Compromise decree to be challenged in the same suit and not a subsequent suit

An agreement or compromise should not be deemed to be lawful if the same is void or voidable under Indian Contract Act, 1872.

Whether a decree passed pursuant to compromise can be questioned in a separate suit? The Supreme Court replied in negative. As per proviso to Order XXIII Rule 3 of the Code of Civil Procedure, 1908 (CPC) where one party alleges and the other denies adjustment or satisfaction of any suit by a lawful agreement or compromise in writing and signed by the parties, the Court before whom such question is raised should decide the same. An agreement or compromise should not be deemed to be lawful if the same is void or voidable under Indian Contract Act, 1872. In every case where the question arises whether or not there has been a lawful agreement or compromise in writing and signed by the parties, the question whether the agreement or compromise is lawful has to be determined by the Court concerned. What is lawful will in turn depend upon whether the allegations suggest any infirmity in the compromise and the decree that would make the same void or voidable under the Contract Act. 

Order XXIII Rule 3A clearly bars a suit to set aside a decree on the ground that the compromise on which the decree is based was not lawful. This implies that no sooner a question relating to lawfulness of the agreement or compromise is raised before the Court that passed the decree on the basis of any such agreement or compromise, it is that Court and that Court alone which can examine and determine that question. The Court cannot direct the parties to file a separate suit on the subject for no such suit will lie in view of the provisions of Order XXIII Rule 3A of CPC.

[R. Rajanna vs. S.R. Venkataswamy & Ors.]
(SC, 20.11.2014)