Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 6
CASE NO.:
Appeal (civil) 16814 of 1996
PETITIONER:
Rajasthan Financial Corporation
RESPONDENT:
M/s Man Industrial Corporation Ltd.
DATE OF JUDGMENT: 26/08/2003
BENCH:
S. N. VARIAVA & H. K. Sema.
JUDGMENT:
J U D G M E N T
S. N. Variava, J
This Appeal is against an order dated 13th September, 1996
passed by the High Court of Rajasthan.
Briefly stated the facts are as follows:
The Appellants had sanctioned a loan to the Respondents against
security of a mortgage. As the Respondents failed to repay the loan
the Appellants filed an application under Sections 31 (1) (a) and (c)
and 32 of the State Financial Corporation Act for recovery of a sum of
Rs. 10,89,265.88. Parties compromised the dispute and signed a deed
of compromise. The relevant terms of the compromise deed read as
follows:
"1. xxx xxx xxx
2. That the company hereby confirm the balance dues
of the Corporation (after deduction of Rs. 1,00,000/-
(Rupees one lakh only) received on 1.4.1976) as on
5.9.1977 at Rs. 12,08,806.83 ps. (Rupees Twelve lakhs
eight thousand eight hundred six and paisa eighty three
only) as per the statement of account enclosed herewith
and agree to pay the said dues as follows alongwith future
interest @ 5% above the bank rate prevailing from time to
time subject to a minimum of 13-1/2% per annum or at
such other rate of interest as may be decided by the
Corporation for similar advances from time to time, with
half yearly rests on product basis and expenses and cost of
litigation. The increased rate of interest shall apply from
the 1st January, 1977. (emphasis supplied)
xxx xxx xxx
7. That the company and the Corporation further
specifically agree that on non payment of consenting two
installments of the repayment of the loan for the loan or
interest or expenses hereinabove mentioned or on breach
of any of the terms and conditions of this compromise, the
Corporation shall have the right to receive the whole dues
in one lump-sum and to get the compromise decree
executed by sale of mortgaged and attached properties
and to ask the lessee to pay the rent directly to the
Corporation."
On 22nd September 1977 an Order came to be passed wherein it
was recorded that the parties had compromised and that they had
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 6
filed the compromise deed in Court. The Order then reproduces the
entire compromise deed. Clause 5 of the Order, which is relevant,
reads as under:
"5. Therefore, the application is allowed and the suit is
decreed in terms of compromise in favour of plaintiff-
corporation and against the defendant of Rs. 12,08,806
and 83 paise only. The defendant shall pay the interest on
this amount at the rate of 5% more than the current Bank
interest rate which all not be less than 13-1/2% and the
cost of the suit shall be paid by the defendant. The
increased rate of interest shall be effective w.e.f. 1.1.1978.
The above amount be paid in the installments as per the
terms of the compromise. The compromise shall form part
of the decree and the corporation shall be entitled to
realize the amount of compromise decree from the
property of the defendant which is mortgaged with the
corporation and the same has been attached." (emphasis
supplied)
Payments were not made, as contemplated by the compromise
deed. The Appellants thus initiated execution proceedings on 5th
February 1987. As has become common nowadays, the Respondents
filed an application under Section 22 of the Sick Industrial Companies
Act, 1985. They thus managed to effectively delay execution.
Unfortunately for the Respondents the Board directed winding up of
the Respondent company. The Respondents filed an appeal before
A.A.I.F.R. The Respondents submitted a rehabilitation scheme
wherein it was shown that a sum of Rs 62.72 lakhs was to be paid to
the Appellants. On 18th August, 1994 A.A.I.F.R. passed an order
directing that a sum of Rs 62.72 lakhs be paid to the Appellants so
that the properties could be released from mortgage. The Respondents
do not pay the amount. They now cannot also delay execution any
longer.
On 27th September, 1995 i.e. more than 9 years after the
execution proceedings were filed, the Respondents file an application,
under Section 151 of the Civil Procedure Code objecting to the
calculation of interest with half yearly rests. The executing Court
overruled the objections and directed execution. The Respondents file
a Revision Petition before the High Court. This has been allowed by the
impugned Judgment. The High Court has held that that the Appellants
are not entitled to charge interest on half yearly rests basis. Hence
this Appeal.
On behalf of the Appellants Mr Jain submitted that the decree
was in terms of the compromise deed. It was submitted that the
compromise deed, which had been signed by both the parties, clearly
provided that interests could be charged on half yearly rests basis. It
was submitted that under Order 23 Rule 3 Civil Procedure Code the
Court has to pass the decree in terms of the compromise. It was
submitted that the words "the defendant shall pay the interest on this
amount at the rate of 5% more than the current Bank interest rate
which are not be less than 13 1/2 %" do not alter the main provision
in the compromise deed whereunder interest is payable with half
yearly rests. It is submitted that through inadvertence the Court has
omitted to mention that interests is payable with half yearly rests. It
was submitted that the High Court has exceeded its jurisdiction under
Section 115, Civil Procedure Code, by revising/modifying the decree. It
was submitted that the High Court overlooked the fact that the decree
had been passed in pursuance of a compromise deed signed by the
parties.
