Party to contract can’t question amount of consideration after signing it – Supreme Court

A party to contract not entitled to question amount of consideration after signing the contract – Supreme Court

ABCAUS Case Law Citation
ABCAUS 3642 (2023) (01) SC

In the instant case, the State Government (the Appellant) had challenged the judgment of the Division Bench of the High Court reducing the agreed charges which the Respondent had contracted to pay.

In the instant case, prior to the signing of the contract, respondent had written to the Government for part exemption from paying the proposed charges.  Pending consideration of this request, the respondent requested that they may be allowed to enter into an agreement.

Again, the respondent wrote to the Govt. for reduction of proposed charges on the ground that when the in-principle allocation was made and when the final approval was given, the prevalent rate of charge was half of the proposed charges.

Also, the respondent sought an extension to enter into an agreement. Thought the respondent was granted extension to execute the agreement, no commitments were made by the Appellant on the other request raised.

Subsequently, the Appellant granted option of paying charges in instalments but clearly stated that there shall be no reduction in the proposed charges.

Finally, the Appellant and the respondent entered into an agreement.

Six months later the respondent approached Hon’ble High Court for reduction in charges.

The division bench of the High Court refused to the prayer made on the ground the respondent had accepted its liability to pay charge at the agreed rate by signing the agreement. The High Court was of the view that it could not pass any order which would obviate compliance of the agreement. However, the High Court directed that plea of the respondent for reduction of the charge shall be decided by the Govt.

The Govt. after considering the plea, rejected it on the ground that the State had never committed to any reduction and also that respondent  itself  had signed the agreement. Immediately thereafter, the Appellant also issued a demand letter.

The respondent again preferred a WRIT before the Hon’ble High Court which allowed it and directed to pay reduced charges on the rationale of the rate prevailing  on the date on which the in-principle approval was  granted.

The question before the Hon’ble Supreme Court was as to whether a party to a contract is entitled to question the  amount of consideration after signing the contract?

The Hon’ble Supreme Court observed that he Appellant and respondent had entered into an agreement which categorically stated that the respondent would pay the agreed consideration. Further, the respondent had agreed to the pay the consideration by issuing an undertaking on the date of signing of the contract. Therefore, the respondent was not justified in challenging the charges when it itself had agreed to the same

The Hon’ble Supreme Court observed that High Court committed an error in entertaining a fresh writ petition, which effectively claimed the same reliefs as of the previous one. The High Court committed a mistake in not only entertaining the writ petition, but also in supplanting its view over that of the contract.

The Hon’ble Supreme Court opined that all the communications between the Govt and the respondent got subsumed in the agreement. Therefore, signing the agreement and issuing an undertaking would estop the respondent from challenging the levy of charges in question.

The Hon’ble Supreme Court rejected the argument in allowed the appeal in favour of the assessee of the rate  prevailing on the date of grant of in-principle approval. The Hon’ble Supreme Court stated that the rights and liabilities of the parties stand crystallized on the date of entering into the agreement.

Accordingly, the appeal was allowed in favour of the Government and the impugned judgement of the High Court was set aside.

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