Court’s Decision
The Delhi High Court, in a significant ruling by Justice Purushaindra Kumar Kaurav, held that an order dismissing a suit as withdrawn on the basis of settlement does not amount to an executable decree unless a formal decree embodying the compromise is drawn under Order XXIII Rule 3 of the Code of Civil Procedure, 1908 (CPC).
The Court allowed the judgment debtor’s application under Section 151 CPC, seeking dismissal of the execution petition filed to enforce the alleged consent order dated 7 February 2020. Holding that “a simpliciter order dismissing a suit as withdrawn cannot be construed to have an executable force”, the Court declared the execution petition not maintainable, though it granted liberty to the decree holder to pursue other remedies available in law.
Facts
The decree holder filed an execution petition seeking enforcement of an order dated 7 February 2020, which was passed in two connected civil suits involving a charitable trust and certain family members. Both suits were dismissed as withdrawn after a settlement was purportedly arrived at between the parties.
Under this settlement, one of the trustees was to transfer her rights, title, and interest in a property at New Friends Colony, New Delhi, to the three trustees of the Sujan Mohinder Charitable Trust, for running a hospital. However, the decree holder alleged that the judgment debtors failed to comply with the settlement and instead fabricated a false oral family settlement to avoid execution of the consent order.
The decree holder sought transfer of property, appointment of a receiver, and detention of the judgment debtors in civil prison for non-compliance. In response, the judgment debtor filed an application under Section 151 CPC, asserting that the order dated 7 February 2020 was not executable in law, as no decree had been passed under Order XXIII Rule 3 CPC.
Issues
- Whether the order dated 7 February 2020, passed upon withdrawal of suits on the basis of a settlement, constituted an executable decree under Section 2(2) CPC.
- Whether an execution petition could be maintained without a formal decree being drawn.
- Whether the withdrawal order could be treated as a compromise decree when the Court had not recorded satisfaction about the lawfulness of the settlement.
Petitioner’s Arguments
The judgment debtor contended that the execution petition was a gross misuse of judicial process, since the order dated 7 February 2020 merely recorded a settlement and did not direct any enforceable act. It was emphasized that the suits had been dismissed under Order XXIII Rule 1 CPC as withdrawn, without any decree being drawn under Order XXIII Rule 3 CPC, which alone could render the compromise executable.
Counsel argued that a decree, as defined in Section 2(2) CPC, requires a formal adjudication conclusively determining parties’ rights, which was absent here. They highlighted that the decree holder himself had withdrawn the suits, thus negating the existence of any decree capable of execution.
It was submitted that the order in question only reflected an agreement and was not a judicial direction, relying on the precedents in Mohd. Amin v. Mohd. Iqbal (2009 SCC OnLine Del 861) and Sanjay Goel v. Lions Club International (2012 SCC OnLine Del 4153), which held that withdrawal orders based on settlements cannot be executed unless a formal decree is drawn.
Respondent’s Arguments
The decree holder, on the other hand, contended that the order dated 7 February 2020 constituted a binding compromise decree as it recorded the parties’ undertakings in open court, supported by a Memorandum of Understanding (MoU) and joint application under Order XXIII Rules 1 and 3 CPC.
It was argued that the order contained express undertakings to transfer the property and to use it for hospital operations, thereby satisfying the requirements of a consent decree. The decree holder maintained that the order had attained finality and was uncontested, thus binding upon all trustees.
The counsel emphasized that the judgment debtors were in continuing defiance of judicial directions and that the sanctity of undertakings given to the court must be preserved. The failure to enforce such undertakings, it was argued, would erode public faith in the judicial process.
Reliance was placed on Sir Sobha Singh and Sons Pvt. Ltd. v. Shashi Mohan Kapur ((2020) 20 SCC 798) and Salahuddin Mirza v. Mohd Qamar (2021 SCC OnLine Del 5019), where courts held that even if a formal decree is not drawn, an order recording compromise may be treated as a decree during the interregnum for purposes of execution.
Analysis of the Law
The Court undertook an in-depth analysis of the statutory definition of a decree under Section 2(2) CPC, which requires a formal expression of an adjudication conclusively determining rights. A withdrawal order based on settlement, without judicial adjudication, cannot by itself constitute a decree.
The Court referred to Sanjay Goel v. Lions Club International and Mohd. Amin v. Mohd. Iqbal, holding that mere recording of a settlement without passing a formal decree is not executable
. Similarly, in Kandapazha Nadar v. Chitraganiammal (2007 INSC 426), the Supreme Court had clarified that withdrawal without adjudication does not result in a decree and only amounts to a procedural order.
