' Mashreq Bank, PSC, a banking company within the meaning and scope of the Banking Companies Ordinance, 1984, having succeeded to the Bank of Oman, filed on the 26th of November 1996, a suit for recovery of Rs,73,034,466.00 against Messrs Nazir Cotton Mills Limited and others. During the pendency of the suit, the parties entered into a Compromise on the 21st of October, 1997 and a consent decree was accordingly passed on the 14th of November, 1997. Clauses (2) and (3) of the Compromise, being relevant for the present purpose, are reproduced for facility of reference:- "(2). NCML and the Guarantors hereby agree to pay Rs,41,000,000 (Pak. Rupee forty-one million only) to the Bank (hereinafter referred to as "the Indebtedness" of NCML and the Guarantors), as the full and final settlement of NCML's liabilities to the Bank. NCML and the Guarantors further agree that in case of default as, referred in clause (3) hereinafter, NCML and/or the Guarantors undertake and shall pay Rs,49,200,000 (Pak. Rupees forty-nine million and two hundred thousand only) less the payments (other than compensation as defined under (c) below made of the indebtedness on or after the date of this Settlement Memorandum.
' NCML and the Guarantors hereby further agree to repay the Indebtedness as follows:-
(a) Rs,10,000,000 (Pak Rupees Ten million only) at the time of signing of this Memorandum.
(b) Balance Rs31,000,000 (Pak. Rupees thirty-one million ply) in 12 equal instalments of Rs,2,583,333.33 (Pak Rupees two million, five hundred eighty-three thousands three hundred thirty- three, and thirty-three paisas only) each payable at the end of each quarter, 1st instalment commencing from March 31, 1998, last instalment ending on December 31, 2000.
(c) in case of delay in payment of instalment on due dates, the Bank shall be entitled to recover and NCML and/or the Guarantors shall be bound to pay compensation @ 43.84 paisas per thousand per day for the delayed period in settling the overdue instalment, if any.
3. It is agreed by NCML and the Guarantors that:
(a) Time shall be the essence of this Memorandum and the tenor of repayment schedule as described in clause 2(b) above shall not exceed beyond December 31, 2000, and
(b) In the event NCML and/or the Guarantors fail to perform any of its obligations under this Memorandum including without limitations and in particular if any of the two (2) consecutive instalments referred to in clause 2(b) above are not paid on their respective due dates for any reason whatsoever, the Bank shall be entitled to recover and NCML and/or the Guarantors shall be bound to pay the amount Rs,49,200,000 (Pak. Rupees forty-nine million and two hundred thousand only) less the payments made (exclusive of compensation) of the indebtedness as referred in clause (2) above, which shall then be due and payable forthwith, whereupon such amount shall become immediately due and payable by NCML and/or the Guarantors to the Bank, including the compensation @ 43.84 paisas per thousand per day till full realization, in case of any delay and,
(c) in the event of default as referred above, without prejudice to any other rights of the Bank against NCML and/or the Guarantors including without limitation the right to liquidate any or all of the fixed or current assets under mortgaged/ hypothecated, without the consent of any Court of law, the Bank can take any other steps and measures as may be deemed appropriate in order to enforce the recovery."
2. The case of the decree-holder/applicant-Bank is that the judgment-debtors had not adhered to time in the matter of payment of instalments and had committed delays as will be seen from the following table filed by the learned counsel for the Bank:- Date Instal. Due Instal No. Delayed days From To 31-3-1998 1 0 1st July. 98 30th September, 199830-6-1998 2 91 1st October, 1998. 31st December, 1998.30-9-1998 3 91 1st January, 1999. 4th October, 1999. 3 276 1st January, 1999. 16th November, 1999.31-12-1998 4 319 16th November, 199916th November, 1999 4 0 1st April, 1999. 16th November, 199931-3-1999 5 229 1st July, 1999. 4th January, 2000 30-6-1999 6 187 4th January, 2000. 1st February, 2000 6 28 1st October, 1999 28th February, 200030-9-1999 7 150 28th February, 20004th April, 2000 7 36 1st January, 2000 29th April, 2000 31-12-1999 8 118 29th April, 2000. 26th May, 2000 8 27 1st April, 2000. 8th July, 2000 31-3-2000 9 98 8th July, 2000 3rd August, 2000. 9 26 1st July, 2000. 1st September, 2000.30-6-200010 62 1st September, 200029th September, 2000 10 28 1st October, 2000 27th October, 2000.30-9-200011 26 27th October, 2000.3rd December, 2000 11 37 31-12-200012 0 Total: 1052 ' The decree-holder Bank has, therefore, filed this execution petition wherein it is mentioned that Rs,10 million had been paid at the time of signing of. The Compromise/ Agreement; that the remaining amount of Rs,31 million had been paid during the period from the 31st March, 1998 to the 31st December, 2000, though the instalments had been delayed as afore-mentioned; that in view of the delayed payments of instalments, the applicant-Bank is entitled to compensation/mark-up at the rate of Rs,43.84 per thousand per day, plus mark-up. Besides, Rs,34,012 have been claimed towards the costs awarded. As per Column No,10 of the execution petition, the total amount claimed by the Bank comes to Rs,98,05,771.69 (Rs,16,05,771.69 as mark-up and Rs,82,00,000 as remission amount in the agreement). The recovery of the said amount has been claimed through sale of the mortgaged land, attachment and sale of machinery stocks etc. Hypothecated assets of judgment-debtors 1 to 9, and by arrest and detention of judgment-debtors 2 to 9. When the execution petition came up for preliminary hearing on the 31st of October, 2003, I raised question of limitation as well as the right of the applicant-Bank to invoke penalty clause after having recovered the entire agreed amount in instalments, without any objection. Subject to the said objections, notices were issued to the judgment-debtors.
3. I have heard learned counsel for the parties and have gone through the available record.
4. Khawaja Aamer Farooq, learned counsel for the Bank contends that the Bank had the option to wait till the 31st of December 2000 when the last instalment became due and the period-of limitation of three years is to be reckoned from the said date; that the Bank was entitled to claim the pre-determined amount of damages and that the judgment-debtors were not entitled to press into service the principle of waiver or estoppel in view of the fact that they were in breach of the contract. In support of his submissions, he has relied on Chunilal v. Shivram AIR 1950 Born. 188 F.B., Ganeshlal v. Ramgopal AIR 1955 Raj. 17, Federation of Pakistan v. Bibi Shaidae Fatima PLD 1968 Kar.
31 and Bank of Credit & Commerce v. Messrs Global Produce 1998 M LD 1759.
5. Conversely, Mr. Nomaan Air= Raja, learned counsel for the respondents/judgment-debtors argued that as per Bank's own case, founded on the Compromise Deed, the right to take out execution accrued to it on failure of the respondents/judgment-debtors to pay two' consecutive instalments; that as per the Bank itself, default had occurred when the two consecutive instalments, which were due on the 30th of June and the 30th of September, 1998 were allegedly delayed, each by 91 days; that the right to invoke the penalty clause accrued to the Bank on the 30th of September, 1998; that the instant execution petition, having been filed on the 24th of May, 2003, more than three years after the accrual of the right to enforce the default clause, is barred under Article 181 of the Limitation Act; that even though there was a clause in the Deed of Compromise that in case of delay in payment of instalments on due dates, the Bank could claim damages at the stipulated rate but,. In law, no such damages were recoverable unless evidence was adduced to prove loss; that in the absence of any averment in the execution petition itself about any loss suffered by the Bank, no evidence could be led; and that since the applicant-Bank had been receiving the delayed instalments, without objection or expressly reserving its right to invoke the penalty clause, it is deemed to have waived its right, and was estopped to invoke the penalty clause. In support of his submissions, learned counsel for the judgment-debtors relied on Jwala Ram v. Mathra Das AIR 1931 Lah. 696 D.B., Burjorji v. Madhavlal. AIR 1934 Born. 370 D.B., Narayan Chandra v. Nath Bank Ltd. AIR 1967 Pat. 124 D.B., Muslim Commercial Bank Ltd. v. Perwani Export and Import Trading Co. 1999 YLR 975, and Agricultural Development Bank of Pakistan v. Jasarat Hussain 2002 CLD 93.
