CR No.5140 of 2009 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH CR No.5140 of 2009 Date of decision: 17.02.2010 M/s Prestolite of India Ltd & Anr. ..Petitioners Versus Punjab National Bank of India & Ors. ... Respondents CORAM: HON'BLE MR. JUSTICE VINOD K. SHARMA Present: Mr.Pankaj Gupta, Advocate, for the petitioners. Mr.R.S.Bhatia, Advocate, for respondent No.1. Mr.Sukhwinder Singh, Advocate, for respondent No.2. --- 1. Whether Reporters of Local Newspapers may be allowed to see the judgment? 2. To be referred to the Reporters or not? 3. Whether the judgment should be reported in Digest? CR No.5140 of 2009 2 --- VINOD K. SHARMA,J. This order shall dispose of CR No.5140 and 5172 of 2009 titled M/s Prestolite of India Ltd & Anr. Vs. Punjab National Bank of India & Ors. and M/s Prestolite of India Ltd & Anr. Vs. Union Bank of India & Ors., respectively, as common questions of law and facts are involved in both these petitions. For the sake of brevity the facts are being taken from CR No.5172 of 2009. The petitioner M/s Prestolite of India Ltd, a company registered under the companies Act has invoked the jurisdiction of this court under Article 227 of the Constitution of India read with section 151 of the Code of Civil Procedure (for short the Code) to challenge the order dated 31.7.2009 passed by the learned Civil Judge (Senior Division), Faridabad vide which the application moved of the petitioner for converting the application in execution vis-a-vis claim for damages into suit for damages has been dismissed. The respondent, Union Bank of India filed a suit for recovery of Rs.2,27,58,343.70P against the petitioner and its guarantors. Suit was contested. During the pendency of the suit parties entered into a compromise and decree in terms of the compromise was passed. The operative part of the decree passed by the learned court reads as under:- CR No.5140 of 2009 3 “ It is ordered that as per the statement of the parties and the compromise deed Ex.C-1, a decree for recovery of an amount of Rs.1,12,00,000/- is passed in favour of the plaintiff bank and against the defendants No.1 to 3 jointly and severally. The compromise deed Ex.C-1, is made part of the decree.” The agreed compromise entered into between the parties reads as under:- “1. Agreed and ordered that the defendants No.1 to 3 jointly and severally do pay to the plaintiff a sum of Rs.1,12,00,000/- (Rupees one crore twelve lacs) together with simple interest thereon at the rate of 13.50% per annum such interest accruing 30 months after the date of the consent decree till the payment or realization in full and final settlement of the plaintiffs claim in the suit herein. 2. Agreed and ordered that defendants No.1 to 3 do pay to the plaintiff the decretal amount as mentioned in clause 1 above in instalments as under:- a) First 12 instalments at the rate of Rs.2,00,000/- (Rupees two lacs only) each per month, first of such instalment to be paid after six month from date consent decree is passed by the court and subsequent instalments to be paid on or before 15th of each following month CR No.5140 of 2009 4 thereafter. b) Next 12 (twelve) instalments are to be paid @ Rs.2,50,000/- (rupees two lacs fifty thousand only) each per month, first of such instalment to be paid immediately after the first 12 instalments on or before 15th of each succeeding month as mentioned in 2(a) above and subsequent instalments to be paid on or before 15th of each following month thereafter; c) Remaining instalmens to be paid @ Rs.4,00,000/- (rupees three lacs only) each per month on or before 15th of each succeeding month and subsequent instalments to be paid on or before 15th of each following month thereafter until the entire decretal claim together with interest as afore-stated is repaid in full. 3. Agreed and ordered that the plaintiff do appropriate the payment of monthly instalments afore-stated firstly towards the principal amount of decretal claim and thereafter towards the accrued simple interest calculated at the rate of 13.5.% per annum after 30 months from the date of consent decree on the outstanding balance till the payment of realization of the entire decretal claim plus interest as stated above. 4. Agreed and ordered that in the event of the defendants no.1 to 3 committing any two defaults in the payment of CR No.5140 of 2009 5 the monthly instalments on their respective due dates afore-stated during any one year (such year comprising of 12 months commencing from the date of payment of first instalment), the plaintiff shall be entitled to immediate payment of the entire decretal claim or the balance thereon then remaining payable at one time and to at once execute this decree, as stated in para no.7 herein. 