Two cross appeals have been preferred against common judgment dated 24.4.2001 passed by the Division Bench of the High Court of Madras by which decree of Specific Performance of Contract ...
No Acts & Articles mentioned in this case
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CASE NO.:
Appeal (civil) 6006 of 2001
PETITIONER:
HPA International
RESPONDENT:
Bhagwandas Fateh Chand Daswani and Others
DATE OF JUDGMENT: 13/07/2004
BENCH:
Shivaraj V. Patil & D.M. Dharmadhikari.
JUDGMENT:
J U D G M E N T
With
CIVIL APPEAL NO.336 OF 2002
Bhagwandas Fatehchand Daswani and Others
Versus
HPA International and others
Dharmadhikari J.
These two cross appeals have been preferred against common
judgment dated 24.4.2001 passed by the Division Bench of the High
Court of Madras by which decree of Specific Performance of Contract
of Sale of the suit property granted by the learned single judge has
been set aside with certain directions to adjust the equities between
the parties.
The facts of the present case should be an eye opener to
functionaries in law courts at all levels that delay more often defeats
justice invariably adds complications to the already complicated
issues involved in cases coming before them, and makes their duties
more onerous by requiring them to adjust rights and equities arising
from delay.
This introductory comment is occasioned by the fact that
against the judgment of the learned single judge passed on 6.9.1988
the appeal was earlier heard by the Division Bench of the High Court
on 22.3.1989 but it passed the judgment after a period of about five
years on 24.1.1994. It dismissed the appeal and confirmed the
decree of Specific Performance of the Contract granted by the single
judge.
In appeal preferred by the defendants, this Court by order
passed on 13.1.2000 (reported in 2000 (2) SCC 13) remanded the
appeal to the Division Bench of the High Court for a fresh decision
only because of long gap of five years in hearing arguments and
decision of appeal by the High Court.
After remand the Division Bench reheard the appeal and by the
impugned judgment dated 24.4.2001 has allowed it. The decree
granted by the learned single judge of partial relief of Specific
Performance of Contract of Sale of life interest of the vendor in the
suit properly has been set aside.
With this background the facts of the case may be stated:-
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The owner of the suit property namely, Mouna Gurusamy
Naicker, (hereinafter referred to as the 'vendor') grandfather of
respondent No.6 (G. D. Narendra Kullamma Naicker) executed a Will
and two Codicils on 7.3.1948. Under the Will, the vendor herein was
bequeathed the right of enjoyment during his life, of the estate of the
testator, including the suit property (described as Municipal Door
No.36C, Mount Road, Madras-600 002) but without powers of
alienation. In the Will, it was provided that after the death of the
vendor, his male issue living at the time of his death would take all
the properties absolutely. In the absence of any such male issue of
the vendor, the properties would be taken by other descendants
(hereinafter referred to as the 'reversioners').
Shri M.G.Naicker, the testator died on 23.10.1956. On
26.6.1977, the vendor entered into an agreement of sale of the suit
property with the appellant HPA International, a partnership firm
(hereinafter referred to as the vendee). It was clearly recited in the
agreement that the sale of the property was necessitated because of
the pressing demands of public authorities towards, dues and tax
liabilities on the estate and likelihood of coercive recovery of public
dues by attachment and sale by public auction. The vendor,
therefore, agreed to sell and the purchaser agreed to purchase the
entire interest in the suit property at Mount Road, Madras inclusive of
life interest of the Vendor and the interest of the reversioners
(described as remainder men) free from all encumbrances, for a total
price of 5.5 lacs. A sum of Rupees 25,000/- was paid as advance.
The balance of the sale consideration was to be paid by the purchaser
by bank drafts in favour of the concerned public authorities for
discharging the public dues and taxes. The purchaser agreed to pay
Rupees 18,000/- to the tenant in occupation of the property which
was the liability of the vendor. The vendor agreed to obtain at his
own cost and expense the sanction of the High Court of Madras for
sale of his life interest and interest of the remainder men in the
property. The agreement further provided that in case the sanction
of the Court was not accorded for the sale, the agreement shall
forthwith stand cancelled and the vendors shall return the advance
amount of Rupees 25,000/- to the purchaser.
There was a separate stipulation in the agreement that if after
the sanction of the Court the vendor commits breach of the contract
he shall return the advance money of Rupees 25,000/- and pay a
sum of Rupees 15,000/- to the vendee by way of liquidated damages
for failure to complete the sale. The agreement further provided that
if after the sanction of the Court, vendee commits breach and does
not complete the sale, he shall be liable to pay to the vendor a sum
of Rupees 15,000/- by way of liquidated damages.
The relevant part of opening recitals and clauses 1,2,3,4,6,7,9
& 15 of the agreement dated 26.6.1977 Ex.P1 are reproduced
hereunder as rights, and equities of the contesting parties are
dependent on its proper construction, and understanding:
AGRRMENT OF SALE
"THIS AGREEMENT OF SALE executed at Madras this 26th
day of June 1977 between G.D. NARENDRA KULLAMMA
NAICKER, son of late M.Dorai Pandian alias Subba Naicker,
Hindu, aged about 38 years and now residing at Plot No.24,
Second Stage, Panmanabha Nagar, Adyar, Madras-20,
hereinafter referred to as the VENDOR of the one part and HPA
INTERNATIONAL, a firm having its business office at No.15/16,
Casa Major Road, Egmore, Madras-8 represented herein by its
Managing Partner H.A. ALEEMUDDIN, hereinafter called the
PUTVHASER of the other part:
WHEREAS the Vendor is the Paternal grandson of late
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Mounaguruswamy Naidu, Zamindar of Naickarpatti, Madurai
District, whereas the said Mounaguruwamy Naidu owned and
possessed large immovable properties consisting of Houses and
lands situate in Madurai district and in Madras City.
WHEREAS he executed his last Will and Testament dated
7.3.1948 and two Codicils to the said Will, whereas he had
bequeathed thereunder a life estate in all the said properties to
his grandson, the vendor herein, whereas he provided therein
that after the life time of the Vendor, his male issues, if any,
who may survive him, should take all his properties absolutely,
whereas he also provided in the said Will that if the vendor
should die without leaving any male issue, his brothers and in
default of brothers, his brothers' male issues who may be alive
at the time of death of the vendor should take the property
absolutely and in default of any of them, the testators' daughter
and son's daughters then living at the time of the death of the
vendor should take the property absolutely.
WHEREAS the said Mounaguruswami Naidu died on
23.10.1956, Whereas the vendor's father M.Doraipandian alias
Subba Naicker obtained probate to the said Will and Codicils
from the High Court, Madras in OP No.14 of 1957 and was
administering the estate until 4.12.1963 when he delivered
possession of the estate to the vendor under orders of the High
Court, Madras. Whereas the vendor is in possession of the said
estate ever since then and has been administering the same.
WHEREAS the vendor has not begotten any issues, male
or female, until now, whereas the vendor's father died on
29.9.1972. Whereas the vendor had to spend very large sums
of money for Managing the vast extent of agricultural lands
comprised in the estate and the net income from the same ever
since the vendor took up management of the same until now
has been very negligible and practically nil.
WHEREAS the house properties have also not yielded any
surplus income after discharge of liabilities.
WHEREAS large sums of money by way of public cues
such as Agricultural income Tax, Capital Gains Tax, Income-Tax,
Wealth tax, penalties and interest, property tax, Urban Land
Tax, compulsory deposits, etc., payable on the various
assessments could not be paid and discharged as and where
demanded for want of requisite net income from the estate to
meet the same and on account of paucity of funds in the estate.
WHEREAS there is now due towards the said Public debts
and public liabilities a sum of nearly six lakhs, whereas
consequent on the inability of the estate to pay the same,
interest on the said public debts are accruing from day to day
thereby increasing the liability of the estate enormously.
Whereas in consequence of the inability and failure of the estate
to meet the said public debts within the periods of the
respective demands, penalties are also levied thereby further
swelling the public Debt liabilities of the estate.
WHEREAS the vendor apprehends that eventually the
public debts and liabilities may swallow up the estate whereas
the payment of all the said Public Debts and dues and public
liabilities is a first charge on the entire state.
WHEREAS the vendor also apprehends that in the
circumstances the State and Public Authorities may take
coercive steps and bring the properties comprised in the Estate
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to sale for the realisation of the public Debts and Liabilities.
Whereas the vendor also apprehends that if the properties are
brought to sale in public auction by coercive steps by the state
they may be sold away for ridiculously low and nominal prices
and that the estate would thereby be put to enormous loss and
damage, whereas the vendor has therefore considered it
imperative in the interest of the estate to sell some of the
properties of the estate and to discharge the public dues and
liabilities payable by the estate from the net sale proceeds
thereof, in order to save the remaining portion of the estate.
WHEREAS house, ground and premises bearing Municipal
Door No.36-C, Mount Road, Madras-2 and more fully described
in the Schedule hereto is comprised in the said estate.
WHEREAS the vendor has therefore negotiated for a sale
of the same with a view to utilize the entire net sale proceeds
thereof for discharge of the public debts and dues and public
liabilities of the estate.
WHEREAS the Purchaser has offered to purchase the
said property described in the schedule hereto in its entirety,
that is inclusive of the interest of the remainder men after the
life time of the vendor and free from all encumbrances, charges
or trusts whatsoever for the net sum of Rs.5.5 lakhs (Rupees
five and a half lakhs) only upon and subject to the performance
of all the terms and conditions mentioned hereinbelow:
WHEREAS the vendor has considered the said offer to be
fair, reasonable and best according to present market conditions
and in the circumstances of the case.
WHEREAS the vendor has also considered that it is in
the best interest of and beneficial to the estate to accept the
offer in order to discharge the Public Debts and dues and public
Liabilities of the estate and to save the estate from coercive
steps by the State and from a forced sale of the properties
comprised in the estate in public auction and has therefore
deemed it fit, proper and necessary to accept the said offer.
NOW THIS AGREEMENT WITNESSETH as follows in
pursuance of the premises and agreement hereinabove recited:
1. The vendor doth hereby agrees to sell and the purchaser does
hereby agrees to purchase the entire interest, both present and
future, in house ground and premises bearing Municipal Door
No.36-C, Mount Road, Madras-2 inclusive of the life interest of
the Vendor and the interests of the remaindermen and free
from all encumbrances, charges of trusts whatsoever from the
net sum of Rupees five and a half lakhs and subject to and upon
all the terms and conditions mentioned below:
2. The sale is of the entire interests in the said property
namely, the present interest of the vendor and the interest of
the remaindermen or revesioners after his death.
3. This agreement is subject to the passing of the vendor's
title to the property and of the vendor's rights to sell the entire
interest, present and future in the property by the Purchaser's
advocate.
