Delhi High Court
Ms. Promilla Sethi & Ors. vs Sh. Inder Narain & Ors. on 24 December, 2010
Author: Mukta Gupta
Bench: Vikramajit Sen, Mukta Gupta
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ RFA No. 13/1975 & CM No. 14908/2009
% Reserved on: 16th September, 2010
Decided on: 24th December, 2010
Ms. Promilla Sethi & Ors. ..... Appellants
Through: Mr. Sanat Kumar with Ms. Poonam
Gulia, Advocates
Versus
Sh. Inder Narain & Ors. ..... Respondents
Through: Mr. R. Nanavaty and Mr. Mayank,
Advocates for R-6.
Mr. B.S. Banerjee, Advocate for R-7/Mr.
Vishnu Swaroop Bhatnagar
Mr. Anzar Hussain, Advocate for R-8/
Mr. Brahma Swaroop Bhatnagar
Coram:
HON'BLE MR. JUSTICE VIKRAMAJIT SEN
HON'BLE MS. JUSTICE MUKTA GUPTA
1. Whether the Reporters of local papers may
be allowed to see the judgment? Not necessary
2. To be referred to Reporter or not? Yes
3. Whether the judgment should be reported
in the Digest? Yes
MUKTA GUPTA, J.
Non performance of a 44 year old agreement resulting in filing of the suit and the present appeal has witnessed not only the original contracting parties but members of their next generations also expire, and thus, this Appeal has been flooded with endless applications for substitution of legal heirs of both the Appellants and the Respondents. The delay not only led to RFA No. 13/1975 Page 1 of 34 the legal heirs being substituted but also the Appellants assigning their rights to a third party in the present appeal against the impugned judgment and decree dated 3rd October, 1974 passed by a learned Single Judge of this Court.
Brief facts relevant to the present appeal are that on 30th May/2nd June, 1966, Ram Lal Anand (hereinafter called "the vendor") entered into an agreement with one Keshav Swarup Bhatnagar (hereinafter called "the vendee") for the sale of his house No. 4-D, Ata-ur-Rehman Lane, Underhill Road, Delhi for a sum of `3,55,000/-. A sum of `30,000/- by way of cheque was paid as earnest money and the balance was to be paid at the time of registration of the sale deed or before by mutual agreement. The relevant portions of the agreement to sell Ex. P-203, entered into between the parties are:-
"WHEREBY the parties hereby mutually agreed as under:-
1) The Vendor will sell that the purchaser will buy all that is denoted by Municipal No. 4-D Ata-ur-Rehman Lane, more fully described in the schedule annexed hereto with all the rights belonging or appurtenant thereto.
2) The sale will be free from all encumbrances.
3) That the vendor will procure the willingness and acceptance of his two sons or any other claimant regarding the gift of a portion of open land of the house said to have been executed in their favour of which the possession has not been given.
4) The price will be Rs. Three lacs and fifty five thousand only of which Rs.30,000/- (Rupees thirty thousand) has been paid by way of earnest money through cheque No. D-48931 dated 2-6-1966 on the Mercantile Bank Ltd., Chandni Chowk, Delhi to the Vendor (receipt of which sum the vendor hereby RFA No. 13/1975 Page 2 of 34 acknowledges) and the balance shall be paid at the time of the registration of the registration of the sale deed or before by mutual agreement by means of a bank draft or pay order payable at any scheduled bank at Delhi.
5) The Vendor has furnished the purchaser with full particulars of his title and possession. The demised property originally belonged to one Sheikh Sultan Ahmad Japanwala who conveyed it by a deed of sale dated 20th October, 1947 to R.B. Madho Prasad s/o Late R.B. Hardian Singh of Delhi; R.B. Madho Prasad thereafter in his turn sold the demised property to the Vendor's wife by means of a deed of sale dated 12th June, 1950 registered as No. 1949 in book No.1 volume No. 2613 at pages 376 to 386. On first June 1950 the vendor alongwith his wife and family entered into possession of the demised property in pursuance of the said deed of sale. The demised property was purchased in the name of Shrimati Virawali wife of the Vendor who has since died. Property, however, always belonged to the vendor, a fact which is confirmed by the decree of the Civil court of which a true copy is enclosed.
