Ram Awadh Singh And Another vs The Addl. Commissioner Azamgarh And ... on 12 July, 2019

[Cites 15, Cited by 1]

Allahabad High Court

Ram Awadh Singh And Another vs The Addl. Commissioner Azamgarh And ... on 12 July, 2019

The sole question which has been addressed on this petition is whether the respondents 1 and 2 acting as revenue courts under the provisions of the U.P. Zamindari Abolition and Land Reforms Act, 19501 had the jurisdiction to recall a compromise decree recorded inter partes. The skeletal facts which merit notice are as follows.

The dispute relates to Khata No. 102 falling in Village Titlaukiya/Kishoreganj and Khata Nos. 65 and 78 falling in Village Mahendua, Tehsil Belthara Road in the District of Ballia. The petitioners filed suits referable to Section 229-B of the 1950 Act claiming rights under Section 164 of that statute on the allegation that Maha Prasad, the defendant in that suit, had executed an agreement in their favour and on that basis they were inducted in possession. It is stated that during the pendency of that suit a compromise was entered into between the plaintiff petitioners and Maha Prasad and pursuant thereto, compromise terms were settled in writing and filed in the suit proceedings on 23 December 1987. The petitioners assert that the revenue court after verifying the compromise decreed the suits in terms thereof by a common judgment dated 3 May 1989. Six years after the aforesaid compromise decrees were passed, Maha Prasad filed restoration applications. In those applications it was asserted that the compromise terms as framed and filed in Court were an act of fraud and that the plaintiff petitioners had taken advantage of the fact that he was an illiterate person. While these restoration applications were pending, Maha Prasad is stated to have died. According to the petitioners, no applications for substitution were filed and in view thereof, the restoration applications should have been dismissed as having abated. However, this issue need not be gone into in light of the principal legal question that has been raised and addressed. By a common judgment dated 6 December 1997, the Court of the Deputy Collector, the second respondent herein, allowed these applications and restored both the suits to their original numbers. Aggrieved by that decision the petitioners filed two revisions before the Commissioner Azamgarh Division which were ultimately transferred and placed for disposal before the first respondent here. These revisions have been dismissed by the order dated 31 March 2001 impugned herein. When the instant writ petition was entertained, a learned Judge of the Court granted stay of the impugned orders and further provided for stay of all proceedings taken pursuant to the judgments impugned herein.

Learned counsel for the petitioner has principally contended that once the compromise had been duly verified and the suits decreed in terms thereof, no application for restoration was maintainable. On a more fundamental plane, it was contended that the respondents 1 and 2 acting as revenue courts in any case did not have the jurisdiction or authority to either entertain the applications or to recall the compromise decree which came to be entered. Reliance in support of this submission was placed upon the decision rendered by the Supreme Court in Horil Vs. Keshav2.

Learned counsel for the respondent, on the other hand, submitted that the issue of whether the compromise had been lawfully entered into, made with the free consent of parties and not an outcome of fraud were questions and issues which necessarily had to be answered by the Court which had framed the decree itself. According to the learned counsel, in light of the bar placed by Order XXIII Rule 3A, C.P.C. since no suit could be maintained to set aside a decree on the ground that the compromise on which the decree was based was not lawful, the only remedy available to the respondents was to file the restoration applications. According to the learned counsel, the provisions as made in Section 151, C.P.C. sufficiently empowered the revenue courts to recall the compromise decree if it were established to have been made and obtained as an outcome of fraud. Learned counsel for the respondent has in support of his submissions placed reliance upon the decision of the Supreme Court rendered in R. Rajanna Vs. Venkataswamy3.

Before dealing with the rival submissions it would be apposite to briefly notice the statutory position as existing and laid in place by the Civil Procedure Code with respect to a challenge to compromise decrees. Section 96(3) provides that no appeal shall lie from a decree passed by the Court with the consent of parties. Order XXIII Rule 3 deals with the subject of compromise of suits. The said provision is in the following terms:

"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 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.] Order XXIII Rule 3A reads thus: -

[3-A. 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."

A careful reading of the provisions aforementioned establishes that where parties assert that a suit has been adjusted wholly or in part by virtue of a lawful agreement or compromise, the Court on being satisfied shall proceed to record the agreement, compromise or satisfaction and proceed to pass a decree in accordance therewith. The Court while recording its satisfaction with respect to the agreement or compromise stated to have been arrived at must also bear in mind that the terms of settlement are not void or voidable under the Indian Contract Act, 1872. This caveat stands placed in light of the Explanation appended to Rule 3. The Proviso to Rule 3 empowers the Court to decide the question of whether an adjustment or satisfaction has in fact been arrived at and reached. The Proviso comes into play where parties dispute an adjustment or satisfaction in fact having been reached. Order XXIII Rule 3A bars a suit to set aside a decree on the ground that the compromise on which it was based was not lawful.