As against this Mr Diwan, on behalf of the Respondents,
submitted that the High Court had correctly held that the decree did
not provide for interests on half yearly rests basis. Mr Diwan submitted
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 6
that, even though the Respondents signed the compromise deed, they
were not agreeable to payment of interest from 1st January, 1977 as
in the compromise deed the sum of Rs 12,08,806.83 was the figure
payable along with interest on 5th September, 1977. It was submitted
that the Respondent was also not willing to pay interest with half
yearly rests. It was submitted that the Respondent was also not willing
to pay expenses. It was pointed out that on 12th September, 1977
when the compromise deed was filed in Court time was taken for
arguments. It was submitted that on 21st September, 1977 the Court
heard arguments. It was submitted that the final Order was dictated
on 22nd September, 1977. It was pointed out that the Order dated 22nd
September, 1977 read as follows:
"Order dictated and pronounced. Amount
compromised at Rs. 12,08,806.83 be decreed in favour of
the applicant and against the Defendant. Compromise be
attached to decree. Installments be paid as mentioned in
the compromise Order issued on the matter of interest
also. Decree be prepared as per Order passed today.
Compromise be attached to the Decree" (emphasis
supplied)
It was submitted that after hearing arguments the Court whilst
passing the decree in terms of the compromise modified the
compromise deed in three aspects viz (a) the increased rate of interest
was to be payable with effect from 1st January, 1978 instead of 1st
January, 1977 (b) the Court did not allow charging of interest on half
yearly rests basis (c) expenses were not permitted. It was submitted
that the final decree which had been drawn up contained the above-
mentioned three differences. It was also submitted, rather faintly, that
the Appellants themselves understood that in the final decree interest
had not been granted on half yearly basis. The application for
execution of decree was shown to Court. It was submitted that
paragraph 7 clearly indicates that the Appellants themselves
understood that they had not been granted interest with half yearly
rests. Paragraph 7, which has been relied upon reads as under:
"7. Amount with interest due On the decreetal amount of
upon the decree or other Rs. 12,08,806/- the rate of
relief granted thereby interest will be @ 5% more
together with particulars than the prevalent bank rate
or any cross decree and not less than 13-1/2%
from 1.1.77 to 2.2.87 =
Rs. 46,59,920.83. Cost
of litigation Rs. 12.50/- cost of
execution Rs. 10/-."
At this stage itself it must be mentioned that along with the application
for execution a statement showing interest due has also been
annexed. The statement clearly indicates that interests has been
calculated on half yearly basis. There is thus no substance in the
submission that paragraph 7 indicates that the Appellants themselves
understood that interest on half yearly basis was not granted under
the decree.
It was submitted that if the Court were to hold that the decree
was in terms of the compromise deed then the decree would be
uncertain and incapable of being executed as it would be unclear
whether the future interest was to be at the rate of 5% above the
prevailing bank rate subject to a minimum of 13 1/2% per annum or
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 6
whether the future interest was to be at such other rate of interest as
may be decided by the Corporation for similar advances from time to
time. It was submitted that it would be unclear and uncertain as to
what was meant by the words "with half yearly rests on product
basis". It was submitted that it would be unclear whether the half
yearly rests on product basis was to be only applied if the rate of
interest was to be decided by the Corporation and not if the rate of
interests was to be 5% above the prevailing bank rate subject to a
minimum of 13 1/2 %. It was submitted that the final decree which
had been passed removed these uncertainties by providing for simple
interest at the rate of 5% above the prevailing bank rate subject to a
minimum of 13 1/2%.
It was submitted that the decree being clear the executing Court
could not go behind the decree. It was submitted that the executing
Court erred in rejecting the objections raised by the Respondents. It
was submitted that the Respondents could have led evidence to show
that it was pursuant to the arguments made before the decree was
passed that the trial Court made the aforementioned three changes
whilst passing the decree.
Reliance was placed on the case of Vasudev Dhanjibhai Modi v.
Rajabhai Abdul Rehman reported in 1970 (1) SCC 670. In this case it
had been held that the executing Court cannot go beyond the decree.
It has been held that the executing Court must take the decree
according to its tenor. It was held that the executing Court cannot
entertain any objection that the decree was incorrect in law or in fact.
It was held that the decree, even if erroneous, is binding between the
parties.