6) The present position as regards portions in personal possession and occupation of the Vendor and other persons is represented to be as follows:-
a) M/s Har Narain Gopi Nath as tenant in possession of
2 Garrages, 2 Bed Rooms and one drawing/dining room togetherwith 3 servants quarters at Rs.425/- per month as rent on a monthly tenancy as also a dressing room, extra room and two bath rooms.
b) Mr. Parkash Chandra Jain as tenant in possession of 3 rooms and a gallery alongwith two servants quarters at Rs.465/- per month as rent as also a dressing room, one extra room and a bath room.
c) Shri Pyare Lal son of Shri Bakshi Ram tenant in possession of annexe at Rs.165/- per month.
d) Nine servant quarters out of a total of 14 are in possession of licensees whose particulars appear below:-
Name of Licensees No. of Qr. Rent p.m.
1) Sh: Jagan Nath 2 Rs.35/-
2) Sh: Jai Ram 1 Rs.22/-
3) Sh: Khushali 2 Rs.34/-
RFA No. 13/1975 Page 3 of 34
4) Sh: Bhagwati 1 Rs.15/-
5) Sh: Sultan 1 Rs.25/-
6) Sh: Mohan 1 Rs.18/-
7) Railway Clerk (Sh: Puran Chand) 1 Rs.30/-
Rs.179/-
e) The vendor himself is in possession of 11 rooms, 2
bath rooms together with the court compound and a gali with two servant quarters. All the lawns in the house in addition to a motor garage and a room near the motor garage (the circular room).
6) The Vendor undertakes to get proper attornment in favour of the purchaser by the tenants and the licensees before the execution of the sale deed and shall deliver them to the purchaser at the time of execution. The vendor further undertakes to deliver vacant possession of the portion in his personal possession at the time of the execution of the deed.
7) The property is believed and shall be taken to be correctly described and is sold subject to all outgoing easements restrictions and rights affecting the same and if any error, mis- statement or omission shall be discovered the same shall not annul the sale but the vendee shall be allowed compensation in respect thereof by vendor at the current market rate.
8) In case of the breach of agreement to sell on the part of the vendor the purchaser shall have the right to enforce all remedies available to him in law including the right to claim specific performance of this agreement.
9) The purchase shall be completed within three months by the purchaser paying the balance of the price and the vendor executing the sale deed.
10) All expenses for preparation of the sale deed and the cost of stamp and registration charges shall be borne by the purchaser.
11) That the Vendor will not let out any portion of the building vacated by any tenant till the period granted to the vendee for purchaser of the property.
RFA No. 13/1975 Page 4 of 34
12) All rents, license fees, etc. due from the tenants or licensees shall be payable to the purchaser after the date of execution of the sale deed. All taxes and other charges of any kind payable by the vendor shall be paid by him as they are found due till the date of the execution of the sale deed. In case those charges are found not to have been paid, the purchaser shall be entitled to pay them and claim to be reimbursed by the vendor.
13) The title to the demised property shall pass to the purchaser on payment of the balance of the price and the execution of the sale deed by the vendor.
14) The vendor shall apply to the purchaser for payment of all expenses for preparation of the sale deed, fifteen days before the date of execution, i.e. 31st August, 1966. The purchaser shall purchase the requisite stamp paper and get the sale deed prepared after having got the draft sale-deed approved by the vendor. The registration charges shall be paid by the purchaser at the time of the registration.
15) The sale deed duly prepared shall be sent to the vendor 3 days before the due date and the vendor shall make all necessary arrangements for the proper execution of the sale deed on the due date.
16) The parties have been brought together through Shri R.P. Bhardwaj, property dealer. Each party will pay 2% as commission to the property dealers.
In witness whereof the parties set their hands on the date hereby specified."
