PARVATI BAI Vs. AYODHIA PRASAD JAIN

JUDGEMENT

(1.) IN a suit for specific performance of contract to sell certain land for a consideration of Rs. 2,000 a compromise decree was passed. The terms of the compromise decree were that the defendant Kishorilal (whose legal representatives are the appellants in this appeal) shall pay Rs. 2,000 and cost of the suit to the respondent/plaintiff Ayodhia Prasad in instalments on specified dates. It was further stipulated that on default of payment of sum due under two consecutive instalments, the defendant kishorilal would execute a sale-deed of 8. 48 acres of land in favour of the plaintiff and the plaintiff would return the amount recovered till then in accordance with the decree. The defendant committed the defaults as a result of which the plaintiff/respondent put the decree into execution and claimed execution of the decree in its terms. On being noticed, the defendant objected to the execution on the grounds that the terms as to execution of the sale-deed on default of payment of instalments was penal in nature and that he was entitled to be relieved against it. The parties led no evidence before the executing Court. The trial Court upheld the objection and refused to enforce the clause in the compromise decree relating to the execution of sale-deed. In appeal, the lower appellate Court held that the default clause relating to execution of sale-deed being within the scope of the original claim in the suit cannot be regarded penal. During the course of the judgment, the lower appellate Court has observed that the trial Court could have enquired into whether the price of Rs. 2,000 was inadequate but since this question was not raised before it, the lower appellate Court was precluded from making any investigation in the direction. It has, therefore, directed the execution to proceed. Hence this appeal by the legal representatives of the deceased defendant/judgment-debtor.

(2.) IN support of the appeal, Shri N. S. Kale, learned counsel for the appellants, argued that the direction in the compromise decree regarding execution of sale-deed was in terrorem, the principal decree being for payment of Rs. 2,000. It was also submitted that if this term is given effect to it would put the respondent/plaintiff to an unfair advantage inasmuch as it would enable him to obtain the sale-deed only for a sum of Rs. 1,000 which was paid before the filing of the suit. It was pointed out that the land in question is all that the appellants possess and forms the only source of their livelihood. On the date of the compromise the land was very valuable. According to the learned counsel, these circumstances obtaining on the date of the compromise are also indicative of the penal nature of the clause directing sale. As against this, Shri S. L. Jain, learned counsel for the respondent contended that the suit itself was for specific performance of the contract to sell and by the compromise decree the plaintiff got nothing more than what he claimed in the suit. Learned counsel added that payment of the amount in instalments was only a concession given to the defendant and, therefore, the stipulation as to execution of sale-deed cannot be termed as penal.

(3.) HAVING heard the learned counsel for the parties, I am of opinion that this appeal must be allowed. It is lawful to incorporate in a contract as one of its terms that upon breach of the contract the party in default shall pay to the other contracting party certain specified sum or perform any other act by way of penalty. Section 74 of the Contract Act, which embodies the law in this behalf, is as follows :