The court analyzed the terms of a compromise embodied in a decree and determined whether the recovery of the suit amount on nonpayment of a stipulated sum was recoverable by way of penalty. The court held that the agreement did not impose a penalty as the decree-holder was entitled to the full amount of the claim if the stipulation regarding the concession was not carried out.

Cornish, J.

1. The decree-holder is the appellant. He brought a suit on a promissory note executed by defendant 1, he being the younger brother of defendant 2. The suit was alone contested by defendant 2, but it ended in a compromise. This compromise was embodied in a decree and runs as follows:

That if, out of the suit amount of Rupees 1,383-12-4, the sum of Rs. 800 is paid in two months from this date by the defendants to the plaintiff, that is, on 24th April 1933, in cash, the plaintiff shall give up the remaining suit amount and costs of the suit; that, in case the defendants fail to so pay the sum of Rs. 800 to the plaintiff on 24th April 1933, the plaintiff shall recover the suit amount or Rs. 1,383-12-4 only from the defendants from their moveable and Immovable properties in execution proceedings with execution costs and that as regards the costs in this suit, the plaintiff shall give up his costs and the defendants shall give up their costs.

2. The sum of Rs. 800 was not paid on 24th April 1933; but on that day defendant 1 was allowed by the Court to pay Rs. 500 and was given time up to 3rd May 1933 to pay the balance of Rs. 300. As a matter of fact, he paid the balance on 29th April 1933. The defendant then applied to the Court to record full satisfaction of the decree. This was resisted by the decree-holder. The District Munsif dismissed the application, but it has been allowed by the Subordinate Judge on appeal. The Subordinate Judge was of opinion that the stipulation regarding payment of the full suit amount on failure of payment of Rs. 800 on the fixed date amounted to a penalty against which the Court was entitled to give the judgment-debtor relief. The decree-holder has appealed. There is no doubt that a compromise being an agreement is subject to Section 74, Contract Act, and to the equitable relief which the Court can give under that provision, notwithstanding that the compromise is embodied in a decree. It has been so held by a Full Bench of the Allahabad High Court in Mohiuddin v. Kashmiro Bibi AIR1933All252 . The question here is, whether the recovery of the suit amount of Rs. 1,300 odd on nonpayment of the sum of Rs. 800 on the stipulated date was recoverable by way of penalty. This must depend upon the terms of the agreement under which this sum was made payable. The law on the subject has been stated by Sir John Beaumont, C.J. in Burjori Shapurji v. Madhavlal Jesingbhai AIR1934Bom370 , in these words:

If there is an agreement to pay a sum of money by a particular date with a condition that if the money is not paid on that date a larger sum shall be paid, that condition is in the nature of a penalty against which a Court of equity can grant relief and award to the party seeking payment only such damage as he has suffered by the nonperformance of the contract.... But if, on the other hand, there is an agreement to pay a particular sum followed by a condition allowing to the debtor a concession, for example, the payment of a lesser sum, or payment by instalments, by a particular date or dates, then the party seeking to take advantage of that concession must carry out strictly the conditions on which it was granted, and there is no power in the Court to relieve him from the obligation of so doing.

3. It has been contended that the present case is distinguishable from the Bombay case because the larger amount there had been decreed. It is true that in the present case the sum of Rs. 1,383 has not in terms been decreed as payable; but I think it is clear from the language of the decree that the defendants had both agreed to pay the full amount of the plaintiffs claim if they did not fulfil the condition on which the concession of a reduced sum had been made to them. Defendant 2 by virtue of the compromise had submitted to a liability for this sum if the stipulation of the payment of a lesser sum was not fulfilled, and it is not correct in my view to describe this agreement as one for the payment only of Rs