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Report No. 54

Order 23, rule 3-the words "so far as relates to"

23.17. Order 23, rule 3, authorises the court to pass a decree on a compromise in so far as the compromise relates to the subject matter of the suit. The controversy on one point under this rule was noted in the earlier Report1. That controversy2 related to the interpretation of the words "so far as relates to the suit" used in Order 23, rule 3. The question that arose in practice was, whether a decree which records the terms of a compromise in respect of matters beyond the scope of the suit is executable, or whether the terms of the decree relating to matters outside the suit can be enforced (as a contract) only by a separate suit. It was not, however, (in the Commission's view) possible to resolve the conflict of decisions by verbal changes, since the application of the rule may vary according to the facts of each case. As a general amendment was not thus possible, no change was considered necessary.

1. 27th Report, note on Order 3, rule 3 and the words "so far as relates to".

2. See case law discussed in AIR 1960 MP 280 (282), paras. 17 and 18.

23.18. We have given some thought to the matter and come to the conclusion that

(i) the controversy should be put an end to, and

(ii) the only way to put an end to it is to widen the provision, by requiring the court to pass a decree covering the whole compromise, so far as it relates to the parties to the suit, whether or not the subject matter of the compromise is confined to the subject of the suit. This will avoid the unnecessary controversy that arises under the present wording, namely, how much of the compromise has attained the force of a decree, and how much is to be left to be enforced by separate agreements, and so on. No doubt, such a widening can, theoretically, raise questions of jurisdiction and court fees. In most cases, however, the wide power will not affect jurisdiction and court fee. In any case, the proposed simplification is needed, and should override any such objections.

Recommendation

23.19. Accordingly, we recommend that in Order 23, rule 3, for the words "so far as relates to the suit", the words "so far as relates to the parties to the suit, whether or not the subject-matter of the agreement a compromise or satisfaction is the same as the subject-matter of the suit", should be substituted.

Order 23, rule 3A (New)

23.20. In a representative suit, leave of the court should be required before a compromise is recorded. Before such leave is given, notice to interested persons could be provided for. We have in mind those suits where a decree passed in the suit can bind persons not formally on the record. Such a provision is, in our view, required in order to safeguard the interests of persons so bound.

Recommendation

23.21. A new rule is proposed accordingly, as follows:-

"3A. (1) No agreement or compromise in a representative suit shall be entered into without the leave of the court expressly recorded in the proceedings; and any such agreement or compromise entered into without the leave of the court so recorded shall be void.

[Cf. Order 32, rule 7(1)]

(2) Before granting such leave, the court shall give notice to such persons as may appeal to be interested in the suit, in such manner as it thinks fit.

[Contrast Order 32, rule 7(2)]

Explanation-In this rule, the expression "representative suit" means-

(a) a suit under section 91 or section 92;

(b) a suit under Order 1, rule 8;

(c) a suit in which the manager of an undivided Hindu family sues or is sued as representing the other members of the family;

(d) any other suit in which the decree passed, may by virtue of the provisions of this Code or of any other law for the time being in force, bind any person who is not named as party to the suit."

Order 23, rule 3, and the word "proved"

23.22. There is another point concerning rule 3. According to this rule, if it is "proved" to the satisfaction of the Court that a suit has been lawfully compromised or settled, it is bound to pass a decree accordingly. Now, the expression "proved" has raised an interesting question as to how far is the court bound to hold an inquiry as to the factum of the compromise. The matter was discussed at length in a recent Mysore case. The facts were as follows:-

The respondent filed a suit for cancellation of a registered deed of sale against the petitioner. The petitioner, during the course of the suit, filed an application under Order 23, rule 3 (read with section 151) saying that a decree be drawn up in the terms of the compromise. The respondent contended that there was no agreement, and that he had not received any money as mentioned in the endorsement, and that the document had been brought about fraudulently. The Munsiff came to the conclusion on the evidence that the suit had been settled out of court. An appeal to the Civil Judge by the respondent was allowed, and the decree of the Munsiff set aside. On revision before the High Court, it was contended that the Civil Judge had exceeded his jurisdiction in examining the allegations of fraud and misrepresentation.1

1. Shetty v. Sasani, AIR 1970 Mys 209 (Tukol J.).

23.23. The High Court held that Order 23, rule 3, requires that there should be proof to the satisfaction of the Court that the suit has been adjusted wholly or in part by an agreement; and, further, such agreement should be lawful. The words "where it is proved to the satisfaction of the court" with which the rule opens impose an obligation on the court to be satisfied that the suit has been genuinely adjusted in whole or in part that the words "proved to the satisfaction of the court" are comprehensive enough, indeed seem to have been intended to empower the Court to go into the merits of the allegations "set up by the party denying or disagreeing with the terms of compromise or agreement and decide them, so that the parties get full justice in the suit in which a decree in terms of the compromise is to be passed under the rule.

Where the Court finds during the course of the enquiry that the alleged agreement or compromise is vitiated by fraud, misrepresentation etc. it cannot be said legally that an agreement has been arrived at. The agreement contemplated under the rule envisages the two parties coming to certain terms voluntarily and of a free will, so as to put an end to the litigation pending between them in the Court. If (the Court decides that the agreement or compromise is vitiated, it can reject it and proceed to dispose of the suit on merits."

23.24. The High Court, after reference to the order of the Civil Judge and to the depositions of the parties, also came to the conclusion that there was no agreement as alleged by the defendant, and the order of the Civil Judge (for the remand of the suit for disposal according to law) was therefore affirmed.

23.25. The decision is correct on the present language. But it now requires to be considered whether some modification in the existing position is not called for in the interest of speed. Reference may be made to the Punjab Amendment.

In the Punjab, the following provisos have been added to the existing rule:-

"Provided that the hearing of a suit shall proceed and no adjournment shall be granted in it for the purposes of deciding whether there has been any adjustment or satisfaction, unless the court for reasons to be recorded in writing, thinks fit to grant such adjournment, and provided further that the judgment in the suit shall not be announced until the question of adjustment or satisfaction has been decided:

Provided further that when an application is made by all the parties to the suit, either in writing or in open court through their counsel, that they wish to compromise the suit, the court may fix a date on which the parties or their counsel should appear and the compromise be recorded, but shall proceed to hear those witnesses in the suit who are already in attendance unless for any other reason to be recorded in writing, it considers it impossible or undesirable to do so. If, upon the date fixed, no compromise has been recorded, no further adjournment shall be granted for this purpose, unless the court, for reasons to be recorded in writing, considers it highly probable that the suit will be compromised on or before the date to which the court proposes to adjourn the hearing."

23.26. A similar provision would be useful. It could, however be made simpler. Recommendation

23.27. We, therefore, recommend that the following proviso should be inserted below Order 23, rule 3-

"Provided that where it is alleged by one party and denied by the other that an adjustment or satisfaction has been arrived at, the court shall decide the question, but no adjournment shall be granted for tile purpose of deciding the question whether there has been any adjustment or satisfaction, unless the court, for reasons to be recorded in writing, thinks fit to grant such adjournment."



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