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Case Number
Attorney(S)
  • S.C. Khare
  • Gopal Behari
Judges
  • Hon'ble Mr. Basudeva Mukerhji
  • Hon'ble Mr. Ambika Prasad Srivastava
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Citation Codes
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citation codes
Case Number
Attorney(S)
  • S.C. Khare
  • Gopal Behari
Judges
  • Hon'ble Mr. Basudeva Mukerhji
  • Hon'ble Mr. Ambika Prasad Srivastava
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Smart Summary

Structured Summary of the Opinion (Srivastava, J.)

Factual and Procedural Background

The plaintiff sued the defendant for recovery of Rs. 8,497. On the date fixed for the final hearing the parties filed a compromise signed by the plaintiff's vakil, the defendant personally and the defendant's counsel. The compromise was verified in court by the plaintiff's counsel and by the defendant. On 30-1-51 the Court passed an order stating that the suit was decreed in terms of the compromise and that the compromise shall be part of the decree. A formal decree was drawn and signed on 5-2-51.

On 9-2-51 the defendant filed an application under Section 151 CPC alleging that the plaintiff's son had induced him to sign the compromise by fraud and misrepresentation, that he was not allowed to consult his counsel, had not understood the compromise, and that the compromise had not been read out to him. He alleged the compromise was obtained by fraud on him and the Court and sought to set aside the decree. He filed an affidavit in support. The plaintiff denied the allegations and contended the compromise was valid and that the defendant had voluntarily signed and verified it; she also argued that the appropriate remedy for alleged fraud was a regular suit and that Section 151 was not the correct vehicle.

The learned Civil Judge held that Order 23, Rule 3 CPC had not been strictly followed because the compromise had not been ordered to be recorded; he considered that in absence of such an order a decree could not have been passed and that the omission deprived the defendant of a right of appeal. The Civil Judge quashed and set aside the decree and directed parties to produce evidence on the compromise issue, fixing a date for proof.

The plaintiff moved in revision against that order, pressing two principal contentions: (1) once the compromise had been filed, verified and a decree passed thereon, the Civil Judge had no jurisdiction under Section 151 CPC to set aside the decree; and (2) the order making the compromise part of the decree satisfied Order 23, Rule 3 and, if aggrieved, the defendant should have appealed rather than move under Section 151.

Legal Issues Presented

  1. Whether the learned Civil Judge had jurisdiction under Section 151 CPC (inherent powers) to set aside a decree passed on a compromise which had been filed, verified and decreed.
  2. Whether Order 23, Rule 3 CPC was complied with when the Court ordered that the compromise "shall be part of the decree" (i.e., whether that amounted to ordering the compromise to be recorded).
  3. Whether allegations that a compromise was procured by fraud can be contested and the decree set aside in summary proceedings (e.g., under Order 23, Rule 3 CPC or Section 151 CPC) or whether the proper remedy is a regular suit to set aside the decree for fraud.
  4. Whether the revision application is maintainable (i.e., whether the order setting aside the decree constitutes a "case decided" under Section 115 CPC for the purposes of revision).

Arguments of the Parties

Plaintiff's Arguments

  • The compromise had been filed and duly verified in court and a decree had been passed on that basis; the Civil Judge therefore had no jurisdiction to set aside the decree by an application under Section 151 CPC.
  • The order declaring that the compromise "shall be part of the decree" amounted to an order recording the compromise under Order 23, Rule 3 CPC; if the defendant were aggrieved he should have appealed under Order 43, Rule 1 CPC.
  • If the defendant wanted to set aside the compromise on grounds of fraud or misrepresentation, his remedy lay in a regular suit rather than in summary or miscellaneous proceedings under Order 23 or Section 151.

