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Issues: Whether permission to withdraw the suit with liberty to institute a fresh suit could be granted under Order XXIII Rule 1(3) of the Code of Civil Procedure, 1908 at the second appellate stage without proper consideration of the statutory preconditions and the consequences of nullifying findings already recorded below.
Analysis: Order XXIII Rule 1(3) permits withdrawal with liberty to sue afresh only when the court is satisfied either that the suit must fail by reason of some formal defect or that there are sufficient grounds for allowing a fresh suit. The power is discretionary, but the discretion must be exercised cautiously and on a proper appraisal of all relevant factors. At the appellate or second appellate stage, the court must be especially careful because granting liberty may deprive the successful party of the benefit of findings already secured and may also permit a fresh round of litigation on the same subject-matter. The impugned order did not reflect due consideration of these requirements and proceeded on an erroneous assumption that no prejudice would be caused if the defendants were allowed interim protection until the fresh suit was decided.
Conclusion: The order granting withdrawal with liberty to file a fresh suit was unsustainable for non-application of mind to the conditions prescribed by Order XXIII Rule 1(3) of the Code of Civil Procedure, 1908.
Final Conclusion: The appeal succeeded, the High Court's permission to withdraw the suit with liberty to institute a fresh suit was set aside, and the second appeal was directed to be decided in accordance with law.
Ratio Decidendi: Permission to withdraw a suit with liberty to file a fresh suit can be granted only on satisfaction of the statutory grounds under Order XXIII Rule 1(3), and an appellate court must apply a strict and reasoned scrutiny before permitting withdrawal that would unsettle adjudication already obtained below.
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