Full Judgment Text
1
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
NAGPUR BENCH
WRIT PETITION NO. 485 OF 2006
AND
WRIT PETITION NO. 486 OF 2006
WRIT PETITION NO. 485 OF 2006
1. Smt. Jamotibai Satyanarayan Bajaj,
aged about 71 years,
occupation – Household.
2. Smt. Kirandevi Omprakash Bajaj,
aged about 46 years,
occupation – Household.
3. Shriram Omprakash Bajaj,
aged about 25 years,
occupation – Business.
4. Yogesh Omprakash Bajaj,
aged about 23 years,
occupation – Student.
5. Kum. Seema Omprakash Bajaj,
aged about 19 years,
occupation – Student.
All residents of Main Road,
PETITIONERS
Yavatmal, Tq. & District – Yavatmal. ...
Versus
1. Abdul Razzak s/o Usman,
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2
aged about 59 years,
occupation – Business.
2. Ahmad Usman,
aged about 55 years,
occupation – Business.
3. Harun Usman,
aged about 52 years,
occupation – Business.
All residents of Arni, Tq. Arni,
District – Yavatmal. ... RESPONDENTS
WRIT PETITION NO. 486 OF 2006
1. Smt. Jamotibai Satyanarayan Bajaj,
aged about 71 years,
occupation – Household.
2. Smt. Kirandevi Omprakash Bajaj,
aged about 46 years,
occupation – Household.
3. Shriram Omprakash Bajaj,
aged about 25 years,
occupation – Business.
4. Yogesh Omprakash Bajaj,
aged about 23 years,
occupation – Student.
5. Kum. Seema Omprakash Bajaj,
aged about 19 years,
occupation – Student.
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3
All residents of Main Road,
Yavatmal, Tq. & District – Yavatmal. ... PETITIONERS
Versus
1. Abdul Razzak s/o Usman,
aged about 59 years,
occupation – Business.
2. Ahmad Usman,
aged about 55 years,
occupation – Business.
3. Harun Usman,
aged about 52 years,
occupation – Business.
All residents of Arni, Tq. Arni,
District – Yavatmal. ... RESPONDENTS
Shri J.T. Gilda, Advocate for the petitioners.
Shri S.U. Nemade, Advocate for the respondents.
.....
CORAM : B.P. DHARMADHIKARI, J.
DATE OF RESERVING THE JUDGMENT : SEPTEMBER 28, 2006.
DATE OF PRONOUNCING THE JUDGMENT: OCTOBER 13, 2006.
JUDGMENT :
Heard Shri Gilda, learned counsel for the petitioners and
Shri Nemade, learned counsel for the respondents finally by
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4
consent.
2. The petitions are filed by the decree holders challenging
the common order dated 28.4.2005 passed below Exh. 23 in
Special Execution Case No. 175 of 2004 and Exh. 16 in Special
Execution Case No. 176 of 2004. The Executing Court has by said
order accepted the contention of respondents/ judgment debtors
that after effecting balance payment of Rs.1,800/- each towards
above mentioned execution cases, the decrees obtained against
them would be satisfied if balance amount of Rs.900/- and Rs.
1,800/- were paid to decree holders.
3. It appears that the respondents moved these applications
at Exh. 23 and 16 before the lower Court for recording satisfaction
of decrees passed against them in Special Civil Suit Nos. 125 of
1995 and 124 of 1995. The Suits were amicably settled before Lok
Adalat. In one suit giving rise to Special Execution No. 175 of
2004, claim of present petitioners was Rs.1,17,398.95 ps. and it
has been settled by accepting amount of Rs.37,800/-. In other suit
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which forms subject matter of Special Execution Case No. 174 of
2004, total claim of petitioners was Rs.1,30,692.76 ps. and it was
compromised by accepting amount of Rs.37,800/-. The
respondents accordingly wanted to complete payment of Rs.