Defendant's Arguments

  • The defendant alleged the compromise had been obtained by fraud and misrepresentation by the plaintiff's son; he claimed he was not allowed to consult his counsel, had not understood the compromise and that it had not been read out to him.
  • He applied under Section 151 CPC to have the decree set aside on the ground that the compromise was obtained by fraud.
  • At the trial court he also contended that Order 23, Rule 3 CPC had not been strictly complied with because the compromise had not been ordered to be recorded, thus depriving him of a right of appeal; accordingly he sought relief in the court's inherent jurisdiction.
  • He raised a preliminary objection later asserting that the revision was not maintainable because no case had been decided.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Ramrichpal Singh v. Dayanand Sarup, AIR 1955 All 309 Definition of a "case decided" for Section 115 CPC — three essential features (claim of right, substantiality of the right, and proceeding being separate and complete). The Court applied these three features to hold that the order setting aside the decree amounted to a case decided and therefore the revision was maintainable; the preliminary objection was overruled on this basis.
Sadho Saran Rai v. Anant Rai, AIR 1923 Pat 483 Where gross fraud has been perpetrated upon the Court (fraud on the Court), a compromise decree may be set aside on a mere application; draws distinction between fraud on a party and fraud on the Court. The Court considered this case but held it did not support setting aside the decree in the present matter because in that case gross fraud upon the Court had been found; the present case lacked any allegation of fraud upon the Court.
Jagat Singh v. Sanat ??? Singh, AIR 1940 PC 70 Illustrates that a decree expressed to be passed "on the terms and under the conditions embodied in the deed of compromise" can suffice to record the compromise for purposes of Order 23, Rule 3. Used to support the view that an order making the compromise part of the decree is a valid mode of recording the compromise and that strict formal words are not necessary under O. 23, R. 3.
Mt. Shah Jahan Begam v. Ghulam Rabani, 1935 All LJ 962 : AIR 1935 All 738 Omission to record a compromise is at most an irregularity; Section 99 CPC makes such irregularity unimportant. The Court cited this authority to show that failure to record a compromise strictly is not necessarily fatal and can be treated as an irregularity not invalidating the decree.
Tjmia Shanker Naranji v. Sheoshankar Prabhashankar, AIR 1944 Bom 239 Shows that an order under Order 23, Rule 3 is an order that can be appealed against (i.e., an alternative remedy existed by way of appeal). The Court relied on this to observe that if the defendant was dissatisfied with the Court's order making the compromise part of the decree, his remedy lay in appeal rather than in invoking inherent jurisdiction.
Union of India v. Raghubir Saran, AIR 1957 All 120 Held that a contract vitiated by fraud can be set aside by a regular suit; Order 23, Rule 3 does not provide for inquiry into disputed collateral facts; a party cannot avoid an admittedly executed compromise in miscellaneous proceedings under O.23,R.3 by alleging fraud. The Court relied heavily on this precedent to conclude that where the factum of consent is not disputed but fraud is alleged to have procured that consent, the appropriate remedy is a regular suit and not summary proceedings under O.23 or Section 151.
Mst. Kalpa v. Sitaram, AIR 1955 All 187 When the very factum of a compromise is disputed (i.e., whether a compromise was in fact arrived at), the Court must investigate that question and record a finding before acting on the compromise. The Court distinguished this case: it applied where the factum of the compromise itself was denied before recording; here, by contrast, the factum was admitted and only its alleged procurement by fraud was raised later, so Mst. Kalpa did not permit setting aside in summary proceedings.

Court's Reasoning and Analysis

The Court proceeded in a series of analytically distinct steps:

  1. Maintainability of revision: The Court rejected the defendant's preliminary objection that the revision was not maintainable for want of a "case decided". Applying the three-fold test from Ramrichpal Singh v. Dayanand Sarup, the Court found that (a) the plaintiff had claimed a right (to maintain the decree), (b) this was a substantial right materially affecting the plaintiff's interests, and (c) the proceedings in which the order was made were separate and complete. Hence the order setting aside the decree amounted to a decision under Section 115 CPC and the revision was maintainable.
  2. Availability of inherent jurisdiction under Section 151 CPC: The Court emphasised the well-settled legal principle that a party cannot invoke the inherent jurisdiction of the court when an alternative remedy exists and was not pursued. It accepted the plaintiff's contention that where another remedy (e.g., appeal or a regular suit) was available, the defendant could not properly seek to set aside a compromise decree under Section 151 CPC.
  3. Distinction between fraud on the court and fraud on a party: The Court examined Sadho Saran Rai v. Anant Rai and related authorities, underlining that gross fraud upon the Court may justify setting aside a compromise decree on a summary application, whereas fraud which affects only a party (i.e., that a party's consent was procured by fraud) ordinarily requires a suit. The Court found that in the present case there were no allegations showing fraud on the Court itself; allegations of fraud were made only after the decree had been passed and related to procurement of consent, not to deception of the Court.
  4. Factum of consent versus vitiation of consent: Following the Patna case and Union of India v. Raghubir Saran, the Court held that where the factum of consent is not disputed (the parties filed and verified the compromise), the question whether consent was procured by fraud (i.e., the reality or vitiation of consent) cannot be adequately resolved in summary proceedings under O.23,R.3 or by invocation of Section 151. The proper remedy for such a claim of fraudulent procurement is a regular suit to set aside the decree.
  5. Compliance with Order 23, Rule 3 CPC: The Court noted that O.23,R.3 requires that the compromise be ordered to be recorded but does not prescribe the precise form of recording. The order making the compromise "part of the decree" was held to be a valid method of recording; authorities such as Jagat Singh and Mt. Shah Jahan Begam supported treating omission to use specific words as at most irregular and not fatal. The Court therefore considered the learned Civil Judge's reliance on the absence of a formal order recording the compromise to be misplaced.
  6. Distinguishing Mst. Kalpa: The Court accepted that if the factum of compromise itself is disputed before recording, the court must investigate that factual question. But where the factum is admitted and only vitiation by fraud is alleged subsequently, the proceedings contemplated by O.23,R.3 or Section 151 are not the correct forum for resolution.
  7. Conclusion of analysis: Because the factum of the compromise was not disputed (it was signed and verified by the parties and counsel) and there was no charge of fraud upon the Court, the learned Civil Judge lacked jurisdiction to set aside the decree in exercise of inherent powers under Section 151 CPC. The Civil Judge's order was therefore unsustainable.

Holding and Implications

Holding: The revision is allowed; the order dated 25-7-51 (by which the learned Civil Judge quashed and set aside the decree based on the compromise) is set aside. Costs awarded to the applicant in revision.

Implications:

  • Direct effect on the parties: The order of the learned Civil Judge that had set aside the compromise decree has been overturned; the plaintiff's challenge in revision succeeds and the civil judge's order is annulled. The defendant's attempt to set aside the decree by means of an application under Section 151 CPC (and by miscellaneous proceedings) was held to be inappropriate in the circumstances of this case.
  • Procedural guidance: The opinion reiterates and applies the settled principle that where the factum of consent to a compromise is admitted, allegations that consent was procured by fraud should be pursued by a regular suit rather than in summary or miscellaneous proceedings under Order 23, Rule 3 or by invoking Section 151 CPC, unless there is a clear case of fraud upon the court itself.
  • On precedent and novelty: The decision applies established authorities and principles and does not purport to lay down a novel rule; it distinguishes prior cases where the factum of the compromise itself was disputed or where gross fraud upon the court was found.

Outcome recorded in the opinion: "Revision allowed." (R.G.D.)

Show full summary ...

    Laraiti Devi v. Sia Ram

    Srivastava, J.:— This is a plaintiff's application in revision. She filed a suit against the defendant, now opposite party, for the recovery of Rs. 8497/-. On the date fixed for final hearing of the case, a compromise purporting to have been arrived at between the parties was filed in Court. The compromise was signed by the vakil for the plaintiff, the defendant himself and the defendant's counsel. The compromise was put up before the Court and was duly verified on behalf of the plaintiff by her counsel and by the defendant personally. The Court on 30-1-51 passed an order in these terms:

    “Parties file compromise.

    The suit is decreed in terms of the compromise, 35B which shall be pant of the decree.”