4. The vendor shall obtain at his own cost and expense the
sanction of the High Court, Madras for the absolute sale as
aforesaid of the entire interest in the property inclusive of the
interest of the remaindermen or reversioners after the life time
of the vendor.
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5. The pruchaser has this day paid to the vendor a sum of
Rs.25,000/- (rupees twenty five thousand only) by bank draft
bearing No.CL/AA 779570 dated 24.6.1977 drawn on the State
Bank of India, Adyar, Madras, in favour of the Vendor, as
advance towards agreement of sale.
6. In case sanction of the Court is not accorded as aforesaid,
this agreement shall forthwith stand cancelled and the vendor
shall forthwith return the advance amount of rupees twenty five
thousand to the purchaser.
7. If the sanction of Court is obtained the sale shall be
completed within a period of three months thereof.
8. ...................
9. The balance of the sale price of Rs. Five lakhs twenty
five thousand shall be paid by the purchaser at or before the
execution and registration of the sale deed by bank draft drawn
in favour of the respective concerned Public Authorities on behalf
of the vendor for discharge of the public debts and dues and
public liabilities of the said estate and other liabilities binding on
the said property, viz. The advance of Rs.18,000/- liable to be
returned to the tenant of the said property by the vendor and
the commission payable by the vendor to the broker on this
transaction.
10. ...................
11. ...................
12. ...................
13. ....................
14. ....................
15. If after the sanction of court to the aforesaid sale is obtained
the vendor fails to complete the sale he shall be liable to refund
forthwith to the Purchaser the advance of rupees twenty five
thousand and also pay a sum of rupees fifteen thousand to the
Purchaser by way of liquidated damages for his failure to
complete the sale. If after the sanction of court is obtained the
purchaser fails to complete the same he shall be liable to pay to
the vendor a sum of rupees fifteen thousand by way of
liquidated damages for his failure to complete the same."
At the time of execution of the agreement Ex.P1 dated
26.6.1977 the Testator's only daughter and the three sisters of the
vendee were the reversioners in accordance with the terms of the
Will because by that time the vendor had no male issue.
In accordance with the terms of the sale agreement the
vendor filed Civil Suit No.471/77 (originating Summons Suit) on the
original side of the High Court for seeking sanction of the court for
sale of full interest in the property inclusive of his own life interest
and the interest of the reversioners. The reversioners were
impleaded as parties to that suit.
On 16.1.1978, one of the reversioners viz., Saraswati Devi
filed a written statement objecting to the grant of sanction for sale
and prayed for dismissal of the suit. Another reversioner Prema
Gangaiya adopted the written statement filed by other reversioner
and objected to the sale.
As the sanction sought from the Court was opposed by the
above-named reversioners, the vendor sent a lawyer's notice on
11.9.1979 to the vendee stating therein as under:
"In view of the prolonged proceedings in obtaining
sanction of Court, for sale of the above said property
and the pressing demands from Tax Authorities, my
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client Mr. G.D.Narendra, hereby cancels the
agreement of sale referred to above and the advance
sum of Rs.25,000/- paid by your draft under the
above said agreement is, therefore, refunded by his
check bearing No.........dated 11.9.1979."
Soon after issuance of the above lawyer's notice, the vendor,
on 12.9.1979, instructed his lawyer stating that the suit seeking
sanction of the Court was not likely to be decided early and the
chances of grant of sanction being remote, the suit be withdrawn.
It may be mentioned at this very stage that eventually the suit
was not, in fact, withdrawn and, as would be stated in detail
hereinafter, the suit was prosecuted by the vendee himself who got
himself transposed in the suit as co-plaintiff.
The vendee sent a detailed reply to the lawyer's notice sent by
the vendor canceling the agreement. In his reply, the vendee
attributed mala fides to the vendor in rescinding the agreement. In
his reply, the vendee acknowledged that the sale was necessitated
because of public liabilities towards taxes and other dues in respect of
the property but it was alleged that there was no such pressing
demand from any tax authorities creating an urgency as to compel
the vendor to rescind the contract. It was alleged in the reply that
the vendor was negotiating a sale for higher price with one Bob
Daswani and to effectuate sale in favour of the new purchaser, one of
the partners of the vendor firm was called for discussion. It is
disclosed from the evidence led in the trial that Bob Daswani and
respondent Fateh Chand Daswani who were shown and impleaded as
two different persons, were one and the same although initially
attempt was made by the defendants to mislead the Court that they
were two persons and the subsequent sale to respondents 1 to 5 was
without knowledge of prior agreement with the vendee. The
purchaser of the suit properties shall hereinafter be referred as the
subsequent vendee.
What is to be taken note of from the lawyer's reply for vendee
to the lawyer's notice for the vendor is that the former had alleged
breach of contract on the part of the vendor with attributing
intention to the latter of selling the property for higher price to third
parties. The other relevant part of the reply to lawyer's notice sent
by the vendee is the acknowledgement of the fact of necessity of
sale of the property for discharging public taxes and dues although in
reply it was reiterated that the vendee was always ready to
discharge the tax liability in accordance with the sale agreement.
The relevant part of the reply reads thus:
"The very object of the intended sale is for
discharge of the income tax and other tax
liabilities and my clients are always ready to
discharge the same as per the sale agreement."
It may be mentioned at this very stage that in his reply sent
through his lawyer to the lawyer's notice of the vendor cancelling the
agreement, the vendee did not express desire to purchase life
interest of the vendor without insisting on transfer of interest of the
reversioners which was subject matter of the suit filed for seeking
sanction of the Court.
On 29.12.1979, the vendor sold his life interest in the suit
property for a sum of Rs.4.40 lacs by executing registered instrument
in favour of respondents 1 to 5 (shortly referred to as the
subsequent vendee). What is apparent from the contents of the
subsequent sale deed Ex.D1 dated 29.12.1979 executed in favour of
the subsequent vendee is that large part of the sale consideration
in different sums aggregating to Rs.2.68 lacs was paid directly by the
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subsequent vendee to various authorities to discharge public dues
and taxes like Corporation Property Tax, Urban Land Tax and Income
Tax arrears.
The subsequent vendee by separate release deeds dated
21.10.1980, 22.1.1980, 22.2.1980 and 29.4.1980 obtained surrender
of rights individually from the reversioners by paying each of them
a sum of Rs. 20,000/-.
After receiving the lawyer's notice and cancellation of the sale
agreement, the vendee on 25.3.1981 got himself impleaded as a
party-defendant in Suit No.471/77 which was filed to seek sanction of
the Court.
On 16.8.1981 the vendee filed Civil Suit No.423/81 seeking
Specific performance of the Agreement of Sale agreement Ex.P1.
Under order dated 17.12.1981 passed in Civil Suit No.471/77
seeking sanction of the Court, the vendor got himself transposed as
co-plaintiff. The two suits i.e. Civil Suit No.471/77,seeking court
sanction for sale under the agreement Ex.P1 and Civil Suit No.423/81
seeking Specific Performance of the Agreement of Sale, were clubbed
and tried together by the learned single judge on the original side of
the High Court.
After the pleadings were completed in the two suits, the
vendee on 25.11.1986 filed an affidavit purporting to be under
Section 12(3) of the Specific Performance Act of 1963 stating therein
that without prejudice to his claim for transfer of full interest in the
suit property to him under the agreement of sale, if he was found
not entitled to maintain the suit seeking sanction of the Court for sale
of full interest in the property a decree be granted for Specific
Performance of transfer of life interest of the vendor in the suit
property. The relevant part of the affidavit claiming lesser relief of
sale of life interest of the vendor reads as under:
"I submit that the relief as prayed for in CS
No.471 of 1977 can be granted by this Hon.
Court. The relief prayed for in the present suit
is for a decree for specific performance in
respect of the entire property with full rights of
the first defendant and of the reversioners.
Without prejudice to what is stated above, it
has become necessary for me to file this
affidavit before commencement of the trial of
the suit under the following circumstances.
I state that in the event of this Hon.
Court taking the view and coming to the
conclusion that the plaintiff herein as the
second plaintiff in CS No.471 of 1977 is not
entitled to maintain the suit and pray for the
relief sought for, then, I submit that this Hon.
C ourt may be pleased to decree the suit in CS
No.423 of 1981 for specific performance of the
life interest of the first defendant and direct
the defendants in the suit to execute the sale
deed in favour of the plaintiff to the extent of
the life interest of the first defendant."
In view of the above averment made in the affidavit filed by the
vendee in which he alternatively claimed lesser relief of transfer of
only life interest in the suit property of the vendor, the learned
single judge by common judgment dated 6.9.1988 dismissed Civil
Suit No.471/77 seeking sanction of the Court for sale as infructuous.
The relevant part of order of the learned single judge dismissing Civil
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Suit for sanction as infructuous reads thus:
"While so, by affidavit dated 25th November,
1986, Messrs. HPA International, swore in CS
No.423 of 1981, that in the event of this Court
coming to the conclusion that Messrs. HPA
International as 2nd plaintiff in CS No.471 of
1977 is not entitled to maintain the suit as
prayed for, HPA International is restricting
their claim in CS No.423 of 1981 for specific
performance of the agreement Ex.P1 with
reference to the life-estate of Narendra
Kullamma Naicker alone and for a direction to
the defendants in that suit to execute the sale
deed in favour of the plaintiff to the extent of
the life-estate of Narendra Kullamma Naicker as
provided under Section 12(3) of the Specific
Relief Act for the consideration of Rs.5,50,000/-
for which he had bargained for the whole
interest in the suit property.
In view of the above affidavit filed by Messrs.
HPA International in CS No.423 of 1981, this
suit viz., CS No.471 of 1977 has become
infructuous. Further, this Court cannot compel
the reversioners to part with their interest.
As such, I find that the suit in CS No.471 of
1977 has become infructuous, and it is
dismissed as infructuous accordingly. No
costs."
It may be stated that this part of the common judgment
dismissing Civil Suit No.471/77, in which sanction for sale was sought
from the Court, has not been appealed against before us although
learned counsel for the vendee has contended that no separate
appeal was required to be filed against dismissal of the suit for
court's sanction as infructuous because the common judgment
passed in the suit seeking sanction of the suit for sale and the suit for
specific performance is under appeal before us. We shall deal with
this argument separately at the appropriate stage as to whether any
separate appeal was required to be filed against dismissal of suit
seeking sanction of the Court for sale, as having been rendered
infructuous.
The learned single judge by the impugned common judgment
decreed Civil Suit No.423/81 in favour of the vendee to the extent of
directing conveyance of life interest in the suit properties of the
vendor under the Agreement Ex.P1. It was further held that as the
subsequent vendee has purchased the property with knowledge of
the prior sale agreement with the vendee the former should join in
re-conveying the property to the latter.
