This is a plaintiff's second appeal, arising from a suit for cancellation of sale deed.
2. The facts giving rise to this appeal, according to the plaintiff's case, are these :
The plaintiff Jagdish Mani Tripathi's father, Shiv Pujan Mani, was twice married. Jagdish Mani Tripathi was begotten of Shiv Pujan Mani's first wife. Jagdish Mani is the sole survivor and heir of Shiv Pujan. Shiv Pujan's first wife and Jagdish Mani's mother passed away and after her death, Shiv Pujan married Smt. Kailash Pati, who did not bear him any child. After Shiv Pujan's death, Kailash Pati would not inherit any estate in his agricultural holdings, and it all went to Jagdish Mani. But, after Shiv Pujan's death, Kailash Pati's disposition towards Jagdish Mani turned hostile and unfriendly. It is Jagdish Mani's case that fuelled by the hostility of a step relationship between parties, Smt. Kailash Pati, in conspiracy with members of her native family, devised various ways to harm him. She left her matrimonial home and went back to her parents' place. She sued Jagdish Mani for maintenance before the Court of the Munsif, Court No. 2, Deoria, instituting Original Suit No. 1154 of 1967 for the purpose. The suit aforesaid was decreed in favour of Smt. Kailash Pati. With the assistance of one Virendra Mishra and others from her parents' family, she levied execution of the decree passed in Original Suit No. 1154 of 1967. The execution entailed attachment of Khasra No. 430, admeasuring 34 decimals and Khasra No. 457, admeasuring 58 decimals, situate at Village Basdila, Tappa Dhatura, Parghana Silhat, Teshil and District Deoria. The attached property was then brought to sale and Smt. Kailash Pati purchased that property herself in the auction sale. The facts about the institution of the suit last mentioned, the decree passed therein and the result of the execution is not in issue between parties.
3. The attachment and sale were both objected to by Jagdish Mani Tripathi, but his objections did not succeed. The auction sale was held and proceedings for delivery of possession to the auction purchaser were concluded. Jagdish Mani challenged the entire proceedings of the auction sale as materially irregular, asking them to be set aside through Original Suit No. 404 of 1980, that he instituted before the Court of Munsif, Court No. 8, Deoria. In the said suit, on 14.10.1983, a compromise was recorded between Jagdish Mani, the plaintiff of the suit and Smt. Kailash Pati, the defendant there. In terms of the said compromise, a decree was passed, embodying the following terms :
(I) That Smt. Kailash Pati is being entitled to receive from Jagdish Mani a sum of Rs. 8,000/- and in consideration thereof, the land comprising Plot Nos. 430 and 475 that she had purchased in the auction sale, would not be sold, encumbered or given away to any third party on a crop-share arrangement.
(II) That Smt. Kailash Pati's name would continue to be recorded over the Plot Nos. 430 and 475 for satisfaction's sake.
(III) That out of a sum of Rs. 8,000/-, a sum of Rs. 3,000/- have been received by Smt. Kailash Pati on the date of compromise, and the balance of Rs. 5,000/- would be paid by Jagdish Mani Tripathi to Smt. Kailash Pati up to 14.12.1983. If the balance sum of Rs. 5,000/- was not paid up to 14.12.1983, the compromise would be treated as cancelled.
(IV) That Jagdish Mani Tripathi would remain in possession of the plots/fields.
(V) That Jagdish Mani Tripathi would till the fields comprising the two plots and harvest crops, where for, he would take half of the required seeds and manure from Smt. Kailash Pati and in return, deliver up to her half the produce of the fields.
(VI) Once on 14.12.1983, Jagdish Mani pays the balance sum of Rs. 5,000/- in terms of the compromise to Smt. Kailash Pati, she would have no further right to execute the decree passed in Original Suit No. 1154 of 1967. Upon Smt. Kailash Pati's death, Jagdish Mani would perform her last rites and Shradh; and further Jagdish and his sons would take the land in dispute as heirs of Smt. Kailash Pati.
