Case Note & Summary
Background: The dispute arose from a Joint Development Agreement (JDA) dated 31 October 2020 between applicant no.1, Royal Realtors Landmarks Pvt. Ltd., and respondent no.1, Shah Housecon Pvt. Ltd., concerning two properties, particularly a second property bearing CTS No.580, 581/1 to 13 and 581/A/3B in Malad (East), Mumbai. The JDA was executed during financial difficulties of respondent no.1 due to Covid-19. Applicant no.1 secured a loan of Rs.50 crores from IndiaBulls by mortgaging respondent no.1's property, with respondent nos.2 to 4 as guarantors. Rs.30 crores was transferred to respondent no.1 to clear its IndiaBulls debt, making applicant no.1 the debtor to IndiaBulls. Facts: Disputes arose, leading applicants to file Commercial Suit No.303 of 2022 on 21 September 2022 for specific performance of the JDA. They also filed Interim Application (L) No.30675 of 2022 seeking injunction against respondent nos.1 to 7 from creating third party rights. A lis pendens was registered on 26 September 2022 under Section 52 of the Transfer of Property Act, 1882. On 9 December 2022, a Single Judge recorded an undertaking of respondent nos.1 to 7 not to create third party rights. Respondent no.1 issued a termination notice dated 9 March 2023 terming the JDA incomplete and unenforceable, which applicants denied by letter dated 24 March 2023. Consent terms dated 1 November 2023 were executed between applicants and respondent nos.1,2,5 to 7. Orders dated 2 November 2023 and 3 November 2023 directed the parties to appear before the Prothonotary and Senior Master for verification; the Prothonotary reported that the consent terms were executed in an orderly manner. Interim Application (L) No.26702 of 2024 was filed on 27 August 2024 seeking decree in terms of the consent terms. Legal Issues: The core legal question was whether the consent terms dated 1 November 2023 could be decreed under Order XXIII Rule 3 CPC, considering allegations of vagueness, uncertainty, fraud and unenforceability. Arguments: Applicants sought a decree in terms of the consent terms, contending they were valid. Respondents opposed, asserting the consent terms were vague, uncertain, vitiated by fraud and hence unenforceable, and no order or decree could be passed on legally unenforceable consent terms. Court's Analysis: The court observed that in such cases its endeavor is to determine if the compromise represented by the consent terms is lawful and valid for purposes of passing orders and decreeing the proceedings. It noted the need to consider the implications of the earlier orders of 2 November 2023 and 3 November 2023 and the Prothonotary's verification report. The court was to evaluate whether the consent terms satisfied the requirements of Order XXIII Rule 3 CPC. Decision: The final decision is not available in the provided excerpt; the court was adjudicating the interim application to determine whether to decree the consent terms after assessing their lawfulness and validity.
Headnote
A) Compromise Decree - Validity of Lawful Compromise - Consent terms must be lawful and valid for court to decree under Order XXIII Rule 3 CPC - Code of Civil Procedure, 1908, Order XXIII Rule 3 - The court examined whether consent terms dated 1 November 2023 could be decreed; respondents alleged vagueness, uncertainty and fraud; court observed its endeavor is to determine lawfulness and validity before decreeing. Held that the court must be satisfied as to lawfulness and validity of compromise before passing decree (Paras 1-2).
B) Fraud - Unenforceability of Compromise - Allegations of fraud can render consent terms unenforceable - Code of Civil Procedure, 1908, Order XXIII Rule 3 - Respondents assailed interim application on ground that consent terms were vitiated by fraud, vague and uncertain; this raised issue of enforceability of consent terms; court was to consider such objections in deciding whether to decree consent terms. Held that fraud, vagueness and uncertainty are grounds to bar enforcement of consent terms (Paras 2).
Issue of Consideration
Whether consent terms dated 1 November 2023 can be decreed under Order XXIII Rule 3 of the Code of Civil Procedure, 1908, in light of allegations of vagueness, uncertainty, fraud and unenforceability.
Law Points
- Order XXIII Rule 3 CPC requires court to be satisfied that compromise is lawful and valid before decree
- allegations of fraud
- vagueness
- uncertainty can bar enforcement of consent terms
- court must verify compromise and may decree if lawful
- lis pendens under Section 52 TPA protects property from third party rights during pendency
- undertaking to court not to create third party rights is binding.