Order XLIII Rule 1(m) as it stood prior to its deletion by the Code of Civil Procedure (Amendment) Act, 19764 provided for an appeal against an order passed under Order XXIII Rule 3 recording or refusing to record an agreement, compromise or satisfaction. The 1976 Amendment Act while spelling out the Objects and Reasons for the deletion of clause (m) noted that it was being omitted because an aggrieved party had the remedy of preferring an appeal against a decree where he could urge that the compromise ought not to or ought to have been recorded, as the case may be. The provision for an appeal against a compromise decree was introduced by the 1976 Amendment Act itself with the insertion of Order XLIII Rule 1-A which reads thus:

"1-A. Right to challenge non-appelable orders in appeal against decrees.--(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.]"

The statutory position which thus emerges is that firstly a bar operates against a separate suit being filed challenging a decree which came to be made on the basis of a compromise. This clearly appears to flow from the provisions made in XXIII Rule 3A. Although, Section 96(3) continues to exist in the statute book and bars a decree passed by a Court with the consent of parties being challenged by way of appeal, a specific provision for appeal against a decree passed either on compromise or refusing to record a compromise has now been made available in terms of the provisions made in Order XLIII Rule 1A(2). The provisions made in Order XXIII Rule 3 and more particularly the Proviso appended thereto, empowers the Court itself to undertake an enquiry whether the compromise or settlement has in fact been arrived at. Even otherwise, the substantive provision made in Order XXIII Rule 3 requires the Court concerned to satisfy itself whether a lawful agreement or compromise has in fact been arrived at.

Dealing with the issue of challenge to a compromise in suit proceedings, three learned Judge of the Supreme Court in Kishun Alias Ram Kishun (Dead) Through Lrs. Vs. Behari (Dead) by Lrs.5 observed thus:

"That apart, we are of the view that the High Court was in error in holding that the appeal filed by Kishun against the decree of the trial court accepting a compromise which was disputed by him, was not maintainable. When on a dispute in that behalf being raised, an enquiry is made (now it has to be done in view of the proviso to Order XXIII Rule 3 of the Code added by Act 104 of 1976) and the suit is decreed on the basis of a compromise based on that enquiry, it could not be held to be a decree passed on consent within the meaning of Section 96(3) of the Code. Section 96(3) contemplates non-appellability of a decree passed by the court with the consent of parties. Obviously, when one of the parties sets up a compromise and the other disputes it and the court is forced to adjudicate on whether there was a compromise or not and to pass a decree, it could not be understood as a decree passed by the court with the consent of parties. As we have noticed earlier, no appeal is provided after 1.2.1977, against an order rejecting or accepting a compromise after an enquiry under the proviso to Order XXIII Rule 3, either by Section 104 or by Order XLIII Rule 1 of the Code. Only when the acceptance of the compromise receives the imprimatur of the court and it becomes a decree, or the court proceeds to pass a decree on merits rejecting the compromise set up, it becomes appealable, unless of course, the appeal is barred by Section 96(3) of the Code. We have already indicated that when there is a contest on the question whether there was a compromise or not, a decree accepting the compromise on resolution of that controversy, cannot be said to be a decree passed with the consent of the parties. Therefore, the bar under Section 96(3) of the Code could not have application. An appeal and a second appeal with its limitations would be available to the party feeling aggrieved by the decree based on such a disputed compromise or on a rejection of the compromise set up."

As is evident from the recordal of facts in Kishun, the High Court had proceeded to dismiss the second appeal taking the view that it would not be maintainable in view of the bar placed by Section 96(3). The Supreme Court in Kishun, however, proceeded to hold that the bar placed by Section 96(3) would apply only in a case where the consent, settlement or agreement is not challenged by parties. Their Lordships held that where a dispute is raised with respect to the existence of the compromise itself and whether it was in fact lawfully entered into, the decree passed in terms of that alleged compromise cannot be understood to be one made with the consent of parties. The decision is an authority for the proposition that the bar placed by Section 96 (3) can have no application where the factum of a valid compromise having been arrived at is itself assailed. Although this decision does not specifically refer to the provisions made in Order XLIII Rule 1A, it essentially holds that the remedy of an appeal against a compromise decree would be available to an aggrieved party. In R. Rajanna, the decision which is relied upon by the learned counsel for the respondent, their Lordships framed the principal question to be whether the validity of a compromise decree could be challenged by way of a separate suit. Although, the High Court had found that such a right would exist, in R. Rajanna that view was overruled and the judgment of the High Court set aside. While doing so, the Supreme Court explained the legal position in the following terms:

