Summary
The Supreme Court affirmed a Gujarat High Court Larger Bench ruling that a party on record who disputes the existence or validity of a compromise recorded under Order XXIII Rule 3 CPC must first apply to the trial court under the proviso to that rule; no direct first appeal lies against the consent decree in view of Section 96(3), Order XLIII Rule 1A creates no independent right of appeal, and appeals from order under the deleted Order XLIII Rule 1(m) are incompetent since 1976. The appellant's appeals from orders against two consent decrees were rightly dismissed, with liberty to invoke the proviso.
Issues
- Whether a litigant who was a party to the suit but contests the fact or legality of a compromise embodied in a decree is restricted to an application under the proviso to Order XXIII Rule 3 CPC, or may maintain a first appeal under Section 96 CPC notwithstanding Section 96(3).
- Whether Order XLIII Rule 1A(2) CPC confers an independent right of appeal against a decree recording a compromise.
- Whether allegations of fraud or want of authority in obtaining a consent decree take it outside the bar in Section 96(3) CPC.
- Whether the remedy of a first appeal with leave available to non-parties affected by a consent decree can be invoked by a party to the suit.
Provisions considered
- Section 96(1) and Section 96(3), Code of Civil Procedure, 1908Section 96(3) bars an appeal from a decree passed with the consent of parties. The Court held the bar is absolute where the fact of compromise is undisputed; a party who denies the compromise must first raise it before the trial court, and a first appeal under Section 96(1) lies only if the trial court decides the objection and passes a decree adverse to the objector. Non-parties whose rights are affected may file a first appeal with leave. Decrees resting on written terms signed by duly authorised counsel are consent decrees within Section 96(3). (¶¶ 6, 7, 8, 11, 12, 13, 14, 15)
- Order XXIII Rule 3 (proviso and Explanation), Code of Civil Procedure, 1908The proviso, inserted by the 1976 amendment, obliges the trial court itself to decide forthwith any dispute whether an adjustment or compromise has been arrived at. The Court held it is not optional but the exclusive first port of call for any party on record who denies the compromise; fraud, want of authority and other vitiating elements are precisely what the proviso directs the trial court to examine. (¶¶ 7, 8, 11, 13, 15, 18)
- Order XXIII Rule 3A, Code of Civil Procedure, 1908Rule 3A bars a separate suit to set aside a decree on the ground that the compromise was not lawful; the Court treated it as one of the four companion provisions of the 1976 amendment closing the route of a fresh suit. (¶¶ 7, 8, 10)
- Order XLIII Rule 1A(2), Code of Civil Procedure, 1908Rule 1A(2) permits an appellant in an appeal against a decree passed after recording or refusing a compromise to contend that the compromise should or should not have been recorded. The Court held it does not create a new or independent right of appeal; it only enables an appellant already before the appellate court in a competent appeal to attack the decree on that ground. (¶¶ 7, 8, 11, 15)
- Order XLIII Rule 1(m) (deleted), Code of Civil Procedure, 1908Before 01.02.1977 an order recording or refusing to record a compromise was appealable under clause (m); Parliament deleted it by Amendment Act 104 of 1976. The appellant's Appeals from Orders, lodged on the footing of the deleted clause, were held incompetent. (¶¶ 7, 12)
- Section 21(2), Legal Services Authorities Act, 1987Both suits were eventually compromised before a Lok Adalat; the Court noted that Section 21(2) interdicts any appeal from a Lok Adalat award, leaving only the supervisory jurisdiction under Article 227, which had not been invoked. (¶ 14)
- Article 227, Constitution of IndiaNoted as the limited supervisory remedy that remains available against a Lok Adalat award, but which the appellant had not invoked. (¶ 14)
Held
- After the 1976 amendment the CPC provisions on compromise decrees form a coherent scheme: a party accepting the compromise is bound and cannot appeal (Section 96(3)); a party denying the compromise must first raise the dispute before the trial court (proviso to Order XXIII Rule 3); a fresh suit is barred (Order XXIII Rule 3A); and only if the trial court decides the objection and passes a decree adverse to the objector does a first appeal lie under Section 96(1), in which Order XLIII Rule 1A(2) permits the recording of the compromise to be challenged. (¶¶ 7, 8, 9, 11)
- The proviso to Order XXIII Rule 3 is the exclusive first port of call for a party on record who denies the compromise; Order XLIII Rule 1A creates no independent right of appeal, and where the fact of compromise is not disputed the bar in Section 96(3) is absolute. This reading is affirmed by Banwari Lal and Pushpa Devi. (¶¶ 9, 10, 11)
- Compromise terms signed by counsel holding unquestioned vakalatnamas bind the party, since the signature of duly authorised counsel is the signature of the party; the resulting decrees are consent decrees within Section 96(3). Appeals from orders filed on the footing of the deleted Order XLIII Rule 1(m), without invoking the proviso, are incompetent since 1976. (¶ 12)
- Allegations of fraud do not transform a consent decree into an ordinary decree; fraud, want of authority and other vitiating elements are the very matters the proviso directs the trial court to examine, and until that route is pursued the bar in Section 96(3) remains operative. (¶ 13)
- A person who was not a party to the suit but whose rights are affected by a consent decree may, with leave, file a first appeal under Section 96(1); a party to the suit cannot appropriate that remedy reserved for third parties. Where the suits were compromised before a Lok Adalat, Section 21(2) of the Legal Services Authorities Act bars any appeal from the award, leaving only Article 227. (¶¶ 14, 15)
Result
Civil appeals dismissed; the Gujarat High Court Larger Bench judgment dated 28.08.2019 and the Single Judge's consequential order dated 06.09.2019 affirmed; appellant at liberty to invoke the proviso to Order XXIII Rule 3 CPC before the trial court, on which no opinion was expressed; no order as to costs; pending applications disposed of.