Kumar Malik Vs. Surinder Kumar Malik  INSC 1376 (4 August 2009)
Sinha & Deepak Verma
SCR 479 The Judgment of the Court was delivered by Deepak Verma, J.
Parties to the litigation are real brothers having spent their
childhood with cheer and joy in the courtyard, are here, now fighting tooth and
nail for theirf respective shares in a piece of plot admeasuring 3149.75 sq. yds.
allotted to the partnership firm, viz., M/s. Narinder Kumar Malik & Surinder
Kumar Malik at D-2, Udyog Nagar, Rohtak Road, New Delhi.
Even though the partnership business could never commence but the
plot in question continued to be owned by both of them as partners of the firm
to the extent of 50% each. On account of differences having arisen between the
parties, the present appellant-Narinder Kumar Malik was constrained to file a
suit bearing No. 779 of 1997 before the High Court of Delhi, later transferred
to the Court of Additional District Judge, Tis Hazari, Delhi and was numbered
as 289 of 2004, claiming 1/2 share in the aforesaid piece of land allotted to
the partnership firm.
The respondent filed a written statement and took an objection
that the property was owned by a partnership firm and thus the suit for
partition was not maintainable and rather a suit for dissolution of partnership
firm ought to have been filed.
During the pendency of the proceedings of the suit, the defendant
(respondent herein) filed an application under O.VII R. 11 of the Code of Civil
Procedure (for short, `CPC') for dismissing the suit on the ground that it did
not disclose any cause of action as the property was owned by a partnership
firm, whereas the appellant herein filed an application under O.XII R 6, CPC
praying therein that on account of admission having been made by the
respondent, judgment and decree on the said admission be passed.
Both the applications came to be considered by the learned trial
Judge on 04th November 2004. By the said order, the application filed by the
respondent under O.VII R. 11, CPC came to be dismissed. However, the
application filed by the appellant herein under O.XII R.6 CPC came to be
allowed and a preliminary decree of partition was passed in the following
terms:- "12. In view of my above discussion, the application of the
defendant under order 7 rule 11 CPC is hereby dismissed and application under
order 12 rule 6 CPC is hereby allowed. A preliminary decree of partition is
passed with the direction to the parties to decide the means of partitioning
the plot in question and in case they failed to partition the plot by
themselves, a Local Commissioner may be appointed by the court for suggesting
case is now adjourned for 8.12.2004 for further proceedings."
Feeling aggrieved and dissatisfied with the said order respondent
herein, viz., Surinder Kumar Mail was constrained to file appeal in the High
Court of Delhi at New Delhi registered as R.F.A. No. 649 of 2004 reiterating
the grounds taken in the written statement and in the application filed by him
under O.VII Rule 11 of CPC.
It appears, during the pendency of the said appeal in the High
Court, good sense prevailed upon the two brothers and they arrived at a
settlement and pursuant thereto "Memorandum of Understanding"
(hereinafter referred to as `MOU') came to be executed between themselves on
09th February 2005 at Delhi.
It is pertinent to mention here that this MOU was arrived at also
on account of the strong belief of the Division Bench of the High Court that
the parties being real brothers should settle the matter among themselves
through mediation. Accordingly, on 17th December 2004 an order was passed, with
the consent of the parties, that both the brothers would appear before Mr. M.L.
Mehta, Addl. District Judge, Delhi who was requested to be a mediator. On 17th
March 2005 it was noted by the High Court that parties have entered into a
settlement as MOU was already entered into between the parties on 09th February
2005. However, despite settling the matter outside the Court on their own terms
and conditions, it appears that the dispute between them did not come to an
Some of the relevant and salient terms and conditions of the MOU
are reproduced here in below:
that Party No.1 has agreed to sell his share i.e. 50% area of the said
Industrial plot to party No.2 at the settled and agreed consideration of Rupees
three crores fifty lacs only and party No.2 has agreed to purchase the said
share at the said consideration.
the second party has paid a sum of Rs. 10,00,000.00 (Rupees ten lacs) in cash
and Rs. 15,00,000.00 vide Payee's A/c Cheque No. 131112 dated 05.02.2005 drawn
on UCO Bank, Punjabi Bagh in favour of the first party as a token money and in first
party has accepted the same.
