Novartis A.G. vs Wander Pvt. Ltd
2009 Latest Caselaw 1953 Del

     *IN THE HIGH COURT OF DELHI AT NEW DELHI

+                   Ex. No. 87/2004

%                             Date of decision: 11th May, 2009

 NOVARTIS A.G.                                .......Decree Holder
                         Through: Mr. P.V. Kapur, Sr. Advocate with Ms.
                                  Binny Kalra, Mr. Varun Menon,
                                  Advocates.

                                 Versus
 WANDER PVT. LTD.                         .......   Judgment Debtor
                         Through: Dr. A.M. Singhvi & A.K. Nigam, Sr.
                                  Advocates with Mr. Sudhanshu Batra
                                  & Mr. Bhuvan Gugnani, Advocates.


CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
1.  Whether reporters of Local papers may
    be allowed to see the judgment?       Yes

2.      To be referred to the reporter or not?      Yes

3.      Whether the judgment should be reported
        in the Digest?                                    Yes

RAJIV SAHAI ENDLAW, J.

1. Execution is sought of a compromise decree dated 28th August,

2002 in CS(OS) No.372/2002.

2. The decree holder had instituted the suit inter-alia for the

relief of permanent injunction restraining the judgment debtor from

using the word WANDER or any other word deceptively similar

thereto as part of its name and trading style and/or from using the

trademarks TRIAMINIC, TRIOMINIC, TRIATUSSIC or WANDER or

any other mark deceptively similar to the said marks in relation to

goods being marketed or manufactured by the judgment debtor. The

relief of accounts of profits made by judgment debtor by use of

trading style Wander Pvt Ltd and decree for amount so found due

was also claimed.

3. The compromise application under Order 23 Rule 3 of the CPC

was filed by the parties even before the judgment debtor filed the

written statement. It was inter-alia stated in the said application:-

(A) That the plaintiff and defendant had settled the dispute

subject matter of the suit and other related disputes by

agreeing to enter into the distributorship and marketing

agreement on the terms & conditions recorded in the

compromise application.

(B) That the defendant agreed and declared that it be restrained

from using WANDER and other trademarks with respect to

which the suit had been filed. It was thus prayed that the

decree of injunction in terms of prayer (a) & (b) be passed

against the defendant.

(C) The parties further agreed that the decree in terms of prayer

clause (a) i.e. with respect to WANDER shall not come into

operation until 1st August, 2004.

(D) Clause 4 of the compromise application as under:-

" The Defendant agrees and undertakes to this Hon‟ble Court that well before 1st August, 2004 it shall take the necessary steps for amending its corporate name and/or trading style so as to delete therefrom the word Wander and substitute in its place the word having no confusing similarity with the word „WANDER‟. The Defendant shall supply to the Plaintiff proof of steps taken to have the Company name changed as soon as such steps are taken and in any event not later than 1st August, 2004."

(E) The defendant also agreed and undertook to the court to

withdraw from the market/destroy the unsold stocks etc.,

to destroy the labels, wrappers, cartons bearing the

infringing trademark, not to challenge the plaintiff‟s

rights in the said trademark, to withdraw the

rectification applications for cancellation of the

registration of the plaintiff‟s trademark, to withdraw the

applications for registration of the said marks, to

withdraw the suit filed by the defendant against the

plaintiff and certain other parties, to transfer the

tenancy rights in a premises at Mumbai, to make certain

other payments to the plaintiff under the prior

agreements between the parties, to assign and transfer

to the plaintiff certain other trademarks etc.

(F) The defendant also agreed that during the term of

distribution and marketing agreement to be separately

entered into between the Novartis Consumer Health

India Private Limited (not a party to the suit) and the

defendant and copy of which was filed as Annexure „A‟ to

the said application, not to engage in manufacture or

sale of any pharmaceutical preparation which was

earlier manufactured or sold by Novartis Consumer

Health India Private Limited or its affiliates or any

other pharmaceutical preparation having the same

composition and competing in the same theurapeutic

classes as TRIAMINIC.

(G) It was further agreed that the said distribution and

marketing agreement shall come into force only after

obligations as mentioned in certain other paragraphs of

the application had been acted and performed by the

defendant to the satisfaction of the plaintiff and its

affiliates. The said clauses inter-alia included clause with

respect to the defendant suffering the decree for

injunction as well as clause 4 set out herein above.