4. It is Jagdish Mani's case that Smt. Kailash Pati was paid the balance sum of Rs. 5000/- within the period of time before 14.10.1983 by the plaintiff, after calling her over to Village Basdila. However, for the reason that the compromise had fostered a beginning of good relations between parties, Jagdish Mani did not ask Smt. Kailash Pati for issuing him a receipt/written acknowledgement; he was desirous that the relationship between his stepmother and himself may remain cordial. However, Smt. Kailash Pati's blood relations, particularly, Virendra Mishra, defendant no. 2 to the suit and a respondent to this appeal was not happy about these good relations. Virendra Mishra was Smt. Kailash Pati's nephew (brother's son). He was on the lookout of an opportunity to wean her away from the new-found bonds with her stepson, so as to reclaim the lands that Smt. Kailash Pati had given back to Jagdish Mani in compromise. Virendra Mishra took away Smt. Kailash Pati back to her kin, whereafter he said that the sum of Rs. 5000/- that Smt. Kailash Pati had received from Jagdish Mani without a receipt, she would not acknowledge. It is pleaded that after the sum of Rs. 5,000/- was paid within the period of time stipulated in the compromise, Smt. Kailash Pati had forsaken her dominion over the lands comprising the suit property. Jagdish Mani, on coming to know the aforesaid stand that Virendra Mishra had caused Smt. Kailash Pati to take, deposited the sum of Rs. 5,000/- to her credit in the bank. All his efforts to cajole Smt. Kailash Pati's conscience failed, and she sailed along with Virendra Mishra and her other kinsmen. She never came back to stay with her husband's family, including Jagdish Mani. She died in the month of April, 1985.
5. The news about her death was never conveyed by Virendra Mishra to Jagdish Mani. Jagdish Mani, upon coming to know of Smt. Kailash Pati's death, undertook her Shradh and the onerous ceremonies that it involves. In the meantime, Jagdish Mani came to know that Virendra Mishra, entering into a conspiracy with Smt. Kailash Pati, had caused her to execute a registered sale deed of the suit property in favour of a relative-defendant no. 1, Braj Bhooshan Tiwari vide registered sale deed dated 14.03.1985. Jagdish Mani's possession of the suit property was threatened by the defendants, which led him to institute the suit seeking cancellation of the registered sale deed dated 14.03.1985, executed by the late Smt. Kailash Pati in favour of Braj Bhooshan Tiwari, defendant-respondent no. 1. The suit was filed arraying Braj Bhooshan Tiwari as defendant no. 1 and Virendra Mishra as defendant no. 2. The suit aforesaid was instituted before the learned Munsif on 26.08.1985. The suit was contested by Braj Bhooshan Tiwari, who filed a written statement dated 22.07.1986, traversing the plaint allegations. The Trial Court framed the following issues (translated from Hindi to English vernacular) :
1. Whether the sale deed dated 14.03.1985 was liable to be cancelled on the grounds detailed in paragraph 15 of the plaint?
2. Whether the suit is undervalued?
3. Whether defendant no. 1 is a bona fide purchaser? If yes, its effect.
4. To what relief is the plaintiff entitled?
6. The parties went to trial and the learned Munsif held on Issue no. 1 in favour of the plaintiff and on Issue no. 4 against the defendant. He decreed the suit by his judgment and decree of September the 21st, 1987. Braj Bhooshan Tiwari, the defendant, appealed the decree to the learned District Judge vide Civil Appeal No. 270 of 1987. The appeal came up for determination before the learned IIIrd Additional District Judge, Deoria on 29.09.1987. He allowed the defendant's appeal, set aside the Trial Court's decree, reversed the same and dismissed the suit.
7. Jagdish Mani has put in issue the Lower Appellate Court's judgment and decree by means of the present appeal. He seeks restoration of the Trial Court's decree invoking this Court's jurisdiction under Section 100 of the Code of Civil Procedure, 19081.
8. This appeal was admitted to hearing vide order dated 18.10.1994, on what was indicated by the Court to be substantial questions of law carried in Grounds (a) and (b) set out in the memorandum of appeal. This Court, in the order dated 22.01.2020, extracted the substantial questions of law carried in Ground Nos. (a) and (b) and framed an additional question before commencement of hearing on the said date. These figure in the order dated 22.01.2020. It was later on found by the Court, on a closer examination of the record, that what was described as Ground (a) and (b) in the Court's order dated 18.10.1994, referred to questions formulated in the memorandum of appeal as (a) and (b). Thus, bearing in mind the requirements of sub Section (4) of Section 100 CPC., the Court formally proceeded to frame those questions vide order dated 03.09.2020 and heard the appeal on Questions (a) and (b), besides the question that was formulated on 22.01.2020, and judgment was reserved. The appeal was posted for further hearing on 27.08.2020 and judgment was reserved again on 19.02.2021. The appeal has, therefore, been heard on the following substantial questions of law that would be denoted by letters (a), (b) and (c). These read:
(a) Whether the court below has completely misconstrued the provisions of section 55 of the Indian Contract Act, 1872 as to whether the time was the essence of the contract and whether the contract was voidable at the option of the promisee or not?