5. Agreed, declared and ordered that the repayment of the decretal claim mentioned in clause 1 above is hereby validly crated to secure in favour of the plaintiff:- a) by charge upon the entire fixed and floating assets of defendant no.1 namely all the properties, land and building of the factory premises of defendant no.1 admeasuring 7 bighas 6 biswas comprising of Khasra Nos. 302, 303 and 3404 situated at 16/4, Main Mathura Road, Faridabad (Haryana) more particularly described in Schedule 1 hereto below together with plaint, machinery, equipment etc. therein; b) By pledge of the stock of defendant No.1 in possession of the plaintiffs per the statement of stocks annexed hereto as Schedule no.2 for securing repayment to the defendant no.1 has deposited an amount of Rs.7,49,720/-. CR No.5140 of 2009 6 c) By pledge of the stock (covered under Bills Recalled) of defendant No.1 in possession of the plaintiff as per the statement of stocks annexed hereto as schedule no.3 and for securing repayment to the extent of Rs.26,53,392.98. 6. The plaintiff agrees to release the pledged goods mentioned in clause 5(b) and (c) above as and when required by the Ist defendant against the payment by the Ist defendant to the plaintiff of the amount equivalent to advance value thereof as mentioned in Schedule Nos. 2 and 3 hereto. The plaintiff agrees to appropriate such payments received from the Ist defendant or any other payment received from the Ist defendant or to their account towards the amount of instalments payable by the defendants No.1 to 3 as per clause 2 above. Only on payment of the full decretal amount with interest, as stated above, the plaintiff agrees to release all the securities mentioned herein above in clause 5(a), *b) (c) and to release the personal guarantees executed by the directors. 7. Agreed and ordered that in the event of defendants No.1 to 3 committing any two defaults in the payment of the monthly instalments during any one year as provided in clause 2 above and the plaintiff becoming entitled to forthwith execute this decreed as per clause 4 above in CR No.5140 of 2009 7 that event, the plaintiff shall be entitled for the recovery of the entire decretal a claim along with interest thereon as stated above or the balance thereof then remaining outstanding to release the said securities mentioned in clause 5 above by sale thereof by and under the directions of this. Hon'ble Court inter alia by appointment of receiver thereof and by sale of the said securities by the said receiver. 8. Agreed and declared that the plaintiff and defendant No.4 have pari passu charge upon the said securities, mentioned in clause 5(a) above for repayment of the plaintiff's decretal claim herein along with interest as stated above and the claim of defendant no.4 which is the subject matter of such suit No.183 of 1981 filed by defendant No.4 against defendants No.1 to 3 and the plaintiff herein in this Hon'ble Court. 9. The plaintiff agrees to grant its 'no objection certificate' in favour of the Ist defendant immediately within two days of passing of the consent decree with a view to enabling the Ist defendant to avail loans and/or banking facilities from other banks and financial institutions. 10. Agreed and recorded that subject to the paramount charge of the plaintiff upon the said securities mentioned in clause 5(a) above under the said decree, the Ist CR No.5140 of 2009 8 defendant shall be at liberty to create second charge/subsequent charge on the aid securities mentioned in clause 5(a) above (pledged stocks not included) with a view to enabling the 1st defendant to avail credit/loan facilities from any other source/banks/institutions/leasing company. 11. Agreed and recorded that immediately upon the passing of the consent decree in terms of these consent terms, the plaintiff and defendants No.1 to 3 shall withdraw all other legal proceedings whatever by one against the other including the following:- a) Suit No.517 of 1980 before the high court of New Delhi in its Ordinary Original Civil Jurisdiction (Prestolite of India Limited Vs. General Insurance Corporation of India and others). However, this suit will be continued against defendants No.1 and 2 to the said suit and plaintiff herein shall agreed to produce such documents and give such evidence as may be necessary in the said suit; b) Special Leave petition before he Supreme Court of India against the judgment and order dated 17th October, 1985 of Punjab and Haryana High Court in Civil Revision No.3041 of 1984; c) Contempt Petition No.147 of 1982 filed by the plaintiff CR No.5140 of 2009 9 against the defendants No.1 and 2.; d) Suit No.149 of 1977 filed by the plaintiff against M/s Automark and defendant No.1 herein. However, this suit will continue against the said M/s Automark. 