Law Web: Whether Bar On Appeal Against Compromise Decree is Applicable Where Court Declines To Record Some Part Of Compromise?

Again, in Kishun alias Ram Kishun (supra) it was held that

where the compromise is contested, the bar under Section 96 (3) will

not come into play. The order passed by the court on such contest

and the resultant decree would be subject to appeal and second

appeal. It has been observed that “when there is a contest on the

question whether there was a compromise or not, a decree accepting

the compromise on resolution of that controversy, cannot be said to

be a decree passed with the consent of the parties. Therefore, the bar

under Section 96(3) of the Code could not have application. An

appeal and a second appeal with its limitations would be available

to the party feeling aggrieved by the decree based on such a disputed

compromise or on a rejection of the compromise set up.”

The law laid down in Ram Kishun has been reiterated by the

Supreme Court in a more recent judgement in Daljit Kaur and

another Vs. Muktar Steels Private Limited and others (2013) 16 SCC 607 holding

that bar under Section 96 (3) CPC will not get attracted where the

compromise is disputed. In my considered opinion, the same would

also be the position where the court refuses to record compromise or

part of it on the ground that it is not lawful, as in the instant case.

The legal position which thus emerges after amendment of

Civil Procedure Code by Act No.104 of 1976 is that the appellant in

an appeal against a decree passed in suit after recording a

compromise or refusing to record a compromise is entitled to contest

the decree on the ground that the compromise should, or should not,

have been recorded (Order 43 Rule1-A). The same principle would

apply where the court records some part of the compromise while

declines to record the remaining part. In such cases, the bar

contained under Section 96 (3) CPC would not get attracted.

ALLAHABAD HIGH COURT

Case :- MATTERS UNDER ARTICLE 227 No. - 3147 of 2019

Sri Ram Krishna Vivekanand Shishu Niketan Vs

Sri Onkarnath And 19 Others

Hon'ble Manoj Kumar Gupta,J.

Dated:Order Date :- 3.9.2019

An interesting question as to whether second appeal would lie

against the impugned order/judgement of the first appellate court or

the same is barred by Section 96 (3) of the Code of Civil Procedure

(for short 'Code' or 'C.P.C.') arises for consideration in the instant

petition filed before this Court invoking its supervisory jurisdiction

under Article 227 of the Constitution. In case, an appeal is

maintainable, this Court in view of availability of efficacious remedy

under the Code would decline to entertain the instant petition.

The backdrop in which the controversy has arisen is as

follows:-

Two suits were instituted by the petitioner ( hereinafter referred

to as 'the plaintiff') bearing Original Suit Nos.381 of 1987 and 800 of

1987. In Original Suit No.381 of 1987, the plaintiff prayed for

permanent injunction, declaration of its title in respect of the suit

property and mandatory injunction against respondents no.1 to 14

(hereinafter referred to as 'the defendants 1st set). The declaration of

title was sought on the ground that the suit property was donated to it

by Dwarika Nath Bhargava, Kedar Nath Bhargava and Onkar Nath

Bhargava by an unregistered instrument dated 10.3.1969. Since then,

the plaintiff had been in possession of the same as its owner without

any objection from any one and thus perfected its title by adverse

possession. In alternative, the plaintiff also prayed for mandatory

injunction directing defendants 1 to 10 as well as defendants 11, 12

and 13 to execute registered gift deed in pursuance of an alleged

agreement dated 12.2.1969. In Original Suit No.800 of 1987, the

plaintiff took the same stand and prayed for permanent injunction

against respondents 12 to 20 (hereinafter referred to as 'the

defendants 2nd set). Both the suits were dismissed by the trial court

by judgement dated 14.12.2018. The trial court held that the plaintiff

was not able to prove its title to the suit property; that it also failed to

prove its possession and thus, also not entitled to declaration as

owner on basis of adverse possession. Aggrieved by the judgement

of the trial court, the plaintiff filed an appeal under Section 96 CPC.

It was registered as Civil Appeal No.213 of 2018. During pendency

of the appeal, the plaintiff entered into a compromise with defendants

12/1 and 14 ( Paper No.18 Ka/4). The compromise was signed by the

parties/their authorised representatives and their signatures were duly

verified by respective counsel for the parties except respondents 1 to

11 and 13, who were discharged from the suit and also the

compromise. There is a map annexed with the compromise,

according to which, the portion of land shown with letters DEFH was

admitted to be in possession of the plaintiff and would continue in its

possession; ABHF was recognised as belonging to defendant 12/1

and BCDH as belonging to defendant no.14. On 22.1.2019 the date

on which compromise application Paper No.18 Ga was filed before

the appellate court, one Kapil Dev Upadhyay filed an application

seeking his impleadment alleging title in respect of 322.66 sq. yards

of the suit property on basis of a sale deed dated 18.1.2019 executed

in his favour by Narain Das Agrawal, power of attorney holder of

Desh Bandhu Kagaji (son of defendant no.13 of Original Suit No.381

of 1987 and defendant no.1 of Original Suit No.800 of 1987) and

Manager of Phool Chandra Kagaji HUF. According to him, the

original owner of the suit property namely Thakur Madan Mohan Ji

Maharaj had executed registered lease deed on 29.12.1987 in favour

of Phool Chandra Kagaji HUF with respect to 1320 sq. yards of the

suit property. It is also his case that Phool Chandra Kagaji HUF had

also obtained a sale deed dated 7.10.1987 (registered on 15.1.1988)

