2006 (7) TMI 707 - SC - Indian Laws

Suit against the tenant for possession - Recovery of the possession of the suit property - Let out the suit property with the fittings and fixtures - tenancy continued after the lease term of three years - Rule 3 of Order 23 of CPC - agreement or compromise between the parties - HELD THAT - In this case under the settlement the tenant undertook to vacate the suit property on a future date (that is 22.1.2002) and pay the agreed rent till then. The decree in pursuance of such settlement was an executable decree. Therefore the settlement did not fall under the second part but under the first part of Rule 3. The High Court obviously committed an error in holding that the case fell under the second part of Rule 3. If the terms of a compromise written on a paper in the form of an application or petition is considered as a compromise in writing can it be said that the specific and categorical statements on oath recorded in writing by the court and duly read over and accepted to be correct by the person making the statement and signed by him can be said to be not in writing? Obviously no. We may also in this behalf refer to Section 3 of the Evidence Act which defines a document as any matter expressed or described upon any substance by means of letters figures or marks or by more than one of those means intended to be used or which may be used for the purpose of recording the matter. The statements recorded by the court will therefore amount to a compromise in writing. Consequently the statements of the parties or their counsel recorded by the court and duly signed by the persons making the statements would be statement in writing signed by the parties . The court however has to satisfy itself that the terms of the compromise are lawful. In this case we find from the trial court records that the second defendant had executed a vakalatnama empowering her counsel Sri Dinesh Garg to act for her in respect of the suit and also to enter into any compromise. Hence there can be no doubt that Sri Dinesh Garg was authorized by the second defendant to enter into a compromise. We also find that the counsel for the plaintiffs and counsel for the defendants made solemn statements on oath before the trial court specifying the terms of compromise which were duly recorded in writing and signed by them. The requirements of the first part of Rule 3 of Order XXIII are fully satisfied in this case. The suit was a simple suit for possession by a landlord against a tenant filed in the year 1993. Plaintiff s evidence was closed in 1998. The contesting defendant (defendant No.2) did not lead any evidence and her evidence was treated as closed. The matter was dragged on for 3 years for defendant s evidence after the conclusion of plaintiff s evidence. It was noted on 19.5.2001 that no further adjournment will be granted for the evidence of defendants 4 and 5 (who are not contesting the matter) on the next date of hearing (23.5.2001). When the matter finally came up on 23.5.2001 no evidence was tendered. On the other hand a statement was made agreeing to vacate the premises by 22.1.2002. The trial court took care to ensure that the statements of both counsel were recorded on oath and signed. Thereafter it passed a consent decree. The attempts of tenants in such matters to protract the litigation indefinitely by raising frivolous and vexatious contentions regarding the compromise and going back on the solemn undertaking given to court should be deprecated. Neither the second defendant nor her legal representative has attributed any improper motive to second defendant s counsel. The facts go to show nothing further could have been done for the defendants-tenants. All that the counsel for defendants had done was to get the maximum advantage to his clients in the circumstances after dragging on the matter to the extent possible. This appeal is therefore liable to be dismissed as being devoid of merit. The consent decree is upheld though for reasons different from those which weighed with the High Court. The landlords (respondents) will be entitled to seek mesne profits for the period from 22.1.2002 to date of delivery of possession in accordance with law. The appeal is accordingly dismissed with costs. The costs payable by the appellant are quantified at Rs. 25, 000/-.

The core legal questions considered by the Court are:

(i) Whether the appeal filed by the tenant against the consent decree was maintainable under the Code of Civil Procedure (CPC).

(ii) Whether the compromise recorded on 23.5.2001, resulting in a consent decree dated 18.7.2001, constituted a valid compromise under Order 23 Rule 3 CPC.

Issue-wise Detailed Analysis

(i) Maintainability of Appeal Against Consent Decree

Relevant Legal Framework and Precedents: Section 96(1) CPC provides for appeals from original decrees, but sub-section (3) explicitly bars appeals against decrees passed with the consent of parties. Earlier, Order 43 Rule 1(m) CPC allowed appeals against orders recording or refusing to record an agreement or compromise, but this was omitted by Act 104 of 1976 effective 1.2.1977. A proviso was added to Order 23 Rule 3 CPC, requiring courts to decide disputes about the existence of a compromise. Rule 3A bars suits to set aside a decree on grounds that the compromise was unlawful.

Court's Interpretation and Reasoning: The Court held that no appeal is maintainable against a consent decree due to the explicit bar in section 96(3) CPC. Likewise, no appeal lies against the order recording or refusing to record a compromise after the deletion of Order 43 Rule 1(m). The only remedy to challenge a consent decree is by an application before the court which passed the decree under the proviso to Rule 3 of Order 23 CPC, to establish that no valid compromise existed.

Key Evidence and Findings: The tenant filed an application under section 151 CPC to set aside the consent decree alleging no valid compromise existed. Instead of pursuing it, she filed an appeal against the consent decree before the District Judge, which was found to be not maintainable.

Application of Law to Facts: The Court allowed the jurisdictional plea to be raised despite it not being argued earlier, relying on precedents that jurisdictional questions can be raised at any stage. It concluded the appeal was not maintainable and the tenant's only remedy was to challenge the decree before the trial court.

