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Conflicting View Of Supreme Court In The Setting Aside The Compromise Decree Obtained By Fraud

Hon'ble Supreme Court in Triloki Nath Singh v. Anirudh Singhi (herein after referred as Triloki Nath Singh) has rendered its decision regarding interpretaion of Order 23 Rule 3-A and held that the Civil Suit field by the stranger to that proceeding challenging legality of compromise decree obtained even on the basis that such decree is obtained by fraud is not maintainable.

The present article tries to critically analyze the judgment of Hon'ble Court in the light of its earlier decisons which were not considered by the Hon'ble Court while passing the judgment of Triloki Nath Singh.

Facts of the Case
The Appellant Plaintiff in the instant case has filed a suit in the district court alleging that the compromise decree dated 15-09-1994 passed in the second appeal by the High Court is illegal as the same has been obtained by way of fraud and misrepresentaion by the respondent defendents and prayed injuction against the respondent.

The dispute in the instant case was related to the Land which orginally belonged to one Lakhan Singh who died living behind three sons, namely Din Dayal Singh, Jalim Singh and Kunjan Singh. Din Dayal Singh is said to have died issueless during lifetime of his father and his other brother, namely, Jalim Singh also died leaving behind a son Ram Nath Singh and two daughters Sampatiya and Soniya. As regards the third son Kunjan Singh, he is said to have died issueless but prior to his death he gifted the land of his share to Sampatiya on the basis of a gift deed dated 10-7-1978 which came on possession over her.

Thereafter a woman named Salehari failed a partition suit No. 13/17 claming that she is daughter of the Kunjan Singh consequently setting aside gift and partition of her share in the ancestral property. In the aforesaid suit, Sampatiya, Dulari Devi, Ram Nath and Soniya were imp leaded as respondent/defendants. Ram Nath died during pendency of the proceedings and only Sampatiya contested the suit however the said suit was consequently dismissed wherein court finds that Salehari is not the daughter of Kunjan Singh and has no right in the said properties.

Aggrieved by such dismissal the Salehari filed an appeal bearing no TA No. 19/84 which was dismissed on 7-4-1986. It was further stated that a total of 3 bighas 6 kathas 3 dhurs was sold by Sampatiya to the appellant-plaintiff for a sum of Rs 25,000 by a registered sale deed dated 6-1-1984 and put the appellant-plaintiff in possession over the suit property. Later on enquiry it was found that such sale deed has been executed on the strength of some compromise which was filed in second appeal before the High Court of Patna.

Thereafter the appellant/plaintiff challenged the said compromise decree stating that same has been obtained by fraud and misrepresentation concealing the material facts from the high court. The respondent-defendant raised the objection upon the maintainability of the suit on the ground that the same is not maintainable in the view of Order 23 Rule 3-A of the Code of Civil Procedure (hereinafter being referred to as "CPC").

The the learned trail judge after the appreciation of the evidence on record passed a judgment and decree dated 31-7-1998 and the same was challenged by the appellant-plaintiff in appeal before the learned District Judge . The said appeal was also dismissed by the court of appeal by its judgment dated 5-5-2003 that came to be challenged by the appellant in Second Appeal No. 153 of 2003 before the High Court which also get dismissed at the motion stage and subsequently went to the supreme court.

Judgment and Observation of the Court
The question which falls for the consideration before Hon'ble Supreme Court was whether the decree passed on a compromise can be challenged by the stranger to the proceedings in a separate suit.

The Hon'ble Court has held in the instant case that the principal of finality of legislation is the underlying principle which is omnipresent in all the litigation and thus, further litigation contenting a compromise decree cannot be allowed in view of the bar present in the Rule 3A of Order 23 Code of Civil Procedure which specifically provides that no suit shall lie to set aside a decree on the ground that the compromise on the basis of which the decree is passed was not lawful.

The Court further observed that the the scheme of Order 23 Rule 3 of Code of Civil Procedure is to avoid multiplicity of litigation and permit parties to amicably come to a settlement is in writing and a voluntary act on the part of the parties. The Court must protect the agreed compromise effected and respect the finality attached to the same.