37,800/- only in both the matters. They paid substantial amount
and wanted balance amount to be certified. The payment made
has been acknowledged and accepted by the petitioners.
However, there was one default clause in Compromise Decree
which envisaged that if judgment debtor made default in payment
of any three installments within time, decree holder would be
entitled to recover entire amount of Rs.1,17,398.95 ps. or Rs.
1,30,692.76 ps. The judgment debtors contended that this was
penal clause and according to them they had completed the
payment as per clause (1) of Compromise Decree and hence
decrees stood satisfied. The decree holders, on the other hand,
contended that amount of Rs.37,800/- each was to be paid by
monthly installments of Rs.900/- within due time and judgment
debtors made default in payment of three installments within time
and therefore, the entire amount as mentioned above became due
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and payable. The trial Court heard respective parties on the
grievance made and found that the condition incorporated by
default clause was a penal condition and therefore not
enforceable. It found that in Special Execution Case No. 176 of
2004, only amount of Rs.900/- was to be recovered by decree
holders while in other execution amount of Rs.1,800/- was due to
the decree holders. Thus, in effect the lower court held that
decree holders were entitled to recover total amount of Rs.
37,800/- each in both the executions.
4. Shri Gilda, learned counsel appearing for the petitioners
has contended that the lower Court has erroneously placed
reliance upon the judgment of the Hon'ble Apex Court in the case
of Prithvichand Ramchand Sablok v. S.Y. Shinde, reported at AIR
1993 SC 1929. He contends that the law as laid down by the
Hon'ble Apex Court has not been properly understood and
appreciated by the trial Court and hence there is failure on its part
to exercise jurisdiction available to it. He contends that the
compromise clearly mentioned that concession was given to
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judgment debtors to pay amount of Rs.37,800/- within specified
time and if the amount was not paid accordingly, the entire
amount as claimed was liable to be recovered. He has placed
reliance upon the judgments of Hon'ble Apex Court in the case of
Sova Ray v. Gostha Gopal Dey, reported at AIR 1988 SC 981, K.P.
Subbarama Sastri v. K.S. Raghavan, reported at AIR 1987 SC 1257,
in State of Goa vs. Placido Braganza, reported at 2002 (1) Mh.L.J.
370, in Rabindra Narain v. Nirmala, reported at AIR 1978 Pat. 162,
N. Kullayyappa v. N. Dastagiri, reported at AIR 1982 A.P. 154, Sri
Ram v. State Bank of Bikaner , reported at AIR 1972 All. 456, B.
Kishanprasad v. Kunj Bihari Lal, reported at AIR 1926 All. 278.
5. Shri Nemade, learned counsel, who appears for the
respondents in both the matters has placed reliance upon the
judgment of the Hon'ble Apex Court in Prithvichand Ramchand
Sablok v. S.Y. Shinde, reported at AIR 1993 SC 1929, to assert that
the said judgment clinches the issue. In addition, he has placed
reliance upon the judgment of Rajasthan High Court in the case of
Naresh Kumar v. Jan Mohd., reported at 1999 (2) Civil L.J. 446,
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8
judgment of Madhya Pradesh High Court in the case of Nonjibhai v.
Ramkishan, reported at AIR 1977 M.P. 112, judgments of the
Hon'ble Apex Court in the case of K.P. Subbarama Sastri v. K.S.
Raghavan, reported at AIR 1987 SC 1257, Fateh Chand v.
Balkishan Dass, reported at AIR 1963 SC 1405. He contends that
the respondents never agreed to the suit amount as due and
payable by them and hence it cannot be recovered under the
guise of invoking default clause. He argues that the said clause
has rightly been held to be penal clause by the lower Court.
6. It is to be noticed that the Court below has relied upon the
judgment of the Hon'ble Apex Court in Prithvichand Ramchand
Sablok v. S.Y. Shinde (supra) and there it was cited by Decree
holders. The perusal of said judgment reveals that while
considering the controversy before it, in order to explain the
circumstances in which a clause in contract can be described as
penal in character, the Hon'ble Apex Court has taken two
illustrations. The said portion is reproduced below for ready
reference :
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9
“It is necessary to understand when a clause
in the contract can be described as penal in character.
