B. Hanumanth Reddy vs B. Lakshmamma and Others

J. Eswara Prasad, J.—This revision arises out of the order of the learned Principal Subordinate Judge, Ranga Reddy District, rejecting the application filed by the petitioner under Order 7 Rule 11 of Civil Procedure Code, to reject the plaint in O.S. No. 514/90 in view of Order 23 Rule 3-A of CPC.

Respondents 3, 4, 8 and father of respondents 5 to 7 filed O.S. No. 45/85 before the Court of the Principal Subordinate Judge, Ranga Reddy District, for declaration of their title and recovery of plaint schedule properties against the petitioner and respondents 1 and 2. The said suit was dismissed on 31-8-88 and the plaintiffs preferred A.S. No. 9/89 in the Court of the Addl. Dt. Judge, Ranga Reddy. The matter was compromised between the parries on 19-6-90 based on a compromise memo filed by the parties and the suit O.S. No. 45 /88 was decreed in terms of the compromise setting aside the decree dated 31-8-88.

Respondents 1 and 2, who are respondents 1 and 3 in A.S. No. 9/89, filed O.S. No. 514/90, praying for partition of the plaint schedule properties into three equal shares and for cancellation of the compromise decree in A.S. No. 9/ 89 dated 19-6-90. The petitioner, who is the first defendant in the said suit, filed LA. No. 337/92 praying for rejection of the plaint under Order 7 Rule 11(d) in view of Order 23 Rule 3-A of CPC. The learned Judge dismissed the application, holding that the suit is maintainable and that the plaint cannot be rejected.

Sri Veerabhadraiah, learned Counsel for the petitioner submitted that compromise was recorded in A.S. No. 8/89 on 19-6-90 in the presence of the appellants as well as respondents and their Counsel and the decree in O.S. No. 45/85 was set aside and the terms of the compromise were read over and explained to the parties in Telugu, which the parties admitted. He contends that the suit is barred under Rule 3-A of Order 23 CPC, and it is not open to the trial Court to go into the question whether the compromise was obtained by fraud or misrepresentation, as alleged by the plaintiffs and to contend that the compromise was not lawful.

Sri M. Rama Rao, appearing for respondents 1 and 2 contends that the suit is maintainable and it is open to the Court to decide whether the compromise was void or voidable in terms or Explanation to Rule 3. He further contended that the present suit is filed for partition of the plaint schedule properties which comprises other properties apart from the properties which were the subject-matter of the compromise decree.

In view of the rival contentions of the learned Counsel, the question for consideration is whether the suit is maintainable?

Rule 3 of Order 23 CPC deals with compromise of suits and provides for passing of a decree by compromise or agreement or satisfaction, on the Court being satisfied that the suit has been adjusted wholly or in part by a lawful agreement or compromise in writing and signed by the parties, so far as it relates to the parties to the suit. The proviso to Rule 3 lays down that the Court shall decide the question when one of the parties denies that an adjusment or satisfaction has been arrived at. Explanation to Rule 3 of Order 23 lays down that an agreement or compromise which is void or viodable under the Indian Contract Act, 1872 (9 of 1872) shall not be deemed to be lawful within the meaning of Rule 3. In other words, if an agreement or compromise is to be held to be void or voidable as per the provisions of the Indian Contract Act, such an agreement or compromise shall not be deemed to be lawful and no compromise or adjustment shall be recorded and no decree shall be passed. This provision enables the Court to decide whether the compromise entered into is lawful, that is, whether the compromise is void or voidable.

Rule 3-A of Order 23 bars suits laid for setting aside a decree on the ground that the compromise on which the decree is based was not lawful. It is not open to the Court to go into the question whether the compromise was lawful or not in a suit instituted for a declaration that the compromise decree was not lawful. In support of the contention that the suit is barred, Sri Veerabhadraiah, placed reliance on Banwari Lal Vs. Smt. Chando Devi (through L.R.) and another, . It was held by the Supreme Court that a party challenging the compromise can file a petition under proviso to Rule 3 of Order 23, or an appeal u/s 96(1) of the Code, and he can question the validity of the compromise in view of Rule 1-A of Order 43 of the Code. It was further held that if the agreement or the compromise itself is fraudulent, then it shall be deemed to be void within the meaning of explanation to the proviso to Rule 3 and as such not lawful. The Supreme Court reversed the judgment of the High Court, which held that such an application was not maintainable. Though the Supreme Court was concerned with Rule 3 of Order 23, the entire gamut or Order 23, including Rule 3-A as well as Section 96(1) and Order 43, were gone into and elaborately considered. Referring to Rule 3-A of Order 23, it was observed:

"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 basis of a compromise".

It was further held:

"Similarly a suit used to be filed for setting aside such decree on the ground that the decree is based on an invalid and illegal compromise not binding on the plaintiff of the second suit. But after the amendments which have been introduced, neither an appeal against the order recording the compromise nor remedy by way of filing a suit is available in cases covered by Rule 3-A of Order 23."

Dealing with the remedy open to the party when the validity of the compromise is questioned, it was observed:

"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 Indian 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 Indian Contract Act."

Sri Ramarao, learned Counsel for respondents 1 and 2, referred to various decisions of the High Courts and contended that the observations of the Supreme Court in respect of Rule 3-A are only obiter. He contends that the various High Courts have held that a suit is maintainable under such circumstances.

The learned Counsel placed reliance on S.G. Thimmappa Vs. T. Anantha and Others, wherein it was held:

"Therefore, to hold that the compromise decree cannot be challenged on the ground of fraud, undue influence or coercion under Rule 3-A, would not be correct".

This decision is no longer good law in view of the judgment of the Supreme Court referred to above. The same High Court in another decision in Smt. Tara Bai v. Krishnaswamy Rao AIR 1985 Kant 270 held that a suit to question a compromise decree on grounds of fraud or misrepresentation is barred by Rule 3-A. Reliance was also placed on the decision in Gosto Behari Pramanik Vs. Sm. Malati Sen and Others, in contending that a compromise decree can only be set aside in a separate suit or proceedings on the ground that consent was obtained by fraud or coercion and such consent or compromise decree resulted in serious and substantial injustice. These decisions are of no help in view of the decision of the Supreme Court referred to above. The Bombay High Court held in Anant Mahadeo Godbole Vs. Achut Ganesh Godbole and Others, that Rule 3-A bars the remedy of a second suit on the cause of action that the compromise which resulted in the passing of the decree was not lawful. As I observed above, this decision too is of no avail. Even the obiter dicta laid down by the Supreme Court is binding on all the High Courts and no decision contrary to the obiter of the Supreme Court can be relied upon.

The last submission of Sri Ramarao is that the present suit is laid for partition of the properties which are not covered by the compromise decree and to that extent, the suit is not barred. The Court below will have to go into this question and find out whether the plaint schedule comprises other properties apart from the properties covered by the compromise decree. The order under revision is set aside and the Court below is directed to reject the plaint so far as the plaint schedule properties which are covered by the earlier compromise decree are concerned and to proceed with the suit if there are any other properties which are not covered by the compromise decree, treating the suit as a suit laid only for partition of the properties not covered by the compromise decree. The revision is accordingly allowed. No costs.