Statutory reconstruction schemes cannot be treated as compromise adjustments under civil procedure rules.

A court-sanctioned scheme of reconstruction under the Companies Act operates with statutory force and is not merely an act of private agreement between parties. Because Order 23, Rule 3 of the Code of Civil Procedure applies only where a suit is adjusted by a lawful compromise or agreement, such a statutory scheme cannot be recorded as a compromise or adjustment of the suit. The application under Order 23, Rule 3 was therefore rightly refused, and the appeal failed.

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Issues: Whether a scheme of reconstruction sanctioned under Section 153 of the Companies Act, 1913 could be treated as an adjustment by lawful agreement or compromise so as to attract Order 23, Rule 3 of the Code of Civil Procedure, 1908.

Analysis: Order 23, Rule 3 applies only where a suit has been adjusted by a lawful agreement or compromise, that is, by an act of the parties. A scheme of arrangement sanctioned by the Court under Section 153 of the Companies Act operates with statutory force. Because such an arrangement derives its effect from statute and not merely from private agreement between the parties, it cannot be equated with a compromise or adjustment within the meaning of Order 23, Rule 3.

Conclusion: The application under Order 23, Rule 3 was rightly refused and the appeal failed.

Final Conclusion: A court-sanctioned scheme of reconstruction under the Companies Act cannot be recorded as a compromise or adjustment of the suit under Order 23, Rule 3 of the Code of Civil Procedure, 1908.

Ratio Decidendi: A scheme of arrangement sanctioned under the Companies Act has statutory operation and is not an adjustment by lawful agreement or compromise within Order 23, Rule 3 of the Code of Civil Procedure, 1908.

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