(H) Clause 15 of the said agreement is as under:-

"The Defendant agrees and undertakes to this Hon‟ble Court that upon Defendant‟s failure to fulfill any of its obligation hereunder or upon its failure to comply either with the terms and conditions hereinunder contained or with the conditions enumerated in the Distributorship and Marketing agreement for any reason whatsoever, it shall forthwith pay by way of damages to the Plaintiff a sum of Rs.50,000,000/- (Rupees Five Crores only) with interest @ of 18% per annum to be calculated from the date of default till the date of the payment and shall submit to the Decree of this Hon‟ble Court. The defendant agrees and undertakes not to dispute correctness of this amount to be paid to the Plaintiff as aforesaid. It is further agreed and declared the Defendants liability to pay the aforesaid amount to the Plaintiff is not derogatory to and shall not in anyway affect the rights and remedies which the Plaintiff otherwise has against the Defendants and is also without prejudice to the Plaintiff‟s right of action and to seek other appropriate rights and remedies against the Defendant."

(I) The defendant under clause 8 (vi) of the compromise

application also agreed to give an unconditional and

irrevocable guarantee of the Bank of India, to cover due

and timely performance of obligations on the part of the

defendant contained in the compromise application, as

also thus contained in the distributorship and marketing

agreement to be executed on 1st October, 2002, if the

conditions of the compromise application were to be

fulfilled by the defendant. The said guarantee was to be

for the sum of Rs.32,10,000/-.

4. This court finding the compromise to be lawful allowed the

same to be taken on record and passed a decree in terms of the

compromise application which was ordered to form part of the

decree.

5. On the request of the counsels for the parties during the

hearing of the execution, I have after reserving the orders called for

the suit file and perused the same. I have noticed that though the

compromise application at several places as aforesaid states that

"the defendant agrees and undertakes", this court neither accepted

any undertaking of the defendant nor ordered the defendant or any

of its official to be bound by the same.

6. The record reveals that the defendant filed I.A. No.4839/2004

in the suit for extension of time of 1st August, 2004 (Supra). It was

stated therein that in true letter and spirit of the compromise, the

defendant commenced taking all necessary steps for amending its

corporate name with a view to delete the word "WANDER"

therefrom, as envisaged in the compromise; that the defendant on

2ndFebraury, 2004 had initiated merging process with its group

company M/s Pearl Organics Ltd and for change of name of merged

entity to M/s Wanbury Ltd; that the said process required an order

of the High Court of Bombay, furnishing of information to the

Bombay Stock Exchange and approvals/actions of certain other

authorities and which was taking time; that the defendant had

approached M/s Novartis Consumer Health India Pvt Ltd, being

representative of plaintiff on 9th July, 2004 to allow defendant to use

the old name for another three months after 1st August, 2004; that

the representative of plaintiff had agreed to extension of one month

and to filing joint application in court; however the plaintiff had till

last day of July not sent the signed compromise application; the

defendant was as such unilaterally seeking extension of effective

date of order dated 28th August, 2002 restraining defendant from

using "WANDER", from 1st August, 2004 to 30th September, 2004.

7. The said application came up before the court first on 4th

August, 2004 when notice was ordered to be issued to the plaintiff

for 27th August, 2004. It was also ordered "in the meanwhile the

judgment dated 28th August, 2002 is stayed". However it appears

that on the same day the matter was subsequently unilaterally

mentioned by the counsel for the plaintiff, explaining the reasons

for earlier non-appearance inspite of advance copy. On the request

of the counsel for the plaintiff, the matter was adjourned to the next

date and it was further ordered "till tomorrow the above order

passed in the morning shall not be given effect to".

8. On the next date or any subsequent date no further interim

order was made. The plaintiff opposed the application. The

application was finally dismissed on 5th October, 2004 on the ground

that without consent of plaintiff, the court has no jurisdiction to

extend the time. The defendant preferred FAO (OS) No.223/2004

against the said order and which is still pending consideration. Vide

order dated 29th November, 2004 in the said FAO(OS), the following

interim order was made "impugned order is stayed till the next date

of hearing".

9. The plaintiff preferred SLP Civil No.25981/2004 to the Apex

court against order dated 29th November, 2004 (Supra). The Apex

court on 4th January, 2005 dismissed the said Special Leave Petition

observing that the impugned order dated 29th November, 2004 was

only an interlocutory order and that both parties had agreed that

they will argue the appeal on the date fixed next in the same without

seeking adjournment.

