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Judgment
C.Nagappan, J.—This appeal is preferred against the Order dated 21.11.2011 passed in Application No. 5028 of 2011 in Tr. C.S. No.
998 of 2008 on the file of this Court. Respondents 1 and 2 in the application are the appellants herein. The case of the second respondent
herein/applicant is that numerous suits were pending on the file of this Court between the parties herein and they settled the disputes by entering
into a compromise on agreed terms and conditions and under the compromise decree dated 19.04.2011 in C.S. No. 998 of 2008, it was agreed
that a basic sum of Rs. 41,00,00,000/- would be paid by the defendants to the plaintiff in the suit and it was further agreed that the appellants
herein would pay the second respondent herein an additional sum of Rs. 9,00,00,000/-, upon an order of regularisation for the eighth and ninth
floors of the subject building from Chennai Metropolitan Development Authority on or before 17.10.2011 and though the second respondent
herein diligently submitted the documents to obtain the order of regularisation, due to the Tamil Nadu State Assembly Elections, all such
applications were not processed in a timely manner and the approval is in its final stage and the regularisation order shall be passed within a short
time and hence, the time granted to obtain the order of regularisation be extended by a further period of three months from 17.10.2011 upto
17.01.2012.
No counter was filed in the application by the appellants herein/respondents 1 and 2 and after hearing both sides, the learned single Judge held
that the provisions of Section 148 of the CPC cannot be a bar to exercise the inherent jurisdiction to do substantial justice between the parties and
in the interest of justice, extended the time as prayed for and consequently, ordered the application as prayed for and the said order is under
challenge in this appeal.
The point for determination in the appeal is as to whether the second respondent herein is entitled for extension of time as granted to it so as to
obtain an order of regularisation under Clause 3 of the consent decree.
The relevant part of the consent decree dated 19.4.2011, reads as under:
That the plaintiff herein agrees that in addition to the consideration of Rs. 41,00,00,000/- (Rupees forty one crores only) paid by them and as
decreed in C.S. No. 732 of 2001 and the plaintiff shall pay an additional consideration of Rs. 9,00,00,000/- (Rupees nine crores only) to the
defendant herein.
That upon the defendant obtaining an order of regularization from the Chennai Metropolitan Development Authority for the 8th and 9th floor in
Rayala Towers 11 & 111 of Rayala Towers on or before 17/10/2011 in terms of G.O.Ms. No. 76, Housing and Urban Development (UDI)
dated 27/02/1999 (hereinafter referred to as the Regularization Scheme).
That in the event the defendant does not obtain the said regularization within time as mentioned in clause (3) supra the plaintiff herein, shall not be
liable to pay the additional consideration of Rs. 9,00,00,000/- (Rupees nine crores only) and right of the defendant to receive the same stands
abated/extinguished and claim of the defendant for the said sum under this decree stands fully discharged.
That however in such an event, the plaintiff shall pay sum of Rs. 54,67,324/- (Rupees fifty four lakhs sixty seven thousand three hundred and
twenty four only) which has been actually expended by the defendant in applying for regularizing the additional construction subject to the same
being duly supported by receipts issued by the Chennai Metropolitan Development Authority and also subject to handing over all records drawings
and relevant papers in connection therewith to the plaintiff herein.
That the plaintiff herein shall be liable to pay the aforementioned sum of Rs. 9,00,00,000/- (Rupees nine crores only) forthwith to the defendant
within seven (7) days of the aforesaid order of regularization.
That if the plaintiff defaults in making such payment within such time the defendant shall be entitled to execute this clause as a decree for money
against the plaintiff herein.
That the parties hereto agree to bear their respective costs.
Mr. P.S. Raman, learned Senior Counsel appearing for the appellants, made the following submissions:
(i) Clause 3 of the Consent Decree constitutes a commercial understanding between the parties, arrived at after due negotiations and after taking
into account various factors and hence, constitute an essential term of the contract and it is not capable of being extended or modified or altered by
the Court without express consent of the parties. The condition for obtaining an order of regularisation from C.M.D.A. is a material commercial
term and not just a ministerial act such as remittance of court fee or payment of costs and hence, time cannot be extended. Granting extension of
time in such commercial transaction, more so in a consent decree, would tantamount to re-writing the contract, which is impermissible in law.