6. So far as the case-law relied upon by the learned counsel for the applicant-Bank is concerned, the decision of Full Bench of the Bombay High Court reported as Chunilal v. Shivram is not applicable to the facts of the present case. In that case, the decree provided for payment of annual instalments with interest, the first of such instalments was made payable in March and April, 1932 and each subsequent instalment on the succeeding March and April of every year. It was also provided that in default of payment of any two instalments the plaintiff might recover the whole balance that would remain over after deduction of payments received in one lump sum by sale of the mortgaged property. Certain payments were made by the judgment-debtors between the period from the 24th November, 1931 to the 17th April, 1933. However, on the 5th October, 1936, the decree-holder filed an application claiming that in view of default in payment of instalments the whole decretal amount had become payable and, therefore, claimed that amount. The application was dismissed for non-prosecution. A further application was filed on 15th November, 1938 and the executing Court held that the application was barred by limitation. The decree-holder filed an appeal. The matter was referred to a Full Bench of three learned Judges. The precise question referred to the Full Bench was whether in case of an instalment decree providing that on failure of payment of certain instalments the whole amount due may be recovered, and the decree-holder was entitled to exercise' his option to recover the whole amount then recoverable, and notwithstanding that the first default had occurred more than three years before the filing of the execution application. The question was answered in the negative; by observing inter alia as follows:- ' "Mr. Patwardhan's contention before us has been that it was on 5th October, 1936, that the decree- holder exercised his option to enforce the decree by claiming the whole amount due under the decree and therefore limitation did not begin to run till that date. Mr. Patwardhan says that although the default took place in March-April, 1933, it was open to the decree-holder not to exercise his right given to him under the decree, and till he exercised the right no question of limitation could arise. It is perfectly true and the decree-holder exercised his right on 5th October, 1936. But the question that we have to consider is whether when he exercised his right that right was subsisting or whether the remedy for that right had been barred by the statute of limitation. If a right accrued to the decree-holder in March April, 1933, he may not be bound to exercise that right, but as far as the statute of limitation is concerned, limitation would begin to run and he would not be able to exercise that right after limitation had run out under the Limitation Act. The mere fact that the decree-holder has an option to exercise a right does not mean that the right does not accrue to him so long as he does not exercise the option. The right is there, it has accrued to him, but he may choose not to exercise it at the moment when it accrues to him. He may exercise it at a later date or he may not exercise it at all. It also cannot be disputed as a principle underlying the Limitation Act that limitation begins to run when the right accrues for the first time and once limitation begins to run, limitation cannot be stopped. It would be fallacious to argue that in case of each default there is a separate right which accrues to the decree-holder. There may be subsequent defaults, but the right having once accrued to the decree-holder, limitation would run notwithstanding the subsequent default and subsequent defaults would not give him further rights, the right having already accrued to him when the first default took place."
' "The decree-holder treated the first default made by non-payment of two instalments as a default under the decree and it was on the basis of that default that he filed his Darkhast of 1936 claiming the whole amount due under the decree. There is no direct authority of this Court on the question that we have to consider and answer, and therefore, judging the question as a matter of first impression, it seems to us that when the judgment-debtor committed a default in March-April, 1933 and when the decree-holder became entitled to claim the full amount due under the decree, his right to apply within the meaning of Article 181 accrued and limitation began to run from that date, and as three years had expired before he preferred the Darkhast of 1938, that Darkhast was clearly out of time."
' "Article 181 itself provides the time when limitation begins to run and that time is when the right to apply accrues. It is clear that limitation would begin to run when the right first accrues, and limitation once having begun to run it could not run again when a second or subsequent default took place, nor would another right or a different right accrues to the decree-holder by reason of a fresh or subsequent default."
' Chagla, C.J., speaking for the Full Bench, further held as follows:-- ' "It is not disputed that the default in payment of two instalments did take place in March-April, 1933 because the two sums which were paid of Rs,1,195 and Rs,1,260 were not the full amounts of the instalment and interest payable under the decree. It cannot be seriously disputed that the Article under the Indian Limitation Act which applies is Article 181 and the period of limitation laid down under that Article is three years and limitation begins to run from the time when the right to apply accrues. If the right to apply accrued to the decree-holder in March-April, 1933, then clearly the Darkhast which was filed on 5th October, 1936, was not within time, and really the very narrow question that we have to consider is whether on 5th October, 1936, when the decree-holder applied for the execution of the decree for the whole amount, he had a subsisting right which he could enforce by the Darkhast. It is well-settled that the right which is given to a decree-holder under a decree to enforce the payment of the full decretal amount in default of payment of any instalment is a right given to the decree-holder for his benefit. He may or he may not enforce it. Although a default may take place, he may treat the decree as still a decree for instalments and he may pursue in execution his right to obtain the instalments as and when they fall due..."
' Moreover, the following observations are also worth special notice in the context of the facts of the present case:-- ' "The only exception to this proposition is a question of waiver or condonation on the part of the decree-holder. It would be open to the decree-holder not to treat the non-payment of the instalment on the due date as a default at all. He may waive or condone the default, in which case limitation would not run from the default which was condoned or waived, but from the default which the decree-holder treated as a default under the decree . "
' "Where the parties agree not to treat failure to pay an instalment on the due date as a default, then in the eye of the law there is no default at all and limitation does not begin to run and the parties would be estopped from contending that there was a default when they did not in fact treat it as such."
' The Full Bench did not agree with the view taken by a learned Single Judge of Madras High Court in Gopal v. Alagirisami AIR 1942 Mad. 581 to the effect that a decree payable by instalments, limitation does not run from the date of the first default, and that limitation only runs when the decree-holder makes up his mind to enforce his rights under the decree. On the other hand, the view taken in Joti Prasad v. Sri Chand AIR 1928 All. 629 F.B. And Ram Prasad Ram v. Jadunandan Upadhia AIR 1934 All. 534 was held to be correct view. Consequently, the question submitted to the Full Bench was answered in the negative. In Ganeshlal v. Ramgopal, a compromise decree was passed. The decree, among other terms, provided for payment by five instalments of the entire decretal amount. It was also provided that in case of default of even one instalment, the decree- holders would be entitled to `realize the entire decretal amount with interest. There was also a provision creating a charge on the share of Ganeshlal in a house in the City of Udaipur. The first instalment was due on the 31st of July, 1952, but nothing was paid. In view of this default, the decree-holders applied for execution on the 2nd of September, 1952, and prayed for sale of immovable property of Ganeshlal and other judgment-debtors. Ganeshlal appeared and objected to the execution application on the 7th of February, 1953. In the meantime, he had paid certain amounts to the decree-holders after the execution application had been filed. The objection raised by Ganeshlal, relevant to the present controversy, was that as the judgment-debtors had paid something more than the first instalment after the execution application had been filed, the Court should not proceed to enforce the penal clause and execute the entire decree at once. The executing Court having decided against the judgment-debtors, they filed appeal, which was heard and dismissed by a Division Bench of Rajasthan High Court, by observing as follows:- ' "The first instalment was not paid by the date fixed for it, namely the 31st of July, 1952. It was not even paid up to the date of the execution application. The payment was made after the execution application had been filed, and that also by two or three instalments to make up the entire amount of the first instalment. Under these circumstances, the trial Court was right in holding that the execution could be taken out of the entire decretal amount, and that there was no waiver by the decree-holders. We do not see why we should relieve the judgment-debtors of the penalty incurred by them ' It will thus be seen that the decree-holders in the cited case had immediately upon default by the judgment-debtors approached the executing Court with an execution application and the plea of the judgment-debtors about waiver founded upon having received the amount of first instalment after filing of execution application was rightly not entertained, because there was no question of waiver, the decree-holders having invoked penalty clause before any amount was paid toward liquidation of the first instalment. The precedent case relied upon by the learned counsel for the applicant-Bank, has thus no bearing on the facts of the present case and instead of rendering any support to the contention being convassed by him causes heavy dent to the same.
