REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 5087-5088 OF 2009 [Arising out of S.L.P.(C)Nos.24593-24594 of 2008]

Narinder Kumar Malik ....Appellant Versus

Surinder Kumar Malik .... Respondent

J U D G M E N T Deepak Verma, J. 1. Leave granted. 2. 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 their 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. 3. 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. 4. 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. 5. 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. 6. 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  thefollowing  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 the means. 13. The case is now adjourned for 8.12.2004 for  further proceedings.”

7. Feeling aggrieved and dissatisfied with the said order  respondent herein, viz., Surinder Kumar Malik 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. 8. 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.   9. 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 end. 10. Some of the relevant and salient terms and conditions of  the MOU are reproduced hereinbelow :

“i) 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. ii)  that  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 the  first party has accepted the same. iii) that as agreed the second party shall make the  balance payment of Rs.3.25 crores within a maximum  period of 150 days from 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. iv)  that  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. v) that 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. vi)  that  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. vii)  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.”

11. 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 differences continued to rise.  12.

A registered notice dated 22nd June 2005 was 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  approaching  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  transfer documents for transfer of his share of the property in  the name of the respondent or his nominee would be executed. 13. 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. 14. 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. 15. 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. 16. 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 the MOU. 17. 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. 18. 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  hereinbelow :

“.... While 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.  Counsel 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.

In  these  circumstances,  we  consider  it  appropriate to refer the matter to Delhi High Court  Mediation & Conciliation Center for mediation.

Mr. A.S. 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.

List  this  matter  before  the  court  on  21.8.2007.”

19. 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 :

“We  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). B) Along 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.

C) The learned Trial Judge would thereupon finalize  the  document  to  be  executed  and  the  respondent  would thereafter execute the document drawn up and  on  execution  of  the  same  would  be  entitled  to  receive  Rs.3.5  crores  from  the  learned  Trial  Judge.”

20. Appellant, feeling aggrieved and dissatisfied with the  aforesaid  direction  contained  herein,  has  preferred  this  appeal. 21. 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 Court. 22. 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 effect to. 23. Mr. Raju Ramchandran, 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 other 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.  24. 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. 25. In the light of the aforesaid contentions, we have heard  learned counsel for the parties and perused the record. 26. 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' time 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/stipulated date.

27. 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.   However,  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.

28. 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 contract.

29. A bare perusal of the aforesaid provision makes it clear  that ultimately the time was fixed only upto 09th July 2005.  However,  with  an  intention  to  give  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.   Admittedly,  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.  30. 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.  When MOU 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. 31. 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. 32. 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. v. India  Cements Ltd. (2001) 3 SCC 351 and laid emphasis on paragraph 7  thereof which reads thus :

“7.  In  this  case,  applications  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  the 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.”

33. She has further placed reliance on yet another judgment  of this Court in the case of  United Bank of India v.  Ramdas  Mahadeo Prashad & Ors. (2004) 1 SCC 252 particularly paragraphs  7 and 9 thereof which are reproduced hereinbelow :

“7. 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  imagination  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. Thus, it is  clear that there was no concluded contract nor was  there any novation. 9.  Mr  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.”  

 34.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.

35. Thus, judgment and decree passed by the impugned order  are hereby set aside and quashed, but, with no order as to  costs. 36.The appeals are allowed accordingly.

.........................J. [S.B. SINHA]

.........................J. [DEEPAK VERMA]

New Delhi. August 04, 2009.