(ii) Inasmuch as parties agreed to a date in a negotiated settlement and no force majeure clause has been consciously inserted, time was clearly the
essence of the contract and such time could not be extended invoking the provision u/s 148 or 151 C.P.C. The cut off date assumes certain
sanctity and either party cannot plead or complain inequity or injustice in not honouring the cut-off date.
(iii) The stipulation and condition in the consent decree confer a benefit to the second respondent and any default in it would not amount to
forfeiture or penalty and only deprive the additional benefit.
The learned Senior Counsel cited the following decisions on this issue.
(I) A learned Single Judge of this Court in the decision in Moorianthakath Ammo v. Matathankandy Vattakkayil Pokkan (52 L.W. 336), held that
when there is a decree based on an agreement between the parties, an essential term which fixes a definite period for the performance of an
obligation as an essential part of the contract, cannot be changed by the Court on the application of one only of the parties but the consent of both
the parties would be necessary to vary the terms of the decree and if the time stipulated is an essential part of the terms of the contract embodied in
the decree and not a mere threat of a penal nature, there is no power in the court to make a new contract for the parties fixing some other time than
that which has been stipulated.
(ii) The said decision was followed in a subsequent decision rendered by the learned single Judge of this Court in Bethanna Nadar v. M. Srinivasan
and others (1962 MLJR 418)= (1961) 74 LW 773, in which it was held that the provision in the compromise decree, which fixed a definite period
for the performance of an obligation as an essential part of the contract, such as deposit of a sum of money by one party as a condition of his
recovering possession of the property and an extension of time, cannot be granted by the court on the application of one only of the parties.
(iii) In the decision in Mahanth Ram Das Vs. Ganga Das, , the Supreme Court held that procedural orders though peremptory (conditional decrees
apart) are, in essence, in terrorem, and they do not however completely estop a court from taking note of events and circumstances, which happen
within the time fixed and the provisions under sections 148 and 149 C.P.C. provide ample power to the Court to do justice to a litigant for whom
it entertained considerable sympathy, and granted extension of time for payment of the deficit court fee.
(iv) The Supreme Court in the decision in Smt. Periyakkal and others v. Smt. Dakshyani (1983 (2) SCC 127) (1983) 96 LW 110 S.N, held that
the parties entered into a compromise and invited the Court to make an order in terms of the compromise, which the court did and the time for
deposit stipulated by the parties became the time allowed by the Court and this gave the Court the jurisdiction to extend time in appropriate cases
and of course, time would not be extended ordinarily, nor for the mere asking and it would be granted in rare cases to prevent manifest injustice
and it is true that the Court would not rewrite a contract between the parties, but the Court would relieve against a forfeiture clause and where the
contract of the parties has merged in the order of the Court, the Court''s freedom to act to further the ends of justice would surely not stand
curtailed.
(v) The Supreme Court in the decision in Sova Ray and Another Vs. Gostha Gopal Dey and Ors, , held that under the agreement the ninth
defendant therein was subjected to the condition that if he had to take advantage of the bargain he was under a duty to pay the stipulated amount
by the time mentioned in the agreement and on failure to do so within time, he was to be deprived of the special benefit and such a clause cannot
be considered to be a penalty clause and it merely deprived the ninth defendant of a special advantage in case of default and on facts, held that the
ninth defendant cannot be permitted to make a grossly belated payment and justice was manifestly in favour of the plaintiffs and further the Clause
in question was not a forfeiture Clause.
(vi) In the decision in Gupta Steel Industries Vs. Jolly Steel Industries Pvt. Ltd. and Another, , the Supreme Court observed that as a principle of
law, the High Court was obviously incorrect in interfering with and modifying the consent decree unless parties agree for the same.
