Compromise of Civil Suit Must Be in Writing and Signed by Parties: Supreme Court

The Supreme Court has held that a compromise of a civil suit must be in writing and signed by the parties or their duly authorised representatives, as an agreement or compromise which is void or voidable under the Indian Contract Act, 1872 cannot be treated as lawful.

A Bench of Justices Sanjay Karol and N Kotiswar Singh said courts must apply their judicial mind before accepting a compromise to ensure that its terms are lawful and have been voluntarily accepted by the parties.

Dealing with an appeal filed by Krishna Kumar Ojha and others, the court held that the compromise decree was invalid because it was not signed by the defendant and there was no express authorisation permitting his counsel to sign on his behalf.

Court also observed that the law of limitation should not be used to defeat substantive rights, particularly where fraud is alleged. It said courts may invoke their inherent powers under Section 151 of the Code of Civil Procedure (CPC) to prevent the perpetuation of illegal acts, especially where the dispute concerns foundational facts and the rights of parties.

Accordingly, the Bench upheld the decision to entertain a challenge to the compromise decree after 25 years, noting that allegations of fraud and substantial property rights were involved.

Can a lawyer sign a compromise without the client's express authority?

Answering this in the negative, the Bench emphasised that an advocate requires express authorisation before entering into a compromise that determines a client's substantial legal rights.

"A lawyer has no implied or apparent authority to make an admission or statement that would directly surrender or conclude the substantial legal rights of a client without express authorization. An advocate is expected to follow the instructions of the client rather than substitute their judgment, and prudence dictates obtaining a special vakalatnama for entering into a compromise."

The appeal before the Supreme Court was filed by the legal heirs of the original plaintiffs and other co-sharers. They challenged a Patna High Court order dismissing their civil revision petition against a February 2024 order of the Sub-Judge-01 (East), Muzaffarpur. The trial court had set aside a February 1994 compromise decree passed in a 1989 partition suit.

The principal question before the Supreme Court was whether the compromise accepted by the civil court in February 1994 complied with the requirements of Order XXIII Rule 3 of the CPC.

Examining the compromise placed on record by the respondents, Court noted that it merely recorded that defendant no. 5, Chaturbhuj Chaudhary, had no objection, and that this statement had been made through his counsel, Ram Krishna Mehta, who had been appointed through a vakalatnama in August 1992. The real issue, Court said, was whether the advocate had been authorised by his client to enter into a settlement affecting the entire property.

"There is no express authorisation by defendant no.5 allowing Mehta to sign the compromise on his behalf, nor is there anything on record to demonstrate the exigent circumstances which prompted the counsel to act without seeking a clear approval from defendant no.5," the Bench observed.

In the absence of such authorisation, Court held, the requirement of voluntary consent under Order XXIII Rule 3 of the CPC could not be said to have been satisfied. Since this mandatory requirement was not fulfilled, the compromise decree was contrary to law.

Why did the Supreme Court entertain a challenge after 25 years?

On the issue of delay, the Bench acknowledged that the gap between 1994 and 2022 was, prima facie, exceptionally long. However, it noted that the high court had not dismissed the case on the ground of limitation and had instead affirmed the trial court's order after finding no illegality or jurisdictional error.

The Supreme Court held that dismissing the challenge solely on the ground of delay would have perpetuated an illegal decree.

"In our view, if the delay had been the ground to dismiss the miscellaneous case, the effect would be to perpetuate something which is not in accordance with law. The same cannot be permitted. The law of limitation, while undoubtedly an important facet of the legal system, cannot be used as a means to defeat substantive rights."

The Bench noted that although defendant no. 5 had not signed the compromise, his property rights, which were substantial, were directly affected by it.

Court further observed that the very foundation of the compromise remained disputed. While one side claimed the parties were not family members, the other relied on a family chart to establish the relationship. One side argued that defendant no. 5 had been impleaded only because his name was mistakenly entered in the survey records, whereas the other asserted full ownership rights over the property. There was also a dispute over whether the advocate had any authority to enter into the compromise and whether defendant no. 5 was even aware of the proceedings leading to the compromise decree.

The Bench also noted that it was only around 22 years after defendant no. 5's death, which occurred eight years after the 1994 decree, that the respondents attempted to dispossess the appellants, triggering the present litigation.

"Clearly, the most basic facts are disputed. This, along with the fact that the compromise decree is not in accordance with law, gives us enough reason to agree with the reasoning of the court below," the Bench said.

Holding that the compromise decree had rightly been set aside, Court observed that the issues arising in the 1989 partition suit required adjudication through a full-fledged trial.

Dismissing the appeal, the Bench acknowledged the practical difficulty of conducting a trial in a suit instituted in 1989, nearly 37 years ago. However, it said the rights of the parties could not be decided without following due process and evaluating whatever evidence remained available.

Case Title: Krishna Kumar Ojha & Ors Vs Jitendra Chaudhary & Ors

Bench: Justices Sanjay Karol and N Kotiswar Singh

Date of Judgment: July 1, 2026