(b) Whether even if the condition in the agreement dated 14.10.1983 to the effect that the contract will be deemed to be cancelled if the appellant does not deposit Rs. 5000/- by 04.12.1983, is taken to imply that the time was the essence of the contract, the contract would become voidable at the option of the promisee and not void?
(c) Whether the provisions of Section 55 of the Indian Contract Act that provide that time should be of the essence, and about which Section 55 mandates that breach of the condition as to time renders the contract voidable, would apply to a decree of Court founded on compromise?
9. It must be recorded here that the respondents did not turn up at the hearing of the appeal and it was heard ex-parte.
10. Heard Mr. Haushila Prasad Mishra, learned Counsel for the appellant. The respondents have not answered the appeal.
11. The substantial question of law marked (a) has been formulated to examine whether Jagdish Mani's obligation to pay the balance of Rs. 5,000/- to Smt. Kailash Pati on 14.12.1983, in terms of the compromise decree dated 14.10.1983, carries a term that makes time the essence of contract; and if it does, would its breach make the contract underlying the compromise decree dated 14.10.1983 voidable at the instance of Smt. Kailash Pati?
12. It is submitted by Mr. Mishra, learned Counsel for the appellant, that the effect of provision of Section 55 of the Indian Contract Act, 18722 is not to make breach of every obligation to be performed at the covenanted time a ground to avoid the contract. It makes the breach of a term in the contract to do a certain thing or act before or at a particular time, a ground to avoid the contract, if on a construction of the true import of the contract, time is, expressly or by necessary implication, found to be of the essence. He submits that whether in a given case, time is of the essence, is a matter that has to be judged on the terms of the relevant contract, viewed in the entirety of the circumstances under which the parties have entered into it.
13. In support of the submission about this principle of law, Mr. Mishra placed reliance on the decision of the Andhra Pradesh High Court in Tandra Venkata Subrahmanayam v. Vegesana Viswanadharaju & Another3. He has drawn the attention of this Court to the holding in Paragraph No. 7 of the report, which reads :
7. In regard to the first contention, it cannot be in doubt that time can be made the essence of the contract by subsequent notice given by anyone of the parties to the contract, even though Section 55 of the Indian Contract Act does not provide for such a notice. It is of course necessary that if the notice wants time to be made essence of the contract it must expressly or by necessary implication say so. Any such notice ought to fix a reasonably long time requiring the other side to perform his part of the contract. The question whether the time prescribed in the notice is or is not of the essence of the contract would naturally depend upon the facts and circumstances of each case the mere fact that the notice gave a certain time to perform the contract would not necessarily lead to the conclusion that the time prescribed was the essence of the contract. In all such cases, the Court has to look to the pith and substance of the notice and not at the letter of the notice and decide as to whether time was or was not essential to the subsistence of the contract. The real intention of the party who gives notice must be clear from the notice itself. It may in certain cases be necessary to rely upon surrounding circumstances. Nevertheless one has to largely look to the notice itself.
14. Canvassing his case on this score, Mr. Mishra says that the terms of the compromise do not show that stipulation of the date, by which the balance of Rs. 5,000/- was covenanted to be paid by Jagdish Mani to Smt. Kailash Pati, made time the essence. The stipulation of the date, according to the learned Counsel for the appellant, was a clause to ensure that Smt. Kailash Pati was paid the balance of Rs. 5,000/- that was consideration for the compromise. The further stipulation in the compromise that is the event the balance of Rs. 5,000/- was not paid to Smt. Kailash Pati by 14.12.1983, the compromise would be treated as cancelled, is not decisive about time being of the essence. According to the learned Counsel for the appellant, a contract has to be read as a whole and in the circumstances in which it has been made. It is submitted by Mr. Mishra that a stipulation as to the time, or so to speak, a date by which the balance of Rs. 5,000/- had to be paid to Smt. Kailash Pati, is no more than a clause in terrorem.
