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Jhurai Lal Vs. MohIn Das Bose - Court Judgment

LegalCrystal Citation
SubjectTenancy;Contract
CourtAllahabad High Court
Decided On
Case NumberEx. Second Appeal No. 1097 of 1966
Judge
Reported inAIR1972All457
ActsContract Act, 1872 - Sections 74
AppellantJhurai Lal
RespondentMohIn Das Bose
Appellant AdvocateNagendra Singh Chaudhary and ;Prakash Gupta, Advs.
Respondent AdvocateK.C. Agarwal, Adv.
DispositionAppeal dismissed
Excerpt:
.....comply with that condition the default clause comes into operation, it cannot be said that it is a penal clause because nothing is demanded from the judgment-debtor by way of penalty. kashmiro bibi air1933all252 .the only principle which was laid down in this case was that the provisions of section 74 of the indian contract act applied to a compromise decree as well and the court executing the decree could go behind it so as to interfere with the stipulation by way of penalty contained in the compromise. ' this observation clearly means that the clause would become penal only when the penalty imposed is in excess of the amount claimed. the clause in the compromise decree is not like clauses where a penalty -is prescribed for default of payment. the judgment-debtors did not like to..........and, therefore, the decree was not executable. the second ground was that the default clause was a penal clause, as provided under section 74 of the indian contract act. the third ground was that the decree was a nullity. the fourth ground was that the decree has been fully satisfied. these objections did not find favour with the executing court and the objection filed by the judgment-debtor appellant under section 47, c. p. c., was dismissed. being dissatisfied the judgment-debtor appellant filed an appeal. the lower appellate court agreed with the findings of the executing court and dismissed the appeal. hence, this execution second appeal.3. it was strenuously argued that the default clause being penal was not enforceable, as provided under section 74 of the indian contract act.4. in.....
Judgment:

K.N. Srivastava, J.

1. This is an Execution Second Appeal arising out of the following facts:

The decree-holder respondents filed a suit for ejectment and arrears of rent against the judgment-debtor appellant. They prayed for ejectment of the judgment-debtor appellant from three portions of land. Over one portion a Gumti stood, and the other two portions were open pieces of land. The suit resulted in a compromise decree. By this compromise decree, the defendant was allowed to pay all the arrears of rent within a period of three months. He was also to give possession of the two vacant pieces of lands within a month. The defendant judgment-debtor was allowed to remain tenant of the Gumti. But, if the first two conditions were not satisfied within the time stipulated in each of them, the whole decree was to be executed with costs, including that portion over which the defendant-appellant was allowed to remain as tenant.

2. According to the decree-holder respondents, the appellant made defaults in the first two conditions and, therefore, the decree was executed for all the reliefs contained in the plaint, as stipulated in the compromise decree. The appellant, inter alia, pleaded that there was a renovation o contract in so far as the decree-holders accepted the rent of subsequent periods and, therefore, the decree was not executable. The second ground was that the default clause was a penal clause, as provided under Section 74 of the Indian Contract Act. The third ground was that the decree was a nullity. The fourth ground was that the decree has been fully satisfied. These objections did not find favour with the executing Court and the objection filed by the judgment-debtor appellant under Section 47, C. P. C., was dismissed. Being dissatisfied the judgment-debtor appellant filed an appeal. The lower appellate Court agreed with the findings of the executing Court and dismissed the appeal. Hence, this execution second appeal.

3. It was strenuously argued that the default clause being penal was not enforceable, as provided under Section 74 of the Indian Contract Act.

4. In order to appreciate this point it has to be seen as to what is the penal clause in the Indian Contract Act. Section 74 of the Indian Contract Act speaks of a penal contract. In the instant case, the penal clause is said to have been contained in a compromise decree. A compromise decree is essentially based on a contract. A perusal of the wordings of Section 74 of the Indian Contract Act leaves no room for doubt that it would cover a case where a compromise decree is sought to be enforced by way of execution. There is preponderance of authorities in support of the fact that the provisions of Section 74 of the Indian Contract Act apply to a compromise decree as well, and, therefore, it is needless to quote authorities on this point.

