UNITED BANK OF INDIA versus RAMDAS MAHADEO PRASHAD AND ORS.

Citation: [2003] SUPP. 5 S.C.R. 129 · Decided: 04-11-2003 · Supreme Court of India · Bench: S.N. VARIAVA · Disposal: Appeal(s) allowed
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Judgment (excerpt)

UNITED BANK OF INDIA 
A 
v. 
RAMDAS MAHADEO PRASHAD AND ORS. 
NOVEMBER 4, 2003 
[S.N. VARIAVA AND H.K. SEMA, JJ.] 
B 
Contract Act, 1872--Section 62-Enforcement of contract-Dispute 
between parties-Suit-During pendency parties arriving at Memorandum of 
Understanding and entering into compromise-However, parties not complying C 
with the terms and conditions stipulated in the Memorandum of Understanding 
and acting upon them-Effect of-Held: A party in breach cannot seek to 
enforce a contract-The Memorandum of Understanding does not amount to 
concluded contract or novation of contract under Section 62. 
Respondent filed suit regarding under-writing commitment in public D 
issue against appellant-bank. During pendency of the suit, parties arrived 
at Memorandum of Understanding (MOU) in which a compromise was 
entered into. MOU stipulated certain conditions and the parties were to 
comply with the same. 
The question which arises for consideration is these appeals is E 
whether the MOU, entered into between the parties has been acted upon 
and complied with by the parties. 
Respondent Nos. 1and2 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 Contract Act can be invoked. 
F 
Allowing the appeals, the Court 
HELD : 1.1. In the instant case, the respondents did not withdraw 
the suit filed by them against the United Bank of India, which is the 
condition precedent stipulated in clause (1) of the MOU. The respondents G 
also did not pay the guarantee liability and also no compromise petition 
was filed before an appropriate court. Therefore, by,.no stretch of 
imagination it can be said that the terms and conditions stipulated in the 
MOU had been complied with and acted upon by the parties. Subsequent 
129 
• 
H 
130 
SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R. 
A to the MOU there was also a lot of correspondence between the parties 
by exchanging letters giving offers and counter-offers which shows 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. Even otherwise, there has been non-compliance of the 
B 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 
Contract Act. (133-E-H; 134-A-B) 
CIVIL APPELLATE WRISDICTION : Civil Appeal Nos. 8132-8133 
C of 2001. 
From the Judgment and Order dated 30.5.2001 of the Debts Recovery 
Appellate Tribunal, Calcutta in A. No. 23/2000 and 6 of 200 I. 
Dhruv Mehta, Mohit Chaudhary, Ms. Shalini Gupta for Mis K.L. Mehta 
D & Co., for the Appellant. 
E 
Ranjit Kumar, Rana Mukherjee, Siddharth Gautam, Goodwill Indeevar 
and Mrs. Sumita Ray for the Respondents. 
The Judgment of the Court was delivered by 
SEMA, J. Heard Mr. Dhruv Mehta, learned counsel for the appellant 
and Mr. Ranjit Kumar, learned Senior advocate on behalf of respondent Nos. 
1 and 2 at length. 
These appeals are directed against the judgment and order dated 
F 30.05.2001 passed by the Debts· Recovery Appellate Tribunal (DRA1), 
Calcutta. Two appeals were preferred before the DRAT. Appeal No. A-23/ 
2000 was preferred by the appellant and Appeal No. A-6/200 I was preferred 
by the respondents herein. By the impugned judgment Appeal No. A-23/ 
2000 was dismissed and Appeal No. A-6/2001 was allowed. In view of the 
order that we propose to pass, it may not be necessary to delve into the facts 
G leading to the filing of the present appeals. Suffice it to say that during the 
pendency of the suit, ~ Memorandum of Understanding (MOU) was arrived 
at; in a meeting held on 18.05.1994 between the parties in which a compromise 
was entered into, on the sole basis of which the order impugned was rendered. 
H 
The spinal question raised in these appeals, therefore, is centred around 
U.0.1. v. RAMDAS MAl-10,DEO PRASHAD [SEMA, J.J 
131 
.. 
as to whether the MOU, entered into between the parties on 18.05.1994 and A 
forwarded by letter dated 20.05.1994, has been acted upon and complied 
with by the parties. 
After considering the MOU, the Tribunal arrived at the following 
conclusion : 
B 
"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.
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