(vii) In the decision in The Blind Relief Association and others Vs. The State of Maharashtra and others, , the learned single Judge of the Bombay
High Court held that the principle is that in a normal case, the Court will not alter the terms of consent decree without the consent of the parties, but
in abnormal circumstances, where it appears to the Court that without the interference of the Court, a serious miscarriage of justice cannot be
obviated, then certainly the Court can exercise its inherent power u/s 151 C.P.C. to step in and on the facts of the case held that the fourth
defendant did not commit any default in making the payment to attract any of the default clauses in the consent decree and he is entitled to the relief
sought for in the Chamber Summons.
(viii) In the decision in D.V. Paul Vs. Manisha Lalwani, , the Supreme Court held that there is no reason to draw a distinction depending on
whether the prayer for extension is in regard to a conditional order or a conditional decree and the heart of the matter is that where the Court has
the power to fix time and that power is not regulated by any statutory limits, it has in appropriate cases the power to extend the time fixed by it and
on the facts of the case, it was shown that there was no deliberate inaction on the part of the appellant in depositing the amount and hence, he has
made out a case for extension of time.
(ix) The Supreme Court in the latest decision in Citadel Fine Pharmaceuticals v. Ramaniyam Real Estates P. Ltd. & another (2011 (6) CTC
112)2001-5-LW 30, held that the stipulation as to the time being the essence of the contract was specifically mentioned in Clause 10 of the
agreement and the express terms of the contract, the commercial nature of the transaction and the surrounding circumstances, make it clear that the
parties intended time was to be the essence of the contract and the suppression of a material fact would disentitle the plaintiff-purchaser from
getting discretionary relief of specific performance by Court.
Per contra, Mr. Srinath Sridevan, learned Counsel appearing for the second respondent, submits that the extension of time for Clause 3 of the
consent decree would depend upon whether time is of the essence and in order to determine as to whether the time is of the essence, it has to be
seen as to whether the failure to fulfill the obligation within the time limit would result in any irreversible change of circumstances for the affected
party and in the present case, there is no irreversible change in circumstances and hence time is not the essence of the compromise decree.
It is his further submission that the duty to obtain regularization order in a time bound fashion has been linked to a governmental action, over
which the second respondent has no say or control and the second respondent has not committed any breach so as to disentitle it to the benefit of
Rs. 9 crores and the teamed Single Judge has rightly exercised the power by granting extension of time as sought for.
In support of his submission, the learned Counsel relied on the following decisions:
(I) In the decisions of this Court in S. Ravindra Reddy V.K. Veerabhadrachari ((1999) 2 MLJ 251) and in Seethai Ammal and Five Others
v.V.C. Vaikundam and Five Others (2002-2 LW 506), the point for determination that arose for consideration, was whether the time granted by
the trial Court for deposit of the cost to comply with a conditional order to set aside the ex-parte decree, can be extended and the learned Single
Judge of this Court in both the decisions, held that the Court has got power to extend the time u/s 148 of the Code of Civil Procedure.
(ii) In the subsequent decision in Padmini Ammal Vs. Indian Bank and S.K. Ramamurthy, , learned Single Judge of this Court held that the Court
has got power to extend the time for payment of the entire amount by the Judgment Debtor in the execution proceedings.
(iii) In the decision in Gowri Ammal Vs. Murugan, Anbu, Sekar and Saroja Ammal, , the question that was referred to the Division Bench of this
Court, was whether the Court has jurisdiction to entertain a petition for extension of time filed u/s 148 read with 151 CPC, even after the dismissal
of the earlier petition for non-compliance of the conditional order within the time stipulated. The Division Bench after referring to various decisions,
held that a conjoint reading of Sections 148, 149 and 151 CPC would make it clear that the Court has power to extend the time beyond the
stipulated period, when sufficient cause exists.
(iv) Subsequently, another Division Bench of this Court in the decision in Canara Bank, Asset Recovery Management Branch Vs. Coromandel
Indag Products, Indag Finance and Guarantee Co. Ltd. and The Debt Recovery Appellate Tribunal , held that the Debt Recovery Tribunal was
competent to extend the period for depositing the amount, since on the facts of the case, time was not being the essence of the compromise
decree.