On 4th July, 1966 by way of mutual oral agreement between the vendor and vendee, the vendor delivered vacant possession of all that portion which was in his exclusive possession on a further payment of `1,70,000/- by means of bank draft bearing No. 029003 of even date drawn on the Central Bank of India Ltd, Kashmiri Gate, Delhi. The factum of delivery of possession and receipt of `1,70,000/- was duly acknowledged by RFA No. 13/1975 Page 5 of 34 the vendor vide his letter dated 29th June, 1966 Ex. P-4. The letter also stated about attaching plan forms duly signed by the vendor for transfer of water, electricity, power and lighting connections in favour of the vendee by the concerned authorities after registration of the documents for the sale. Since the vendee was to prepare the draft sale deed, on 26th August, 1966, the vendee sent a draft sale deed to the vendor in terms of the agreement for his approval to which the vendor returned back on 28th August, 1966 stating that "It was replete with deliberate lies" and asking the vendee to sign each page of the draft sale deed. The letter by the vendee dated 26th August, 1966 also stated that as soon as the draft is approved, he shall purchase necessary stamps and take account of other essential steps to get the sale deed executed and registered. The vendee sent back the same on 29th August, 1966, after signing each page of the draft, though objecting to the language used by the vendor.
The dispute between the parties was with regard to the clause mentioned below for the reason that prior to entering into the agreement to sell with the vendee, the vendor had prepared two gift deeds of two small portions of the property i.e., 425 Sq yards and 38' X 100' respectively in favour of his two sons - S.N. Anand and Krishan Kumar Anand respectively. Clause 3 of the Agreement to Sell dated 2nd June, 1966 Ex. P-203 stipulated that the vendor will procure willingness and acceptance of his two sons or any other claimant regarding the gift of the portion of the open land of the RFA No. 13/1975 Page 6 of 34 house and that the possession of these portions of the property had not been given. The relevant clause of the draft sale deed reads:-
"It may, however, be mentioned that the Vendor had executed two deeds of rights in respect of certain portions of this property in favour of his two sons (1) Shri Surinder Nath Anand and (2) Shri Krishan Lal Anand. The gifts were however never completed and did not materialize. The possession was never delivered to the donees under the gift and it has continued to be with the vendor. No title in the property passed to the Donees. For the satisfaction of the PURCHASER the donees have signed this document admitting the said fact to be correct and agreed to be bound by this Deed and they have no objection to the sale deed."
The parties exchanged letters in between and on 4th/8th October, 1966, the vendor wrote a letter Ex. P-26 to the vendee asking him to submit a proper draft sale deed in consonance with the terms of agreement dated 2 nd June, 1966 together with remittance of `1,55,000/- by a draft of an approved bank within a fortnight and if he failed to do so, the agreement shall be deemed to have been cancelled. On 5th November, 1966, the vendor wrote a letter to the vendee stating that the agreement dated 2nd June, 1966 stands rescinded and that he could treat the vendee as a tenant of the rooms vacated by him on 15th June, 1966 and occupied by the vendee. On 23rd November, 1966, the vendor died.
On 1st September, 1968, the Appellant/vendee filed the suit being Suit No. 92/1968 against the legal heirs of the vendor inter alia seeking specific performance of the agreement dated 2nd June, 1966, part performance in case the court finds that a portion of the property had been given by way of RFA No. 13/1975 Page 7 of 34 gift to the defendant Nos. 1 and 2 in respect of which the defendants are unable to perform the whole of the vendor's part under the contract and compensation in money for such deficiency.
In the suit after adducing of evidence, vide the impugned judgment, the learned Single Judge held that the two gift deeds by the vendor in favour of his two sons admeasuring 425 sq. yards and 38' X 100' in the name of S.N. Anand and Krishan Kumar Anand respectively were the gifted properties and they were the absolute owners thereof. It was held that in view of the Plan Ex. DW1/9, the gifted properties were separate and independent from the main bungalow and thus, the vendee was not entitled to the specific performance of the said portions. With regard to the remaining portion of the 5,700 sq yards after excluding the gifted portion, it was held that Sections 12(2) and 12(3) of the Specific Relief Act were applicable and the vendee was entitled to the specific performance of that part of the contract which the vendor was capable of performing reduced by the consideration for the part, specific performance of which cannot be performed. In the gift deeds the properties were valued at `16,900/- The findings of the learned Single Judge on the issues were:-
"1. That there was a concluded contract between Ram Lal Anand and the plaintiff dated 30th May/2nd June, 1966 to sell his kothi bearing municipal No.4-D Ata-ur-Rehman Lane.
