2022 (6) TMI 373 - SC - Indian Laws

Validity of order of Lok Adalat based on mutual compromise - High court set aside the order of Lok Adalat -Suit for partition and separate possession of property - Schedule properties - Compromise entered into between parties - Order XXIII Rule 3 of the Code of Civil Procedure, 1908 - HELD THAT - It is a settled position of law that where an allegation of fraud is made against a party to an agreement, the said allegation would have to be proved strictly, in order to avoid the agreement on the ground that fraud was practiced on a party in order to induce such party to enter into the agreement. Similarly, the terms of a compromise decree, cannot be avoided, unless the allegation of fraud has been proved. In the absence of any conclusive proof as to fraud on the part of the objectors, the High Court could not have set aside the compromise decree in the instant case. There are no ground made out warranting the decision of the High Court to set aside the order of the Lok Adalat dated 07th July, 2012, wherein compromise was recorded between the parties - The High Court's decision to set aside the order of the Lok Adalat, without entering into a discussion as to the findings in such order, cannot be sustained. Such decision of the High Court runs contrary to established principles of law which seek to protect the sanctity and finality of orders based on a compromise or consent between parties. - appeal allowed.

Summary

Issues Involved:
1. Validity of the compromise recorded by the Lok Adalat.
2. Allegation of fraud in obtaining signatures on the compromise petition.
3. Jurisdiction and authority of the High Court in setting aside the Lok Adalat's order.

Detailed Analysis:

1. Validity of the Compromise Recorded by the Lok Adalat:
The Lok Adalat recorded a compromise on 07th July 2012, wherein the plaintiffs agreed to relinquish their rights in the suit properties in exchange for monetary consideration. The Lok Adalat confirmed that the terms of the compromise were read and explained to the parties in Kannada, and all parties, including Plaintiff No. 1 on behalf of his minor children, consented to the compromise. The compromise was recorded as a decree of the court under Section 21 of the Legal Services Authorities Act, 1987, which equates an award of the Lok Adalat to a decree of a Civil Court, making it final and binding on all parties.

2. Allegation of Fraud in Obtaining Signatures on the Compromise Petition:
Plaintiff Nos. 4-6 alleged that their signatures on the compromise petition were obtained by fraud. They claimed that they were misled by the defendants into believing that the documents they signed were for tax purposes related to a property sale. They also stated that Plaintiff No. 4 refused to sign the order sheet on 07th July 2012 upon realizing the true nature of the documents. However, the Lok Adalat, in its order dated 27th April 2013, rejected these allegations, noting that Plaintiff Nos. 4-6 did not raise any objections on the day the compromise was recorded and had already accepted the monetary consideration.

3. Jurisdiction and Authority of the High Court in Setting Aside the Lok Adalat's Order:
The High Court, in its judgment dated 17th April 2015, set aside the Lok Adalat's order without providing detailed reasoning. The Supreme Court highlighted that a writ petition is maintainable against an award of the Lok Adalat, especially when fraud is alleged. However, the High Court must provide strong reasons and cannot set aside such an order in a cursory manner. The Supreme Court emphasized the need for reasoned decisions, especially when setting aside a compromise that results in a decree, citing the importance of transparency and accountability in judicial decisions.

Conclusion:
The Supreme Court set aside the High Court's judgment, restoring the Lok Adalat's order dated 07th July 2012. The Supreme Court found that Plaintiff Nos. 4-6 failed to provide conclusive proof of fraud and had accepted the monetary consideration as per the compromise. The High Court's decision lacked detailed reasoning and did not consider the findings of the Lok Adalat. The Supreme Court reiterated the sanctity and finality of orders based on compromise or consent between parties, emphasizing the need for strong reasons to recall such compromises.