The Supreme Court ruled on Monday that parties cannot casually withdraw from a mediated settlement of matrimonial disputes after accepting its benefits and then starting new legal proceedings, unless they prove “force, fraud, undue influence or non-compliance” by the other side.
A bench of Justices Rajesh Bindal and Vijay Bishnoi said that while a party can legally withdraw consent to a mutual divorce before the final decree is issued, it cannot back out of a mediated settlement that resolves all disputes between the parties.
Once such a settlement is reached and ratified by the mediator, its terms are binding on both sides, and if one party backs out of the agreement without valid reasons such as fraud or coercion, courts must treat the deviation seriously, even imposing “exorbitant costs,” because such behavior undermines the basis and “credibility of the mediation process,” the court said. The court added: “It is a trite law that once the parties have entered into a settlement agreement duly ratified by the mediator, in the event of any retreat from these terms as agreed in the settlement, heavy costs must be borne by the rejecting party.”
It also strongly excluded the wife’s withdrawal in this case from the settlement agreement after it was disposed of. The court was hearing a case involving a dispute where the husband and wife had entered into a detailed settlement through mediation to resolve their marriage by mutual consent. The husband was represented by lawyer Prabhjeet Johar.
Under the agreement, the husband agreed to pay the woman $1.5 Crores, pay additional amount of $14 lakh to buy a new car and return her jewelery or ‘stree dan’. Both parties also filed their first divorce application before the Family Court. However, the wife later withdrew her consent before submitting the second application and filed a case against her husband and mother-in-law under the Domestic Violence Act.
The Delhi High Court allowed domestic violence proceedings to continue as long as the wife deposited the amount she had already received as part of the settlement. The husband then filed a lawsuit in the Supreme Court seeking to set aside the Delhi High Court order and also seeking divorce.
The Supreme Court then formulated three central questions – whether a party can walk away from a mediated settlement, whether that party can continue with domestic violence proceedings, and whether the court can use its powers under section 142 to grant a divorce on the grounds of the irretrievable breakdown of the marriage.
She went on to say that although there was a settled legal position that a party could withdraw consent to a mutual divorce at any stage before the decree was issued, such a change in opinion could not be based on frivolous reasons.
In this case, the court indicated that the wife refused to respect the terms of the settlement agreement and withdrew her consent from the divorced wife on the grounds that the husband retracted his “verbal assurance” to return the value of the jewelry. $120 crores and gold biscuits worth $50 crores outside the settlement agreement. She claimed that she was told that including these elements in the agreement would alert the Income Tax Department.
The Supreme Court expressed strong rejection of the wife’s argument that some financial aspects, including the alleged guarantee for the return of gold biscuits and jewellery, were deliberately kept out of the settlement to avoid tax scrutiny, and described the submission as “absolutely egregious” and reflecting a disregard for the legal system.
“We are appalled at the sheer audacity of bringing such a request before a court of law and deplore the clear implication thereof.”
The court said the disregard was shown towards the legal system.
The court also cautioned against allowing marital disputes to escalate into a passion-driven criminal case.
“While we are aware of the fact that parties to a long-standing marital dispute are often fueled by emotions, we cannot allow these emotions to take a drastic turn as much as we allow the outpourings of emotions to form the basis of criminal prosecution. Such criminal prosecution, if allowed, will lead to abuse of law and cause harassment,” she said.
The High Court eventually invoked its powers under section 142(1) and granted divorce to the couple after finding that their marriage had broken down “irretrievably”.
It also set aside the Supreme Court order, quashing the domestic violence proceedings pending against the husband and mother-in-law.