2. That Ram Lal Anand had committed breach of agreement.RFA No. 13/1975 Page 8 of 34
3. That there was no modification of the terms of the agreement dated 30th May/2nd June, 1966 subsequent to the execution of the agreement.
4. That the plaintiff was always willing and ready to perform his part of the agreement.
5. That defendants 1 to 7 are heirs of the estate of the deceased Ram Lal Anand and are competent to represent the estate of the deceased.
My answer to the second part of Issue No.5 is that the defendants have a right to contest the suit.
6. That the agreement to sell was complete. No argument was addressed on Issue No.6 on behalf of the defendants.
7. That the agreement in question is not a contingent contract.
8. That the plaintiff is not estopped from questioning the factum, validity or the effect of the gifts alleged to have been made by Ram Lal Anand in favour of defendants No. 1 & 2.
9. That Ram Lal Anand had made valid gifts in favour of his sons, defendants 1 and 2, and they are competent to set up those gifts against the plaintiff in the suit.
10. The possession of the plaintiff of part of the house in dispute is not as a lessee or licensee. He is in possession of the house in his own right under the agreement dated 2.6.1966 as modified by the subsequent oral agreement and evidenced by Exhibit P-10 dated 15th June, 1966.
11. No argument was addressed on Issue No. 12 and it is decided against the defendants.
12. That the plaintiff was aware of the gifts Ex. D2 and Ex.
DW1/1 made in favour of defendants No. 1 and 2 when he entered into the agreement of sale and the gifts are binding on the plaintiff.
13. That Ram Lal Anand was not competent to enter into the agreement dated 30th May/2nd June, 1966 in regard to the gifted properties.
14. No finding need be recorded on Issue No.11, 13 and 16 in view of my findings on the other issues."RFA No. 13/1975 Page 9 of 34
Aggrieved by the impugned order, both the sides i.e., the legal heirs of the vendor and the vendee filed two appeals being RFA Nos. 13/1975 and 17/1975 titled as Promila Sethi & Ors. vs Inder Narain & Ors., and Keshav Swarup Bhatnagar vs Surinder Nath Anand & Ors. Both the appeals were taken up for hearing together however, the legal heirs of K.S. Bhatnagar who had been substituted withdrew the said appeal. Thus RFA No. 17/1975 was dismissed as withdrawn on 14th September, 2010.
During the pendency of the present appeal, one M/s Drishtikon Properties Pvt. Ltd. has filed an application CM No. 14908/2009 under Order XXII Rule 10 read with Section 151 CPC praying substitution as Appellants since the legal representatives of the vendor vide Agreement to Sell dated 6th February, 2005 and General Power of Attorney dated 8th April, 2005 have already transferred and conveyed all their rights, claims, interests, obligations etc in the suit property in favour of the applicant. Vide order dated 21st April, 2010, this Court had directed this application to be heard and disposed of along with the Appeal. As Order XXII Rule 10 CPC permits assignment, creation or devolution of any interest during the pendency of the suit and by the leave of the court, the suit may then be continued by or against the person to or upon whom such interest has come or devolved and also in view of the fact that on 15th September, 2010, learned counsels for the Respondents, on instruction from their clients, RFA No. 13/1975 Page 10 of 34 stated that they do not oppose this application, the Application is allowed. M/s Drishtikon Properties Pvt. Ltd. is substituted as Appellant in the present appeal.
The issues which arise for consideration in the present appeal are:-
1. Whether there was a concluded contract between the parties.
2. In case the same was a concluded contract, was it a contingent contract?
3. Was there any breach of the terms of agreement by the vendee?
4. Whether the conduct of the plaintiff showed readiness and willingness on his part to perform the contract?
5. Whether the Respondents have elected not to accept part performance and thus cannot seek enforcement of part of the agreement?
6. Whether the court could have granted specific performance of a part of the contract?
7. Whether in view of the changed circumstances immense hardship would be caused to the Appellants and thus the contract should be avoided?
Issue No. 1: Whether there was a concluded contract between the parties?
