A landmark ruling by the Bombay High Court has clarified that consent terms filed in a civil appeal, when accepted by the court, transform into binding undertakings enforceable as court orders. This decision reinforces the sanctity of judicially sanctioned settlements and imposes strict compliance obligations on parties who seek to resolve disputes through mutual agreement.
Background & Facts
The Dispute
The dispute arose between Mindset Estates Pvt Ltd and Biyani Financial Services Pvt Ltd over a complex commercial arrangement involving property development, funding obligations, and default in repayment. The parties had previously litigated before the National Company Law Tribunal, Mumbai Bench - V, which passed an order on 19 February 2025 addressing certain financial liabilities and asset transfers.
Procedural History
The case progressed through multiple forums:
- 2019: Original suit filed in District Court, Mumbai
- 2021: First Appeal filed in Bombay High Court under Section 100 of the Code of Civil Procedure
- 2025: National Company Law Tribunal issued an order on financial restructuring and asset allocation
- January 2026: Parties filed Consent Terms before the Bombay High Court, resolving all outstanding claims
Relief Sought
The appellants sought dismissal of the Second Appeal on terms of a comprehensive settlement. The respondents agreed to the terms, which included repayment schedules, release of encumbrances, and mutual waivers of all pending claims.
The Legal Issue
The central question was whether consent terms filed before the High Court, even without a formal decree, constitute binding undertakings enforceable by the court, and whether the court has the authority to treat such terms as its own order.
Arguments Presented
For the Appellant
The appellants relied on the principle that parties are free to settle disputes by mutual consent under Section 89 of the Code of Civil Procedure. They argued that the Consent Terms, signed by all parties and their advocates, reflected a final and irrevocable compromise. They cited Salem Advocate Bar Association v. Union of India to affirm that courts must encourage settlement and give effect to consensual resolutions.
For the Respondent
The respondents did not contest the validity of the Consent Terms but emphasized that the terms were not merely private agreements. They contended that by filing the terms before the court and seeking disposal of the appeal on those terms, the parties had implicitly invited the court to endorse and enforce them as judicial orders.
The Court's Analysis
The Court examined the nature of consent-based resolutions in appellate proceedings and held that when parties file comprehensive settlement terms before a court and request disposal of the matter on those terms, the court is not merely a passive observer. It becomes an active participant in giving legal effect to the agreement.
"All rights and obligations mentioned in the Consent Terms qua the respective parties are taken as undertaking given to this Court and parties shall abide by the same."
The Court emphasized that the judicial endorsement of consent terms elevates them beyond private contracts. Once accepted by the court, they become undertakings to the court itself, enforceable under Order XXIII Rule 3 of the Code of Civil Procedure and the inherent powers of the court under Section 151. The Court noted that the parties had not only signed the terms but had also submitted them with the explicit intention of obtaining judicial recognition. The annexure to the Consent Terms, including the NCLT order, further demonstrated the integrated nature of the settlement.
The Court rejected any notion that consent terms remain unenforceable unless converted into a formal decree. It held that the court’s role in accepting such terms is not procedural but substantive - creating a binding obligation enforceable through contempt or execution proceedings.
The Verdict
The appellants prevailed. The Bombay High Court held that consent terms filed in a civil appeal and accepted by the court constitute binding undertakings to the court, enforceable as if they were court orders. The Second Appeal was disposed of in terms of the Consent Terms, and all ancillary applications were closed.
What This Means For Similar Cases
Consent Terms Are Judicial Undertakings
- Practitioners must treat consent terms filed in court as legally binding obligations to the court, not merely private agreements
- Failure to comply may attract contempt proceedings under Section 12 of the Contempt of Courts Act
- Drafting should include explicit language: "The parties undertake to comply with these terms as directed by this Court"
No Formal Decree Required for Enforcement
- A formal decree is not a prerequisite for enforcement
- Courts may directly enforce consent terms through execution petitions under Order XXI Rule 32
- Parties should seek an explicit order from the court stating: "The Consent Terms are hereby accepted and made an order of this Court"
Strategic Implications for Settlement Negotiations
- Settlement discussions should be conducted with awareness that court filing triggers judicial oversight
- Parties must ensure all terms are unambiguous, complete, and signed by authorized representatives
- Legal counsel must verify that all annexures and referenced orders are properly incorporated and authenticated