It is necessary to take note of the legal and factual issues
decided by the learned single judge in favour of the vendee. On the
issue whether the vendee can be granted lesser relief directing
conveyance of life interest of property of the vendor, the learned
single judge held in favour of the vendee thus:
"A perusal of the oral and documentary
evidence clearly proves that DW 1 has no
regard for truth. Further, the built-in clauses
namely clauses 4 & 6 in Ex.P1 have been
introduced for the benefit of the plaintiff. The
non-enforcement of those clauses will not
prejudice the Ist defendant. As such I find
that the facts of this case amply illustrate the
forethought of the framers of the Specific
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Relief Act in introducing Section 12 therein.
The failure to get sanction of the court by the
Ist defendant to convey the whole of the
interest of the suit property as contained in
clause 4 of Ex.P1 agreement is not a bar for
the plaintiff herein to enforce Ex.P1.since he
has relinquished the benefit that accrues to
him, which will not prejudice the Ist defendant.
In view of the relinquishment of the right given
to the plaintiff under clause 4 of Ex.P1, clause
6 of the agreement becomes otiose."
In granting decree of Specific performance of Conveyance of
life interest of the vendor, learned single judge further held thus:
"Whereas, the agreement involved in this suit
is capable of separation, one consisting of
enforceable portion viz. the life interest of the
first defendant and unenforceable portion viz.
interest of remainder men and reversioners."
The learned single judge found that the equity was in favour of
the vendee as the vendor has been found guilty of misrepresenting
Bob Daswani and Fateh Chand Daswani as two persons when they
were the same and the negotiations for subsequent sale were held in
presence of one of the partners of the vendee. The learned single
judge on this aspect in the judgment comments thus:
"It is a pity that third defendant who is
considered to be an enlightened citizen having
international connections with so much of
wealth has not come forward to state at the
earliest opportunity that he carries the name
Bob Daswani also. That shows the guilty
conscious of the third defendant. Having
projected his image as Bob Daswani, the
presence of the first defendant and the plaintiff
on 9.9.1979 he wanted to hoodwink the plaintiff
for getting his sale-deed in the name of the
third defendant so as to plead that third
defendant is bona fide purchaser for value
"without notice." But anticipating that his claim
would be exposed he omitted to mention the
aforesaid facts that he and his wife and children
are bona fide purchases for value only. They
omitted to state "without notice."
It needs to be mentioned at this stage that learned counsel
appearing for the subsequent vendee has not disputed in this
appeal that the sale in favour of the subsequent vendee was with
notice of the prior sale agreement Ex.P1 with the vendee.
Against the judgment granting decree of specific performance
of sale of life interest of vendor in the suit property, an appeal was
preferred by the subsequent vendee to the Division Bench of the
High Court. As has been mentioned earlier, the Division Bench
concluded hearing of the appeal on 22.3.1989 but pronounced
judgments almost five years after on 24.1.1994 and dismissed the
appeal. That judgment has been set aside by this Court by order
dated 13.1.2000 reported in 2000(2) SCC 13. This Court remanded
the appeal for re-hearing by the Division Bench of the High Court.
After re-hearing, the Division Bench by the impugned judgment
dated 24.4.2001 has allowed the appeal preferred by the
subsequent vendee. The decree granted for conveying life interest
of the vendor in the suit property has been set aside. The only relief
granted to the plaintiff, is that out of the rental income realised by
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the plaintiff during long pendency of the appeal, a sum of Rs.5.5 lacs
has been deducted to deprive the subsequent vendee of that sum
for his misconduct of projecting Bob Daswani and Fateh Chand
Daswani as two persons when, in fact, they were one. Rest of the
rental income recovered by the plaintiff vendee has been directed to
be paid to the subsequent vendee as a consequence of success of
appeal and setting aside of the decree for specific performance.
Before considering the various grounds urged in this appeal, it
is necessary to briefly indicate the basis on which the Division Bench
on re-hearing of the appeal - reversed the judgment of the learned
Single Judge.
Construing the relevant clauses of the contract the Division
Bench held that clause (6), which placed an obligation on the vendor
to approach the court for sanction of sale of interest of reversioners,
was incorporated not with a view to safeguard interest of the vendee
alone but it was a term meant for benefit of both the parties. The
Division Bench in paragraph 31 held thus:
"The sanction referred to in the agreement is a
sanction which was clearly meant for the benefit of
both the parties to the agreement. The plaintiff was
interested only in the purchase of entire interests' in
the property, had made the agreement subject to
such interest being lawfully conveyed and accepted
liability for payment of liquidated damages if it failed
to obtain the sale deed after the sanction was
obtained. Plaintiff not having contracted with the
reversioners to buy their interest, could not have
secured the 'entire interest' in the property without
an order of this Court directing conveyance of the
reversionary interest to the purchaser. The sanction
of the Court was clearly meant for the benefit of the
purchaser as well as the vendor."
The Division Bench has taken the view that as the sanction for sale
was not granted by the Court as was contemplated by the parties
under the terms of the agreement; the contract was rendered un-
enforceable. The Division Bench concluded thus:
"Appellants are entitled to contend that the contract
is a contingent one, and that the contingency
contemplated by the parties not having occurred, the
contract, regard being had to what had been
expressly provided by the parties in clause 6 of the
agreement, had collapsed by implosion, the dismissal
of the suit for sanction having triggered it."
With regard to dismissal of Civil Suit No.471/77 seeking
sanction of the Court as infructuous and having attained finality
because of non-preferring of appeal by the vendee-plaintiff in
paragraphs 25 & 34, the Division Bench held thus:
"It is now a matter of record that the sanction
sought for the sale of reversionary interest was not
given the Civil Suit 471 of 1977 having been
dismissed that dismissal has become final. By virtue
of clause 6, the suit agreement Ex.P1, forthwith
stood cancelled, if that clause was meant for the
benefit of both the parties to the contract. If the
contract thus stood cancelled the suit for specific
performance had necessarily to be dismissed.
That suit for sanction, CS No.471 of 1977, was in
fact prosecuted by the respondent herein, who after
becoming a party to that proceeding, had itself
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transposed as a co-plaintiff. Having thus put itself in
a position where it could seek sanction, plaintiff's
failure to lead evidence on the justification for
sanction, on the ground that it had invoked S.12(3)
of the specific Relief Act, is a default which cannot
now be turned to its advantage, after the suit for
sanction was dismissed."
The claim allowed for grant of lesser relief of conveyance of life
interest of the vendor in the suit property, was negatived by the
Division Bench and the decree granted by single judge was reversed
by recording the following conclusion:
"The suit agreement being an integrated whole was
one and indivisible incapable of being split into an
agreement for sale of life interest and another for
the sale of reversionary interest. What perished was
the whole of the contract and not only a part. What
was contemplated by the parties to the agreement
was the sale of 'entire interest' in the property
provided sanction was given, and in the event of
sanction not being given the agreement stood
cancelled as a whole leaving each of the parties to
arrange their affairs as they thought fit wholly
unhampered by anything contained in the
agreement. The agreement contemplated the sale of
all interests in the property if sanction was
forthcoming, and no sale of any part of the property
in case sanction was not given. The bargain was for
all or nothing. It was not open to the court to make
a new contract for the parties after the contract in its
entirety had perished."
The Division Bench negatived the claim seeking conveyance of
life interest in the property of the vendor, also on the ground of
delay and equity by observing thus:
"Plaintiff cannot be allowed to claim performance in
part several years later. Had the plaintiff been
earnest about relinquishing its claim for reversionary
interest, it could have obtained Narendra's life
interest in 1977 itself, and at any time up to the
execution of the sale deed by Narendra In favour of
appellants in 1979. Narendra was eager to sell and
had been waiting for the plaintiff to take a sale deed
from him. The sale by Narendra to appellants was
for the purpose inter alia, of raising the monies
required for paying the arrears of revenue - funds
which the plaintiff could have provided by obtaining
conveyance of his life interest, but was not so
provided. Having regard to these facts the prayer
for part performance made during the course of the
trial at a stage when it was evident that the suit as
laid was doomed to failure, was not one which could
be acceded to. The trial court was in error in
granting that prayer by ignoring the plaintiff's
conduct."
As a result of the conclusion reached as mentioned above, the
Division Bench allowed the appeal and set aside the decree of
granting Specific Performance of the Contract Ex.P1 to the extent of
conveyance of life interest of the vendor. A decree of refund of full
sale price to the vendee was however granted. Since pending the
appeal, the decree granted by the learned single judge had been
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executed and possession had been obtained by the vendee, who had
raised further construction on the property and collected rents from
the tenants, the Division Bench in paragraph 63 made directions to
adjust the rights and equities between the parties with regard to the
amounts spent by each of them on putting up their own constructions
and rental income realised by each of them from the property. We
shall separately deal with that aspect at appropriate stage of our
judgment.
We have heard the learned counsel appearing for the
contesting parties at great length. Apart from long oral arguments,
written submissions have been made and plethora of case law has
been placed before us on various legal contentions advanced.
Considering the view that we propose to take and the conclusions
reached by us, we do not consider it necessary to deal with each of
the rulings cited before us by the learned counsel at the Bar. We will
confine our consideration to certain rulings directly on the issues and
few others touching them.
In substance, the main submission advanced by learned
counsel Shri K. Parasaran on behalf of the vendee is that the
vendor clearly committed a breach of the terms of the sale
agreement Ex. P-1. During pendency of the suit seeking sanction of
the court, the contract was formally terminated by lawyer's notice
dated 11.9.1979 sent by him. It is submitted that actions such as of
sending notice of terminating the contract, thereafter instructing his
lawyer to withdraw the suit for sanction followed by the negotiations
which were proved to have been held to sell the suit property to the
subsequent vendee, were clearly mala fide attempts on the part of
the vendor to resile from the contract for getting higher price for
the property. It is pointed out that an attempt was made to mislead
the Court by creating confusion that Bob Daswani and Bhagwandas
Daswani were two different persons and the subsequent vendee
had no knowledge of the prior agreement entered with the plaintiff-
vendee. This deception sought to be practised on the opposite party
and the court was exposed during trial and the learned single judge
has imposed penalty on the subsequent vendee for the misconduct
of misleading the court. It is submitted that the subsequent
vendee having purchased the property with knowledge of the prior
agreement holds the property in trust for the benefit of the prior
vendee and is obliged in law to make over the property to the prior
vendee under decree for specific performance of the prior contract.
Sections 90, 91 & 92 of the Indian Trusts Act are relied for the above
proposition and need reproduction at this stage for better
appreciation of the arguments advanced on this point on behalf of the
vendee :-
"Section 90. Advantage gained by qualified owner. -
Where a tenant for life, co-owner, mortgagee or other qualified
owner of any property, by availing himself of his position as
such, gains an advantage in derogation of the rights of the
other persons interested in the property, or where any such
owner, as representing all persons interested in such property,
gains any advantage he must hold, for the benefit of all persons
so interested, the advantage so gained, but subject to
repayment by such persons of their due share of the expenses
properly incurred, and to an indemnity by the same persons
against liabilities properly contracted, in gaining such
advantage.
