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Introduction
Order XXIII Rule 3A of the Code of Civil Procedure, 1908 (the “CPC”) was inserted by the Code of Civil Procedure (Amendment) Act, 1976 to achieve the objective of mitigating the number of suits filed before a court by allowing parties to come to an amicable settlement which is lawful, is in writing, and a voluntary act on the part of the parties. The provision puts a bar on the filing of a separate suit to set aside a compromise decree on the ground that the compromise on which the decree is based was not lawful. However, with the passage of time, the provision has been interpreted differently by various High Courts and the Supreme Court. Recently, the Supreme Court in Triloki Nath Singh v. Anirudh Singh (D) Thr. Lrs. & Ors.[1] (“Triloki Nath”), ruled that even a stranger is prohibited from challenging a decree that is passed on the basis of a compromise. Surprisingly, the Court while deciding upon the instant case failed to take into consideration the concept of representative suit enshrined under Rule 3B of Order XXIII of the CPC.
Understanding ‘Representative Suit’
Explanation annexed to Rule 3B of Order XXIII of the CPC defines representative suit as:
(a) a suit under Section 91 or section 92,
(b) a suit under rule 8 of Order I,
(c) a suit in which the manager of an undivided Hindu family sues or sued as representing the other members of the family,
(d) any other suit in which the decree passed may, by virtue of the provisions of this Code or of any other law for the time being in force, bind any person who is not named as party to the suit.
In case of compromise decrees, it is clear that clause (d) includes every such person who is not a party to the suit but would be bound by such a decree. This position has been affirmed by the Supreme Court inter alia, in Hussainbhai Allarakhbhai v. State of Gujarat & Ors.[2]. The purpose of introducing the concept of representative suit is to safeguard the interests of a person who is not formally on the record.[3]
Purpose of the bar under Order XXIII Rule 3A
The purpose of introducing the bar under Order XXIII Rule 3A of the CPC can be ascertained from the 54th Law Commission Report wherein it was recommended that for the interest of finality of litigation, a bar may be imposed on challenge and setting aside of a compromise decree merely on the ground that the compromise on which the decree is based was not lawful. This view has been considered by Supreme Court in Pushpa Devi Bhagat (Dead) Through LR Sadhna Rai (Smt) v. Rajinder Singh & Others[4] and R. Rajanna v. S.R. Venkataswamy & Ors[5].
Further, the bar was imposed to prevent parties who have mutually settled their disputes by way of compromise from challenging the decree based on such compromise. It was the propensity of the parties to challenge the compromise decree and get it nullified by the court of competent jurisdiction that was to be stopped by way of imposing such a bar, in order to give effect to the compromise decree and attain finality of litigation.
Relevant Facts of the case
A piece of land was initially owned by one Lakhan Singh who after his death left it for his three sons- Din Dayal Singh, Jalim Singh and Kunjan Singh. Two of the sons died issueless and Jalim Singh left behind one son and two daughters. Kunjan Singh, before his death, gifted his share in the land to Sampatiya, daughter of Jalim Singh. Later, Salehari, wife of Satyanarayan Prasad claiming to be the daughter of Kunjan Singh filed a suit for setting aside the gift and also for partitioning her share in the aforesaid land. The suit was dismissed and it was held that Salehari was not the daughter of Kunjan Singh.
Further, a portion of land was sold by Sampatiya to the appellant for a sum of Rs. 25,000/- by a registered sale deed, thereby putting the Appellant in possession of the suit property. Later, it was revealed that a compromise was entered into between Salehari and Sampatiya for the suit property and a decree was passed by the High Court of Patna on the basis of such compromise. The appellant before the court contended that the compromise decree was obtained by fraud and misrepresentation, concealing from the High Court the fact that the land was sold by Sampatiya to the appellant and therefore the decree is liable to be set aside.
Decision
The court ruled that finality of decisions is the underlying precept of all dispute resolution forums. The purpose of Order XXIII Rule 3A of the CPC is to frustrate multiplicity of litigations and to enable the parties to mutually settle their disputes by way of compromise which fulfills the criteria of Indian Contract Act, 1872. Further, the court opined that the purpose of executing a compromise between the parties is to resolve the various disputes pending before the court of competent jurisdiction and thus, creation of further disputes should not be the basis of a compromise between the parties. Rejecting the contentions of the appellant that the bar prescribed under Order XXIII Rule 3A of the CPC is limited to the parties to the compromise decree; the court held that Order XXIII Rule 3A of the CPC restricts everyone, including a stranger to institute an independent suit challenging the lawfulness of the compromise decree. The court further held that no right is extended to a stranger for challenging the compromise decree merely on account of him not being made a party to the suit in which the compromise was achieved.