In addition to the above, learned Counsel for the second respondent also relied on the decision rendered by the learned Single Judge of the
Bombay High Court in The Blind Relief Association Case which is cited supra.
Now the legal position that emerges from the decisions of the Supreme Court, referred to above, has to be seen. The decision of the Supreme
Court in Mahanth Ram Case, was rendered by a Three Judge Bench, which held that in all decrees, except conditional decrees, the Court can
grant extension of time u/s 148 CPC. The subsequent decision in Smt. Periyakkal Case, was rendered by a Two Judge Bench of the Supreme
Court, which held that in consent decrees, extension of time to comply with the decree would not be granted ordinarily, not for the mere asking,
but would be granted in rare cases to prevent manifest injustice. However, the Supreme Court in the said decision, cautioned the exercise of the
power of the Court by observing that the Court would not rewrite the contract between the parties, but it would relieve against a forfeiture Clause.
The subsequent decision in Smt. Sova Ray Case, came to be rendered by a Two Judge Bench of the Supreme Court which held that in the
consent decree, the Clause directing a party to pay a certain sum within the stipulated time, cannot be considered to be a penalty Clause and it
merely deprived the party of a special benefit in case of default and the Clause in question was also not a forfeiture Clause. The decision in Gupta
Steel Industries Case, was also rendered by a Two Judge Bench of the Supreme Court, in which it was observed as a principle of law that the
High Court was incorrect in interfering with and modifying the consent decree unless the parties agree for the same.
It is true that the judgment of the Supreme Court in Smt. Periyakkal Case, was not referred to in the decision in Gupta Steel Industries Case.
However, it cannot be said that these two decisions are in conflict to each other, since the principle in normal case, is that the Court will not alter
the terms of the consent decree without the consent of parties. Thereafter, the recent decision in D.V. Paul Case, was rendered by a Two Judge
Bench of the Supreme Court, in which, it is held that there is no reason to draw a distinction depending on whether the prayer for extension is in
regard to a conditional order or a conditional decree and the heart of the matter is that where the Court has the power to fix time, it has in
appropriate cases, the power to extend the time fixed by it.
From the above, it is seen that extension of time to comply with the consent decree, would not be granted ordinarily; but, in rare or appropriate
cases, to prevent manifest injustice or to relieve against a forfeiture/penalty Clause, the Court can grant extension of time.
In the present appeal, the point for determination is as to whether the second respondent/applicant is entitled to extension of time by three
months as sought for.
As per the terms of the consent decree, the first appellant herein paid a sum of Rs. 41 crores to the second respondent herein in consideration
of both the respondents giving up their claims/rights over Towers - II and III of Rayala Towers and it is also on record that out of the sum of Rs.
41 crores paid, a sum of Rs. 35 crores was being funded by M/s. Kotek Mahindra Bank Limited and in addition to the consideration of Rs. 41
crores, the first appellant would pay an additional consideration of Rs. 9 crores to the second respondent, conditional upon the second respondent
obtaining an order of regularization of the entire 8th and 9th floors in Towers - II and III, from Chennai Metropolitan Development Authority
(CMDA) on or before 17.10.2011. Clause 4 of the compromise decree also states that in the event of second respondent not obtaining
regularization as above, the first appellant shall not be liable to pay the additional consideration of Rs. 9 crores and the right of the second
respondent to receive the sum stands abated/extinguished and the claim of the second respondent for the said sum would stand fully discharged.
However, it is also recited in the decree, that in the event of second respondent not obtaining regularization on or before 17.10.2011, the first
appellant would pay a sum of Rs. 54,67,324/- which has been actually expended by the second respondent in applying for regularization of the
additional construction, subject to production of receipts issued by CMDA, and handing over of records, drawings and relevant papers. The
second respondent failed to get an order of regularization before the time stipulated, namely 17.10.2011, but, however, filed this application
seeking for extension of time by three months from 17.10.2011 upto 17.1.2012 on the ground that it submitted the application seeking for
regularization to the CMDA and on account of State Assembly Election, the application submitted to the concerned governmental authority was
not processed in a timely manner; but, the regularization approval is now in its final stage and the order would be passed within a short time.