5. Coming to the point as to what is a penal clause, certain facts have to be borne in mind. The first fact which should weigh in deciding this question would be as to whether the decree-holder was claiming something more than what he claimed in the suit, or he claimed in the execution by way of penalty only that much of the just claim to which he was entitled to. The second consideration should be as to whether the just part of the claim was conceded by the defendant judgment-debtor in complying with the terms of the compromise within a certain period. And, the third condition should e as to whether the judgment-debtor failed to comply with the terms of the compromise without any just and proper cause so as to disentitle him to the concession allowed to him by the decree-holder linear the compromise.

6. If we analyse the present case in the above light, we find that the plaintiff decree-holder's claim was that the defendant-judgment-debtor was his tenant of all the three portions of the tenement which consisted of two vacant portions of lands, and the third portion covered with a Gumti. The other relief sought in the suit was for arrears of rent. It cannot be said that the claim put forth by the plaintiff decree-holder was obviously false because any claim put forth in a plaint cannot be presumed to be false unless it is not proved or is disproved. In the instant case, the very wordings of the compromise clearly indicated that the defendant judgment-debtor admitted the title of the plaintiff decree-holders over all the three portions of the land and agreed to vacate the two vacant pieces or land within one month. He also agreed that he was in arrears ol rent and he consented to pay the same within a period of three months. As ft concession for this, he was allowed to remain as tenant over that portion of the land over which the construction stood, on payment of a certain monthly rent. It was, therefore, by way of concession that a part of the just claim was given up by the plaintiff decree-holders and the defendant judgment-debtor was allowed to remain as a tenant of only a portion of the tenement in case he agreed to comply with the terms of the compromise decree.

7. In a case where only a part of the prima facie just claim is given up or conceded in consideration of a certain condition, and on failure to comply with that condition the default clause comes into operation, it cannot be said that it is a penal clause because nothing is demanded from the judgment-debtor by way of penalty. Had the plaintiff decree-holder not conceded a part of the claim for the consideration mentioned in the compromise decree, the whole suit of the plaintiff was likely to be decreed. In my opinion the default clause cannot be said to be a penal clause.

8. In support of their respective contentions, learned counsel for the parties relied on certain earlier decisions and it would be in the fitness of things to discuss them here to find out as to How far these decisions support their respective contentions.

9. The first case relied upon by the learned counsel for the appellant was a Full Bench decision of this Court in Mohiuddin v. Mt. Kashmiro Bibi : AIR1933All252 . The only principle which was laid down in this case was that the provisions of Section 74 of the Indian Contract Act applied to a compromise decree as well and the Court executing the decree could go behind it so as to interfere with the stipulation by way of penalty contained in the compromise. The point that in all the circumstances the default clause comes within the mischief of the penal clause was not discussed in this Full Bench case.

10. The other case was a Division Bench decision by the Oudh Chief Court in Munshi Lal v. Ahmad Mirza Beg, AIR 1933 Oudh 291. In this case reliance was placed on an English decision in John H. Kilmer v. British Columbia Orchard Lands Ltd., 1913 AC 319, where there was a clause of forfeiture of all payments of past instalments of purchase money in case of default of punctual payment of any one instalment. In this case it was held that the default clause amounted to punishment.

11. In Munshi Lal's case AIR 1933 Oudh 291, also, the default clause amounted to a punishment, and, therefore, the following observation was made :--

'We should not be understood to say that the provision as regards forfeiture was, in the case before us, a mild or a reasonable penalty. But what we mean to say is that reading all the conditions together we think that the condition of forfeiture carried with it an element of punishment, and is therefore taking the transaction as a whole, in the nature of a penalty.'

12. In the instant case, there was no question of any penalty being imposed on the defendant judgment-debtor. By the default clause all that was agreed was that the claim of the plaintiff would stand decreed in toto, and the concession made by the plaintiff decree-holder, if other conditions were not fulfilled, would be deemed to have been withdrawn.

13. The next case relied upon by tile learned counsel for the appellant was a decision of this Court in Krishna Kant Misra v. Lalit Mohan Sharma, 1969 All LJ 279. In this case it was observed as below :--

'A clause would be by way of penalty S it entitles a party to something which he would not have been otherwise entitled to at all in the suit.'

This observation clearly means that the clause would become penal only when the penalty imposed is in excess of the amount claimed.