12. Agreed and recorded that save as provided unde these consent terms neither party has nay other claim against each other party. 13. The defendants Mo.1 to 3 agreed and undertake to this Hon'ble Court not to initiate any other legal proceedings in future on account of or arising out of any of the dealing by the defendants no.1 to 3 with the plaintiff herein prior to the date hereof; 14. The defendants no.1 to 3 undertake to this Hon'ble Court to insure to the satisfaction of the plaintiff and keep insured all the properties moveables and immovables constituting the plaintiffs' securities hereunder against fire and all other risks in a sum equivalent to their full market value with insurance company approved by the plaintiff in the joint names of the plaintiff and the first defendant or otherwise as the plaintiff may require and shall duly and punctually pay all premiums and shall do or suffer to be done by anything which may invalidate or avoid such insurance and shall deposit the insurance policy and all cover notes, premium receipts and other CR No.5140 of 2009 10 documents connected therewith the plaintiff. Any monies realized from such insurance shall at the option of the plaintiff be applied either in reinstating the security or in repayment of the loan advanced and interest. 15. The defendants No.1 to 3 undertake to this Hon'ble Court to pay the property tax, Municipal tax and all other outgoing in respect of the property described in Schedule No.1 hereto punctually and produce for inspection of the plaintiff whenever called upon the receipts for such payment. 16. No order as to costs. Dated this 16th day of October, 1991.” The case of the petitioners is that the bank failed to discharge its obligation in terms of the compromise decree Ex.P.1, as it failed to grant no objection certificate to the Petitioner within 2 days of the passing of the compromiser decree and also failed to release the goods equivalent to the value of money deposited by the company. The execution application was filed by the petitioner, even though the decree passed was in favour of respondent No.1 bank. The petitioners on 3.6.1995 filed an application before the Executing Court under Order 21 Rule 1 & 2 of the Code read with section 151 of the Code for issuance of a certificate of satisfaction of compromise CR No.5140 of 2009 11 decree. In the application the petitioners filed claim on 5.6.1996 under section 47 of the Code, for damages suffered by the petitioners on account of non-compliance of the terms of the compromise decree. The petitioners claimed damages on the basis of projected profit statement. However, no court fee was paid on the claim for damages. The application was contested and on the pleadings of the parties learned executing court framed the issues. It is interesting to note that in the application moved under Order 21 Rule 1 and 2 of the Code, the petitioner projected itself to be the decree holder, though petitioner was defendant in the suit and no counter claim was filed. Order 21 Rules 1 and 2 of the Code under which the application was moved read as under:- “ ORDER XXI Execution of Decrees and Orders Payment under decree 1. Modes of paying money under decree.--(1) All money, payable under a decree shall be paid as follows, namely:- (a) by deposit into the Court whose duty it is to execute the decree, or sent to that Court by postal money order or through a bank; or (b) out of Court, to the decree-holder by postal money order or through a bank, or by any other mode wherein payment is evidenced in writing; or CR No.5140 of 2009 12 (c) otherwise, as the Court, which made the decree, directs. (2) Where any payment is made under clause (a) or clause (c) of sub-rule (1), the judgment-debtor shall give notice thereof to the decree-holder either through the Court or directly to him by registered post, acknowledgment due. (3) Where money is paid by postal money order or through a bank under clause (a) or clause (b) of sub-rule (1), the money order or payment through bank, as the case may be, shall accurately state the following particulars, namely:- (a) the number of the original suit; (b) the names of the parties or where thre are more than two plaintiffs or more than two defendants, as the case may be, the names of the first two plaintiffs and the first two defendants; (c) how the money remitted is to be adjusted, that is to say, whether it is towards the principal, interest or costs; (d) the number of the execution case