SMT SHILPA K v. SRI M K KRISHNEGOWDA

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Employees Association, Ashok Kumar and others in O.S.No.5597/2011, O.S.No.5599/2011 O.S.No.5600/2011 O.S.No.5601/2011 O.S.No.5623/2011. In the suits, they alleged that compromise entered into by "D" Group Employees Association, Ashok Kumar and others was fraudulent compromise and therefore, they sought that compromise decree passed in O.S.No.4186/2008 is held to be null and void and did not grant any right, title and interest for the "D" Group Employees Association to form a layout and distribute the sites.

4. The Trial Court, after considering the rival contentions of the parties, decreed the suits of the plaintiffs by holding as under:

"The suit of the plaintiff in O.S.No.5597/2011, 5599/2011, 5600/2011, 5601/2011 and 5623/2011 are decreed with costs as under:-

It is declared that the Judgment & Decree dated.17.03.2011 passed in O.S.No.4186/2008 by the Learned City Civil Judge is null and void-ab-initio and not binding on the plaintiff.

Consequently, permanent injunction is granted, thereby the defendants or anybody claiming under them are restrained from alienating or in any manner crating

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encumbrance or third party interest over the suit schedule property.

Further the defendants are restrained by way of permanent injunction from dispossessing or disturbing the peaceful possession of the plaintiff over the suit schedule property.

Draw up a decree accordingly.

Keep the original of this Judgment in

O.S.No.5597/2011 and a copy thereof shall be kept in O.S.No.5599/2011, 5600/2011, 5601/2011 and O.S.No.5623/2011."

5. Being aggrieved by the same, these appeals have been filed by Smt.Shilpa and Smt.Sumangala R. Naik who are not parties to either of the suits, Sri H.K.Krishnappa who was defendant No.23 in O.S.No.5597/2011 and Smt.Anjana Devi, one of the defendant in O.S.No.4186/2008.

6. At the outset, Sri V.B.Shivakumar and Sri C.R.Gopalaswamy, learned Senior Counsel for Sri G.Bhargav, contended that separate suits filed by E.Venkatarathnam and others who are vendees from 6^thdefendant in O.S.No.4186/2008 is impermissible and if at all if there is fraud played by the parties in O.S.No.4186/2008, the only course

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that was open for the parties was to file an application in O.S.No.4186/2008 seeking necessary orders to be passed in the said suit and not by filing separate suit and no Court can pass a decree holding that a decree passed by a duly constituted Court is null and void. In that regard, they placed reliance on the judgment of this Court in the case Division Bench decision of this Court in the case of Syed Basheer Malik and others vs. Jameela Begum and others passed in

RFA No.960/2003 dated 31.01.2015. Relevant portion of the said judgment is culled out hereunder for ready reference:

"28. In this regard, it is useful to refer to Order 23 Rule 3 CPC. It reads as under:

'WITHDRAWAL AND ADJUSTMENT OF SUITS

3. Compromise of suit.- Where it is proved to the satisfaction of the court that a suit has been adjusted wholly or in part by any lawful agreement or compromise in writing and signed by the parties, or where the defendant satisfies the plaintiff in respect of the whole or any part of the subject matter of the suit, the court shall order such agreement, compromise or satisfaction to be recorded, and shall pass a decree in accordance therewith so far as it relates to the parties to the

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suit, whether or not the subject matter of the agreement, compromise or satisfaction is the same as the subject matter of the suit - Provided that where it is alleged by one party and denied by the other than an adjustment or satisfaction has been arrived at, the court shall decide the question; but no adjournment shall be granted for the purpose of deciding the question, unless the court, for reasons to be recorded, thinks fit to grant such adjournment.

Explanation : An agreement or compromise which is void or avoidable under the Indian Contract Act, 1872 (9 of 1872), shall not be deemed to be lawful within the meaning of this rule.