It is contended by the learned counsel for the Appellant that there was no concluded contract and the same would have been so only on RFA No. 13/1975 Page 11 of 34 execution of the sale deed which was never executed due to the default on the part of the vendee. Despite repeatedly disapproving the draft, the vendee did not send an appropriate draft sale deed in terms of the agreement to sell. The objections raised by the vendor were bona fide as the gift deeds had already been executed by the vendor in favour of his sons for two portions of the suit property. Vide letter dated 5th November, 1966 Ex. P-29, the agreement was rescinded by the vendor. Since it was not a concluded contract, thus, it is not enforceable in law. Reliance is placed on M.V. Shankar Bhat and Anr. v. Claude Pinto (D) by LRs. and Ors AIR 2004 SC 636.
On the other hand, learned counsels for the Respondents submit that the entire suit property was admeasuring 5700 sq yards of which only a small portion of about 850 sq yards was gifted which even according to the learned trial Judge was clearly identifiable and separable, and in view of the fact that substantial amount of money i.e. `2,00,000/- out of the sale consideration of `3,55,000/- had been paid to the vendor and possession of 11 rooms handed over to the vendee, thus it was a concluded contract. The letter of the vendor dated 5th November, 1966 was meaningless as not only was the contract concluded but was acted upon also and thus, could not have been rescinded.
In Kollipara Sriramulu v. T.Aswathanarayana and Ors., AIR 1968 SC 1028 the Hon'ble Supreme Court held:-
RFA No. 13/1975 Page 12 of 34
"3. We proceed to consider the next question raised in these appeals, namely whether the oral agreement was ineffective because the parties contemplated the execution of a formal document or because the mode of payment of the purchase money was not actually agreed upon. It was submitted on behalf of the Appellant that there was no contract because the sale was conditional upon a regular agreement being executed and so such agreement was executed. We do not accept this argument as correct. It is well-established that a mere reference to a future formal contract will not prevent a binding bargain between the parties. The fact that the parties refer to the preparation of an agreement by which the terms agreed upon are to be put in a more formal shape does not prevent the existence of a binding contract. There are, however, cases where the reference to a future contract is made in such terms as to show that the parties did not intend to be bound until a formal contract is signed. The question depends upon the intention of the parties and the special circumstances of each particular case. As observed by the Lord Chancellor (Lord Cranworth) in Ridgway v. Wharton 6 H.L.C. 238 the fact of a subsequent agreement being prepared may be evidence that the previous negotiations did not amount to a concluded agreement, but the mere fact that persons wish to have a formal agreement drawn up does not establish the proposition that they cannot be bound by a previous agreement In Von Hatzfeldt-Wildenburg v. Alexander [1921] 1 Ch. 284 it was stated by Parker, J. as follows:
"It appears to be well settled by the authorities that if the documents or letters relied on as constituting a contract contemplate the execution of a further contract between the parties, it is a question of construction whether the execution of the further contract is a condition or term of the bargain or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will in fact go through. In the former case there is no enforceable contract either because the condition is unfulfilled or because the law does not recognize a contract to enter into a contract. In the latter case there is a binding contract and the reference to the more formal document may be ignored."
4. In other words, there may be a case where the signing of a further formal agreement is made a condition or term of the bargain, and if the formal agreement is not approved and signed there is no concluded contract. In Rassier v. Miller 3 A.C. 1124 Lord Cairns said:
RFA No. 13/1975 Page 13 of 34
"If you find not an unqualified acceptance subject to the condition that an agreement is to be prepared and agreed upon between the parties, and until that condition is fulfilled no contract is to arise then you cannot find a concluded contract."