"11. It is manifest from a plain reading of the above that in terms of the proviso to Order 23 Rule 3 where one party alleges and the other denies adjustment or satisfaction of any suit by a lawful agreement or compromise in writing and signed by the parties, the Court before whom such question is raised, shall decide the same. What is important is that in terms of Explanation to Order 23 Rule 3, the agreement or compromise shall not be deemed to be lawful within the meaning of the said Rule if the same is void or voidable under the Contract Act, 1872. It follows that in every case where the question arises whether or not there has been a lawful agreement or compromise in writing and signed by the parties, the question whether the agreement or compromise is lawful has to be determined by the court concerned. What is lawful will in turn depend upon whether the allegations suggest any infirmity in the compromise and the decree that would make the same void or voidable under the Contract Act. More importantly, Order 23 Rule 3-A clearly bars a suit to set aside a decree on the ground that the compromise on which the decree is based was not lawful. This implies that no sooner a question relating to lawfulness of the agreement or compromise is raised before the court that passed the decree on the basis of any such agreement or compromise, it is that court and that court alone who can examine and determine that question. The court cannot direct the parties to file a separate suit on the subject for no such suit will lie in view of the provisions of Order 23 Rule 3-A CPC. That is precisely what has happened in the case at hand. When the appellant filed OS No. 5326 of 2005 to challenge the validity of the compromise decree, the court before whom the suit came up rejected the plaint under Order 7 Rule 11 CPC on the application made by the respondents holding that such a suit was barred by the provisions of Order 23 Rule 3-A CPC. Having thus got the plaint rejected, the defendants (respondents herein) could hardly be heard to argue that the plaintiff (appellant herein) ought to pursue his remedy against the compromise decree in pursuance of OS No. 5326 of 2005 and if the plaint in the suit has been rejected to pursue his remedy against such rejection before a higher court.

12. The upshot of the above discussion is that the High Court fell in a palpable error in directing the plaintiff to take recourse to the remedy by way of a separate suit. The High Court in the process remained oblivious of the provisions of Order 23 Rules 3 and 3-A CPC as also orders passed by the City Civil Court rejecting the plaint in which the trial court had not only placed reliance upon Order 23 Rule 3-A but also the decision of the Court in Pushpa Devi case [Pushpa Devi Bhagat v. Rajinder Singh, (2006) 5 SCC 566] holding that a separate suit was not maintainable and that the only remedy available to the aggrieved party was to approach the Court which had passed the compromise decree. The following passage from the decision ofPushpa Devi case [Pushpa Devi Bhagat v. Rajinder Singh, (2006) 5 SCC 566] is, in this regard, apposite: (SCC p. 576, para 17) "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."

We may also refer to the decision of this Court in Banwari Lal v. Chando Devi [Banwari Lal v. Chando Devi, (1993) 1 SCC 581] where also this Court had observed: (SCC p. 588, para 13)"

"13. ... As such a party challenging a compromise can file a petition under proviso to Order 23 Rule 3, or an appeal under Section 96(1) of the Code, in which he can now question the validity of the compromise in view of Order 43 Rule 1-A of the Code."

As is evident from the above extract of that decision, it was categorically held that while a separate suit would not be maintainable, it would be open for a party to challenge the compromise by either filing a petition referable to the Proviso to Order XXIII Rule 3 or an appeal in light of the provisions of Order XLIII Rule 1A.

Having noticed the legal position as enunciated in the decisions aforenoted, the Court then proceeds to consider whether the revenue courts in the facts of the present case were justified in entertaining the applications for restoration and whether they had the requisite jurisdiction and authority to do so. Insofar as the issue of jurisdiction is concerned, that question clearly stands answered against the respondents in light of the decision in Horil. Significantly, while the Supreme Court noticed the right of parties to challenge a compromise in accordance with the procedure laid in place in terms of the Proviso to Order XXIII Rule 3 and Order XLIII Rule 1A, it held that notwithstanding those provisions of the Civil Procedure Code applying to proceedings taken before a revenue court, these courts would not be competent to deal with these questions. Explaining the provisions of the Civil Procedure Code which stood attracted, the Supreme Court in Horil held:

"9. It is true that a compromise forming the basis of the decree can only be questioned before the same court that recorded the compromise and a fresh suit for setting aside a compromise decree is expressly barred under Order 23 Rule 3-A. It is equally true that the expression "not lawful" used in Order 23 Rule 3-A also covers a decree based on a fraudulent compromise hence, a challenge to a compromise decree on the ground that it was obtained by fraudulent means would also fall under the provisions of Order 23 Rule 3-A.

