The recent decision by the High Court of Judicature at Bombay in Anwar Liyakat Khan & Another v/s Ramesh Dattatraya Dhone & Others offers crucial insights into the complexities surrounding consent decrees, particularly when challenged by third parties alleging fraud. Decided on June 9, 2025, by Justice N.J. Jamadar, this case underscores the delicate balance between the finality of consent decrees and the inherent power of courts to address fraud.
The Genesis of the Dispute:
The case originated from RCS/2546/2022, a suit that was decreed in December 2022 based on consent terms. Subsequently, in May 2023, supplementary consent terms were accepted, leading to a modification of the decree. The petitioners in the present writ petition were parties to this initial suit.
The core of the current dispute arose when the respondents, who were third parties to the original suit, filed an application (Civil Misc. Application No. 1680 of 2023) under Section 151 read with Order I Rule 10 of the Code of Civil Procedure, 1908 ("the Code"). They sought the recall of the consent decree, restoration of RCS/2546/2022, and their impleadment as party defendants. Their central assertion was that certain properties, specifically Survey No. 82, were "surreptitiously and fraudulently incorporated" into the consent decree via the supplementary terms. They alleged that the original plaintiff and defendant had "played fraud on the Court and obtained the consent decree by practicing fraud on the Court."
The Civil Judge, by an order dated November 6, 2023, granted interim relief by staying the effect and operation of the consent decree and restoring the original suit to the file. The Civil Judge was "persuaded to entertain the application" based on a prima facie finding that the parties had entered into consent terms concerning properties owned by third parties through the suppression of material documents, thereby constituting a "fraud on Court."
Arguments and Legal Precedents:
The petitioners, aggrieved by this order, invoked the writ jurisdiction of the High Court. Mr. V.A. Thorat, Senior Advocate for the petitioners, argued that an application for recall of a consent decree at the instance of a third party, who was neither a party to the suit nor claiming under a party, was not maintainable. He contended that the appropriate remedy for such third parties was to institute a separate, substantive suit challenging the decree's legality and validity. Mr. Thorat cited the Supreme Court's judgment in Triloki Nath Singh vs. Anirudh Singh (Dead) through Legal Representatives and others ((2020) 6 Supreme Court Cases 629) and My Palace Mutually Aided Co-operative Society vs. B. Mahesh and others (2022 SCC OnLine SC 1063) to support his contention that Section 151 of the Code should not be invoked where other remedies exist.
Conversely, Mr. Vijay Upadhyay, counsel for the respondents, argued that the impugned interim order did not warrant interference, particularly given the "egregious fraud which is self-evident." He highlighted that the original suit was "ex facie collusive," with a consent decree being passed within twenty days of its institution, and that the respondents' property was "fraudulently included" in the decree. Mr. Upadhyay relied on Ganpatbhai Mahijibhai Solanki vs. State of Gujarat and others ((2008) 12 Supreme Court Cases 353), which enunciates that fraud vitiates all solemn acts and can set aside an order without strict adherence to natural justice principles.
The Court's Analysis:
The High Court meticulously considered the arguments, acknowledging that the underlying transactions' legality and validity were not the focus of the current writ petition. The Court noted the timeline of events: the suit's institution on December 2, 2022 , the consent terms on December 15, 2022 , the decree on December 23, 2022 , and the supplementary consent terms including Survey No. 82 accepted on May 4, 2023. The Civil Judge had indeed found prima facie substance in the third parties' claim that the consent terms were obtained by "playing fraud on the Court," especially noting that the parties to the suit had not placed on record the record of rights for Survey No. 82.
The Court delved into the interpretation of Order XXIII Rules 3 and 3A of the Code. Rule 3 allows for a decree based on a lawful agreement or compromise, "whether or not the subject-matter of the agreement, compromise or satisfaction is the same as the subject-matter of the suit." Rule 3A, however, imposes a bar: "No suit shall lie to set aside a decree on the ground that the compromise on which the decree is based was not lawful." These provisions, read with Section 96(3) of the Code (which proscribes an appeal against a consent decree), highlight the legislative intent to ensure the finality of consent decrees.
The Court referred to Puspa Devi Bhagat (Dead) through LR Sadhna Rai vs. Ravinder Singh and other ((2006) 5 SCC 566), which established that neither an appeal nor a fresh suit is maintainable to set aside a consent decree on the ground of unlawfulness, and the only remedy for a party to such a decree is to approach the court that passed it to establish that no valid compromise occurred.
However, the pivotal question was whether this principle applied to strangers to the consent decree. While Triloki Nath Singh (supra) suggested that a suit by a stranger to challenge a compromise decree was not maintainable due to Rule 3A of Order XXIII, the Bombay High Court carefully considered this. The Court found that the distinction Mr. Thorat attempted to draw—between a third party claiming through a party to the suit and one not—could not be "legitimately sustained, especially in view of the clear language of Rule 3A of Order XXIII."
Crucially, the High Court emphasized the long-standing principle that "a fraud vitiates all acts." Citing S. P. Chengalvaraya Naidu vs Jagannath ((1994) 1 SCC 1) and A.V. Papayya Sastry & Ors. Vs. Government of A.P. & Ors. ((2007) 4 SCC 221) , the Court reiterated that a judgment or order obtained by fraud is a nullity and can be challenged in "any Court, at any time, in appeal, revision, writ or even in collateral proceedings."
The Court also relied heavily on Banwari Lal vs. Chando Devi (Smt) (through LRs) and another ((1993) 1 Supreme Court Cases 581) and the more recent Navratan Lal Sharma vs. Radha Mohan Sharma and others (2024 SCC OnLine SC 3720). These judgments affirm that an application for the recall of a consent decree, particularly on the grounds of fraud, is maintainable before the very court that passed the decree. The Supreme Court in Banwari Lal explicitly stated that if an agreement or compromise is fraudulent, it is "deemed to be void within the meaning of the explanation to the proviso to Rule 3 and as such not lawful."
The High Court's Decision:
Ultimately, the High Court partly allowed the petition. It ruled that the impugned order staying the effect and operation of the consent decree in RCS/2546/2022 should be treated as an interim order in CMA/1680/2023. The restoration of RCS/2546/2022 to the file was solely for the purpose of determining the prayers in CMA/1680/2023—namely, the impleadment of the respondents as party defendants and the setting aside of the consent decree. The petitioners were granted liberty to file a reply to the application within four weeks, and the Civil Judge was directed to decide the application on its own merits, uninfluenced by any observations in the impugned order or the High Court's current order.
Implications:
This judgment reinforces the principle that while consent decrees are intended to bring finality to disputes, they are not immune to challenges, especially when fraud is alleged. The decision clarifies that even a third party, not privy to the original consent decree, may approach the court that passed the decree to seek its recall if they can establish that the decree was obtained through fraud. This emphasizes the paramount importance of courts maintaining their inherent power to prevent and rectify miscarriages of justice caused by fraudulent actions, ensuring that the legal ecosystem remains fair and equitable.
Section 151., Code of Civil Procedure - 1908
Code of Civil Procedure, 1908