Mediated Settlements Enforceable Only After Judicial Approval: J&K And Ladakh High Court

The Jammu and Kashmir and Ladakh High Court has reaffirmed that mediated settlements under the Jammu and Kashmir Mediation and Conciliation Rules, 2019, attain enforceability as decrees only after judicial approval.

The Single Bench of Justice Sanjay Dhar emphasized that mediated agreements must follow procedural requirements, including submission to the court and the issuance of a decree or order to be legally binding.

"A settlement arrived at between the parties before the Mediator becomes a decree of the Court enforceable at law only if the same has the seal of approval of the Court and a decree is passed in terms of the said settlement...In the present case, despite a settlement having been arrived at by the parties before the Mediator, the Appellate Court has not passed any order or decree in terms of the said settlement. Thus, the settlement between the parties has not matured into an order or decree of the Court," the Court said. 

The Court’s made the observation in a case involving a property dispute where a mediated settlement was reached but not judicially approved. The petitioner, Nazir Ahmad Bhat, had filed a suit seeking a perpetual injunction against the respondents to prevent interference in property dealings. The dispute arose from agreements to sell immovable property worth Rs. 2.19 crores, with both parties accusing each other of non-compliance.

The Trial Court had earlier ordered a status quo and directed the deposit of received funds. During the pendency of the petitioner’s appeal, the matter was referred for mediation. In July 2024, the parties reached a settlement allowing the petitioner to pay Rs. 96.50 lakhs to the respondent and sell the property to third parties. However, the agreement was not presented for court approval.

Subsequently, the petitioner filed an application under Order 12 Rule 6 of the Code of Civil Procedure (CPC), admitting the counterclaim and seeking adjudication based on the mediated terms. The Trial Court directed execution of the settlement without judicial approval, prompting the present petition to challenge its legality.

The Single Judge clarified that under Rule 24 and Rule 25 of the Mediation and Conciliation Rules, 2019, mediated agreements must be written, signed, and submitted to the court for evaluation. Judicial satisfaction regarding the resolution of disputes is mandatory before passing a decree. The Court noted that no such procedure was followed in this case. "From a conjoint reading of the aforequoted Rules, it is clear that when an agreement is reached between the parties with regard to the subject matter of a suit or other proceedings, the same has to be reduced into writing, executed, and signed by the parties or their constituted attorney, whereafter the same has to be submitted to the Mediator, who has to forward the same to the Court before whom the suit or proceeding is pending. The Court, upon receipt of any settlement, if satisfied that the parties have settled their disputes, has to pass an appropriate decree/order in accordance with the terms thereof," the Court said. 

Citing Order 23 Rule 3 of the CPC, the court reiterated that compromises or adjustments in suits require judicial acknowledgment and a decree for enforceability. The trial court's handling of the case was also criticized for procedural lapses regarding suit and counterclaim valuations under the Suits Valuation Act and Court Fee Act.

“Whether defendant No. 1 could have valued the counterclaim in the manner in which he has done and whether he was obliged to pay an ad valorem court fee on the value of the suit property are issues to be considered by the trial court before proceeding further,” the Court observed.

The Court set aside the Trial Court’s order, allowing the petition and directing adherence to the procedural framework under the Mediation and Conciliation Rules and CPC. This ruling underscores the critical role of judicial oversight in mediated settlements to ensure legal enforceability.

Cause Title: Nazir Ahmad Bhat v. Sehrish Shafi & Ors [CR No. 34/2024; CM No. 7751/2024; Caveat No. 3000/2024]

Appearance:-

Petitioner: Advocate Shuja-ul-Haq

Respondent: Advocate Sajad Ahmad Mir

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