Case Details
2025 LawText (BOM) (06) 77
Interim Application (L) No. 26702 of 2024 in Commercial Appeal (L) No. 27216 of 2023 with Commercial Appeal (L) No. 27216 of 2023 with Interim Application (L) No. 27806 of 2023 in Commercial Appeal (L) No. 27216 of 2023 with Contempt Petition (L) No. 2148 of 2025 in Interim Application No. 27806 of 2023
G.S. Kulkarni, Advait M. Sethna
Mr. Dinyar Madon, Senior Advocate a/w Mr. Ziyad Madon, Mr. Bharat Jain, Mr. Anant Ratnaparkhi, Mr. Kavish Arora i/b I C Legal for the Applicants; Mr. Pravin Samdani, Senior Advocate a/w Ms. Usha S. Agarwal for Respondent No. 1; Mr. Anoshak Davar a/w Shubi Syed i/b Ms. Swati Margi for Defendant Nos.2 & 5; Mr. Ankit Lohia a/w Pooja Batra i/b Ms. Usha S. Agarwal for Respondent Nos.3 & 4; Mr. Abdul Rehman Khan i/b Mariyah Khatkhatay for Respondent Nos.6 & 7; Ms. Dhruti Kapadia for SRA-Respondent No.8
Royal Realtors Landmarks Pvt. Ltd., Mr. Premji Harakchand Shah, Mr. Deven Premji Shah, Mr. Himmatlal Ganeshlal Kachhara
Shah Housecon Pvt. Ltd., Mr. Ramji Harakchand Shah, Mr. Mansukh Harakchand Shah, Mr. Akash Harakchand Shah, Mr. Hiren Premji Savla, Mr. Pankaj Nandi Gada, Mr. Gaurav Padamshi Khirani, The Slum Rehabilitation Authority
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Nature of Litigation
Interim Application seeking decree of consent terms in a commercial appeal arising from a suit for specific performance of a Joint Development Agreement.
Remedy Sought
Applicants sought an order decreeing the proceedings in terms of consent terms dated 1 November 2023 under Order XXIII Rule 3 CPC.
Filing Reason
Respondents opposed the consent terms as vague, uncertain, vitiated by fraud and unenforceable, preventing a decree.
Previous Decisions
Orders dated 2 November 2023 and 3 November 2023 directed parties to appear before Prothonotary and Senior Master for verification of consent terms; Prothonotary opined consent terms were executed in orderly manner; earlier in the suit, Single Judge order dated 9 December 2022 recorded undertaking of respondent nos.1-7 not to create third party rights.
Issues
Whether consent terms dated 1 November 2023 are lawful and valid and can be decreed under Order XXIII Rule 3 CPC
Whether allegations of fraud, vagueness and uncertainty render the consent terms unenforceable
Submissions/Arguments
Applicants contended that the consent terms were valid and should be decreed.
Respondents contended that the consent terms were vague, uncertain, vitiated by fraud and hence unenforceable.
Ratio Decidendi
For a consent decree under Order XXIII Rule 3 CPC, the court must be satisfied that the compromise is lawful and valid; if the consent terms are vitiated by fraud, vagueness or uncertainty, they cannot be enforced. The court's endeavor is to determine lawfulness and validity before decreeing proceedings in terms of consent terms.
Judgment Excerpts
The basic issue which we are called upon to adjudicate revolves around the compromise manifesting in the consent terms dated 1 November 2023 (“Consent Terms”) executed between the applicants and respondent nos.1, 2, 5 to 7.
The respondents would assail the interim application mainly on the ground that the consent terms are vague, uncertain, vitiated by fraud and hence unenforceable.
The endeavor of the Court in such cases would be to determine if such compromise in terms of the consent terms is lawful and valid for the purposes of passing orders and accordingly decree the proceedings, in terms of such consent terms.
Procedural History
Joint Development Agreement executed on 31 October 2020 between applicant no.1 and respondent no.1 in respect of two properties including subject property. Loan of Rs.50 crores secured from IndiaBulls, Rs.30 crores transferred to respondent no.1 to clear its IndiaBulls debt. Disputes arose; applicants filed Commercial Suit No.303 of 2022 on 21 September 2022 for specific performance of JDA. Interim Application (L) No.30675 of 2022 filed seeking injunction. Lis pendens registered on 26 September 2022 under Section 52 TPA. Single Judge order dated 9 December 2022 recorded undertaking of respondent nos.1-7 not to create third party rights. Termination notice dated 9 March 2023 issued by respondent no.1 alleging JDA incomplete and unenforceable. Applicants' advocate letter dated 24 March 2023 denied termination. Consent terms dated 1 November 2023 executed between applicants and respondent nos.1,2,5-7. Orders dated 2 November 2023 and 3 November 2023 directed verification by Prothonotary and Senior Master; Prothonotary reported consent terms executed in orderly manner. Interim Application (L) No.26702 of 2024 filed on 27 August 2024 seeking decree in terms of consent terms.
Acts & Sections
- Code of Civil Procedure, 1908: Order XXIII Rule 3
- Transfer of Property Act, 1882: Section 52