10. The plaintiff instituted this execution on 25th August, 2004

stating that the sum of Rs.5 crore along with interest at 18% per

annum from 1st August, 2004 was due under clause 15 of the

compromise decree. The decree is sought to be executed by

directing the Bank of India to immediately pay Rs.32,10,000/- to the

decree holder being the sum guaranteed under clause 8 (vi) of the

compromise decree and by directing the bank to pay the sum of Rs.5

crore in terms of clause 15 aforesaid of the compromise application.

It is further pleaded that Mr Rayana is the principal officer of the

judgment debtor and the decree is personally binding on him. His

arrest and detention in civil prison is sought for willfully disobeying

the order of permanent injunction which came into force on 1st

August, 2004, by continuing to use the word WANDER as part of its

corporate name and trading style.

11. The present execution was being taken up for consideration

along with IA No. 4839/2004 in the suit and thereafter also was

adjourned from time to time. The order dated 17th August, 2006 in

the execution shows that while it was the contention of the judgment

debtor that owing to the order aforesaid in appeal, the execution

stood stayed, the decree holder contended otherwise. The same

issue was raised on 28th January, 2009 also. Finding that the order

impugned in the appeal was the order of rejection of the application

for extension of the time which was agreed to be till 1st August ,

2004 only and thus the order of the appellate court of stay of the

said order could not mean a stay of the present execution and

further feeling that since the Division Bench was seized of the

matter, it was appropriate to give an opportunity to the judgment

debtor to seek a clarification from the Division Bench, the matter

was adjourned to 13th March, 2009. On 13th March, 2009 the matter

was adjourned to 24th April, 2009.

12. On 24th April the senior counsel for the decree holder

contended that though the judgment debtor had applied to the

Division Bench in accordance with the order dated 29th January,

2009 but the said application was not pursued resulting in the same

being posted for hearing along with appeal on 6th August, 2009. It

was contended by the decree holder that the judgment debtor

having been given an opportunity to seek clarification and having

failed to do so, there was no occasion for further deferring the

execution which had already been pending for five years. The senior

counsels for the judgment debtor of course contended that the order

aforesaid of the Division Bench tantamounted to the stay of

execution and it was contended that there could be no other

meaning of the interim order of the Division Bench and the said

interim order has to be interpreted meaningfully and purposively.

13. Finding the execution had remained pending for long, an

option was given to the judgment debtor to either give undertaking

to this court to pay the decretal amount in the event of the appeal

being dismissed and subject to any further orders of the Apex court

or to proceed with the execution.

14. The senior counsels for the judgment debtor contended that

besides the plea of the execution having been stayed by the Division

Bench, they had other objections also to the execution (to which

reply has been filed) and as such they were not in a position to give

an undertaking and which will tantamount to their giving up the

other objections to the decree.

15. Finding that even if the order aforesaid of the Division Bench

is to be construed as a stay of the execution and further feeling that

at least the other objections of the judgment debtor to the execution

be adjudicated so that in the event of the appeal being dismissed

time thereafter is not wasted thereon, counsels were heard.

16. The senior counsels for the judgment debtor have contended

that the only reason for the decree holder claiming Rs.5 crores from

the judgment debtor as set out in the execution is the failure of the

judgment debtor to continue using the word WANDER as part of its

corporate name and trading style beyond 1st August, 2004. It was

contended that under clause 4 (Supra) of the compromise

application, the judgment debtor had only agreed to, before 1st

August, 2004 take the necessary steps for amending the corporate

name and style so as to delete therefrom the word WANDER. It is

the case of the judgment debtor that the judgment debtor had never

agreed or undertaken to ensure that the name will be so changed on

or before 1st August, 2004. It is further contended that the judgment

debtor had in fact taken the requisite steps for having the name

changed, as set out in para 6 hereinabove; that the High Court of

Bombay had in fact allowed the merger on 12th August, 2004.

Mohammed Gazi Vs. State of M.P. (2000) 4 SCC 342 was cited to

contend that none should suffer due to act of court. It was stated

that delay, if any, in change of name was for the reason of the order

being pronounced on the application of the judgment debtor for

amalgamation resulting in change of name, on 12th August, 2004. It

was further contended that the affiliate of the decree holder had in

terms of the compromise application entered into the distributorship

agreement with the judgment debtor and which was to be entered

into only after the decree holder satisfying itself of the judgment

debtor having performed its obligations under the compromise

application. It is the case of the judgment debtor that the execution

of the said distributorship agreement tantamounts to waiver by the

decree holder of the right, if any, to claim Rs.5 crores under clause

15 of the compromise application. It was further contended that the

order of the court on a petition for amalgamation relates back to the

date of presentation thereof and in the present case also, the

amalgamation resulting in change of name though pursuant to order

dated 12th August, 2004 related back to the date of presentation of

the petition i.e. February, 2004. It is also contended that the decree

holder had earlier agreed to extension but on last date did not sign

the application for extension. It is further the contention that the

decree holder has illegally terminated the Distributorship and

Marketing Agreement also and for which claims have been made

before Bombay High Court and are pending.

