WITHDRAWAL AND COMPROMISE OF SUITS (Order 23 of the Code of Civil Procedure)

 Order 23 which deals with withdrawal and compromise of suits, provides for two types of withdrawals

• Absolute withdrawal, without the leave of the court

• Qualified withdrawal, with the leave of the court

Order 23 also provides for compromise of suits and effect thereof.

Important points to remember

Order 23 Rules 1 & 2

• At any time after the institution of a suit, the plaintiff may abandon his suit or abandon a part of his claim against all or any of the defendants without the leave of the court-  Rule 1(1)
• This right is absolute and unqualified, the permission of which the court cannot refuse.
• The Court can't compel the plaintiff to proceed with the suit unless any vested right comes into existence before such prayer is made.
• In case of abandonment or withdrawal of a suit or part of a claim without the leave of the court, the plaintiff will be precluded from instituting a fresh suit in respect of the same cause of action.
• It is in the discretion of the court to grant such permission and it can be granted by the court either on an application of the plaintiff or even suo motu. Such permission may be granted on such terms as to costs, etc as the Court thinks fit. The granting of permission removes the bar of Res judicata, restoring the plaintiff to the position which he would have occupied had he brought no suit at all.
• The maxim "invito beneficium non datur" means that the law confers, upon a man no rights or benefits which he does not desire, which forms the basis for Rule 1 .
• By the Amendment Act of 1976, a specific provision has been made that where the plaintiff is a minor, neither the suit nor any part of the claim can be abandoned without the leave of the court- Proviso to Rule 1(1). 
• An application for leave under the proviso to Rule 1(1) must be accompanied by an affidavit of the next friend and also, if the minor of such person is represented by a pleader, by a certificate of the pleader to the effect that the proposed abandonment is, in his opinion, for the minor's benefit- Rule 1(2).
• Where the court is satisfied that a suit must fail by reason of some formal defect, or there are sufficient grounds for allowing the plaintiff to institute a fresh suit for the subject-matter of a suit or part of a claim, it may (not shall) grant permission to withdraw such suit or such part of the claim with the liberty to file a fresh suit in respect of the subject-matter of such suit or such part of the claim on such terms as it thinks fit - Rule 1(3)
• The expression "formal defect" connotes some defect of form or procedure not affecting the merits of the case; such as notice under Section 80 of CPC, misjoinder of parties or of causes of action, non-payment of proper court fee or stamp fee, failure to disclose cause of action, mistake in not seeking proper relief, improper or erroneous valuation of the subject matter of the suit, absence of territorial jurisdiction of the court, defect in prayer clause, or where the plaintiff felt that the defendant was absent and even if the decree was passed, etc.  
• Defects that affect the merits of the case, or a defect which goes to the root of the plaintiff's case cannot be said to be a formal defect; e.g. non-joinder of a necessary party, omission to substitute heirs, omission to include all the causes of action in the plaint, non-registration of a partnership firm, bar of limitation, deliberate undervaluation of the subject-matter of the suit, addition of a new factual plea, failure to bring legal representatives on record, non - examination of material witnesses, insufficiency of evidence, filling of a representative suit without following the procedure prescribed by Order 1 Rule 8 etc.
• The expression " sufficient grounds" need not generally be construed ejusdem generis ( of the same kind or nature) with a formal defect. For instance, where the suit was premature, or it had become infructuous etc, it was held to be a sufficient ground. Wide and liberal should be given to the expression " sufficient grounds" by exercising power in the interest of justice ( ex debit justitiae)
• However, the power cannot be exercised where the plaintiff was not ready to conduct the suit or where no notice was served to the defendant due to death, etc.
• The plaintiff also becomes liable for such costs as the court may award to the defendant- Rule 1(4) 
• Rule 1A of Order 23 as added by the Amendment Actor of 1976 provides for the circumstances under which the defendant may be allowed to be transposed as a plaintiff where the suit is withdrawn by the plaintiff. 
• Where there are two or more plaintiff's in a suit, the suit or part of the claim cannot be abandoned or withdrawn without the consent of all the plaintiff's. The plaintiff who wants to abandon or withdraw from the suit is at the liberty to do so to the extent of his own interest in it.

Limitation: Rule 2

A plaintiff withdrawing a suit with liberty to file a fresh suit is bound by the law of limitation in the same manner as if the first suit has not been filed at all.