Treatment of Competing Arguments: The landlords had not raised the maintainability issue earlier but the Court permitted the plea due to its jurisdictional nature. The tenant argued the appeal was maintainable, but the Court rejected this based on the express statutory bar.

Conclusion: The appeal against the consent decree was not maintainable under the CPC.

(ii) Validity of the Compromise under Order 23 Rule 3 CPC

Relevant Legal Framework and Precedents: Order 23 Rule 3 CPC provides two limbs for compromise of suits: (a) where a suit is adjusted wholly or partly by a lawful agreement or compromise in writing and signed by the parties; and (b) where the defendant satisfies the plaintiff in respect of the whole or any part of the subject matter of the suit. The first limb requires a written and signed agreement; the second limb concerns satisfaction of the claim, which need not be in writing. The Court relied on authoritative precedents including Byram Pestonji Gariwala v. Union Bank of India and Jineshwardas v. Jagrani, which recognize that a counsel duly authorized by vakalatnama can enter into a compromise binding on the party.

Court's Interpretation and Reasoning: The Court distinguished the two limbs of Rule 3. The first part involves promises or agreements to perform acts in the future, enforceable by execution. The second part involves completed acts or satisfaction already performed, not enforceable by execution. In this case, the tenant undertook to vacate the premises on a future date and pay rent till then, which is a promise to perform a future act, falling under the first part. The High Court erred in holding the case fell under the second part.

The Court interpreted "signed by the parties" to include signatures by duly authorized counsel, supported by the CPC provisions on appearance and representation. The statements of counsel recorded on oath and signed in court constituted a compromise "in writing" under Rule 3. The Court rejected the tenant's contention that a formal document or instrument was necessary.

Key Evidence and Findings: The trial court record showed that the counsel for both parties made solemn statements on oath specifying the terms of the compromise, which were read over, accepted, and signed by them. The tenant had executed a vakalatnama authorizing her counsel to act and compromise. The tenant did not lead evidence or dispute the counsel's authority at any stage.

Application of Law to Facts: The Court found that the requirements of the first part of Rule 3 were fully satisfied: there was a lawful compromise in writing, signed by authorized representatives, recorded on oath by the court. The tenant's counsel had authority to enter into the compromise, and the statements constituted a binding agreement.

Treatment of Competing Arguments: The tenant argued that the compromise was not in writing signed by the parties and that the promise to vacate was a future act, not satisfaction of the claim. The Court rejected this, clarifying the distinction between the two limbs of Rule 3 and emphasizing the binding nature of counsel's statements made under vakalatnama authority. The Court also distinguished the tenant's reliance on earlier precedents requiring formal instruments, noting the facts here differed as the statements were recorded on oath and signed.

Conclusion: The compromise recorded on 23.5.2001 was a valid and lawful compromise under the first part of Order 23 Rule 3 CPC, binding on the parties and supported by the consent decree.

Additional Observations

The Court noted the prolonged litigation and the tenant's failure to lead evidence despite multiple opportunities. The compromise was a pragmatic resolution, granting time to vacate with payment of rent, and the Court deprecated attempts to prolong litigation by repudiating solemn undertakings given through counsel. The Court also held that the landlords were entitled to mesne profits from the date the tenant was to vacate until actual delivery of possession.

Significant Holdings

"No appeal is maintainable against a consent decree having regard to the specific bar contained in section 96(3) CPC."

"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."

"Where the matter falls under the first part [of Rule 3], there is a promise or promises agreed to be performed or executed, and that can be enforced by levying execution."

"The words 'signed by the parties' refer not only to parties in person, but their attorney holders or duly authorized pleaders."

"The statements of the parties or their counsel, recorded by the court and duly signed by the persons making the statements, would be 'statement in writing signed by the parties'."

"A judgment or decree passed as a result of consensus arrived at before court, cannot always be said to be one passed on compromise or settlement and adjustment. It may, at times, be also a judgment on admission."

"The attempts of tenants in such matters to protract the litigation indefinitely by raising frivolous and vexatious contentions regarding the compromise and going back on the solemn undertaking given to court, should be deprecated."

Core Principles Established

- Consent decrees are binding and not subject to appeal under section 96(3) CPC; challenges must be made before the court that recorded the compromise.

- Order 23 Rule 3 CPC distinguishes between compromises in writing signed by parties (first part) and satisfaction of claims (second part), with different legal consequences.

- Authorized counsel's statements recorded on oath and signed in court satisfy the requirement of a compromise "in writing" signed by parties under Order 23 Rule 3 CPC.

- Promises to perform future acts (such as vacating premises by a specified date) fall under the first part of Rule 3 and create executable decrees.

- The role of counsel includes authority to compromise suits on behalf of clients, especially when empowered by vakalatnama, and courts will uphold such compromises unless authority is successfully challenged.

Final Determinations

(i) The appeal filed by the tenant against the consent decree was not maintainable under the CPC.

(ii) The compromise recorded on 23.5.2001 was valid and lawful under the first part of Order 23 Rule 3 CPC, resulting in a binding consent decree dated 18.7.2001.

The Court accordingly dismissed the appeal, upheld the consent decree, and awarded costs to the landlords.

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