Let us illustrate by taking two concrete situations. A
plaintiff files a suit to recover Rs.20,000/- with interest
and costs from the defendant. They enter into a
compromise, the terms whereof are as under :
Situation 1 :
The defendant shall pay to the plaintiff a sum
st
of Rs.15,000/- and costs on or before 31 December,
1993. If, however, he fails to pay the said amount of
Rs.15,000/- with costs within the time stipulated, the
plaintiff will be at liberty to recover the entire sum of
Rs.20,000/- with interest and costs from the defendant
by executing the decree.
The latter clause of such a decree will clearly
be in terrorem and, therefore, penal in character. No
Court will execute the same.
Situation 2 :
The decree provides that the defendant shall
pay Rs.20,000/- with interest and costs to the plaintiff.
However, if the defendant pays Rs.15,000/- and costs
st
on or before 31 December, 1993 to the plaintiff, the
plaintiff will treat the decree as fully satisfied and will
not claim the balance amount from the defendant.
In such a case the latter clause operates as a
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10
concession and the plaintiff waives his right to the
balance amount. Such a decree will be executable to
the full extent if the defendant fails to avail of the
concession by paying Rs.15,000/- and costs on or
st
before 31 December, 1993.
From the above two illustrations it should
become clear that if the defendant is required to suffer
the consequence for his failure to abide by the terms by
a stipulated date such a consequence would be penal in
nature but on the other hand if the defendant gets
some benefit by complying with the requirement by the
stipulated date such a clause granting benefit can
never be treated as penal in character.”
7. The Hon'ble Apex Court has applied said test to the facts
before it and found that the defendant – tenant was given grace
period to comply with the decree failing which the landlord was
given right to put the decree to execution and obtain possession of
the premises and recover the arrears of rent. It held that by
clause 3 of the consent terms before it, the tenant was given
th
concession that if he paid entire rent etc. before 10 October
1970, the landlord would not recover the possession. The said
stipulation was clearly made to secure arrears of rent and landlord
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11
agreed not to insist for possession if all arrears were cleared. It
found that, therefore, the defendant tenant was getting the benefit
by complying with said requirement and clause could not have
been assailed as penal clause. The judgment in the case K.P.
Subbarama Sastri v. K.S. Raghavan (supra) is relied upon by both
the learned counsel. The Hon'ble Apex Court there has applied
the test of finding out whether the amount sought to be recovered
after default were due on the date on which the compromise was
entered into or were becoming payable only on account of such
default. The Hon'ble Apex Court has found that if on proper
construction of a contract real agreement between parties was
found to be that the entire amount was on the date of agreement
a debt due but the creditor for the convenience of the debtor
allowed it to be paid by installments intimating that if default
would be made in payment of any installment, he would withdraw
the concession, then the stipulation as to the whole amount of the
balance becoming payable would not be penal. If, on the other
hand, the Court finds that the debts itself arises or becomes due
and payable only on respective dates fixed for the installments,
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the stipulation that default being made in payment of any
installment, the whole of balance should become due and payable
would be in the nature of penalty.
8. In Sova Ray v. Gostha Gopal Dey (supra), the Hon'ble
Apex Court has considered the situation in which plaintiff had in
rd
trial Court obtained the decree for partition for 1/3 share in his
favour. At appellate stage defendant wanted to acquire ½ of the
share of plaintiff on payment of consideration. The plaintiff agreed
to it and sum of Rs.40,000/- was fixed as price. The appeal
accordingly was disposed of by compromise and in said
rd
compromise, the plaintiffs claim of 1/3 share was accepted as
th
correct. It was further agreed that ½ of plaintiffs share i.e. 1/6
share would go to one of the defendants provided he paid a sum of
Rs.40,000/- to the plaintiffs by a particular date. It also provided
that failing payment within time, the decree passed by the trial
Court would stand confirmed. The defendant was to pay Rs.