No counter was filed to the said application. Rejecting the contention of the respondents in the application, stating that no documentary
evidence was adduced by the applicant, learned Single Judge observed that uncontroverted facts are not required proved being accepted.
The submission of the learned Senior Counsel appearing for the appellants, is that when the application seeking for extension of time came
before the Court, they raised a preliminary objection that the application is not maintainable and did not make any submission on merits of the
application; but, however, the learned Single Judge rejected their contention on maintainability and allowed the application by observing that no
counter was filed to the application.
It is the further submission of the learned Senior Counsel appearing for the appellants, that Clause 3 of the consent decree constitutes a
commercial understanding between the parties, arrived at after due negotiations and constitutes an essential term of the contract and hence not
capable of being extended or modified or altered by the Court without express consent of the parties and merely at the instance of the applicant
and in the event of the second respondent/applicant fulfilling its obligation of obtaining an order of regularization from CMDA within the time
stipulated, namely 17.10.2011, the appellants are liable to pay an additional consideration of Rs. 9 crores and the obligation coupled with the
default Clause, is not in the nature of penalty/forfeiture Clause and the default merely deprived the additional benefit.
It is the submission of the learned Senior Counsel that the first appellant has itself borrowed a sum of Rs. 35 crores from M/s. Kotek Mahindra
Bank and is servicing a sum of Rs. 43,75,000/- every month towards interest to the Bank without being able to market any portion of Towers - II
and III owing to the fact that the said buildings do not have a completion certificate from CMDA and because of the above, no tenant or buyer is
willing to enter into any agreement for lease/sale of the superstructure in the property and as a result of the same, the first appellant is losing heavily.
Learned Senior Counsel for the appellants also submitted that the first appellant has already paid a sum of Rs. 54,67,324/- to the second
respondent/applicant, since the order of regularization was not obtained on or before 17.10.2011.
Per contra, it is the submission of the learned Counsel for the second respondent/applicant that at the time of entering into the compromise, it
was felt that six months would be sufficient to obtain the order of regularization from CMDA and in view of the State Assembly Election and
change in the Government, delay has occurred in the process of regularization and in the event of rejection of the application for extension of time,
it would result in the appellants herein/respondents in the application, making an unjust enrichment, to which they are not entitled to.
In reply, it is contended by the appellants herein that out of the total agreed amount of Rs. 41 crores, a sum of Rs. 35 crores represented the
value of the building in Towers - II and III upto 7th floor and the balance sum of Rs. 6 crores reflected the reduced value of 8th and 9th floors in
both the Towers, since these two floors were yet to be regularized by CMDA and thus, the sum of Rs. 41 crores included the value of Towers - II
and III upto 7th floor and also reduced value of its 8th and 9th floors and hence there is no injustice being caused to the second
respondent/applicant.
It is brought to our notice during the arguments, that there were 19 suits between the parties and on compromise, 17 suits were withdrawn and
consent decrees came to be passed in the remaining two suits, one of which is the subject matter herein. The memorandum of compromise was
signed by the parties on 19.4.2011, and on the same day, this Court recorded it and passed the decree in terms thereof. There is no doubt that the
Clauses of the consent decree constitute a commercial understanding between the parties, arrived at after due negotiations and after taking into
account various factors including the State Assembly Election, the outcome thereof, etc. The surrounding circumstances make it clear that the
parties to the consent decree intended the time to be the essence of the contract. The failure to fulfill the obligation of obtaining an order of
regularization within the stipulated time, namely on or before 17.10.2011, cannot be considered to be a penalty or forfeiture Clause and it merely
deprived the second respondent/applicant of an additional benefit of Rs. 9 crores. It is also to be borne in mind that the total agreed amount of Rs.
41 crores included the full value of the approved seven floors and the reduced value of 8th and 9th floors, which were yet to be regularized and the
second respondent/applicant cannot plead any injustice.
