In the recent case of Square Four Assets Management & Reconstruction Co P Ltd and Ors v Orient Beverages Ltd and Ors, the Calcutta High Court held that in an application for an order under order XII, rule 6, of the Code of Civil Procedure, 1908 (CPC), the admission made by a defendant can only be enforced consistent with the conditions in or attached to it.
The plaintiffs applied for judgment based on the minutes of a meeting held after the filing of the case. The parties had negotiated over the way in which the defendants were to pay damages to the plaintiffs. The defendants had agreed that they would pay INR160 million (USD1.96 million) by three equal instalments on the plaintiffs withdrawing their claims under such headings as arrears of rent, mesne profits, maintenance and car parking charges from October 2015 to the meeting in October 2020.
The plaintiffs contended that the admission by the defendant as to liability was unequivocal, a severable as opposed to a reciprocal promise, and was independent and unconditional. The plaintiffs relied on the admission of the defendants as recorded in the minutes of the meeting and applied for judgment.
It was argued by the defendants that the minutes of the meeting did not contain an unequivocal and unconditional admission. The minutes recorded a mutual agreement with the parties accepting inseverable and reciprocal obligations to resolve all disputes through an out-of-court settlement. The admission, if made at all, was half of the reciprocal promises made by the parties, and could not result in a judgment unless the plaintiffs performed their part of the compromise.
In deciding the matter, the Calcutta High Court held that having failed to withdraw the suit, and having resiled from the agreed terms, the plaintiffs could not then seek to enforce one of the reciprocal promises advantageous to them.
The plaintiffs admitted keeping the case and all other applications alive in order to seek other relief against the defendants. The plaintiffs could not rewrite the minutes or interpret them in a manner clearly inconsistent with the understanding of both parties at the time the minutes were signed. The plaintiffs and the defendants had to stay within the bounds of the agreed terms and seek only such relief as was consistent with those terms.
The high court held that the basis of order XII, rule 6, of the CPC in dealing with judgments on admissions was that a party making an admission of fact, in a pleading or otherwise, orally or in writing, would be held to it on the application of the other party or by the court of its own motion.
The admission that had been made may be transformed into an order or judgment of the court subject to the court’s discretion, and solely confined to such admission. The precondition to a judgment being entered on the admission made by a party was that the admission must be capable of standing on its own. It must retain and carry into effect its contents and form, even when taken out of context.
In other words, an admission relied on by the party that looks to enforce it against the party that made the admission must not be ineffective when taken out of its surrounding circumstances. Admissions that form the basis for later judgments must be unequivocal, independent and unconditional.
An admission that can satisfy these conditions only in conjunction with other conditions closely intertwined with it is not sufficient. As order XII, rule 6, empowers courts to enter judgments based on admissions, without waiting for the resolution of other matters between the parties, this case is true to the policy behind the CPC, as well as to its form.
The high court held in the present case that admissions made by the defendant as to the amount payable were completely without effect in the absence of the corresponding obligation of the plaintiffs to withdraw the suit. This is all the more so when payment was to be made only after withdrawal of the case.
Given the legislative intent behind order XII, rule 6, of the CPC, the admission of the defendant was only conditional. The admission, with the failure of the plaintiffs to withdraw the case, was only half of the reciprocal promises made in reaching the out-of-court settlement.
The court held that the admission should be enforced against the defendant, but that such enforcement should be performed by both parties carrying out the conditions that were in, or attached to, the admission. All the conditions formed the basis of the agreement that was minuted, and the parties were directed to act in accordance with the terms mutually agreed by them.
The dispute digest is compiled by Numen Law Offices, a multidisciplinary law firm based in New Delhi & Mumbai. The authors can be contacted at firstname.lastname@example.org. Readers should not act on the basis of this information without seeking professional legal advice.