IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 6TH DAY OF MARCH 2015

PRESENT

THE HON’BLE MR. JUSTICE N.KUMAR

AND THE HON’BLE MR. JUSTICE B.SREENIVASE GOWDA

R.F.A NO.1138/2013

BETWEEN : 1. Smt.Lakshmamma

D/o Late Hanumanthegowda, W/o Narayanaswamy, Aged about 63 years, Residing at:Linganahalli Village, Hesaraghatta Hobli – 560 088, Bangalore North Taluk, Bangalore Rural District.

2. Smt.Sharadamma D/o Late.Hanumanthegowda, W/o Anjanappa, Aged about 61 years, Residing At: Ancharahalli Village, Toobagere Hobli, Doddaballapura Taluk – 561 203, Bangalore Rural District.

3. Smt.Susheelamma D/o Late Hanumanthegowda, W/o Gowdappa, Aged about 57 years, Residing At:Thimmasandra Village, Jala Hobli – 562 110,

R

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Bangalore North Taluk, Bangalore Rural District. ...APPELLANTS

(By Sri.P.Mahesha, Adv.)

AND : 1. Sri.T.H.Ramegowda

S/o Late Hanumanthegowda, Aged about 65 years, Residing At:Tharahunise Village, Jala Hobli, Bangalore North Taluk, Bangalore District-562157.

2. Smt.Kanthamma D/o Late Hanumanthegowda, W/o Muninarayanappa, Aged about 59 years, Residing At: K.Narayanapura Village, Kothnur Post, Bangalore South Taluk, Bangalore District-560077.

3. Sri N.C.Patel, S/o Late Chikkakempanna, Aged about 69 years, Residing At Nagadasanahalli Village, Yelahanka Hobli, Bangalore South Taluk, Bangalore District – 560 077.

4. Sri Vivek Kumar S/o Dinesh Kumar, Aged about 43 years, Residing At No.61, "Sribagh 4th Main, Malleshwaram, Bangalore-560055.

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5. Sri T R Jagadeesh S/o T.H.Ramegowda, Aged about 40 years, Residing At No.64, Tharahunase Village & Post, Jala Hobli, Bangalore North Taluk, Banglaore District – 562 157.

6. Sri T R Manjunathagowda S/o T.H.Ramegowda, Aged about 30 years, Residing At No.64, Tharahunase Village & Post, Jala Hobli, Bangalore North Taluk, Bangalore District – 562 157.

7. Sri T R Sonnegowda S/o T.H.Ramegowda, Aged about 28 years, Residing At No.64, Tharahunase Village & Post, Jala Hobli, Bangalore North Taluk, Bangalore District – 562 157. …RESPONDENTS

(By Sri.G.V.Shashi Kumar, Adv. for R-1, R-5 to R-7,

Sri G.S.Patil, Adv. for R-3 Sri Ganesh Bhat Y.H., Adv. for R-4.)

. . . .

This RFA is filed Under Section 96 of CPC, against the judgment and decree dated:12.04.2013 passed in O.S.438/2011 on the file of the Presiding Officer, Fast Track Court, Devanahalli, allowing the application filed U/O-VII, Rule-11 of CPC.

This R.F.A. coming on for orders, this day,

N.Kumar J., delivered the following:

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J U D G M E N T

The plaintiff has preferred this appeal against the

order passed by the Trial Court on an application filed

under Order 7 Rule 11 of CPC by the 1st defendant

requesting the Court to dismiss the suit as not

maintainable.

2. For the purpose of convenience, the parties are

referred to as they are referred to in the original suit.

3. Plaintiffs filed O.S.No.438/2011 on the file of

the Fast Track Judge, Devanahalli for partition and

separate possession of their 1/5th share in all the plaint

schedule properties and for a decree to set aside the

compromise petition dated 28.03.2005 filed under Order

23 Rule 3 r/w Section 151 CPC by the plaintiffs and the

defendants in O.S.No.121/2000 on the file of the

Second Additional Senior Civil Judge, Bangalore Rural

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District at Bangalore on the ground that fraud and

misrepresentation was practiced on them in obtaining

their signatures on the compromise petition and for

other consequential reliefs.

4. After service of summons, the defendant

entered appearance and filed an application under

Order 7 Rule 11 of CPC contending that if the plaintiffs’

case is that compromise decree was obtained by fraud,

their remedy is to approach the very same Court, which

passed the compromise decree and they have no right to

maintain a separate suit for setting-aside the said

compromise decree. They further contend that the

statutory provisions contained in the Civil Procedure

Code in particular Order 23 Rule 3A, categorically states

that no suit shall lie to set-aside a decree on the ground

that the compromise on which the decree was passed

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was not lawful. Therefore, they sought for rejection of

the plaint.

5. The plaintiffs filed their objections contending

that the subject matter of the earlier proceedings is only

item No.8 of the plaint schedule property. The

compromise relates only to that item and there is no

compromise in respect of other items of the plaint

schedule property.

