Financial Corporation Vs. M/S Man Industrial Corporation Ltd  Insc 413 (26 August 2003)
N. Variava & H. K. Sema. S. N. Variava, J
Appeal is against an order dated 13th September, 1996 passed by the High Court of Rajasthan.
stated the facts are as follows:
Appellants had sanctioned a loan to the Respondents against security of a
mortgage. As the Respondents failed to repay the loan the Appellants filed an
application under Sections 31 (1) (a) and (c) and 32 of the State Financial
Corporation Act for recovery of a sum of Rs. 10,89,265.88. Parties compromised
the dispute and signed a deed of compromise. The relevant terms of the
compromise deed read as follows:
xxx xxx xxx
That the company hereby confirm the balance dues of the Corporation (after
deduction of Rs. 1,00,000/- (Rupees one lakh only) received on 1.4.1976) as on
5.9.1977 at Rs. 12,08,806.83 ps. (Rupees Twelve lakhs eight thousand eight
hundred six and paisa eighty three only) as per the statement of account
enclosed herewith and agree to pay the said dues as follows alongwith future
interest @ 5% above the bank rate prevailing from time to time subject to a
minimum of 13-1/2% per annum or at such other rate of interest as may be
decided by the Corporation for similar advances from time to time, with half
yearly rests on product basis and expenses and cost of litigation. The
increased rate of interest shall apply from the 1st January, 1977. (emphasis supplied) xxx xxx xxx
That the company and the Corporation further specifically agree that on non
payment of consenting two installments of the repayment of the loan for the
loan or interest or expenses hereinabove mentioned or on breach of any of the
terms and conditions of this compromise, the Corporation shall have the right
to receive the whole dues in one lump-sum and to get the compromise decree
executed by sale of mortgaged and attached properties and to ask the lessee to
pay the rent directly to the Corporation." On 22nd September 1977 an Order came to be passed wherein it was recorded
that the parties had compromised and that they had filed the compromise deed in
Court. The Order then reproduces the entire compromise deed. Clause 5 of the
Order, which is relevant, reads as under:
Therefore, the application is allowed and the suit is decreed in terms of
compromise in favour of plaintiff- corporation and against the defendant of Rs.
12,08,806 and 83 paise only. The defendant shall pay the interest on this
amount at the rate of 5% more than the current Bank interest rate which all not
be less than 13-1/2% and the cost of the suit shall be paid by the defendant.
The increased rate of interest shall be effective w.e.f. 1.1.1978.
above amount be paid in the installments as per the terms of the compromise.
The compromise shall form part of the decree and the corporation shall be
entitled to realize the amount of compromise decree from the property of the
defendant which is mortgaged with the corporation and the same has been
attached." (emphasis supplied) Payments were not made, as contemplated by
the compromise deed. The Appellants thus initiated execution proceedings on 5th February 1987. As has become common nowadays, the
Respondents filed an application under Section 22 of the Sick Industrial Companies
Act, 1985. They thus managed to effectively delay execution.
for the Respondents the Board directed winding up of the Respondent company.
The Respondents filed an appeal before A.A.I.F.R. The Respondents submitted a
rehabilitation scheme wherein it was shown that a sum of Rs 62.72 lakhs was to
be paid to the Appellants. On 18th August, 1994
A.A.I.F.R. passed an order directing that a sum of Rs 62.72 lakhs be paid to
the Appellants so that the properties could be released from mortgage. The
Respondents do not pay the amount. They now cannot also delay execution any
On 27th September, 1995 i.e. more than 9 years after the
execution proceedings were filed, the Respondents file an application, under
Section 151 of the Civil Procedure Code objecting to the calculation of
interest with half yearly rests. The executing Court overruled the objections
and directed execution. The Respondents file a Revision Petition before the
High Court. This has been allowed by the impugned Judgment. The High Court has
held that that the Appellants are not entitled to charge interest on half
yearly rests basis. Hence this Appeal.
behalf of the Appellants Mr Jain submitted that the decree was in terms of the
compromise deed. It was submitted that the compromise deed, which had been
signed by both the parties, clearly provided that interests could be charged on
half yearly rests basis. It was submitted that under Order 23 Rule 3 Civil
Procedure Code the Court has to pass the decree in terms of the compromise. It
was submitted that the words "the defendant shall pay the interest on this
amount at the rate of 5% more than the current Bank interest rate which are not
be less than 13 1/2 %" do not alter the main provision in the compromise
deed whereunder interest is payable with half yearly rests. It is submitted
that through inadvertence the Court has omitted to mention that interests is
payable with half yearly rests. It was submitted that the High Court has
exceeded its jurisdiction under Section 115, Civil Procedure Code, by
revising/modifying the decree. It was submitted that the High Court overlooked
the fact that the decree had been passed in pursuance of a compromise deed
signed by the parties.