in respect of the same land from the Bhargavas, through whom the

plaintiff also claims title to the suit property. It is common ground

between the parties that the predecessor of Bhargava family namely

Late Girdhar Das Bhargava obtained the said property by way of a

registered perpectual lease deed dated 21.8.1943 from the then

Shebiat of Thakur Madan Mohan Ji Temple, the original owner of the

property. According to both the parties, after death of Girdhar Das

Bhargava, his three sons inherited the suit property. According to the

plaintiff society, the three sons of Girdhar Das Bhargava donated the

suit land to the plaintiff and since then, it has been in possession of

the same.

The Appellate Court, by order dated 1.2.2019, rejected the

impleadment application observing that intervention of a third party

at the appellate stage when the matter had remained pending for last

32 years would not be in interest of justice. However, on the same

date, it proceeded to pass order on the compromise application as

well. The Appellate Court accepted the compromise in part i.e. in

respect of defendant no.12/1 and 14 but it refused to decree the suit

in favour of the plaintiff for the suit land DEFH observing that as per

boundaries, it is the same land in respect of which Kapil Dev

Upadhyay had filed impleadment application claiming title on basis

of registered lease deed of thirty years. The Appellate Court has held

that the plaintiff had failed to bring on record any document to prove

its title; consequently, the compromise application in respect of land

shown with letters DEFH was rejected. In pith and substance, the

Appellate Court, in absence of any document of title with regard to

the portion of land shown with letters DEFH, declined to grant

declaration in favour of the plaintiff. The operative part of the

order/judgement of the Appellate Court dated 1.2.2019 reads thus:-

{Vernacular omitted}

Being aggrieved by the above order/judgement of the Appellate

Court, declining to record compromise in respect of the claim of the

plaintiff while deciding the appeal, the instant petition has been filed.

Sri Diwakar Rai Sharma Advocate appearing on behalf of

respondent no.14 raised a preliminary objection relating to

maintainability of the instant petition under Article 227 of the

Constitution. Sri Tarun Agrawal Advocate appearing on behalf of

Kapil Dev Upadhyay, the applicant seeking impleadment also

submitted that the petitioner has remedy of challenging the impugned

judgement by filing a second appeal under Section 100 CPC. It is

urged that since the remedy is available under the Code itself,

therefore, the present petition under Article 227 of the Constitution

should not be entertained and the petitioner should be relegated to

the remedy available under the Code. It is urged by them that a

second appeal would lie against the impugned order/judgement in

view of Order 43 Rule 1-A read with Order 42 Rule 1 CPC and

Section 100 and 108 CPC. In support of their contention, they have

placed reliance upon the judgements of the Supreme Court in

Banwari Lal Vs. Chando Devi (Smt.) (Through Lrs.) and

another1, Kishun alias Ram Kishun Vs. Behari2 and a Division

Bench judgement of Madhya Pradesh High Court in Thakur Prasad

Vs. Bhagwandas3.

On the other hand, Sri Nirvikar Gupta, learned counsel

appearing on behalf of plaintiff-petitioner submitted that the

impugned order recording compromise in part and declining to

record other part would not amount to a decree. He points out that

even no decree has been drawn in pursuance of the impugned order.

It is urged that clause (m) of Rule 1 of Order 43 under which an

appeal was maintainable against an order recording or refusing to

record an agreement, compromise or satisfaction was omitted by Act

No.104 of 1976 w.e.f. 1.2.1977. Consequently, it is submitted that no

appeal would lie against such an order. He further submitted that

1 (1993) 1 SC 581

2 (2005) 6 SCC 300

3 1984 Law Suit (MP) 120

since rights of parties have not been decided under the impugned

order, therefore, it would not amount to a judgement nor would result

in a decree, therefore, Order 43 Rule 1-A (2) will also have no

application. He placed a strong reliance on Section 96 (3) CPC and

the same judgments upon which reliance was placed by the other

side in contending that no appeal is maintainable from a decree

passed by court with consent of the parties.