6. The Trial Judge after considering the material

on record and hearing the parties recorded a categorical

finding that the earlier compromise is not confined to

only item No.8. All the properties, which are the subject

matter of the present suit were the subject matter of the

earlier suit and the plaintiffs had given up their right in

the entire schedule properties on a receipt of a sum of

Rs.4,00,000/- from the 1st defendant. Therefore, the

contention that it was confined to only item No.8 of the

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plaint schedule was not accepted. Further it held that if

the grievance is that the said compromise was brought

about by practicing fraud by the 1st defendant, his

remedy was to approach the very same Court, which

passed the compromise decree and the suit for setting

aside the decree is not maintainable. Therefore, the

learned Trial Judge allowed the application under Order

7 Rule 11 dismissing the suit filed by the plaintiff.

Aggrieved by the said order, the plaintiffs have preferred

this appeal.

7. We have heard the learned counsel for the

parties.

8. The question that arises for our consideration

in this appeal is as under:

If the party chooses to challenge the

compromise decree, which is the forum before

which such a challenge is to be made?

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9. Order 23 Rule 3 provides for compromise of the

suit. It reads as under:

R. 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 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 that an

adjustment or satisfaction has been arrived

at, the court shall decide the question; but no

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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.

10. Rule 3A imposes a bar to challenge such

compromise which reads as under:

R. 3A. Bar to suit.– No suit shall lie to set

aside a decree on the ground that the

compromise on which the decree is based

was not lawful.

11. Order 43 Rule 1 clause (m) of the Code which

provided for a miscellaneous appeal against an order

passed on the application filed under Order 23 Rule 3 of

CPC has now been deleted from the statute. Section

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96(3) of the Code declares that no appeal shall lie from a

decree passed by the Court with the consent of the

parties.

12. These provisions fell for consideration before

the Apex Court in the case of Banwari Lal Vs.

Smt.Chando Devi (through L.R.) and another

reported in AIR 1993 SC 1139(1) where interpreting

Order 23 Rule 1 and 3, Order 43 Rule 1A and Section

96(1) of the code, it was held as under at paras 13

and 14:

13. When the amending Act introduced a

proviso along with an explanation to Rule 3 of

Order 23 saying that where it is alleged by

one party and denied by other that an

adjustment or satisfaction has been arrived

at, "the Court shall decide the question", the

Court before which a petition of compromise is

filed and which has recorded such

compromise, has to decide the question

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whether an adjustment or satisfaction had

been arrived at on basis of any lawful

agreement. To make the enquiry in respect of

validity of the agreement or the compromise

more comprehensive, the explanation to the

proviso says that an agreement or

compromise "which is void or voidable under

the Indian Contract Act..." shall not be

deemed to be lawful within the meaning of

the said Rule. In view of the proviso read with

the explanation, a Court which had

entertained the petition of Compromise has to

examine whether the compromise was void or

voidable under the Indian Contract Act. Even

Rule 1(m) of Order 43 has been deleted under

which an appeal was maintainable against

an order recording a compromise. As such a

party challenging a compromise can file a

petition under proviso to Rule 3 of Order 23,

or an appeal under Section 96(1) of the Code,

in which he can now question the validity of

the compromise in view of Rule 1A of Order

43 of the Code.

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14. The application for exercise of power

under proviso to Rule 3 of Order 23 can be

labeled under Section 151 of the Code but

when by the amending Act specifically such

power has been vested in the Court before

which the petition of compromise had been

filed, the power in appropriate cases has to

be exercised under the said proviso to Rule 3.

It has been held by different High Courts that

even after a compromise has been recorded,

the Court concerned can entertain an

application under Section 151 of the Code,

questioning the legality or validity of the

compromise. Reference in this connection may

be made to the cases Smt. Tarn Bai v. V.S.

Krishnaswamy Rao AIR 1985 Karnataka

270, S.G. Thimmappa v. T. Anantha,

Bindeshwari Pd. Chaudhary v. Debendra Pd.

Singh , Mangal Mahton v. Behari Mahton and

Sri Sri Iswar Gopal Jew v. Bhagwandas

Shaw , where it has been held that

application under Section 151 of the Code is

maintainable. The Court before which it is

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alleged by one of the parties to the alleged

compromise that no such compromise had

been entered between the parties that Court

has to decide whether the agreement or

compromise in question was lawful and not

void or voidable under the Indian Contract

Act. If the agreement or the compromise itself

is fraudulent then it shall be deemed to be

void within the meaning of the explanation to

the proviso to Rule 3 and as such not lawful.

The learned Subordinate Judge was perfectly

justified in entertaining the application filed

on behalf of the appellant and considering the

question as to whether there had been a

lawful agreement or compromise on the basis

of which the Court could have recorded such

agreement or compromise on 27.2.1991.

Having come to the conclusion on the material

produced that the compromise was not lawful

within the meaning of Rule 3, there was no

option left except to recall that order.

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13. The Apex Court again in the case of Pushpa

Devi Bhagat (D) by L.R. Vs. Rajinder Singh and

others reported in AIR 2006 SC 2628(1) after

considering the aforesaid provisions has held as under

at para 12:

12. 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 compromise was not lawful in

view of the bar contained in Rule 3A.

