Order XXIII Rule 3: Detailed Analysis

Introduction:

Decree as defined in Section 2(2)[1] of Civil Procedure Code, 1908, refers to the judgment of the court. It refers to the legal announcement by the court in consequence of the act brought up before the act for resolution of justice. In general words, a decree is a formal interpretation of the interest of both parties which provides a conclusive result to the controversial matter of a particular civil suit. For the decision of the court to be known as Decree, the following essentials are to be present such as:

• There must be an adjudication. 
• Adjudication to be carried out in a suit.
• Determination over the rights of the parties in a disputed matter of the suit. 
• Conclusive determination of the rights of the parties.
• The determination must be in a formal manner.

A decree is a later part of the judgment, formed by the judge after studying the disputed matter and determining the rights of the parties. The Court considers the circumstances in which an order is passed and the words used to determine whether the order of the Court is a decree or not? Decisions like abetment of suits; dismissal of the appeal as time-barred; dismissal of suit or appeal for want of evidence or proof; rejection of plaint for non-payment of court fees; granting or refusing to grant costs or instalment; order refusing one of several risks; modification of schemes under Section 92 of the Code; order holding appeal not maintainable; order holding that the right to sue does not survive; order holding that there is no cause of action; are held to be a decree. 

Decisions such as a dismissal of an appeal for default; Appointment of Commissioner to take accounts; Order of remand; Order granting or refusing interim relief; return of plaint for presentation to the proper court, dismissal of the suit under Order 23 Rule 1; Rejection of application for condonation of delay; rejection of the application to be maintainable; order refusing to set aside the sale; an order directing the assessment of mesne profits; are held not to be a decree.[2]

According to Section 2, there are 3 types of Decree:

1. Preliminary Decree
2. Final Decree
3. Partly Preliminary and Partly Final Decree

Further, there are different types of decree determined by the Court in its various orders, which are as follows;

1. Deemed Decree
2. Compromise Decree
3. Consent Decree
4. Ex-Parte Decree
5. The decree passed in appeal
6. Conditional Decree

The question arises, in a situation where a suit has been filed, is it possible whether that suit can be withdrawn or not? The answer is yes, it can be withdrawn under Order 23 Rule1. Order XXIII Rule 3 talks about the Compromise Decree. But before discussing Rule 3, let’s have a look at Rule 1 and Rule 2.

Order XXIII, Rule 1[3]

Order XXIII talks about the Withdrawal and adjustment of suits.

Withdrawal or adjournment can be done in two types of cases:

• Withdrawal of suit or part of a claim with the permission of the court known as Qualified Withdrawal;
• Withdrawal of suit without the permission of the court is known as Absolute Withdrawal.

Rule 1 (1) talks about the withdrawal of cases without the leave of the Court. The suit or part of the claim can be abandoned by the plaintiff without the leave of the court. This right comes with a restriction which is stated in Rule 1(4). It says, if the plaintiff abandoned a suit regarding a subject matter, then he cannot file a fresh suit regarding the same subject matter and has to bear the cost as the Court may prescribe. This principle is laid down on the legal maxim, Invito beneficium non-datur, which means the law confers, upon a man no rights or benefits which he does not desire. Rule 1(A) talks about the circumstances where the defendant can be transposed as a plaintiff when the initial plaintiff withdraws the suit. 

Rule 1(2) makes it mandatory in the case of a minor to get the permission of the court for the abandonment of the suit, and Rule 1(3) states the criteria based on which permission can be granted for the abandonment of suit. These grounds are:

• If there are formal defects that affect the merits of the case;
• If there are reasonable and sufficient grounds;
• On the discretion of the court, which the court deems fit.

As per Rule 1(5), if there are two or more plaintiffs, then the suit cannot be withdrawn or abandoned without the permission of all the plaintiffs. However, if one of the plaintiffs wishes to give up on his part of the interest in the suit, he can withdraw it.

