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Sanwarlal Agrawal & Ors. vs Ashok Kumar Kothari & Ors.

Civil Appeal · 2023 INSC 149Decided 21 Feb 2023
Civil Appeal Nos. 1312-1313 of 2023
Krishna Murari · S. Ravindra Bhat

Background

The Agrawal and Kothari groups were equal partners in a 2017 joint venture to run a multi-specialty hospital in Malad, Mumbai, each having advanced about Rs 10 crore as interest-free loans. In March 2019 the Kotharis bid Rs 36.75 crore for the Agrawals' 50% shareholding, and the terms were recorded in an email of 28 March 2019 that mentioned only the shares. The next day the Kotharis emailed a "break-up" treating the Rs 36.75 crore as including repayment of the Agrawals' Rs 10.29 crore loan, which the Agrawals expressly rejected in several emails. The Kotharis sued for specific performance and the Agrawals submitted to a consent decree in terms of the 28 March email. In execution, a single judge of the Bombay High Court called the decree "ambiguous," looked into the pleadings (to which the Agrawals had filed no written statement) and held the price was inclusive of the loan; the Division Bench agreed.

Decision Breakdown

The Supreme Court allowed the appeal and set aside the High Court's orders. Reaffirming Topanmal Chhotamal (1960) and Meenakshi Saxena (2018), it held that an executing court must take the decree as it stands and cannot go behind it; while it may construe a genuinely ambiguous decree by reference to the judgment and pleadings, it cannot add terms the parties never agreed. Here the consent decree mirrored the 28 March email, which spoke only of the sale of shares; the loan inclusion appeared for the first time in the Kotharis' 29 March email and was expressly refused, so there was "a clear lack of consensus." The 2017 joint venture agreement itself provided a separate mechanism for repaying a seller's loans within 15 days of a bid, confirming that the share price and the loan were distinct. The Agrawals' failure to file a written statement could attract an adverse inference but could not justify expanding the decree; "the stream cannot rise above its source."

Lesson Learnt

A court enforcing a decree can only enforce what the decree actually says; it cannot rewrite a consent decree to include terms one side proposed but the other side rejected. Parties settling a dispute should ensure every financial component, such as loans owed alongside a share sale, is spelled out explicitly in the document that becomes the decree.

Official source (sci.gov.in)View Judgment (PDF)

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