It is significant to know the essentials of a valid compromise entered into between the parties either before the Court or before the Lok Adalat especially in civil proceedings. By having an understanding of the same, one can be aware when to challenge a compromise decree if they intend to do so because it is obtained by fraud or other reasons. Below are the guidelines laid down by the Hon’ble Karnataka High Court in Writ Petition No. 103766 of 2018 (GM-RES) and by way of Order dated 31.03.2022:-
i. When a compromise is filed before the Court and when the parties are filing an application under Order 23 Rule 3 CPC, when they are admitting the terms of the compromise and execution of the terms and conditions, then the Court before which it is presented, is the competent court to record the compromise and dispose of the suit in terms of the compromise. The question of referring the said dispute to the Lok Adalath would not arise. This is when the parties have already settled the matter amongst themselves and they do not require the assistance of a third person / mediator to settle the dispute.
ii. It is only if there is no settlement arrived at before the Court and the parties request for the matter to be referred to Lok Adalat to enable a settlement, then in such event the parties are to be referred to the Lok Adalat. In the event of a compromise being arrived at before the Lok Adalat, the same could be recorded by the Lok Adalat.
iii. When the matter is referred to Lok Adalat, separate order sheets would have to be opened and maintained by the said Lok Adalat and the Order Sheet of the Court in the suit cannot be used by the Lok Adalat.
iv. The Trial Court and or the Lok Adalat while recording compromise is required to ascertain if the parties are present personally as also to ascertain and verify their identities by production of suitable documentary proof.
v. The Trial Courts shall ensure that proper and acceptable proof of identity of the parties to proceedings as mandated by the Government for various purposes (such as Aadhar Card, Driving License, Passport Copy, Election Identity Card, etc.) are obtained as a matter of rule at the time of compromise.
vi. In the event of a power of attorney appearing, it would be the bounden duty of the Court or the Lok Adalat to ascertain if the concerned party has been served with notice.
vii. When recording a compromise being entered into by a power of attorney holder, the original of the power of attorney is required to be examined by the Court and the Lok-Adalat and necessary endorsement made in the order to that effect and the original power of attorney returned to the parties.
viii. As far as possible, the Trial Court or the Lok Adalat to secure the presence of the party and obtain signature of such party rather than the power of attorney.
In summary, if the above conditions are not satisfied and the parties have exercised fraud or collusion and a person’s rights to properties are infringed, the aggrieved party can approach the appropriate court of law for challenging / setting aside the compromise decree.
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