"29. Interpreting this provision, the Apex Court in the case of PUSHPA DEVI BHAGAT referred to supra has held as under:

16. Section 96 provides for appeals from original decrees. Sub-section (3) of section 96, however, provided that no appeal shall lie from a decree passed by the court with the consent of the parties. We may notice here that Order 43 Rule 1

(m) of CPC had earlier provided for an appeal against the order under Rule 3 Order 23 recording or refusing to record an agreement, compromise or satisfaction. But clause (m) of Rule 1 Order 43

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was omitted by Act 104 of 1976 with effect from 1.2.1977. Simultaneously, a proviso was added to Rule 3 Order 23 with effect from 1.2.1977. We extract below the relevant portion of the said proviso:

'Provided that where it is alleged by one party and denied by the other that an adjustment or satisfaction has been arrived at, the court shall decide the question' Rule 3A was also added in Order 23 with effect from 1.2.1977 barring any suit to set aside a decree on the ground that the compromise on which the decree is based was not lawful.

17. The position that emerges from the amended provisions of Order 23, can be summed up thus :

(i) No appeal is maintainable against a consent decree having regard to the specific bar contained in section 96(3) CPC.

(ii) No appeal is maintainable against the order of the court recording the compromise (or refusing to record a compromise) in view of the deletion of clause (m) Rule 1 Order 43.

(iii) No independent suit can be filed for setting aside a compromise decree on the ground that the

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compromise was not lawful in view of the bar contained in Rule 3A.

(iv) A consent decree operates as an estoppel and is valid and binding unless it is set aside by the court which passed the consent decree, by an order on an application under the proviso to Rule 3 of Order 23.

Therefore, the only remedy available to a party to a consent decree to avoid such consent decree, is to approach the court which recorded the compromise and made a decree in terms of it, and establish that there was no compromise. In that event, the court which recorded the compromise will itself consider and decide the question as to whether there was a valid compromise or not. This is so because a consent decree, is nothing but contract between parties superimposed with the seal of approval of the court. The validity of a consent decree depends wholly on the validity of the agreement or compromise on which it is made. The second defendant, who challenged the consent compromise decree was fully aware of this position as she filed an application for setting aside the consent decree on 21.8.2001 by alleging that there was no valid compromise in accordance with law. Significantly, none of the other defendants challenged the consent decree. For reasons best known to herself, the second defendant within a few days thereafter (that is on 27.8.2001), filed

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an appeal and chose not to pursue the application filed before the court which passed the consent decree. Such an appeal by second defendant was not maintainable, having regard to the express bar contained in section 96

(3) of the Code."

7. Sri B.Rangaswamy, counsel for respondent No.1 in all these appeals contended that since the plaintiffs who are the purchasers of the sites from defendant No.6-"D" Group Employees Association, being not party to the compromise, they can maintain a separate suit and the same has been rightly appreciated by the Trial Court and decreed the respective suits and sought for dismissal of the appeals.

8. The said contention of the counsel for respondent No.1- Sri B. Rangaswamy, in all these appeals cannot also be countenanced in law in view of the principles of law enunciated by the Hon'ble Apex Court. The Hon'ble Apex Court, recently had an occasion to consider the scope of amended Order XXIII Rule 3 and Rule 3A of the Code of Civil Procedure, vis a vis a non party or a stranger to the compromise decree. Their Lordships, in the case Triloki Nath Singh vs. Anirudh Singh

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(dead) through legal representatives and others reported in (2020)6 SCC 629 while considering the scope of Order XXIII Rule 3 and Rule 3A of CPC and its effect in respect of a person who is affected by a compromise decree, but who is not a party to the compromise decree, at paragraphs 15 to 20 held as under:

15. What has emerged as a legislative intent has been considered in extenso by this Court in Pushpa Devi Bhagat v. Rajinder Singh [Pushpa Devi Bhagat v. Rajinder Singh, (2006) 5 SCC 566] , after taking note of the scheme of Order 23 Rule 3 and Rule 3-A added with effect from 1-2-1977. The relevant paragraphs are as under: (SCC p. 576, para

17)

"17. The position that emerges from the amended provisions of Order 23 can be summed up thus:

(i) No appeal is maintainable against a consent decree having regard to the specific bar contained in Section 96(3)

CPC.

(ii) No appeal is maintainable against the order of the court recording the compromise (or refusing to record a

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compromise) in view of the deletion of clause (m) of Rule 1 Order 43.