Section 91. Property acquired with notice of existing
contract.-Where a person acquires property with notice that
another person has entered into an existing contract affecting
that property, of which specific performance could be enforced,
the former must hold the property for the benefit of the latter to
the extent necessary to give effect to the contract.
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Section 92. Purchase by person contracting to buy
property to be held on trust.-Where a person contracts to
buy property to be held on trust for certain beneficiaries and
buys the property accordingly, he must hold the property for
their benefit to the extent necessary to give effect to the
contract."
In elaborating the above argument to support claim of specific
performance of the contract, the further submission made is that the
act of rescinding contract, pending suit for sanction of the court and
selling the property with only life interest to the subsequent
vendee, who later on, obtained surrender deeds from the
reversioners by independently paying them, were acts done in
conspiracy between vendor and the subsequent vendee. They
were self-induced actions to render the suit for seeking sanction as
infructuous and frustrate the contract. It is contended that in such a
situation, the prior vendee can take recourse to section 90 read with
sections 91 & 92 of the Indian Trusts Act, and is entitled to seek
specific performance of the contract of full rights of the property i.e.
life interest of the vendor and spes successionis of the
reversioners. To give effect to the right of the vendee to specific
performance - the vendor, reversioners and subsequent
vendee can be compelled in law to convey full title of the property to
the plaintiff.
The alternative argument advanced on behalf of the plaintiff-
vendor is that although the petitioner is, in law, entitled to
conveyance of full title in the property by the vendor, the
reversioners and the subsequent vendee, he has restricted his
claim to the lesser relief of seeking conveyance only of life interest in
the property of the vendor. Such relief can be granted under
section 12(3) of the Specific Relief Act as the vendee is willing to
pay full agreed consideration for lesser relief of conveyance of life
interest in the property. Reliance is placed on Lala Durga Prasad
vs. Lala Deep Chand [1954 SCR 360 at pg. 367]; Jhumma Masjid
vs. Kodimaniandra Devaiah [1962 Supp (2) SCR 554 at pg. 570];
Soni Lalji Jetha vs. Sonkalidas Devchand [1967 (1) SCR 873 at
pg. 879]; and Narandas Karsondas vs. S. A. Kamtam [1977 (3)
SCC 247].
It is argued that the Division Bench of the Madras High Court
was wrong in coming to the conclusion that the contract was a
contingent one and as the court did not grant sanction for sale of
reversioners' interest and dismissed the suit seeking sanction as
infructuous, the contract failed. The contention advanced is that
where the grant of sanction of the court was frustrated by the
vendor himself by prematurely rescinding the contract and
instructing his lawyer not to prosecute the sanction suit, the dismissal
of the suit as infructuous was self-induced by the vendor. The
vendor cannot be allowed to take advantage of his own wrong. The
law and equity is in favour of the plaintiff- vendee. Reliance is placed
on Ganga Saran vs. Ramcharan Ram Gopal [1952 SCR 36 at pg.
42].
Alternatively, it is submitted that even though sanction could
not be obtained from the court for transferring interest of the
reversioners, the law permits the equity court to grant lesser relief
of directing conveyance of life interest of the vendor on payment of
full agreed consideration, in accordance with section 12(3) of the
Specific Relief Act. In this respect, it is contended that the Division
Bench of the High Court was wrong in holding that there was undue
delay on the part of the plaintiff- vendee in exercising the option for
lesser relief of transfer of life interest of the vendor. Further it is
also contended that the option exercised for lesser relief was not
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'conditional,' as is sought to be projected by the other side. It is
submitted that when both suits for seeking sanction and for specific
performance were jointly tried, exercise of option by filing affidavit
stating that it was without prejudice to the right of obtaining full title
with sanction of the court, cannot be said to be conditional to deny
relief under section 12(3) of the Specific Relief Act.
In support of the claim for lesser relief of transfer of life
interest, it is submitted that the clause in the contract requiring
sanction of the Court for transfer of reversioners' interest was a
condition solely in favour of the plaintiff- vendee which he could
waive and the vendor could not insist on fulfillment of that condition
as a fundamental term of the contract.
In reply to the plea of the finality of the decree of dismissal of
sanction suit as infructuous, being not appealed against, it is
submitted that the proceedings for sanction are summary in nature,
under the rules and procedures of Madras High Court framed for its
original side. That suit for sanction which was of summary nature
happened to be clubbed with the suit for specific performance. The
two suits were jointly tried. A common judgment was passed
dismissing the sanction suit as infructuous and partly decreeing the
suit for specific performance. An appeal was filed against the common
judgment. Therefore, non-filing of appeal against the dismissal of
sanction suit as infructuous does not operate as res judicata and is no
ground to refuse specific performance of the grant of decree of
specific performance of contract for transfer of life interest for which
no sanction of the court was needed. Reliance is placed on S.P.
Chengalvarya Naidu vs. Jagannath [1994 (1) SCC 1] and
Sheoparsan vs. Ramnandan [AIR 1916 PC 78 at pg. 81].
Rest of the contentions advanced at the Bar on behalf of the
plaintiff- vendee, in our opinion, are not required to be separately
dealt with because of the view we propose to take and the conclusion
reached by us which shall be elaborated hereinafter.
Learned senior counsel Shri Soli J. Sorabjee appearing for the
subsequent vendee rested his argument on his main submission
that the sale agreement was a contingent contract - the contingency
named being sanction of the court which did not materialize. Upon
failure of that contingency, the agreement stood cancelled forthwith
under clause (6) of the agreement. On failure of the happening of
the contingency, the agreement had been rendered unenforceable in
accordance with section 32 of the Indian Contract Act read with
definition of 'Contingent Contract' contained in section 31 of the said
Act :-
"Section 31.- A 'contingent contract' is a contract to do or not
do something, if some event, collateral to such contract, does or
does not happen.
Section 32. Enforcement of contracts contingent on an
event happening.- Contingent contracts to do or not to do
anything if an uncertain future event happens cannot be
enforced by law unless and until that event has happened.
If the event becomes impossible, such contracts become void."
Heavy reliance is placed on decisions of Privy Council reported
in Dalsukh M. Pancholi vs. Guarantee Life & Employment
Insurance & Co. [AIR 1947 PC 182 at pg. 186]; Narain Pattro vs.
Aukhoy Narain Manna [ILR 12 Calcutta 153 at pg. 155]; Sreemati
Kalidasi Dassee vs. Sreemati Nobo Kumari Dassee [20 CWN 929
at pgg. 937, 938 & 939]; and Golab Ray & Anr vs. Muralidhar
Modi & Ors. [AIR 1964 Orissa 176 at pgg. 180 & 181].
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The decision cited by the other side in the case of Mrs.
Chandnee Widya Vatee Madden vs. Dr. C.L. Kataial & Ors.
[1964 (2) SCR 495], is sought to be distinguished on the ground that
there the vendor without sufficient reason withdrew the application
made to the Chief Commissioner for sanction and therefore, the relief
granted was to direct the vendor to make the necessary application
for sanction. In that case, it was further made clear that ultimately if
the sanction was refused, the plaintiffs would be entitled only to
damages as decreed by the High Court.
With regard to the claim allowed for grant of lesser relief of
transfer of life interest, the contention in reply is that the agreement
Ex. P-1 was a single indivisible and inseparable contract based on
sanction of the court. By segregating the contract, no new contract
can be created by the court and take recourse to section 12(4) of the
Specific Relief Act is impermissible. Reliance is placed on William
Graham vs. Krishna Chandra Dey [1925 PC 45]; Abdul Haq vs.
Mohammed Yehia Khan & Ors. [AIR 1924 Patna 81 at pg. 84]; and
Hiralal Lachmiram Pardesi vs. Janardhan Govind Nerlekar &
Anr. [AIR 1938 Bombay 134].
The claim for conveyance of life interest is also opposed on the
ground that the option exercised under section 12(3) of the Specific
Relief Act was not unconditional and without reservations. There was
no surrender of claim to the interest of the reversioners. Such a
conditional claim for lesser relief was rightly rejected by the Division
Bench of the High Court. Reliance is placed on T.V. Kochuvareed &
Anr. Vs. P. Mariappa Gounder & Ors. [AIR 1954 TC 10, para 40];
Bolla Narayan Murthy vs. Cannamaneedi Madhavayya & Anr.
[1947 (2) MLJ 347]; and Surjith Kaur vs. Naurata Singh & Anr.
[2000(7) SCC 379].
The additional ground urged to oppose claim for lesser relief
of the conveyance of life interest is that such option under section
12(3) of the Specific Relief Act was not exercised at the first available
opportunity when a formal legal notice was given by the vendor to
terminate the contract anticipating remote possibility of grant of
sanction. It is submitted that the option for lesser relief was claimed
when the joint trial had already commenced in the suits and all the
pleadings of the parties had been completed. It was not an
unconditional offer to obtain life interest. The provisions of Section
12(3)(b)(i) & (ii) of the Specific Relief Act were thus not fully
complied with which require for obtaining partial relief of specific
performance, unconditional surrender of remaining part of the
contract.
In reply to the argument that the sanction suit was not
prosecuted by the vendor deliberately to render it infructuous with a
design to back out from the contract in conspiracy with the
subsequent vendee, it is pointed out that despite service of notice
terminating the contract, the suit was not in fact withdrawn. Soon
thereafter the vendee got himself impleaded and later transposed
in the suit as co-plaintiff. In the course of trial of sanction suit with
suit for specific performance, the vendee exercised option by an
affidavit of claiming lesser relief of life interest. He himself was thus
responsible for rendering the sanction suit infructuous. It is argued
that if it was possible to obtain sanction of the court on the ground of
continuous pressure on the property for recovery of public dues, the
order of the single judge on original side dismissing the sanction suit
as infructuous should have been challenged in appeal by the
vendee. In any case when the subsequent vendee had gone in
appeal against the decree granted for life interest in the suit for
specific performance, the vendee could not have allowed the
dismissal of the sanction suit to attain finality by not filing cross
appeal against the same. Even in this Court, there is no appeal
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preferred and no ground urged challenging the dismissal of the
sanction suit as infructuous. It is, therefore, submitted that one of
the essential terms of the contract of obtaining sanction of the court
having been rendered impossible of performance, the contract for
sale of the property was rightly held by the Division Bench of the
High Court to have failed rendering it incapable of specific
performance.
