Friday, September 22, 2023

CONSENT JUDGMENT & DECREE- CAN IT BE CHALLENGED?

 



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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