Consent Decree Based On Compromise Signed By Constituted Attorney And Counsel Is Binding Even After 30 Years: Bombay High Court

"If a power-of-attorney holder can enter into an agreement or compromise on behalf of his principal, so can counsel, possessed of the requisite authorisation by vakalatnama, act on behalf of his client." Bombay High Court, in a significant ruling dated 09 October 2026, held that a consent decree cannot be challenged on the grounds of fraud after three decades when the compromise was executed by a duly authorized Power of Attorney (PoA) holder and an Advocate.

A single bench of Justice Sandeep V. Marne observed that where a party, such as an Association of Persons (AoP), grants broad legal authority to a manager to prosecute and settle suits, such compromises are valid and binding upon the entity, especially when valuable consideration is received and accepted.

The Petitioners, claiming to be members of an Association of Persons (AoP) known as 'Bhandup Estate', challenged a 2014 City Civil Court order that dismissed their attempt to set aside a 1982 consent decree. The 1982 decree had recognized the original Plaintiff’s ownership of approximately 33 acres of land based on adverse possession. The Petitioners alleged that their former manager, Mahendra J. Mehta, colluded with the Plaintiff to facilitate a fraudulent transfer of their land via the consent decree, claiming he lacked the authority to compromise the suit.

The court was called upon to determine whether the 1982 consent decree was vitiated by fraud due to the alleged lack of authority of the manager and the counsel to compromise the suit. Furthermore, the court examined whether the challenge, initiated after 30 years, was barred by the law of limitation and whether the Petitioners could invoke Section 17 of the Limitation Act, 1963, to seek an exemption from the delay.

Authority of Constituted Attorney and Counsel

The court meticulously examined the Power of Attorney (PoA) granted to Mahendra J. Mehta by the co-owners of Bhandup Estate. Rejecting the petitioners' claim that the manager was only authorized to collect rent, the court held that the PoA clearly granted wide-ranging powers, including the authority to initiate, defend, and compromise legal proceedings.

"The PoA clearly belies the contention of the Petitioner that Mr. Mahendra J. Mehta had power only to collect rent. It therefore clearly appears that Mr. Mahendra J. Mehta had the power to enter into compromise on behalf of the co-owners of Bhandup Estate."

The court further noted that the consent terms were also signed by the advocate representing the Bhandup Estate. Relying on the Supreme Court’s decision in Byram Pestonji Gariwala v. Union Bank of India, the bench emphasized that an advocate appointed via a vakalatnama possesses the inherent authority to compromise a suit on behalf of their client.

Receipt of Consideration and Suppression of Facts

The court found that the Petitioner’s claim of fraud was undermined by the fact that the Bhandup Estate had received a consideration of Rs. 60,000 for the settlement in 1982. This transaction was documented and reflected in the bank records, suggesting that the co-owners were aware of the settlement at the time.

"It is thus, clearly established that an amount of Rs.60,000/- is transmitted in the account of Bhandup Estate and receipt dated 5 April 1982 was executed by Mr. Mahendra J. Mehta on 5 April 1982 on behalf of Bhandup Estate. This appears to be the reason why none of the co-owners of AoP Bhandup Estate raised any grievance with regard to compromise."

Failure to Prove Fraud under Section 17 of Limitation Act

Addressing the 30-year delay, the court held that the Petitioners failed to meet the rigorous pleading standards required to invoke Section 17 of the Limitation Act. Merely using the word "fraud" in pleadings without specific particulars or proof of due diligence is insufficient to extend the period of limitation.

"It is not the mere use of general words such as 'fraud' that can serve as the foundation for the plea. Such expressions are quite ineffective to give the legal basis in the absence of particular statements of fact which alone can furnish the requisite basis for the action."

The court also highlighted that the property had since been transferred to a bona fide purchaser for value (Sun-N-Shine Entertainers) for a substantial amount, further solidifying the finality of the original decree. Consequently, the court found no patent error in the City Civil Court’s dismissal of the motion and upheld the validity of the 1982 consent decree.

The High Court dismissed the Writ Petition, affirming that the consent decree remains legally valid and binding on the Petitioners. The court emphasized that parties cannot wake up after three decades to challenge a settled legal outcome without providing concrete evidence of fraud or demonstrating why the alleged fraud could not have been discovered earlier with reasonable diligence.

Date of Decision: 09 October 2026