Lastly, it is submitted that grant of specific relief being
discretionary the court should decline the relief to the plaintiff-
vendee as the sanction suit got delayed and ultimately no sanction
was granted. The vendor had no other option but to sell the
property to clear the taxes and public dues for saving the property
from being attached and sold through coercive process of recovery of
public dues and possibly at a price less than the prevailing market
price. The subsequent vendee has purchased separately the life
interest of the vendor which alone he could convey and obtained
separate surrender-deeds from the reversioners by paying each of
them price of their interest. In the agreement Ex.P-1 entered with the
vendee, as also in the sale-deed obtained by subsequent vendee,
there is clear mention of the fact of pressure on the property for
recovery of taxes and public dues. In the sale-deed obtained by the
subsequent vendee, there is recital that taxes and public dues were
directly paid by the subsequent vendee to the public authorities.
The contents of the agreement of sale Ex. P-1 and the sale-deed Ex.
D-1 are evidence of the fact that early disposal of the property was
the pressing necessity to ward off coercive recovery from the
property.
The additional argument advanced in opposing the claim for
lesser relief of conveyance of life interest is that the clause requiring
the sanction of the court for transfer of the reversioners' interest
was a term of contract for the benefit of both the vendor and the
vendee. The court's sanction would have protected the vendor from
claims and possible legal proceedings against him by the
reversioners. Court's sanction was also for the benefit of the vendee
to ensure effectuation of the agreement of sale which purported to
sell entire interest that is life interest of vendor and spes
successionis of reversioners. The term of seeking court's sanction
being a term in common interest - both of vendor and the vendee,
the vendee could not be allowed to unilaterally waive it by
restricting his claim to life interest. There is also no pleading and
evidence to justify claim set up by the vendee. The dismissal of
sanction suit as infructuous was induced by the vendee becoming a
co-plaintiff and filing an affidavit restricting his claim to life interest.
It was, therefore, a self-defeating act on the part of the vendee and
the Division Bench of the High Court rightly dismissed the suit for
specific performance for the life interest.
After hearing the argument at length advanced by the counsel
for the parties and perusing the record of the case, the basic question
that first needs consideration is whether there was any breach of
contract on the part of the vendor so as to justify the grant of relief
of specific performance of the contract of sale. We do not consider it
necessary to deal with the legal contention whether clause (4) of the
contract requiring vendor to obtain sanction of the court was an
exception clause or a fundamental term of the contract. From the
recitals of the sale agreement Ex. P-1 and particularly those requiring
the vendee to discharge public debts and dues directly as part of
the consideration of sale, it is clear that the necessity of sale for the
vendor arose for safeguarding the property from being put to auction
and sale through coercive process of recovery of public dues.
Naturally, the vendor wanted to obtain market price of the property
and desired to avoid sale of the property through a coercive process
at a lesser price. That there were outstanding taxes and public dues
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have not been disputed by the vendee and in fact, they are
acknowledged by him in reply to the lawyer's notice sent by the
vendor terminating the contract. In the reply sent through lawyer by
the vendee, it is clearly acknowledged that tax dues were there but
it is stated that the alleged pressure from tax authority was merely
as an excuse to terminate the agreement. The motive attributed to
the vendor that he tried to wriggle out of the sale agreement Ex. P-
1, only to obtain higher price of his property by selling it to the
subsequent vendee, is not borne out from the evidence on record.
The contents of the sale-deed Ex. D-1 dated 29.12.1979 executed in
favour of the subsequent vendee clearly show that a substantial
portion of agreed consideration of Rs. 4,40,000/- was paid directly by
cheques towards the property tax [Rs.50,383.98] to Corporation of
Madras, Urban Land Tax to Tehsildar [Rs. 36,860.70] and income tax
[Rs.1,10,000/-] to Income-Tax Officer. The above payments made by
the subsequent vendee to public authorities justify the stand of
the vendor that there were pressing demands of public authorities
on the property and the sale of the property, well before the
impending initiation of coercive recovery by public authorities, was an
urgent necessity.
The main contention advanced against the vendor is that the
contract term clause (4) imposed a liability on him to seek sanction of
the court for transfer of full title in the property. During pendency of
suit for sanction, actions on the part of the vendor such as
terminating the contract by sending a lawyer's notice and instructing
his lawyer to withdraw the suit for sanction, amounted to committing
breach of the contract.
The agreement was entered into on 26.6.1976. The
reversioners opposed sanction by filing written statements on
16.1.1978. It is long after, on 11.9.1979 by lawyer's notice, the
vendor terminated the contract. The sanction suit was pending from
26.6.1976. Even after two years, the sanction was not granted. The
question is whether the agreement Ex.P-1 contemplated that the
vendor should have waited for grant of sanction by the court for an
indefinite period of time. The recitals of the agreement of sale clearly
mention the necessity of sale arising from the pressure of public dues
and taxes. The vendor could not have waited for an unreasonably
long period of pendency of sanction suit when commencement of
recovery proceedings for public dues and taxes could have
commenced any time. There is no period fixed in the terms of the
contract for obtaining sanction of the court, but keeping in view the
other terms of the contract and the pressing requirement for sale of
the property to clear public dues, it has to be held that obtaining of
court's sanction within a reasonable period and in any case within a
period well before commencement of recovery proceedings for dues
and taxes, was in contemplation of the parties as an implied term.
Notice served for terminating the contract, after waiting for two years
for sanction by the court, cannot be held to be a breach of the
contract on the part of the vendor. The argument that the vendor
rescinded the contract only because he had entered into secret
negotiations with the subsequent vendee to obtain higher price for
the property is not borne out from the evidence. We cannot attach
too much importance to the fact of initial attempt made by
subsequent vendee to conceal knowledge of the existing contract
with the vendee when sale-deed was obtained by the former. For
the misconduct of misrepresentation and attempt to mislead the
court, the Division Bench of the High Court has rightly deducted a
sum of Rs. 5.5 lacs from the rental income found payable to the
subsequent vendee. We propose not to disturb the same. But the
aforesaid misconduct of subsequent vendee does not render the
act of vendor in rescinding the contract to be an act of breach of
contract which can be said to have been committed solely with desire
to obtain higher price of the property.
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As we have mentioned above, only life interest was sold to the
subsequent vendee for higher price. Out of the agreed sale
consideration, major portion of money was directly paid by the
subsequent vendee to satisfy dues and taxes of public authorities.
The notice served for terminating the contract, anticipating remote
prospect of grant of sanction by the Court within a reasonable period
and after waiting for two years from date of the contract, cannot be
termed to be a breach to justify grant of any specific relief to the
vendee.
In this respect, it is also relevant to state that although by
lawyer's notice, the vendor terminated the contract and instructed
his lawyer to withdraw the suit for sanction, but in fact, the suit was
not withdrawn. The vendee got himself impleaded initially as
defendant to the suit and then sought his transposition as co-plaintiff.
That part of the action of the vendee cannot be castigated as self-
defeating because he was naturally interested in prosecuting the suit
for sanction diligently to obtain conveyance of full rights in the
property. However, the further act on the part of the vendee of
filing an affidavit restricting his claim only to life interest resulted in
dismissal of the suit for sanction as infructuous. The learned single
judge trying jointly the two suits came to the conclusion that as the
vendee gave up his claim for transfer of interest of the reversioners,
the court's sanction was not required. He dismissed the suit for
sanction as infructuous.
In this appeal on behalf of the vendee it is now contended
that had the suit for sanction been prosecuted by the vendor bona
fide and diligently, as stipulated in the terms of the contract, the
court might have granted sanction despite objection of the
reversioners because there was likelihood of loss of the property in
process of recovery of public dues by auction and sale. If that was
the legal position, the vendee ought not to have suffered the
alleged wrongful dismissal of suit for sanction as infructuous. When
decree granted for conveyance of life interest of the vendor in the
suit for specific performance was challenged by the subsequent
vendee before the Division Bench of the High Court, the vendee
could as well have preferred cross appeal against the dismissal of the
suit for sanction as infructuous. He was a co-plaintiff in that suit and
had an independent right of appeal. The non-filing of any appeal
against dismissal of sanction suit as infructuous is a clear indication
that the vendee was satisfied with the grant of decree merely of
specific performance of conveyance of life interest of the vendor. It
is not open to the vendee now to question the correctness of the
dismissal of the suit for sanction as infructuous by the learned single
judge.
The next question that arises is whether the terms of the
contract justify grant of decree of specific performance for lesser
relief of conveyance of life interest of the vendor.
The argument advanced on behalf of the subsequent vendee
seems prima facie acceptable that the contract Ex.P-1 is one single
indivisible contract for sale of full interest in the property that is life
interest of the vendor and spes successionis of the reversioners
with sanction of the court. The reversioners were not parties to the
sale agreement Ex.P-1 entered with the vendee. At the time when
the sale agreement was entered into, the parties were conscious that
the vendor had only life interest in the property and he could not
convey more than his own interest. It was open to the vendee to
obtain conveyance of interest of the reversioners by obtaining
release deeds from them by paying them consideration for surrender
of their interest, as was done by the subsequent vendee. Another
course open to him was to enter into separate agreement with the
reversioners or insist on the reversioners joining the sale agreement.
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It seems the vendee entered into a speculative deal for obtaining
full interest in the property depending upon the sanction to be
granted by the court. It seems to be in contemplation of the parties
that if the reversioners objected, the court might refuse sanction.
They could as well foresee that despite the reversioners' objection,
the court might grant sanction. The transfer of full interest in the
property was, therefore, dependent on sanction of the court. To meet
this contingency, there were specific terms such as clauses (4) and
(6) incorporated in the contract whereby it was clearly agreed that
the vendor shall obtain sanction of the court at his own expense and
costs and if the sanction was not accorded by the court, the
agreement would stand cancelled and the advance money refunded
to the vendee. Clause (15) of the agreement could come into
operation only if the court granted sanction and any of the parities
failed to complete the sale. Clause (15) had no operation when the
sanction was not accorded to the sale.
As has been seen from the facts of this case, the vendor did
apply for sanction, waited for two years and when it found that the
reversioners opposed the grant of sanction, cancelled the contract.
The sanction suit, despite instructions to his lawyer was not, in fact,
withdrawn. The suit for sanction frustrated not because the vendee
became co-plaintiff but because he filed an affidavit restricting his
claim to life interest of vendor. The life interest was not agreed to
be separately sold apart from the interest of the reversioners. The
terms of sale agreement Ex.P-1 clearly stipulate sale of full interest in
the property. Whatever may be the reasons, the sanction of the
court could not be obtained for sale of interest of the reversioners.
The reversioners were not parties to the sale agreement Ex.P-1. In
such a situation, the question is whether in law and equity, the
vendee can insist that the vendor should convey, if not full interest,
his own life interest in the property.
