The Supreme Court on Friday (October 30) reiterated that there's no bar to file an appeal against the consent decree by a stranger if it shows that the consent decree prejudicially affects his rights or interests. Also, a leave to appeal cannot be denied to such a stranger merely because he was not party to a consent decree, if shown that the consent decree materially affects his rights or interests.

A bench of Justice JB Pardiwala and Justice K. Vinod Chandran explained that the principle of estoppel applicable to the consent decree operates within the parties who were party to a consent decree, and not to the stranger who was never a party to a consent decree.

“…a person who was neither a party to the original proceedings nor a party to the compromise cannot, merely by virtue of the decree having been passed with the consent of others, be deemed to have consented to it or be precluded from asserting an independent right allegedly prejudiced thereby. A stranger to a compromise decree cannot be said to be barred under Section 96(3) read Order XXIII Rule 3 & Rule 3A of the CPC, 1908, since the scope and import of these provisions are limited to the parties to the compromise and act as an estoppel only with respect to them.”, the Court said.

“…non-party status does not confer an unrestricted right of appeal. Such a person must prima facie demonstrate that the impugned decree prejudicially affects his rights or interests and must obtain leave of the appellate court in accordance with the settled principles governing appeals by persons who were not parties to the original proceedings.”, the Court added.

To summarise this sub-issue, an appeal under Section 96 of the CPC, 1908, may be preferred by any of the following persons:

"i. Any party to the suit adversely affected by the decree or if such party is dead, by his legal representative.

ii. Any transferee of the interest of such party, so far as such interest is concerned, is bound by the decree.

iii. No person unless he is a party to the suit, is entitled to appeal under this Section. But a person who is not a party to the suit, may prefer an appeal with leave of the appellant court and such leave should be granted if he would be aggrieved, prejudicially affected by the judgment or if it would be binding on him as res judicata under Explanation 6 to Section 11 of the CPC, 1908. A person who is not a party to the decree or order may with the leave of the Court prefer an appeal from such decree or order if he is either bound by the order or is aggrieved by it or is prejudicially affected by it. As a rule, leave to appeal will not be refused to a person who might have been made ex nominee a party.

iv. Whether a party is adversely affected by a decree is a question of fact to be determined in each case according to its peculiar circumstances.”

The Case

The dispute concerns a parcel of land in Gujarat and a consent decree passed in a suit for specific performance instituted by a Cooperative Housing Society against the legal heirs of the original owner.

The suit was based on an agreement to sell. It culminated in a compromise decree in favour of the Society. The decree was subsequently put into execution in 2020, and a sale deed was executed through a Court Commissioner in favour of Patel, with the Society joining as a confirming party.

Nine persons, who claimed through the HUF associated with the original purchaser of the land, approached the Gujarat High Court, alleging that the consent decree and subsequent proceedings were the result of fraud and collusion. They contended that the original seller's legal heirs had no subsisting title to transfer the property and that the proceedings had prejudiced their rights.

They also relied on documents obtained through the RTI process, which allegedly revealed Appellant's close association with the Society, including his position as its chairman during 2002-2003.

The High Court granted an ex parte ad interim injunction, restraining Appellant from entering upon, selling, transferring, mortgaging, leasing or creating third-party rights in the disputed property. The High Court continued the injunction, condoned the delay of approximately 11 years and granted the Applicants, Respondent No. 1 to 9 leave to appeal against the consent decree, following which an appeal was preferred before the Supreme Court.

Decision

Affirming the impugned order, the judgment authored by Justice Pardiwala observed that the High Court has correctly granted leave to appeal to the Respondents, considering that they have asserted a legally cognisable interest which may be prejudicially affected by the consent decree.

“…the material on record establishes, for the limited purpose of determining their entitlement to seek leave, that the Respondent Nos. 1-9 have asserted a legally cognisable interest which may be prejudicially affected by the consent decree. The fact that they were not parties to the original suit or to the compromise does not, by itself, disentitle them from seeking leave to appeal where the decree is alleged to impinge upon their independent rights. We are, therefore, satisfied that the High Court was justified in granting leave to appeal to the Respondent Nos. 1-9. This conclusion is confined to their standing to challenge the decree and the need for appellate scrutiny; it shall not be construed as an expression of opinion on the ultimate merits of their claim to the subject land or on the truth of the allegations of fraud and collusion, which must be determined in accordance with law.”, the Court said.

The Court explained that:

“Such an applicant seeking leave to appeal cannot be bound by the estoppel arising from the compromise merely because the decree was passed with the consent of others. Accordingly, the application for leave to appeal must be examined in accordance with the same settled principles that govern an application by a non-party seeking to challenge an ordinary decree passed upon adjudication. The decisive consideration remains whether the applicant has demonstrated a legally cognisable interest that is prejudicially affected by the impugned decree so as to warrant the exercise of the appellate court's discretion in granting leave. The fact that the decree in question is a consent decree neither dispenses with this requirement nor, in itself, constitutes a bar to the grant of leave.”

As a result, the appeal was dismissed.

Appearance:

For Petitioner(s) :Mr. Anshin H Desai, Sr. Adv. Mr. Shiv Mangal Sharma, Adv. Ms. Venu Nanavaty, Adv. Ms. Shalini Singh, Adv. M/s Aura & Co., AOR

For Respondent(s) : Mr. Mihir J Thakore, Sr. Adv. Ms. Megha Jani, Sr. Adv. Ms. Anushree Prashit Kapadia, AOR Mr. Arun Joshi, Adv. Ms. Pragya Jaishwal, Adv. Mr. Pranay Bhardwaj, Adv

Related: When Can Stranger To Suit Seek Leave To Appeal Against Decree? Supreme Court Lays Down Principles