(iii) No independent suit can be filed for setting aside a compromise decree on the ground that the compromise was not lawful in view of the bar contained in Rule 3-A.

(iv) A consent decree operates as an estoppel and is valid and binding unless it is set aside by the court which passed the consent decree, by an order on an application under the proviso to Rule 3 Order 23.

Therefore, the only remedy available to a party to a consent decree to avoid such consent decree, is to approach the court which recorded the compromise and made a decree in terms of it, and establish that there was no compromise. In that event, the court which recorded the compromise will itself consider and decide the question as to whether there was a valid compromise or not. This is so because a consent decree is nothing but contract between parties superimposed with the seal of approval of the court. The validity of a consent decree depends wholly on the validity of the agreement or compromise on which it is made. The second

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defendant, who challenged the consent compromise decree was fully aware of this position as she filed an application for setting aside the consent decree on 21-8-2001 by alleging that there was no valid compromise in accordance with law. Significantly, none of the other defendants challenged the consent decree. For reasons best known to herself, the second defendant within a few days thereafter (that is on 27-8-2001) filed an appeal and chose not to pursue the application filed before the court which passed the consent decree. Such an appeal by the second defendant was not maintainable, having regard to the express bar contained in Section 96(3) of the Code." (emphasis supplied)

16. The scope of intent of Order 23 Rule 3 and Rule 3-A was further considered by this Court in R. Rajanna v. S.R. Venkataswamy [R. Rajanna v. S.R. Venkataswamy, (2014) 15 SCC 471 : (2015) 4 SCC (Civ) 238] wherein this Court held as under : (SCC p. 474, para 11)

"11. It is manifest from a plain reading of the above that in terms of the proviso to Order 23 Rule 3 where one party alleges and the other denies adjustment or satisfaction of any suit by a lawful

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agreement or compromise in writing and signed by the parties, the court before whom such question is raised, shall decide the same. What is important is that in terms of Explanation to Order 23 Rule 3, the agreement or compromise shall not be deemed to be lawful within the meaning of the said Rule if the same is void or voidable under the Contract Act, 1872. It follows that in every case where the question arises whether or not there has been a lawful agreement or compromise in writing and signed by the parties, the question whether the agreement or compromise is lawful has to be determined by the court concerned. What is lawful will in turn depend upon whether the allegations suggest any infirmity in the compromise and the decree that would make the same void or voidable under the Contract Act. More importantly, Order 23 Rule 3-A clearly bars a suit to set aside a decree on the ground that the compromise on which the decree is based was not lawful. This implies that no sooner a question relating to lawfulness of the agreement or compromise is raised before the court that passed the decree on the

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basis of any such agreement or compromise, it is that court and that court alone who can examine and determine that question. The court cannot direct the parties to file a separate suit on the subject for no such suit will lie in view of the provisions of Order 23 Rule 3-A CPC. That is precisely what has happened in the case at hand. When the appellant filed OS No. 5326 of 2005 to challenge the validity of the compromise decree, the court before whom the suit came up rejected the plaint under Order 7 Rule 11 CPC on the application made by the respondents holding that such a suit was barred by the provisions of Order

23 Rule 3-A CPC. Having thus got the plaint rejected, the defendants (respondents herein) could hardly be heard to argue that the plaintiff (appellant herein) ought to pursue his remedy against the compromise decree in pursuance of OS No. 5326 of 2005 and if the plaint in the suit has been rejected to pursue his remedy against such rejection before a higher court." (emphasis supplied)

17. By introducing the amendment to the Civil Procedure Code (Amendment) 1976 w.e.f. 1-2-1977,

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the legislature has brought into force Order 23 Rule 3-A, 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. 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.

18. 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. Rule 3-A 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 Order 23 Rule 3 CPC before the court.