7. The next decision cited by the learned counsel for the applicant, and reported as Federation of Pakistan v. Bibi Shaidae Fatima is by a learned Single Judge of the Karachi Bench of the then West Pakistan High Court. The question which arose in that case was whether the decree-holder was entitled to file an execution application in January, 1963, in spite of the fact that the first default was committed on the 1st of April, 1959. Referring to a Full Bench judgment of Calcutta High Court reported as Ranglal v. Syamlal AIR 1946 Cal. 500, relied upon by the learned executing Court, it was held that the decree-holder could wait till the period up to the 15th of October, 1962, when the last instalment became due, had expired and then apply for execution within three years of it. Besides the fact that this decision of the learned Single Judge did not receive approval in the subsequent decision of a Division Bench of the same High Court, as will be shown presently, the moot question that arises here was not involved in that case, where the judgment-debtors had not only delayed the payment of the two instalments which had been paid, but no payment thereafter was made at all. In the present case, the judgment-debtors have paid, and the applicant-Bank has received, the entire amount agreed to be payable by instalments, and it is after having recovered the entire agreed amount, without any demur or objection at the relevant time, that the applicant-Bank now seeks to invoke the penalty clause. In Muhammad Ali v China Silk House 1985 CLC 679 a Division Bench of High Court of Sind at Karachi held as follows:-- ' "So far as the case of Federation of Pakistan, Department of Supply and Development, Cottage Industries v. Bibi Shaidae Fatima, Founder and Manager of Dilnashin Industrial Home and 2 others PLD 1968 Kar. 31 is concerned the learned Judge has placed reliance on the Full Bench case of Culcutta High Court cited above, and observed that the decree-holder who is entitled to recover the decretal amount by instalment is not bound to proceed to recover the whole amount even if it becomes due by default and can wait until the period within which the instalments are payable expires. It is necessary to state certain facts of the case under discussion. In this case a consent decree for Rs,5,098 was granted with a provision that the amount was payable by instalment of Rs,100 per month beginning from 15-8-1958. Thus, the total amount was to be paid in 51 instalments, last of which was to be paid on 15-10-1962. The judgment-debtor paid the first instalment of Rs,100 on 14-3-1959 then he paid Rs,296.25 on 8-8-1959, the decree-holder, therefore, filed the execution application on 16-1-1962, for recovery of the entire balance with interest in the amount of Rs,7,660.96. On these facts following Calcutta case it was held that the decree-holder in that case could wait till the period up to 1540-1962, expired and then apply for execution within 3 years of it and accordingly the first execution application made on 16-1-1962, was within time. With utmost respect we may state that the judgment of Calcutta High Court has not been correctly appreciated for in that case the following question was referred which was answered in the affirmative:-- ' "Where a decree directs payment of the decretal amount by instalments on particular dates and provides that in case the defendant fails to pay any instalment at the stipulated period, the entire decretal amount would be due, whether any application, made more than three years after the first default, but relating only to instalments which fell within three years of the date of the application, is within time and is governed by Article 182(7), Limitation Act."
' In that case the learned Judges nowhere laid down that the decree could be executed even in respect of instalments which had become barred by time and they have also nowhere laid down that time for execution of the whole decree would run from the date when the last instalment under the decree was payable."
' It was further held by the learned Judges of the Division Bench that where decretal amount was payable by instalments but it was provided that in case of default whole decretal amount would become due and payable, on any default, time would run from the date of such default. The precise observations appear in paragraph 15 of the judgment and are as follows:-- "(15) As regards second contention that since the decrees were for payment of the amount by instalments the time would run from the date when last instalment became due and payable. The proposition cannot be accepted as stated for in a case where the decretal amount is payable by instalments but it is provided that in case of default the whole decretal amount becomes due and payable on any default the time would run from the date of such default unless there is waiver or condonation of default in which case time for each instalment would run from the date of each default and therefore, to recover the instalments under the decree the application must be filed within the time provided under the law from the date of each default for, if, it is held otherwise it would have the effect of extending the period of limitation for the whole decretal amount or the instalments in default, as the case may be, beyond the_prescribed period for which there is no warrant in the Limitation Act." (Emphasis supplied).
8. The case of Bank of Credit and Commerce, lastly relied upon by the learned counsel for the applicant, proceeds on altogether different facts as will be seen from the following observations at pages 1763-64 of the Report:-- ' "Moreover, the decree-holder in the present case has admittedly applied for execution of decree in relation to the instalments which were to be paid on 31st December, 1992 and thereafter. When a decree permits payment of decretal amount in instalments, the payment becomes due and the right to apply for execution accrues when the instalment becomes due and not earlier. Evidently aid of the Court cannot be sought for effecting recovery of the amount which is not due. In any event, the dictum laid down in the above referred case of Sh. Muhammad Ali, is binding on me and I do hold the same view. In my view, therefore, time for filing execution application would start from the date when default is committed in payment of instalments and not from the date of decree.
Any other interpretation is bound to expose the decree-holder to undue hardship and trapping them in technicalities. Even under Article 181 of the Limitation Act, time starts running from the date when the right to apply accrues. The right to file execution application for recovery of unpaid instalments accrues when the same became due and not earlier. The principle contained in Article 115 of the Limitation Act, too supports the said view and time would commence from the date breach in payment of instalment occurs.
' The present proceedings, in view of the above decisions, could not have been filed before 31st December, 1992 and the same having been filed within 3 years from such date are within time, hence not barred by limitation."
' Thus, none of the cases, on which reliance has been placed by the learned counsel for the applicant-Bank, has either direct bearing on the facts of the present case, nor in any way supports his submissions.
9. Adverting to the case-law cited by the learned counsel for the judgment-debtors, in Jawala Ram's case, Jawala Ram had obtained an ex parte decree against six persons, including one Mathra Das. During the course of execution proceedings a compromise was effected. By virtue of the compromise, the decree-holder agreed to accept Rs,5,000, in full satisfaction of the decree as against Mathra Das provided the amount was paid to him in certain instalments. The last of these instalments was one of Rs,500, to be paid on the 16th of August, 1928. This instalment was not paid on the due date. It was offered to the decree-holder a few days later but he refused to accept it and subsequently applied for execution of the entire decree according to the terms of the compromise. On behalf of Mathra Das an objection was raised that the provision-of the compromise decree giving power to the decree-holder to execute the whole decree in case of default was in the nature of a penalty and should not, therefore, be. Enforced. The objection was upheld by the Executing Court which held that there was substantial compliance with the terms of the compromise and that the decree-holder was not entitled to enforce the penal provision. The execution application against Mathra Das was accordingly rejected. From the said decision, an appeal was presented to the High Court which first came before a Single Judge but was referred by him to a Division Bench. The learned Judges of the Division Bench, comprising Jai Lal and Agha Haider, JJ., having differed, a reference was made under section 98, Civil Procedure Code, to Bhide, J., who, after reviewing the case-law on the subject inter alia held as follows:-- ' "In the case of decree of this kind, i.e,, a decree based upon a compromise, where a decree-holder Agrees to accept payment of a smaller sum than what is actually due from a judgment-debtor in discharge of his claim against him and this sum is to be paid in instalments on specified dates, and it is stipulated that in default of payment of any instalment as agreed, the whole amount originally due shall become recoverable, the executing Court has power to go behind the decree and give the same equitable relief that the Court enforcing the agreement embodied in the compromise decree could give. The question whether a default has or has not taken place is one of fact to be decided on the facts of each case. In my opinion it cannot be laid down as a matter of law that time is not the essence of the contract in such cases.. It seems to me therefore that this question of fact is a matter for the decision of the Division Bench. If time was an essence of the contract as I think, it should be considered to be for reasons given in Dayaram Gidumal v. Nabibax AIR 1929 Sind 98 a default on the part of the judgment-debtor had clearly taken place in this case.
