Consent Decree Would Not Serve As An Estoppel Where The Compromise Was Vitiated By Fraud, Misrepresentation, Or Mistake: Supreme Court

The Supreme Court observed that a consent decree would not serve as an estoppel, where the compromise was vitiated by fraud, misrepresentation, or mistake.

This case arose out of a suit for possession and mesne profits filed by one Beant Singh against Compack Enterprises with respect to the ground floor of the property owned by the former. The High Court passed a consent decree, directing that 'the Petitioner (Compack) shall pay to the Respondent (Singh), by way of mesne profits, an enhanced sum of Rs.1,00,000/­ p.m., with a 10% increase "after every 12 months, i.e. from 1.10.2009, 1.10.2011 etc etc" w.e.f. 1.10.2008 (i.e., the date on which the 2006 Agreement expired) till the date the Petitioner hands over actual possession of the suit property measuring 5,472 sq. ft. to the Respondent.' The review petition filed by the 'petitioner' was also dismissed. 

Before the Apex Court, the 'petitioner' contended that the High Court erred in recording that the Petitioner has consented to handing over possession of the entire suit property area and that recording the terms of the consent decree, the High Court recorded a 10% increase in mesne profits every 24 months, instead of 12 months.  

The bench comprising Justices Mohan M. Shantanagoudar and Vineet Saran observed that consent decrees are intended to create estoppels by judgment against the parties, thereby putting an end to further litigation between the parties and therefore it it would be slow to unilaterally interfere in, modify, substitute or modulate the terms of a consent decree, unless it is done with the revised consent of all the parties thereto. The bench, however, observed:

"However, this formulation is far from absolute and does not apply as a blanket rule in all cases. This Court, in Byram Pestonji Gariwala v. Union Bank of India & ors., (1992) 1 SCC 31, has held that a consent decree would not serve as an estoppel, where the compromise was vitiated by fraud, misrepresentation, or mistake. Further, this Court in the exercise of its inherent powers may also unilaterally rectify a consent decree suffering from clerical or arithmetical errors, so as to make it conform with the terms of the compromise."

The bench held that the High Court was correct in upholding the terms of the consent decree directing Petitioner to hand over possession of the entire suit property. On the issue of Mesne Profits, the bench observed that recording of a 10% increase after every 12 months in the consent decree was an inadvertent error on the part of the High Court. It said:

"The learned Single Judge, in noting that "this figure of mesne profits of Rs.1 lakh will be increased by 10% after every 12 months, i.e from 1.10.2009, 1.10.2011 etc etc" (emphasis supplied), has confused not only himself, but also the parties to the litigation. There is an inconsistency in so far there is a gap of every alternate year, i.e. from 2009 to 2011, in the example used by the learned Single Judge even though the decree notes an increase of 10% in mesne profits after every 12 months. The aforementioned inconsistency in the underlined extract of the consent decree is an error apparent on the face of the record. Hence we find that this is a fit case to exercise inherent the jurisdiction to correct the terms of the consent decree, to bring it in conformity with the intended compromise."

While disposing the appeal, the bench also recorded its displeasure at the Petitioner's repeated and persistent efforts to re­agitate the question of delivery of possession to the Respondent.

CASE: COMPACK ENTERPRISES INDIA (P) LTD. vs. BEANT SINGH

CORAM: Justices Mohan M. Shantanagoudar and Vineet Saran

CITATION: LL 2021 SC 93

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