Summary
The Supreme Court held that a party aggrieved by a compromise decree has a statutory remedy of moving the court that recorded the compromise to recall it and restore the proceeding, and a court cannot defeat that remedy by recording that no liberty to restore is granted; the High Court's refusal to restore a first appeal on that ground alone was set aside and the recall application remanded.
Issues
- Whether a High Court that disposed of a first appeal on a compromise while expressly declining liberty to restore it could reject a later restoration application solely for that reason.
- What remedy is available to a party who alleges that a compromise recorded under Order 23 Rule 3 CPC is unlawful because of fraud or non-performance.
Provisions considered
- Order 23 Rule 3 (with proviso and Explanation), Code of Civil Procedure, 1908Read with Banwari Lal v. Chando Devi, the Court held that the court recording a compromise must be satisfied it is lawful, that void or voidable agreements are not lawful, and that the question can be raised by a recall application before the same court even after the decree. (¶¶ 10, 11, 12, 13, 14)
- Order 23 Rule 3A, Code of Civil Procedure, 1908Because no suit lies to set aside a compromise decree on the ground that the compromise was unlawful, the only remedy is an application before the court that recorded it. (¶¶ 10, 12, 14)
- Section 96(3), Code of Civil Procedure, 1908Noted, with the deletion of Order 43 Rule 1(m), as barring an appeal against a consent decree or an order recording a compromise, leaving recall as the sole remedy. (¶¶ 12, 14)
- Section 19, Indian Contract Act, 1872An allegation that consent was obtained by fraud, if proved, makes the compromise voidable and therefore not lawful under the Explanation to Order 23 Rule 3; the burden of proving fraud lies on the appellant. (¶ 13)
- Section 28, Indian Contract Act, 1872Cited as reflecting the public policy of access to justice: agreements restraining a party from enforcing rights through legal proceedings are void, consistent with the compromise clauses preserving the right to seek restoration. (¶ 16)
Held
- Since no appeal lies against a consent decree or an order recording a compromise and no separate suit lies to set it aside, the only remedy of a party aggrieved by a compromise decree is to approach the court that recorded the compromise, which alone can decide its legality, whether at the time of recording or on a recall application. (¶¶ 11, 12, 14)
- An allegation of fraud in a recall application challenges the lawfulness of the compromise, because a compromise voidable under the Contract Act is not lawful under the Explanation to Order 23 Rule 3; the court that recorded the compromise is bound to examine that question. (¶ 13)
- Where a statutory remedy exists, no liberty from the court is needed to pursue it; a court cannot curtail it by recording that liberty to restore is refused, and as a matter of public policy courts must not cut down statutory remedial mechanisms. Dismissing the restoration application solely because no liberty had been granted was therefore wrong. (¶¶ 14, 15)
- The compromise deed itself preserved the appellant's right to seek restoration on breach and provided that it would be void on non-payment, which accords with the policy of Section 28 of the Contract Act. (¶ 16)
Result
Appeal allowed; High Court order dated 19.10.2023 set aside and the recall application remanded to the High Court for decision on merits, with no opinion expressed on the merits; no order as to costs.