1992 (12) TMI 239 - SC - Indian Laws

Summary

Issues Involved:
1. Validity of the compromise petition filed on 27.2.1991.
2. Applicability of Order 23, Rule 3 of the Civil Procedure Code (CPC).
3. Legality of the High Court's order setting aside the Trial Court's decision.
4. The role of fraud in the compromise petition.
5. The power of the court to recall orders under Section 151 of the CPC.

Issue-wise Detailed Analysis:

1. Validity of the Compromise Petition Filed on 27.2.1991:
The appellant contended that no actual compromise had been reached between the parties, and the petition filed on 27.2.1991 was fabricated. The petition was not signed by the contesting respondent or his counsel, which is a requirement under Order 23, Rule 3 of the CPC. The Trial Court initially accepted the compromise and dismissed the suit based on the petition. However, upon discovering the alleged fraud, the appellant sought to have the order recalled.

2. Applicability of Order 23, Rule 3 of the Civil Procedure Code (CPC):
Order 23, Rule 3 of the CPC mandates that any compromise must be in writing and signed by the parties. The Trial Court's acceptance of the compromise without the necessary signatures was a significant procedural lapse. The Supreme Court emphasized that the court must be satisfied that the agreement is lawful before accepting it. The proviso to Rule 3 also requires the court to decide any disputes regarding the compromise, ensuring that it is not void or voidable under the Indian Contract Act.

3. Legality of the High Court's Order Setting Aside the Trial Court's Decision:
The High Court set aside the Trial Court's order, interpreting the compromise petition as a simple withdrawal under Rule 1 of Order 23. The Supreme Court disagreed, stating that the order on 27.2.1991 was based on a compromise, not a withdrawal. The Supreme Court held that the Trial Court's order should be treated as one under Rule 3 of Order 23, and its validity should be judged accordingly.

4. The Role of Fraud in the Compromise Petition:
The appellant alleged that the compromise petition was a result of fraud by his counsel in collusion with the respondent. The Supreme Court highlighted that any agreement or compromise obtained through fraud is void under the Indian Contract Act. The Trial Court, upon recognizing the alleged fraud, was justified in recalling the order and restoring the suit.

5. The Power of the Court to Recall Orders Under Section 151 of the CPC:
The Supreme Court affirmed that the Trial Court has the power to recall orders under Section 151 of the CPC, especially when fraud is alleged. The proviso to Rule 3 of Order 23 also empowers the court to decide the validity of a compromise. The Supreme Court noted that the Trial Court appropriately exercised its power in recalling the order dated 27.2.1991 after determining that the compromise was not lawful.

Conclusion:
The Supreme Court allowed the appeal, setting aside the High Court's order. The Trial Court's decision to recall the order and restore the suit was upheld. The Supreme Court stressed the importance of ensuring that compromises are lawful and free from fraud, and reiterated the procedural requirements under Order 23, Rule 3 of the CPC. The judgment underscores the judiciary's role in scrutinizing compromise agreements to prevent injustice.