15. This Court has considered the submissions advanced by learned Counsel for the appellant and perused the record. It is true that Section 55 of the Contract Act makes it dependent upon the intention of parties whether time is of the essence. That intention has to be gathered from the terms of the contract, not just going by the letter of it, but by construing the contract as a whole. The consideration of surrounding circumstances may also be relevant in certain cases. Here, there are circumstances attending the contract that make it imperative to look beyond the four corners of it. The most important circumstance is the relationship between parties in the transaction and the ensuing litigation that has given rise to the compromise decree. Jagdish Mani and Smt. Kailash Pati stand in the relationship of a stepson and stepmother. Admittedly, Jagdish Mani's father had married Smt. Kailash Pati after his first wife and Jagdish Mani's mother passed away. Smt. Kailash Pati remained issueless. She was somehow advised to claim maintenance from Jadgish Mani, which she did by a suit and succeeded in it. In execution of the decree passed in the maintenance suit, she brought the agricultural holdings left to Jagdish Mani by his father to sale and purchased these in the auction sale, though herself the decree holder. Jagdish Mani's endeavours to get the sale set aside on the execution side failed, and he brought Suit No. 404 of 1980 to set aside the auction sale. It was in this suit that the compromise subject matter of the present appeal was entered into between parties.
16. The terms of the compromise have to be considered in the background of the relationship between parties and the course of proceedings that have led to it. It has figured in the plaintiff's evidence that Jagdish Mani was inclined to take care of his stepmother, but she went away to her native family after her husband's death and sued Jagdish Mani for maintenance. The transaction that has led to the compromise is not one that is commercial or mercantile between two strangers. It is not ex-facie based on a motivation to purchase agricultural land for Smt. Kailash Pati's need or to acquire that land for the purpose of agriculture. The motivation for Smt. Kailash Pati to make a move was to secure maintenance for herself, after her husband's death and that is what she wanted. This is more than evident from the fact that she sued for maintenance and secured a personal decree against Jagdish Mani to pay her maintenance. It was Jagdish Mani's failure to satisfy the decree that led her to levy of execution. That execution brought about an auction sale, where she purchased the suit property as an auction purchaser. The suit property or the agricultural land, thus, came to her not because she intended to buy or acquire that land, but, in due course of proceedings, for the enforcement of her maintenance decree. She wanted maintenance; not lands to do farming.
17. The next positive circumstance that points to Smt. Kailash Pati's intent vis-à-vis acquisition of the suit property is evident from the fact that she entered into a compromise in a suit brought by Jagdish Mani to set aside the auction sale as irregular, after it had already been confirmed in the execution proceedings. The way the law stands, it is but reasonable to expect that she would have been advised about the possible feeble chances of success for Jagdish Mani in his suit to set aside a confirmed auction sale. Still, she entered into a compromise with Jagish Mani.
18. The terms of the compromise read as a whole indicate that the motivation and the object for Smt. Kailash Pati was to secure maintenance for herself as means for sustenance. A careful look at the terms of the compromise show that she bargained a sum of Rs. 8,000/- for herself from Jagdish Mani to serve as some kind of corpus or contingency fund, or a lump sum that she intended to apply for some use best known to her. It then shows that she incorporated a term that would provide her with half the harvest of the fields, wherein she would invest half the inputs comprising the seeds and manure. This provision was made either to keep her granary well-supplied or again, to secure some money for herself from proceeds of sale of the crop coming to her share. This term also shows that she did not intend to dissociate with Jagdish Mani or her deceased husband's family; rather she made provision for a strong foothold for herself in her deceased husband's family, where her stepson would also be in touch with her.
19. There is then a clear provision in the compromise that once Jadgish Mani paid her the balance sum of Rs. 5,000/- on 14.12.1983, Smt. Kailash Pati would have no further right to execute the decree passed in her maintenance suit. There is then that term in the agreement, which shows that upon Smt. Kailash Pati's death, Jagdish Mani would perform her last rites and Shradh. The suit property would be inherited by Jagdish Mani and his sons as Smt. Kailash Pati's heirs, after she passed away. The aforesaid terms in the compromise do not show that Smt. Kailash Pati had any intention to own the land and deal with it. She wanted to own the land so as to continue her association with her deceased husband's family and her stepson, and also to secure out of it, some lump sum money and a regular share in the crop. She covenanted that the land would remain hers during her lifetime, despite Jagdish Mani paying her the balance sum of Rs. 5,000/- on 14.12.1983, and the suit property would pass on to Jagdish Mani and his sons as her heirs, upon her decease.
20. In view of all these telltale terms, the background in which the lis has arisen and the relationship between parties, it is difficult to hold that Smt. Kailash Pati would have intended time to be the essence of the contract. In fact, read as a whole, the compromise, by stipulating the date by or on which the balance of Rs. 5,000/- had to be paid by Jagdish Mani, does not make time the essence. The essence is that Jagdish Mani would pay the balance to keep his association alive with Smt. Kailash Pati, provide her with her share in the crop by cultivating the land comprising the suit property and when life had ebbed out, render the spiritual duties of a son by performing her last rites. She even covenanted with Jagdish Mani to perform her Shradh to benefit her in the afterlife.