that as agreed the second party shall make the balance payment of Rs. 3.25
crores within a maximum period of 150 days the date of execution of this, MOU
i.e. upto or before 9th day of July, 2005. However, this period of 150 days is
extendable by another 10 to 20 days, if need be, with the consent of both the
parties but not more.
on receiving the full consideration of Rupees three crores, fifty lacs the
first party shall execute the necessary documents like GPA, Release Deed, Sale
Deed etc., as advised in favour of the second party or his nominee and hand
over the physical, peaceful and vacant possession of his share to the second
party or his nominee as the case may be.
the First Party i.e. Shri Narinder Kumar Malik is presently out of India, but
his counsel/advocate Shri J.R. Bajaj along with Shri Rohit Malik son of the
first party and Shri Ashok Kumar Marwaha, Advocate, have been authorized to
sign this MOU for and on his behalf.
both the parties shall be jointly responsible for payment of ground rent/lease
money and all other statutory taxes etc., in respect of the Industrial Plot
upto the date of execution of this MOU, but thereafter only party No.2 and/or
his nominee shall be liable to pay the same.
that all the expenses like stamp duty, registration charges etc., for the
registration of necessary documents shall be borne by party No.2 or his nominee
in whose favour the documents of ownership are to be executed.
On 12th May 2005 despite having arrived at a settlement, High
Court directed them to approach the learned mediator for resolving their points
of differences, if any, but, instead of resolving the same, their difference
continued to rise.
A registered notice dated 22nd June 2005 was not sent to the
appellant by respondent's advocate Mr. Harish Malhotra mentioning therein that
his client, viz., the respondent herein is ready with the balance payment as
mentioned in the said MOU and despite apporaching the appellant, he has not
been honouring the same. Appellant replied to the said notice through his
advocate Shri Anuj Sehgal on 30th June 2005 denying the averments made in the
notice and calling upon the respondent to pay the balance sum of Rs. 3.25 crores
to him on 07th July 2005 at 10.00 a.m. at 885, East Park Road, Karol Bagh, New
Delhi. On payment of the aforesaid amount, it was categorically mentioned by
the appellant that necessary transfrer dcouments for transfer of his share of
the property in the name of the respondent or his nominee would be executed.
It was further mentioned in the said reply to the notice that in
case there is any default committed by the respondent to pay the balance amount
on the said date or latest by 09th July 2005 as contemplated in the MOU then in
that eventuality MOU would stand cancelled and the appellant would no longer be
bound by the said MOU dated 09th July 2005.
It appears from the record that despite giving a fixed time to the
respondent for compliance of the terms and conditions of the MOU, respondent
did not honour the commitment and instead continued to send notices through his
advocate, which were replied to by the appellant.
During all this period, the appeal filed by the respondent in the
High Court remained pending and it came up for hearing before the Division
Bench on 19th July 2005. On the said date, learned counsel appearing for the
parties informed that negotiations have failed as both of them were making
allegations against each other. On the said date, it was further informed that
respondent is still ready and willing to pay the balance sum of Rs. 3.25 crores
in terms of the MOU, but, counsel for the appellant said that since no payment
was received by the last date, i.e. 09th July 2005 as mentioned in the MOU, the
time cannot be extended. In the said order, it was further directed that the
amount of Rs.25 lac, which was received by the appellant during the pendency of
the appeal, be returned to the respondent within a week.
In spite of the aforesaid order, the respondent filed an
application being C.M. No.12796 of 2005 before the High Court seeking a
direction to the appellant to execute necessary transfer documents in terms of
On 04th April 2006, a statement was made by the parties that no
settlement is possible between them and the appeal was directed to be listed
for hearing on 14th July 2006.
However, on 11th October 2006, yet another statement was made by
the learned counsel appearing for the parties that they are making another
attempt to find an amicable solution and thus prayed for time. Consequently,
appeal kept on being adjourned from time to time. But it came up for hearing
again on 18th July 2007. On the said date, the Division Bench passed an order,
the relevant portion whereof is reproduced here in below :
counsel for the appellant claims that the appellant was ready and willing to
implement the settlement and had raised the funds therefore, counsel for the
respondent disputes the same. Coursel for both the parties are conscious of the
fact that as a result of passage of time, there have been change in the values
of the assets etc. Both of them, however, are desirous of making yet another
attempt of an amicable settlement, since appellant and the respondent happen to
be the brothers.
circumstances, we consider it appropriate to refer the matter to Delhi High
Court Mediation & Conciliation Center for mediation.
