Suit Against Consent Decree by Non-Party: Bombay High Court Upholds Trial Court's Decision.


17 April 2025 Civil Revision >> Civil & Consumer Law  

The Bombay High Court recently upheld an order of Messrs Kaycee Corporation Vs Suresh Ramchand Mehta & Ors., passed by the City Civil Court, rejecting an application for the rejection or return of a plaint in a long-standing property dispute. The case, stemming from a suit filed in 1999, involves a prior agreement for sale and a subsequent consent decree that included the same property. The High Court's decision, while concurring with the trial court's outcome, provided a nuanced reasoning, emphasizing the complexities arising from subsequent transfers in specific performance suits.

The dispute originated from an agreement to sell an office premises (Unit No. 204) in a building named 'Comet' by Galaxy Corporation (defendant No. 1) and its trustees (defendant Nos. 2-4) to the plaintiff, executed and registered in 1994. The plaintiff claimed default by the original vendors and alleged that they subsequently put defendant No. 5 in possession. Further investigation revealed that defendant No. 5 had earlier filed a suit (Suit No. 1701 of 1994) against defendant Nos. 1-4 for specific performance of a Memorandum of Understanding (MoU) concerning different units in the same building. This earlier suit culminated in a consent decree in 1996, wherein defendant Nos. 1-4 agreed to sell the suit premises (Unit No. 204), along with other units, to defendant No. 5.

 
 

Faced with this development, the plaintiff instituted the present suit (Suit No. 9794 of 1999) seeking declarations regarding the validity and subsistence of their 1994 agreement, specific performance against defendant Nos. 1-4, possession of the suit premises, and a declaration that the 1996 consent decree was null and void and not binding on them. The plaint was later amended to include a claim for refund of consideration, stamp duty, registration charges, and substantial damages.


Defendant No. 5 then filed a Notice of Motion seeking rejection of the plaint, arguing no cause of action against them, failure to challenge the registered instrument in their favor, undervaluation of the suit, insufficient court fees, and crucially, a bar under Order XXIII Rule 3-A of the Code of Civil Procedure (CPC) against challenging a consent decree through a separate suit.

The City Civil Court rejected this application, noting the plaintiff's willingness to pay the requisite court fees and holding that the plea of fraud in obtaining the consent decree warranted further examination, thus precluding rejection of the plaint at the threshold.

Aggrieved by this rejection, defendant No. 5 approached the High Court in revision. Their counsel argued that the trial court erred in not considering the bar under Order XXIII Rule 3-A, citing the Supreme Court's decision in Triloki Nath Singh vs. Anirudh Singh. It was contended that the plaintiff's prayer for declaring the consent decree null and void was explicitly barred. Furthermore, it was argued that there was no privity of contract or specific performance sought against defendant No. 5, rendering the suit untenable against them, and that damages for mental agony were inappropriate in a specific performance suit. Reliance was also placed on a Bombay High Court order in Siddhesh Suresh Chawan vs. Suresh Chawan and the Supreme Court's judgment in Ghaziabad Development Authority vs. Union of India.

The plaintiff's counsel countered by asserting that the bar under Order XXIII Rule 3-A did not apply as the plaintiff was not claiming through the parties to the consent decree. The damage claims were presented as alternative reliefs to specific performance, and the main prayers were inseparable, preventing partial rejection of the plaint. Reliance was placed on Supreme Court judgments in Sejal Glass Ltd. vs. Navilan Merchants Private Ltd. and Madhav Prasad Aggarwal vs. Axis Bank Ltd., as well as a Bombay High Court decision in Smt. Sushama Tulsidas Adhav vs. Mr. Pradeep D. Shah.

The High Court, after considering the arguments, upheld the trial court's rejection of the application, albeit offering a different rationale. Justice N.J. Jamadar noted that the issue of undervaluation and deficit court fees was being addressed by the trial court and did not warrant immediate rejection of the plaint.

Addressing the core issue of the challenge to the consent decree, the High Court referred to Order XXIII Rules 3 and 3-A of the CPC. While acknowledging the bar under Rule 3-A against a separate suit to set aside a decree based on an unlawful compromise, the court distinguished the present case. It highlighted that the plaintiff's agreement for sale predated the consent decree.

The High Court cited Section 40 of the Transfer of Property Act (TP Act), which states that an agreement for sale creates an obligation attached to the ownership of the property, enforceable against a transferee with notice, but not against a bona fide transferee for consideration without notice. Furthermore, Section 19 of the Specific Relief Act allows specific performance to be enforced against a party to the contract and any person claiming under them by a subsequent title, except a bona fide transferee for value without notice.

Drawing upon these provisions and the Supreme Court's rulings in Durga Prasad vs. Deep Chand and Dwarka Prasad Singh vs. Harikant Prasad Singh, the High Court emphasized that a subsequent transferee with notice becomes a necessary party in a suit for specific performance to convey complete title to the original purchaser. The court clarified that a consent decree, being essentially a contract with the court's seal, does not inherently hold a higher status than the underlying agreement. If the subsequent agreement leading to the consent decree is subservient to a prior obligation created by an earlier agreement, the consent decree cannot shield the subsequent transferee from the consequences of the specific performance of the first agreement.

Regarding the argument that no specific performance was sought against defendant No. 5, the High Court reasoned that once impleaded as a necessary party in a suit for specific performance against the original vendors, the absence of a specific prayer against the subsequent transferee does not render the suit untenable. The entitlement to the claimed reliefs remains a matter for trial.

In conclusion, the High Court dismissed the revision application, affirming the trial court's decision to not reject the plaint. The court clarified that its observations were solely for the purpose of determining the legality of the impugned order and should not influence the trial court's adjudication of the suit on its merits.


Indian Contract Act, 1872  

Section 40, Transfer of Property Act - 1882  

Transfer of Property Act, 1882  

Code of Civil Procedure, 1908