    2. A formal decree was drawn up and was signed on 5-2-51, On 9-2-51 the defendant filed an application headed as an application under Section 151 of the CPC, in which he alleged that the plaintiff's son had persuaded him to sign the compromise by practising fraud and misrepresentation. He further said that he had not been allowed to consult his counsel and had signed the compromise without understanding its contents. At the time of the verification also the compromise had not been read out to him. The compromise had thus been obtained by practising fraud on him as well as on the Court, and was liable to be set aside. He also urged that the decree had been passed without complying strictly with the provisions of O. 23, R. 3 of the CPC. He, therefore, prayed that the decree be set aside. In support of this application he filed an affidavit. The plaintiff contested the application and denied all the allegations of fraud and misrepresentation. She said that the compromise was a valid one and that the defendant had settled the terms willingly and after understanding each the of them. He had not only signed the compromise petition but had also verified it before the Court. He was therefore not entitled to get the decree passed on the basis of the compromise set aside by filing an application like the one he had filed. It was also urged on her behalf that S. 151 did not apply at all and if the defendant wanted to have the compromise set aside on the ground of fraud he should have sought his remedy in a regular suit.

    3. The learned Civil Judge took the view that the provisions of O. 23, R. 3 had not been strictly followed because the compromise had not been ordered to be recorded. Without there being an order directing the recording of the compromise no decree could have been passed on its basis. As there was no order for recording the compromise the defendant had been deprived of his right of appeal and could/therefore agitate the matter under Section 151 of the CPC. The learned Civil Judge, therefore, quashed the decree passed in the case on the basis of the compromise and set it aside. He required the parties to produce evidence for and against the compromise, and fixed a date for that purpose.

    4. The plaintiff has come up in revision against the order and two contentions have been pressed on her behalf. It was urged, in the first place that the compromise having been filed and verified before the Court and a decree having been passed on its basis the learned Civil Judge had no jurisdiction to set it aside under Section 151 of the CPC. The second contention was that the view of the learned Civil Judge that O. 23, R. 3 of the CPC, had not been strictly complied with was not correct. As the order directed the compromise to be a part of the decree it amounted to an order recording the compromise. If the defendant was not satisfied with the order he should have gone up in appeal against it under O. 43, R. 1 of the CPC. The question of fraud or misrepresentation which the defendant wanted to raise by his subsequent application could not be legally raised or considered in proceedings under O. 23. R. 3 of the CPC.

    5. A preliminary objection has been raised on behalf of the defendant that the application in revision is not maintainable as no case had been decided.

    6. The preliminary objection has in our opinion no real force. A decree on the basis of the compromise had been passed in favour of the Plaintiff. By the order sought to be revised the learned Civil Judge has set aside the decree. The main contention of the plaintiff which has been rejected by the learned civil Judge was that after the decree had been passed it was not open to the defendant to have set aside by a mere application. His grievance now is that by rejecting his contention the learned Civil Judge has deprived him of a substantial right. The fact that the learned Civil Judge has fixed a date for considering the evidence of the parties about the allegations on which the compromise was sought to be avoided by the defendant cannot make any material difference.

    7. The setting aside of the decree by itself amounts to a decision of the case within the meaning of the term as used in Section 115 of the CPC. In the Full Bench case of Ramrichpal Singh v. Dayanand Sarup AIR 1955 All 309 (A), Agarwala J. laid down three essential features of a case which must be present before it can be held to be a case decided under Section 115 of the CPC. These features, according to the learned Judge are: (1) the proceeding should be one in which a claim is made by one party that he is entitled to certain rights by the other party; (2) the rights claimed must be substantial, the grant or refusal of which materially affects the interest of a party and (3) the proceeding must be separate and complete by itself.

    8. All these essential features will be found to be present in the matter now in hand. In the proceedings in which the order sought to be revised was passed the plaintiff claimed the right to maintain the decree which had been passed in her favour on the basis of the compromise. The right which she claimed was a substantial one, the grant or refusal of the right materially affected her interest and the proceedings were separate and complete proceedings which had been started by the defendant's application made after the decree had been passed. We, therefore, find it difficult to accept the contention that the order sought to be revised does not amount to a case decided. The preliminary objection must consequently be overruled.