If the vendee intended to seek conveyance separately of the
life interest of the vendor, the earliest opportunity for him was when
he had received notice dated 11.9.1979 sent through lawyer by the
vendor cancelling the contract. Assuming that at that time he could
not opt for lesser relief as the suit for sanction was pending, he could
have, in any case, opted for conveyance of life interest of the
vendor soon after he came to know of the negotiations for sale with
Bob Daswani, which took place in the presence of one of the partners
of the plaintiff- vendee. Even after deriving the knowledge of the
execution of the sale deed dated 29.12.1979 Ex. D-1, the option to
obtain lesser relief of transfer of life interest was not exercised. It
was exercised as late on 25.11.1986 by filing an affidavit and at the
time when pleadings of the parties were completed and the joint trial
in the two suits had already commenced. During long pendency of
the suits between 1979 to 1986, the parties interested in the
property changed their positions. The vendor by executing
registered sale deed in favour of the subsequent vendee got his
public dues paid to relieve the pressure on the property and obtained
market price of the property. After obtaining possession of the
property pursuant to the sale deed, the subsequent vendee has
raised construction and inducted tenants. Accepting the legal stand
based on sections 90, 91 & 92 of the Indian Trusts Act that the
subsequent vendee, being a purchaser with knowledge of prior
agreement, is holding the property as a trustee for the benefit of the
prior vendee, the vendor, who changed his position by effecting
subsequent sale cannot be compelled to convey his life interest when
such lesser relief was not claimed at the earliest opportunity and the
terms of the contract did not contemplate transfer of life interest
alone.
On duly appreciating of the evidence on record, construing
specific terms of the contract and considering the conduct of the
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parties, we have arrived at the conclusion that the recession of the
contract, due to non-grant of sanction by the court within two years
after execution of the contract and filing of the suit for sanction,
was not an act of breach of contract on the part of the vendor
to justify grant of relief of specific performance of the contract to the
prior vendee.
We are also of the view that the subsequent vendee, by his
own act in the pending suits, was responsible for rendering the suit
for sanction as infructuous. He was guilty of lapse in not seeking
conveyance of life interest of the vendor at the earliest opportunity
when notice of recession of the contract was received by him and
later when he derived the knowledge of execution of registered sale-
deed in favour of the subsequent vendee. The option was
exercised conditionally in the midst of the joint trial of the two suits.
There was one integrated and indivisible contract by the
vendor to convey full interest in the property i.e., his own life
interest and the interest of the reversioners with sanction of the
court. As the court had not granted the sanction, the contract could
not be specifically enforced. The lesser relief of transfer of life interest
was not claimed within a reasonable time after the vendor had
intimated that the contract, as agreed for full interest, was not
possible of performance. We find neither equity nor law is in favour of
the plaintiff- vendee.
Section 12(3)(a)(b)(i)(ii) of the Specific Relief Act
read thus :-
"12. Specific performance of part of contract.-
(1) ..................
(2) ..................
(3) Where a party to a contract is unable to perform the
whole of his part of it, and the part which must be left
unperformed either -
(a) forms a considerable part of the whole, though
admitting of compensation in money; or
(b) does not admit of compensation in money;
he is not entitled to obtain a decree for specific
performance; but the court may, at the suit of other
party, direct the party in default to perform specifically so
much of his part of the contract as he can perform, if the
other party -
(i) in a case falling under clause (a), pays or
has paid the agreed consideration for the
whole of the contract reduced by the
consideration for the part which must be left
unperformed and a case falling under clause
(b), [pays or had paid] the consideration for
the whole of the contract without any
abatement; and
(ii) in either case, relinquishes all claims to the
performance of the remaining part of the
contract and all right to compensation, either
for the deficiency or for the loss or damage
sustained by him through the default of the
defendant."
[Emphasis added]
The power to grant partial relief, from the very language of the
Section 12(3) is discretionary with the Court to be exercised keeping
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in view the facts and circumstances of each case and the rights and
interests of the parties involved.
What is most important to be taken note of is that the
reversioners were not parties to the sale agreement Ex.P1. In the
sanction suit they filed written statement opposing the proposed sale
as adversely affecting their spes successionis.
The Court dismissed the sanction suit rightly or wrongly but the
matter having not been carried further in appeal, the subject of
grant or refusal of sanction is no longer open to consideration in this
appeal preferred only against the decision of the Division Bench in
appeal refusing decree of Specific Performance of Sale of life
interest.
The reversioners have surrendered their interest by accepting
consideration separately and executed separate release deeds in
favour of the subsequent vendee. Even though the subsequent
vendee has acquired property with knowledge of sale agreement
Ex.P1 existing with the prior vendee, the latter has no equity in his
favour as to bind the reversioners and in any manner adversely
affect their interest. They were not parties to the sale agreement
and have already by separate release deeds, on accepting separate
consideration, surrendered their interest in favour of the
subsequent vendee. Any grant of relief of transfer of life interest of
the vendor to the prior vendee would involve the reversioners in
further litigation. If only life interest of the vendor is allowed to be
conveyed to the prior vendee, after death of vendor, the
reversioners are likely to be involved in litigation in future to help
in restoring possession of the property to the subsequent vendee
and effectuate the release deeds executed in his favour by them.
Grant of such equitable relief would adversely affect the immediate
efficacy of the release deeds and would create various hurdles in
working out the rights and remedies of the reversioners vis-`-vis
the subsequent vendee. It would not be a proper exercise of
discretion by the Court to grant such partial relief of directing
conveyance of life interest of the vendor as that would adversely
affect the interest of the reversioners.
We have already held above while construing the terms of sale
agreement Ex.P1 that as the reversioners' interest in the property
was likely to be affected, the contracting parties never intended
piecemeal transfer of life interest of the vendor and spes
successionis of reversioners. What the contracting parties intended
and stipulated was transfer of full interest in the property i.e.
vendor's life interest and reversioners' spes successionis with
sanction of the Court. It is for the above reason that parties very
clearly agreed by specific clause (6) in the agreement that if the
sanction of the Court was not accorded, the agreement shall forthwith
stand cancelled and the advance money received shall be returned to
the purchaser. The contracting parties were fully aware that
reversioners, who had a mere chance of succession, were not
parties to the agreement. The parties to the contract could have
taken care of the eventuality of refusal of sanction by the Court and
possibility of the vendor transferring only his life interest to the
vendee, but such eventuality of separate transfer of life interest is
conspicuously absent in the terms of the agreement. Such obligation
on the part of the vendor to transfer his life interest, if sanction for
transfer of reversioners' interest was not granted, cannot be read in
the contract by implication and recourse to Section 12(3) of the
Specific Relief Act, therefore, is impermissible.
In our considered opinion, Section 12(3) of the Specific Relief
Act can be invoked only where terms of contract permit segregation
of rights and interest of parties in the property. The provision cannot
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be availed of when the terms of the contract specifically evince a
intention contrary to segregating interest of the vendor having life
interest and spes successionis of reversioners. Neither law nor
equity is in favour of the vendee to grant Specific Performance of the
Contract.
On these facts, in our opinion, the learned single judge of the
High Court was in error in granting decree of specific performance of
transfer of life interest of the vendor on a finding that the vendor
had committed breach by rescinding contract during pendency of
sanction suit. The Division Bench of the High Court, in our considered
opinion, rightly reversed the decree and dismissed the suit.
We are fortified in our conclusion by the decisions of Privy Council
reported in AIR (34) 1947 PC 182 [Dalsukh M. Pancholi vs. The
Guarantee Life and Employment Insurance Co. Ltd., & Ors.] in which
facts were somewhat similar requiring court's approval for performance of
the agreement of the sale. Two questions were posed by the court - a) was
the term "subject to the Court's approval" an essential term of the
agreement?; and b) if it was essential, by whose default did it fail? The
Privy Council answered the questions saying - " No wonder that the
approval of the 'attaching court' was insisted on as a necessary condition
for effecting the sale, for without it, the title to the property was not at all
safe. In their Lordships' opinion there can be no doubt that the condition
was an essential one."
The Privy Council then recorded the following conclusions on the
questions posed :-
"The person to apply to the 'attaching Court" for securing the
approval of the Court was the vendor; on the construction of the
contract, the provision for approval by the Court was not exclusively
for the benefit of the purchaser, and therefore, the purchaser cannot
by his waiver get rid of the necessity for the Court's approval; the
Court contemplated, was the Court having charge of the mortgage
proceedings, as that Court alone could get rid of the Order for public
sale; application was made by the vendor to the proper Court and
was refused; the contract then fell to the ground and had worked
itself out. In their Lordships' opinion, the contract was a contingent
contract and, as the contingency failed, there was no contract which
could be made the basis for a decree for specific performance and
the appellant's suit has to be dismissed. In this view, it is
unnecessary to consider the second question, or any other point in
the case."
The above Privy Council decision was sought to be distinguished
on the ground that it was not a case where the vendor was not in a
position to convey his own interest in the property without the court's
sanction. In our opinion, however, that aspect is not of much
importance because our conclusion is that the agreement was
indivisible, for sale of full interest in the property i.e. vendor'sP life
interest and reversioners spes successionis. As the court's sanction
was not obtained within a reasonable time, the contract became
unenforceable.
The decision of the Calcutta High Court reported in ILR 152
[Narain Pattro vs. Aukhoy narain Manna & Ors] also supports
the respondents. When the sanction as contemplated was not
obtained from the court, the contract even with variations could
not be directed to be enforced. See the following observations of the
Calcutta High Court :-
"It is not necessary for us to express any opinion as to whether
the suit was barred by clause (e) of section 21 or clause (b) of
section 27 of the Specific Relief Act, for in our opinion the
Judge was quite right in saying that the contract as it stood
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could not be enforced, and that section 26 had no application
to the case. The contract such as it was, was not a complete
contract at any time. It was contingent upon the permission of
the court. The court's permission did not extend to the whole
contract as set out in the shuttanamah. The defendants,
therefore, could not be compelled to carry out the terms of
the original agreement, nor could they have insisted upon the
plaintiff's carrying out the terms sanctioned by the court.
Section 26, upon which the vakeel for the appellant relies, sets
out cases in which contracts cannot be specifically enforced
except with a variation; and there are five particular cases set
out in which a contract may be enforced subject to a variation,
such variation being in favour of the defendant, and the
section in our opinion assumes that the parties or vakeels
representing them are agreed as to the existence of the
contract, but not agreed as to specific terms. The section
provides that, when fraud or mistake of fact, or
misrepresentation has induced the defendant to sign an
agreement, that agreement can only be enforced on the terms
which the defendant intended to agree to. There is no
provision of law of which we are aware which entitles the
plaintiff to claim a variation in the terms of his contract, when
he finds that the contract itself cannot be carried out. In the
present case the plaintiff by his plaint sought to enforce the
original contract without any variation. It seems to us,
therefore, that the Judge was right in holding that the
agreement in the shuttanamah could not be enforced as it
stood, and that section 26 would not entitle the plaintiff to
enforce it with a variation.