As a result of the default the judgment-debtor, no doubt became liable to pay a larger amount than he would have paid, if all the instalments had been paid in time. But as the decree-holder is merely withdrawing a concession and as the amount claimed by him does not exceed what was found to be due to him, there is no equitable ground for treating this sum as a "penalty" and refusing to enforce its payment."
' With the above observations, the matter was referred back to the Division Bench. The Division Bench held that the time was of the essence of the contract and consequently accepted the appeal and sent the case back to the executing Court to proceed with the execution of the decree in accordance with law. I wonder how this decision supports the contentions of the learned counsel for the judgment-debtors, or even otherwise has any bearing on the facts of the present case. The decision reported as Burjorji v. Madhanlal AIR 1934 Bombay 370 is almost to the same effect, as will be seen from the following observations at page 372 of the Report:-- ' "The law on the subject is not, I think, open to any serious question. 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 damages as he has suffered by the non-performance 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."
' In Narayan Chandra v. Nath Bank Ltd., a Division Bench of Patna High Court inter alia observed as follows:-- ' "Therefore, in case of instalment decrees each instalment, as it became due, was a claim originating under the decree from the date when such claim arises, and under the provisions of clause (7) of Article 182 the period of limitation is to be reckoned in respect of each instalment from the date when such instalment fell due. Had the decree under execution been a simple instalment decree, the execution to recover the last three instalments was not barred".
' "It is no doubt open to a decree-holder to waive the benefit of a default clause and although a default may take place, he may treat the decree as still a decree for instalments and he may pursue in execution his right to obtain the instalments as and when they fall due. But once the right to enforce the default clause accrues to the decree-holder for the first time and there is no waiver of such right, time begins to run from the date of such accrual and would not be stopped by reason of subsequent defaults. An execution application to enforce the default clause filed more than three years from the date of such accrual would be barred under Article 181".
' This decision thus supports the contentions of the learned counsel for the respondents/judgment- debtors.
10. An instalment decree, containing a penalty clause, and giving option to the decree-holder to invoke the same in case of default, is doubtless for the benefit of the decree-holder, and he can take out execution of the decree for the full amount if there is a default in the payment of any instalment. But, if he elects not to refuse a delayed payment, and receives without objection, it would constitute waiver of his right. The dictionary meaning of the word "waiver" is "to abandon, relinquish, desert, to relinquish (a right, claim or contention) either by express declaration or by some intentional act which by law is equivalent to this." In Law Terms and Phrases "waiver" is inter alia described to mean "forsaking the assertion of a right act at the proper time"; "an intentional relinquishment of a right a man is entitled to" "an intentional relinquishment of a known right"; "it may consist either of a positive act of relinquishment or of conduct such as would warrant an inference of relinquishment of the right". Thus the word "waiver" means to forego, to waive a claim or right, or not to put forward the same. In Norton v. Wood (1829) IR&M 178 where the obligee under a bond bounds himself not to call in the principal for a specified period, if interest were regularly paid. On two occasion interest was paid after the due date. The question whether payment of interest tendered after it was due and accepted by the creditor was or was not a regular payment was answered in the following terms:-- ' "I think, if money is tendered after the period when it became due, and the person, to whom it has been paid does not see fit to refuse it, it is a waiver of the objection; it must be taken as a regular payment if the person receives it the day after without making any objection."
' In Nilmadhub Jchuckerbutty v. Ramjsodoy Ghose (1883) ILR Cal. 857, the decree contained a provision that in default of payment of any one instalment, the execution creditor should have the option of executing the decree for the whole amount remaining unpaid. Default was made in payment of the first instalment, but the judgment-debtor paid up (not on due date) the instalment which fell due up to, and including October/November, 1878, when he stopped making any payment. On the 26th of November, 1881, the decree-holder applied for execution in respect of all sums then remaining unpaid under the decree. The District Judge allowed execution to issue for all sums which had fallen due within three years previously to the date of the application for execution but refused to allow execution to issue in respect of the instalments not then due. In second appeal, a Division Bench of the High Court had held that the execution creditor must be considered to have waived his right to execute decree for the whole amount, but was entitled under the decree to realize any instalments which were still due. In Radha Prasad Singh v. Bhagwan Rai (1883) ILR 5 All. 289, a Division Bench held as follows:-- ' "The admitted fact that the decree-holder has, after the alleged failure to pay the full amount of the instalment due for 1876, accepted payments of all subsequent instalments payable under the decree will, In my opinion, amount, under the circumstances of the case, to a waiver of the decree- holder's right to enforce the penalty which the compromise and decree allowed to him, in the event of failure to pay the instalments. He was well aware of his right to take the benefit of the provision on default taking place in 1876, and his refraining from doing so for so many years and accepting subsequent instalments as though no default had taken place, must in the absence of proof to the contrary, be ascribed to intentional waiver of any right he may have had, and must have been so understood by the judgment-debtors when they paid their subsequent instalments and the decree-holder is now estopped from enforcing the penalty."
' In Nagappa v. Ismail (1889) 12 Mad. 192, case-law was reviewed, and it was held in the following terms:-- ' "It is provided by Art. 75 that time begins to run when the first default is made, unless where the payee or obligee waives the benefit of the provision (under which the whole debt becomes due), and then when fresh default is made, in respect of which there is no such waiver. It was held in Papamma Row v. Toleti Venkaiya 5 Mad. HCR 198 that if the obligee accepted one or more sums as an instalment or instalments due under the bond, such acceptance amounted to a waiver, of the condition of forfeiture, and put an end to the cause of action which accrued, so that the bond was set up again as a bond payable by instalments. In Satracherla v. Setarama ILR 3 Mad. 65, it was observed that the clause providing for forfeiture of the right to pay the debt by instalments creates a case of election for the benefit of the creditor at each default, that the creditor may waive the benefit of the provision on each occasion, and that the question whether there is a waiver on any particular occasion is one of fact. It was also pointed out there that it must be ascertained whether the payment was accepted on account of a specific instalment, so that an intention to waive the forfeiture might be inferred, or as a mere part payment of the balance due. According to the decision, therefore, in this Presidency the acceptance of a payment as the instalment in arrear under the bond and in its satisfaction is a waiver. It was similarly held in Cheni Bash Shaha v.
Kadum Mundul ILR 5 Ca1.100 that a waiver consists in the receipt of an instalment after due date, instead of insisting on payment in full. It was no doubt observed in Mumford v. Peal ILR 2 All. 863 that the abandonment of a right accruing on default and the revival of the right to pay the debt by instalments must be established by cogent evidence. In that case it was held that mere acceptance of a payment after a default had been made in the payment of an instalment, was not sufficient proof of a waiver, because the acceptance of the payment was an act consistent, as explained in Satracherla v. Setarama ILR 3 Mad. 65 with an intention to treat it as a part payment on account of the balance due. The mere acceptance of a payment after default in the payment of an instalment may not be sufficient, but when the payment is accepted on account of the specific instalment in arrear, as contra distinguished from a part payment on account of the whole debt, there may be sufficient evidence of a waiver. Hence it was that this Court observed in Pappama Row v. Toleti Venraiya 5 MHCR 198 that the payment must be accepted as a payment, on account of an instalment or instalments due under the bond. It is not necessary that the creditor should say expressly that he waives the forfeiture, but it is sufficient if from the amount paid and accepted and the circumstances attending the payment, and the conduct of the parties, an intention to set up the bond notwithstanding the default as one payable by instalments is unequivocally indicated. In the case before us, the District Munsif finds that the payment made after the third instalment had fallen due was accepted as a payment made on account and in satisfaction of the third instalment, and that an intention to waive the forfeiture is sufficiently indicated.
