Withdrawal and Compromise of Suits: Order 23
The present article, ‘Withdrawal and Compromise of Suits: Order 23’ will examine the rules included under Order 23 and discuss the same with reference to relevant case-law. Withdrawal and Compromise of Suits: Order 23 Reducing needless litigation is an important concern in a civil law system with high pendency rates, like in India. Order 23 of the Code… Read More »
The present article, ‘Withdrawal and Compromise of Suits: Order 23’ will examine the rules included under Order 23 and discuss the same with reference to relevant case-law. Withdrawal and Compromise of Suits: Order 23 Reducing needless litigation is an important concern in a civil law system with high pendency rates, like in India. Order 23 of the Code of Civil Procedure, 1908 (‘the Code’) sets out the appropriate procedure to be followed when parties wish to withdraw their suits...
The present article, ‘Withdrawal and Compromise of Suits: Order 23’ will examine the rules included under Order 23 and discuss the same with reference to relevant case-law.
Withdrawal and Compromise of Suits: Order 23
Reducing needless litigation is an important concern in a civil law system with high pendency rates, like in India. Order 23 of the Code of Civil Procedure, 1908 (‘the Code’) sets out the appropriate procedure to be followed when parties wish to withdraw their suits at certain stages of civil proceedings. It also outlines the situations in which compromise of suits can be entered into between parties to a civil suit, and which scenarios require the leave of the court concerned.
I. Introduction
The terms “withdrawal” and “compromise” of civil suits refer to scenarios wherein one party to a suit or both parties to a suit choose or consent to cease the litigation. This withdrawal or compromise may be done with or without the leave of the court, depending upon the specific situation of the party and the applicable rule of the Code. The procedure-related to the withdrawal of suits is outlined in Order 23 Rules 1-2 and the procedure related to compromise of suits is contained within Order 23 Rules 3-3B of the Code.
II. Withdrawal of Suits Order 23 Rules 1-2
1. Withdrawal of suit or abandonment of part of the claim: Rule 1
According to this rule, the plaintiff may at any time after instituting the civil suit, abandon the suit or abandon a part of his/her claim in the subject matter of the suit.[1] A plaintiff may find that after instituting the suit, that the possibility of a favourable decree is low- in such cases he may withdraw suit under Rule 1(1) without further expenditure of cost.[2] This is because it is an unqualified and absolute withdrawal under the Code.
In fact, the Court has no power to compel a plaintiff to continue with his suit or refuse permission to withdraw the suit,[3] unless there are some extraordinary conditions justifying such refusal.[4]
If the plaintiff in question is a minor or person of unsound mind (i.e any person to whom rules 1-14 of O. 32 apply), then the leave of the court is required for the plaintiff in this case to abandon the suit in its entirety or even a part of the claim.[5]
Along with such an application for leave of the court, an affidavit of the next friend is also to be provided in case of minor plaintiffs or other similarly placed plaintiffs.[6] In case of a minor or a person of unsound mind being represented by a pleader, the application to the court for its leave must be accompanied with a certificate by said pleader that the action being taken is in his opinion, for the benefit of his client.[7]
Withdrawal of suit and res judicata
According to the Supreme Court (‘SC’), the underlying principle or object of Rule 1 is that whence a plaintiff institutes a civil suit and opens himself to remedies available under law, he cannot be permitted to file a fresh suit on the same subject-matter after withdrawing/abandoning the earlier suit without the leave of the court to institute such fresh suit.[8]
When a plaintiff withdraws a suit without seeking the leave of the court, costs can be imposed upon the plaintiff.[9] Withdrawing a suit without the permission of the court has an adverse impact on the plaintiff’s success in a specific claim. This is because withdrawing a suit without seeking permission to institute a new suit will lead to the second suit being barred.[10]
In Sarjuga Transport case (see below), the petitioner withdrew his earlier writ petition without permission of the court to file a fresh suit.[11] Thereafter, the petitioner filed a suit disputing an order passed in the first petition. However, the Supreme Court held that withdrawal is not the same as res judicata, which bars other remedies, and the petitioner was entitled to move court under Art. 32 of the Constitution if he saw fit to. In the view of the court, the rule of res judicata applies only when there has been a final disposition of a case by a court. However, in case of a withdrawal, there is no prior adjudication at all.