40,000/- in two installments. He paid Rs.10,000/- within time but
remaining amount was not paid. In view of the default in payment
of second installment, the plaintiffs deposited back the amount of
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Rs.10,000/- received by them and thereafter defendant made
application before the High Court for extension of period of second
installment. The defendant contended that default clause in the
agreement was illegal being penal in nature. The Hon'ble Apex
Court held that a particular benefit was bestowed upon the
defendant and he was subjected to a condition that if he had to
take advantage of the bargain he was under a duty to pay the
stipulated amount by the time mentioned in the agreement. On
failure to do so within time, he was deprived of that special benefit
and such a clause therefore could not be considered to be a
penalty clause.
9. In this background, when the compromise entered into
between the parties before this Court is looked into, said
compromise nowhere shows that respondents accepted that entire
amount of Rs.1,17,398.95 ps. or Rs.1,30,692.76 ps. was either due
or payable by them to the petitioners – plaintiffs. Clause (1) only
states that on account of said demand, the defendants have
agreed to pay Rs.37,800/- and the petitioners – plaintiffs have
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given up remaining amount. The subsequent clause further states
that amount of Rs.37,800/- is to be paid in monthly installments of
st
Rs.900/- before 1 day of each month and entire amount is to be
cleared in 42 installments. The first installment was to be paid on
1.12.1996 or before that. All next installments were to become
st
due before 1 day of each subsequent English month. Default
clause provided that if defendants committed default in paying
within time any three installments, the plaintiffs would be entitled
to recover entire suit amount.
10. Thus, when the tests laid down by the Hon'ble Apex Court
above are applied to the facts of present case, it is apparent that
the defendants (present respondents) nowhere accepted their
liability to pay the suit amounts. Therefore, suit amount was not
the amount due on the date of compromise. The amount is
becoming due to present petitioners only on account of default
committed by present respondents. Thus, the compromise was
not a concession given to the respondents but it was a threat
given to them. The illustrations in Situation 1 and Situation 2
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15
mentioned by the Hon'ble Apex Court in Prithvichand Ramchand
Sablok v. S.Y. Shinde (supra) clearly clinch the issue. The Situation
1 in which the decree drawn was only for Rs.15,000/- and time was
given to pay that amount till 31.12.1993 and default clause
provided that if said amount was not paid, the plaintiff would be
entitled to recover entire sum of Rs.20,000/- with interest and cost,
clearly applies to the facts of present case. The default clause has
the effect of permitting the plaintiffs liberty to recover amount for
which there was no decree. As against this, when Situation 2
considered by the Hon'ble Apex Court is looked into, there the
decree was for Rs.20,000/- hence it was held that amount of Rs.
15,000/- and time till 31.12.1993 was in fact a concession provided
to the defendant. It is therefore clear that here when there is no
decree for Rs.1,17,398.95 ps. or for Rs.1,30,692.76 ps., the default
clause has been rightly read as penal clause by the Executing
Court.
11. As I find that the controversy is clearly covered by the
judgment of the Hon'ble Apex Court in Prithvichand Ramchand
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Sablok v. S.Y. Shinde (supra) and I also find that the ratio in other
two Apex Court judgments mentioned above are against present
petitioners, I do not find it necessary to consider various other
judgments on which reliance has been placed by the learned
counsel for the petitioners or respondents. However, in most of
the cases, the plaintiffs had an existing right in their favour
incorporated in compromise to recover the entire amount and
thereafter the concession was provided.
12. I, therefore, find that there is no jurisdictional error or
perversity in the approach of trial Court in the matter. No case is
made out for interference in writ jurisdiction. Writ Petitions are
accordingly dismissed. There shall be no order as to costs.
JUDGE
*
*GS.