' Our answer, therefore, to the question referred to us is that the acceptance of the amount of an instalment in arrear on account or in satisfaction of such instalments, and not as a mere part payment in reduction of the whole debt, amounts to a waiver".
' In Kashiram v. Pandu (1902) ILR 27 Bombay 1, the facts were that one Gopalji-bin-Bhagoji obtained a decree against his mortgagor, Ramji-binMankoji. The decree was dated the 27th June, 1887, and directed payment of the mortgage debt by instalments payable in April of each year. The precise terms of the decree were that the "plaintiff, that is, the judgment-creditor Gopalji Bhagoji, do recover the sum of Rs,1,0550 including the costs of the suit, by instalments of Rs,55 a year, the first instalment of Rs,55 to be recovered in April of 1888 and so on in future Rs,55 in April of each year until the whole amount of Rs,1050 is paid off". In the event of default, the penalty clause added was: "That if default be made to pay any two consecutive instalments, the plaintiff do recover possession of the mortgaged property and pay the Government assessment thereof and enjoy the profits in lieu of interest". The defendant did not pay in April, 1891 and in April, 1892 the instalments due in those months as ordered by the decree, but he paid the same and were accepted by the plaintiff in the months of May, 1891 and May, 1892, respectively. He also paid subsequent instalments, and up to 1895 no single instalment remained unpaid at the date at which that immediately succeeding it became due. But he again failed to pay two consecutive instalments, viz: those due in 1896 and 1897, and he paid nothing subsequently. In July, 1899, the plaintiff applied for execution of the decree, contending that his right to execution arose in 1897 under the terms of the decree. The First Appellate Court held that the plaintiff's right to execution had arisen in 1892 and that his execution application was barred by limitation. The plaintiff preferred a second appeal which came on for hearing before a Division Bench comprising Jenkins, C.J. And Aston, J. Who referred the case to a Full Bench for decision. The concluding portion of the referring judgment reads thus:-- ' "There is no doubt there had been failure in punctual payment of two successive instalments more than three years before the presentation of the Darkhest of 1898 and the question whether, by the payment and acceptance of the several instalments as above stated, the parties have been remitted to the same position as they would have been in, if no default had occurred. There is a conflict of view as to the possibility in law of such a waiver, and in illustration of this we may (without at this stage exhaustively citing the rival authorities) point to Dulsook v. Chugon (1877) 2 Bom. 356 on the one side and Balaji v. Sakharam (1892) 17 Bom. 555 Ram Culpo v. Ram Chandara (1887) 14 Cal. 352 and Mon Mohun v. Durga Churan (1888) 15 Cal. 502 on the other. Certainly as to instalment decrees is so important for the Mofussil Courts, that we refer to a Full Bench the question, whether by reason of the payment and acceptance of instalments in this case the application for execution is within time".
' The reference came on for hearing before the Full Bench consisting of Jenkins, C.J. Crowe, Batty and Aston, JJ. Doubtless, the Full Bench reversed the decree of the lower Court by holding on the facts of that particular case, that having regard to the payment and acteptance of instalments subsequently to 1892, the parties had been remitted to the same position as they would have been in if no default had then occurred, and that on the subsequent default in 1897, the plaintiff's right to execution arose and that consequently his application in 1899 was in time. However, the following observations of Jenkins, C.J. Are worth special notice:- ' "The true view appears to me to be, that, though there may be a failure to pay punctually under an instalment decree, still the subsequent conduct of the parties may preclude either of them from afterwards asserting that payment was not made regularly and in satisfaction of the obligation under the decree."
' After referring to the decision of Lord Lyndhurst in Norton v. Wood, (supra) the learned Chief Justice further observed as follows:-- ' "Here, then, we have a recognition of the principle involved in the maxim unusquisque potest renunciare juripro se introducto whose modern application has been asserted by Lord Selborne in the Great Eastern Railway Company v. Goldsmith (1884) 9 App. Cas. 927 at page 966) even where the jus renounced was the creature of a statute charter. It is true that in Norton v. Wood the delay in payment was small but that does not disturb the principle on which the decision rests. Also, no doubt, in that case the rights were contractual and not decretal, but this is a distinction in a circumstance not really material, for the case of Great Eastern Railway Company shows that the maxim is not limited in its operation to right arising from convention."
' "An exposition of the law on the same lines is to be found in the judgment of Lord Hatherelay in Thompson v. Hudson (1868) LR 8 HL 1 at p. 17 where he says:-- ' "It is simply (as Lord Justice Turner put it) that, upon one of the conditions being broken, a concession is made in respect of that one condition, with regard to which the appellants could never again insist upon their complete rights.
' This view is not far, if at all, removed from an application of the doctrine of estoppel, for it would be but an elaboration of it to say that if each of the parties has by 'his acts intentionally caused the other to believe that the payment was a regular satisfaction of the obligation, and the parties have acted on that belief, neither can afterwards deny the regularity.
' "The voice of Dulsook's case (1877) 2 Bom.356 as it seems to me, is that it stands on too narrow a basis; it insists on the default to the exclusion of all else; while the true view would seem to be that default may, under the influence of after events cease, as between the parties, to bear that character."
' "There cannot be approbation and reprobation. The soundness of this view may be tested thus; if in this case all instalments save the last two had been punctually paid, would the unpunctual payment of those two, after they had in fact been paid and accepted, have entitled the decree- holder to possession? Surely not. And the reason must be, that he could not after acceptance of those instalments be heard to say, that they had not been paid and accepted as regular instalments in satisfaction of the decree."
' "I now proceed to deal with the second of the two difficulties which confronted the referring Bench, viz, the opinion expressed in Balaji V. Sakharam (1892) 17 Born. 555 at p. 559 that payment and acceptance of overdue instalments cannot be themselves prove waiver. This (if intended to be a general proposition of law) is opposed to the view expressed in several Calcutta cases (Ram Culp v. Chunder (1887) 14 Cal. 352; Mon Mohun v. Durga Churn (1888) 15 Cal. 502; Hurri Pershad v. Nasib Singh (1894) 21 Cal. 542 at p.547 and in its operation conflicts with the decision of Lord Lyndhurst, which I have already cited. In my opinion the point is one to be determined on the circumstances of each case, and unless the proposition in Balaji v. Sakharam (1892) 17 Born. 555 at p. 559 was intended to be limited to the facts of that case, I think it cannot be sustained, and that we should decline to follow it.
' The result is that, in my opinion, we should answer the reference by holding that, having regard to the payment and acceptance of instalments in this case, the application is within time. I think we are entitled so to decide, notwithstanding that this is a second appeal, for it is a mixed question of law and fact that is involved."
' I am glad that it is open to us to come to this conclusion as to the effect of waiver on instalment decrees; for, though in this case the result is that a judgment-debtor is held to his obligation, to hold otherwise, instead of being beneficial to judgment-debtors generally, would preclude decree- holders under instalment decrees, however favourably inclined, from acting with reasonableness, and would possibly in the result throw debtors (to use the language of Lord Selborne in Cotterell v.
Stratton (1873) L.R. 8 Ch. 225 at p. 302 "into the hands of those who indemnify themselves against extraordinary risks by extraordinary exactions."
