Compromise decree - When is a required to be registered?

 

Ans.  Section 17(2)(vi) of the Registration Act provides that nothing in clauses (b) and (c) of sub-section (1) applies to any decree or order of a court except a decree or order expressed to be made on a compromise and immovable property other than that which is the subject-matter of the suit or proceeding.

 

Section 17(2)(vi) of the Registration Act indicates that broadly speaking all the decrees or orders of court have been exempted from the operation of clauses (b) and (c) of sub-section (1). There is, however, an exception to this rule. Those decrees or orders, which are expressed to be made on a compromise relating to property other than which is the subject-matter of the suit or the proceeding would not be exempted from the operation, of clauses (b) and (c). If the case of a compromise relates to property, which is not the subject-matter of the suit or proceeding, then obviously the latter part of clause (vi) would take away the exception, and to such a case clause (b) and (c), as the case may be, would apply and such a document would be liable for registration. It will thus be plain that where the compromise deals only with the properties in the suit and the court passes a decree in accordance therewith, such a case will squarely fall within the exception and such a decree would not require registration.

 

In Moti Kuer v S.M. Usman, AIR 1949 Pat 304, it was observed that if by a decree of the court, made on a compromise, a transaction is had which has the effect of extinguishing the right of a party and declaring or outing a right in favour of another party in any property which is the subject-matter of the suit or proceeding, sub-section (1) of section 17 would not hit that decree. Such a decree is admissible notwithstanding that it is not registered. On the other hand, where the decree was obtained in a money suit as the result of a compromise, and purported to create a charge on the property, and the charge being for a sum exceeding Rs. 100, the decree should have been registered, if it has not been registered the decree did not create a charge.

 

FAQ (Frequently Asked Questions)

 

What is a compromise decree?

s A compromise decree is a decree passed by a court on the basis of a lawful settlement/compromise arrived at between the parties during a suit.

s It is governed mainly by Order 23 Rule 3 of the Code of Civil Procedure, 1908, and has the same force as any other decree of a civil court.​

 

When does a compromise decree require registration?

s If the decree itself creates a new right, title or interest in immovable property of value Rs.100 or more, and particularly if it deals with property not originally the subject matter of the suit, registration is compulsory under Section 17(1)(b) of the Registration Act, 1908.​

s If the decree only declares/recognizes pre‑existing rights in the same property that is already the subject matter of the suit, and does not create any new right, it does not require registration.​

 

What if the compromise covers property outside the suit?

s Where the compromise decree includes immovable property that was not the subject matter of the original suit (for example, additional plots added only in the compromise), it generally becomes compulsorily registrable.​

s Courts have consistently held that the statutory exemption for court decrees does not extend to a compromise that brings in outside property or creates fresh rights, so non‑registration can make such terms inadmissible and inexecutable.​

 

What is the effect if a required registration is not done?

s If a compromise decree that is compulsorily registrable is not registered, it cannot be received as evidence of the transfer or creation of rights in immovable property, and the part requiring registration may not be executable.​

s However, other independent parts of the decree that do not involve unregistered transfer of immovable property (for example, money obligations) may still be valid and executable.​

 

How is a compromise decree registered in practice?

s The usual practice is to obtain a certified copy of the compromise decree from the court and present it for registration before the appropriate Sub‑Registrar, paying applicable stamp duty and registration fees, wherever the law requires registration.​

s Stamp duty liability and place of registration are generally determined by state stamp laws and registration laws; parties should consult a local property lawyer or the Sub‑Registrar’s office to confirm the exact duty and procedure.