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
NAGPUR BENCH
WRIT PETITION NO. 485 OF 2006
AND
WRIT PETITION NO. 486 OF 2006
WRIT PETITION NO. 485 OF 2006
1. Smt. Jamotibai Satyanarayan Bajaj,
aged about 71 years,
occupation – Household.
2. Smt. Kirandevi Omprakash Bajaj,
aged about 46 years,
occupation – Household.
3. Shriram Omprakash Bajaj,
aged about 25 years,
occupation – Business.
4. Yogesh Omprakash Bajaj,
aged about 23 years,
occupation – Student.
5. Kum. Seema Omprakash Bajaj,
aged about 19 years,
occupation – Student.
All residents of Main Road,
PETITIONERS
Yavatmal, Tq. & District – Yavatmal. ...
Versus
1. Abdul Razzak s/o Usman,
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2
aged about 59 years,
occupation – Business.
2. Ahmad Usman,
aged about 55 years,
occupation – Business.
3. Harun Usman,
aged about 52 years,
occupation – Business.
All residents of Arni, Tq. Arni,
District – Yavatmal. ... RESPONDENTS
WRIT PETITION NO. 486 OF 2006
1. Smt. Jamotibai Satyanarayan Bajaj,
aged about 71 years,
occupation – Household.
2. Smt. Kirandevi Omprakash Bajaj,
aged about 46 years,
occupation – Household.
3. Shriram Omprakash Bajaj,
aged about 25 years,
occupation – Business.
4. Yogesh Omprakash Bajaj,
aged about 23 years,
occupation – Student.
5. Kum. Seema Omprakash Bajaj,
aged about 19 years,
occupation – Student.
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3
All residents of Main Road,
Yavatmal, Tq. & District – Yavatmal. ... PETITIONERS
Versus
1. Abdul Razzak s/o Usman,
aged about 59 years,
occupation – Business.
2. Ahmad Usman,
aged about 55 years,
occupation – Business.
3. Harun Usman,
aged about 52 years,
occupation – Business.
All residents of Arni, Tq. Arni,
District – Yavatmal. ... RESPONDENTS
Shri J.T. Gilda, Advocate for the petitioners.
Shri S.U. Nemade, Advocate for the respondents.
.....
CORAM : B.P. DHARMADHIKARI, J.
DATE OF RESERVING THE JUDGMENT : SEPTEMBER 28, 2006.
DATE OF PRONOUNCING THE JUDGMENT: OCTOBER 13, 2006.
JUDGMENT :
Heard Shri Gilda, learned counsel for the petitioners and
Shri Nemade, learned counsel for the respondents finally by
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4
consent.
2. The petitions are filed by the decree holders challenging
the common order dated 28.4.2005 passed below Exh. 23 in
Special Execution Case No. 175 of 2004 and Exh. 16 in Special
Execution Case No. 176 of 2004. The Executing Court has by said
order accepted the contention of respondents/ judgment debtors
that after effecting balance payment of Rs.1,800/- each towards
above mentioned execution cases, the decrees obtained against
them would be satisfied if balance amount of Rs.900/- and Rs.
1,800/- were paid to decree holders.
3. It appears that the respondents moved these applications
at Exh. 23 and 16 before the lower Court for recording satisfaction
of decrees passed against them in Special Civil Suit Nos. 125 of
1995 and 124 of 1995. The Suits were amicably settled before Lok
Adalat. In one suit giving rise to Special Execution No. 175 of
2004, claim of present petitioners was Rs.1,17,398.95 ps. and it
has been settled by accepting amount of Rs.37,800/-. In other suit
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which forms subject matter of Special Execution Case No. 174 of
2004, total claim of petitioners was Rs.1,30,692.76 ps. and it was
compromised by accepting amount of Rs.37,800/-. The
respondents accordingly wanted to complete payment of Rs.
