H.K Sema, J.— Heard Mr Dhruv Mehta, learned counsel for the appellant and Mr Ranjit Kumar, learned Senior Advocate on behalf of Respondents 1 and 2 at length.
2. These appeals are directed against the judgment and order dated 30-5-2001 passed by the Debts Recovery Appellate Tribunal (“DRAT”), Calcutta. Two appeals were preferred before DRAT. Appeal No. A-23 of 2000 was preferred by the appellant and Appeal No. A-6 of 2001 was preferred by the respondents herein. By the impugned judgment Appeal No. A-23 of 2000 was dismissed and Appeal No. A-6 of 2001 was allowed. In view of the order that we propose to pass, it may not be necessary to delve into the facts leading to the filing of the present appeals. Suffice it to say that during the pendency of the suit, a memorandum of understanding (MOU) was arrived at in a meeting held on 18-5-1994 between the parties in which a compromise was entered into, on the sole basis of which the order impugned was rendered.
3. The primal question raised in these appeals, therefore, is centred around as to whether the MOU entered into between the parties on 18-5-1994 and forwarded by letter dated 20-5-1994 has been acted upon and complied with by the parties.
4. After considering the MOU, the Tribunal arrived at the following conclusion:
“In order to resolve the dispute between the parties it is necessary to interpret the terms of compromise as conveyed by the appellant Bank by letter dated 20-5-1994. Since there was talk of compromise between the parties which actually took place on 18-5-1994 at 3.00 p.m, the consensus arrived at must be taken to be a new contract between the parties and in the event the terms of this contract are obeyed by any party, the other side cannot get away from them on the principle laid down in Section 62 of the Contract Act. Clause II of the enclosure containing the terms of the compromise fixes this settled amount at Rs 33.14 lakhs plus interest at 6% thereon till the date of liquidation which is fixed at 12 months from the payment of first instalment of Rs 12 lakhs which is to be paid within a month from the date of arriving at the MOU. From the series of correspondence which I have referred to earlier it is amply clear that the first instalment was paid by the opposite party in time and the liquidation of the agreed amount was also made within the terms of the MOU. So far as the bank guarantee is concerned, it is nobody's case that such guarantee has actually been invoked and as such the opposite party is under no obligation to pay the said sum to the Bank. The only question which remains in dispute is the calculation of interest, rather the date and time from which such interest is to be calculated. That MOU does not mention the time from which such interest is to be calculated and as such in my opinion since a new contract was invoked by way of talk between the parties on 18-5-1994 the claim of interest cannot go earlier to the said period because the Bank actually waived its original claim of a much more higher sum by agreeing to remain contented with Rs 33.14 lakhs as suit amount. As such, the subsequent contention of the Bank as conveyed by letter dated 12-6-1995 enhancing the suit amount as Rs 47.22 lakhs cannot stand. It further appears that in spite of the fact that the opposite party actually obeyed the terms of MOU in toto, the Bank did not adhere to the terms of the said agreement and did not release the title deeds as claimed by the opposite party. It is surprising that in course of the written note it has even been alleged on behalf of the Bank that the MOU reveals the mind of one officer of the Bank alone and there was no resolution of the Board of Directors to that effect on the said date. It is true that there was some exchanging of letters between the parties after the MOU. But that does not mean that the MOU loses its legality and significance, rather such correspondence was made between the parties due to wrong interpretation given to the said MOU by one party and non-compliance with the terms by the Bank. Therefore, the MOU creating a new contract between the parties does not lose its force because of such correspondence. Accordingly, I come to the conclusion that the Bank is precluded from claiming any higher rate of interest or claiming the interest from the debt of the claim case in view of the terms of MOU. Accordingly, the decision of the Tribunal below granting repayment of further sum of Rs 12.75 lakhs cannot stand. Needless to say, the claim of the Bank for enhanced sum after calculating on the basis of enhanced rate of interest also does not stand since the opposite party complied with the terms of MOU by making payments strictly in conformity with the said agreement.”
5. At this stage, it will be useful to reproduce the MOU entered into between the parties on 18-5-1994:
“(1) M/s Swaika Vanaspati Products Ltd. will withdraw the suit against UBI regarding underwriting commitment in SVPL Public Issue.
(2) The suit against SOM may be is settled for Rs 33.14 lakhs (suit amount) plus simple interest @ 6% thereon till the date of liquidation. The period for liquidation is kept at 12 months from the date of first instalment. The first instalment of Rs 12.00 lakhs is to be paid within one month preferably before 30-5-1994. The sum of Rs 2.33 lakhs which is the guarantee liability, is to be honoured due to invocation of guarantee, and will have to be paid by the borrower additionally but will not bear any interest. To sum up, the total dues will be suit-filed amount of Rs 33.14 lakhs plus 6% interest at simple rate on Rs 33.14 lakhs till liquidation on reducing balance plus Rs 2.33 lakhs (which is the guarantee liability). The consent decree to this effect will be filed in the appropriate court after receipt of Rs 12.00 lakhs. Securities charged to the Bank shall only be released after full and final payment.
(3) The payment of the aforesaid amount will be made in instalments. The first instalment of Rs 12.00 lakhs will be made within 30 days and then the residual amount will be repaid by 4/5 instalments in 12 months. On receipt of the first instalment of SOM compromise amount of Rs 12.00 lakhs, UBI will participate in rehabilitation/restructuring of SVPL a/c. It will parallely discuss with IRBI for the expansion scheme and will also subscribe to equity shares as required under the project.
(4) In case of default of instalment payment of SOM as prescribed above, the entire outstanding liability will attract normal rate of interest with quarterly rests.
(5) UBI will pay up-to-date fixed deposit interest on the money received in SVPL Public Issue and lying with UBI.”
6. A fascicule reading of the conditions stipulated in the MOU clearly posits that the parties were to comply with the conditions stipulated by taking the following actions:
(a) to withdraw the suit filed by them against the appellant;
(b) to pay the guarantee liability of Rs 2.33 lakhs; and
(c) to file a compromise petition in terms of MOU before an appropriate court.
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.
8. As already noticed, no compromise petition was also filed in an appropriate court in terms of Order 23 Rule 3 of the Civil Procedure Code.
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.
10. For the reasons aforestated, we allow the appeals. The order of the Appellate Tribunal dated 30-5-2001 dismissing Appeal No. A-23 of 2000 and allowing Appeal No. A-6 of 2001 is set aside. Consequently, Appeal No. A-23 of 2000 before DRAT is allowed and Appeal No. A-6 of 2001 stands dismissed. Parties are asked to bear their own costs.