The Supreme Court recently held that a compromise decree under Order XXIII Rule 3 of the Code of Civil Procedure (CPC) is invalid if it was entered into by a lawyer without the client's express authority [Krishna Kumar Ojha & ors v. Jitendra Chaudhary & Ors.].

A Bench of Justices Sanjay Karol and N Kotiswar Singh held that a compromise decree can only be passed if the compromise is signed by the parties themselves or by a duly authorised representative and a lawyer cannot surrender a client’s substantive legal rights on the basis of implied authority alone

“A counsel should not act on implied authority in the absence of exigent circumstance,” the Court observed.

It further emphasised that while courts record compromise decrees, they cannot act as mere recorders and must apply their judicial mind to ensure that the compromise is lawful and voluntary before passing a decree.

The Court made the observation while upholding Patna High Court's decision to set aside a 28-year-old compromise decree on the ground that the lawyer who signed the compromise on behalf of one of the parties had not been expressly authorised to do so by his client.

The case arose from a partition suit filed in 1989 over ancestral property. During the pendency of the suit, a compromise petition was filed and accepted by the trial court in 1994, following which a final decree was passed in 1997.

Nearly 28 years later, the legal heirs of one of the defendants approached the trial court seeking to set aside the compromise decree. They alleged that their predecessor had never signed the compromise petition, had never authorised the lawyer to consent to the settlement on his behalf and had, in fact, never even participated in the proceedings.

The trial court accepted these contentions and set aside the compromise decree. The Patna High Court later upheld that decision, prompting the present appeal before the Supreme Court.

After examining the records, the Supreme Court found that the compromise petition merely recorded that there was “no objection” on behalf of the concerned defendant through his lawyer. However, there was nothing to show that the lawyer had been expressly authorised by the client to enter into such a compromise.

The Court referred to a series of earlier judgments, reiterating that while advocates may represent clients in court proceedings, they cannot, in the absence of express authority or exceptional circumstances, compromise or surrender their clients’ substantive legal rights.

The Bench observed that the requirement that a compromise be signed by the parties was introduced through the 1976 amendment to the CPC to prevent false or fabricated claims of settlement.

Since there was no material to establish that the defendant had voluntarily authorised the compromise, the mandatory requirements of Order XXIII Rule 3 had not been satisfied, it held.

The appellants argued that the challenge to the compromise decree was hopelessly delayed, having been filed almost 28 years after the decree was passed.

The Supreme Court, however, rejected the contention. It observed that although the delay was substantial, refusing to examine the challenge solely on the ground of limitation would have the effect of perpetuating a decree that was itself contrary to law.

“The law of limitation, while undoubtedly an important facet of the legal system, cannot be used as a means to defeat substantive rights,” the Court said.

The Bench clarified that this did not mean every delayed challenge would be entertained. Whether such extraordinary delay could be overlooked would depend on the facts of each case. In the present case, the compromise directly affected valuable property rights and the very validity of the compromise itself was under serious dispute.

The Court also noted that several foundational facts - including whether the defendant had authorised the lawyer, whether he was aware of the proceedings and whether the compromise was genuine - were all seriously contested and could only be decided after a full trial.

Accordingly, the Court dismissed the appeal, upheld the orders setting aside the compromise decree and directed that the partition suit proceed to trial despite having been instituted nearly 37 years ago.

The petitioners were represented by advocate Anisha Upadhyay.

The respondents were represented by advocates Arun Maitri, Rabin Majumder, Radhika Chandrasekhar, Mousumi Roy and Shivam Majhi.

[Read Judgment]