Civil Revision No.1726 of 2010 (O&M) -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Civil Revision No.1726 of 2010 (O&M) Date of decision: 06.08.2010 Ram Kumar ....Petitioner Versus M/s Subhash Chand Sohan Lal Commission Agent ....Respondent CORAM: HON'BLE MR. JUSTICE VINOD K. SHARMA Present: - Mr. Harkesh Manuja, Advocate, for the petitioner. Mr. Ravinder Malik Ravi, Advocate, for the respondent. ***** VINOD K. SHARMA, J (ORAL) The petitioner has invoked the supervisory jurisdiction of this Court to challenge the orders Annexures P-6 and P-7 attached with the revision petition. The plaintiff-decree-holder filed a suit for recovery of Rs.4,17,135.41 (Rupees four lac seventeen thousand one hundred thirty five and paise forty one only) along with interest @ 1 ½% per month. During the pendency of the suit, the parties entered into a mutual agreement vide which the petitioner-judgment-debtor undertook to pay a sum of Rs.1,70,000/- (Rupees one lac and seventy thousand only) in instalments upto 15.5.2013 towards final settlement. It was also agreed to between the parties, that in case, the petitioner-judgment-debtor failed to honour the compromise, then he would be liable to pay interest on the whole amount of Rs.4,17,135.41 Civil Revision No.1726 of 2010 (O&M) -2- (Rupees four lac seventeen thousand one hundred thirty five and paise forty one only) @ 1 ½% per month. It is not in dispute, that the judgment-debtor defaulted in making the payment, therefore, the decree-holder became entitled to recover a sum of Rs.1,70,000/- (Rupees one lac and seventy thousand only) as agreed to be principal amount, as also interest on Rs.4,17,135.41 (Rupees four lac seventeen thousand one hundred thirty five and paise forty one only) from the date of default. In the execution application the decree-holder claimed a sum of Rs.4,17,135.41 (Rupees four lac seventeen thousand one hundred thirty five and paise forty one only), to which objections were filed by the judgment-debtor. The learned Executing Court did not agree with the objections, by mis-reading the judgment, held that the judgment-debtor in event of default had agreed to pay a sum of Rs.4,17,135.41 (Rupees four lac seventeen thousand one hundred thirty five and paise forty one only) . This finding was also upheld by the learned appellate Court. The learned counsel for the petitioner contends, that the impugned order passed by the learned Courts below, vide which the objections by the petitioner to the execution have been dismissed, is outcome of mis-reading of evidence, as the learned Courts below misread the decree passed. There is force in the contention of the learned counsel for the petitioner. The operative part of the mutual agreement entered into between the parties, on the basis of which the decree was passed, reads as under: - Civil Revision No.1726 of 2010 (O&M) -3- “The defendant shall pay the whole amount in suit to the plaintiff in instalments in the following manner: Dated 15.4.2006 Rs.20,000/- Dated 15.5.2006 Rs.10,000/- Dated 15.11.2006 Rs.10,000/- Dated 15.5.2007 Rs.10,000/- Dated 15.11.2007 Rs.10,000/- Dated 15.5.2008 Rs.10,000/- Dated 15.11.2008 Rs.10,000/- Dated 15.5.2009 Rs.10,000/- Dated 15.11.2009 Rs.10,000/- Dated 15.5.2010 Rs.10,000/- Dated 15.11.2010 Rs.10,000/- Dated 15.5.2011 Rs.10,000/- Dated 15.11.2011 Rs.10,000/- Dated 15.5.2012 Rs.10,000/- Dated 15.11.2012 Rs.10,000/- Dated 15.5.2013 Rs.10,000/- That the term of the compromise is that if the defendant does not pay the amount as per aforesaid instalments, then the defendant will be bound to pay interest on the whole amount of Rs.417135/41 Paisa @ 1 ½ % per month. The expenses of the suit will be borne by the plaintiff and the plaintiff shall recover the aforesaid amount by taking legal action. That the parties have no objection if the suit is decreed in view of the compromise. It is therefore, prayed that the aforesaid case may be decided in terms of the compromise.” The reading of the compromise would show, that the judgment-debtor had agreed to pay a sum of Rs.1,70,000/- (Rupees one Civil Revision No.1726 of 2010 (O&M) -4- lac and seventy thousand only) in instalments w.e.f. 15.4.2006 till 15.5.2013. No interest was payable on this amount. It was further agreed, that in event of failure of the judgment- debtor to pay the amount as mutually agreed, he was liable to pay the interest @ 1 ½ % per month on the principal amount, which was due from the judgment-debtor and was claimed in the suit i.e. Rs.4,17,135.41 (Rupees four lac seventeen thousand one hundred thirty five and paise forty one only), however, the principal amount payable was only Rs.1.70 lacs (Rupees one lac and seventy thousand only). The learned counsel for the petitioner challenged the impugned part of the decree by contending it to be a penalty, therefore, not enforceable. In support of this contention the learned counsel for the petitioner placed reliance on the judgment of the Hon'ble