against this Mr Diwan, on behalf of the Respondents, submitted that the High
Court had correctly held that the decree did not provide for interests on half
yearly rests basis. Mr Diwan submitted that, even though the Respondents signed
the compromise deed, they were not agreeable to payment of interest from 1st January, 1977 as in the compromise deed the sum
of Rs 12,08,806.83 was the figure payable along with interest on 5th September, 1977. It was submitted that the
Respondent was also not willing to pay interest with half yearly rests. It was
submitted that the Respondent was also not willing to pay expenses. It was
pointed out that on 12th September, 1977 when the compromise deed was filed in
Court time was taken for arguments. It was submitted that on 21st September, 1977 the Court heard arguments. It was
submitted that the final Order was dictated on 22nd September, 1977. It was pointed out that the Order dated 22nd September, 1977 read as follows:
dictated and pronounced. Amount compromised at Rs. 12,08,806.83 be decreed in favour
of the applicant and against the Defendant. Compromise be attached to decree.
Installments be paid as mentioned in the compromise Order issued on the matter
of interest also. Decree be prepared as per Order passed today.
be attached to the Decree" (emphasis supplied) It was submitted that after
hearing arguments the Court whilst passing the decree in terms of the
compromise modified the compromise deed in three aspects viz
increased rate of interest was to be payable with effect from 1st January, 1978
instead of 1st January, 1977
Court did not allow charging of interest on half yearly rests basis
were not permitted.
submitted that the final decree which had been drawn up contained the above-
mentioned three differences. It was also submitted, rather faintly, that the
Appellants themselves understood that in the final decree interest had not been
granted on half yearly basis. The application for execution of decree was shown
to Court. It was submitted that paragraph 7 clearly indicates that the
Appellants themselves understood that they had not been granted interest with
half yearly rests. Paragraph 7, which has been relied upon reads as under:
Amount with interest due On the decreetal amount of upon the decree or other Rs.
12,08,806/- the rate of relief granted thereby interest will be @ 5% more
together with particulars than the prevalent bank rate or any cross decree and
not less than 13-1/2% from 1.1.77 to 2.2.87 = Rs. 46,59,920.83. Cost of
litigation Rs. 12.50/- cost of execution Rs. 10/-." At this stage itself
it must be mentioned that along with the application for execution a statement
showing interest due has also been annexed. The statement clearly indicates
that interests has been calculated on half yearly basis. There is thus no
substance in the submission that paragraph 7 indicates that the Appellants
themselves understood that interest on half yearly basis was not granted under
submitted that if the Court were to hold that the decree was in terms of the
compromise deed then the decree would be uncertain and incapable of being
executed as it would be unclear whether the future interest was to be at the
rate of 5% above the prevailing bank rate subject to a minimum of 13 1/2% per
annum or whether the future interest was to be at such other rate of interest
as may be decided by the Corporation for similar advances from time to time. It
was submitted that it would be unclear and uncertain as to what was meant by
the words "with half yearly rests on product basis". It was submitted
that it would be unclear whether the half yearly rests on product basis was to
be only applied if the rate of interest was to be decided by the Corporation
and not if the rate of interests was to be 5% above the prevailing bank rate
subject to a minimum of 13 1/2 %. It was submitted that the final decree which
had been passed removed these uncertainties by providing for simple interest at
the rate of 5% above the prevailing bank rate subject to a minimum of 13 1/2%.
submitted that the decree being clear the executing Court could not go behind
the decree. It was submitted that the executing Court erred in rejecting the
objections raised by the Respondents. It was submitted that the Respondents
could have led evidence to show that it was pursuant to the arguments made
before the decree was passed that the trial Court made the aforementioned three
changes whilst passing the decree.
was placed on the case of Vasudev Dhanjibhai Modi v. Rajabhai Abdul Rehman reported
in 1970 (1) SCC 670. In this case it had been held that the executing Court
cannot go beyond the decree.
been held that the executing Court must take the decree according to its tenor.
