(1) In O.S. 271/1952-53, in the Court of the Munsiff of Chitaldurg, the decree-holder, who is the respondent in the appeal, and two others, used the judgment-debtor, who is the appellant in this appeal for a sum of Rs. 1,970-13-6. In that suit, a consent decree was made against the judgment-debtor for a sum of Rs. 700/-. It was provided by that consent decree that the sum of money should be paid in two equal installments. The first installment was payable on May 28, 1954, and the second, on November 28, 1954. The decree also contained a further provision which was to the effect that if the judgment-debtor committed default in making these payments, the decree-holder would be entitled to recover from the judgment-debtor the entire sum of money claimed in the plaint.
(2) The first payment made by the judgment-debtor was a delayed payment. He made that payment on May 31, 1954, with the result that the decree-holder sought to recover from him the entire sum of money claimed in the plaint, which was more than Rs. 1,200 in excess of that for the payment of which the consent decree provided.
(3) The executing Court refused to recognize the right of the decree-holder to claim that larger sum of money. It thought that it had power to relieve the judgment-debtor against what it considered to be in the nature of a penalty.
(4) But, in the appeal preferred by the decree-holder, he was able to get the order which he wanted. The lower appellate Court was of the view that the executing Court had no power to relieve the judgment-debtor from the liability to pay the entire sum of money claimed by the decree-holder in his plaint.
(5) The judgment-debtor appeals.
(6) I am not disposed to agree with the view taken by the lower appellate Court in this case. The principle applicable to cases like the present one is that if a creditor agrees to reduce the amount of his claim on certain conditions but the agreement provides that, on the failure of the debtor to fulfill any of those conditions, the original claim shall revise, it is clear that the revival of the original claim is not in the nature of a penalty. But, if, on the contrary, a debtor agrees to pay a sum of money over and above his original liability, he is entitled to be relieved against what undoubtedly has to be regarded as a penalty. The same principle applies to a consent decree made by a Court.
(7) In Sannappa v. Mallari Jois, 20 Mys CCR 299 where an installment decree directed that in default of payment of any two installments, the whole of the decretal amount then due should be paid with interest at 12 per cent thereon from the date of suit till date of payment, it was held that the provision regarding payment of interest amounted to a penalty since the amount of the decree already included future interest and that the Court had power to relieve the judgment-debtor such penalty.
(8) In Muthuswami Mudaliar v. MalleGowda 35 Mys CCR 291 it was pointed out that there was a well recognised distinction between an agreement under which in default of payment, the defaulting party has to pay a much larger sum than is admittedly due and, that, under which , in default of payment of a sum smaller than is admitted, he has to pay the full sum so admitted, and that the stipulation in the former case is in the nature of a penalty but not in the latter case.
(9) In Kaudarpa Nag v. Banwari Lal, 60 Ind Cas 864 : (AIR 1921 Cal 356 (2)) Sir Asutosh Mookerjee, Acting C. J., pointed out that where a consent decree gives effect to an agreement which embodies a right to forfeiture, the Court, in the exercise of its equitable jurisdiction, is competent to grant such relief against forfeiture, as it might have granted if there had been no consent decree and a suit had been instituted to enforce the compromise.
(10) So tested, it cannot be disputed that, in this case, the provision for the payment of the amount claimed by the decree-holder in the plaint, it there was default in the payment of any one of the installments, payable under the consent decree, was clearly in the nature of penalty. The consent decree providing for the payment of a sum of Rs. 700 by the judgment-debtor must, in the absence of any indication to the contrary, be regarded to have declared that the judgment-debtor was not liable to pay any sum in excess of the sum of Rs. 700. The decree-holder must be deemed to have admitted, when he consented to that decree, that what was payable by the judgment-debtor to him did not exceed Rs. 700. It is impossible in this case to hold that the sum of Rs. 1,970-13-6 claimed by the decree-holder in his suit was really due to him by the judgment-debtor.
(11) There is no other material on the record to justify the conclusion that although the decree-holder was entitled to recover from the judgment-debtor a larger sum of money, he consented to receive from the judgment-debtor a smaller sum of money.
(12) That being the position, the executing Court was right in disallowing execution for the recovery of the larger sum of money claimed by the decree-holder.
(13) This second appeal succeeds and is allowed. The order of the lower appellate Court is set aside and that of the executing Court is restored.
(14) But, in the circumstances of the case and having regard to the fact that the judgment-debtor admittedly committed default in the payment of the amount as directed by the consent decree, this in a case in which the judgment-debtor must pay the costs of the decree-holder in all the three Courts and I order accordingly.
(15) Appeal allowed.