21. In the face of these terms carried in the compromise, to read, construe or understand it as a mere embodiment of adjustments of rights in a suit, a commercial transaction or a contract affecting disposition of property, where time is of the essence, would be doing great violence to what both parties intended. The two Courts of fact below have disbelieved the plaintiff's oral testimony that he paid the entire sum of Rs. 5,000/- to Smt. Kailash Pati at home, well before 14.10.1983. The sum of Rs. 1,000/- was +deposited with the Trial Court on 14.12.1983 and a further sum of Rs. 4,000/- on 11.07.1984. It has surprisingly not figured in judgments of both the Courts below whether this sum of money was withdrawn by Smt. Kailash Pati or not. That fact, though important, this Court does not wish to determine it with the onerous consequences of the remand, or even remitting that issue, inasmuch as the cause can be determined on wider principle.
22. It must be remarked here that where time is of the essence, the contract is voidable at the option of the promisee, and not void. The Trial Court, in holding Smt. Kailash Pati to be without authority to execute the impugned sale deed, was of opinion that the breach of the condition about time, though of essence, made the compromise voidable, and since no steps were taken by Smt. Kailash Pati to get the compromise avoided, it was still valid and binding on parties. The added reason for the Trial Court to think that the compromise was still valid and not avoided, was the fact that Smt. Kailash Pati was not proven to have refunded the sum of Rs. 3,000/- that she had admittedly received in terms of the compromise decree before she executed the impugned sale deed. In the opinion of the Trial Court, it was a step necessary to avoid the compromise.
23. The term in the compromise which says that Smt. Kailash Pati would have no further right to execute the decree passed in Original Suit No. 1154 of 1967, shows that all proceedings of the auction sale, through which she had got the suit property, stood set aside. This reasoning was adopted by the Trial Court because it thought that the execution of the decree in the maintenance suit being already concluded, a term in the compromise decree that said that Smt. Kailash Pati would have no further right to execute the decree, showed that all proceedings of the auction sale stood rescinded.
24. The Lower Appellate Court reversed the finding of the Trial Court that the compromise being voidable for non-performance of one of the covenants under it by Jagdish Mani, it could not be held void unless steps were taken to avoid it. The Lower Appellate Court, like the Trial Court, proceeded on the premise that payment of the balance of Rs. 5,000/- on or before 14.12.1983 was a part of the covenant that made time the essence. About this issue, both the Courts below are ad idem, and it is about this conclusion of the Courts below that this Court is unable to agree, for reasons already indicated. The findings of the Lower Appellate Court in reversing the Trial Court may be well-founded, if the premise that time is of the essence as held by both the Courts below were accepted. But, that is not so. The Lower Appellate Court has reasoned differently to conclude that time is of essence. It has gone by the principle that wherever a decree is passed on the basis of compromise and one party does not fulfill his/her obligations under it, that party cannot take advantage of the decree.
25. The Lower Appellate Court, in support of its reasoning, has relied on the decision of a Division Bench of this Court in Nagoo & Another v. P.T. Shiv Dularey Dixit & Others4 and further on a decision of the Patna High Court in Hansraj Sangechi & Others v. Jogeshar Prasad & Another5. The principles in Nagoo (supra) were laid down in the context of a suit for sale on a mortgage that was brought by the mortgagee after a compromise decree passed in an earlier suit by the mortgagor had led to a violation of terms about repayment of the mortgage debt in two installments on stipulated dates. The compromise decree passed in the earlier suit carried a term that in case of default of payment of the installments by the mortgager, his suit shall stand dismissed. The first of the two installments was paid on schedule, but the mortgager defaulted in making good the second installment. He deposited it a month after the scheduled date in Court. The mortgagee then sued on the original mortgage for the entire mortgage debt and not the abated sum settled through the compromise. The mortgagor contended that the compromise decree passed in his suit was still in force and the delay in remitting the second installment did not lead to the dismissal of the suit. It was held in Nagoo on two of the three points urged that are relevant, thus :
5. In this special appeal three points have been urged before us. It has been urged that the defendants, having paid one of the two instalments, it could not be said that the default clause of the compromise came into operation. In our opinion this contention has no force. The clause in the compromise that "in case of default of payment of the instalments mentioned above the plaintiffs' suit shall be deemed to be dismissed" clearly meant that if the defendants failed to pay either of the instalments within the time stipulated the plaintiffs' suit shall be deemed to be dismissed. The word ''instalments' in the context meant either of the two instalments. If the meaning were as alleged by the appellants it would lead to a very strange result. The defendants could claim not to pay the second instalment at all after paying the first and yet say that the suit could not be deemed to be dismissed. We do not think that this could have been the intention of the parties.