' On the question of estoppel, Batty, J., expressed himself in the following terms:- ' "The tender on one side and acceptance on the other of instalments as such appears to me to create an estoppel, which precludes both parties from offering evidence of an alleged default which each party had by his conduct induced the other to believe had not occurred."
' Aston, J. Held inter alia as follows:- ' "In Gumma v. Bhiku (1875) 1 Poom. 125, the plaintiff sued on a promissory note which provided for payment by instalments, with a stipulation that, in default of anyone of these instalments not being punctually paid, the whole amount was to become payable at once. The plaintiff alleged that after a default the defendants made and plaintiff accepted payments. It was said in the Full Bench decision in that case: 'The creditor is, no doubt, not bound immediately to sue for, or insist upon payment of, the whole debt. He may, if he chooses, show forbearance towards his debtor, and accept a part of what is due. But, if he does so, he does not thereby prevent, or change in any way, the operation of the law of limitation, which, notwithstanding any such subsequent wish on his part, begins to run from the time of the first default rendering the whole amount due'."
' "But in Dulsook v. Chugon (1877) Born. 356 its principles were applied to a decree payable by instalments. In this case it is remarked by Westropp, C.J.:-- ' "The principles, however, on which that case (Rumna v. Bhiku) was decided, apply in this case.
There is not in the last clause of Article 167 of Schedule II of the Act IX of 1871, which clause relates to decrees payable by instalments, any provision similar to that in Article 75 of the same schedule with respect to promissory notes or bonds payable by instalments; where such notes or bonds provide that if default be made in payment of one instalment the whole shall be due, fixing that the period of limitation shall begin to run from the time of the first default, unless where the obligee waives the benefit of the provision, and then when fresh default is made. Nor does there appear in the new Limitation Act (XV of 1877), Schedule II, Article 179, clause 6, relating to decrees payable by instalments, any such provision."
' Accordingly, it was held that a decree payable by instalments, with a proviso that in default of payment of any one instalment the whole amount of the decree shall become payable at once, is barred if application for execution be not made within three years from the date on which any one instalment fell due and was not paid."
' "In Hoti Devchand v. Jaraji (1894) PJ, p. 407 the decision related to a decree payable by instalments. The decree directed payments by annual instalments from November, 1884, and ordered that in default of payment of three instalments the whole amount shall be recovered at once by sale of the mortgaged property. The instalments were not regularly paid, but between August, 1885, and November, 1891, the defendant paid various small sums. In 1893 the decree- holder applied for execution of the decree to recover Rs,29, being the balance of the instalments which had become due till then, by the attachment and sale of the deceased defendant's movable property. It was held that the application was time-barred, because it was not made within three years from the default in payment of the first three instalments. It must be observed, however, that the Judges who decided this case expressly stated: "In the present case we do not construe the decree as giving an option."
' "In the case of Balaji v. Sakharam (1892) 17 Bom. 555 already referred to the dispute was about execution of a consent decree for Rs,1,800 passed in a mortgage suit, which ordered (inter alb.) that the defendants should pay off the amount by annual instalments of Rs,50 to be paid on the 30th April every year, and on their failure to pay any of the instalments within the stipulated period, the plaintiff should recover the balance of the decretal amount by the sale of the mortgage property and from the defendants personally. The defendants made default in payment, but paid various sums later on. The plaintiff applied well within time for execution of the decree and to recover the balance due by sale of the mortgaged property and from defendants personally. The defendants pleaded waiver. No question was raised that the plaintiff was left no option under the decree to extend the time for payment of any instalment, and the decision turned merely upon the point whether there was sufficient evidence of a waiver."
' "If the decision in Dulsook v. Chugon (1877) 2 Bom. 358 was intended to rule, that in applying the law of limitation to an application for execution of an instalment decree, the Court executing the decree must confine attention merely to the decree and to what is provided within the four corners of the Limitation Act; that, in fact, the right to apply for execution, which must accrue before limitation can begin to run, cannot be affected by the conduct or agreement of the parties to the decree, and the executing Court is therefore precluded from giving effect to legal or equitable principles derived from authority outside the sections and schedules of the Limitation Act in determining whether the rights of the parties to such a decree have been so modified by the conduct or agreement after the decree as to affect the law of limitation applicable to an application for its execution; then I think, with great deference to the authority by which Dulsook's case was decided that we may, for reasons advanced by the Chief Justice, well hesitate to accept such a proposition. It has not been expressly adopted by any subsequent decision of this Court cited during the course of the arguments, and such a proposition is opposed to the principle upon which, as already shown, subsequent cases in this Court have been decided."
' "Now the decree of which execution is sought in the present case contains no stipulation that the whole balance of the decreed debt is to become recoverable at once in execution proceedings on the. Occurrence of the default mentioned in the decree. The decree is a consent decree passed in a mortgage suit. It decrees payment of a sum specified by specified instalments and it converts the mortgagee's rights to possession of his security into a conditional right, the condition precedent to the recovery of possession being default by the judgment-debtor in paying any two consecutive instalments of the debt decreed. The position of judgment-debtor, who is in default under such a decree, though not exactly the same as that of a lease holder whose lease of immovable property has become determined by forfeiture under clause (g), section III of the Transfer of Property Act (IV of 1882), is sufficiently analogous to make it pertinent to observe that such a forfeiture is waived by acceptance of rent which has become due since the forfeiture, or by any other act on the part of the lessor showing an intention to treat the lease as subsisting unless such acceptance is subsequent to a suit in ejectment".
' "The guiding principle applicable to the question appears to me to have been laid down in Ramkrishna v. Bayaji, (1868)
5. BHCR. 35 where it was said by Couch, C.J. And Newton, J: `Although the instalments were not paid by the defendant at the time fixed for payment, yet the defendants having paid the money on account of them, and the plaintiff having accepted it, the payments must be considered as regards both the parties as it made it the time fixed, and the plaintiff cannot take advantage of the stipulation that the sum should become due on failure to pay any instalment, or the defendant reply upon it as making the whole debt due and fixing the period from which the time of limitation ran' ."
' "The question thus arises whether any essential difference exists when the decreed debt is divided into instalments payable at stated intervals with the same provision as to recovering possession in execution when there is default in paying any two consecutive instalments. Such a decree would be satisfied for the time being by payment of the instalments on the dates specified, and if it would not be straining the interpretation of such a decree to treat it as satisfied for the time being if the decree-holder accepts all the instalments which have fallen due, though overdue at the time of acceptance, then in such cases alone there would be no right to possession and no scope therefore for waiver, if such right is lost by acceptance whether intended to be waived or not. On the other hand, if the decree made all the remaining instalments payable on the occurrence of a default specified (which the decree under consideration does not do), then, too, if we accept the principle laid down in Ram Chandta v. Bayaji 1868) 5 Bom. HCR (ACJ) 35 the Court to which application for further execution of the decree is made may well say to the decree-holder: "The judgment-debtor is not in default, the payments you have chosen to accept before making your application must be treated as if made at the time fixed in the decree, and the decree is therefore satisfied for the present and not capable for the present of further execution."
11. Confronted with a similar situation, a Division Bench of Madras High Court in Easin Khan v. Abdul Wahab Sikandar (15 IC 10) rendered the following opinion:- ' "It must be assumed therefore that the decree-holder with full knowledge of the circumstances under which the different deposits had been made by the judgment-debtors accepted payment of the money. The question arises under these circumstances, whether there has been on the part of the decree-holders a waiver of their right to enforce the terms of the decree by reason of the first default".
' "But two useful tests may be applied. In the first place, we may examine whether the payment which has been made may be treated as a valuable consideration for the renunciation or abandonment on the part of the decree-holder; secondly, we may consider whether the execution creditor has by his act intentionally caused the other to believe that the payment was received in satisfaction of the obligation and whether the parties have acted on that belief, because if they have done so, they cannot afterwards question their legality. In the case before us, both the tests point to a conclusion in favour of the Appellants."
