Consent Decree cannot be modified or altered unless the mistake is a patent or obvious mistake: Supreme Court

Supreme Court of India
PC: Supreme Court Observer
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  • Post published:February 4, 2022
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The Court has observed that a consent decree cannot be modified/ altered unless the mistake is a patent or obvious mistake. Or else, there is a danger of every consent decree being sought to be altered on the ground of mistake/ misunderstanding by a party to the consent decree.

The Court further observed that, a consent decree would not serve as an estoppel, where the compromise was vitiated by fraud, misrepresentation, or mistake. The Court in exercise of its inherent power may rectify the consent decree to ensure that it is free from clerical or arithmetical errors so as to bring it in conformity with the terms of the compromise. Undoubtedly, the Court can entertain an Application under Section 151 of the CPC for alterations/ modification of the consent decree if the same is vitiated by fraud, misrepresentation, or misunderstanding.

The moot question before the Court was whether the consent decree can be modified/altered on the ground of mistake or misunderstanding between the parties in terms of Section 152 and 153 read with Section 151 of the Code of Civil Procedure.

Facts:

In the instant case, the suit was decreed in terms of compromise agreement reached between the parties. Subsequently, the defendants-Appellants filed an application under Section 152 and 153 read with Section 151 CPC for correction/rectification/amendment of judgment. However, the application came to be dismissed by the High Court of Delhi. Being aggrieved, the defendants filed the instant appeal before the Supreme Court.

Submissions of the Appellants:

The Appellant stated in the Application that the Settlement Agreement pertains only to trademark “FX-991ES PLUS’/ ‘FX-991”. However, there was an inadvertent typographical error of the trademark in the Settlement Agreement as “FX-991ES PLUS/ FX/ 991”.

Appellant had contended that the High Court committed an error in dismissing the Application by considering the same to have been filed only under Section 152 of the CPC.

Appellant further submitted that the High Court ought to have considered the Application by referring to Order 23 Rule 3 read with Section 151 of the CPC.

The learned Senior Counsel argued that misunderstanding between the parties is a valid ground to interfere with a consent decree by relying upon the judgment of this Court in Shankar Sitaram Sontakke & Anr. v. Balkrishna Sitaram Sontakke & Ors.1 and Byram Pestonji Gariwala v. Union Bank of India & Ors.2.

The learned Senior Counsel further argued that the High Court has inherent jurisdiction to correct the terms of a consent award to bring it in conformity with the intended compromise by placing reliance on a judgment of this Court in Compack Enterprises India Pvt. Ltd. v. Beant Singh. He also relied upon the judgment of the Privy Council in Sourendra Nath Mitra & Ors. v. Srimati Tarubala Dasi to contend that the inherent power of a Court should be exercised not to allow its proceedings to give rise to substantial injustice.

Learned Counsel referred to the e-mails exchanged between the advocates of the parties and submitted that the intention of the parties throughout related to the use of scientific calculator ‘FX-991ES PLUS’ only. He submitted that it would be clear from the correspondence that all along ‘FX’ and ‘991’ were separated by a ‘-’ (hyphen) and for the first time a ‘/’ (slash) was introduced in the final version of the Settlement Agreement. According to the Appellant ‘FX’ is a common generic name that is used to denote “function of” and it is not capable of being independently trademarked.

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The Appellant realized the mistake only after a legal notice was issued by the Respondent on 26.07.2019 in which it was mentioned that the Appellant had agreed not to use “FX” or “991” as per packaging.

Submissions of the Respondents:

The Respondents submitted that there is no allegation of fraud or misrepresentation in arriving at the Settlement Agreement and the High Court was right in dismissing the Application seeking modification of the decree.

It was submitted on behalf of the Respondents that the parties agreed that the advocates would act as mediators. Several mediation sessions were held, and e-mails were exchange between the advocates appearing for the parties whereafter a Settlement Agreement was entered into between the parties. The Final agreement was checked and signed by the mediator and finally, the Court examined the terms of the Agreement in terms of which a decree was passed. After applying its mind to the Settlement Agreement, the High Court passed a decree in terms of the Agreement.

