A) ABSTRACT / HEADNOTE
The Supreme Court of India in Navratan Lal Sharma v. Radha Mohan Sharma & Ors. (2024 INSC 970) addressed the issue of whether a party has the right to seek restoration of a first appeal that was disposed of based on a compromise decree, particularly when the compromise agreement is later alleged to be fraudulent. The case originated from a civil dispute where the appellant’s suit for declaration and injunction was dismissed by the Trial Court. Subsequently, the parties reached a compromise during the pendency of the first appeal before the Rajasthan High Court. The High Court disposed of the appeal in terms of the compromise but explicitly stated that no liberty was granted to restore the appeal.
When the respondent allegedly failed to comply with the terms of the compromise, the appellant filed an application for recall, which was dismissed on the ground that the compromise decree did not provide for restoration. The Supreme Court, relying on Order 23 Rule 3 and Rule 3A of the Code of Civil Procedure, 1908, ruled that the High Court’s approach was incorrect as it curtailed the statutory remedy available to the appellant. The Court clarified that the legality of the compromise could still be challenged through a recall application, as an appeal or fresh suit was not maintainable under the CPC. The Court held that public policy does not permit the curtailment of statutory remedial mechanisms and remanded the matter to the High Court for reconsideration of the recall application.
Keywords:
Compromise decree, Fraud in recall application, Restoration of first appeal, Void and voidable agreements, Statutory remedies.
B) CASE DETAILS
i) Judgment Cause Title
Navratan Lal Sharma v. Radha Mohan Sharma & Ors.
ii) Case Number
Civil Appeal No. 14328 of 2024
iii) Judgment Date
12 December 2024
iv) Court
Supreme Court of India
v) Quorum
Hon’ble Justices Pamidighantam Sri Narasimha and Manoj Misra
vi) Author
Justice Pamidighantam Sri Narasimha
vii) Citation
[2024] 12 S.C.R. 453 : 2024 INSC 970
viii) Legal Provisions Involved
- Code of Civil Procedure, 1908, Order 23 Rule 3 and Rule 3A
- Indian Contract Act, 1872, Section 19 and Section 28
ix) Judgments Overruled by the Case
None explicitly overruled, but the ruling clarifies judicial interpretations regarding restoration of appeals under compromise decrees.
x) Case is Related to which Law Subjects
- Civil Procedure
- Contract Law
C) INTRODUCTION AND BACKGROUND OF JUDGMENT
The case arose from a dispute regarding ownership and fraudulent transactions involving property rights. The appellant had originally filed a suit for declaration and injunction concerning the validity of sale deeds executed through a fraudulent power of attorney. The suit was dismissed by the Trial Court, prompting the appellant to file a first appeal before the Rajasthan High Court.
During the pendency of the appeal, the parties entered into a compromise agreement, which was recorded by the High Court under Order 23 Rule 3 CPC. However, the respondent allegedly failed to honor the terms of the compromise, including financial payments and property transactions. The appellant, alleging fraud, sought restoration of the appeal, which was denied by the High Court on the ground that the compromise decree did not expressly permit restoration.
The Supreme Court was called upon to decide whether the High Court erred in dismissing the recall application solely based on the absence of explicit liberty to restore the appeal.
D) FACTS OF THE CASE
- The appellant owned the disputed property and filed a suit against the respondent to cancel sale deeds and declare certain power of attorney documents as fraudulent.
- The Trial Court dismissed the suit on 17.02.2014.
- The appellant filed a first appeal before the Rajasthan High Court.
- During the appeal, the parties entered into a compromise agreement on 18.05.2022, with an additional corrigendum compromise on 08.07.2022.
- The compromise stipulated that if the terms were violated, the appellant had the right to restore the first appeal.
- The High Court disposed of the appeal on 14.07.2022 based on the compromise but stated that no liberty to restore the appeal was granted.
- The respondent failed to honor the compromise, including non-payment of the agreed amounts.
- The appellant filed an application to restore the appeal, alleging fraud and non-compliance.
- The High Court dismissed the recall application on 19.10.2023, reasoning that no liberty was given to restore the appeal in the compromise decree.
- The Supreme Court granted leave and set aside the High Court’s order, allowing the recall application to be reconsidered on merits.
E) LEGAL ISSUES RAISED
- Whether the absence of express liberty in a compromise decree prevents restoration of a first appeal?
- Whether fraud in the compromise agreement can be a ground for recall of the appeal under Order 23 Rule 3 CPC?
- Whether a party aggrieved by non-compliance of a compromise decree has a statutory right to seek restoration of the appeal?
F) PETITIONER / APPELLANT’S ARGUMENTS
- Fraud vitiates all proceedings, and the respondent failed to adhere to the compromise terms.
- Order 23 Rule 3 CPC permits recall of a compromise decree if the agreement is voidable.
- Explanation to Order 23 Rule 3 CPC provides that voidable agreements are not lawful.
- Right to restoration was explicitly mentioned in the compromise deed, even if the High Court failed to record it.
- Denying recall curtails statutory remedies, violating principles of access to justice.
G) RESPONDENT’S ARGUMENTS
- The compromise decree was recorded with full consent, and the appellant was aware that no liberty for restoration was granted.
- The appellant should pursue separate remedies such as execution or damages, rather than recall of the appeal.
- The High Court correctly applied Order 23 Rule 3, barring restoration absent explicit permission.
H) JUDGEMENT
a. Ratio Decidendi
- The absence of express liberty to restore an appeal does not bar recall applications if the compromise is fraudulent.
- Order 23 Rule 3 CPC obligates courts to verify the legality of compromise agreements, even post-decree.
- A party can approach the court that recorded the compromise for recall under statutory rights.
- Courts must not curtail statutory remedies by procedural technicalities.
b. Obiter Dicta
- Public policy does not favor curtailment of statutory rights and remedial mechanisms.
- A compromise decree is subject to recall if it results from fraud or voidable agreements.
c. Guidelines
- Courts must assess the legality of a compromise agreement before recording it under Order 23 Rule 3 CPC.
- Courts must ensure remedial mechanisms remain available in cases of non-compliance.
- Dismissing recall applications solely on procedural grounds is incorrect when statutory rights are involved.
I) CONCLUSION & COMMENTS
The Supreme Court’s ruling underscores the importance of statutory remedies in cases of compromise decree violations. It affirms that fraud can vitiate a compromise decree and that courts must not mechanically dismiss recall applications.
J) REFERENCES
a. Important Cases Referred
- Banwari Lal v. Chando Devi (1993) 1 SCC 581
- Pushpa Devi v. Rajinder Singh (2006) 5 SCC 566
- R. Rajanna v. S.R. Venkataswamy (2014) 15 SCC 471