    9. The contention of the learned counsel for the plaintiff is that if the defendant was aggrieved by the order accepting the compromise and making it a part of the decree he should have challenged it in appeal. If it was his case that the compromise was voidable his option on the grounds of fraud or misrepresentation he had his remedy in a regular suit. In any case he had no right to pray for the quashing of the compromise and the setting aside of the decree on an application made under Section 151 of the CPC. This contention appears to us to be well founded. It is well settled that it is not open to any party to Invoke the inherent jurisdiction of the court when he had another remedy open to him but did not pursue It.

    10. The only case which the learned counsel for the defendant could refer to in support of the contention that the decree in the present case could be set aside on an application under Section 151 of the CPC is the case of Sadho Saran Rai v. Anant Rai, AIR 1923 Pat 483 (B). A careful perusal of the case Will, however show that it does not in fa-1 support the contention of the learned counsel. It had been found as a fact in that case that gross fraud had been perpetrated not only upon the plaintiff but on the court itself. That was the main reason why the compromise decree passed. In that case had been set aside on a mere application.

    11. While dealing with the question whether a compromise decree could be challenged by an application or whether a regular suit was necessary for setting it aside was laid down:

    “A distinction has been drawn in the cases of Indian Courts between a fraud practised upon a party and a fraud practised upon the Court. It has been laid down that where the question is whether there was consent in fact there is power in the Courts to investigate the matter in a properly constituted application and to set aside the decree if it is satisfied that a party never in fact consented to it but that the Court was induced to pass the decree on the fraudulent representation made to it that the party had consented to it but that where there is a consent in tat the is to say where the parties have filed a compromise petition and they admit that they have filed but if the parties allege that the consent was procured by fraud, the Court cannot investigate the matter either in review or in the exercise of its inherent power and that the only remedy of the party is to institute a suit to set aside the decree on the ground of fraud. In other words, the factum of the consent can be investigated in summary proceedings but the reality of the consent cannot be so investigated.”

    12. Applying these principles to the present case it will be found that there the defendant as well as his counsel had signed the compromise along with the plaintiff's counsel. The compromise had been filed in court and had been duly verified. Till that stage there was no allegation of any fraud or his-representation. Even the decree had been allowed to be passed on the basis of the compromise. It was only after the decree had been passed that the defendant alleged for the first time that his consent of the compromise had really been obtained by fraud and misrepresent at on practised by the son of plaintiff. Even at that stage no definite allegations were made showing that any fraud had actually been practised on the court.

    13. This was therefore a case in which the factum of the consent was not disputed. The only thing alleged was that the consent had been procured by fraud. According to the Patna case also, therefore, the consent decree in the present case could not be set aside in summary proceedings and the only remedy of the defendant if he wanted to challenge the decree was to institute a suit to set aside the decree on the ground of fraud. It therefore appears to us that the learned Civil Judge had really no jurisdiction to set aside the decree in the exercise of his inherent powers under Section 151 of the CPC. The first contention of the plaintiff's counsel must therefore succeed.

    14. In view of what has been said above the second contention loses much of its importance. It may however be observed that in taking the view that O. 23, R. 3 of the CPC had not been strictly complied with in the present case the learned Civil Judge appears to have ignored two facts: (1) That O. 23, R. 3 only requires that the compromise or adjustment should be ordered to be recorded. It does not lay down how it is to be recorded. In the present case in the order dated 31-1-51 the learned Civil Judge had clearly provided that the compromise should form part of the decree. That was certainly one of the ways in which the compromise could have ceen recorded. In the case of Jagat Singh v. Sanat ??? Singh, AIR 1940 PC 70 (C), the decree had been passed on the basis of a compromise without a specific order that the compromise be recorded. The decree was in these terms:

    “Ordered that a decree be and the same is hereby passed on the terms and under the conditions embodied in the deed of compromise dated 9th June 1907, as a whole with this res ration that the sum of Rs. 8150 shall be paid within fifteen days from today, in case of failure defendant No. 1 (Bishan Devi) to be entitled to recover that amount by execution”