14. The Supreme Court in Fateh Chand v. Balkishan Dass : [1964]1SCR515 , observed as below :--

'Section 74 declares the law as to liability upon breach of contract where compensation is by agreement of the parties pre-determined or where there is a stipulation by way of penalty. But the application of the enactment is not restricted to cases where the aggrieved party claims relief as a plaintiff. The section does not confer a special benefit upon any party; it merely declares the law that notwithstanding any term in the contract pre-determining damages or providing for forfeiture of any property by way of penalty, the Court will award to the party aggrieved only reasonable compensation not exceeding the amount named or penalty stipulated. The jurisdiction of the Court is not determined by the accidental circumstance of the party in default being a plaintiff or a defendant in a suit. Use of the expression 'to receive from the party who has broken the contract' does not predicate that the jurisdiction of the Court to adjust amounts which have been paid by the party in default cannot be exercised in dealing with the claim of the party complaining of breach of contract The Court has to adjudge in every case reasonable compensation to which the plaintiff is entitled from the defendant on breach of the contract. Such compensation has to be ascertained having regard to the conditions existing on the date of the breach.'

15. As against this, the learned counsel for the respondent relied upon a Division Bench decision of this Court in B. Kishen Prasad v. Kunj Behari Lal : AIR1926All278 . The following observation was made in this case :--

'I agree that the terms of the compromise decree make it quite clear that the plaintiffs had agreed to make a concession in favour of the defendants in case the amounts were paid in two instalments within the times fixed. If the amounts were paid in time then the plaintiffs agreed to give up and relinquish the remaining portions of the amount claimed and to excuse its non-payment. This was a concession which they agreed to make in case no default was made. In the present case it cannot be disputed that the default was made at least with regard to the second instalment. The clause in the compromise decree is not like clauses where a penalty -is prescribed for default of payment.'

The facts of this case are almost similar to the facts of the present case.

16. A similar question came up for decision in Ramayan Dubey v. Chitradeo Rai : AIR1969Pat85 . The following observation was made in this case:--

'It was really not in the nature of a penalty as urged on behalf of the judgment-debtors. It is to be remembered that the decree was passed on the basis of a compromise between the parties. The judgment-debtors did not like to contest the claim which the decree-holders had made in the money suit. They only wanted some concession which the decree-holders agreed to give to them on condition that the judgment-debtors paid to them a sum of Rs. 2,000 in full satisfaction of the claim on or before the 23rd October, 1958. This was undoubtedly a 'very favourable term so far as the judgment-debtors were concerned because the sum of Rs. 2000 was less even than the principal amount which was Rs. 2178/-. In other words, what the decree-holders had agreed to forgo was not only the entire interest and costs of the suit, but also a part of the principal sum which had been advanced under the hand note in suit.'

17. In the instant case, the compromise decree was decidedly to the advantage of the defendant judgment-debtor n so far as he was allowed to remain a tenant of a portion of the tenement on a certain monthly rent, provided he complied with the conditions of the decree within the time stipulated therein. It was for Slim to have taken the benefit of this agreement. In case he made a default, he could not be permitted to say that the clause was a penal clause. As observed above, what the decree-holder was to get was nothing more than what he would have got had the entire suit been decreed, rather even less so far as certain amount of costs was concerned. In this view of the matter, the consensus of opinion of this Court as well as of the other High Courts is in favour of the view I have taken in this case.

18. In the result, the argument of the learned counsel for the appellant that the default clause was a penal clause and as such the decree was not executable, has no force in it.

19. The next argument of the learned counsel for the appellant was that the decree-holder respondent accepted the rent for a period subsequent to the period of the decree, and, as such, there was a renovation of the contract of tenancy. This argument too has no legs to stand. The papers on which reliance was placed wera neither proved nor exhibited in this case. They cannot be taken into consideration at this stage in the second appeal. There is, therefore, no evidence whatsoever that the decree-holder respondents accepted any rent from the plaintiff of a period later than the period of the decree which amounted to renovation of the contract.

20. The third point pressed in this appeal was that the decree was a nullity and was not executable. This argument was fully and properly replied to by the trial Court and the lower appellate Court The decree related to three specific plots of land which were fully demarcated and were identifiable at the spot. The decree is, therefore, neither a nullity nor it is unexecutable, as contended by the learned counsel for the appellant.

21. There is no evidence that the decree has been satisfied. On the other hand, there is ample evidence that the defendant-appellant made a default in fulfilment of the conditions of the compromise decree within the time stipulated therein. He was, therefore, liable to be ejected from the entire tenement, that is the two vacant pieces of land, as well as the land on which the Gumti stood.

22. In the result, the appeal fails. It is hereby dismissed with costs. The stay order is discharged.


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