CONSENT JUDGMENT &
DECREE- CAN IT BE CHALLENGED?
Whether a consent judgment and decree can be challenged and if so, what
are the parameters of it? The efforts herein shall be to find out that and the
broad contour of the points. The law, prior to 1976 and after the amendment in
Order XXIII Rule 3 of Code of Civil Procedure are of significance and shall be
dealt with.
In the very beginning, it may be worthwhile to start from a recent
judgment of Supreme Court reported as Ajanta LLP Versus Casio Keisanki Kabushiki Kaisha d/b/a Casio Computer Co. Ltd. 2022 SCC
OnLineSC148.
The following judgments referred
to below are some of the judicial precedent. The details of the judgments
however shall be further delineated later in its context:
(i)
Shankar Sitaram Sontakke &
Anr. v. Balkrishna Sitaram Sontakke & Ors.
AIR 1954 SC 352
(ii)
Byram Pestonji Gariwala v. Union
Bank of India & Ors. (1992) 1 SCC 31
(iii)
Compack Enterprises India Pvt.
Ltd. v. Beant Singh (2021) 3 SCC 702
(iv)
Sourendra Nath Mitra & Ors.
v. Srimati Tarubala Dasi AIR 1930 PC 158
(v)
Banwari Lal v. Chando Devi (Smt.)
(through LRs.) & Anr (1993) 1 SCC 581
(vi)
Rafiq Bibi
(dead) by LRs Vs Sayed Waliuddin (Dead) by LRs & Ors (2004)1 SCC 287.
Turning to the facts
of Ajanta
LLP (Supra), the facts are interesting. The parties
were referred to mediation by the High Court of Delhi on 18.12.2018. After a
detailed correspondence and exchange of e-mails between the counsel appearing
for the parties, a settlement was arrived at vide a Settlement Agreement dated 16.05.2019. The High Court decreed the
suit on 03.07.2019 in terms of the Settlement Agreement. Subsequently, an
Application was filed by the Appellant under Sections 152 and 153 read with
Section 151 of the CPC for correction/ rectification/ amendment of the judgment
dated 03.07.2019. It was stated in the said Application that the Settlement
Agreement pertains only to trademark “FX-991ES PLUS’/ ‘FX-991”. However, there
was an inadvertent typographical error of the trademark in the Settlement
Agreement as “FX-991ES PLUS/ FX/ 991”. The High Court dismissed the
Application.
The Special Leave
Petition (SLP) before the Supreme Court was preferred.
CONTENTIONS OF APPELLANT
(i)
The
high Court wrongly treated the application as filed under section 152 of CPC;
(ii)
The
High Court ought to have considered the Application by referring to Order 23
Rule 3 read with Section 151 of the CPC;
(iii) Misunderstanding
between the parties is a valid ground to interfere with a consent decree;
(iv) Judgments
pronounced by Supreme Court and captioned as Sitaram Sontakke (Supra) & Byram
Pestonji (Supra) were relied upon;
(v)
The
High Court has inherent jurisdiction to correct the terms of a consent award to
bring it in conformity with the intended compromise. Reliance was placed on AIR 1954 SC 352 & (1992) 1 SCC 31. Reliance was also also
placed on Sourendra Nath Mitra (Supra) to the effect that the inherent
power of a Court should be exercised to prevent substantial injustice;
(vi) The intention
of the parties throughout related to the use of scientific calculator ‘FX-991ES
PLUS’ only;
CONTENTIONS OF
RESPONDENTS
(i)
There
is no allegation of fraud or misrepresentation in arriving at the Settlement;
(ii)
The
parties agreed that the advocates would act as mediators;
(iii) Thereafter a
Settlement Agreement was entered into between the parties;
(iv) The Final agreement was checked and signed by
the mediator and finally, the Court examined the terms of the Agreement in
terms of which a decree was passed;
(v)
The
High Court passed the judgment and decree based on settlement and after
applying its mind to the Settlement Agreement;
(vi) A perusal of
the correspondence between the advocates for the parties would clearly
demonstrate that the Respondent made it clear that the Appellant should not use
“FX-991ES PLUS”/ “FX-991ES” or any deceptively or confusingly similar mark;
(vii) The consent
decrees created estoppel by judgment against the parties and cannot be
interfered with, unless, the decree is vitiated by fraud, misrepresentation or
a patent or obvious mistake;
(viii) The Respondent
No. 1 has adopted trademark ‘FX’ for scientific and electronic calculators
since the year 1985. Respondent No. 1 obtained a Design registration for the
mark “FX” bearing No.5010491 in Class-9 and claiming use since 29.01.1999.
The High Court was therefore right in
dismissing the Application seeking modification of the decree.
The issue before the Supreme Court was as to whether the
Appellant has made out a case for modification/ alteration of the decree by his
application being treated to be one under Rule 3 of Order 23 of the CPC.
LAW/Judicial Precedents
The Supreme Court has
referred to various judicial precedents and that are illustrated above for comfortable
reference.