    15. It was urged that as the compromise had not been ordered to be recorded the decree had not been properly passed. The contention was not accepted and it was held that O. 23, R. 3 had been sufficiently complied with the decree could be regarded to have recorded the compromise. In the case Mt. Shah Jahan Begam…Defendant v. Ghulam Rabani…Plaintiff ., 1935 All LJ 962 : (AIR 1935 All 738 (D)) it was held that the omission to record a compromise was at the most an irregularity which could not be given any importance in view of S. 99 of the Code of Civil Procedure. (2) The order dated 31-1-5-1 though it did not in terms say that the compromise be recorded was in fact an order under O. 23. R. 3 and could be appealed against if the defendant really wanted to challenge it vide Tjmia Shanker Naranji v. Sheoshankar Prabhashankar, AIR 1944 Bom 239 (2) (E).

    16. The learned Civil Judge thus appears to have given undue importance to the fact that in the order dated 31-1-51 the Court had not specifically provided that the compromise was to be recorded. There was no question of the defendant having been deprived of any right of appeal nor could it be said that on account of that omission the decree passed became one without jurisdiction.

    17. The view of the learned Civil Judge that it was possible for the defendant to raise in proceedings under O. 23, R. 3 of the CPC, the question whether the compromise had been obtained by fraud or misrepresentation can also not be said to be in consonance with the view of this Court. In the case of Union of India v. Raghubir Saran. AIR 1957 All 120 (P), a Bench of this. Court has laid down:

    “A contract vitiated by fraud can be set aside by a decree obtained in a regular suit instituted for that purpose. Order 23, R. 3 does not provide any enquiry into the disputed facts collateral to the terms of the compromise. The party alleging fraud cannot be allowed to avoid the compromise admittedly executed by it in Miscellaneous proceedings started by an application under O. 23.,R. 3 of the CPC. The Court is bound to give effect to it if it is lawful having regard to its own terms.”

    18. The learned counsel for the defendant referred in this connection to the case of Mst. Kalpa v. Sitaram, (S) AIR 1955 All 187 (G) and urged that a different view had been taken in that case. This does not appear to be correct, and the two cases are easily reconcilable. In the case of Mst. Kalpa v. Sitaram, (G) the defendant No. 1 who was alleged to have compromised the suit with the plaintiff had repudiated the compromise before it was acted upon by the Court and bad alleged that she had neither entered into a compromise nor had she appeared before the Court for the verification of the same. An issue was framed on the point, but the learned civil Judge held that it was not open to him to go into the question in view of the compromise having been verified earlier before his predecessor. Without considering the question, therefore, he order ??? that a decree be prepared in terms of the compromise.

    19. In these circumstances it was held that when the factum of the compromise was itself disputed the Court was bound to go into the question and to record a finding whether the compromise had in fact been arrived at or not. The case was therefore sent back for the decision of that question. The distinction between the case of Mst. Kalpa v. Sitaram, (G) and the case of Union of India v. Raghubir Saran, (P) lies in the fact that While in the latter case the entering into of the compromise was not disputed but it was sought to too avoided on the ground that it had been obtained by fraud, in the former case the very fact that the compromise has been arrived at was disputed. When a compromise is filed and is alleged to have been made by the parties, before recording it the Court is bound to arrive at a finding on the question whether the compromise has in fact been arrived at or not. That was the only thing that was laid down in Mst. Kalpa's case (G).

    20. If the compromise was in fact arrived at the additional question whether it was voidable at the instance of one of the parties on grounds similar to fraud or misrepresentation was according to the Union of India v. Raghubir Saran (F) foreign to proceedings under O. 23, R. 3 and could not be considered in those proceedings. The settled view of this Court thus appear to be that it is not open to a party to avoid a compromise admittedly entered into by it in proceedings under O. 23. R. 3 by alleging fraud. This is in substance what the defendant wanted to do before the learned Civil Judge. The result is that the order sought to be revised cannot be upheld and the application must succeed. The application in revision is therefore allowed with costs. The order dated 25-7-51 is set aside.

    R.G.D

    21. Revision allowed.

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    Comments

    Laraiti Devi v. Sia Ram
    (Mar 22, 1957)