Counsel Has Implied Authority To Enter Into Compromise On Behalf Of Parties Unless It is Motivated by Malafide Intentions: Chhattisgarh HC [Read Order]

The Chhattisgarh High Court has reiterated that a counsel has an implied authority to enter into compromise on behalf of the parties unless it is motivated by malafide intentions such as fraud, misrepresentation, etc.

Justice Sanjay K. Agrawal held that under Order 23 Rule 3 of CPC, it was mandatory for the Court to record a lawful compromise and one of the conditions which normally must be satisfied for passing of such a decree, was that the compromise is in writing and signed by the parties. "The object of mandating a written agreement was "to prevent false and frivolous pleas that a suit had been adjusted wholly or in part by any lawful agreement or compromise", it was held in light of Gurpreet Singh v. Chatur Bhuj Goel, (1988) 1 SCC 270.

The Appellants, one Phatkan Bai and her daughters, through Advocate Ratan Pusty, had pursued the second appeal against the order of the first appellate court which passed a compromise decree. It was submitted that the application for compromise therein was filed by the original defendant and one of the plaintiff's in the original suit for declaration of title and possession. However, the appellate court failed to notice that the compromise so entered into was contrary to Order 23 Rule 3 of CPC, as the Appellants had neither filed any application for entering into compromise nor instructed their counsel to enter into compromise on their behalf.

The court noted that the Appellants, though represented by their counsel, were not examined before the first appellate Court nor the statement of the counsel appearing for them was recorded stating that the Appellants have instructed him to enter into compromise on their behalf. Thus, the court was inclined to set aside the compromise decree so passed.

It stated that "The first appellate Court ought to have satisfied himself that all the parties to the appeal particularly, the present appellants in whose favour decree was passed by the trial Court, agreed and entered into compromise".

Reliance was placed on Byram Pestonji Gariwala v. Union Bank of India & Ors., (1992) 1 SCC 31, to hold that "duty is cast on Courts to guard against misuse of authority by counsel and must satisfy itself about the genuineness of the compromise before putting its stamp of approval on a compromise. The words "in writing and signed by the parties" …necessarily mean and include duly authorised representative and counsel. Thus, a compromise in writing and signed by counsel representing the parties but not signed by the parties in person, is valid and binding on the parties, unless it is attempted with fraud, misrepresentation, etc. as the counsel has implied authority".

Accordingly, the matter was remitted back to the first appellate Court for fresh consideration. 

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