The Court then examined Sir Sobha Singh (2020) 20 SCC 798, which explained that Order XXIII Rule 3 CPC prescribes two steps:
- The court must record the compromise after satisfying itself that it is lawful; and
- The court must pass a decree in accordance with it.
The High Court observed that both steps were missing in the 7 February 2020 order, which neither contained judicial satisfaction nor a direction to draw a decree.
Precedent Analysis
- Sanjay Goel v. Lions Club International (2012 SCC OnLine Del 4153) – Held that withdrawal of a suit, even if based on settlement, does not result in an executable decree without a formal order recording compromise.
Applied here to show that the 7 February 2020 order was non-executable. - Kandapazha Nadar v. Chitraganiammal (2007 INSC 426) – Clarified that withdrawal without adjudication cannot be treated as a decree.
Used to reinforce that procedural withdrawal cannot confer enforceable rights. - Sir Sobha Singh and Sons Pvt. Ltd. v. Shashi Mohan Kapur (2020) 20 SCC 798) – Laid down that until a formal decree is drawn, an order recording compromise may be treated as a decree only if the compromise is lawful and the court has recorded satisfaction.
Distinguished here because no such satisfaction or order existed. - Salahuddin Mirza v. Mohd Qamar (2021 SCC OnLine Del 5019) – Execution was allowed because the suit was “disposed of as settled,” not merely “withdrawn.”
Distinguished since the present case involved dismissal as withdrawn simpliciter. - P.U.R. Polyurethane Products (P) Ltd. v. Geeta Bhargava (2006) 92 DRJ 83 (DB) – Held that once a suit is withdrawn, the court becomes functus officio and cannot modify its order except via review or clerical correction.
Relied on to recall the modification order earlier passed on 30 May 2022. - Pradeep Mehra v. Harijivan J. Jethwa (2023 SCC OnLine SC 1395) – Reaffirmed that the executing court’s powers under Section 47 CPC are limited and it cannot enlarge or modify the terms of a decree.
Applied to hold that no execution could lie without a formal decree.
Court’s Reasoning
Justice Kaurav held that while the settlement might bind the parties contractually, its enforcement could not be sought through execution unless it culminated in a decree recorded under Order XXIII Rule 3 CPC.
The Court observed that the 7 February 2020 order simply permitted withdrawal of the suits and did not contain any formal adjudication, satisfaction, or direction binding the parties to the settlement terms.
The Court also noted that the decree holder had earlier attempted to convert the order into a decree through an application, which was initially allowed on 30 May 2022, but later recalled on 19 December 2022, as the Court had become functus officio after the suit’s withdrawal. Thus, no valid decree subsisted.
Ultimately, the Court held that an executing court cannot exceed its jurisdiction or enlarge the scope of the order sought to be executed. It cannot enforce private settlements not crystallized into judicial decrees.
Conclusion
The Delhi High Court allowed the judgment debtor’s application under Section 151 CPC and dismissed the execution petition as not maintainable, holding:
“A simpliciter order directing dismissal on the basis of withdrawal, for whatever reason, cannot be construed to be of an executable nature so as to enable an execution petition.”
Liberty was granted to the decree holder to pursue independent legal remedies, such as a separate civil action to enforce the settlement, but not through execution proceedings.
Implications
This judgment reinforces the procedural sanctity of Order XXIII Rule 3 CPC, underscoring that courts must formally record a lawful compromise and pass a decree for it to be executable. It protects parties from misuse of execution proceedings based on informal or incomplete settlements and clarifies that execution cannot be used as a substitute for enforcement of contracts.
The decision also reaffirms the limited jurisdiction of executing courts under Section 47 CPC, ensuring they act strictly within the decree’s four corners.
FAQs
1. Can a settlement recorded during withdrawal of a suit be executed like a decree?
No. Unless the court records the compromise under Order XXIII Rule 3 CPC and passes a formal decree, such settlement cannot be executed.
2. What if the decree was not drawn despite a compromise being recorded?
If the court has recorded satisfaction about the lawfulness of the compromise, the order may temporarily act as a decree under Order XX Rule 6A(2). Otherwise, a fresh suit must be filed.
3. Can the court modify an order after the suit is withdrawn?
No. Once a suit is dismissed as withdrawn, the court becomes functus officio and cannot alter its order except through review or correction of clerical mistakes.
