Punjab-Haryana High Court
Gabril India Ltd. vs Arun And Rajive (P.) Ltd. on 23 October, 1986
Equivalent citations: [1989]65COMPCAS155(P&H)
JUDGMENT R.N. Mittal, J.
1. This petition has been filed by the petitioner under Section 433 of the Companies Act, 1956, for ordering winding up of the respondent company.
2. It is stated in the petition that the petitioner filed a suit for recovery of Rs. 3,20,138.67 against the respondent. A compromise was arrived at between the parties therein according to which it was agreed that the respondent would pay Rs. 1,47,072 in six quarterly instalments starting with April 30, 1984, and ending on July 30, 1985. The first instalment would be of Rs. 22,072 (which was paid in the court) and the other instalments would be of Rs. 25,000 each. It was further agreed that in case the defendant defaulted in payment of any of the instalments by the due date, the petitioner would be entitled to recover the whole of the amount, namely, Rs. 3,20,138.67. It is alleged that the respondent did not pay any of the instalments, in spite of notice under Section 434 of the Companies Act.
3. The petition was contested by the respondent. However, it was admitted by it that a decree in the aforesaid terms was passed by the Subordinate Judge, Chandigarh, in favour of the petitioner.
4. During the pendency of the petition, the respondent paid an amount of Rs. 1,25,000. Thus, it paid in all Rs. 1,47,072.
5. Learned counsel for the respondent has contended that the amount of Rs. 3,20,138.67 claimed by the petitioner was by way of penalty and that consequently, he could not recover that amount. He could recover only Rs. 1,47,072 which has already been paid to him. In support of his contention he refers to Abdul Ghanisab v. Alampalli Nanjunda Setty, AIR 1962 Mys 9 and Mohiuddin v. Mt. Kashmiro Bibi, AIR 1933 All 252 [FB]. On the other hand, Mr, Kapur, learned counsel for the petitioner, has argued that the petitioner is entitled to recover Rs. 3,20,138.67 in terms of the decree and that this court cannot go behind the decree.
6. I have duly considered the arguments of learned counsel. However, I agree with the submission of Mr. Bhagirath Das. According to the compromise decree, it was agreed that if the respondent failed to pay a sum of Rs. 1,47,072. in instalments, it would be liable to pay Rs. 3,20,138.67. The payment of an amount in excess of Rs. 1,47,072 is by way of penalty and is violative of Section 74 of the Contract Act. It is well settled that Section 74 is applicable to compromise decrees. Mulla, in his well-known treatise on the Indian Contract and Specific Relief Acts, 9th edition, page 577, dealt with this matter as follows :
" Accordingly, a conventional larger sum agreed upon as payable in the event of failure to pay a smaller sum, or in such an event among others, is treated as penal only."
7. I am fortified in the above view by the observations of the Full Bench of Allahabad High Court in Mohiuddin's case, AIR 1933 All 252, wherein it is held that Section 74 of the Contract Act does apply to a compromise decree and that it is open to a court executing such decree to go behind it so as to interfere with a stipulation by way of penalty contained in the compromise. A similar matter came up before the Mysore High Court in Abdul Ghanisab'$ case, AIR 1962 Mys 9. In that case, a suit for a sum of Rs. 1,970-13-6 was filed in the court in which a consent decree was made against the judgment debtor for a sum of Rs. 700. The amount was to be paid in two equal instalments. It was further provided that if the judgment debtor committed default in making the payment, the decree-holder would be entitled to recover the entire sum of money claimed in the plaint from the judgment-debtor. It was observed therein that the provision for the payment of the amount claimed by the decree-holder in the plaint, if there was default in the payment of any one of the instalments payable tinder the consent decree, was clearly in the nature of a penalty and the executing court had power to relieve the judgment-debtor of it. I am in respectful agreement with the view expressed in both the cases. Consequently, I am of the view that the petitioner was entitled to recover only Rs. 1,47,072 from the judgment debtor and not Rs. 3,20,138.67 as mentioned in the compro mise decree in case of default. The amount of Rs. 1,47,072 has been paid by the respondent to the petitioner.
8. Consequently, I do not find any merit in the petition and dismiss the same. However, I am of the view that the respondent is liable to pay the costs of the petition to the petitioner as the respondent paid the agreed amount during the pendency of the petition.