of the Court, where such case is pending; and (e) the name and address of the payer. (4) On any amount paid under clause (a) or clause (c) of sub-rule(1), interest, if any, shall cease to run from the date of service of the notice referred to in sub-rule(2). (5) On any amount paid under clause (b) of sub-rule (1), interest, if any, shall cease to run from the date of such payment: CR No.5140 of 2009 13 Provided that, where the decree-holder refuses to accept the postal money order or payment through a bank, interest shall cease to run from the date on which the money was tendered to him, or where he avoids acceptance of the postal money order or payment through bank, interest shall cease to run from the date on which the money would have been tendered to him in the ordinary course of business of the postal authorities or the bank, as the case may be. 2. Payment out of Court to decree-holder.--(1) Where any money payable under a decree of any kind is paid out of Court or a decree of any kind is otherwise adjusted in whole or in part to the satisfaction of the decree-holder, the decree- holder shall certify such payment or adjustment to the Court whose duty it is to execute the decree, and the Court shall record the same accordingly. (2) The judgment-debtor or any person who has become surety for the judgment debtor also may inform the Court or such payment or adjustment, and apply to the Court to issue a notice to the decree holder to show cause, on a day to be fixed by the Court, why such payment or adjustment should not be recorded as certified; and if, after service of such notice the decree holder fails to show cause why the payment or adjustment should not be recorded as certified, the Court shall record the same accordingly.” CR No.5140 of 2009 14 When the application moved by the petitioners was at the stage of arguments, the petitioners on 5.6.2008 filed an application for converting the application to a suit for damages. The application was opposed by the bank, by pleading that the execution application was moved by the petitioners on 12.6.1995 and both the parties have already led their oral as well as documentary evidence and the case was now pending for final arguments, therefore, the present application was moved merely to delay the disposal of the application. Learned executing court noticed, that the bank had issued no objection certificate in favour of the petitioners, pointing out therein that an amount of Rs.11,62,771/- was deposited by the petitioners i.e. Rs.7,49,720 prior to passing of consent decree and an amount of Rs.4,13,021/- after passing of the consent decree. The amount deposited stood adjusted. The court found that when the execution application was pending, the petitioners moved an application on 5.6.1996 claiming damages on account of non-performance of decree dated 15.11.1991. Now the petitioners wanted to convert application into the civil suit in the year 2008. In support of the application the petitioners had placed reliance on the judgment of Hon'ble Supreme Court in the case of Sugan Chand Vs. Prakash Chand Pradhan & Ors. AIR 1966 SC 1587 The learned executing court did not find the case to have any application to the facts of the case. This need not be discussed any further, as learned counsel for the petitioners admitted that the judgment of Hon'ble CR No.5140 of 2009 15 Supreme Court in the case of Sugan Chand Vs. Prakash Chand Pradhan & Ors.(supra), had no application to the present case. Learned executing court after going through the compromise terms entered into between the parties, recorded a finding that there was no clause in the compromise which entitled the petitioners to claim damages on account of non-performance of the terms of the compromise, therefore, the damages claimed was not consequential to the decree. The learned executing court held that the petitioners could file a fresh suit for damages, as it was a fresh cause of action as the question of damages being not a question relating to execution discharge or satisfaction of decree, was not within the jurisdiction of the executing court. The application was accordingly dismissed. Mr.Pankaj Gupta, learned counsel for the petitioners vehemently contended that the respondent bank had agreed to release the pledged goods as and when required against the payment by the first defendant to the plaintiff which was not done. Main stress of the learned counsel was on the clause which entitled the petitioners to have 'no objection certificate' immediately with a view enabling the petitioner to avail loan or banking facility from other banks and financial institutions. The contention of the learned counsel