Before adverting to the submissions advanced by learned

counsel for the parties, certain amendments carried out in the Code

by Act No.104 of 1976 are worth noticing. Order 23 Rule 3 CPC

envisages compromise of suit. Prior to its amendment by Act No.104

of 1976, it read as follows in its application to the State of Uttar

Pradesh:-

“R.3. 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, or where the defendant

satisfies the plaintiff in respect of the whole or any part

of the subject-matter of the suit, the Court shall order

such agreement, compromise or satisfaction to be

recorded, and shall pass a decree in accordance

therewith so far as it relates to the suit.”

“ ALLAHABAD.- (1) In Rule 3 of Order 23 between the

words “ or compromise” and “or where” insert the

words “in writing duly signed by parties”; and between

the words “subject matter of the suit” and the words “the

Court” insert the words “and obtains an instrument in

writing duly signed by the plaintiff.”

(2) At the end of the Rule 3 of Order 23 add the

following, namely:

“Provided that the provisions of this rule shall not

apply to or in any way affect the provisions of Order XXXIV,

Rules 3, 5 and 8.

Explanation.- The expression “agreement” and

“compromise”, include a joint statement of the parties

concerned or their counsel recorded by the Court, and the

expression “Instrument” includes a statement of the plaintiff

or his counsel recorded by the Court”- U.P. Gaz., 31-8-1974,

Pt.II, p.52 (31-8-1974)”

Order 43 Rule 1 (m) enabled a party aggrieved by an order

passed under Rule 3 of Order 23 recording or refusing to record an

agreement, compromise or satisfaction to challenge the order in

appeal. Clause (m) was to the following effect:-

“(m) an order under Rule 3 of Order XXIII recording or

refusing to record an agreement, compromise or

satisfaction;”

Section 96 (3) placed a specific embargo on maintainability of

appeal from a decree passed by the court with the consent of parties.

It reads thus:-

“96 (3). No appeal shall lie from a decree passed by the

Court with the consent of parties.”

Under Order 43 Rule 1 (m), an order recording or refusing to

record an agreement, compromise or satisfaction could be directly

challenged by filing an appeal even before the final judgement is

passed in the suit. In cases where the decree is passed by the court

with consent of parties, no appeal would lie in view of the

prohibition contained under Section 96 (3). It was settled by a series

of precedents that the prohibition under Section 96 (3) would remain

limited to cases where the parties, after complying with the

procedure prescribed under Order 23 Rule 3 CPC, invites the court to

pass decree in a particular manner to which they had agreed to and

the court acts accordingly. However, in cases where a party disputes

being signatory to the compromise or the compromise decree is

challenged on ground of fraud, undue influence or misrepresentation,

the bar stipulated under Section 96 (3) would not come in way of

filing an appeal. It was also open to such a party to file a regular civil

suit challenging the compromise decree on the ground of it being

void or voidable.

After the Code was amended by Act No.104 of 1976, clause

(m) of Rule 1 of Order 43 was omitted, meaning thereby that an

order recording or refusing to record an agreement, compromise or

satisfaction is no more appealable. By the same amendment, Rule 1-

A was inserted in Order 43. Sub-rule (2) thereof, which is relevant

for our purpose, is as follows:-

“(2) In an appeal against a decree passed in a suit after

recording a compromise or refusing to record a

compromise, it shall be open to the appellant to contest

the decree on the ground that the compromise should, or

should not, have been recorded.”

At the same time, certain amendments were also made in Rule

3 of Order 23 conferring jurisdiction upon the same court to decide

whether adjustment or satisfaction has been arrived at where it is so

alleged by one party while denied by the other. It has also been made

mandatory that the compromise should be in writing and signed by

the parties. An Explanation has also been inserted clarifying that an

agreement or compromise, which is void or voidable under the

Indian Contract Act, 1872, shall not be deemed to be lawful within

the meaning of this rule. Rule 3-A, inserted by the same Amending

Act of 1976 specifically bars a suit before civil court for setting aside

a compromise decree on the ground that it was not lawful. Order 23

Rule 3 and Rule 3-A as amended by Act No.104 of 1976 are as

follows:-

“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 satisfies the plaintiff in respect of

the whole or any part of the subject-matter of the suit,

the Court shall order such 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 no

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.]”

“3-A. 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.”

In Pushpa Devi Bhagat Vs. Rajinder Singh4, a two Judge

Bench of the Supreme Court, after considering Rule 3 and 3-A of

Order 23, summed up the statement of law emerging from these

provisions as follows:-

“13.1. no appeal is maintainable against a consent

decree having regard to the specific bar contained in

Section 96(3) CPC;

13.2. 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;

13.3. 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; and

13.4. 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 of Order 23.”