17. The senior counsel for the decree holder has on the contrary

contended that the provision of relating back of the order on an

application for amalgamation cannot be read so as to defeat the

rights of the decree holder under the compromise decree. It is

contended that if the same is permissible, every order of injunction

in trademark matters shall be defeated by averring that

amalgamation resulting in change on trade name had been applied

and as and when granted, will relate back to the date of presentation

of the petition. The senior counsel for the decree holder has also

relied upon clause 2 of the compromise application as per which the

injunction against the defendant from using the word WANDER as

part of its trade name/trading style was to come into operation w.e.f.

1st August, 2004. It is contended that clause 4 has to derive its

meaning from clause 2 and clause 4 cannot be read as meaning that

the obligation was only to apply for change of name and not to have

the change affected by that date. It is further contended that clause

4 read alone also conveys that the change of name was to be

effective from 1st August, 2004. It is stated that change of name

under the Companies Act requires only a special resolution to be

passed by the Board of Directors of the judgment debtor and the

judgment debtor from the decree in 2002 slept over till February,

2004 and cannot escape liability under clause 15 of the compromise

application. In response to the execution of the distribution and

marketing agreement, it is contended that the argument of the

judgment debtor is contradictory; as per clause 2 of the compromise

application, subject to satisfaction whereof also the distributorship

and marketing agreement was to be entered into, the change of

name was to come into effect w.e.f. 1st August, 2004; the

distributorship agreement was admittedly entered into prior thereto.

The same could thus not be in satisfaction of or waiver of the rights

of the decree holder to have the change of name affected latest by

1st August, 2004. It is further contended that the judgment debtor

also understood the compromise to be so, as evident from

IA.No.4839/2004 (supra) and the correspondence prior thereto.

18. The counsels for the judgment debtor in rejoinder have

submitted that the name having been changed shortly after 1st

August, 2004, it not being the case that the same was delayed

indefinitely, the decree holder could not be permitted to illegally

enrich itself. It was also contended that the judgment debtor was

entitled to concession for the time during which the decree holder

had represented that it was willing to extension of time and if such

time is deducted, there is no delay.

19. I had during the hearing put to the counsels for the parties

whether the decree such as under execution was at all executable, if

the parties were found to have arrived at a fresh agreement. The

senior counsel for the decree holder in response contended that

though the parties had entered into a fresh distributorship and

marketing agreement but the sum of Rs.5 crores provided in clause

15 of the compromise application was in terms of the claim of the

decree holder for damages. However a perusal of the plaint in the

suit file shows that the decree holder had in para 17 thereof stated

that it estimated that it will be entitled to a sum in excess of Rs 5

lacs after the defendant had rendered accounts and there is no

claims as such for damages of 5 crores.

20. The compromise application in the very preamble thereof

states that the parties had settled the disputes subject matter of the

suit and other related disputes by agreeing to enter into a

distributorship and marketing agreement. A further perusal of the

compromise application shows that though the judgment debtor

agreed to suffer a decree for permanent injunction but the said

decree for permanent injunction was to come into operation after

nearly two years from the date of the compromise i.e., w.e.f. 1st

August, 2004. The draft distributorship and marketing agreement

was annexed to the compromise application.

21. The judgment debtor, besides agreeing to suffer a decree for

permanent injunction as aforesaid, agreed to do several other things

as enumerated in the compromise application. Clause 4 deals with

the change of name. It imposes an obligation on the judgment

debtor only to take steps for amending its corporate name and to

supply to the decree holder proof of having taken such steps.

Though the date mentioned in clause 4 also is of 1st August, 2004,

i.e., the date on which permanent injunction prohibiting the

judgment debtor from using WANDER as part of its corporate name

was to come into force but clause 4 conspicuously does not provide

that the judgment debtor will before the said date of 1st August,

2004 ensure change of its name. That however does not compel me

to interpret clause 4 as meaning that the judgment debtor was not

only to take steps but also ensure change of name. That would be

doing violation to the language used by parties. Had the intention of

the parties been that the judgment debtor shall ensure change of

name latest by 1st August 2004, nothing prevented the parties from

expressly providing so. It is also significant that while with respect

to the various matters, the steps to be taken by the judgment debtor

and the time therefor is expressly provided, the decree holder did

not insist upon the judgment debtor to undertake effecting change of

name before 1st August, 2004.