for the petitioner was that the payment of decretal amount was, therefore, subject to compliance of the terms by the respondent bank. The petitioner was, therefore, entitled to the damages. The learned counsel, however, admitted that decretal amount or interest was not CR No.5140 of 2009 16 paid and only amount referred to in the order of the Executing Court has only been paid. Learned counsel for the petitioners also contended that though provisions of Order 47 (2) of the Code stands repealed still in view of the judgment of Hon'ble Bombay High Court in the case of Jitendra Narottamdas Shethand Ors. Vs. Indradeep Co-operative Housing Society Ltd and Ors. AIR 1993 Bombay 302, petitioners were entitled to the application for execution converted into the suit for damages. Hon'ble Bombay High Court in the case referred to above has been pleased to lay down as under:- “3. Shri Shah, learned counsel appearing on behalf of the appellants, submitted that prior to amendment of Code of Civil Procedure by Amending Act of 1976, sub-sec.(2) of S.47 of the Act read as follows: “The Court may, subject to any objection as to limitation or jurisdiction, treat a proceeding under this Section as a suit or a suit as a proceeding and may, if necessary, order payment of any additional Court/fees.” Shri Shah urged that Sub-Section (2) of S.47 was deleted by Amending Act of 1976 and thereby the powers of the Court to treat the suit as an execution proceedings were withdrawn. The learned counsel contended that after the year 1976, it is not open for the Court to treat the suit as an execution application. It is not possible to accede to the submission of the learned CR No.5140 of 2009 17 counsel that after the deletion of sub-s(2) of S.47 in the year 1976, the Court has no power whatsoever to treat the suit as an execution application, Sub-sec.(2) of S.47 was introduced in year 1908 to give legislative sanction to the practice followed by the Court under the Code of 1882. The power was consistently exercised by the Courts prior to 1908 with a view to advance the cause of justice. It is not clear from the Amending Act of 1976 the reasons for withdrawal of powers conferred under sub-sec. (2) of S.47. Sub-Section (2) of Section 47 prior to its amendment had conferred specific powers on the Courts to treat the suit as an execution application and when that power is withdrawn, then the Court can fall back upon the inherent powers under S.151 of the Code of Civil Procedure. Section 151, inter alia, provides that nothing in this Code shall be deemed to limit or otherwise affect the inherent power of the Court to make such orders as may be necessary for the ends of justice or to prevent abuse of the process of the Court. The powers under S.151 relate to matters of procedure and it is well settled by catena of a decisions that posers under S.151 can be exercised provided such a power is not available under any provisions of the Code or where the power is specifically prohibited or excluded by the Code,. Shri Shah did not dispute that the powers to treat the suit as an execution application is not specifically prohibited or CR No.5140 of 2009 18 excluded by any of the provisions of the Code. In these circumstances, power of the Court to treat the suit as an execution application can be exercised under S..151 of the Code. 4. There is another aspect of the matter which cannot be overlooked. The impugned order directing transfer of the suit to City Civil Court and treating it as execution application causes no prejudice whatsoever to the interest of the appellants but, on the other hand, enables the respondent No.1 to enforce the decree passed in the year 1991. It is always open for the appellants to raise all permissible contentions in the execution application and in these circumstances, the order passed by the learned single Judge for the purpose of advancing cause of justice is not required to be disturbed.” Mr.R.S.Bhatia, and Mr.Sukhwinder Singh, learned counsel appearing on behalf of the respondents vehemently contended that even if for the sake of arguments it is taken that the petitioners had a right to get an application moved for execution converted into the suit, still the application moved by the petitioners was not competent. The decree was passed on 17.11.1991 and no objection was to be issued to the petitioners within 2 days i.e. by 19.11.1991. Thus, the cause of action accrued to the petitioners on 19.11.1991, whereas for the first time application claiming damages was moved by the petitioners on 12.6.1995 i.e. after limitation prescribed for CR No.5140 of 2009 19 claiming of damages i.e. 3 years that too under unamended Sub