SETTLEMENT - A settlement entered in open court in the presence of parties and counsel, recorded by the Court, and consented to by parties through signatures constitutes a binding contract.

 

Case: Kotte Hewa Swarnamali Thilinika Deshabandu v. Ranatunga Arachchilage Sunil Harshadewa and another

Court: Supreme Court of Sri Lanka

SC/APPEAL/130/2025 | CA/RII/01/2021 | DC Kandy 1482/2012/L

Before: Samayawardhena J., Wijesundera J., Wijeratne J.

Decided on: 18.12.2025

 

Facts:

The Plaintiffs instituted an action in the District Court of Kandy seeking declaration of title to the land in dispute, ejectment of the Defendant, and damages. The Defendant, while resisting the claim, sought compensation for alleged improvements. On the first date of trial, admissions were recorded, including the Defendant’s occupation under the Plaintiffs’ leave and licence. On 23.02.2016, a settlement was recorded in open court, in the presence of parties and Attorneys-at-Law, by which decree was to be entered in favour of the Plaintiffs, and the Defendant agreed to vacate on 31.12.2016. The parties signed the case record.

Four months thereafter, the Defendant changed his counsel and moved to set aside the settlement, claiming omission of a compensation term. The District Court refused the application. The Defendant filed a final appeal to the High Court instead of seeking leave to appeal; the High Court dismissed the appeal. Nearly six years after the settlement, the Defendant filed an application for restitutio in integrum in the Court of Appeal which was allowed on the basis that the settlement was not notified to Court by motion in terms of section 408 read with section 91 of the Civil Procedure Code.

 

Issues:

Whether a settlement recorded in open court, in the presence of parties and Attorneys-at-Law, and signed by parties is invalid or unenforceable for failure to notify the Court by way of motion under section 408 CPC.

Whether such a settlement may be set aside merely on grounds of procedural non-compliance in notification, absent vitiating factors affecting contractual validity.

Whether the Court of Appeal erred in invoking restitutio in integrum in the circumstances of the case.

Held:

(1) A settlement entered in open court in the presence of parties and counsel, recorded by the Court, and consented to by parties through signatures constitutes a binding contract.

(2) Section 408 CPC, read contextually, requires notification to the Court of a compromise, but non-notification by formal motion does not invalidate a settlement where the substantive requirement is fulfilled through open-court recording. Section 91 CPC does not affect the validity of such settlements.

(3) The long-standing practice (cursus curiae) of District Courts to record settlements in open court is recognized; the practice of the Court is itself part of the law of the Court.

(4) A party cannot unilaterally resile from a compromise simply because it becomes unfavourable; only grounds that vitiate a contract, such as fraud, illegality, mistake, coercion, misrepresentation, or undue influence, can justify rescission, and such instances are rare.

(5) A party represented by a registered Attorney-at-Law acts through that Attorney unless personal presence is mandated; absence of personal presence or non-signing does not invalidate a settlement where the Attorney acts with authority.

(6) The Defendant failed to establish any vitiating ground and had abused the process to delay ejectment.

(7) The Court of Appeal erred in law in setting aside the settlement.

 Disposition:

The Supreme Court set aside the judgment of the Court of Appeal;  Defendant directed to vacate the premises by the specified date, failing which a writ to issue for ejectment. 

Principles Reaffirmed:

 

Settlements recorded in open court with consent are final, binding, and contractual in nature.

Section 408 CPC is satisfied by substantive compliance; procedural formality of motion is not indispensable where terms are recorded in Court.

Cursus curiae est lex curiae established judicial practice informs procedural interpretation.

Restitutio in integrum is not available merely to escape a lawfully entered compromise absent legally recognized vitiating circumstances.

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