22. I do not find any inconsistency in clauses 2 and 4 and the two

can be read harmoniously. The principle of interpretation of deeds

also is to first explore harmonious interpretation, before doing

violation to literal language used or giving precedence to clause

appearing first, over that appearing later. Under Clause 2, the

decree for permanent injunction and by which the judgment debtor

would stand prohibited from using WANDER as part of its corporate

name was to come into force on 1st August, 2004. Coming into force

of such decree was not dependent upon the judgment debtor taking

steps for change. The central pillar of the compromise appears to be

the agreement of the parties to enter into Distributorship cum

Marketing Agreement. The said agreement, under clause 11 was

agreed to be executed after the decree holder had satisfied itself

that the judgment debtor had performed its obligations under the

specified clauses of compromise application. Clause 4 regarding

change of name is one of such clauses. That appears to be the

purpose of clause 4, i.e., to assure the decree holder before its

affiliate enters into the Distributorship cum Marketing Agreement

with the judgment debtor, that the judgment debtor intended to

abide by the decree for permanent injunction which in any case

would come into force on 1st August, 2004. Clause 2 was also

included in the clauses specified in clause 11. The effect of inclusion

of clause 2 was not that Distributorship and Marketing Agreement

will be entered after 1st August, 2004. Clause 2 also provides for

decree for permanent injunction qua other trademarks coming into

force immediately. The decree holder was only to ensure that the

judgment debtor was abiding by the said decree qua marks other

than WANDER. The Distributorship and Marketing Agreement has

admittedly been entered into. The execution of the said agreement

signified satisfaction by the decree holder of the judgment debtor

having complied with obligations under clause 4. Clause 4 as

interpreted literally has admittedly been complied by the judgment

debtor. The contention of senior counsel for decree holder of clause

4 being required to be read as requiring the judgment debtor to

ensure change of name by 1st August, 2004, is not found tenable.

23. That brings me to (A) whether clause 15 provides for an

executable decree for Rs 5 crores on the happenings of events

mentioned therein and if so, (B) whether any such event has

happened.

24. Clause 15 contains the agreement of the judgment debtor that

upon its failure to fulfill "any of its obligations" under the

compromise application or upon its failure to comply either with the

terms and conditions of the compromise application or the

conditions enumerated in the Distributorship and Marketing

Agreement "for any reason whatsoever", it shall forthwith pay to the

decree holder by way of damages the amounts mentioned therein

"and shall submit to the decree of this Hon‟ble Court".

25. The Apex Court in Ruby Sales and Services (P.) Ltd Vs State of

Maharashtra (1994) 1 SCC 531 held that merely because an

agreement is put in the shape of a consent decree, it does not

change the contents of documents - it remains an agreement and it

is subject to all rights and liabilities which any agreement may

suffer; having a stamp of court affixed will not change the nature of

the documents; a compromise decree does not stand on a higher

footing than the agreement which preceded it. It was held, a

consent decree is a mere creature of the agreement on which it is

founded and liable to be set aside on any of the grounds which will

invalidate the agreement.

26. The relevant aspects of clause 15 are as under:-

A) It has no reference to the decree holder‟s claim in plaint for

accounts and recovery of amount found due. The accounts were

sought of profits earned by judgment debtor by use of word

WANDER as its trading name. The amount of Rs 5 crores in

clause 15 is payable not on this account but for reason of

breach of fresh obligations undertaken by the judgment debtor

in the compromise application. So much so, the breach by

judgment debtor of the terms and conditions of Distributorship

and Marketing Agreement to be entered into as central pillar of

compromise and not with the decree holder but with an affiliate

of the decree holder, was also to result in the payment

envisaged.

B) It does not provide that decree for Rs 5 crores be passed and

made executable in eventualities mentioned.

C. It provides that the judgment debtor shall not dispute the

correctness of the sum of Rs 5 crores to be paid to the decree

holder. This is indication of the said clause being as that of

payment of liquidated damages under an agreement rather

than of being a decree. Had the money been intended to

become due to the decree holder as a decree of the court there

could be no question of the judgment debtor disputing the

correctness of the amount.

D. It also provides that the liability of the judgment debtor for the

said amount shall not affect the other rights, reliefs and

remedies of the decree holder against the judgment debtor.