6. The next point urged is that, even though the previous suit would be deemed to have been dismissed because of the non-payment of one of the instalments, nevertheless the amount due under the mortgage was settled between the parties to be a sum on Rs. 700 and that the plaintiff was bound by that settlement. Learned counsel has urged that the amount thus settled is res judicata between the parties in the present case. He has relied upon several decisions, viz. Maina Bibi v. Chaudhri Vakil Ahmad[I.L.R. 47 Alld. 250.] ,Raghunath Singh v. Sheo Pratapsingh[1929 A.L.J.R. 761.] ,Secretary of State for India v. Ateendranath Das [I.L.R. 63 Cal. 550.] and has referred to Spencer Bower on Res Judicata at pp. 23 and 24. In Maina Bibi v. Chaudhri Vakil Ahmad [I.L.R. 47 Alld. 250.] and Raghunath Singh v. Sheo Pratap Singh [1929 A.L.J.R. 761.] it was held that, even though a redemption suit was ultimately dismissed because the mortgage money was not paid by the mortgagor within the time allowed by the Court, yet the decisions on several issues decided by the Court in the suit were binding in a subsequent suit between the parties, where the same questions were agitated afresh. In the Secretary of State for India in Council v. Ateendranath Das [I.L.R. 63 Cal. 550.] it was held that "a decree passed by consent is as effective a bar to a subsequent suit as one passed on contest, not only with reference to the conclusions arrived at in the previous suit, but also with regard to every step in the process of reasoning on which the said conclusions are founded."
7. There can be no doubt about these propositions. A judgment by consent or by default raises an estoppel just in the same way as a judgment after the Court has exercised a judicial discretion in the matter. The basis of the estoppel is that, when parties have once litigated a matter, it is but fair that litigation should come to an end. And, if they agree upon a result, or upon a verdict or upon a judgment, or upon a verdict and judgment, as the case may be, an estoppel is raised as to all the matters in respect of which an estoppel would have been raised by judgment if the lease had been fought out to the bitter end. The same proposition has been laid down in Spencer Bower on Res judicata:
"Any judgment or order which in other respects answers to the description of res judicata is none the less so because it was made in pursuance of the consent and agreement of the parties."
8. The case of a compromise falling through, however, by reason of the default of one of the parties in not carrying out its terms, is quite a different matter. In the case of a compromise the presumption is that it is arrived at because there has been a give and take between the parties. All the terms of a compromise are presumably to be taken together and unless the contrary is expressed in the compromise itself or necessarily implied in the circumstances of a particular case an individual term of the compromise cannot be, picked out by one party and the other party cannot be said to be bound by it in spite of the fact that the compromise, as a whole, he fallen through by default of the very party who wishes to take advantage of its terms. .......
26. In Hansraj Sangechi (supra) it was held :
2. It is contended that the learned District Judge by the order of the 19th September, and also by his order of the 13th September, allowed an extension of the time and that he had power so to order an extension, and therefore, the depositing of the decretal amount on the 22nd September fulfilled all the requirements of the agreement and the sale should have been set aside. In the order sheet there is no order for extension of time; there are orders that an inquiry should be made whether the amount had been deposited or not, and, when the appellant brought the money into Court and asked leave to deposit it, the learned District Judge allowed the deposit, but he did not express that by that deposit the terms of the agreement would be held to have been fulfilled. The question is whether the learned District Judge would in any case have jurisdiction to allow an extension of time having in view the terms of the agreement reached between the parties and whether time was of the essence of the contract. Several cases have been put before us in which it has been held that, where there has been a consent between the parties, the Court has power to grant relief against forfeiture and to extend the time for this purpose.
