1. This is an application by the appellant (defendant 2 in the original suit) praying that a decree be passed in terms of a registered compromise arrived at between the appellant and the plaintiffs-respondents on 1st February 1933. The original document was in possession of the plaintiffs-respondents. The appellant filed a certified copy thereof with his application in this Court. He also prayed that the plaintiffs-respondents be called upon to produce the original deed of compromise. An order was passed by this Court sending down the certified copy of the compromise to the lower Court for 'verification and report.' The lower appellate Court issued a notice to the plaintiffs-respondents directing them to file the original deed of compromise and to verify the same. The plaintiffs-respondents appeared before the lower Court and filed the original with an application in which they admitted having executed the registered compromise relied on by the appellant but alleged that the appellant's conduct in inducing the plaintiffs-respondents to enter into the compromise was fraudulent. According to them, the appellant had given an assurance that no other defendant would file any cross-objection, but in contravention of that assurance, a cross-objection had been filed by another defendant, namely, Mt. Sabra Begam, just a day before the compromise was registered, a fact of which the plaintiffs-respondents were not aware and which the appellant concealed from them. The compromise does not contain any such stipulation.
2. The lower Court did not enter into the truth or otherwise of the respondents' allegation and made a report to the effect that the compromise had not been 'verified.' We do do not think that the plaintiffs-respondents can be considered to have refused to 'verify' the compromise except in the sense that they declined to give effect to it. They admit its execution and registration. They do not plead that any of the stipulation contained in the document was not known to them or that they were not free agents in entering into it. Apart from the allegation of fraud, to which reference has already been made, the compromise is a perfectly valid and binding document. The question is whether the plaintiffs-respondents' averment of fraud should be enquired into before the compromise is given effect to under Order 23, Rule 3, Civil P.C. Rule 3 is mandatory in its terms and provides that if it is proved to the satisfaction of the Court that a suit (or appeal) has been adjusted by a lawful compromise, the Court has no option but to order such compromise to be recorded and to pass a decree in accordance thereof. The compromise if given effect to adjusts the appeal as between the parties to the compromise. It is not disputed that they consented to its terms. Therefore a decree must be passed unless it is shown that Order 23, Rule 3 does not apply for any reason.
3. The learned advocate for the plaintiffs-respondents contends that Order 23, Rule 3 does not apply inasmuch as the compromise in question in the present case is not 'lawful' as the same had been obtained by fraud. He offers to show by evidence, if an opportunity is given to him that the fraud alleged by his clients in their application already referred to was in fact perpetrated by the defendant-appellant. Assuming, in favour of the plaintiffs-respondents, that the appellant had given an assurance to them that no other defendant would file any cross-objection and that the was privy to a cross-objection being filed by another respondent. We do not think that the compromise can, for that reason, be considered to be otherwise than lawful within the meaning of Order 23, Rule 3, Civil P.C. The point is covered by Qadri Jahan Begam v. Fazal Ahmad 1928 All. 494 in which a Division Bench of this Court held that:
The word 'lawful' in Order 23, Rule 3 does not merely mean binding or enforceable. A contract which is brought about either by undue influence, misrepresentation or fraud is, under Sections 19 and 19-A, Contract Act, merely voidable and not absolutely illegal or unlawful. These are cases where it...involves or implies injury to any person or property, or where the Court regards it as immoral or opposed to public policy. We think that the word 'lawful' in Order 23, Rule 3, refers to agreements which in their very terms or nature are not 'unlawful', and may therefore include agreements which are voidable at the option of one of the parties thereto because they have been brought about by undue influence coercion or fraud.
4. We are in entire agreement with the views expressed in the passages quoted above. A contract which has been induced by fraudulent conduct is between the parties, not void but only voidable at the option of the party defrauded. Such contract is valid until it is set aside at the instance of the party at whose option it is voidable. A contract vitiated by fraud can be set aside by a decree obtained in a regular suit instituted for that purpose. A mere repudiation by one of the parties, not acquiesced, in by the other is not avoidance of such contract. A judicial determination of facts on which the right to avoid rests is a necessary preliminary to the contract being set aside. Order 23, Rule 3 does not provide for an inquiry into disputed facts collateral to the terms of the compromise. It is highly inexpedient that questions of the character raised in the present case should be enquired into in a miscellaneous proceeding started by an application under Order 23, Rule 3, Civil P.C. If such enquiry is allowed, all the various stages of a regular suit will have to be gone through in disposing of that application. For these reasons, we do not think that a proceeding of the nature above referred to is within the purview of Order 23, Rule 3 and that a party alleging fraud cannot be allowed to avoid the compromise admittedly executed by it in proceedings started by an application under Order 23, Rule 3, Civil P.C. The Court is bound to give effect to it forthwith if it is lawful having regard to its own terms.
5. The learned advocate for the plaintiffs-respondents invoked our jurisdiction under Section 151, Civil P.C. We do not think this is a fit case in which we should act in the exercise of our inherent power and enquire into the truth or otherwise of the plaintiffs' allegations, assuming we have such power under that section. It is open to the plaintiffs-respondents to institute a regular suit for setting aside the compromise. If such a suit is successful, the compromise shall be set aside and the decree passed thereon shall be vacated with the result that the appeal which has been compromised shall have to be reopened.
6. Having regard to the circumstances which exist at present, the compromise which was admittedly executed by the plaintiffs-respondents cannot be considered to be otherwise than lawful. Accordingly we order the compromise to be recorded and pass a decree in accordance therewith.