37,800/- only in both the matters. They paid substantial amount
and wanted balance amount to be certified. The payment made
has been acknowledged and accepted by the petitioners.
However, there was one default clause in Compromise Decree
which envisaged that if judgment debtor made default in payment
of any three installments within time, decree holder would be
entitled to recover entire amount of Rs.1,17,398.95 ps. or Rs.
1,30,692.76 ps. The judgment debtors contended that this was
penal clause and according to them they had completed the
payment as per clause (1) of Compromise Decree and hence
decrees stood satisfied. The decree holders, on the other hand,
contended that amount of Rs.37,800/- each was to be paid by
monthly installments of Rs.900/- within due time and judgment
debtors made default in payment of three installments within time
and therefore, the entire amount as mentioned above became due
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and payable. The trial Court heard respective parties on the
grievance made and found that the condition incorporated by
default clause was a penal condition and therefore not
enforceable. It found that in Special Execution Case No. 176 of
2004, only amount of Rs.900/- was to be recovered by decree
holders while in other execution amount of Rs.1,800/- was due to
the decree holders. Thus, in effect the lower court held that
decree holders were entitled to recover total amount of Rs.
37,800/- each in both the executions.
4. Shri Gilda, learned counsel appearing for the petitioners
has contended that the lower Court has erroneously placed
reliance upon the judgment of the Hon'ble Apex Court in the case
of Prithvichand Ramchand Sablok v. S.Y. Shinde, reported at AIR
1993 SC 1929. He contends that the law as laid down by the
Hon'ble Apex Court has not been properly understood and
appreciated by the trial Court and hence there is failure on its part
to exercise jurisdiction available to it. He contends that the
compromise clearly mentioned that concession was given to
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7
judgment debtors to pay amount of Rs.37,800/- within specified
time and if the amount was not paid accordingly, the entire
amount as claimed was liable to be recovered. He has placed
reliance upon the judgments of Hon'ble Apex Court in the case of
Sova Ray v. Gostha Gopal Dey, reported at AIR 1988 SC 981, K.P.
Subbarama Sastri v. K.S. Raghavan, reported at AIR 1987 SC 1257,
in State of Goa vs. Placido Braganza, reported at 2002 (1) Mh.L.J.
370, in Rabindra Narain v. Nirmala, reported at AIR 1978 Pat. 162,
N. Kullayyappa v. N. Dastagiri, reported at AIR 1982 A.P. 154, Sri
Ram v. State Bank of Bikaner , reported at AIR 1972 All. 456, B.
Kishanprasad v. Kunj Bihari Lal, reported at AIR 1926 All. 278.
5. Shri Nemade, learned counsel, who appears for the
respondents in both the matters has placed reliance upon the
judgment of the Hon'ble Apex Court in Prithvichand Ramchand
Sablok v. S.Y. Shinde, reported at AIR 1993 SC 1929, to assert that
the said judgment clinches the issue. In addition, he has placed
reliance upon the judgment of Rajasthan High Court in the case of
Naresh Kumar v. Jan Mohd., reported at 1999 (2) Civil L.J. 446,
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8
judgment of Madhya Pradesh High Court in the case of Nonjibhai v.
Ramkishan, reported at AIR 1977 M.P. 112, judgments of the
Hon'ble Apex Court in the case of K.P. Subbarama Sastri v. K.S.
Raghavan, reported at AIR 1987 SC 1257, Fateh Chand v.
Balkishan Dass, reported at AIR 1963 SC 1405. He contends that
the respondents never agreed to the suit amount as due and
payable by them and hence it cannot be recovered under the
guise of invoking default clause. He argues that the said clause
has rightly been held to be penal clause by the lower Court.
6. It is to be noticed that the Court below has relied upon the
judgment of the Hon'ble Apex Court in Prithvichand Ramchand
Sablok v. S.Y. Shinde (supra) and there it was cited by Decree
holders. The perusal of said judgment reveals that while
considering the controversy before it, in order to explain the
circumstances in which a clause in contract can be described as
penal in character, the Hon'ble Apex Court has taken two
illustrations. The said portion is reproduced below for ready
reference :
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9
“It is necessary to understand when a clause
in the contract can be described as penal in character.
