In a significant ruling, the Supreme Court of India reaffirmed the right of litigants to challenge compromise decrees when statutory remedies are available. The judgment in Navratan Lal Sharma vs. Radha Mohan Sharma & Ors. (Civil Appeal No. 14328/2024 @ SLP (Civil) No. 27723 of 2024), delivered by a bench comprising Justice Pamidighantam Sri Narasimha and Justice Manoj Misra, underscores the importance of ensuring access to justice, even in cases resolved through compromise agreements.
Background of the Case
The appellant, Navratan Lal Sharma, had initially approached the court to cancel allegedly forged sale deeds and power of attorney related to a disputed property. These documents, executed in 2010, had been challenged on the grounds of fraud. After the dismissal of his suit in 2014 by the Trial Court, Sharma filed a first appeal in the Rajasthan High Court.
During the pendency of the appeal, a compromise agreement was reached between Sharma and Respondent No. 2, which included monetary payments and property development arrangements. However, when the terms of the agreement were not honored—specifically, cheques issued by the respondent were dishonored—Sharma sought to restore the appeal. The High Court dismissed this application, stating that its prior order, based on the compromise, did not grant liberty to restore the appeal.
Key Legal Issues
The Supreme Court addressed several critical legal issues in its judgment:
1. Restoration of Appeals After Compromise: Whether a litigant can restore an appeal after a compromise decree if the terms of the compromise are violated.
2. Statutory Remedies and Judicial Curtailment: The implications of a court’s denial of the right to restore appeals, especially when such a denial limits statutory remedies.
3. Validity of Compromise Agreements: The responsibility of courts to ensure that compromise agreements are lawful and comply with the Indian Contract Act, 1872.
Supreme Court’s Observations
The bench highlighted that the High Court’s denial of the appellant’s restoration application on procedural grounds undermined the statutory remedies available under Order 23, Rule 3 and Rule 3A of the Code of Civil Procedure (CPC). Quoting its earlier judgments, the Court reiterated:
– On statutory rights:
“When there is a statutory remedy available to a litigant, there is no question of a court granting liberty to avail of such remedy, as it remains open to the party to work out their remedies in accordance with law.”
– On public policy:
“Courts must not curtail statutorily provisioned remedial mechanisms available to parties. Such actions run contrary to the principles of justice and access to remedies.”
– On compromise agreements:
A compromise decree is akin to a contract validated by a court, and its validity depends wholly on the legality of the underlying agreement.
The Court emphasized that the High Court should have considered the legality of the compromise agreement, especially in light of allegations of fraud and dishonored cheques.
The Judgment
The Supreme Court set aside the Rajasthan High Court’s order and remanded the matter for fresh consideration of the restoration application. It observed that clauses in the compromise deed explicitly allowed for restoration of the appeal in case of non-compliance. The judgment also noted that agreements restraining parties from pursuing legal remedies are void under Section 28 of the Indian Contract Act, 1872.
