What constitute consideration for passing of compromise decree?

 Section 2(d) of the Indian Contract Act, 1872 defines consideration. It is something done or promised to be done or something not done or something promised not to be done by the promisee at the desire of the promiser. This definition clearly shows that the consideration could be monetary as well as in kind or in the nature of some sacrifice made by the promisee at the desire of the promiser. Having understood the concept of consideration under the Indian Contract Act, now we would have to take a look at the compromise application signed and executed by the parties.

7. It is seen from the compromise application that even though there is no mention in it about payment of price of the suit properly, the deficiency is made up by what is stated in it's paragraph 3(1). Contents of this para disclose that the defendant (applicant-judgment debtor) has shown his readiness to execute the sale deed in respect of 1/4th share out of his 1/3rd share from the property bearing Khasra No. 81/2, RH. No. 46 situated at mouza Isasani. So, this is an act promised to be done by the defendant or the applicant who is the promisee in the instant case. The respondent or the decree holder is the promiser in this case and as seen from the prayer clause, has expressed a desire that in lieu of the promise so given by the promisee, the Court be pleased to grant a compromise judgment and decree as per the terms and conditions mentioned in the application. These mutual acts performed or promised to be performed by both parties from the consideration for what each of the parties to the compromise application has agreed to do in the present case. Therefore, this is not a case wherein one can surely say that the compromise application was devoid of any consideration, as the term is defined in law.

IN THE HIGH COURT OF BOMBAY (NAGPUR BENCH)

Civil Revision Application No. 86 of 2017

Decided On: 13.09.2017

Suresh Daulatrao Wirulkar Vs.  Ganesh Rajaram Bodkhe

Hon'ble Judges/Coram:

S.B. Shukre, J.

Citation: 2018(3) MHLJ 112

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Procedure to be followed by court when contract is partly valid and partly invalid

In BOI Finance Ltd. Vs. Custodian 1, the Supreme court has held that in the case of a composite agreement consisting of diverse reciprocal promises, the Court has to see whether the contract is such that the illegal or void part of the transaction can be severed from the legal and valid part and such severing does not amount to rewriting or rearranging the contract. The Supreme Court, in that case, was dealing with a ready forward contract. The Court held that there was one agreement, but it contained two sale transactions, the execution of each of which envisaged a transfer of title in the securities. The valid part (the ready leg) of the transaction was allowed whilst the invalid part (the forward leg) was ignored. Even in Canbank Financial Services Ltd. Vs. Custodian 2, the Supreme Court, relying on BOI Finance Ltd., laid down the law on the subject in the following words :

"79. A contract may be unlawful or partly lawful or partly unlawful. If it is lawful, it will be given effect to whereas in case it is wholly unlawful being opposed to the public policy, it would not be. In case a transaction is partly lawful and partly unlawful, if they are severable, the lawful part shall be given effect to."

1 (1997) 10 Supreme Court Cases 488 2 (2004) 8 Supreme Court Cases 355 These observations squarely apply to the facts of our case. We are concerned here with a Deed of Guarantee - one part of the guarantee dealing with an Indian Rupee Loan by an Indian entity to an Indian party and the other part dealing with FDI by a foreign investor in an Indian company, with securities of the common borrower being shared pari passu. Even if the foreign part, namely, FDI, cannot be permitted in law due to infringement with FEMA regulations or FDI policy of the country, that is no reason to refuse enforcement of the Indian part, namely, guarantee for a loan between two Indian parties. The latter part is clearly severable from the former and can be enforced independently of the former.

Bombay High Court

Idbi Trusteeship Services Ltd vs Hubtown Limited on 6 June, 2016

Bench: S.C. Gupte

Citation:AIR 2016 Bom243,(2017)1SCC568

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How reciprocal promises are to be performed in suit for specific performance of contract?

 Section 51 provides that when a contract consists of reciprocal promises to be simultaneously performed, no promisor need perform his promise, unless the promisee is ready and willing to perform his reciprocal promise. For example, if the contract provides that the balance of sale consideration shall be paid by the purchaser to the vendor against execution of sale deed within a period of three months, the purchaser need not pay the balance sale consideration if the vendor was not willing to execute the sale deed. Similarly the vendor need not execute the sale deed unless the purchaser is ready to pay the balance sale consideration.

32. Section 52 relates to the order of performance of reciprocal promises. It provides that where the order in which reciprocal promises are to be performed is expressly fixed by the contract, they shall be performed in that order; and where the order is not expressly fixed by the contract, they shall be performed in that order which the nature of the transaction requires. Let us illustrate with reference to an agreement of sale which provides that the vendor shall make out to the satisfaction of the purchaser a good, marketable and subsisting title and provide all documents as required by the purchaser to satisfy him about the title of the vendor, that the vendor shall obtain a certificate of clearance from a specified authority for the sale, that the sale shall be completed within a period of four months of receipt of the clearance certificate and the purchaser shall pay the balance sale price at the time of registration of the sale. It is evident that the vendor will have first to make out a title by producing the documents required by the purchaser and also obtain the clearance certificate. Only thereafter the sale deed shall have to be executed and payment of the sale consideration will have to be made at the time of registration of the sale deed. The vendor cannot seek payment of the balance sale price without performing his obligations as per the agreement.

Reportable

Supreme Court of India

Saradamani Kandappan vs S. Rajalakshmi & Ors on 4 July, 2011

Bench: R.V. Raveendran, K.S. Panicker Radhakrishnan

Citation:AIR 2011 SC 3234:(2011)12 SCC18

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What is doctrine of severability of contract as per S 57 of Indian contract Act?

Explaining the doctrine of severability contained in Section
57 of Indian Contract Act, 1872, in B.O.I. Finance Ltd., v.
Custodian and others
, a three Judge Bench of this Court has
held that question of severance arises only in the case of a
composite agreement consisting of reciprocal promises. In Shin
Satellite Public Co. Ltd. V. Jain Studios Ltd.
, this Court has
observed that the proper test for deciding validity or otherwise of
an order or agreement is “substantial severability” and not
“textual divisibility”. It was further held by this Court that it is
the duty of the Court to sever and separate trivial and technical
parts by retaining the main or substantial part and by giving
effect to the latter if it is legal, lawful and otherwise enforceable.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 9151-9152 OF 2015
(Arising out of S.L.P. (Civil) Nos. 34129-34130 of 2014)
Elektron Lighting Systems 
Pvt. Ltd. and Anr.
V
Shah Investments Financial Developments
and Consultants Pvt. Ltd and Ors. Etc.
Dated:November 20, 2015.
Prafulla C. Pant, J.

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