Let us illustrate by taking two concrete situations. A
plaintiff files a suit to recover Rs.20,000/- with interest
and costs from the defendant. They enter into a
compromise, the terms whereof are as under :
Situation 1 :
The defendant shall pay to the plaintiff a sum
st
of Rs.15,000/- and costs on or before 31 December,
1993. If, however, he fails to pay the said amount of
Rs.15,000/- with costs within the time stipulated, the
plaintiff will be at liberty to recover the entire sum of
Rs.20,000/- with interest and costs from the defendant
by executing the decree.
The latter clause of such a decree will clearly
be in terrorem and, therefore, penal in character. No
Court will execute the same.
Situation 2 :
The decree provides that the defendant shall
pay Rs.20,000/- with interest and costs to the plaintiff.
However, if the defendant pays Rs.15,000/- and costs
st
on or before 31 December, 1993 to the plaintiff, the
plaintiff will treat the decree as fully satisfied and will
not claim the balance amount from the defendant.
In such a case the latter clause operates as a
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10
concession and the plaintiff waives his right to the
balance amount. Such a decree will be executable to
the full extent if the defendant fails to avail of the
concession by paying Rs.15,000/- and costs on or
st
before 31 December, 1993.
From the above two illustrations it should
become clear that if the defendant is required to suffer
the consequence for his failure to abide by the terms by
a stipulated date such a consequence would be penal in
nature but on the other hand if the defendant gets
some benefit by complying with the requirement by the
stipulated date such a clause granting benefit can
never be treated as penal in character.”
7. The Hon'ble Apex Court has applied said test to the facts
before it and found that the defendant – tenant was given grace
period to comply with the decree failing which the landlord was
given right to put the decree to execution and obtain possession of
the premises and recover the arrears of rent. It held that by
clause 3 of the consent terms before it, the tenant was given
th
concession that if he paid entire rent etc. before 10 October
1970, the landlord would not recover the possession. The said
stipulation was clearly made to secure arrears of rent and landlord
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11
agreed not to insist for possession if all arrears were cleared. It
found that, therefore, the defendant tenant was getting the benefit
by complying with said requirement and clause could not have
been assailed as penal clause. The judgment in the case K.P.
Subbarama Sastri v. K.S. Raghavan (supra) is relied upon by both
the learned counsel. The Hon'ble Apex Court there has applied
the test of finding out whether the amount sought to be recovered
after default were due on the date on which the compromise was
entered into or were becoming payable only on account of such
default. The Hon'ble Apex Court has found that if on proper
construction of a contract real agreement between parties was
found to be that the entire amount was on the date of agreement
a debt due but the creditor for the convenience of the debtor
allowed it to be paid by installments intimating that if default
would be made in payment of any installment, he would withdraw
the concession, then the stipulation as to the whole amount of the
balance becoming payable would not be penal. If, on the other
hand, the Court finds that the debts itself arises or becomes due
and payable only on respective dates fixed for the installments,
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the stipulation that default being made in payment of any
installment, the whole of balance should become due and payable
would be in the nature of penalty.
8. In Sova Ray v. Gostha Gopal Dey (supra), the Hon'ble
Apex Court has considered the situation in which plaintiff had in
rd
trial Court obtained the decree for partition for 1/3 share in his
favour. At appellate stage defendant wanted to acquire ½ of the
share of plaintiff on payment of consideration. The plaintiff agreed
to it and sum of Rs.40,000/- was fixed as price. The appeal
accordingly was disposed of by compromise and in said
rd
compromise, the plaintiffs claim of 1/3 share was accepted as
th
correct. It was further agreed that ½ of plaintiffs share i.e. 1/6
share would go to one of the defendants provided he paid a sum of
Rs.40,000/- to the plaintiffs by a particular date. It also provided
that failing payment within time, the decree passed by the trial
Court would stand confirmed. The defendant was to pay Rs.