Observations of the Court:

The Court observed that were alterations that were proposed by the advocate for the Appellant during the course of correspondence, no objection was raised to the proposed terms of the Settlement Agreement communicated by the Advocate for the Respondent on 14.05.2019 which ultimately was the final Settlement Agreement signed by the parties.

The Court referred to the law laid in case of Banwari Lal v. Chando Devi (Smt.) (through LRs.) & Anr. wherein this Court was concerned with a compromise on the basis of which the Appellant delivered possession of the disputed land to the Respondent. Later, on verification and inspection of the records, the Appellant realized that his advocate colluded with the defendants in the suit and had played fraud on him by filing a fabricated petition of compromise. The Trial Court recalled the order on the ground that the compromise petition was not signed by the parties as required by proviso to Rule 3 of Order 23 of the CPC. The Revision Petition filed by the Respondent was allowed by the High Court against which the Appellant filed an Appeal before this Court. It was held in the said case that an Application to exercise the power under proviso to Rule 3 of Order 23 can be labelled under Section 151 of the CPC. It was observed in the judgment that the illegality and validity of a compromise can be examined under Section 151 of the CPC.

Whether the Appellant has made out a case for modification/ alteration of the decree by his application being treated to be one under Rule 3 of Order 23 of the CPC?

To answer this question the Court referred to the judgment in Shankar Sitaram Sontakke & Anr. wherein this Court held:
“If the compromise was arrived at after due consideration by the parties and was not vitiated by fraud, misrepresentation, mistake or misunderstanding committed by the High Court – the finding which was not interfered with by the High Court – it follows that the matter which once concluded between the parties who were dealing with each other at arm’s length cannot now be reopened.”

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13. A consent decree would not serve as an estoppel, where the compromise was vitiated by fraud, misrepresentation, or mistake. The Court in exercise of its inherent power may rectify the consent decree to ensure that it is free from clerical or arithmetical errors so as to bring it in conformity with the terms of the compromise. Undoubtedly, the Court can entertain an Application under Section 151 of the CPC for alterations/ modification of the consent decree if the same is vitiated by fraud, misrepresentation, or misunderstanding.

The misunderstanding as projected by the learned Senior Counsel for the Appellant between parties relates to use of “FX” or “991” as separate marks in the Settlement Agreement. The understanding between the parties was with respect to “FX-991ES PLUS” as a whole and not with reference to “FX”. A close scrutiny of the correspondence between the parties would show that the Settlement Agreement was arrived at after detailed consultation and deliberations.

Thereafter, the parties were communicating with each other and they took six months to arrive at a settlement. The final Settlement Agreement was approved by the mediator. The High Court applied its mind and passed a decree in terms of the Settlement  Agreement dated 16.05.2019.

Though, the High Court dismissed the Application by refusing to entertain the Application on the ground that it was filed under Section 152 of the CPC, we have considered the submissions of the parties to examine whether the Appellant has made out a case for modification of the decree by treating the Application as one under the proviso to Order 23 Rule 3 read with Section 151 of the CPC.

There is no allegation either of fraud or misrepresentation on the part of the Respondent. We are unable to agree with the Appellant that there was a mistake committed while entering into a settlement agreement due to misunderstanding. Correspondence between the advocates for the parties who are experts in law would show that there is no ambiguity or lack of clarity giving rise to any misunderstanding. Even assuming there is a mistake, a consent decree cannot be modified/ altered unless the mistake is a patent or obvious mistake. Or else, there is a danger of every consent decree being sought to be altered on the ground of mistake/ misunderstanding by a party to the consent decree.

In view of the above, the Court upheld the judgment of the High Court and dismiss the instant appeal.

Click here to read/download the judgment

Case Details:
Civil Appeal No. 1052 of 2022
Ajanta LLP Versus Casio Keisanki Kabushiki Kaisha d/b/a Casio Computer Co. Ltd. & Another
Coram: Justice NAGESWARA RAO
Date of Judgment: 04-02-2022