Chandhiok, Sr. Advocate is appointed as the mediator along with Ms. Swati Singh
as the co-mediator. Both the parties will deposit Rs.2500/- each with Delhi
High Court Mediation & Conciliation Center and shall appear before it on
23.7.2007 at 4.30 P.M.
matter before the court on 21.8.2007"
The aforesaid order would show that parties were once again given
an opportunity to iron out the differences between them. But despite the best
efforts made by the learned Judges of the High Court, the Mediator and the
senior advocate appointed in this behalf they were not able to convince the
parties that it is a fit case where an amicable settlement must be arrived at.
Thus, on 24th January 2008 a statement was made that mediation talks have
failed. The matter, then came up for hearing again before another Division Bench
of the High Court on 24th July 2008, but learned counsel appearing for the
parties thought that there is still light at the end of the tunnel and prayed
for two weeks' time for arriving at a lasting settlement between the parties.
Since nothing worked on that, the matter was, finally taken up by the High
Court on 08th September 2008 and appeal of the respondent was allowed in terms
of the directions contained in para 39 of the impugned judgment which are
reproduced hereinbelow :
thus dispose of the application and along therewith the appeal by passing the
following directions :- (A) The appellant shall deposit Rs. 3.5 crores with the
learned Trial Judge within a period of 2 weeks from today. (The appellant is
being directed to deposit Rs. 3.5 crores because the appellant has received
back Rs.25 lacs pursuant to interim orders passed in the appeal).
with the deposit, the appellant shall file a draft of the document which the
appellant desires to be execute by the respondent to convey respondent's 50%
share in the subject property.
learned Trial Judge would thereupon finalize the document to be executed and
the respondent would thereafter execute the document drawn up and ond execution
of the same would be entitled to received Rs. 3.5 crores from the learned Trial
Appellant, feeling aggrieved and dissatisfied with the aforesaid
direction contained herein, has preferred this appeal.
Ms. Indu Malhotra, learned senior counsel appearing on behalf of
the appellant contended that in the MOU a specific date was fixed for payment
of balance consideration by or before 09th July 2005 and respondent having
failed to honour his commitment by the said date and time being the essence of
the contract, MOU could not have been directed to be implemented by the High
It was also contended that it being a contingent contract
dependent on execution of the terms and conditions mentioned in the M.O.U. and
respondent having failed to honour his own commitment, the same cannot be given
Mr. Raju Ramchandranm learned senior counsel appearing for the
respondent contended that at all material times, the respondent had been ready
and willing to perform his part of the contract but for some reason or the
order and also keeping in mind that the price of the disputed plot has
substantially shot up, the appellant is making excuses not to comply with the
direction as contained in the said order.
It was also contended by him that the appellant would be required
to pay unearned increase of the plot to the Delhi Development Authority and,
therefore, he has taken somersault from complying with the directions.
In the light of the aforesaid contentions, we have heard learned
counsel for the parties and perused the record.
It is pertinent to mention here that the amount was deposited by
the respondent only on 04th October 2008 whereas in the impugned order passed
by the High Court two weeks' times was granted to him to deposit the sum of
Rs.3.5 crores. From the aforesaid date it would be clear that the amount, as
directed to be deposited by the impugned order, was not deposited by the
respondent within the stipulated time. Instead, the same was done much after
the last/stipulate date.
To ascertain if the time was the essence of the contract, we have
to go through Condition No. (iii) of the MOU which categorically mentions that
the second party, viz., the respondent herein shall make the payment of the
balance amount of Rs. 3.25 crores within a maximum period of 150 days from the
date of execution of the MOU, i.e., upto or before 09th July 2005.
this period of 150 days was extendable by another 10 to 20 days, if need be
with the consent of both the parties but not more.
High Court certainly fell into error in construing the said
provision in right perspective and erred in coming to the conclusion that since
time was extendable, the time could not have been made the essence of the
A bare perusal of the aforesaid provision makes it clear that
ultimately the time was fixed only up to 09th July 2005. However, with an
intention to given further leverage to the respondent herein, the time was made
extendable by 10 to 20 days and not more and that too only with the consent of
the parties. Even if it is said that 09th July 2005 could not have been the
last date, at least after 20 days the said last date expired.
the respondent has not honoured his commitment, within the extendable period
given to him, even though he had no right to claim the benefit as of right for
the extendable period.