Analysis
It is the authors’ perspective that the decision in the instant case has made certain departures from existing legal principles. The court ruled that the “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.” It can, however, be said to be true only when the compromise is the result of fair representation and consensus of each and every affected party to the dispute. It is further argued that the bar provided under Order XXIII Rule 3A of the CPC is not an absolute bar. It is subjected to compliance of certain provisions.
For instance, Rule 3B of Order XXIII of the CPC stipulates that compromise in a representative suit cannot be entered into without the leave of the court and before granting such leave, notice has to be served to the interested party to the suit. This has been reiterated in several decisions. In Siddalingeshwar & Ors. v. Virupaxgouda & Ors.[6], the Karnataka High Court ruled that it is mandatory for the court to serve notice to the interested parties to a particular dispute and failure to comply with it will not bind such party on whose behalf or for whose benefit the suit is instituted. Further, the court pointed out that a decree passed in a representative suit would be binding upon the third party only if the established procedure is complied with. Similarly, a compromise decree passed in a representative suit has to adhere to the procedure prescribed under Order XXIII Rule 3B of the CPC in order to attract the bar under Order XXIII Rule 3A of the CPC.
Moreover, in 2019, the Supreme Court in Aliyathammuda v. Pattakal Cheriyakoya[7] ruled that a compromise decree in a representative suit when obtained without the leave of court and notice to interested parties is void and therefore liable to be set aside.
While the above reasoning may still be accepted to a limited extent, the other reasoning given by the court for extension of bar to a stranger is intriguing as the court held that it is immaterial whether or not the third party (or stranger) has been made a party to the dispute. By opining so, the court has failed to appreciate the above-discussed principle and has passed the order in complete ignorance. The suit (in which the compromise was entered into by the parties) being a representative suit (as it falls under clause (d) of explanation under Order XXIII Rule 3B of the CPC) was supposed to be treated like one. In furtherance of that, the court was supposed to issue notice to the third party (appellant in this case) and the appellant was to be brought on record by making him a party to the suit. However, this was not adhered to. In that case, to say that further litigation cannot be a basis of compromise is beyond the legislative intent behind the insertion of Rule 3A of Order XXIII of the CPC. Moreover, the Supreme Court in Pulavarthy Venkata Subba Rao & Anr. v.Valluri Jagannadha Rao& Ors.[8], held that a compromise decree cannot be said to operate as res judicata for it is not decided on merits. Therefore, the principle of res judicata cannot be advocated by the court in a case where the aggrieved third party was not provided a chance to be represented fairly.
Furthermore, even if one argues that a compromise decree creates an estoppel as also held in Byram Pestonji Ganwala v. Union of India[9], the principle of estoppel binds only the parties who enter into a contract/compromise. It does not bind a party which does not affirm to the contents of the compromise so entered into.
Conclusion
No doubt the efficacy and finality of a compromise decree is crucial to mitigate litigation. However, it should not deprive the interested party to the suit of his or her right to be fairly represented. In the instant case, while the Supreme Court has no doubt upheld one of the principles, it has failed to acknowledge the other. Creation of further litigation should never be the basis of a compromise but it has to be applied when every party to the compromise decree has fair and equal opportunity to give effect to the compromise so concluded. Therefore, the Supreme Court must reconsider its decision in light of the afore-mentioned departures.
(This post has been authored by Piyush Agrawal and Sunil S Singh. Piyush and Sunil are third year law students at Hidayatullah National Law University, Raipur)
References
1. Triloki Nath Singh v. Anirudh Singh (D) Thr. Lrs. & Ors MANU/SC/0438/2020. ↑
2. Hussainbhai Allarakhbhai v. State of Gujarat & Ors MANU/SC/0663/2010. ↑
3. 54th Law Commission report on the Code of Civil Procedure, 1908 (Feb 1973). ↑
4. Pushpa Devi Bhagat (Dead) Through LR Sadhna Rai (Smt) v. Rajinder Singh & Others MANU/SC/3016/2006. ↑
5. R. Rajanna v. S.R. Venkataswamy & Ors MANU/SC/1060/2014. ↑
6. Siddalingeshwar & Ors. v. Virupaxgouda & Ors MANU/KA/0224/2003. ↑
7. Aliyathammuda v. Pattakal Cheriyakoya MANU/SC/1019/2019. ↑
8. Pulavarthy Venkata Subba Rao & Anr. v.Valluri J. Rao & Ors MANU/SC/0018/1963. ↑
9. Byram Pestonji Ganwala v. Union of India 1992 (1) SCC 31. ↑