Supreme Court clarifies if a stranger can challenge a compromise decree: Triloki Nath Singh vs. Anirudh Singh (2020)

LEGAL ISSUE: Can a person not party to a compromise decree challenge it in a separate suit?

CASE TYPE: Civil

Case Name: Triloki Nath Singh vs. Anirudh Singh(D) Thr. Lrs & Ors.

[Judgment Date]: May 6, 2020

Introduction

Date of the Judgment: May 6, 2020

Citation: (2020) INSC 371

Judges: A.M. Khanwilkar, J., Ajay Rastogi, J. (authored the judgment)

Can a person who was not part of a legal case challenge a compromise decree made in that case? This question was addressed by the Supreme Court of India in a recent judgment. The core issue was whether a third party, not involved in the original suit, can file a separate case to challenge a decree that was based on a compromise between the original parties. The Supreme Court clarified the legal position on this matter, focusing on the limitations imposed by the Code of Civil Procedure, 1908 (CPC).

Case Background

The case revolves around a property dispute. The appellant, Triloki Nath Singh, claimed ownership of a piece of land based on a sale deed from Sampatiya. Sampatiya had received this land as a gift from her uncle, Kunjan Singh. However, Salehari, claiming to be Kunjan Singh’s daughter, filed a partition suit challenging the gift deed and seeking her share of the property.

Initially, Salehari’s suit was dismissed. Sampatiya then sold the land to Triloki Nath Singh. Later, in a second appeal before the High Court of Patna, Sampatiya and Salehari reached a compromise, which resulted in a decree. This compromise effectively nullified Sampatiya’s claim to the land, which she had already sold to Triloki Nath Singh. Triloki Nath Singh, feeling aggrieved, filed a separate suit to declare the compromise decree illegal and obtained by fraud.

Timeline:

Course of Proceedings

The trial court dismissed Triloki Nath Singh’s suit, holding that it was not maintainable. The court reasoned that the compromise decree passed by the High Court could not be challenged in a separate suit. Triloki Nath Singh appealed this decision, but the District Judge also dismissed the appeal. Finally, he filed a second appeal before the High Court, which was also dismissed at the motion stage. This led to the current appeal before the Supreme Court.

Legal Framework

The Supreme Court examined the relevant provisions of the Code of Civil Procedure, 1908 (CPC), specifically Order 23 Rule 3 and Rule 3A.

Order 23 Rule 3 of the CPC deals with compromise of suits. It states:

“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 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:”

The provision further explains that an agreement or compromise that is void or voidable under the Indian Contract Act, 1872, is not considered lawful.

Order 23 Rule 3A of the CPC bars a separate suit to challenge a compromise decree. It states:

“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 court also considered Order 43 Rule 1A(2) of the CPC, which allows a party to challenge a decree in an appeal on the ground that the compromise should not have been recorded.

Arguments

Appellant’s Arguments (Triloki Nath Singh):

• The appellant argued that Order 23 Rule 3A of the CPC applies only to parties of the suit and not to strangers like himself.
• He contended that a stranger to a compromise decree has the right to file a separate suit to address their grievances.
• He argued that the compromise decree was obtained by fraud and misrepresentation, as the sale deed to him was executed before the compromise.
• He submitted that Sampatiya colluded with Salehari to defeat his rights.

Respondents’ Arguments (Anirudh Singh & Ors.):

• The respondents argued that the suit was not maintainable because Order 23 Rule 3A of the CPC bars a separate suit to set aside a compromise decree.
• They contended that the appellant should have filed an application before the High Court that passed the compromise decree, not a separate suit.
• They stated that the appellant’s suit was barred by Section 52 of the Transfer of Property Act, 1882.
• They also argued that the trial court had already decided against the appellant on the issue of his right, title, and interest in the property.

Issues Framed by the Supreme Court

The Supreme Court framed the following issue:

1. Whether the suit filed by the appellant seeking a declaration against the compromise decree dated September 15, 1994, passed by the High Court of Patna in Second Appeal was maintainable in view of the provisions of Order 23 Rule 3 and Rule 3A of the CPC.

Treatment of the Issue by the Court

The following table demonstrates how the Court decided the issue:

Authorities

The Supreme Court relied on the following authorities:

Judgment

How each authority was viewed by the Court?

✓ The Supreme Court in Pushpa Devi Bhagat(Dead) Through LR Sadhna Rai(Smt) Vs. Rajinder Singh and Others [2005(5) SCC 566]* clarified that the only way to avoid a consent decree is to approach the court that recorded the compromise and prove that there was no valid compromise.