Even before the above principles were laid down by the

Supreme Court, another Division Bench in Banwari Lal (supra)

considered the interplay between Order 43 Rule 1-A added by Act

No.104 of 1976 and Section 96 (3) as well as the impact of deletion

of clause (m) of Rule 1 of Order 43. The Supreme Court has

observed that the amendments were carried out taking into

consideration the past experiences, as on many occasions, parties

4 (2006) 5 SCC 566

used to file compromise on basis of which suit used to be decreed but

later on, for one reason or the other, the validity of such compromise

was challenged by way of separate suit dragging the litigation for

years together. By the amendments made by 1976 Act, special

requirements were introduced before a compromise is recorded by

the court. The compromise should be lawful, must be in writing and

signed by the parties. The relevant observations made in this regard

by the Supreme Court in Banwari Lal (supra) are extracted below:-

“7. By adding the proviso along with an explanation the

purpose and the object of the amending Act appears to

be to compel the party challenging the compromise to

question the same before the court which had recorded

the compromise in question. That court was enjoined to

decide the controversy whether the parties have arrived

at an adjustment in a lawful manner. The explanation

made it clear that an agreement or a compromise which

is void or voidable under the Indian Contract Act shall

not be deemed to be lawful within the meaning of the

said rule. Having introduced the proviso along with the

explanation in Rule 3 in order to avoid multiplicity of

suit and prolonged litigation, a specific bar was

prescribed by Rule 3-A in respect of institution of a

separate suit for setting aside a decree on basis of a

compromise saying:

“3-A. 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.”

8. Earlier under Order 43, Rule 1(m), an appeal was

maintainable against an order under Rule 3 of Order 23

recording or refusing to record an agreement, compromise or

satisfaction. But by the amending Act aforesaid that clause

has been deleted, the result whereof is that now no appeal is

maintainable against an order recording or refusing to

record an agreement or compromise under Rule 3 of Order

23. Being conscious that the right of appeal against the order

recording a compromise or refusing to record a compromise

was being taken away, a new Rule 1-A has been added to

Order 43 which is as follows:”

The 1976 Amendment, while on one hand conferred right to

challenge decree passed in suit after recording a compromise or

refusing to record a compromise by filing regular appeal but at the

same time, Section 96 (3) of the Code, which says that no appeal

shall lie from a decree passed by the court with the consent of the

parties, was left untouched. The impact of insertion of Rule 1-A (2)

upon Section 96 (3) was explained thus:-

“9. Section 96(3) of the Code says that no appeal shall

lie from a decree passed by the Court with the consent of

the parties. Rule 1-A(2) has been introduced saying that

against a decree passed in a suit after recording a

compromise, it shall be open to the appellant to contest

the decree on the ground that the compromise should not

have been recorded. When Section 96(3) bars an appeal

against decree passed with the consent of parties, it

implies that such decree is valid and binding on the

parties unless set aside by the procedure prescribed or

available to the parties. One such remedy available was

by filing the appeal under Order 43, Rule 1(m). If the

order recording the compromise was set aside, there was

no necessity or occasion to file an appeal against the

decree. Similarly a suit used to be filed for setting aside

such decree on the ground that the decree is based on an

invalid and illegal compromise not binding on the

plaintiff of the second suit. But after the amendments which

have been introduced, neither an appeal against the order

recording the compromise nor remedy by way of filing a suit

is available in cases covered by Rule 3-A of Order 23. As

such a right has been given under Rule 1-A(2) of Order 43 to

a party, who challenges the recording of the compromise, to

question the validity thereof while preferring an appeal

against the decree. Section 96(3) of the Code shall not be a

bar to such an appeal because Section 96(3) is applicable to

cases where the factum of compromise or agreement is not in

dispute.”

Once again, in paragraph 13 of the Law Report, the Supreme

Court explained the interplay between the above provisions as

follows:-

“13. When the amending Act introduced a proviso along with

an explanation to Rule 3 of Order 23 saying that where it is

alleged by one party and denied by other that an adjustment

or satisfaction has been arrived at, "the Court shall decide

the question", the Court before which a petition of

compromise is filed and which has recorded such

compromise, has to decide the question whether an

adjustment or satisfaction had been arrived at on basis of

any lawful agreement. To make the enquiry in respect of

validity of the agreement or the compromise more

comprehensive, the explanation to the proviso says that an

agreement or compromise "which is void or voidable under

the Indian Contract Act..." shall not be deemed to be lawful

within the meaning of the said Rule. In view of the proviso

read with the explanation, a Court which had entertained the

petition of Compromise has to examine whether the

compromise was void or voidable under the Indian Contract

Act. Even Rule 1(m) of Order 43 has been deleted under

which an appeal was maintainable against an order

recording a compromise. As such a party challenging a

compromise can file a petition under proviso to Rule 3 of

Order 23, or an appeal under Section 96(1) of the Code, in

which he can now question the validity of the compromise in

view of Rule 1-A of Order 43 of the Code.”

(emphasis supplied)