Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 5087-5088 OF 2009
[Arising out of S.L.P.(C)Nos.24593-24594 of 2008]
Narinder Kumar Malik ....Appellant
Versus
Surinder Kumar Malik ....
Respondent
J U D G M E N T
Deepak Verma, J.
1. Leave granted.
2. Parties to the litigation are real brothers having spent
their childhood with cheer and joy in the courtyard, are here,
now fighting tooth and nail for their respective shares in a
piece of plot admeasuring 3149.75 sq. yds. allotted to the
partnership firm, viz., M/s. Narinder Kumar Malik & Surinder
Kumar Malik at D-2, Udyog Nagar, Rohtak Road, New Delhi.
3. Even though the partnership business could never commence
but the plot in question continued to be owned by both of them
as partners of the firm to the extent of 50% each. On account
of differences having arisen between the parties, the present
appellant – Narinder Kumar Malik was constrained to file a suit
bearing No.779 of 1997 before the High Court of Delhi, later
transferred to the Court of Additional District Judge, Tis
Hazari, Delhi and was numbered as 289 of 2004, claiming 1/2
share in the aforesaid piece of land allotted to the
partnership firm.
4. The respondent filed a written statement and took an
objection that the property was owned by a partnership firm and
thus the suit for partition was not maintainable and rather a
suit for dissolution of partnership firm ought to have been
filed.
5. During the pendency of the proceedings of the suit, the
defendant (respondent herein) filed an application under O.VII
R.11 of the Code of Civil Procedure (for short, 'CPC') for
dismissing the suit on the ground that it did not disclose any
cause of action as the property was owned by a partnership
firm, whereas the appellant herein filed an application under
O.XII R.6, CPC praying therein that on account of admission
having been made by the respondent, judgment and decree on the
said admission be passed.
6. Both the applications came to be considered by the
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learned trial Judge on 04 November 2004. By the said order,
the application filed by the respondent under O.VII R.11, CPC
came to be dismissed. However, the application filed by the
appellant herein under O.XII R.6, CPC came to be allowed and a
preliminary decree of partition was passed in thefollowing
terms:-
“12. In view of my above discussion, the
application of the defendant under order 7 rule 11
CPC is hereby dismissed and application under order
12 rule 6 CPC is hereby allowed. A preliminary
decree of partition is passed with the direction to
the parties to decide the means of partitioning the
plot in question and in case they failed to
partition the plot by themselves, a Local
Commissioner may be appointed by the court for
suggesting the means.
13. The case is now adjourned for 8.12.2004 for
further proceedings.”
7. Feeling aggrieved and dissatisfied with the said order
respondent herein, viz., Surinder Kumar Malik was constrained
to file appeal in the High Court of Delhi at New Delhi
registered as R.F.A. No.649 of 2004 reiterating the grounds
taken in the written statement and in the application filed by
him under O.VII Rule 11 of CPC.
8. It appears, during the pendency of the said appeal in the
High Court, good sense prevailed upon the two brothers and they
arrived at a settlement and pursuant thereto “Memorandum of
Understanding” (hereinafter referred to as 'MOU') came to be
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executed between themselves on 09 February 2005 at Delhi.
9. It is pertinent to mention here that this MOU was arrived
at also on account of the strong belief of the Division Bench
of the High Court that the parties being real brothers should
settle the matter among themselves through mediation.
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Accordingly, on 17 December 2004 an order was passed, with the
consent of the parties, that both the brothers would appear
before Mr. M.L. Mehta, Addl. District Judge, Delhi who was
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requested to be a mediator. On 17 March 2005 it was noted by
the High Court that parties have entered into a settlement as
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MOU was already entered into between the parties on 09
February 2005. However, despite settling the matter outside the
Court on their own terms and conditions, it appears that the
dispute between them did not come to an end.
10. Some of the relevant and salient terms and conditions of
the MOU are reproduced hereinbelow :
“i) that Party No.1 has agreed to sell his share
i.e. 50% area of the said Industrial plot to party
No.2 at the settled and agreed consideration of
Rupees three crores fifty lacs only and party No.2
has agreed to purchase the said share at the said
consideration.
ii) that the second party has paid a sum of
Rs.10,00,000.00 (Rupees ten lacs) in cash and
Rs.15,00,000.00 vide Payee's A/c Cheque No.131112
dated 05.02.2005 drawn on UCO Bank, Punjabi Bagh in
favour of the first party as a token money and the
first party has accepted the same.
iii) that as agreed the second party shall make the
balance payment of Rs.3.25 crores within a maximum
period of 150 days from the date of execution of
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this MOU i.e. upto or before 9 day of July, 2005.