This is again in consonance with an agreement rather than with

a decree. The question of the decree holder claiming other

reliefs and remedies against the judgment debtor would be

arisen only if Rs 5 crores was by way of liquidated damages in a

contract and not if it was by way of a decree.

E. The words "submit to the decree of this court", of course could

mean that there was to be a decree of the court by way of

compromise. However, they can also mean that the judgment

debtor, in the event of such claim being preferred by a separate

suit, submit to decree in this amount at least.

27. The question which arises for consideration is, where parties

by way of compromise enter into fresh agreement, and provide for

consequences of default thereof, are such defaults executable or to

be adjudicated by separate proceedings.

28. The courts have held that the question, whether the parties

had adjusted/compromised the suit by entering into a contract and

the court by recording compromise has merely expressed

satisfaction of claims in suit being settled by execution of such

agreement OR whether the parties have by compromise extended

the relationship leading to the suit and agreed to an executable

decree being passed in terms thereof, is a matter of interpretation of

the decree. In this regard, see:

a) Sudhir Kumar Vs Baldev Krishna Thapar 1969 (3) SCC

611 where it was held that the parties had agreed to a fresh

lease and the direction in the decree to vacate the suit

premises at the end of the term fixed in the compromise was

held to be an ineffective direction, not amounting to

ejectment decree and at best a declaration of right;

b) Kunchanda Ramamurthy Vs Gopinath Naik AIR 1968 SC

919, where no fresh agreement was found to have come into

existence;

c) Godhumal Sanmukhmal Vs Mt. Bhambho AIR 1943 Sind

11 holding that the question how far decree is capable of

execution as an executory decree is entirely distinct from

question of validity of the decree and further that where

decree sets out penalties to be incurred for non fulfillment of

certain of its terms and is concerned not so much with

present rights but as to future rights on uncertain

happenings in future, it must be held incapable of execution;

d) Harihar Pandey Vs Mangala Prasad Singh AIR 1986 All. 9

holding, where prohibitions and/or positive mandates

mentioned in compromise to regulate future mode of conduct

were intended to be enforced as injunction, then decree

holder could not be driven to file fresh suit.

e) Prithvichand Ramchand Sablok Vs S.Y. Shinde AIR 1985

Bom 297 laying down principles of interpretation of consent

decrees.

f). Bibekananda Bhowal v. Satindra Mohan Deb AIR 1996

SC 1985 holding that the default clause in the compromise in

that case to be not meaning enforcement thereof by

execution of the compromise in relation to breach of such

clause. It was held that the question arising for adjudication

in relation to the said default clause could be adjudicated

only in an appropriate proceeding and not in the execution of

the decree. It was further held that had the intention been

that on default the decree will be executable, nothing

prevented the parties from providing so. It was thus held

that the consequences of the default clause were not

executable and only a separate proceeding could lie

therefrom.

g) Municipal Board Kishangarh Vs M/s Chand Mall & Co.

laying down that subsequent events can be looked into by the

executing court under Section 47 CPC.

h) M.P.E.B. Vs M/s Central India Electric Supply Co. Ltd

AIR 1995 SC 1456 holding that compromise providing for

determination of compensation in appropriate proceeding

would mean independent proceedings and not execution

proceedings.

i) Bhavan Vaja Vs Solanki Hanuji AIR 1972 SC 1371 laying

down that though an executing court cannot go behind the

decree but that does not mean that it has no duty to find out

the true effect thereof and for construing the decree, in

appropriate cases pleadings as well as proceedings leading to

the decree can be considered.

j) Parkash Chand Khurana Vs Harnam Singh AIR 1973 SC

2065 holding that executability is the main facet of a decree

and that mere non mentioning of the decree being executable

on happening of certain events is not determinative, if

otherwise it is found intended to be executable.

k) Salkia Businessmen's Association Vs Howrah Municipal

Corporation AIR 2001 SC 2790 laying down that terms of

compromise become order of court and courts should strictly

enforce the terms and viewing breach of terms of

compromise as a matter of mere contract between parties

and disregarding it has disastrous effect on rule of law. This

judgment does not consider the earlier judgments aforesaid

and was in reference to a compromise in a writ proceeding

and not in a suit.

29. The single-most factor which leads me to hold in this case that

the decree in clause 15 is not an executable decree is that it in its

sweep also includes breach of terms and conditions of

Distributorship and Marketing Agreement to be entered into

pursuant to compromise, not between the decree holder and the

judgment debtor but between a nonparty to the suit and the

judgment debtor. The parties could never have intended, also in law

of an executable decree on default by judgment debtor of terms of

an agreement with a party not a party to the suit or the compromise.