✓ The Supreme Court in R. Rajanna Vs. S.R. Venkataswamy and Others [2014(15) SCC 471]* reiterated that the court which passed the compromise decree is the only court that can examine and determine the question of whether the agreement or compromise is lawful.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the legislative intent behind Order 23 Rule 3 and Rule 3A of the CPC, which aims to prevent multiplicity of litigation and ensure finality of decrees. The Court emphasized that a compromise decree is essentially a contract between the parties, and its validity can only be questioned before the court that passed it. The court also noted that the appellant’s claim was based on a sale deed from Sampatiya, who was a party to the compromise decree, and thus, the appellant’s rights were subject to the outcome of the compromise.

Fact:Law Ratio

The Supreme Court’s reasoning was heavily based on legal principles and the interpretation of procedural laws. The factual aspects of the case, such as the sale deed and the alleged fraud, were secondary to the legal question of whether the suit was maintainable.

The Court’s reasoning was that the appellant’s suit was an attempt to circumvent the bar under Order 23 Rule 3A of the CPC. The Court emphasized that the proper remedy for the appellant was to approach the High Court that passed the compromise decree, not to file a separate suit in a civil court. The Supreme Court also noted that the appellant’s claim was derived from Sampatiya, who was a party to the compromise, and therefore, the appellant’s rights were subject to the outcome of that compromise.

The Court stated:

“The trial Court in any case would not be competent to adjudicate the grievance of the appellant herein in respect of the validity of compromise decree dated 15th September, 1994 passed by the High Court in the partition suit.”

The Court further stated:

“Merely because the appellant was not party to the compromise decree in the facts of the present case, will be of no avail to the appellant, much less give him a cause of action to question the validity of the compromise decree passed by the High Court by way of a substantive suit before the civil Court to declare it as fraudulent, illegal and not binding on him.”

The Court also observed:

“Assuming, he could agitate about the validity of the compromise entered into by the parties to the partition suit, it is only the High Court, who had accepted the compromise and passed decree on that basis, could examine the same and no other Court under proviso to Rule 3 of Order 23 CPC.”

There was no minority opinion in this case.

Key Takeaways

• A person who is not a party to a compromise decree cannot challenge it by filing a separate suit.
• The only way to challenge a compromise decree is to approach the same court that passed the decree and demonstrate that the compromise was not lawful.
• This judgment reinforces the principle of finality in legal proceedings and prevents multiplicity of litigation.
• Parties who purchase property that is subject to ongoing litigation are bound by the outcome of that litigation, including any compromise decrees.

Directions

No specific directions were given by the Supreme Court in this case.

Development of Law

The ratio decidendi of this case is that a stranger to a compromise decree cannot challenge it in a separate suit. This judgment reinforces the existing legal position under Order 23 Rule 3A of the CPC. There is no change in the previous position of law, but the judgment clarifies the application of the existing legal principles to a specific set of facts.

Conclusion

The Supreme Court dismissed the appeal, holding that the suit filed by Triloki Nath Singh was not maintainable. The Court reiterated that a compromise decree can only be challenged before the court that passed it and not through a separate suit. This judgment clarifies the legal position regarding the challenge of compromise decrees by third parties and reinforces the importance of the legislative intent behind Order 23 Rule 3 and Rule 3A of the CPC.

Category

Parent Category: Code of Civil Procedure, 1908

Child Categories:

• Order 23, Code of Civil Procedure, 1908
• Rule 3, Order 23, Code of Civil Procedure, 1908
• Rule 3A, Order 23, Code of Civil Procedure, 1908
• Compromise Decree
• Civil Litigation
• Third Party Rights

FAQ

Q: Can I challenge a court decree if I was not a party to the original case?

A: If the decree was based on a compromise between the parties, you generally cannot challenge it through a separate lawsuit. You must approach the same court that passed the decree.

Q: What does Order 23 Rule 3A of the CPC mean?

A: Order 23 Rule 3A of the Code of Civil Procedure, 1908, bars a separate suit to set aside a decree on the ground that the compromise on which the decree is based was not lawful.

Q: What should I do if I believe a compromise decree was obtained fraudulently?

A: You should file an application in the same court that passed the compromise decree, explaining the fraud and seeking to set aside the decree.

Q: I bought a property, and later there was a compromise decree that affected it. What can I do?

A: Your rights will be subject to the outcome of the compromise decree if you purchased the property while the litigation was ongoing. You may have to seek relief through the court that passed the compromise decree.

Q: What is a compromise decree?

A: A compromise decree is a court order that is based on an agreement or compromise between the parties to a lawsuit. It is essentially a contract with the court’s approval.