The case of Narain Pattro (supra) was relied by the same
Calcutta High Court in the case of Sreemati Kalidasi Dassee & Ors.
vs. Sreemati Nobo Kumari Dassee & Ors. [20 CWN 929] wherein
on similar circumstances for not obtaining letters of administration
from the Court, the contract was held to have failed.
In the case M.V. Shankar Bhat & Anr. Vs. Claude Pinto
Since (dead) by LRs. & Ors. [2003 (4) SCC 86], the agreement for
sale was subject to ratification by co-heirs and this Court concluded
in para 31 as under :-
"When an agreement is entered into subject to ratification by
others, a concluded contract is not arrived at. Whenever
ratification by some other persons, who are not parties to the
agreement is required, such a clause must be held to be a
condition precedent for coming into force of a concluded
contract."
The alternative claim for lesser relief of life interest of vendor
has been rejected by us. We find support for our conclusion from the
following observations of Privy Council reported in AIR 1925 PC 45
[William Graham vs. Krishna Chandra Dey], where on similar
provisions of section 16 of the old Specific Relief Act, such claim for
lesser relief was negatived on the ground that it would amount to
creating a different contract between the parties not in contemplation
by them when they entered into the contract in question, which is
sought to be enforced.
"Their Lordships think (1) that before a Court can exercise the
power given by section 16 it must have before it some material
tending to establish these propositions, and cannot apply the
section on a mere surmise that, if opportunity were given for
further enquiry, such material might be forthcoming and
possibly might be found to be sufficient; and (2) that the
words of the section wide as they are, do not authorise the
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Court to take action otherwise than judicially, and in particular
do not permit it to make for the parties, or to enforce upon
them a contract, which in substance they have not already
made for themselves. .............
...............
Hence section 16, both because it must be something not
covered by section 14 and because no court can act
unjudicially without either statutory warrant or consensual
authority, must be limited and the expression "stands on a
separate and independent footing" points to a limitation, which
would exclude any new bargain, that cannot be said to be
contained in the old one."
As the lesser relief was claimed after long delay and the
contract was found to be indivisible and inseparable, the partial relief
was denied in the case of Govinda Naicken & Anr. Vs.
Apathsahaya Iyer alias Ayawaiyer [ 37 Madras Series 403]
"But when the family is divided as here, section 17 distinctly
prohibits a Court from directing the specific performance of a
part of a contract except in accordance with the preceding
sections. Even in cases where the conditions of section
15 are fulfilled the use of the word 'may' indicates that
the granting of a decree for part performance is
discretionary with the Court, and we should hold that
when there has been great delay in attempting to
enforce a contract and circumstances have greatly
changed either from a rise of prices or other causes in
the interval, the Courts would be justified in refusing to
given legal effect to an inequitable arrangement.
Now the plaintiff in the present case wants the Court to compel
the defendant to execute a deed of sale for the whole property
and if he refuses, to issue one in his name under the seal of
the court, and to allow him to make what he can out of the
title thus conveyed. Such a request is quite inadmissible. A
sale is a transfer of ownership in exchange for a price (section
54, Transfer of Property Act). The defendant has nothing which
he is capable of transferring in the moiety of the property of
which he is not the owner and is not in possession. It is
impossible to sever the execution of the deed from the transfer
to be effected thereby and to treat them as separate acts of
the same person.
[Emphasis added]
An old decision of Judicial Commissioner, Nagpur reported in
AIR 1915 Nappur 15 [Shardaprasad vs. Sikandar] is being referred
only because it has some persuasive value and the facts of that case
are to a great extent nearer to the facts of the present case. The
pertinent observations in that case are :-
"The first defendant made two undertakings. The first was to
apply for sanction for the sale to the plaintiffs of Sir land
without reservation of occupancy rights. This part of his
contract he duly performed. The second undertaking was that,
if sanction were granted, he would sell his share with
cultivating rights in Sir. No provision was made for the event of
sanction being applied for and refused. This part of the
contract was purely a contingent contract, and if the future
event provided for became impossible the contract fell
through. Sections 14 and 15 of the Specific Relief Act
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appear to me to refer to cases where the inability to
perform the whole contract was not contemplated by
the contracting parties. Where, as here, the contracting
parties knew of and contemplated the possibility of the
whole contract being incapable of performance, for
reasons beyond the control of either of the parties, the
sections have no application. They apply to unforeseen
contingencies, not to foreseen contingencies. The
parties should have provided in the contract for such an
eventuality, but failed to do so.
[Emphasis added]
In the present case, the terms of the contract fully indicate that
the parties did contemplate that if the sanction of the court was not
granted for transfer of the interest of the reversioners, the contract
could not be enforced. Clause (6) specifically provided that in case
sanction by the court was not granted, the advance money of Rs.
25,000/- shall be refunded to the purchaser. It was known to the
parties that the vendor had only life interest in the property and the
reversioners were not the parties to the agreement. Even with this
knowledge of limited right of the vendor and the reversioners
being not signatories to the sale agreement, there is no stipulation
made in the contract that if court's sanction was not obtained for
transfer of reversioners' interest, the vendor shall convey his life
interest to the vendee.
On behalf of the plaintiff- vendee, strong reliance was placed
on Suisse Atlant vs. N. V. Rotterdam [1966 (2) ALL. ER 61]. It
has been argued that seeking sanction of the court for transfer of
reversioner's interest was an obligation on the vendor and if it
deliberately acted in a manner to get relieved of that obligation by
not prosecuting sanction suit and prematurely terminating the
contract, the vendee has a right to waive that condition and ask for
transfer of life interest of the vendor which he could alienate to the
vendee. In other words, it is submitted that even if the clause
seeking sanction of the court was a fundamental term of the contract,
its breach was deliberately committed by the vendor and the
vendee was, therefore, entitled to insist on fulfilment of the contract
to the extent the vendor is in a position to fulfil.
We have gone through the opinions expressed by Hon'ble
Judges of the House of Lords in the case of Suisse Atlant (supra).
On the evidence, in the present, we do not find that the decision of
the House of Lords, can be taken aid of for claiming specific relief of
transfer of life interest. We have found from the evidence discussed
above that there was pressure on the property for recovery of taxes.
It was not expected or in contemplation, of the parties, as can be
gathered from the terms of the contract, to wait for an uncertain
period of time and to expose the property to coercive public recovery
proceedings. The vendor applied for sanction but the reversioners
had opposed. Finding, no possibility of grant of sanction, the vendor
terminated the contract but did not withdraw the sanction suit,
although his lawyer was instructed accordingly. We are, therefore,
not prepared to accept that the vendor had committed any breach
of the contract as has been sought to be urged on behalf of the
vendee. It is not possible to accept allegations of fraud, conspiracy
or bad faith on the part of the vendor for which there is no firm
foundation in the pleadings or the evidence led. In this respect, the
following observations of the Lord Reid in the House of Lords' decision
(supra) are pertinent :-
"I think that it would be open to the arbitrators to find that the
respondents had committed a fundamental or repudiatory
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breach. One way of looking at the matter would be to ask
whether the party in breach has by his breach produced a
situation fundamentally different from anything which the
parties could as reasonable men have contemplated when the
contract was made. Then one would have to ask not only what
had already happened but also what was likely to happen in
future. And there the fact that the breach was deliberate might
be of great importance".
Applying the above test to the terms of the contract and the
conduct of the parties under consideration before us, we do not find
that the parties had agreed to wait for the whole period during which
the suit for sanction was pending and till its finalisation including
appeal proceedings, if any. Such a course was not in contemplation of
the parties because the vendor had agreed that the vendee would
directly discharge the tax liabilities from the total amount of sale
consideration. It was not possible for the vendor to have waited
indefinitely for final orders on the suit for sanction when the
reversioners had objected to the sanction and there was remote
possibility of the grant of sanction in foreseeable near future.
It is argued that the Court could have granted sanction even
though the reversioners objected because there was threat of
coercive sale of the property for recovery of tax dues and taxes.
It would be purely in field of speculation as to what would have
actually happened had the vendor continued to prosecute the suit
despite the objection of the reversioners. As we have mentioned
above the complications in disposal of sanction suit on merit were
created by the vendee himself by getting himself transposed as co-
plaintiff and then filing an affidavit restricting his claim to transfer of
life interest. It is, thereafter, that the sanction suit was dismissed as
infructuous. If the order of the court refusing sanction was erroneous
and when an appeal was filed by the subsequent vendee against
grant of decree of specific performance of life interest to the
vendee, the vendee could have appealed against dismissal of suit
for sanction as infructuous. It is argued that the two suits were
clubbed for trial and as the lesser relief of transfer of life interest was
granted in suit for specific performance, it was not necessary for the
vendee to have appealed against dismissal of the sanction suit. We
need not deal with this argument any further, as in our view, as the
sanction was not granted for sale by the court within a reasonable
period of two years and the possibility of commencement of coercive
proceedings of tax recovery loomed large, the vendor cannot be held
to have committed a breach of the contract when he served a notice
of termination of contract.
On behalf of the vendee, reliance is heavily placed on
Satyabrata Ghose vs. Mugneeram Bangur & Co. [1954 SCR
310]. The decision is distinguishable. In that case, the defendant
company for the purpose of developing certain land, entered into the
contract with plaintiff for sale of its plot. The sale-deed was to be
executed after construction of drains and roads. After the execution
of the agreement and when construction of public roads and drains
was half done, the land was requisitioned by the government for
military purposes. The defendant company could not further
undertake the road construction work and therefore, wrote to the
plaintiff to treat agreement as cancelled. It is on these facts that this
court held :-
"that having regard to the nature and terms of the contract,
the actual existence of war conditions at the time when it was
entered into, the extent of the work involved in the scheme
fixing no time limit in the agreement for the construction of the
roads etc., and the fact that the order of requisition was in its
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very nature of a temporary character, the requisition did not
affect the fundamental basis of the contract; nor did the
performance of the contract become illegal by reason of the
requisition, and the contract had not, therefore, become
impossible within the meaning of section 56 of the Indian
Contract Act."
Such is not the position in the present case. The vendor could
not have waited indefinitely for the final result of the sanction suit as
coercive proceedings for recovery of tax were likely to be initiated at
any time. We have held above that reasonable period for obtaining
sanction from the court has to be read as an implied condition of the
contract in view of the urgent necessity of sale to satisfy the tax dues
and save the property from coercive recovery. The vendor had
agreed for transfer of full interest in the property including his own
life interest and of the reversioners. As the reversioners
objected and ultimately the sanction suit failed, the performance of
contract, as agreed for transfer of full interest in the property, had
become impossible. There was no agreement between the parties
that if sanction was not granted, the vendor would transfer his life
interest. On the contrary, the agreement clause specifically stated
that if the sanction was not obtained, the advance money shall be
returned. This stipulation shows an intention contrary to the parties
agreeing for transfer of life interest of vendor, if transfer of
reversioners' interest was not possible for want of court's sanction.