Order XXIII, Rule 2[4]

Rule 2 talks about the applicability of Limitation Law. It says if the suit is withdrawn due to certain circumstances and again a fresh suit is instituted on the same subject matter, then the plaintiff is bound by Limitation Act in the same manner as if the first suit has not been filed at all.[5] 

Order XXIII, Rule 3[6]

Soon after the institution of the suit, it is up to the discretion of the parties as to whether they want to compromise, adjust, settle with an agreement or compromise. It is a general presumption that every disputed matter can be settled by compromise, rather than arguing over it. Compromise in a simple sense means giving up on the part of the disputed demand, by both parties.  

According to Rule 3, when the Court believes that a suit has been adjusted wholly or in part by a lawful agreement in writing and signed by the parties; or the defendant satisfies the plaintiff in respect of whole or any part of the subject matter of the suit, the court shall pass a compromise decree based on the record of the satisfactory agreement, or compromise. 

Compromise can only be possible when both the parties mutually decide to settle their dispute. The settlement has to be carried out with the consent of both parties. No party can pressurize the other to compromise the suit. This compromise puts an end to the litigation battle between parties. After a compromise, the fuss between parties is given a decent burial. Sometimes, the parties try to get away from lengthy litigation battles and hold the belief of soft relationships to prevail, decide to compromise the suit reasonably. It might so happen, with the intervention of conciliator, parties get their rights substantiative by consensus both of them. The rule of harmony and peace prevails over the exhaustive litigation battle, which might turn filthy. 

Essential Conditions in a Compromise[7]

For the validity of the consent decree, the following conditions are necessary, which are as follows:

1. It has to be written and signed by both the parties;
2. It must be lawful;
3. There must be an agreement or compromise;
4. It must be recorded by the court;
5. A decree of compromise passed by the court.

Jurisdiction

When both the parties agree to the adjustment or compromise or satisfy themselves over the disputed subject matter, they then need to submit an application stating their consent and the reasons for compromise, the court if may deems fit, will record the satisfaction. In the case of suit, the trial court will record the compromise, whereas, in the case of appeal, such recording will be done by the appellate court or revisional court. In case when compromise has been arrived at in execution proceedings, it is the executing court that can record such compromise. 

When a minor is involved

When a minor enters the compromise, no next friend or the guardian on behalf of that minor can agree without the leave of the court, unless such permission is expressly recorded in the proceedings.  

Applicability

This rule applies to civil suits, but the underlying provision applies to other proceedings also. The compromise observed by the court is called decree but it shall not have the same effect as a decree. 

In Case of Dispute

When the dispute is raised for the genuineness of the compromise, in that scenario, the jurisdiction to try such dispute always lies in the hands of the court which recorded the compromise and passed such decree. A fresh suit can never be filed against such decree, rather an appeal can. 

Either party may challenge it on its validity, on the ground that there is no existence of compromise, or it is not written or signed by him. The right to decide on this question is vested on the court recording the compromise. 

Satisfaction of the Court

The court needs to satisfy himself with the terms of the compromise. The court must satisfy himself that the agreement is lawful and must be following the terms of requirement of same. The Court must check the enforceability of the same overall the parties to suit. The passing of a compromise decree is a judicial act, not a ministerial act. 

The court to check the legality, must check the evidence or the affidavit submitted. The court cross-examines the parties regarding the adjustment of the suit. In the case of Banwari Lal v. Chando Devi[8], it was held that an order recording compromise can be recalled by the court if the compromise is found to be illegal. 

It was in the same case the court also held that the agreement or compromise which is void or voidable under the Indian Contract Act, 1872, shall not be deemed to be lawful within Rule3. 

The court in the same case had a say regarding the question of legality. It was observed by the court that in the case where either of the party alleged that a compromise has not been entered into or is not lawful, then the court must decide that question. 

Authority of Pleader

 An advocate appearing in a suit for the party holds the same implied authority to enter into a compromise on behalf of the client. 

