Can we make a compromise in a suit?

Can we make a compromise in a suit?

Civil Procedure Code LAW EXPLAINED
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Meaning of Compromise

The word “compromise” means the settlement of a dispute by mutual consent of both the parties i.e. plaintiff and defendant. A compromise reached by the parties puts an end to their litigation battle. In simple terms, it is upon the discretion of the parties to compromise, adjust, or settle their dispute by an agreement or compromise.

Order XXIII Rule 3 CPC pertaining to the compromise of the suit is as follows

“Compromise of a suit: Where it is proved to the satisfaction of the court that a suit has been adjusted wholly or in part by any lawful agreement or compromise, in writing and signed by the parties or where the defendant satisfies the plaintiff in respect of the whole or any part of the subject-matter of the suit, the Court shall order such agreement, compromise or satisfaction to be recorded and shall pass a decree in accordance therewith so far as it relates to the parties to the suit, whether or not “the subject-matter of the agreement, compromise or satisfaction is the same as the subject matter of the suit.” (Azeem)

If the court is satisfied that a suit has been adjusted wholly or in part by any lawful agreement in writing and signed by the parties or where the defendant satisfies the plaintiff in respect of the whole or any part of the subject matter of the suit, the court shall record such agreement, compromise or satisfaction, and a compromise decree is passed accordingly.

Conditions needed to be followed for a compromise decree to pass

There are some conditions that are needed to be followed before the compromise decree is passed,

  1. There must be an agreement or compromise.
  2. It must be in writing and signed by the parties.
  3. It must be lawful.
  4. It must be recorded by the court.
  5. A compromise decree must have been passed.

Under provisions of Rule 3a, a party to the compromise, if it feels that the above-mentioned conditions are not fulfilled, can move to a lawful court and if such an issue must be decided by the court recording compromise.

If a minor is a party?

According to the Order XXXII Rule 6 and 7,

“In case of a compromise by a minor, it is provided that no next friend or guardian of the minor shall, without the leave of the court, enter into any agreement or compromise on behalf of the minor with reference to the suit, unless such leave is expressly recorded in the proceedings”.

Case Laws Related to Compromise decree

  • Hiralal Moolchand v. Barot Raman Lal

It was observed that all matters which can be decided by in a suit can also be decided by an agreement of compromise.

  • Banwari Lal v. Chando Devi

The court has got to consider all the shreds of evidence and affidavits with reference to such compromise agreement in order that the court can determine the lawfulness of an equivalent and just in case, the satisfaction of the court isn’t administered, the court may even recall its decree of compromise. Explanation to Rule 3 of the foregoing provision has stated that an agreement of compromise which is void or voidable under the Indian Contract Act, 1872, shall not be deemed to be lawful under the scope of the meaning of Rule 3

  • Subba Rao v. Jagannadha

It was held that compromise decree is not a verdict or a decision given by the court. It is the assent given by the Court of something to which the parties agreed. Such a decree cannot operate as res judicata.

  • Ganganand Singh and Ors. v. Rameshwar Singh Bahadur and Anr, Baldevdas Shivlal, and Anr. v. Filimistan Distributors (India) P.Ltd 

It was held that a compromise decree doesn’t hold a higher value than the actual contract between the parties. The court can set aside the compromise decree at any point in time if it feels that the compromise decree is invalidating the agreement between the parties. If no such grounds for setting aside the contract is identified, the compromise decree will be binding on the parties.

  • Byram Pestonji v. Union Bank of India

It is also peculiar to note that though compromise observed by a court is identified as a decree, it shall not have an impact of similar to an actual decree. Therefore, the principle of res judicata shall not apply to the mere acceptance by the court of something to which the parties had prescribed. It’s not the choice of the court since it merely sets the seal of the court on the agreement of parties. But in some cases, it’s held that a decree operates res judicata as it was held in this case.

At an equivalent time, such a decree may even create estoppel between the parties like in the case of Mohanlal Goenka v. Benoy Krishna

Work cited

Azeem, Naeemullah. “Compromise Decree: A Detailed Overview.” Legalserviceindia.Com,

www.legalserviceindia.com/legal/article-311-compromise-decree-a-detailed-overview.html#:~:text=It%20was%20held%20that%20%22a,the%20principles%20of%20res%20judicata%22.

This blog is written by Amrit Rathi, Jindal Global Law School

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