Brief Facts and Procedural History:
First respondent filed a suit in the year 1988 before IVth Additional judge, city civil court, Hyderabad for a declaration that the agreement and arrangement between the parties amount to “industrial licence” and not “leave and licence”. He also sought permanent injunction from the court. The suit was originally against defendant 1, the managing partner of the firm, but after his death defendant 2 to 6 were brought on record. (Para 4)
During the pendency of the suit, the parties chose to enter into a compromise. An application was filed in the year 2001 before the trial court for recording the compromise and passing the decree in terms of settlement. Further, in the year 2002, an application was filed by the plaintiff alleging that an enquiry should be conducted into the matter since the defendant had disputed the compromise. The learned trial court on the basis of various records opined that the compromise deed was well acted upon between the parties decreed the suit accordingly. This was further affirmed by the learned Additional Chief Judge, City Civil Court, Hyderabad. He was also of the opinion that since it was a consent decree, no appeal would lie under Section 96(3) of the Code of Civil Procedure. Further, a second appeal was filed by the appellant wherein the court placing reliance on Pushpa Devi Bhagat (dead) through LR. Sadhna Rai (Smt.) v. Rajinder Singh and Ors. (2006) 5 SCC 566 held that since the appeal in question is a consent decree it is not maintainable. Thus it dismissed the appeal. (Para 6, 7, 8, 9 and 10)
The present appeal before the Supreme Court is through a Special Leave Petition against the order passed by the second appellate court. (Para 3)
Issues before the Court of Law:
Whether in the present case the appeal could have been preferred against the judgment and decree passed by the learned trial Judge? (Para 14)
Arguments raised by the appellants (para 12):
- It was contended that an erroneous conclusion has been arrived at that the appeal was not maintainable on the assumption that it was a consent decree.
- It was urged that the decision rendered in Pushpa Devi Bhagat had not considered Order XLIII Rule 1A of the Code of Civil Procedure and hence, the said decision could not have been placed reliance upon.
- It was contended that Section 96(3) and Order XLIII Rule 1A of the Code of Civil Procedure should have been harmoniously construed by the High Court as it is open to the Appellant to take a stand that the compromise should not have been recorded.
Arguments raised by the defendant (para 13):
- It was urged that the Appellants had entered into a lawful compromise with the Respondents and the same had been duly acted upon to a great extent and hence, the acceptance of the same by the learned trial Judge on the basis of material brought on record cannot be found fault with.
- It was further submitted that because of the said conclusion, the decree had earned the status of a consent decree and hence, the conclusion arrived at by the High Court is absolutely impeccable.
Ratio as given by the author of the judgement:
In Pushpa Devi Bhagat case, a two-judge bench referred to Rules 3 and 3-A of Order XXIII and held that (Para 14):
(i) no appeal is maintainable against a consent decree having regard to the specific bar contained in Section 96(3) Code of Civil Procedure;
(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) of Rule 1 Order XLIII;
(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 3-A; and
(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 Order XXIII.
The views expressed in this judgement only conveys the principle that a consent decree is not appealable being barred under Section 96(3) of Code of Civil Procedure. Therefore the said decision has to be confined to the facts exposited therein since the facet of consent was not contested. (Para 15)
In Kishun alias Ram Kishun (dead) through L.Rs. v. Behari (dead) by L.Rs. (2005) 6 SCC 300, a three-Judge Bench was dealing the maintainability of appeal in the backdrop of Section 96 (3) of the Code laid down the following ratio (Para 16):
“When on a dispute in that behalf being raised, an enquiry is made 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-appealability 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 the parties. 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.” (Emphasis Applied)
The ratio laid down in the Ram Kishun case applies on all fours to the case at hand. The Defendants-Respondents had raised a dispute with regard to validity of the compromise and the concerned court had conducted an enquiry. Thus, a decree had been passed on the basis of the compromise based on that enquiry and, therefore, it cannot be said to be a consent decree. Thus the appeal was dismissed as there were no merits found in it. (Para 17 & 19)