It was held that the executing Court cannot entertain any objection that the
decree was incorrect in law or in fact.
held that the decree, even if erroneous, is binding between the parties.
is also placed on the case of Greater Cochin Development Authority v. Leelamma Valson
reported in 2002 (2) SCC 573. In this case a decree was passed in terms of the
award given by the arbitrators. The decree provided for interest only up to the
date of the decree. Thereafter an application, under Section 114 Civil
Procedure Code, was made for modification of the decree on the ground that
"by an accidental slip, omission or oversight" future interest from
the date of the decree to payment had not been provided for. This application
was rejected. It was held that there was no omission or slip. It was held that the
Court had not granted any future interest. No appeal was filed against this
order. In the execution proceedings future interest was also claimed. The
executing Court refused future interest but the High Court, in Appeal,
construed the decree and held that the decree was in terms of the award and the
arbitrators had granted interest till payment. The High Court held that
therefore future interest was payable and allowed execution even for future
interest. This Court held that the reasoning of the High Court would normally
have been faultless. In other words this Court held that when a decree is in
terms of award (or some other document like a compromise deed) the terms of
that award/document have to be looked that to see what is provided in the
decree. However on facts of that case this Court held that in the earlier
application, under Section 114 Civil Procedure Code, it had already been held
that the Court had refused future interest. This Court held that once future
interest had been refused and no appeal had been filed against that Order,
subsequently future interest could not have been granted.
was also placed on the case of Bhawarlal Bhandari v. Universal Heavy Mechanical
Lifting Enterprises reported in 1999 (1) SCC 558. In this case the judgment
debtor challenged the decree, when it was before the executing Court, on the
ground that the award on which the decree was based was a nullity. It was
submitted that the award had been filed in Court by the arbitrator 4 years
after it was passed. This Court held that the executing Court could not go
beyond the decree. It was held that the executing Court had to take the decree
according to its tenor and that the executing Court could not entertain any
objection that the decree was incorrect in law or on facts.
was next placed on the case of Rameshwar Dass Gupta v. State of U.P. reported
in 1996 (5) SCC 728. In this case it was held that the executing Court cannot
travel beyond the decree. It was held that the executing Court only got
jurisdiction to execute the decree. It was held that the executing Court could
not granted interest, on the money decree, when interest was not granted in the
was next placed on the case of C.V. Rajendran v. N. M. Muhammed Kunhi reported
in 2002 (7) SCC 447 wherein it has been held that principles of res judicata
applied even to different stages of the same proceeding. It has been held that
if an issue has been decided at an earlier stage it cannot be allowed to be
re-agitated at a subsequent stage.
on the above authorities Mr Divan submitted that the decree being clear the
executing Court could not go beyond the decree on the basis that there was a
mistake in the decree. He submitted that the decree had been passed after
hearing arguments on behalf of both the parties on what the final decree should
be as per the compromise deed. He submitted that even on principles of res judicata
the Appellants are precluded from now contending that they were entitled to
interest on half yearly basis.
Mr Divan made a With Prejudice Offer. He stated that the Respondents are
willing to pay to the Appellants a sum of Rs 75 lakhs in full and final
settlement of all the claims of the Appellants.
have considered the rival submissions. There can be no dispute to the
proposition that the executing Court cannot go beyond the decree. There can be
no dispute that the executing Court must take the decree according to its
tenor. Also as has been set out in the Greater Cochin Development Authority's
case (supra) when a decree is in terms of an award/document then the terms of
that document have to be looked at. In this case the decree is in terms of the
compromise deed. The decree does not provide that the compromise deed or any of
its terms have been varied. To be remembered that the decree is passed under
Order 23 Rule 3 Civil Procedure Code. Under this provision normally the Court
passes the decree in terms of the compromise. Of course the Court can make a
change. However if the Court was making a change it would have had to record
why it was making the change and what change it was making. It could not then
provide that the decree was in terms of the compromise. If the Court was not
passing the decree in terms of the compromise then this opening portion of the
decree could not have been there. The subsequent portion is mere classificatory
in nature as to which of the options was to be exercised. This does not govern
or detract from the main terms of the decree which is a decree in terms of the
compromise. Clauses 2 and 7 of the compromise deed make it very clear that the
Appellants were entitled to charge interest on half yearly basis. We see no
substance in the submission that the "half yearly rests" was to apply
only if the rate of interest was to be decided by the Appellants. These words
clearly applied to both the options. In the classificatory portion the words
"on half yearly basis" have not been mentioned because the portion is
only clarifying how interest was to be calculated. This portion thus does not
detract from the fact that the decree is in terms of the compromise deed.
Merely because some other minor changes, which appear to be inadvertent
changes, have crept in do not also detract from the fact that the decree is in
terms of the compromise deed. We also do not find any uncertainty in the
this view of the matter we are unable to sustain the impugned Judgment. It is
accordingly set-aside and the Order of the executing Court is restored.
Appeal is allowed accordingly. There will be no order is to cost.