10. In Banwari Lal v. Chando Devi [(1993) 1 SCC 581] this Court examined the provisions of Order 23 Rule 3-A in some detail and in the light of the amendments introduced in the Code and in para 7 of the judgment came to hold as follows: (SCC p. 585) "7. By adding the proviso along with an Explanation the purpose and the object of the amending Act appears to be to compel the party challenging the compromise to question the same before the court which had recorded the compromise in question. That court was enjoined to decide the controversy whether the parties have arrived at an adjustment in a lawful manner. The Explanation made it clear that an agreement or a compromise which is void or voidable under the Contract Act shall not be deemed to be lawful within the meaning of the said rule. Having introduced the proviso along with the Explanation in Rule 3 in order to avoid multiplicity of suit and prolonged litigation, a specific bar was prescribed by Rule 3-A in respect of institution of a separate suit for setting aside a decree on the basis of a compromise saying:

''3-A.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. It was further held in Banwari Lal [(1993) 1 SCC 581] in paras 13 and 14 as follows: (SCC pp. 588-89) "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 the 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 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 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 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 1-A of Order 43 of the Code.

14. ... The court before which it is 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 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."

However the matter did not rest there since the Supreme Court proceeded to consider the question whether the power to assail and question a compromise decree as recognised to exist in civil courts, could also be exercised by revenue courts. Answering this issue, the Supreme Court held thus: -

12. In the light of the decision in Banwari Lal [(1993) 1 SCC 581] it would prima facie appear that the High Court was right in holding that the appellant's suit was hit by the provisions of Order 23 Rule 3-A and was not maintainable. But the significant distinguishing feature in this case is that the compromise decree which is alleged to be fraudulent and which is sought to be declared as nullity was passed not by a civil court but by a Revenue Court in a suit under Section 176 of the U.P. Zamindari Abolition and Land Reforms Act, 1950 (hereinafter "the Act").

13. Section 331 of the Act bars the jurisdiction of the civil court and provides that a suit under the Act can be entertained by no court other than that the courts specified in Schedule II to the Act. A reference to Schedule II would show that the court of original jurisdiction for a suit under Section 176 of the Act for division of a holding of a bhumidhar is the Assistant Collector, First Class and the courts of first appeal and second appeal are the Commissioner and the Board of Revenue respectively. Section 341 of the Act, of course, provides that unless otherwise expressly provided by or under the Act, the provisions of the Court Fees Act, 1870; the Code of Civil Procedure, 1908 and the Limitation Act, 1963, including Section 5 thereof would apply to the proceedings under the Act.

14. Though the provisions of the Code of Civil Procedure have been made applicable to the proceedings under the Act but that would not make the authorities specified under Schedule II to the Act as "court" under the Code and those authorities shall continue to be "courts" of limited and restricted jurisdiction.

15. We are of the view that the Revenue Courts are neither equipped nor competent to effectively adjudicate on allegations of fraud that have overtones of criminality and the courts really skilled and experienced to try such issues are the courts constituted under the Code of Civil Procedure.

16. It is also well settled that under Section 9 of the Civil Procedure Code, the civil court has inherent jurisdiction to try all types of civil disputes unless its jurisdiction is barred expressly or by necessary implication, by any statutory provision and conferred on any other tribunal or authority. We find nothing in Order 23 Rule 3-A to bar the institution of a suit before the civil court even in regard to decrees or orders passed in suits and/or proceedings under different statutes before a court, tribunal or authority of limited and restricted jurisdiction.

17. In our view in the facts of the case the provision of Order 23 shall not act as a bar against the suit filed by the appellant. We, accordingly set aside the order of the High Court. As a consequence, the suit will be restored before the Munsif who is directed to accord it priority having regard to the fact that for the last 31 years it is stuck up on the issue of maintainability. The trial court should try to dispose of the suit without any delay, and in any case, not later than one year from the date of receipt/production of a copy of this order.

Horil thus holds that in case a compromise decree has been made by a revenue court, an aggrieved party can maintain an independent suit before a regular civil court challenging that decree on the ground of fraud or other like grounds. While a reading of Horil to this extent may ostensibly appear to be discordant with the views expressed in R. Rajanna and Kishun, it is manifest that the remedy so evolved was principally guided and necessitated by the conclusion that revenue courts were neither equipped nor competent to effectively adjudicate upon allegations of fraud or to decide questions whether a compromise was in fact made the basis of a decree by way of misrepresentation or fraudulent action. In order to overcome such a situation where revenue courts were found to be ill equipped, the Supreme Court in Horil proceeded to recognize the right of an aggrieved party to challenge a compromise decree as rendered by such courts by way of a suit filed before the civil courts. In light of the above, it is manifest that the first and second respondents clearly lacked the jurisdiction and authority to try the restoration applications which sought to recall decrees made inter partes on the basis of a compromise. As a necessary corollary it must also be held that the said respondents could not have taken recourse or resorted to Section 151 of the Civil Procedure Code to entertain the applications as made by the respondents. In light of the aforesaid conclusions, this Court finds itself unable to sustain the orders impugned.

The writ petition is accordingly allowed. The impugned orders dated 6 December 1997 and 31 March 2001 shall consequently stand set aside.

Order Date: - 12.7.2019 Arun K. Singh (Yashwant Varma, J.)

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