40,000/- in two installments. He paid Rs.10,000/- within time but
remaining amount was not paid. In view of the default in payment
of second installment, the plaintiffs deposited back the amount of
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Rs.10,000/- received by them and thereafter defendant made
application before the High Court for extension of period of second
installment. The defendant contended that default clause in the
agreement was illegal being penal in nature. The Hon'ble Apex
Court held that a particular benefit was bestowed upon the
defendant and he was subjected to a condition that if he had to
take advantage of the bargain he was under a duty to pay the
stipulated amount by the time mentioned in the agreement. On
failure to do so within time, he was deprived of that special benefit
and such a clause therefore could not be considered to be a
penalty clause.
9. In this background, when the compromise entered into
between the parties before this Court is looked into, said
compromise nowhere shows that respondents accepted that entire
amount of Rs.1,17,398.95 ps. or Rs.1,30,692.76 ps. was either due
or payable by them to the petitioners – plaintiffs. Clause (1) only
states that on account of said demand, the defendants have
agreed to pay Rs.37,800/- and the petitioners – plaintiffs have
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14
given up remaining amount. The subsequent clause further states
that amount of Rs.37,800/- is to be paid in monthly installments of
st
Rs.900/- before 1 day of each month and entire amount is to be
cleared in 42 installments. The first installment was to be paid on
1.12.1996 or before that. All next installments were to become
st
due before 1 day of each subsequent English month. Default
clause provided that if defendants committed default in paying
within time any three installments, the plaintiffs would be entitled
to recover entire suit amount.
10. Thus, when the tests laid down by the Hon'ble Apex Court
above are applied to the facts of present case, it is apparent that
the defendants (present respondents) nowhere accepted their
liability to pay the suit amounts. Therefore, suit amount was not
the amount due on the date of compromise. The amount is
becoming due to present petitioners only on account of default
committed by present respondents. Thus, the compromise was
not a concession given to the respondents but it was a threat
given to them. The illustrations in Situation 1 and Situation 2
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15
mentioned by the Hon'ble Apex Court in Prithvichand Ramchand
Sablok v. S.Y. Shinde (supra) clearly clinch the issue. The Situation
1 in which the decree drawn was only for Rs.15,000/- and time was
given to pay that amount till 31.12.1993 and default clause
provided that if said amount was not paid, the plaintiff would be
entitled to recover entire sum of Rs.20,000/- with interest and cost,
clearly applies to the facts of present case. The default clause has
the effect of permitting the plaintiffs liberty to recover amount for
which there was no decree. As against this, when Situation 2
considered by the Hon'ble Apex Court is looked into, there the
decree was for Rs.20,000/- hence it was held that amount of Rs.
15,000/- and time till 31.12.1993 was in fact a concession provided
to the defendant. It is therefore clear that here when there is no
decree for Rs.1,17,398.95 ps. or for Rs.1,30,692.76 ps., the default
clause has been rightly read as penal clause by the Executing
Court.
11. As I find that the controversy is clearly covered by the
judgment of the Hon'ble Apex Court in Prithvichand Ramchand
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Sablok v. S.Y. Shinde (supra) and I also find that the ratio in other
two Apex Court judgments mentioned above are against present
petitioners, I do not find it necessary to consider various other
judgments on which reliance has been placed by the learned
counsel for the petitioners or respondents. However, in most of
the cases, the plaintiffs had an existing right in their favour
incorporated in compromise to recover the entire amount and
thereafter the concession was provided.
12. I, therefore, find that there is no jurisdictional error or
perversity in the approach of trial Court in the matter. No case is
made out for interference in writ jurisdiction. Writ Petitions are
accordingly dismissed. There shall be no order as to costs.
JUDGE
*
*GS.
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