Reliance is also placed on the case of Greater Cochin
Development Authority v. Leelamma Valson reported in 2002 (2) SCC
573. In this case a decree was passed in terms of the award given by
the arbitrators. The decree provided for interest only up to the date of
the decree. Thereafter an application, under Section 114 Civil
Procedure Code, was made for modification of the decree on the
ground that "by an accidental slip, omission or oversight" future
interest from the date of the decree to payment had not been provided
for. This application was rejected. It was held that there was no
omission or slip. It was held that the Court had not granted any future
interest. No appeal was filed against this order. In the execution
proceedings future interest was also claimed. The executing Court
refused future interest but the High Court, in Appeal, construed the
decree and held that the decree was in terms of the award and the
arbitrators had granted interest till payment. The High Court held that
therefore future interest was payable and allowed execution even for
future interest. This Court held that the reasoning of the High Court
would normally have been faultless. In other words this Court held
that when a decree is in terms of award (or some other document like
a compromise deed) the terms of that award/document have to be
looked that to see what is provided in the decree. However on facts of
that case this Court held that in the earlier application, under Section
114 Civil Procedure Code, it had already been held that the Court had
refused future interest. This Court held that once future interest had
been refused and no appeal had been filed against that Order,
subsequently future interest could not have been granted.
Reliance was also placed on the case of Bhawarlal Bhandari v.
Universal Heavy Mechanical Lifting Enterprises reported in 1999 (1)
SCC 558. In this case the judgment debtor challenged the decree,
when it was before the executing Court, on the ground that the award
on which the decree was based was a nullity. It was submitted that the
award had been filed in Court by the arbitrator 4 years after it was
passed. This Court held that the executing Court could not go beyond
the decree. It was held that the executing Court had to take the
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 6
decree according to its tenor and that the executing Court could not
entertain any objection that the decree was incorrect in law or on
facts.
Reliance was next placed on the case of Rameshwar Dass Gupta
v. State of U.P. reported in 1996 (5) SCC 728. In this case it was held
that the executing Court cannot travel beyond the decree. It was held
that the executing Court only got jurisdiction to execute the decree. It
was held that the executing Court could not granted interest, on the
money decree, when interest was not granted in the decree.
Reliance was next placed on the case of C.V. Rajendran v. N. M.
Muhammed Kunhi reported in 2002 (7) SCC 447 wherein it has been
held that principles of res judicata applied even to different stages of
the same proceeding. It has been held that if an issue has been
decided at an earlier stage it cannot be allowed to be re-agitated at a
subsequent stage.
Based on the above authorities Mr Divan submitted that the
decree being clear the executing Court could not go beyond the decree
on the basis that there was a mistake in the decree. He submitted that
the decree had been passed after hearing arguments on behalf of both
the parties on what the final decree should be as per the compromise
deed. He submitted that even on principles of res judicata the
Appellants are precluded from now contending that they were entitled
to interest on half yearly basis.
Finally Mr Divan made a With Prejudice Offer. He stated that the
Respondents are willing to pay to the Appellants a sum of Rs 75 lakhs
in full and final settlement of all the claims of the Appellants.
We have considered the rival submissions. There can be no
dispute to the proposition that the executing Court cannot go beyond
the decree. There can be no dispute that the executing Court must
take the decree according to its tenor. Also as has been set out in the
Greater Cochin Development Authority’s case (supra) when a decree is
in terms of an award/document then the terms of that document have
to be looked at. In this case the decree is in terms of the compromise
deed. The decree does not provide that the compromise deed or any of
its terms have been varied. To be remembered that the decree is
passed under Order 23 Rule 3 Civil Procedure Code. Under this
provision normally the Court passes the decree in terms of the
compromise. Of course the Court can make a change. However if the
Court was making a change it would have had to record why it was
making the change and what change it was making. It could not then
provide that the decree was in terms of the compromise. If the Court
was not passing the decree in terms of the compromise then this
opening portion of the decree could not have been there. The
subsequent portion is mere classificatory in nature as to which of the
options was to be exercised. This does not govern or detract from the
main terms of the decree which is a decree in terms of the
compromise. Clauses 2 and 7 of the compromise deed make it very
clear that the Appellants were entitled to charge interest on half yearly
basis. We see no substance in the submission that the "half yearly
rests" was to apply only if the rate of interest was to be decided by the
Appellants. These words clearly applied to both the options. In the
classificatory portion the words "on half yearly basis" have not been
mentioned because the portion is only clarifying how interest was to be
calculated. This portion thus does not detract from the fact that the
decree is in terms of the compromise deed. Merely because some
other minor changes, which appear to be inadvertent changes, have
crept in do not also detract from the fact that the decree is in terms of
the compromise deed. We also do not find any uncertainty in the
decree.
In this view of the matter we are unable to sustain the impugned
Judgment. It is accordingly set-aside and the Order of the executing
Court is restored.
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 6
The Appeal is allowed accordingly. There will be no order is to
cost.