In the case of Y. Sleebachan v. State of Tamil Nadu[9], the court held that the Government pleader holds the authorities to enter into a compromise on behalf of the Government. Eventually, the authority stated in Vakalatnama and instructions given from time to time might disrupt. 

Order 23 Rule 3-A

The compromise decree once passed cannot be set aside on the grounds of its legality. No suit can be filed against the compromise decree, questioning its legality or lawfulness. 

Order XXIII, Rule 3-B

In the case of a representative suit, the agreement or compromise can never be entered into with the consent of the court. The court must have a word with all parties of the representative suit and must consider the interest of each of them. 

Res Judicata and Compromise Decree

The compromise or agreement is presented by the parties before the court. The court then checks the legality of it and thus passes the decree or recalls it. Since the compromise decree is not the decision of the court, rather it is the mere seal of the court on the agreement of the parties. Thus, it does not attract the principle of res judicata, as it is not the decision of the court, rather the acceptance of the court over something agreed by parties. Also, the decision of the court is not implicit in the agreement. 

Further, there are some exceptional circumstances where the consent decree operates as res judicata. In cases where there is a creation of new rights among the parties, out of consent decree, the principle of res judicata applies. 

In the case of Shankar v. Balkrishna[10], the court observed that a compromise decree is not a decree based on merits as it cannot be said that the case was “heard and finally decided”. It is based on compromise or consent of parties and therefore, will operate as an estoppel. 

In the case of Subba Rao v. Jagannadha[11], it was observed that a compromise decree is not a decision of the court, nor the implicitly of the court be intrude in it. it is the mere acceptance of the court over something, agreed by the parties. Such a decree cannot operate as res judicata.

Execution Decree

A consent decree is executable in the same manner as an ordinary decree. In a case where the consent is unlawful or is not free consent, or passed by a court having no jurisdiction, then that decree is null, and its validity is questioned. In the case where the subject matter of the compromise is not identical with the subject matter of the suit, the court still holds the right to pass such a decree, if the compromise is between parties and is lawful. 

Appeal

When a compromise decree is passed, with the agreement of both the parties, no appeal shall lie against the decree passed by the court with the consent of the parties, nor a suit can be instituted to set aside compromise decree on the ground that such compromise is not lawful.[12]

Though the appeal can be filed under Section 96(1) and Section 96(3) shall not bar such appeal. Such a decree can be challenged on the grounds of coercion, fraud, undue influence. 

Revision

The High Court holds the revisional jurisdiction under Section 115 if all the conditions of it are satisfied. The order of recording or refusing to record compromise is the case decided under Section 115. 

Conclusion

After this discussion, it can be said that the parties hold the right to file a suit against the disputed matter and also holds the right to settle or adjust it accordingly at any point of the suit. The adjustment or settlement can be done by agreement or by compromise and has to be done by the consent of the parties. The necessary conditions are required to be fulfilled as described in Rule 3 and Rule 3-B. If the court is satisfied with all the conditions of the compromise, it shall pass a decree, putting an end to the litigation battle. Compromise decree is one way to lessen the burden of the judicial system. 

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References:

[1] Universal, Lexi Nexis, The Code of Civil Procedure, 1908, Bare Act

[2] 19^th Edition, Sir DinshawFardunji Mulla, The Code of Civil Procedure.

[3]https://www.mondaq.com/india/civil-law/1046300/withdrawal-of-a-plaintiff-from-a-suit-do-co-plaintiffs-have-a-say

[4]Eight Edition, C.K. Takwani, Civil Procedure Code

[5]According to the Section 14 of the Limitations Act,1963, this rule has been impliedly repealed.

[6] http://www.legalserviceindia.com/legal/article-311-compromise-decree-a-detailed-overview.html

[7]https://blog.ipleaders.in/compromise-civil-suit/

[8](1993) 1 SCC 581

[9](2015) 5 SCC 747

[10]AIR 1954 SC 352

[11]MANU/SC/0018/1963

[12]Though appealable before the Amendment Act, 1976.