19. It can be further noticed that earlier under Order

43 Rule 1(m), an appeal which recorded the

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compromise and decided as to whether there was a valid compromise or not, was maintainable against an order under Order 23 Rule 3 recording or refusing to record an agreement, compromise or satisfaction. But by the amending Act, aforesaid clause has been deleted, the result whereof is that now no appeal is maintainable against an order recording or refusing to record an agreement or compromise under Order

23 Rule 3. Being conscious of this fact that the right of appeal against the order recording a compromise or refusing to record a compromise was being taken away, a new Rule 1-A was added to Order 43 which is as follows:

"1-A. Right to challenge non-appealable orders in appeal against decree.—(1) Where any order is made under this Code against a party and thereupon any judgment is pronounced against such party and a decree is drawn up, such party may, in an appeal against the decree, contend that such order should not have been made and the judgment should not have been pronounced.

(2) In an appeal against a decree passed in a suit after recording a compromise or refusing to record a compromise, it shall be open to the appellant to contest the decree on the ground that the compromise should, or should not, have been recorded."

20. Thus, after the amendment which has been introduced, neither any appeal against the order

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recording the compromise nor remedy by way of filing a suit is available in cases covered by Rule 3-A of Order 23 CPC. As such, a right has been given under Rule 1-A(2) of Order 43 to a party, who denies the compromise and invites order of the court in that regard in terms of the proviso to Order 23 Rule 3 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."

9. An amendment was made to Order XXIII Rule 3 of Code of Civil Procedure by incorporating Rule 3A in the year 1976 to be effective from 01.02.1977.

10. As could be seen from the above provision of law, no Court can entertain a fresh suit to set-aside a compromise decree on the ground that compromise decree was not lawful.

11. The plaintiffs who is first respondent in all these appeals have instituted a separate suit alleging that defendant No.6 in O.S.No.4186/2008 has clandestinely entered into a compromise petition and thereafter, on the basis of said compromise, sold an area to the extent of 38,000 sq.ft. in favour of Smt.Mobeena

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Kouser and Smt.Abeeda Begum who are respondent Nos.22 and 23 in RFA No.1285/2016 and they in turn formed the layout and sold individual sites in favour of 3^rdparties and therefore, they can maintain an independent suit. In other words, the contentions of the plaintiffs is that there is a fraud played while entering into compromise in O.S.No.4186/2008 and therefore, disposal of suit in O.S.No.4186/2008 based on the fraudulent compromise is illegal and therefore, impugned judgment and decree in these appeals are perfectly valid.

12. Since the contentions that are urged in the respective plaints by the first respondent in all these appeals is that there was a fraudulent compromise entered into by Ashok Kumar and others and the 6^thdefendant in O.S.No.4186/2008 viz., 'D' Group Employees Association, the said issue could have been adjudicated by the learned Judge in the impugned judgment and decree in separate suits. Therefore, the bar under Order XXIII Rule 3A of the Code of Civil Procedure is applicable to the fresh suits in O.S.No.5597/2011, O.S.No.5599/2011 O.S.No.5600 /2011 O.S.No.5601/2011 O.S.No.5623/2011 filed by purchasers in view of the principles of law enunciated in the

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case of Syed Basheer Malik and others vs. Jameela Begum and others, supra. Therefore, the only course that was open for plaintiffs was to file necessary application before the Court where O.S.No.4186/2008 came to be disposed of in the very same suit.

13. Reserving such liberty for the plaintiffs, the impugned judgment and decrees are to be set-aside, in view of Order XXIII Rule 3A of the Code of Civil Procedure. Hence, the following:

ORDER

(i) Appeals are allowed.

(ii) Impugned judgment and decrees are hereby set-aside.

(iii) Plaintiff in O.S.No.4186/2008 is at liberty to file necessary applications in

O.S.No.4186/2008 to seek revival of

compromise decree and get necessary relief in the very same suit after themselves getting impleaded as parties.

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(iv) Time spent by the plaintiffs in adjudicating O.S.Nos.5597/2011, 5599/2011, 5600/2011, 5601/ 2011 and 5623/2011 stands excluded in view of Section 12 of the Limitation Act. If such applications are filed by the first respondent in all these appeals, Trial Court shall expedite the adjudication of such applications, in accordance with law.

(v) All contentions of the parties are kept open to be adjudicated by the Trial Court, in accordance with law.

(vi) In view of disposal of the appeals, all the pending applications stands disposed of.

Sd/-

JUDGE

kcm List No.: 1 Sl No.: 56