Even though the courts have held that subsequent events can be

gone into in execution and can be subject matter of adjudication

under Section 47 CPC, but such adjudication also is not possible in

the absence of the party to the agreement of which breach is

alleged. Clause 15 of the compromise does not permit of

bifurcation, i.e., that in the case of breach of terms of Distributorship

and Marketing Agreement, proceedings for recovery of Rs 5 crores

were to be instituted and in the event of breach of terms of

compromise, such breach was to be determined by execution. This

reason alone, coupled with others given in para 26 above, compel

me to interpret the clause 15 of the compromise decree to be not

executory but merely expressing satisfaction of the validity of the

agreement recorded in compromise application and on which the

claim in suit was settled/adjusted. I must record that in doing so, I

am conscious of the amendment of 1976 to Rule 3 of Order 23,

permitting compromise decree with respect to matters other than

subject matter of suit and have not relied upon judgments

interpreting the decrees for the said reasoning.

30. I also find that the compromise nowhere records any admission

of the judgment debtor of on accounts being taken, for which relief

was claimed in the pliant, the sum of Rs 5 crores being due to the

decree holder. It was thus not as if the liability in the said amount

was admitted and only executability thereof was deferred till

happening of eventuality in clause 15. The eventualities mentioned

are arising out of fresh agreement reached between the parties and

owing to whereof, the suit was disposed of. This court thus while

decreeing the suit in terms of compromise merely recorded the

compromise in satisfaction of claim in suit. The rights and liabilities

of parties flowing from agreement reported in compromise are to be

adjudicated in a separate proceeding and not found to be intended

to be adjudicated in execution. The disputes, if any, arising between

the parties out of the said fresh arrangement/agreement, could not

be settled in execution and or under the scope of Section 47 of the

CPC. The disputes which can be entertained under Section 47 of the

CPC are only those relating to execution discharge or satisfaction of

the decree. Here it is not found that any decree in the sum of Rs 5

crores has been passed in favour of the decree holder and against

the judgment debtor. Even after the compromise no additional court

fee was paid treating the decree to be for a sum of Rs 5 crores. The

decree holder had in the pliant undertaken to pay additional court

fees in the event of amounts in excess of Rs 5 lacs being awarded to

it.

31. It cannot also be said that because Rs 5 crore is mentioned, it

could only mean that the parties intended an executable decree in

the said sum. Such provisions for liquidated damages are commonly

found in commercial contracts. Simply because the contract in the

present case is recorded in the compromise application would not

imply that upon any dispute arising between the parties out of the

said contract also, that will be adjudicated in execution. A decree

cannot precede a dispute.

32. The courts have in some cases mostly relating to money

recoveries held decrees which provide for the decree being satisfied

upon a lesser amount than due under the decree being paid within

the certain time only on the principle that in those cases the decree

is for the full amount. However, when there is no decree as in the

present case, it cannot be executable.

33. It was also held in J.K. Seth Vs Narendra Nath Bannerjee

AIR 1977 Cal 388 DB that where two interpretations are possible in

respect of a compromise decree, that interpretation which is

favourable to the judgment debtor should be accepted. The same

view was taken in Punjab & Sindh Bank Ltd Vs Jagdish Lal AIR

1972 Punjab & Haryana 144. Of course, in relation to other decrees

and on aspect of limitation, it was held in Deep Chand Vs Mohan

Lal (2000) 6 SCC 259 that where language of a decree is capable of

two interpretations, one which assists the decree holder to have the

fruits of the decree should be preferred, but the same will have no

application to compromise decree. The decree holder having failed

to ensure language as to executability of decree and having acted in

its zeal to protect the rights of a non party to the suit also, under an

agreement then still to be entered into cannot be permitted to have

benefit of the interpretation, since in view of ambiguous language, it

cannot be said with certainty that the judgment debtor understood

that it was suffering a decree for Rs 5 crores. I also do not find any

merit in the contention that from IA.No.4839/2004 and other

correspondence, it can be said that the judgment debtor understood

the decree to be so. As aforesaid, on 1st August, 2004 the decree for

permanent injunction was to come into force. The anxiety of the

judgment debtor was to seek extension of coming into force of the

decree for injunction and not to avoid execution of decree for Rs 5

crores.

