Bar under Order 23 Rule 3A CPC to challenge compromise decree extends to strangers as well

Supreme Court: The bench of AM Khanwilkar and Ajay Rastogi, JJ has held that a decree passed on a compromise cannot be challenged by the stranger to the proceedings in a separate suit. Holding that the bar under Rule 3A to Order 23 CPC would extend to strangers as well, the Court said,

“The purpose of effecting a compromise between the parties is to put an end to the various disputes pending before the Court of competent jurisdiction once and for all.”

The legislature has brought into force Rule 3A to Order 23, by introducing the amendment to the Civil Procedure Code (Amendment) 1976 w.e.f. 1st February, 1977, 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.

“Finality of decisions is an underlying principle of all adjudicating forums. Thus, creation of further litigation should never be the basis of a compromise between the parties.”

The bench explained that Rule 3A of Order 23 CPC put a specific bar that no suit shall lie to set aside a decree on the ground that the compromise on which the decree is based was not lawful. 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 can be instrumental in having an agreed compromise effected and finality attached to the same. The Court should never be party to imposition of a compromise upon an unwilling party, still open to be questioned on an application under the proviso to Rule 3 of Order 23 CPC before the Court.”

It, hence, held that merely because the appellant was not party to the compromise decree, will be of no avail to the appellant, much less give him a cause of action to question the validity of the compromise decree.

It, further, explained that after the amendment which has been introduced, neither any appeal against the order recording the compromise nor remedy by way of filing a suit is available in cases covered by Rule 3A of Order 23 CPC. As such, a right has been given under Rule 1A(2) of Order 43 to a party, who denies the compromise and invites order of the Court in that regard in terms of proviso to Rule 3 of Order 23 CPC while preferring an appeal against the decree. Section 96(3) CPC shall not be a bar to such an appeal, because it is applicable where the factum of compromise or agreement is not in dispute.

[Triloki Nath Singh v. Anirudh Singh,  2020 SCC OnLine SC 444 , decided on 06.05.2020]

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