Supreme Court in K.P. Subbarama Sastri and others Vs. K.S. Raghavan and others, AIR 1987 Supreme Court 1257, wherein the Hon'ble Supreme Court was pleased to lay down as under: - “6. The question whether a particular stipulation in a contractual agreement is in the nature of a penalty has to be determined by the court against the background of various relevant factors, such as the character of the transaction and its special nature, if any, the relative situation of the parties, the rights and obligations accruing from such a transaction under the general law and the intention of the parties in incorporating in the contract the particular stipulation which is contended to be penal in nature. If on such a comprehensive consideration, the court finds that the real purpose Civil Revision No.1726 of 2010 (O&M) -5- for which the stipulation was incorporated in the contract was that by reason of its burdensome or oppressive character it may operate in terrorem over the promiser so as to drive him to fulfil the contract, then the provision will be held to be one by way of penalty. 7. Where a contract provides for payment of money in instalments and contains also a stipulation that on default being committed in paying any of the instalments the whole sum shall become payable at once, the true test for determining whether the said condition is in the nature of a penalty is to find out whether the amounts referred to in the agreement were debitum in praesenti although solvendum in futuro or whether they were to become due to the promisee only on the respective dates when the instalments were payable. If on a proper construction of a contract it is found that the real agreement between parties was to the effect that the whole amount was on the date of the bond a debt due but the creditor for the convenience of the debtor allowed it to be paid by instalments intimating that if default should be made in the payment of any instalment 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, on a proper consideration of the terms of the contract the court comes to the conclusion that the debt itself arises or becomes due and payable by the debtor only on the respective dates fixed for the instalments the stipulation that on default being made in the payment of any instalment the whole of the balance should become due and payable would be in the Civil Revision No.1726 of 2010 (O&M) -6- nature of a penalty.” On consideration, I find no force in this contention of the learned counsel for the petitioner. The interest on principal amount, cannot be said to be penalty nor the judgment referred to by the petitioner can apply to the facts of the present case. It is not in dispute, that the principal amount due from the defendant-judgment-debtor was Rs.4,17,135.41 (Rupees four lac seventeen thousand one hundred thirty five and paise forty one only), the plaintiff-decree-holder had claimed interest on the agreed terms. By mutual agreement concession was given to the judgment-debtor to pay only Rs.1,70,000/- (Rupees one lac and seventy thousand only) out of Rs.4,17,135.41 (Rupees four lac seventeen thousand one hundred thirty five and paise forty one only) that too in instalments. This concession was, however, subject to the condition that in the event of default the judgment-debtor would be liable to pay the interest on the principal amount of Rs.4,17,135.41 (Rupees four lac seventeen thousand one hundred thirty five and paise forty one only). Normally the decree passed in such cases is, that in the event of default, the defaulter party is to pay the total amount claimed along with interest, but in the present case the parties agreed to give concession to the petitioner-judgment-debtor by reducing the amount from Rs.4,17,135.41 (Rupees four lac seventeen thousand one hundred thirty five and paise forty one only) to Rs.1,70,000/- (Rupees one lac and seventy thousand only), with the only stipulation that, in case of default, he was to pay interest on the amount of Rs.4,17,135.41 (Rupees four lac seventeen thousand one hundred thirty five and paise forty one Civil Revision No.1726 of 2010 (O&M) -7- only). Therefore, in addition a sum of Rs.1,70,000/- (Rupees one lac and seventy thousand only), the decree-holder would be entitled to interest @ 1½% per month on the amount of Rs.4,17,135.41 (Rupees four lac seventeen thousand one hundred thirty five and paise forty one only), w.e.f. the date of default. The impugned orders are set aside and the case is remanded back to the learned Executing Court to execute the decree strictly in terms of the decree passed by the learned Court i.e. Rs.1,70,000/- (Rupees one lac and seventy thousand only) as principal along with interest on the amount of Rs.4,17,135.41 (Rupees four lac seventeen thousand one hundred thirty five and paise forty one only) @ 1 ½ % per month from the date of default in payment of instalments. No costs. (Vinod K. Sharma) Judge August 06, 2010 R.S.