However, this period of 150 days is extendable by
another 10 to 20 days, if need be, with the consent
of both the parties but not more.
iv) that on receiving the full consideration of
Rupees three crores, fifty lacs the first party
shall execute the necessary documents like GPA,
Release Deed, Sale Deed etc., as advised in favour
of the second party or his nominee and hand over
the physical, peaceful and vacant possession of his
share to the second party or his nominee as the
case may be.
v) that the First Party i.e. Shri Narinder Kumar
Malik is presently out of India, but his
counsel/advocate Shri J.R. Bajaj along with Shri
Rohit Malik son of the first party and Shri Ashok
Kumar Marwaha, Advocate, have been authorized to
sign this MOU for and on his behalf.
vi) that both the parties shall be jointly
responsible for payment of ground rent/lease money
and all other statutory taxes etc., in respect of
the Industrial Plot upto the date of execution of
this MOU, but thereafter only party No.2 and/or his
nominee shall be liable to pay the same.
vii) that all the expenses like stamp duty,
registration charges etc., for the registration of
necessary documents shall be borne by party No.2 or
his nominee in whose favour the documents of
ownership are to be executed.”
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11. On 12 May 2005 despite having arrived at a settlement,
High Court directed them to approach the learned mediator for
resolving their points of differences, if any, but, instead of
resolving the same, their differences continued to rise. 12.
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A registered notice dated 22 June 2005 was sent to the
appellant by respondent's advocate Mr. Harish Malhotra
mentioning therein that his client, viz., the respondent herein
is ready with the balance payment as mentioned in the said MOU
and despite approaching the appellant, he has not been
honouring the same. Appellant replied to the said notice
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through his advocate Shri Anuj Sehgal on 30 June 2005 denying
the averments made in the notice and calling upon the
respondent to pay the balance sum of Rs.3.25 crores to him on
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07 July 2005 at 10.00 a.m. at 885, East Park Road, Karol Bagh,
New Delhi. On payment of the aforesaid amount, it was
categorically mentioned by the appellant that necessary
transfer documents for transfer of his share of the property in
the name of the respondent or his nominee would be executed.
13. It was further mentioned in the said reply to the notice
that in case there is any default committed by the respondent
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to pay the balance amount on the said date or latest by 09
July 2005 as contemplated in the MOU then in that eventuality
MOU would stand cancelled and the appellant would no longer be
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bound by the said MOU dated 09 July 2005.
14. It appears from the record that despite giving a fixed
time to the respondent for compliance of the terms and
conditions of the MOU, respondent did not honour the commitment
and instead continued to send notices through his advocate,
which were replied to by the appellant.
15. During all this period, the appeal filed by the
respondent in the High Court remained pending and it came up
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for hearing before the Division Bench on 19 July 2005. On the
said date, learned counsel appearing for the parties informed
that negotiations have failed as both of them were making
allegations against each other. On the said date, it was
further informed that respondent is still ready and willing to
pay the balance sum of Rs.3.25 crores in terms of the MOU, but,
counsel for the appellant said that since no payment was
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received by the last date, i.e. 09 July 2005 as mentioned in
the MOU, the time cannot be extended. In the said order, it
was further directed that the amount of Rs.25 lac, which was
received by the appellant during the pendency of the appeal, be
returned to the respondent within a week.
16. In spite of the aforesaid order, the respondent filed an
application being C.M. No.12796 of 2005 before the High Court
seeking a direction to the appellant to execute necessary
transfer documents in terms of the MOU.
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17. On 04 April 2006, a statement was made by the parties
that no settlement is possible between them and the appeal was
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directed to be listed for hearing on 14 July 2006.
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18. However, on 11 October 2006, yet another statement was
made by the learned counsel appearing for the parties that they
are making another attempt to find an amicable solution and
thus prayed for time. Consequently, appeal kept on being
adjourned from time to time. But it came up for hearing again
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on 18 July 2007. On the said date, the Division Bench passed
an order, the relevant portion whereof is reproduced
hereinbelow :
“....
While counsel for the appellant claims that
the appellant was ready and willing to implement
the settlement and had raised the funds therefore,
counsel for the respondent disputes the same.
Counsel for both the parties are conscious of the
fact that as a result of passage of time, there
have been change in the values of the assets etc.
Both of them, however, are desirous of making yet
another attempt of an amicable settlement, since
appellant and the respondent happen to be the
brothers.
