M/s. Sree Surya Developers and Promoters vs. N. Sailesh Prasad and Ors.
Background
A property was gifted to the respondent (then a minor) by his grandmother, who later revoked the gift and entered a Development Agreement with the appellant-developer. After litigation and a compromise, a Compromise Decree was passed in 2016 giving the respondent (through his father, acting on his behalf) the entire constructed area while allowing the developer to assign its development rights, which it did to a third party. On attaining majority, the respondent filed a fresh independent suit seeking to have the Compromise Decree declared invalid and to reclaim rights over the property. The developer sought rejection of this plaint under Order VII Rule 11 CPC, arguing it was barred by Order XXIII Rule 3A CPC (which bars independent suits challenging compromise decrees); the trial court agreed and rejected the plaint, but the High Court reversed this and remanded the matter, holding that the trial court had not considered whether the compromise (made on behalf of a minor) complied with Order XXXII CPC safeguards.
Decision Breakdown
The Supreme Court held that Order XXIII Rule 3A CPC creates an absolute bar on filing an independent suit to set aside a compromise decree, and that the only legal remedy is to approach the very court that recorded the compromise, established through a consistent line of precedent (Banwari Lal, Pushpa Devi Bhagat, R. Rajanna, Triloki Nath Singh). It found that despite the plaintiff drafting multiple prayers (declaration of title, cancellation of gift revocation, etc.), the real relief sought was setting aside the Compromise Decree, which amounted to clever drafting to circumvent the statutory bar. Since the respondent had already filed an application before the same trial court under Order XXIII Rule 3A challenging the compromise, the Supreme Court held the High Court erred in going into the merits of the compromise's validity while merely deciding an Order VII Rule 11 application, restored the trial court's rejection of the plaint, and left the validity question to be decided by the trial court in the separate pending application.
Lesson Learnt
A party who wants to challenge a court-recorded compromise decree cannot file a fresh independent suit, however cleverly the prayers are worded, but must instead apply to the same court that recorded the compromise, since Order XXIII Rule 3A CPC bars separate suits precisely to prevent multiplicity of litigation.