Rule 1(3) states that the Court may grant the plaintiff the right to withdraw the suit (or part of it) and also the leave to institute a fresh suit relating to the subject matter of the withdrawn suit. This is provided that the court is satisfied that the suit was to fail due to a formal defect[12] or there are sufficient grounds[13] to give such leave to the plaintiff.[14] Thus, certain discretion has been given to the court in determining what constitutes as sufficient grounds in such cases.
2. When transposition of defendants as plaintiffs may be permitted: Rule 1A
A defendant in a suit where a plaintiff has withdrawn a case in compliance with Rule 1, may apply for being transposed in place of the plaintiff under Order 1 Rule 10. In deciding whether to order the applicant to be substituted as plaintiff, the court is directed to take due regard as to whether the applicant has a substantial question to be decided vis-à-vis the other defendants in the case. [15]
3. Limitation law not affected by first suit: Rule 2
The Code clarifies how the limitation period for fresh suits would run in case the previous suit has been withdrawn. Rule 2 states that when any fresh suit is instituted with the permission of the court, then the law of limitation will run as if the first suit had not been instituted at all.[16]
III. Compromise of Suits Order 23 Rules 3-3b
1. Compromise of suit: Rule 3
The Code provides for compromise of suits and details the effect of the same. It is up to the parties themselves to compromise or adjust the civil suit and come to a settlement.[17] Finally, the parties must apply, (in the form of a lawful agreement or compromise,[18] written and signed by the parties) for a decree.[19] If the court in turn is satisfied that the suit has come to a lawful compromise, it shall be the duty of the court to pass a decree to the effect of the signed application.[20] Such a decree when passed is known as a consent decree.
Consent decree
The Supreme Court has clarified the meaning of the term consent-decree as follows:
“…a consent decree is a mere creature of the agreement on which it is founded and is liable to be set aside on any of the grounds which will invalidate the agreement.”[21]
Consent decrees, as a rule, have been held to be valid even when the terms of the compromise are entered into by the power of attorney holder on behalf of the parties.[22] In a certain case, the appellants appealed an order by the High Court which dismissed three civil applications preferred by the same parties to recall an earlier order also passed by the High Court: which was founded on consent terms signed in due accordance with the law.[23]
An appellant party had appointed a respondent party as a lawful power of attorney holder, and the actions of the latter were assailed by the other appellants. However, the SC upheld the validity of the consent decree in this case. A judgment by consent essentially functions to stop litigation between the parties- hence it creates an “estoppel by judgment.”[24]
No appeal lies from a consent decree that is founded or based on a compromise between parties under Order 23.[25] This does not mean per se, that a compromise decree operates as a form of res judicata as provided in Section 11 of the Code.[26] It is the seal of the court upon an agreement entered into by the parties.
Compromise decree and Consent decree
While compromise and consent decrees may seem synonymous, they are distinct in terms of the appeal of the same. As mentioned above, no appeal lies from a consent decree. However, according to the court in Banwari Lal v. Chando Devi,[27] a party challenging a compromise can file an appeal under Section 96(1)[28] of the Code and Section 96(3)[29] shall not function to bar the appeal.
A compromise decree may be challenged on grounds of fraud, undue influence or coercion but remains lawful until it is displaced by a court of law.[30] A compromise decree is not a res judicata because the court does not in fact, decide anything or consider the case on merits.
On other hand, a consent decree while it may not be res judicata, may create estoppel between parties. [31] A consent decree may be challenged through a review application or application under Section 151 of the Code (inherent powers of the Civil Court), and this would be an appropriate remedy for setting aside a consent decree.[32] Compromise must be written form and signed by the parties- if not written and signed by the parties or counsel, they may not be seen as not enforceable.[33]
2. Bar to suit: Rule 3A
This provision states that a decree based on compromise cannot be assailed on the grounds that the compromise on which the decree is based is unlawful. When an order is passed on compromise and becomes part of the order of the court- then the terms are to be strictly enforced.[34] As stated earlier, it is possible to assail such decrees but extenuating circumstances must exist in order for this to pass.
Order 23 Rule 3 also provides that a void or voidable agreement cannot be deemed ‘lawful’ within the meaning of the provision. In a particular case, the appellants were traders on Grand Trunk Road, Howrah and were in fear of being displaced due to the imminent construction of a fly-over near their places of business.[35] Thus, the appellants instituted proceedings against relevant authorities in Calcutta High Court, including the Howrah municipal corporation.