The Supreme Court in Shankar
Sitaram Sontakke & Anr (Supra) has held as under:
“If the compromise was arrived at after due
consideration by the parties and was not vitiated by fraud, misrepresentation,
mistake or misunderstanding committed by the High Court – the finding which was
not interfered with by the High Court – it follows that the matter which once
concluded between the parties who were dealing with each other at arm’s length
cannot now be reopened.”
The very object of a
consent decree shall be to stop litigation between the parties. A compromise
decree creates an estoppel by judgment. In Byram Peston Gariwala (supra), the
Supreme Court has held that if there are no doubt as to the validity or
genuineness of the compromise nor a case was made out to show that the decree
was vitiated by fraud or misrepresentation.
The Court in exercise
of its inherent power may rectify the consent decree to ensure that it is free
from clerical or arithmetical errors so as to bring it in conformity with the
terms of the compromise. Undoubtedly, the Court can entertain an Application
under Section 151 of the CPC for alterations/ modification of the consent
decree if the same is vitiated by fraud, misrepresentation, or misunderstanding.
The Supreme Court Byram
Peston Gariwala (supra)after considering the 1976 amendment summarised the
principles in para 17 of the Judgment thus:-
“17.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 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.”
Before proceeding further, it may be
appropriate to refer to the terms of Rule 3 and 3 A of Order XXIII CPC. The
Rule 3 and 3A of Order XXIII of CPC are as under :-
“Rule
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 of
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 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 voidable under the Indian Contract Act, 1872 (9 of 1872),
shall not be deemed to be lawful within the meaning of this rule].
3A. Bar to suit- Not suit shall lie to set aside a
decree on the ground that the compromise on which the decree is based was not
lawful.”
It
may be noted that Rule 3A and the proviso and the explanation to Rule 3 were
added by the amendment of the year 1976 and w.e.f 1st February 1977.
LAW AS EVOLVED
By virtue of Civil Procedure Code (Amendment)
1976 Act the legislature has brought into force Rule 3A to Order 23, which
create bar to institute the suit to set aside a decree on the ground that the
compromise on which decree is based was not lawful. It was so, as the very
purpose of arriving at a compromise between the parties is to put an end to the
inter se disputes pending before the Court of competent jurisdiction fully and
finally. Thus, creation of further litigation can never be the basis of a
compromise between the parties. The Rule 3A of Order 23 CPC is enacted to 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 finality is inbuilt in that. Earlier, under
Order 43 Rule 1(m), an appeal which recorded the compromise and decide as to
whether there was a valid compromise or not, was maintainable against an order
under Rule 3 of Order 23 recording or refusing to record an agreement,
compromise or satisfaction.
The amending Act, however, has deleted
the said provision, resultantly, no appeal shall now be maintainable against an
order recording or refusing
to record an agreement or compromise under Rule 3 of Order 23. In this backdrop
as appeal against the order of recording a compromise or refusing to record a
compromise was being taken away, thus, a new rule 3 A was added to order 43
which reads as under:
“1A.
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.”
After the amendment which has been
introduced, neither any appeal against the order recording the compromise nor
remedy by way of filing a suit is available in cases covered by Rule 3A of
Order 23 CPC. As such, a right has been given under Rule 1A(2) of Order 43 to a party, who denies the
compromise and invites order of the Court in that regard in terms of proviso to
Rule 3 of 23 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.
In this context a judgment of Bombay
High Court reported as Jethalal Thakkar Vs Lalbhai Hiralal Shah
(1985 Mh.L.J. 299)
and the decision of the Andhra Pradesh High Court in Smt Anita Vs Rambilas (AIR 2003
AP 32) may also be referred to.
The Division Bench of Bombay High Court
after taking note of the decision of the Supreme Court in (i) Banwarilal
(Supra) has held in para 13 that:-
“13.
In view of the authoritative pronouncements of the Supreme Court in the case of
Banwarilal (supra) ….reliance on behalf of the appellants on the decision of
the learned single Judge of this Court in Jethalal Thakkar's case (supra) is
inappropriate. We may note that in Banwarilal (Supra), the Supreme Court had considered issue of
collusion and fraud as had arisen in the said case namely a contention that a
fabricated petition of compromise was filed, which is clear from the contents
of para 4 of the decision of the Supreme Court examining the said issue the
Supreme Court had come to a conclusion that a separate suit was not
maintainable as noted by us above in extension. In view of this clear position
in law as laid down in Banwarilal (supra), the appellants contention relying on
Jethalal Thacker's case, that as the appellant had pleaded fraud in relation to
the compromise a separate suit was maintainable, cannot be accepted.”
CONCLUSION
The amendment in Order XXIII Rule 3 and
insertion of Rule 3 A of CPC after 1976 makes the law very clear and the courts
of law based on Supreme Court judgments, more recently, position that emerges as
also held in Ajanta LLP (Supra) can be summed up as under :
(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.
(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.
--------
Anil
K Khaware
Founder
& Senior Associate
Societylawandjustice.com
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