Case Note & Summary
The case involves two appeals filed by the original Defendant No.5 (Dewanchand Ramsaran Trading Pvt. Ltd. and others) against a common order of the learned Single Judge dated 28th November 2014, dismissing two Chamber Summons. The background is that the Plaintiffs (IL & FS Financial Services Ltd. and another) had subscribed to convertible debentures issued by Defendant No.5. When the Defendants failed to honour their commitments, the Plaintiffs filed Suit No.2837 of 2010 on 15th October 2010 claiming sums from Defendant Nos.1 to 5. On 28th September 2011, the parties entered into consent terms, and Defendant No.6 was joined as a party. Defendant Nos.1 to 5 submitted to a decree on admission. The controversy in the appeals revolves around the interpretation of clauses 11(a) and 15 of the consent terms. The Appellant (Defendant No.5) filed Chamber Summons No.748 of 2014 seeking a direction that Defendant No.6 pay Rs.23,50,00,000/- and USD 17,000,000/- to the Plaintiffs as per clause 11(a) read with clause 15, and Chamber Summons No.709 of 2014 seeking a declaration that the consent decree be marked as satisfied and attachments raised. The learned Single Judge dismissed both summons. The Appellants argued that clause 11(a) imposed an obligation on Defendant No.6 to make payments, and that the decree stood satisfied because the Plaintiffs had received payments from other sources. The Respondents contended that Defendant No.6 was not a signatory to the consent terms and could not be bound by them, and that the decree was not satisfied. The court analyzed the consent terms and held that clause 11(a) only obligated Defendant No.5 to pay, and clause 15 was a default clause applicable only to Defendant No.5. Defendant No.6, not being a signatory, could not be directed to pay. The court also held that the consent decree was not satisfied as the amounts due had not been paid in full. The appeals were dismissed with no order as to costs.
Headnote
A) Civil Procedure - Consent Decree - Interpretation - Order 23 Rule 3 CPC - The court interpreted clauses 11(a) and 15 of the consent terms dated 28th September 2011. It held that clause 11(a) imposed an obligation only on Defendant No.5 to pay certain sums, and clause 15 was a default clause applicable only to Defendant No.5. Defendant No.6, not being a signatory to the consent terms, could not be directed to make payments under these clauses. The court also held that the consent decree was not satisfied as the amounts due under the decree had not been paid in full. (Paras 1-25) B) Contract Law - Consent Terms - Binding Effect - Section 74 of the Indian Contract Act, 1872 - The court held that a person who is not a party to a contract cannot be bound by its terms. Since Defendant No.6 was not a signatory to the consent terms, no obligation could be imposed on it to make payments under clause 11(a) or clause 15. The court further held that the consent decree could only be enforced against the parties who had consented to it. (Paras 10-20) C) Execution - Satisfaction of Decree - Order 21 Rule 2 CPC - The court held that the consent decree was not satisfied as the amounts due under the decree had not been paid. The appellant's contention that the decree stood satisfied because the plaintiffs had received payments from other sources was rejected. The court found that the decree was for a specific sum and that sum had not been paid in full. (Paras 21-25)
Issue of Consideration
Whether Defendant No.6, who was not a signatory to the consent terms, can be directed to make payments under clause 11(a) read with clause 15 of the consent terms, and whether the consent decree stood satisfied.
Final Decision
Both appeals dismissed. The impugned order of the learned Single Judge dated 28th November 2014 is confirmed. No order as to costs.
Law Points
- Interpretation of consent terms
- Enforcement of consent decree against non-signatory
- Order 23 Rule 3 CPC
- Section 74 of the Indian Contract Act
- 1872
