Supreme Court: Consent Decree Will Not Act As Estoppel If Compromised By Fraud, Misrepresentation, Or Mistake

Supreme Court: Consent Decree Will Not Act As Estoppel If Compromised By Fraud, Misrepresentation, Or Mistake

The Supreme Court of India (SC) in the case of Compack Enterprises India (P.) Ltd. (Petitioner) v. Beant Singh (Respondent), observed that a consent decree would not serve as estoppel, where the compromise was vitiated by fraud, misrepresentation, or mistake.

The SC bench comprising Justices Mohan M. Shantanagoudar and Vineet Saran, on 17 February 2021, stated that the High Court (HC) was correct in upholding the terms of the consent decree directing Petitioner to hand over possession of the entire suit property.

While referring to the case Gupta Steel Industries v. Jolly Steel Industries Pvt. Ltd. & Anr., (1996) 11 SCC 678, the Apex Court observed that the consent decrees are intended to create estoppels by judgment against the parties, thereby putting an end to further litigation between the parties. 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.

Originally in this case a suit for possession and mesne profits was filed by the owner of the property (respondent) against the company (petitioner) regarding the ground floor of the property owned by the former.

The HC passed a consent decree wherein it directed that Compack Company would pay to Singh through mesne profits, an enhanced sum of Rs.1,00,000/-per month with a 10% increase "After every 12 months, i.e. from 1.10.2009, 1.10.2011,etc. w.e.f. 1.10.2008 (i.e., the date on which the 2006 Agreement expired) till the date the Petitioner (Singh) hands over actual possession of the suit property measuring 5,472 sq. ft. to the Respondent (Company)."

A review petition was filed by the 'petitioner' that was also dismissed by the HC.

The petitioner stated that the HC has erred in recording its judgment that the Petitioner has consented to handing over possession of the entire suit property area and that recording the terms of the consent decree, it recorded a 10% increase in mesne profit every 24 months, instead of 12 months.

The Top Court stated while observing the issue of the Mesne Profits that the recording of a 10% increase after every 12 months in the consent decree was an inadvertent error on the part of the HC.

It stated, "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 Top Court added "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."

The Apex Court disposed of the appeal and recorded its displeasure at the Petitioner's repeated and persistent efforts to re¬-agitate the question of delivery of possession to the Respondent.

The bench observed, "However, this formulation is far from absolute and does not apply as a blanket rule in all cases."

The Top Court referred to its judgment in the case of Byram Pestonji Gariwala v. Union Bank of India &ors., (1992) 1 SCC 31, and held that a consent decree would not serve as estoppel, where the compromise was vitiated by fraud, misrepresentation, or mistake.

The Bench added, "The 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."

While disposing of the petition the Court directed, "The Petitioner is additionally directed to pay costs of Rs. 1 lakh to the Respondent as stated in the impugned order dated 25.7.2019."