3. But the present case is not a case of relief against forfeiture. In the case of Kandarpa Nag v. Banwari Lal Nag [[1920] 33 C.L.J. 244 : 60 I.C. 864.] Mookerjee, Acting C.J., laid down, after considering the case-law on the subject the principle which governs cases like the present one. From the cases he examined he laid down the principle that time is of the essence of the agreement, when, in the course of proceedings by the judgment-debtor to set aside an execution sale, a compromise is made among the decree-holder, judgment-debtor and execution purchaser that on payment of the judgment debt within a prescribed period, the sale shall stand cancelled, while upon failure to make such payment the sale shall stand confirmed. He said:
"in such cases as the parties intended in the first conception of the agreement to make time the essence of the contract, the Court would not be competent to extend the time except by consent of all the parties concerned."
27. The decision in Nagoo lays down a general principle that wherever an essential term of a compromise decree under which a party claims advantage is violated, that party cannot take advantage of the terms of compromise, which must be held to be rescinded. The compromise decree involved in Nagoo, as already said, was based on a statutory suit by the mortgagor, under Section 33 of the United Provinces Agriculturists Relief Act, 1934 brought for a declaration of the sum of money due to the mortgagee. The compromise on which the decree had followed had been settled at an abated figure of Rs. 700/- besides counsel fee, and it was expressed in the compromise to be payable in two installments on scheduled dates. The first was paid and in the second, there was a default. It was later on deposited in Court. In the mortgagee's suit, the compromise decree was held to have been rescinded, owing to the mortgager's default in keeping schedule. It was held on the first point that non-payment of one of the two installments would lead to a very strange result, as the defendant could claim not to pay the second installment at all after paying the first, and yet hold on to the decree. In substance, therefore, the Court held payment of the second installment strictly on schedule as an essential term of the compromise. The Court also opined that all the terms of the compromise are to be wholesomely adhered to, unless a contrary intent expressed in the compromise itself appears or one that is a necessary implication in the circumstances of a particular case. It is here where the general proposition that breach of any of the terms of the compromise decree leads to its rescission has to be differentially applied, depending on what is the nature of the lis, background of parties, the nature and purpose of the settlement.
28. Nagoo was a decision rendered in the context of a mortgage suit or a money claim. The purpose of the suit was to recover the mortgage debt. The purpose of the compromise decree earlier passed in the mortgager's suit was also to ensure timely payment of the mortgage debt in two installments and on schedule. In that context, there was nothing to derogate from the general principle that breach of conditions of a compromise decree must lead to its rescission. Further, Nagoo clearly acknowledges that there could be cases where the terms of the compromise could expressly admit of a different intention or it may be implied from the circumstances of a particular case. That different intention could be about one or the other term being adhered to differently or not strictly, depending on the circumstances of a particular case. The principle in Nagoo would, therefore, not apply to the present case, where, for reasons indicated, this Court has remarked that time was not of the essence of the contract embodied in the compromise decree. For the same reason, the decision of the Patna High Court in Hansraj Sangechi also is not attracted to the question involved here.
29. In this Court's opinion, on a proper construction of the terms of the compromise, time is not of the essence. And once time was not of the essence, the contract underlying the compromise decree must be held to be not voidable at the promisee's option.
30. The former part of substantial question of law (a) is answered in the affirmative, in the manner that time is held not to be of the essence; and the latter part of it is answered in the negative, by holding that time being not of essence, the contract was not voidable at the option of the promisee.
31. In view of the answer to substantial question of law (a), substantial question of law (b) need not be answered.
32. Now, so far as substantial question of law (c) is concerned, the fact to be examined is whether the rule about time being essence of the contract, would apply to a decree of Court founded on compromise. In substance, here, this Court is required to examine whether the rule regarding time being essence of the contract would apply differently to a decree of Court founded on compromise; different from the way it applies to a case where the question arises in an action based on a contract inter partes without the decree of a Court being involved. This question has been examined in some measure while answering substantial question of law (a). The decision of the Division Bench in Nagoo, which comes close on facts to the principle that has bearing on this question, makes allowance for a contrary intention about one or the other term being not strictly followed, if that allowance is "expressed in the contract itself or necessarily implied in the circumstances", to borrow the words of the Division Bench. A stipulation as to time in a compromise on which a decree has followed cannot always be regarded as one that makes it of the essence.