Applicability to other proceedings

• The provisions of this Order, apply to the withdrawal of appeals. The appellant has a right to withdraw his appeal unconditionally and if he makes such an application, the court must grant it, subject to costs, and he has no power to say that it will not permit the withdrawal and will go on with the hearing of the appeal.

• An appellate court can grant permission to withdraw a suit to file a fresh suit.

• When the plaintiff sues in a representative character, he cannot abandon or withdraw the suit or a part of the claim. He may however get out of the suit, but that does not end the litigation where other persons are interested in it and have a right to come in and continue the litigation.

• The general principles for withdrawal of suits also apply to petitions under Article 226 or Article 32 of the Constitution. But once a High Court or the Supreme Court allows the prayer of a petitioner or his advocate to withdraw the petition (provided the withdrawal is unconditional), he cannot thereafter institute a fresh petition on the same cause of action.

• If a writ petition is withdrawn on some technical defect or logistic problem or availability of alternative remedy or such formal objection, the fresh petition will not be barred.

• Order 23 does not apply to execution proceedings - Rule 4

• An order granting or refusing permission to withdraw the suit with permission to file a fresh suit on the same cause of action is neither a "decree" nor an appellate order. Hence, no appeal lies against such an order.

• An order granting or refusing permission to withdraw the suit with the permission to file a fresh suit on the same cause of action can be said to be "a case decided" under Section 115 of the Code, which is revisable.

Compromise of suit

• After the institution of the suit, it is open to the parties to compromise, adjust or settle it by an agreement or compromise.
• Rule 3 of Order23 lays down that
  1. where the court is satisfied that a suit has been adjusted wholly or in part by any lawful agreement in writing and signed by the parties
  2.where the defendant satisfies the plaintiff in respect of the whole or any part of the subject-matter of the suit,
           the court shall record such agreement compromise or satisfaction and pass a compromise decree accordingly.

• The court must be satisfied by taking evidence or  on affidavits or otherwise that the agreement is lawful and it can pass a decree in accordance with it

• A court passing a compromise decree performs a judicial act and not a ministerial act.

• An agreement or compromise which is void or voidable under the Indian Contract Act, 1872, shall not be deemed to be lawful within the meaning of Rule 3

Compromise on behalf of a minor

No next friend or guardian of a minor shall, without the leave of the court, enter into any agreement or compromise on behalf of the minor with reference to the suit, unless such leave is expressly recorded in the proceedings

Compromise by pleader

An advocate appearing for a party always has an implied authority to enter into a compromise on behalf of his client.

Bar to suit: Rule 3-A

No suit can be filed to set aside a compromise decree on the ground that it is not lawful. 

Representative Suit: Rule 3-B

• No agreement or compromise in a representative suit can be entered into without the leave of the court. 

• Before granting such leave, notice to the persons interested should be given by the court

Compromise decree and res judicata

A compromise decree is not a decision of the court. Hence, a compromise decree cannot operate as res judicata.

Compromise decree and estoppel 

A compromise decree is not a decision on merits as it cannot be said that the case was heard and finally decided.  It is based on consent or compromise of parties and therefore will operate as an estoppel.

Execution of compromise decree

• A consent decree is executable in the same manner as an ordinary decree.
• If the decree gives effect to an unlawful compromise or is passed by the court having no jurisdiction to pass it, it is a nullity, which cannot be cured even by the consent of the parties.
• Prior to the Amendment Act of 1976, a compromise decree could be passed only so far as it related to the suit. Following this Amendment Act, whether or not the subject-matter of the agreement, compromise or satisfaction is identical with the subject-matter of the suit, it is between the parties and the compromise is a lawful one, the court can pass such a decree.

Appeal

• No appeal lies against a decree passed by the court with the consent of parties, nor a suit can be instituted to set aside a compromise decree on the ground that such compromise is not lawful, though such order was appealable before the Amendment Act, 1976. 
• Rule 1-A(2) of Order 43, CPC, however, lays down that in an appeal against a decree passed after recording or refusing to record a compromise, the order recording or refusing to record a compromise can also be questioned.
• A party challenging the compromise can file an appeal under Section 96(1), CPC and Section 96(3), CPC shall not bar such an appeal.
• Such a decree can be challenged by filing a suit on the ground of fraud, undue influence or coercion.

Revision

An order recording or refusing to record compromise is a case decide within the meaning of Section 115 of CPC where a High Court can revise such order provided the conditions laid down in this section are satisfied.