34. The detriment to the judgment debtor is that if clause 15 is

only an agreement providing liquidated damages of Rs 5 crores, then

the decree holder ipso facto does not become entitled to the said

amount and will have to prove the loss. Though I may notice that

the courts in Allvarapu Subbayya Vs Jakka Peddayya AIR 1937

Mad 234, Biswanath Kundu Vs Smt Subala Dassi AIR 1962 Cal

272 DB have held that where the compromise decree imposes

greater liability amounting to penalty, in the event of default, the

judgment debtor is entitled to relief in execution even on equitable

principles contained in Section 74 of the Contract Act. Thus the

principle is that if decree is for full amount but on payment by

stipulated date, of lesser sum, the entire decree is satisfied, the

courts, without consent cannot change the decree. However, where

the decree provides for payment of decretal amount by a particular

date and upon default, of more than decretal amount, such clause is

by way of penalty, relief where against can be given in execution

also. Though I must notice a recent pronouncement in Deepa

Bhargava Vs. Mahesh Bhargava (2009) 2SCC 294 which has not

upheld invocation of this principle in revision against an order in

execution.

35. I have already held that there was no failure to fulfill

obligation under clause 4. The other question is whether there was

breach of clause 2 i.e., of permanent injunction, by continuing to use

the name "WANDER" even after 1st August, 2004, according to

judgment debtor till 12th August, 2004 and according to decree

holder till September 2004 when post merger name was changed.

This is relevant because execution of decree for permanent

injunction is also claimed. Irrespective of whether the change of

name was effected or not the decree for permanent injunction in

terms of the compromise application came into operation on 1st

August, 2004. The decree holder was within its rights to enforce the

said decree for permanent injunction. A decree for permanent

injunction under Order 21 Rule 32 is enforceable, if the judgment

debtor in spite of having had an opportunity for obeying the decree

has willfully failed to obey it, by attachment of the property of the

judgment debtor and by detention of the judgment debtor in civil

prison.

36. The decree holder has in the execution not pleaded that the

judgment debtor inspite of having had an opportunity of obeying the

decree, failed to do so, though the word willfully is used. In the facts

and circumstances of the case I am not inclined to give any

opportunity to the decree holder to amend its pleadings in the

execution, or to lead any evidence on this aspect. Though the

decree for permanent injunction was to come into operation as

aforesaid but in another part of the compromise application a

provision was made only for the judgment debtor to take steps for

change of name and trading style. The said steps were admittedly

taken by the judgment debtor and change of name was in fact

effected shortly after 1st August, 2004. In these circumstances, it

cannot be said that the judgment debtor inspite of opportunity to

obey has willfully failed to obey. The judgment debtor could have

been under a bona fide impression that all that it was required to do

was to take steps before 1st August, 2004 for change of name. No

ground for executing the decree for permanent injunction is thus

made out. The decree for permanent injunction is executable by

arrest and attachment only and not by enquiry into any damages

suffered because of breach. The purpose is to ensure compliance.

Even if it be hled that the parties had in compromise agreed for

payment of Rs 5 crores in case of breach, the same will be only when

decree is found executable in terms of CPC. Since the decree has not

been found executable owing to ingredient of failure to obey inspite

of opportunity lacking, the question of execution by payment also

does not arise.

37. Though not cited during hearing, the written note handed over

by senior counsel for decree holder also refers to Bindru Vs Kikru

AIR 1988 J & K 1 FB, Pioneer Engineering Co. Vs DH Machine

Tools AIR 1986 Delhi 165, Rajasthan Financial Corporation Vs

M/s Man Industrial Corporation AIR 2003 SC 4273 and Dr.

Renuka Datla Vs Solvay Pharmaceuticals (2004) 1 SCC 149,

neither of which is found to be on any of the aspects aforesaid nor

persuade me to hold otherwise. Mention therein is also made of

Abro Industries Inc. Vs K.V. International 111(2004) DLT 826

which is found applicable. However, the language of the clause in

the compromise application in that case was materially different.

38. I therefore uphold the objections of the judgment debtor. I

find that there is no decree for Rs 5 crores as claimed by the decree

holder and which can be executed. The only decree is for relief of

permanent injunctions. However, it is not found that the judgment

debtor inspite of having opportunity to obey the relief of permanent

injunction has willfully failed to do so. Thus, no case for execution of

the decree for permanent injunction even is made out. The

execution is dismissed. However, in the facts and circumstances of

the case the parties are left to bear their own costs.

RAJIV SAHAI ENDLAW (JUDGE) May 11, 2009 PP