' "The conduct of the decree-holders, however, lulled the judgment-debtors into a sense of security.
They proceeded on the assumption that the decree-holder had waived the default and accepted the deposit and they continued to make from time to time other deposits in satisfaction of the subsequent instalments. It does not lie in the mouth of the decree-holders now to contend that they accepted the payments on an entirely different footing. But the learned Vakil for the respondent has contended that a mere omission to sue does not constitute waiver. This has not been disputed by the appellants who have, however, relied upon the authority of the cases of Hurri Pershad Chowdhry v. Nasib Singh (1894) ILR 21 Cal. 542 and Fadub Chandra Bakshi v. Bhairab Chandra Chakrabutty (1902) ILR 27 Bom. 1 to show that although mere omission to sue may not constitute waiver, the acceptance of an overdue instalment by a creditor may constitute a waiver of his right to recover the entire debt due on account of the default, but the fact that he has done so may not prejudice his right to declare the whole debt to be due on a subsequent occurrence of a similar default in the payment of interest."
' In Gopal Mal v. Gopal Singh Hira Singh (AIR 1928 Lahore 378) a decree for the payment of money provided that the amount decreed shall be payable in instalments and that in default of payment of any one instalment the whole of the amount due under the decree, would become payable forthwith with the addition of Rs,
50. The first instalment was paid in Court two days late and the amount so paid was realized by the decree-holder. The second instalment was paid before the due date. The third instalment which was payable on the 10th October, 1925 was paid by the judgment-debtor to one Shiv Ram, who, it was alleged, was an agent of the decree-holder, on the 20th October. Later on, it transpired that Shiv Ram paid the amount on the same date to the decree-holder. There was, therefore, no dispute that the instalment due on the 10th October was tendered to the decree-holder on the 20th October and accepted by him. The decree-holder, on the 26th October of 1925, took out execution of the decree for the whole of the balance due thereunder alleging that by paying the third instalment ten days late the judgment-debtor had made a default in the performance of the conditions of the decree. The executing Court declined to entertain the objection by the judgment-debtor to the contrary and held that there had been a default by the judgment-debtor. On appeal the District Judge, without deciding the dispute with regard to the third instalment, held that the first instalment was admittedly paid two days late and, therefore, there had been a default and the whole amount due under the decree had consequently become payable. In second appeal, a learned Single Judge of this Court held as follows:-- ' "Incidentally the ruling cited by the counsel is against his contention on the merits of the appeal because it was held in that case that the acceptance by a creditor of an overdue instalment after the due date does amount to a waiver of the default. The same view was taken in Ram Nath v. Gio (1980) 101 PR 1880 which case related to a default clause contained in a mortgage bond. But in my opinion there is no difference, so far as the point at issue is concerned, between a bond and decree making the amount due payable by instalments with the default clause. In Khairuddin v. Atu Mal (1888) 188 PR 1883 FB, which is a Full Bench judgment of the Chief Court of the Punjab, the following remark appears at p. 553:-- ' "It has been held that if the plaintiff accepted payment of one or more sums as an instalment or instalments due under the bond such acceptance amounts to a waiver and puts an end to the cause of action which had accrued."
' I have not been shown any subsequent ruling either of the Chief Court of the Punjab or of this Court taking a different view to that taken in these two cases. The learned counsel for the respondent relied upon a Full Bench judgment of the Bombay High Court in Kashi Ram v. Pandu (1903) 27 Bom. 1 in which a different view was alleged to have been taken but I have been unable to discover where the difference lies. In that case Jenkins, C.J., held that acceptance of an over due instalment may have the effect of estopping the creditor from enforcing the default clause but that there may be circumstances which may negative the operation of an estoppel, and Aston, J., expressed himself strongly in favour of the proposition that under the circumstances mentioned the creditor must be deemed to have waived his rights under the default clause. Badri Narayan v.
Kunj Behari 18 IC 731 and Jivan Bakhsh v. Mubinal Haq AIR 1923 Lah. 678 also support this view. It is of course open to the decree-holder to expressly state when accepting the instalment that he does so without prejudice to his rights which have already accrued owing -to the default or to show by his conduct at the time of accepting the instalment that he does not waive his right under the default clause. In the absence of proof to the contrary tender by the debtor and acceptance by the creditor of an overdue instalment must be deemed to amount to a waiver and condonation of the default."
' "On the facts that have now transpired and in view of my opinion on the legal point involved in this case. I hold that the default by the judgment-debtor in the payment of the third instalment on the due date has also been waived by the decree-holder."
' The principles governing the execution of an instalment decree with a default clause stood well- settled in India and had been stated with great lucidity by Beaumount, C.J. In the case of Hanmant Bhimrao v. Gururao Swamirao AIR 1943 Bom. 36 which are reproduced below:-- ' "It is well-settled that a default clause of this nature is inserted for the, benefit of the creditor, and that when default in payment of an instalment occurs, the creditor may either exercise his right to recover the whole amount, or may waive the operation of the default clause, and continue to recover the debt in instalments. But it is clear that he cannot have both rights together, they are alternative rights. If he is entitled to recover the amount in one lump sum, he is not entitled to recover annual instalments. On the other hand, if he is entitled to recover annual instalments, he is not entitled to recover the whole amount in one lump sum. In my opinion, as soon as default occurs, the decree-holder has two alternatives, and inconsistent rights, and he must make up his mind which he is going to rest upon. Having in this case issued a Darkhast to recover the whole amount, he has, in my view, unequivocally elected to stand on his right under the decree to recover the whole amount in one sum, and he cannot afterwards go back on that election, and proceed to recover the amount in instalments."
' The decree was originally a decree for payment by annual instalments. As soon as default was made, the decree-holder was given two inconsistent rights; he could continue under the decree to recover the amount by instalments, or he could recover the whole amount at once; but he could not do both. He was bound to limit his Darkhast to a principal sum either of Rupees 1850 or Rs,300.
He had alternative rights and debtor was subject to alternative obligations. The creditor having elected to enforce his right to recover the whole debt in one lump sum, the future obligation of the debtor was filed accordingly, and, in my opinion, it was not open to the creditor subsequently to turn round and seek to enforce the decree as an instalment decree."
12. However, the controversy was finally set at rest with the Supreme Court's decision in Salyanarayana v. Yelloji Rao AIR 1965 Supreme Court 1405 where it was held as follows:-- ' "In Lidsay Petroleum Co. v. Prosper Armstrong Hurd (1874) 5 CP 221 at pp. 239-240 Sir Barnes Peacock defined the doctrine thus: ' "Where it would be practically unjust to give a remedy, either because the party has, by his conduct, done that which might fairly be regarded as equivalent to a waiver of it, or whereby his conduct and neglect he has, though perhaps not waiving that remedy, yet put the other party in a situation in which it would not be reasonable to place him if the remedy where afterwards to be asserted, in either of these cases, lapse of time and delay, are most material."
' This passage indicates that either waiver or conduct equivalent to waiver alongwith delay may be a ground for refusing to give a decree for specific performance. In Caesar Lamare v. Thoma Dixon (1873) 6 HL 414 at p. 423 Lard Chelmsford said: ' "The conduct of the party applying for relief is always an important element for consideration."
' "A Division Bench of the Calcutta High Court in Jadu Nath Gupta v. Chandra Bhusan AIR 1932 Cal.
493, again emphasized the fact that the English doctrine of delay and laches showing negligence in seeking relief in a Court of equity cannot be imported into the Indian law in view of Article 113 of the Limitation Act. Be it pointed out that where the conduct of the plaintiff was such that it did not amount to abandonment but showed waiver or acquiescence especially when inaction on his part induced the defendant to change his position, the plaintiff ought not to be allowed any relief. This case brings out not only the distinction between English and Indian law but also that waiver or abandonment of a right is not a precondition for refusing relief of specific performance."
