 40 shillings for damages and costs of the suit. But no pleadings had been entered on either side. The invalidity of the invention was disputed in the second action. In the second action there were other defendants than those who were parties to the first. After the termination of the first action the defendants to it had obtained a license from the plaintiff to work the patent for five years and the license had expired before the second action was brought. It did not appear that the defendants submitted to judgment in the previous action on the footing of the validity of the patent. Wood V. C, said : "The defendants might have submitted either to avoid litigation or because they thought it not worth their while to try the question." He went on to say : 'As a perpetual injunction was sought he could not hold that the defendants were estopped from denying the validity of the patent. In any case, he could not prevent the defendants, who were not parties to the action at law, from setting up this defence." The Vice-Chancellor did not in that case lay down any rule contrary to what was held to be the law in In re South American Mexican Co. (1895) 1 Ch. 37.
12. The judgment of this Court in S.A. 1351 of 1909 was also cited in support of the appellant's position. In that case there was an ex parte decree for rent in a suit by a landlord against his tenant. The second suit was for the recovery of the property and future instalments of rent and it was held that the defendant was not estopped from denying the plaintiff's title to recover the land or the rent claimed The judgment proceeds on the ground that it did not appear from the judgment in the first suit that it proceeded on any decision as to the plaintiff's title. The question was not one relating to estoppel by a compromise decree. In S.A. 1957 of 1908, Hukdar Syed Bacha Saheb v. Karuppanna Pillai (1895) 1 Ch. 37 on the other hand, cited by Mr. Srinivasa Aiyangar, the principle laid down in In re South American and Mexican Co. (1895) 1 Ch. 37 was accepted by Abdur Rahim and Krishnaswami Aiyar, JJ., although on the facts of the case the learned judges held that the consent decree did not involve an admission by the defendant with respect to the point contested in the second suit. The decision of the Bombay High Court in Minalal Shadiram v. Kharsetji (1906) I.L.R. 30 B. 395 followed the principle.
13. Turning now to the facts of the present case, we think there can be no doubt that the compromise and decree in O.S. No. 19 of 1893 proceeded on the acceptance by the Zemindar of the validity of the mortgages executed in favour of Subbi Chetti. It provided for the payment by the Zemindar of a sum of Rs. 4,549 in discharge of the "plaint amount, interest and costs." The 'plaint amount' was clearly the amount which the plaintiff claimed on the basis of the provisions in the mortgage-deeds. The decree further went on to provide that the defendant should make further payments for the period between the date of the plaint and the date of the Razinama and for the future "the amounts that may become due at the above rates from date of this Razinama until the expiration of the terms of the aforesaid leases." The learned Vakil for the plaintiff was unable to suggest on what other footing than the validity of the mortgages the decree could be taken to have proceeded. We cannot accept his contention that the decree should be taken merely to have directed payment of a certain sum of money without any regard to the title of the plaintiff. We are entitled and bound to look to the Razinama itself, Exhibit IX (a), to understand the terms of the decree which was passed in pursuance of it. The parties expressly reserved one point in dispute between them, namely the question relating to the Zemindar's liability to pay road-cess; but they had definitely resolved that the mortgage-deeds themselves should be taken to be valid and binding on the Zemindar. The appellant's contention that, as the validity of the mortgages with reference to Section 257-A of the Civil Procedure Code should be regarded as a question of law and that therefore the plaintiff in this suit is entitled to re-agitate the question, must also be disallowed. In the first place, the question is not purely one of law, but one of mixed fact and law, depending as it does on the point whether as a fact the Zemindar did agree by the mortgage deeds to pay any sum in excess of the amounts due under the decrees in C.S. Nos. 197 and 117. But even were the question purely one of law, we are disposed to think that a decree on a compromise cannot be impeached on the ground that it was erroneous in law, because it is open to parties to decide both questions of law and of fact between themselves by consent in the manner they deem best. In this respect-a compromise decree resembles not so much an actual decision of a court after contest as an award by an arbitrator, whose decision cannot be impeached on the mere ground that he committed an error of law. See Butta v. Municipal Committee of Lahore (1902) I.L.R. 29 C. 854.
14. We are also unable to accept the argument that an agreement in contravention of Section 257-A is one opposed to public policy. We do not decide the question whether such an agreement is invalid at all when the parties agree that the decree should no longer be executed, and that the rights under the agreement should supersede the decree and be enforceable only by a suit upon the agreement. Such an agreement would more probably be an adjustment of the decree coming within Section 258 of the Civil Procedure Code and not one for the satisfaction of a judgment-debt. We also abstain from deciding the question whether Section 257-A, Clause (2), prohibits anything more than the recognition of the kind of agreement referred to therein in execution proceedings. Nor is it necessary to consider the exact scope of the rule that the doctrine of estoppel by decision of the courts does not apply to questions of law. But it is clear to our minds that the prohibition in Section 257-A is not based on any rule of public policy rendering such agreements illegal; it is merely unenforceable in execution proceedings, or by a fresh suit as the case may be. The rule is merely enacted for the benefit of the individual judgment-debtor and one reason for the rule was probably that litigant parties should not have the right to interfere with the decrees of courts, a reason which would probably indicate that the rule is applicable only to execution proceedings. A judgment-debtor is, in our opinion, entitled to waive the benefit of the rule. The compromise was a lawful compromise and was accepted by the court as lawful and embodied in its decree. We, therefore, hold that the plaintiff in the present suit is estopped from contesting the validity of the mortgages. In the view we have taken on issue No. 4, it is unnecessary to consider the other. questions in the case.
15. In the result the appeal is dismissed with costs.
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