The respondent sent the photocopies of three pay orders two of
which were for a sum of Rs.1 crore each and the third one for a sum of Rs.1.25
crore. It was neither here nor there as the originals were never tendered to
the appellant and only photocopies were sent to make a semblance that
respondent has been ready and willing to perform his part of the contract.
had already been arrived at between the parties then mere show of readiness and
willingness would not discharge the obligation resting on one of the parties
unless it is shown to be real and genuine.
From the conduct, behaviour and attitude of the respondent it is
clearly made out that he had not been ready and willing to perform his part of
the contract as mentioned in the MOU.
Ms. Indu Malhotra, learned senior counsel for the appellant has
placed reliance on a judgment of this Court in the case of Star Construction
and Transport Co. & Ors. vs. India Cements Ltd. (2001) 3 SCC 351 and laid
emphasis on paragraph 7 thereof which reads thus :
In this case, application are filed under Order 23 Rule 3 CPC. This Rule is a
provision for making a decree on any lawful agreement or compromise between the
parties during the pendency of the suit by which claim is satisfied or
adjusted. The agreement, compromise or satisfaction may relate to the whole of
the suit or part of the suit or it may also include matters beyond the
subject-matter of the suit. But Rule 3 clearly envisages a decree being passed
in respect of part of subject- matter on a compromise. Whether in fact there
has been compromise or adjustment of suit claim or any part thereof is itself
put in dispute in this case. Unless it is clearly established that such accord
or compromise has been entered into between the parties, the powers under order
23 Rule 3 CPC could not be exercised. The respondent's case is that the claim
made in the suit were never before the arbitrators in any form and even the
figures mentioned in the reconciliation statement also do not pertain to the
suit claim and the scope of reference to the arbitrators does not enable them
to make an award on that aspect of the matter. Those objections have to be
dealt with appropriately on full trial. That is the course now adopted by the
Division Bench of the High Court."
She has further placed reliance on yet another judgment of this
Court in the case of United Bank of India vs. Ramdas Mahadeo Prashad & Ors.
SCC 252 particularly paragraphs 7 and 9 thereof which are reproduced here in below
Undisputedly, the respondents did not withdraw the suit filed by them against
United Bank of India, which is the condition precedent stipulated in clause (1)
of the MOU. The respondents also did not pay the guarantee liability of Rs.2.33
lakhs. No compromise petition was filed before an appropriate court. Therefore,
by no stretch of impanation can it be said that the terms and conditions
stipulated in the MOU had been complied with and acted upon by the parties.
Apart from what has been said, subsequent to the MOU there was also a lot of
correspondence between the parties by exchanging letters giving offers and
counter-offers, as would be revealed in the letters dated 16.6.1994,
23.12.1994, 12.6.1995, 15.6.1995 and 19.6.1995. All these correspondences would
go to show that the parties failed to arrive at a consensus even on what were
the terms of the MOU.
is clear that there was no concluded contract nor was there any notation.
Ranjit Kumar, learned Senior Advocate contended that in view of the MOU signed
by the parties the original contract stood substituted by the MOU and it is a
fit case where Section 62 of the Indian Contract Act can be invoked. We have
already said that there was no concluded settlement or novation. Even
otherwise, there has been non-compliance with the terms and conditions of the
MOU by the respondents and a party in breach can hardly seek to enforce a
contract. Therefore, the MOU does not amount to novation of contract as
envisaged under Section 62 of the Indian Contract Act. The contention of Mr.
Ranjit Kumar is, therefore, legally untenable."
However, even without referring to the aforesaid judgments, from
the facts as have been mentioned hereinabove, it is as clear as day light that
respondent has committed default of the terms and conditions of the MOU and had
neither been ready and willing nor has been so throughout the relevant period.
Thus, MOU entered into between the parties cannot be given effect to. We
accordingly hold so.
Thus, judgment and decree passed by the impugned order are hereby
set aside and quashed, but, with no order as to costs.
The appeals are allowed accordingly.