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 04

th

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 09

th

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 17

th

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 17

th

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 09

th

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 9

th

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 12

th

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 22

nd

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 30

th

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

07

th

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 09

th

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 09

th

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 19

th

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. 09

th

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 04

th

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 14

th

July 2006.

18. However, on 11

th

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 18

th

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 24

th

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 24

th

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 08

th

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 09

th

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 04

th

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

09

th

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 09

th

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 09

th

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.