Another argument advanced is that the reversioners had
merely a chance of succession and had no transferable interest in
the property. Reference is made to section 6(a) of the Transfer of
Property Act which states :-
"6.What may be transferred.-Property of any kind may be
transferred, except as otherwise provided by this Act or by any
other law for the time being in force, -
(a) The chance of an heir-apparent succeeding to an estate,
the chance of a relation obtaining a legacy on the death of a
kinsman, or any other mere possibility of a like nature, cannot
be transferred."
Elaborating this argument further, it is argued that as the
vendor erroneously represented and agreed for transfer of spes
successionis of the reversioners, on the principle of section 43 of
the Transfer of Property Act read with sections 90, 91 & 92 of the
Indian Trusts Act, the vendor, the subsequent vendee and the
reversioners, who have surrendered whatever right they had in the
property, are bound by estoppel and are obliged in law by the
provisions of Specific Relief Act to transfer full interest in the property
to the prior vendee. Reliance is placed on The Humma Masjid vs.
Kodimaniandra Deviah [1962 Supp.(2) SCR 554].
The above argument has no merit and the aforesaid decision is
hardly of any help to the vendee. This is not a case where the
vendor had only right of spes successionis and after execution of
agreement of sale, he subsequently acquired full interest in the
property to be held bound by section 43 of the Transfer of Property
Act. In the case before us, the reversioners were not parties to the
agreement of sale. When in the suit for sanction to transfer their
interest they were made parties and were noticed, they expressly
objected to the proposed transfer. No principle of estoppel or
provisions of section 43 of the Transfer of Property Act can,
therefore, operate against them. So far as the subsequent vendee
is concerned, in the course of suit, he was pushed to a position in
which he could not take a stand that he had no knowledge of the
prior agreement with the vendee but he has separately purchased
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life interest from the vendor and obtained separate release deeds,
on payment of consideration, from the reversioners. The
reversioners being not parties to the sale agreement Ex. P-1
entered into with the vendee, the latter could not enforce the
contract Ex. P-1 against the former.
The decision in Dr. Jiwanlal & Ors. vs. Brij Mohan Mehra &
Anr. [1972 (2) SCC 757] is also distinguishable on the facts of that
case. There clauses (5) & (6) of the agreement provided for
execution of sale-deed within three months from the date the
premises agreed to be sold were vacated by the Income-Tax
Authorities . It was further provided that if the income-tax authorities
did not vacate the premises or they stood requisitioned by the
Government before registration of sale-deed - the vendor shall
refund the consideration to the purchaser. As the premises were
requisitioned by the government, the stand taken by the vendor
was that it was contingent contract and on requisition of the
premises, the contract failed. On the evidence of the parties, the
finding reached was that the vendor had manipulated requisition of
the premises. This Court, therefore, in appeal held that the contract
did not provide that the sale would be effected only if the premises
remain non-requisitioned or that on requisition of the premises, the
contract would come to an end. The clause providing for refund of
consideration if the premises were not vacated by the income-tax
authorities or subsequently requisitioned by the government was
held to be solely for the benefit of the vendee. It was held that if
the vendor manipulated the requisition, the vendee could waive
that condition and insist on sale of premises in the condition of it
having been requisitioned.
In the case before us, we have not found that the vendor was
guilty of rendering the suit for sanction infructuous. It did terminate
the contract pending the suit for sanction but never withdrew that
suit. The vendee himself prosecuted it and rendered it infructuous
by his own filing of an affidavit giving up his claim for the interest of
reversioners. In such a situation where the vendor was not in any
manner guilty of not obtaining the sanction and the clause of the
contract requiring court's sanction for conveyance of full interest,
being for the benefit of both the parties, the contract had been
rendered unenforceable with the dismissal of the sanction suit.
Where the clause requiring obtaining of sanction was to protect
interest of both the parties and when the sanction could not be
obtained for reasons beyond the control of the parties, the contract
cannot be directed to be specifically enforced. House of Lords in the
case of New Zealand Shipping Co. Ltd. vs. Societe Des Ateliers
Et. Chantiers De France [1918-19 All ER 552], in similar
circumstances, negatived the claim of specific performance. It was
held in that case that where two parties are equally blameless and
none of them could be said to have brought about a situation by their
act or omission to frustrate the contact, the contract cannot be
directed to be specifically enforced.
On behalf of the vendee, support for his claim was sought
from the following observations of Lord Atkinson :-
"The application to contracts such as these of the principle that
a man shall not be permitted to take advantage of his own
wrong thus necessarily leaves to the blameless party an option
whether he will or will not insist on the stipulation that the
contract shall be void on the happening of the named event.
To deprive him of that option would be but to effectuate the
purpose of the blameable party. When this option is left to the
blameless party it is said that the contract is voidance, but
that is only another way of saying that the blameable party
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cannot have the contract made void himself, cannot force the
other party to do so, and cannot deprive the latter of his right
to do so. Of course the parties may expressly or impliedly
stipulate that the contract shall be voidance at the option of
any party to it. I am not dealing with such a case as that. It
may well be that question whether the particular event upon
the happening of which the contract is to be void was brought
about by the act or omission of either party to it may involve a
determination of a question of fact.
As has been observed by Lord Atkinson, it is always a
question of fact to be determined in each case as to who is guilty of
the act or omission to render the contract void or unenforceable. In
the case of New Zealand Shipping Co. Ltd. (supra) on facts the
ultimate conclusion reached unanimously by their Lordships was that
the clause of the contract in that case, was a stipulation in favour of
both the parties and the situation was not brought about by any of
the parties to give rise to avoidance. It was found that the failure to
fulfil the contract was not due to any fault on the part of the
respondents but was due to a cause beyond their control.
In the present case also, we have come to conclusion that
the vendor waited for a reasonable period for grant of sanction to
the sale by the court. There was a pressing need for sale as the
public dues and taxes could have been recovered from the property
by coercive process at any time. The vendor, therefore, advisedly
withdrew from the contract, negotiated sale on different terms with
the subsequent vendee and ultimately entered into the contract
with the latter. The vendor did not actually withdraw the suit for
sanction. The vendee himself became co-plaintiff to the suit and
unsuccessfully tried to prosecute it. The sanction suit was rendered
infructuous by vendee's own conduct of filing affidavit restricting his
claim to life interest. He suffered the dismissal of sanction suit as
infructuous and did not question the correctness of the court's order
in appeal before the Division Bench, although the subsequent
vendee, against grant of decree of specific performance of life
interest, had preferred an appeal.
In this situation, even if we come to a conclusion that the
vendee had rightly tried his utmost to obtain court's sanction and
cannot be blamed for transposing him as a co-plaintiff and
prosecuting the sanction suit, the sanction sought could not be
obtained for reasons beyond the control of the parties. The vendor
can not be held guilty of the breach as to entitle the vendee to seek
specific performance of life interest of the vendor. The contract
entered into between the parties was for conveying full interest in the
property namely life interest of vendor and chance of succession of
reversioners. The contract was one and indivisible for full interest.
There is no stipulation in the contract that if sanction was not
obtained, the vendor would transfer only his life interest for the
same or lesser consideration. On the contrary, the contract stipulated
that if the sanction was not granted, the contract shall stand
cancelled and the advance money would be refunded to the
purchaser.
Lastly, the stage has arrived for considering the question of
adjustment of equities between the parties because of the change of
positions by them in the course of a very long period of litigation.
The decree for specific relief of conveyance of life interest, has been
executed and registered sale deed through the court in favour of the
vendee has also been issued. Possession of the property has been
obtained by the vendee on execution of decree granted by the single
judge of the High Court. The Division Bench of the High Court in
adjusting the equities in paragraphs 62 to 68 of its judgment has
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taken note of the above relevant facts and subsequent events.
After execution of the decree and registered sale-deed the
vendee plaintiff was placed in possession of the property on
25.2.1995. The basement and ground floor have been constructed
by the subsequent vendee after obtaining possession on the basis
of his sale deed. Thereafter plaintiff- vendee, on obtaining
possession pursuant to the execution of decree granted by the
learned single judge, has constructed two floors above the ground
floor although the construction is said to be not complete in all
respects. According to the plaintiff- vendee, he has incurred an
expenditure of Rs.46,28,403/- for construction of two floors above
the ground floor. As the construction put up by the plaintiff- vendee
is to ensure for the benefit of the subsequent vendee, and the
latter having succeeded in appeal before the Division Bench of the
High Court, the Division Bench in adjusting equities has directed that
on payment of construction cost incurred by the plaintiff- vendee for
two floors above ground floor, the whole construction will become
the sole property of the subsequent vendee.
From the date of the impugned judgment of the Division Bench
the total rent received from the property has been accounted for.
The whole rental income has been directed to be paid to the
successful party i.e. the subsequent vendee. Out of the total rental
income payable to the subsequent vendee, apart from adjusting
the construction cost incurred by the plaintiff- vendee, deduction has
been directed towards return of the sale consideration of Rs.5.5 lacs
paid under the sale agreement Ex. P-I A further sum of Rs.5.5 lacs
has been directed to be deducted for the misconduct of the
subsequent vendee in trying to mislead the court that Bob Daswani
and F.C. Daswani were two different persons and the subsequent
vendees had no knowledge of the prior agreement.
On the principle of restitution contained in Section 144 of the
Code of Civil Procedure, we find no ground to interfere with the order
of the Division Bench of the High Court in directing adjustment and
payment by subsequent vendee of the cost of construction
incurred by the plaintiff vendee. The directions for return of full
sale consideration as also deduction towards misconduct of
impersonation and misleading the Court also deserve no interference.
We maintain the directions of the Division Bench of the High
Court to deduct a sum of Rs.5.5 lakhs for the alleged misconduct of
impersonation and misleading the Court. The Civil Appeal No.336 of
2002 preferred by the subsequent vendees only against the above
impugned directions deserves to be dismissed.
During pendency of these appeals, various interim orders were
passed by this Court on 27.8.2001, 11.1.2002 and 17.2.2003. In
pursuance of those orders, rental income derived from the property
has been collected and paid to the subsequent vendee, subject to
the result of these appeals. Learned counsel appearing for the
subsequent vendee, at the conclusion of the arguments, has
handed over to this Court a chart mentioning the figures of total rent
received up to February 2004 and separately shown the amount
deposited in the Court. The figures submitted in the chart by the
subsequent vendees are open to verification by the prior vendee.
With dismissal of these appeals, we confirm the judgment of Division
Bench of the High Court including the directions made to adjust
equities with regard to the construction cost and the rental income
derived from the suit property.
In the result, both the appeals are dismissed. In the
circumstances, we direct the parties to bear their own costs in these
appeals.
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