During the proceedings, an application for settlement of dispute and disposing of the case was filed- the court duly filed an order based on said settlement. However, the authorities did not abide by their terms of the order, and allotted the spaces occupied by the appellant traders to other groups. Aggrieved, the appellants sought to set aside the original order and approached the SC. The Apex Court allowed the appeal and set aside the order passed by the High Court.
3. No agreement or compromise to be entered in a representative suit without leave of the court: Rule 3B
According to this Rule, the leave of the court is required for compromise in a representative suit. A representative suit implies:[36]
“(a) a suit under Section 91 or section 92,
(b) a suit under rule 8 of Order I,
(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.”
Thus, suits relating to public nuisance and wrongful acts so affecting the public; public charities; representative suits as defined in Order 1 Rule 8 of the Code and those involving family or other groups, require the leave of the court in order for a lawful agreement or compromise to be affected.
IV. Conclusion
Order 23 Rules 1-2 and Rules 3-3B allow for parties to adjust and settle their suits. This may be done by complying with the stated conditions and attaining the leave of the court in certain cases.
[1] Order XXIII, Rule 1(1), Code of Civil Procedure, 1908.
[2] D.F. Mulla, Mulla The Key to Indian Practice: Summary of the Civil Procedure Code, 1908, 11th ed., 2016.
[3] K.S. Bhoopathy v. Kokila, (2000) 5 SCC 458.
[4] Sandesh Limited vs Chandulal Jethalal Jaiswal, AIR 2005 Guj 219.
[5] Order XXIII, Proviso to Rule 1(1), Code of Civil Procedure, 1908.
[6] Order XXIII, Rule 1(2), Code of Civil Procedure, 1908.
[7] Ibid.
[8] Haryana State Co-op Land Development Bank v. Neelam, (2005) 5 SCC 91.
[9] Order XXIII, Rule 1(4), Code of Civil Procedure, 1908.
[10] Sarjuga Transport Service vs. State Transport Appellate Tribunal, M.P., Gwalior and Others, [(1987) 1 SCC 5].
[11] Ibid.
[12] Order XXIII, Rule 1(3)(a), Code of Civil Procedure, 1908.
[13] Order XXIII, Rule 1(3)(b), Code of Civil Procedure, 1908.
[14] Order XXIII, Rule 1(3), Code of Civil Procedure, 1908.
[15] Order XXIII, Rule 1(A), Code of Civil Procedure, 1908.
[16] Supra, at note 6.
[17] Supra, at note 2.
[18] It may be noted that the agreement, satisfaction or compromise could relate to the whole or a part of the suit and may also comprise the subject matter of the suit, in keeping with Order XXIII, Rule 3(1), Code of Civil Procedure, 1908.
[19] Order XXIII, Rule 3(1), Code of Civil Procedure, 1908.
[20] Ibid.
[21] Ruby Sales & Services (P) Ltd. v. State of Maharashtra, (1994) 1 SCC 531.
[22] S.B.V Patel v. N.J Tiwari (2010) SCC 104.
[23] Ibid.
[24] Byram Pestonji Gariwala v. Union Bank of India (1992) 1 SCC 31.
[25] Supra, at note 2.
[26] Ibid.
[27] (1993) 1 SCC 581.
[28] Sec. 96(1) of the Code: Save where otherwise expressly provided in the body of this Code or by any other law for the time being in force, an appeal shall lie from every decree passed by any Court exercising original jurisdiction to the Court authorized to hear appeals from the decisions of such Court.
[29] Sec. 96(3) of the Code: No appeal shall lie from a decree passed by the Court with the consent of parties.
[30] Supra, at note 2.
[31] Supra, at note 24.
[32] Sri Sri Iswar Gopal Jen v. Bhagwandas Shan, AIR 1982 Cal 12.
[33] Deepa Bhargava v. Mahesh Bhargava, (2009) 2 SCC 294.
[34] Salkia Businessmen’s Association v. Howrah Municipal Corpn, AIR 2001 SC 2790.
[35] Ibid.
[36] Order XXIII, Rule 3(B), Code of Civil Procedure, 1908.