The court in the instant case has even holds that the compromise decree is binding upon the person who was not even party to the suit. The Court held that just because the Appellant was not party to the compromise decree affected in the earlier case it does not give him a cause of action to question the validity of the compromise decree passed by High Court by way of filling a fresh suit before the civil Court to declare the compromise decree fraudulent, illegal and not binding.

The court has observed that it was the high court who has accepted the compromise agreed by the parries and passed decree on that basis therefore only High Court could examine the validity of compromise and no other Court under proviso to Rule 3 of Order 23 Code of Civil Procedure. Hence, suit instituted before the civil Court by the Appellant was not maintainable in view of specific bar under Rule 3A of Order 23 Code of Civil Procedure.

The Judgment of Hon'ble Court in the instant case has failed to consider the previous judgment of the Courts in the matter. The Judgment has laid down the preposition it the bar present in Order 23 Rule 3-A extends to the third party even when such decree has been obtained by the fraud and collusion.

It is pertinent to mention here that the Supreme Court has time again considered the decree which has been obtained by the fraud and collusion some of the important judgment are now considered for the reference.

It is pertinent to mention here that Lord Denning way back in the year 1956 in the case of Lazarus Estates Ltd. v. Beasleyii held that 'No judgment of a court, no order of a Minister, can be allowed to stand if it has been obtained by fraud.'

In S.P. Chengalvaraya Naidu v. Jagannathiii (Hereinafter referred as S.P. Chengalvaraya Naidu) , where the question before the court was whether the hiding material facts from the court will amount to playing fraud upon the court and in that circumstances can the decree obtained by the court can be set aside. The supreme court in the instant case has held that the person who comes to the court must come with the clean hands and the handing material facts amounts to playing fraud upon the court.

Therefore the decree which has been obtained by the court by playing fraud on the court cannot be allowed to sustain and principle of finality of legislation cannot be extended to extent of absurdity so that it becomes engine of fraud in the hands of the dishonest litigants. The court in the instant case has particularly held that the judgment or decree obtained by fraud is non est in the eyes of law and same must be treated as nullity by every court whether it be first court or highest court, such decree can be challenged in any stage even in collateral proceedings.

Thus the Judgment rendered by the Supreme Court in S.P. Chengalvaraya Naidu would have been considered by the Court in Trilokinath while it was holding that the the Compromise decree effected before the high court can only be challenged before the high court. The view taken in S. P Chengalvaraya Naidu has been retaliated by the supreme court in the N. Khosla v. Rajlakshmiiv.

That it is important to note that by Act 104 of 1976, S. 74 (w.e.f. 1-2-1977) the rule 3A in the Order 23 was introduced which creates a bar upon filing a separate suit challenging lawfulness of the compromise on which the decree is based upon.

However the Supreme Court has time and again considered the question whether the separate suit can be brought for challnaging the compromise decree before any other court other than the court on which such compromise has been effected.

The Supreme Court in the Horil v. Keshavv, held that the term "not lawful" used in Order 23 Rule 3-A also includes decree based on a fraudulent compromise. The view taken has been then retriated by the court in the R. Janakiammal v. S.K. Kumarasamyvi, and several other judgment including R. Rajanna v. S.R. Venkataswamyvii, has also expressed he view that the compromise decree cannot be challanged by way of filling seprate suit.

The Supreme Court in the Banwari Lal v. Chando Deviviii, held that the Compromise Decree can be challnged under Order 23 Rule 3 or in appeal under 96 (1) of the Code of Civil Procedure.

The Supreme Court in Trilokinath has extended the scope of Order 23 Rule 3A to the third parties also without taking the Judgment of the Court in the S.P. Chengalvaraya Naidu.

The perusal of the series of Judgment shows the Therefore, the position of law in the instant subject matter is yet to be decided wherein the view taken by the S.P. Chengalvaraya Naidu and Trilokinath has to be considered.

  1. Triloki Nath Singh v. Anirudh Singh, (2020) 6 SCC 629
  2. [(1956) 1 All ER 341 : (1956) 1 QB 702 : (1956) 2 WLR 502 (CA)]
  3. (1994) 1 SCC 1
  4. (2006) 3 SCC 605
  5. (2012) 5 SCC 525
  6. (2021) 9 SCC 114
  7. (2014) 15 SCC 471
  8. (1993) 1 SCC 581

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