The contention of the learned Counsel for the second respondent that the obtainment of order of regularization in a time bound fashion has
been linked to a governmental action, over which the applicant has no say or control and the delay could not have been within the contemplation of
the parties cannot be accepted. Admittedly, the application seeking for regularization of the two floors, was pending before the concerned authority
on the date of entering into the compromise. Having that in contemplation, the time of six months was agreed as the stipulated period for obtaining
the order of regularization and in the event of not obtaining regularization, the liability of the appellants/respondents to pay a sum of Rs.
54,67,324/- being the actual expenses in applying for regularization, to the second respondent herein/applicant is also fixed. Factually also, the
second respondent/applicant having failed to obtain the order of regularization within the stipulated time, the appellants herein/respondents have
also paid the said amount of Rs. 54,67,324/- to the second respondent. In such circumstances, we are of the considered view that the second
respondent herein/applicant has not made out a case for extension of time as sought for and the order of the learned Single Judge is liable to be set
aside.
During the arguments in the appeal, it is brought to our notice that the second respondent herein filed another application in A. No. 880 of
2012 in A. No. 5028 of 2011, seeking for further extension of time by three months from 17.1.2012 to 17.4.2012. By consent of the Counsel on
both sides, we directed the Registry to list that application also before us.
In the affidavit filed in support of the said application, the applicant/second respondent herein has stated that the application for regularization
had been dismissed by the authority by an erroneous order and the applicant had preferred an appeal to Government u/s 113-A(6) of Tamil Nadu
Town and Country Planning Act, 1971, and the same was pending and the applicant thought that the appeal would be disposed of within six
months and if the regularization order was obtained by 17.10.2011, the applicant would get a further sum of Rs. 9 crores and if not, he would get
back its costs and after the new Government came into power, there were innumerable litigations on the issue of regularization and a Monitoring
Committee was appointed to decide the matter and the proceedings of the said Committee also have been delayed by litigations before this Court
as well as before the Supreme Court and thereby, the process of the appeal of the applicant seeking for regularization, has been delayed and hence
further extension of time is sought for.
An elaborate counter affidavit has been filed by the respondents 1 and 2/appellants herein stating that the applicant is also guilty of suppression
of material facts, since in the affidavit filed by the applicant in A. No. 5028/2011, it has stated that the regularization approval was in its final stage
and the regularization order would be passed within a short time and that fact weighed with the learned Single Judge for allowing the said
application; but, however, to their shock and surprise, the present affidavit and typed-set of papers have been filed in the present application,
which reveal that CMDA had rejected the regularization application as early as on 2.6.2010, and the applicant had preferred an appeal before the
Government on 7.7.2010 itself, and the said appeal is under examination and the whole process may take some more time, and had this fact been
known to the respondents/appellants herein, they would not have entered into such a compromise at all or would have made a suitable alteration in
the terms of compromise itself, to take care of the same and the conduct of the applicant would clearly disentitle it from any equitable relief in the
form of extension of time to comply with its obligation.
We also heard the learned Counsel on both sides on this application.
There was rival contention pertaining to the knowledge of the dismissal of the regularization application by CMDA and the pendency of the
appeal before the Government at the time of entering into the compromise between the parties. The fact remains that in the affidavit filed in support
of the application in A. No. 5028/2011, the applicant had stated that regularization approval is now in its final stage and the regularization order
would be passed within a short time. In the typed-set filed by the applicant, a copy of the letter dated 12.1.2012, written by the Member
Secretary, CMDA, addressed to the applicant/second respondent herein, is found in page No. 24. In that communication, it is stated that the
process of passing orders on the appeal preferred by the applicant, by the Government may take some more time. It has been concluded in the
original side appeal that no case is made out by the applicant for extension of time in A. No. 5028/2011. It is also to be borne in mind that there is
no power in the Court to make a new contract for the parties fixing some other time than that which has been stipulated and hence the applicant is
not entitled for the prayer sought for in A. No. 880/2012. In the result, this original side appeal is allowed and the order of the learned Single Judge
dated 21.11.2011 in A. No. 5028/2011 is set aside and A. No. 5028/2011 is dismissed. A. No. 880/2012 is also dismissed. However, there
shall be no order as to costs. Consequently, connected miscellaneous petition is closed.