' "The result of the aforesaid discussion of the case law may be briefly stated thus: While in England mere delay or laches may be a ground for refusing to give a relief of specific performance, in India mere delay without such conduct on the part of the plaintiff as would cause prejudice to the defendant does not empower a Court to refuse such a relief. But as in England so in India, proof of abandonment or waiver of a right is not a precondition necessary to disentitle the plaintiff to the said relief, for if abandonment or waiver is established, no question of discretion on the part of the Court would arise. We have used the expression "waiver" in its legally accepted sense, namely, waiver is contractual, and may constitute a cause of action: it is an agreement to release or not to assert a right"; see Dowson's Bank Ltd. v. Nippon Menkwa Kabushiki Kaiwh 62 Ind. App. 100 at p.108 = AIR 1935 PC 79 at p.82. It is not possible or desirable to lay down the circumstances under which a Court can exercise its discretion against the plaintiff. But they must be such that the representation by or the conduct or neglect of the plaintiff is directly responsible in inducing the defendants to change his position to his prejudice or such as to bring about a situation when it would be inequitable to give him such a relief."
13. From our own jurisdiction, reference may be made to the case reported as Najmuddin v. Zamir Ahmad PLD 1982 Kar. 188 where it was held as follows:- ' "As regards the submission that there could be no waiver or acquiescence against the statute it may be stated that if law confers any right or advantage on a person exclusively for his own benefit and it does not affect the rights of another person and is not against the public policy, then such a right can be waived and any liability incurred by breach of such provisions may not be enforced and acquiesced." (Emphasis supplied).
14. Somewhat similar views were expressed in Yaqoob Ali v. Ismail 1987 CLC 526. It is not the case of the decree-holder/applicant-Bank that it was not fully cognizant of its right. Since it had neglected to enforce its rights, rather it had chosen the alternate benefit of receiving delayed payments as against taking out execution immediately upon commission of default in payment to time of the first two consecutive instalments, the Bank cannot be allowed to take advantage of the penalty clause. The following statement of law appears at page 637 of Halsbury's Laws of England 3rd Edition Vol.14:- ' "Waiver is the abandonment of a right, and is express or implied from conduct. A person who is entitled to the benefit of a stipulation in a contract or of a statutory provision may waive it, and allow the contract or transaction to proceed as though the stipulation or provision did not exist."
' In the same Volume, at page 638, the term "acquiescence" has been stated to imply in its proper legal sense that a person abstains from interfering while a viplation of his legal rights are in progress, and that acquiescence operates, by way of estoppel and is an instance of estoppel by words or conduct. Of course, for the application of the principles of waiver and acquiescence and also to a certain extent for the application of the doctrine of estoppel by conduct, knowledge of one's legal rights, or true facts must be there. On the facts of the instant case, as narrated above, I have no doubt that it was there.
15. As a general rule, where a decree or order makes a sum of money payable by instalments on certain dates, and provides that, on default in payment of one of the instalments the whole of the money shall then become due and payable, and be recoverable in execution, then, under Article 181 of the Limitation Act, limitation commences to run when the first default is made. There has, however, been engrafted upon this general rule an exception in certain cases, the same being that if the right to enforce payment of the whole sum due upon default being made in the payment of an instalment has been waived by subsequent payment of the overdue instalment on the one hand and receipt on the other, then the penalty having been waived, the parties are remitted to the same position as they would have been as if no default had occurred.
16. In the instant case, as per the Chart submitted by the learned counsel for the decree- holder/applicant-Bank, relevant part of which has been reproduced above, Bank's own case is that the delay committed by the judgment-debtor in making payment of the instalments was ranging between 26 to 319 days, though the entire liability is stated to have been liquidated ahead of the last date fixed for payment of the last instalment, viz. 31st of December, 2000, the last instalment having been paid on the 3rd of December, 2000. The Bank discretely kept silent and deliberately did not choose to raise objection to the delayed payments of the instalments. The Bank appears to have been interested in first getting the settled amount, and then to make an attempt to trip up the judgment-debtors. By receiving the amount of the delayed instalments, without any objection whatsoever, the Bank created an impression in the mind of the judgment-debtors, that it had adopted non-contentious attitude and a clear stance of no grievance. By its own conduct the Bank has waived its right, having acquiesced in the delayed payments. Therefore, on the principle of conscious waiver of its objection to the delayed payment of instalments, the Bank must be held to have given up its grievance and consequently the right to invoke the penalty clause. It is too late for the Bank to turn round and try to go behind it, and get out of its own conduct. Since the Bank had elected to take benefit under the settlement, it must also bear the burden created thereby on the well-established principle of estoppel by acquiescence and waiver which is based on the oft- quoted expression that where a person has been silent when in conscience he ought to have spoken, he shall be debarred from speaking when conscience requires him to be silent.
17. There is yet another aspect of the matter. It is well-established principle of law and legal philosophy that the Courts would refuse to enforce contractual terms in a manner that would unjustly and in an unreasonable manner prejudice the borrower. In the Common Law this was done by the intervention of Equity. Its best-known example is the introduction of the "equity of redemption" in mortgage matters. In the field of contract law this was done by striking down the clauses by which "penalties" were incorporated to be paid by the borrower in case of certain named eventualities. Historically, equity would not impose harsher conditions on a borrower by the modalities of enforcement chosen by a lender which could have been avoided by a more open enforcement of the contractual rights available to such a lender. In England, Courts of Equity will, in cases which have become well defined, relieve against the rigours of the Common Law and for the purpose of this case, two heads of relief are relevant. A Court of Equity will relieve against a penalty, and will also refuse to enforce strictly stipulations as to time where it is satisfied that the parties themselves did not intend those stipulations to be acted upon strictly. This approach was juridically justified by reliance on legal theories that in terrorem liability could not be imposed by contract.
18. Moreover, a Bank which has a clear fiduciary position with respect to a borrower if it does not act promptly and in accordance with its contractual rights at the appropriate time for enforcement of its claims when due it cannot be permitted in good conscience to proceed against a borrower in stages with the aim of amassing the highest amount of money from the borrower. The Courts as guardians of the public under a Constitutional system of Government cannot allow such enforcement of penalties against the citizens. The law presumes that a public financial institution will act in good faith with vast resources at its command when seeking relief against the borrowers.
Scrutiny of the steps the Banks take in such a process will be closely watched by the superior Courts to ensure that public authority is properly exercised, and is not misused.
19. The contention of the learned counsel for the respondents/ judgment-debtors that the Bank cannot claim predetermined liquidated damages from its customer even though there might be a clause to that effect in the agreement, unless evidence is led to prove such loss suffered by the Bank from breach of contract committed by customer by delaying payment, is supported by a Single Bench decision of Sindh High Court at Karachi reported as Muslim Commercial Bank Ltd. v.
Perwani Export and Import Trading Co. 1999 YLR 975 and also by a Division Bench decision of this Court reported as Agricultural Development Bank of Pakistan v. Jasarat Hussain 2002 CLD 93. It is also trite law that in the absence of an averment in the pleadings no evidence can be produced to prove a fact, and that no amount of evidence, even if led, can be considered by the Court. In Ghulam Rasool v. Muhammad Khan 1999 M LD 883 SC (AJ&K) it was held that evidence on matter extraneous to the pleadings could not be considered by Court.
20. For the foregoing reason's, I would hold that the applicant-Bank having not exercised its right by invoking the penalty clause in the Deed of Compromise, at the relevant time, is deemed to have waived its right, consequently the execution petition, being not maintainable, is dismissed accordingly. There shall, ,however, be no order as to the costs.