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(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.

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14. In view of the aforesaid pronouncement of the

law by the Apex Court and the aforesaid statutory

provisions, the law is well settled. Once the parties

settle the disputes by way of a compromise by

presenting an application under Order 23 Rule 3 of the

Code of Civil Procedure and the Court accepts

compromise and passes a decree in terms of the

compromise, the decree passed by the Court attains

finality. Section 96 of the Code provides for appeal from

original decrees. It provides that an appeal shall lie

from every decree passed by any Court exercising

original jurisdiction to the Court authorized to hear

appeals from the decisions of such Court. However

Sub-section (3) of Section 96 provides that no appeal

shall lie from a decree passed by the Court with the

consent of parties. In other words, Section 96(3) of the

Code prohibits an appeal challenging a decree passed

by the Court with the consent of parties. Earlier, Order

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43 Rule 1(m) of CPC provided that an appeal shall lie

from an order under Rule 3 of Order XXIII recording or

refusing to record an agreement, compromise or

satisfaction. If the party wanted to treat the order

accepting the compromise itself as an order and wanted

to prefer a miscellaneous appeal, Order 43 Rule 1(m) of

the Code provided a miscellaneous appeal. However,

clause (m) was omitted by Act 104 of 1976 with effect

from 01.02.1977. Now such a course is not open to

him. No miscellaneous appeal lies against the order

accepting or rejecting the compromise by the Trial

Court. Order XXIII Rule 3A which was inserted by Act

104/1976 which came into effect from 01.02.1977

provides that no suit shall lie to set-aside a decree on

the ground that the compromise on which the decree is

passed was not lawful. In view of the aforesaid

statutory provisions, a regular appeal, a miscellaneous

appeal and a separate suit is not maintainable to

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challenge a compromise decree. Therefore, the only

remedy available to an aggrieved person, who wants to

challenge the compromise decree is to approach the

very same Court, which passed the compromise decree.

He has to file application in the suit, in which the

compromise was recorded and a decree is passed on

such compromise. Thus, after a compromise has been

recorded, the Court concerned can entertain an

application under Section 151 of the Code questioning

the legality or validity of the compromise. If such an

application is filed, then the Court which passed the

decree shall consider the said application after notice to

either side. Then the said Court has to decide the

question as to whether the compromise entered into and

the decree passed thereon is lawful or valid. It can also

decide whether such compromise is void or voidable. If

the agreement or compromise itself is fraudulent, then

it shall be deemed to be void within the meaning of the

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explanation to the proviso to Rule 3 and as such not

lawful.

15. Order 23 Rule 3 of the Code mandates the

acceptance of the compromise by the Court should not

be mechanical. The parties may agree, they may reduce

the compromise into writing and place that compromise

before the Court. Unless the said compromise

agreement is lawful, the Court gets no jurisdiction to

pass a decree on the basis of the agreement. Therefore,

a duty is cast upon the Court before passing a decree on

the basis of the compromise, to apply its mind, look into

the terms of the compromise and find out whether the

agreement entered into between the parties is lawful or

not. If in its view, it is not lawful it shall reject the

compromise. Such a power is conferred on the Court

under Order 23 Rule 3 of the Code. But once the

compromise is recorded and a decree is passed in terms

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of the compromise, then the presumption is the

agreement is lawful. A consent decree, is nothing but

contract between parties superimposed with the seal of

approval of the court.

16. The validity of a consent decree depends

wholly on the validity of the agreement or compromise

on which it is made. It is open to the parties to the

compromise to show that the agreement is not lawful

and by misrepresentation, fraud or mistake, they were

made to agree to such compromise. 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. The explanation to the proviso says that an

agreement or compromise "which is void or voidable

under the Indian Contract Act..." shall not be deemed to

be lawful within the meaning of the said Rule. In view of

the said proviso read with the explanation, a Court

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which had entertained the petition of Compromise has

to examine whether the compromise was void or

voidable under the Indian Contract Act. Then, if the

compromise is not lawful, it may be either invalid decree

or a void decree. In either event, unless, the

compromise is challenged and a competent Court

declares it as invalid or void, the compromise is binding

on the parties.

17. In the instant case, the suit filed by the

plaintiff for setting aside the compromise petition dated

28.03.2005 and consequential decree passed in O.S.

No.121/2000 on the file of the II Additional Senior Civil

Judge, Bangalore Rural District was challenged on the

ground that it is vitiated on the ground of fraud and

misrepresentation. Such a suit was not maintainable.

Therefore, the Trial Court was justified in invoking

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Order VII Rule 11 of the Code to dismiss the suit as not

maintainable.

18. In that view of the matter, we do not see any

merit in this appeal. Accordingly, this appeal is

dismissed reserving liberty to the appellants-plaintiffs

to approach the Court, which passed the decree and

work out their remedies.

Sd/- JUDGE

Sd/- JUDGE

SPS