Introduction 

• This is a landmark judgment relating to setting aside of compromise decree passed under Order 23 Rule 3 of Civil Procedure Code, 1908. 
• This judgment was delivered by bench comprising Of Justice NP Singh and justice NM Kasliwal. 

Facts 

• In the present case a suit was filed on 14th September 1990 concerning disputed land. 
• On 27th February 1991, a petition of compromise was filed, allegedly stating that both parties had agreed to a settlement, and possession of the disputed land had been handed over to the respondent. 
• The compromise petition was not signed by the respondent or their counsel. 
• Shri Soran Ram, Advocate for the appellant, noted that the appellant had provided a thumb impression in his presence. 
• On the same day, the Trial Court dismissed the suit as withdrawn based on the compromise and ordered a decree accordingly. 
• Application for Recall of Order: 
  • On 3rd April 1991, the appellant filed an application alleging fraud. 
  • The Appellant claimed he was misled by his counsel, Shri Soran Ram, who colluded with the respondent to file a fabricated compromise petition. 
  • The Appellant asserted that no compromise had occurred and that the alleged compromise was void as it failed to meet the requirements of Order 23, Rule 3 of the CPC. 
  • The Appellant sought recall of the order dated 27th February 1991 and restoration of the suit. 
• Trial Court's Decision: 
  • The Subordinate Judge found that the compromise petition did not comply with Order 23, Rule 3, as it lacked signatures of both parties. 
  • The court concluded that fraud had been committed and recalled the order dismissing the suit, restoring it to its original number. 
• High Court Revision: 
  • The Respondent filed a revision application against the Trial Court's order. 
  • The High Court set aside the Subordinate Judge's decision, holding that the petition filed on 27th February 1991 was an application for withdrawal of the suit under Order 23, Rule 1. 
  • The High Court ruled that the appellant had voluntarily withdrawn the suit and, therefore, the Trial Court's recall of the order was improper. 
• Appeal Against High Court Order: 
  • The appellant filed the current appeal challenging the High Court's decision, contending that the compromise was fraudulent and void and that the Trial Court's order recalling the compromise should be upheld.
• Issues Involved  
  • Whether the compromise decree is liable to be set aside in the present case?

Observation  

• The Court first of all discussed the purpose of amendments in Order 23 of CPC: 
  • The 1976 Amendment to Order 23 introduced safeguards to prevent vexatious litigation regarding compromises by mandating that agreements or compromises must be in writing, signed by the parties, and lawful under the Indian Contract Act. 
  • Proviso to Rule 3 and its explanation require courts to decide the validity of alleged compromises when contested. 
• The Court discussed the following on bar on separate suits for setting aside Compromise decree: 
  • Rule 3A prohibits filing a separate suit to set aside a decree based on an unlawful compromise, limiting challenges to the court that recorded the compromise. 
  • Section 96(3) CPC bars appeals against consent decrees unless the validity of the compromise itself is challenged per Rule 1A of Order 43. 
• The Court laid down the responsibilities of the Court in recording the compromise: 
  • The court must ensure the compromise is lawful and not void or voidable under the Indian Contract Act. 
  • The order recording the compromise acquires judicial sanctity and cannot be passed casually. 
• The Court observed that in the following case there were procedural flaws which were as follows: 
  • The compromise petition was not signed by both parties or their counsels, violating mandatory requirements under Rule 3. 
  • The Trial Court failed to exercise due diligence and accepted the compromise without verifying its validity. 
• Regarding the recall order under Rule 3 the Court held that: 
  • The Subordinate Judge was correct in recalling the order dated 27th February 1991 after determining the compromise was not lawful. 
  • Courts retain the authority under Section 151 CPC and the proviso to Rule 3 to entertain applications challenging the legality of a recorded compromise. 
• The compromise was deemed fraudulent and thus void under the explanation to Rule 3. The Trial Court rightly set aside the earlier order based on such an unlawful compromise. 
• Finally, the following reliefs were granted: 
  • The High Court erred in treating the compromise petition as an application for withdrawal under Rule 1 of Order 23. 
  • The Trial Court's decision to recall the order and restore the suit was valid and within its jurisdiction. 
• The appeal was hence allowed and the order of High Court was set aside. 

Conclusion 

• The Court in this case laid down the law on setting aside the compromise decree which is recorded under Order 23 Rule 3 of CPC. 
• It was laid down that the only remedy available against the decree recorded under Order 23 Rule 3 of CPC is recalling any compromise decree which is not lawful.