Source: Supreme Court 

Why in News? 

A bench of Justice Vikram Nath and Justice Prashant Kumar Mishra held that the terms of compromise should be reduced to writing and signed by the parties.        

• The Supreme Court held this in the case of Amro Devi & Othrs v. Julfi Ram (Deceased) Thr. LRs and Ors.  

What is the Background of Amro Devi & Othrs v. Julfi Ram (Deeceased) Thr. LRs and Ors. Case? 

• The Respondents/Plaintiff based on an earlier compromise recorded between the parties before the Court, filed a fresh suit for possession and temporary injunction against the Appellants/Defendant.   
• The Plaintiff contended that they were the owners in possession of half share in the suit land as per the compromise arrived between parties to the previous suit. 
• The Appellant/Defendant countered the Plaintiff's contention and argued that the compromise made between the parties in an earlier suit cannot be recognized as there was no compromise decree passed by the Court because of non-compliance with Order 23 Rule 3 of CPC. 
• The trial court rejected the suit in the absence of the existence and production of a written compromise between the parties duly signed by them 
• The First Appellate Court, however, reversed the trial court's findings which was later approved by the High Court. 
• Following this, the Appellant/Defendant approached the Supreme Court. 

What were the Court’s Observations? 

• The Court restored the findings of the Trial Court and observed that it was impermissible under law to arrive at a compromise without existence or production of a written compromise duly signed by parties to the suit. 
• The Court observed that a plain reading of Order XXIII Rule 3 of Civil Procedure Code, 1908 (CPC) clearly provides that a for a valid compromise there has to be a lawful agreement or compromise in writing signed by the parties which would then be required to be proved to the satisfaction of the Court.  
• In the absence of any such document in writing it cannot be said that a valid compromise has been entered into.  
• Hence, the Court clarified here that a compromise decree can only be passed in accordance with Order XXIII Rule 3 of CPC. 

What is Order XXIII Rule 3 of CPC? 

• Order XXIII Rule 3 of CPC provides for compromise of suit. 
• The purpose of this provision is to avoid multiplicity of litigation and permit the parties to amicably come to a settlement. 
• The essential elements here are: 
  • It must be proved to the satisfaction of Court that a suit has been adjusted wholly or in part 
  • By a lawful agreement, compromise  
  • The lawful agreement or compromise must be in writing and signed by the parties (Added by Act 104 of 1976) 
  • The Court shall order such agreement, compromise or satisfaction to be recorded 
  • A decree shall be passed in accordance with the above agreement or compromise. 
  • It is not necessary that the subject matter of the agreement, compromise or satisfaction should be same as subject matter of the suit.  
• The proviso to Order XXIII Rule 3 provides that: 
  • Where it is alleged by one party and denied by other that an agreement or compromise has been arrived at 
  • The above question shall be decided by the Court. 
  • However, no adjournment shall be granted for the purpose of deciding the question unless the Court thinks fit to grant such adjournment. 
• Further, Explanation to the Section provides that an agreement or compromise: 
  • Void, or 
  • Voidable 
  • Under Indian Contract Act, 1872 shall not be deemed to be lawful. 
• It is to be noted that Order XXIII Rule 3A provides that no suit shall lie to set aside a decree on the grounds that the compromise on which decree was based was not lawful.   

What are the Important Case Laws? 

• Pushpa Devi Bhagat v. Rajinder Singh (2006) 
  • The Court noted the provisions of Order XXIII Rule 3 and Rule 3A and held the following: 
    • No appeal is maintainable against a consent decree having regard to the specific bar contained in Section 96(3) CPC. 
    • 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. 
    • 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. 
    • A consent decree operates as an estoppel and is valid and binding unless it is set aside by the court which passed the consent decree, by an order on an application under the proviso to Rule 3 Order 23. 
• Triloki Nath Singh v. Anirudh Singh (2020) 
  • The scheme of Order 23 Rule 3 CPC is to avoid multiplicity of litigation and permit parties to amicably come to a settlement which is lawful, is in writing and a voluntary act on the part of the parties. 
  • The Court held that by introducing the amendment to the Civil Procedure Code (Amendment) Act, 1976, the legislature has brought into force Order 23 Rule 3-A, which creates bar to institute the suit to set aside a decree on the ground that the compromise on which decree is based was not lawful. 
  • The only remedy left with the party to avoid the consent decree is to approach the Court which recorded the compromise and no independent suit can be filed.