In these circumstances, we consider it
appropriate to refer the matter to Delhi High Court
Mediation & Conciliation Center for mediation.
Mr. A.S. Chandhiok, Sr. Advocate is appointed
as the mediator along with Ms. Swati Singh as the
co-mediator. Both the parties will deposit
Rs.2500/- each with Delhi High Court Mediation &
Conciliation Center and shall appear before it on
23.7.2007 at 4.30 P.M.
List this matter before the court on
21.8.2007.”
19. The aforesaid order would show that parties were once
again given an opportunity to iron out the differences between
them. But despite the best efforts made by the learned Judges
of the High Court, the Mediator and the senior advocate
appointed in this behalf they were not able to convince the
parties that it is a fit case where an amicable settlement must
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be arrived at. Thus, on 24 January 2008 a statement was made
that mediation talks have failed. The matter, then came up for
hearing again before another Division Bench of the High Court
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on 24 July 2008, but learned counsel appearing for the parties
thought that there is still light at the end of the tunnel and
prayed for two weeks' time for arriving at a lasting settlement
between the parties. Since nothing worked on that, the matter
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was finally taken up by the High Court on 08 September 2008
and appeal of the respondent was allowed in terms of the
directions contained in para 39 of the impugned judgment which
are reproduced hereinbelow :
“We thus dispose of the application and along
therewith the appeal by passing the following
directions :-
A) The appellant shall deposit Rs.3.5 crores with
the learned Trial Judge within a period of 2 weeks
from today. (The appellant is being directed to
deposit Rs.3.5 crores because the appellant has
received back Rs.25 lacs pursuant to interim orders
passed in the appeal).
B) Along with the deposit, the appellant shall file
a draft of the document which the appellant desires
to be execute by the respondent to convey
respondent's 50% share in the subject property.
C) The learned Trial Judge would thereupon finalize
the document to be executed and the respondent
would thereafter execute the document drawn up and
on execution of the same would be entitled to
receive Rs.3.5 crores from the learned Trial
Judge.”
20. Appellant, feeling aggrieved and dissatisfied with the
aforesaid direction contained herein, has preferred this
appeal.
21. Ms. Indu Malhotra, learned senior counsel appearing on
behalf of the appellant contended that in the MOU a specific
date was fixed for payment of balance consideration by or
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before 09 July 2005 and respondent having failed to honour his
commitment by the said date and time being the essence of the
contract, MOU could not have been directed to be implemented by
the High Court.
22. It was also contended that it being a contingent contract
dependent on execution of the terms and conditions mentioned in
the M.O.U. and respondent having failed to honour his own
commitment, the same cannot be given effect to.
23. Mr. Raju Ramchandran, learned senior counsel appearing
for the respondent contended that at all material times, the
respondent had been ready and willing to perform his part of
the contract but for some reason or the other and also keeping
in mind that the price of the disputed plot has substantially
shot up, the appellant is making excuses not to comply with the
direction as contained in the said order.
24. It was also contended by him that the appellant would be
required to pay unearned increase of the plot to the Delhi
Development Authority and, therefore, he has taken somersault
from complying with the directions.
25. In the light of the aforesaid contentions, we have heard
learned counsel for the parties and perused the record.
26. It is pertinent to mention here that the amount was deposited
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by the respondent only on 04 October 2008 whereas in the
impugned order passed by the High Court two weeks' time was
granted to him to deposit the sum of Rs.3.5 crores. From the
aforesaid date it would be clear that the amount, as directed
to be deposited by the impugned order, was not deposited by
the respondent within the stipulated time. Instead, the same
was done much after the last/stipulated date.
27.
To ascertain if the time was the essence of the contract, we
have to go through Condition No.(iii) of the MOU which
categorically mentions that the second party, viz., the
respondent herein shall make the payment of the balance
amount of Rs.3.25 crores within a maximum period of 150 days
from the date of execution of the MOU, i.e., upto or before
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09 July 2005. However, this period of 150 days was
extendable by another 10 to 20 days, if need be with the
consent of both the parties but not more.
28. High Court certainly fell into error in construing the
said provision in right perspective and erred in coming to the
conclusion that since time was extendable, the time could not
have been made the essence of the contract.
29. A bare perusal of the aforesaid provision makes it clear
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that ultimately the time was fixed only upto 09 July 2005.