33. There is a line of authority which does say that in a compromise arrived at during the course of execution proceedings, time is of the essence and the Court cannot extend that time stipulated in the compromise decree. One of the illustrations in this line of authority is Hansraj Sangechi, the relevant part of which has been extracted in the part of this judgment devoted to substantial question of law (a). It must be said that most of the authorities on this line arise from proceedings seeking extension of time by the Court that passed the decree, invoking provision of Section 148 CPC. Also, it cannot be ignored that the principle laid down in Hansraj Sangechi was in the context of proceedings for confirmation of sale, where a compromise arrived at between the decree holder, the judgment debtor and the auction purchaser, regarding payment due under the judgment to be made within a specified period of time, had been dishonoured. The compromise carried a term that the sale, upon default in keeping schedule, shall stand confirmed. It was in that limited context of proceedings for confirmation of sale that the principle in Hanraj Sangechi was laid down. A compromise decree embodying an underlying contract does not ipso facto lead to the conclusion that a term in the compromise about time on which a decree has followed, must always be regarded as one of essence. The general principles applicable to a contract would remain the same in construing the terms of a compromise decree. The principle that a compromise decree is not to be understood or construed fundamentally in a different way from any other contract is eloquently expressed in the judgment of the majority in the Full Bench decision of this Court in Habib Mian & Another v. Mukhtar Ahmad & Another6. Pathak, J. (as the learned Chief Justice of India then was) held :
5. I think it necessary at the outset to examine the provisions of the compromise decree and to ascertain how the several rights and liabilities between the parties have been distributed under the decree. In doing so, the principles of construction of a compromise decree must be borne in mind. There is authority for the proposition that a compromise decree is a creature of the agreement on which it is based and is subject to all the incidents of such agreement, that it is but a contract with the command of a Judge super-added to it and in construing its provisions the fundamental principles governing the construction of contracts are applicable. Nagappa v. Venkat Rao [I.L.R. 24 Mad. 265.] , Amrit Sundari v. Sherajuddin [A.I.R. 1915 Cal. 464.] , Smith v. Kenny [A.I.R. 1924 Pat. 231.] and Jahuri Lal v. Kandhai Lal [A.I.R. 1935 Pat. 123.] .
6. One of the cardinal principles in the construction of contracts is that the entire contract must be taken as constituting an organic synthesis, embodying provisions which balance in the sum of reciprocal rights and obligations. It is through the prism of that principle that the terms of the compromise decree must be analysed.
34. If there is anything that makes a compromise decree different in construing the clause regarding time to be of the essence, it is that, that the Court which passed the decree gets the power, by virtue of making the agreement of parties its rule to extend the time that the parties had contracted. Here, that question does not arise, because it is not a case where the defaulting party has applied to the Court which passed the compromise decree to extend time stipulated in the compromise. It is a case where one of the parties involved says that time was never regarded by the parties to be of the essence. Nevertheless, the principle that the Court recording a compromise and passing a decree on its basis gets jurisdiction to extend time for the performance of a condition is the only change that comes to a contract on which a compromise decree has followed in the matter of application of the principle about time being of the essence. In this regard, the decision of the Supreme Court in Smt. Periyakkal & Others v. Smt. Dakshyani7 is apposite. In Periyakkal (supra) it was held :
4. In the case before us, the situation is totally different. Unlike the case of Hukumchand v. Bansilal [AIR 1968 SC 86 : (1967) 3 SCR 695 : (1968) 2 SCJ 32] where there was a statutory compulsion to confirm the sale on the dismissal of the application under Order 21 Rule 90 and, therefore, postponement and further postponement of the confirmation of the sale could only be by the consent of the parties, in the case before us, there was no statutory compulsion to dismiss the application under Order 21 Rule 90 in the absence of an agreement between the parties. The court would have then decided the appeal arising out of the application on the merits. The parties, however, entered into a compromise and invited the court to make an order in terms of the compromise, which the court did. 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. Of course, time would not be extended ordinarily, nor for the mere asking. It would be granted in rare cases to prevent manifest injustice. True 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. Nothing said in Hukumchand case [AIR 1968 SC 86 : (1967) 3 SCR 695 : (1968) 2 SCJ 32] militates against this view. We are, therefore, of the view that the High Court was in error in thinking that they had no power to extend time. Even so, Shri Javali submitted that this was not an appropriate case for granting any extension of time. We desire to express no opinion on that question. The High Court will decide that question. ......
35. The substantial question of law (c) would, therefore, have to be answered in the affirmative, in terms that the provisions of Section 55 of the Contract Act about time being essence of the contract, making it voidable upon breach, would apply to a decree of Court founded on compromise in the same manner as any other contract.
36. In view of the Court's answers to Questions (a) and (c), this appeal stands allowed with costs throughout. The decree of the Lower Appellate Court is set aside and that of the Trial Court restored.
Order Date :- August the 17th, 2021 I. Batabyal