However, with an intention to give further leverage to the
respondent herein, the time was made extendable by 10 to 20
days and not more and that too only with the consent of the
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parties. Even if it is said that 09 July 2005 could not have
been the last date, at least after 20 days the said last date
expired. Admittedly, the respondent has not honoured his
commitment, within the extendable period given to him, even
though he had no right to claim the benefit as of right for the
extendable period.
30. The respondent sent the photocopies of three pay orders
two of which were for a sum of Rs.1 crore each and the third
one for a sum of Rs.1.25 crore. It was neither here nor there
as the originals were never tendered to the appellant and only
photocopies were sent to make a semblance that respondent has
been ready and willing to perform his part of the contract.
When MOU had already been arrived at between the parties then
mere show of readiness and willingness would not discharge the
obligation resting on one of the parties unless it is shown to
be real and genuine.
31. From the conduct, behaviour and attitude of the
respondent it is clearly made out that he had not been ready
and willing to perform his part of the contract as mentioned in
the MOU.
32. Ms. Indu Malhotra, learned senior counsel for the
appellant has placed reliance on a judgment of this Court in
the case of Star Construction and Transport Co. & Ors. v. India
Cements Ltd. (2001) 3 SCC 351 and laid emphasis on paragraph 7
thereof which reads thus :
“7. In this case, applications are filed under
Order 23 Rule 3 CPC. This Rule is a provision for
making a decree on any lawful agreement or
compromise between the parties during the pendency
of the suit by which claim is satisfied or
adjusted. The agreement, compromise or
satisfaction may relate to the whole of the suit or
part of the suit or it may also include matters
beyond the subject-matter of the suit. But Rule 3
clearly envisages a decree being passed in respect
of part of subject-matter on a compromise. Whether
in fact there has been compromise or adjustment of
the suit claim or any part thereof is itself put in
dispute in this case. Unless it is clearly
established that such accord or compromise has
been entered into between the parties, the powers
under Order 23 Rule 3 CPC could not be exercised.
The respondent's case is that the claim made in the
suit were never before the arbitrators in any form
and even the figures mentioned in the
reconciliation statement also do not pertain to the
suit claim and the scope of reference to the
arbitrators does not enable them to make an award
on that aspect of the matter. Those objections
have to be dealt with appropriately on full trial.
That is the course now adopted by the Division
Bench of the High Court.”
33. She has further placed reliance on yet another judgment
of this Court in the case of United Bank of India v. Ramdas
Mahadeo Prashad & Ors. (2004) 1 SCC 252 particularly paragraphs
7 and 9 thereof which are reproduced hereinbelow :
“7. Undisputedly, the respondents did not withdraw
the suit filed by them against United Bank of
India, which is the condition precedent stipulated
in clause (1) of the MOU. The respondents also did
not pay the guarantee liability of Rs 2.33 lakhs.
No compromise petition was filed before an
appropriate court. Therefore, by no stretch of
imagination can it be said that the terms and
conditions stipulated in the MOU had been complied
with and acted upon by the parties. Apart from what
has been said, subsequent to the MOU there was also
a lot of correspondence between the parties by
exchanging letters giving offers and counter-
offers, as would be revealed in the letters dated
16-6-1994, 23-12-1994, 12-6-1995, 15-6-1995 and 19-
6-1995. All these correspondences would go to show
that the parties failed to arrive at a consensus
even on what were the terms of the MOU. Thus, it is
clear that there was no concluded contract nor was
there any novation.
9. Mr Ranjit Kumar, learned Senior Advocate
contended that in view of the MOU signed by the
parties the original contract stood substituted by
the MOU and it is a fit case where Section 62 of
the Indian Contract Act can be invoked. We have
already said that there was no concluded settlement
or novation. Even otherwise, there has been non-
compliance with the terms and conditions of the MOU
by the respondents and a party in breach can hardly
seek to enforce a contract. Therefore, the MOU does
not amount to novation of contract as envisaged
under Section 62 of the Indian Contract Act. The
contention of Mr. Ranjit Kumar is, therefore,
legally untenable.”
34.However, even without referring to the aforesaid judgments,
from the facts as have been mentioned hereinabove, it is as
clear as day light that respondent has committed default of
the terms and conditions of the MOU and had neither been
ready and willing nor has been so throughout the relevant
period. Thus, MOU entered into between the parties cannot be
given effect to. We accordingly hold so.
35. Thus, judgment and decree passed by the impugned order
are hereby set aside and quashed, but, with no order as to
costs.
36.The appeals are allowed accordingly.
.........................J.
[S.B. SINHA]
.........................J.
[DEEPAK VERMA]
New Delhi.
August 04, 2009.