5. In Currimbhoy and Company Ltd. v. Creet 60 I.A. 297 the Judicial Committee expressed the view that the principle of the English law which is summarised in the judgment of Parker, J. in Van Hatzfeldt- Wildenburg v. Alexander [1912] 1 Ch. 284 was be applicable in India. The question in the present appeals is whether the execution if a formal agreement was intended to be a condition of the bargain dated July 6, 1952 or whether it was a mere expression of the desire of the parties for a formal agreement which can be ignored. The evidence adduced on behalf of Respondent No. 1 does not show that the drawing up of a written agreement was a pre-requisite to the coming into effect of the oral agreement. It is therefore not possible to accept the contention of the Appellant that the oral agreement was ineffective in law because there is no execution of any formal written document. As regards the other point, it is true that there is no specific agreement with regard to the mode of payment but this does not necessarily make the agreement ineffective. The mere omission to settle the mode of payment does not affect the completeness of the contract because the vital terms of the contract like the price and area of the land and time for completion of the sale were all fixed. We accordingly hold that Mr. Gokhale is unable to make good his argument on this aspect of the case."
In view of the ratio of Kollipara (Supra) we find no merit in the contention of learned counsel for the Appellant that since no final sale deed was executed there was no concluded contract. In the case at hand not only was the agreement dated 2nd June 1966 Ex. P-203 a concluded contract, but had also been substantially acted upon as out of the sale consideration of `3,55,000/- a substantial sum of `2,00,000/- had been paid and the vendor had handed over the possession of major portion of the suit property to the vendee. Reliance placed on M.V.Shankar Bhat (Supra) by the learned RFA No. 13/1975 Page 14 of 34 counsel for the Appellant is misconceived and untenable. In M.V. Shankar the relevant clause in the agreement to sale clearly stated that the executor agreed to convey the property described in the schedule subject to notification by the co-heirs to terms therein after appearing. While interpreting the said clause it was held that the agreement entered into was subject to notification by others and thus a concluded contract had not been arrived at.
Issue No. 2: In case the same was a concluded contract, was it a contingent contract?
Learned counsel for the Appellants contends that the vendor had got registered gift deeds in favour of his two sons - S.N. Anand and K.K. Anand Ex. D2 and Ex. DW1/1 respectively by virtue of which nearly 850 sq. yards of the suit property was given to them. Thus, the agreement dated 2nd June, 1966 was a contingent contract as the agreement was subject to procuring the consent of the vendor's two sons or any other claimants in favour of whom the gift deeds were executed and part of the property had been transferred. Since the consent of the two sons was not obtained at the time of the agreement to sell and the vendor was not the owner of the entire property thus, the agreement to sell dated 2nd June, 1966 was a contingent contract. In view of the contingency having not been fulfilled, it was a void contract and thus, not specifically enforceable. It is contended that the learned Single Judge held the two gift deeds to be valid and having withdrawn the appeal against the said finding and judgment this issue RFA No. 13/1975 Page 15 of 34 remains unassailable. Reliance is placed on Dalsukh M.Pancholi v. The Guarantee Life and Employment Insurance Co. Ltd. and others, AIR (34) 1947 PC 182; Gian Chand v. Gopala & Ors., 1995 (2) SCC 528 and Govinda Naicken and another v. Apathsaharya Iyer alias Ayawaiyer, ILR (1914) 37 Mad. 403.
Learned counsels for the Respondents contend that the agreement dated 2nd June, 1966 was not subject to clause 3 of Ex. P-203 reproduced above. This fact was not pleaded though this issue was framed by the learned trial court. The agreement to sell nowhere states that the agreement was subject to the consent of the sons, in whose favour the gift deeds were executed, and thus, it was not a contingent contract.
In Dalsukh M.Pancholi (supra) the relevant clause of the contract clearly stated "subject to the approval of the Court" and thus it was held that even if the contract was a concluded one, it was contingent on the approval of the Court. In Gian Chand (supra) the Court held the contract in question to be based on uncertain future events besides being a case of suppression of fact and in view of the notification being issued under Section 6 of the Land Acquisition Act the contract became impossible of performance and thus was frustrated. In Govinda Naicken (supra) the agreement to sell was executed by the Defendant alone who stated in the document itself that the lands were being enjoyed in equal shares by the Defendant and his divided elder brother and that they had been purchased RFA No. 13/1975 Page 16 of 34 out of the money belonging to them severally. The Court observed that the Plaintiff in the said case wanted 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 to make what he can out of the title thus conveyed. The Court held such a request to be inadmissible and observed that the defendant therein had nothing which was capable of transferring in the moiety of the property of which he is not the owner and is not in possession and it was 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. Thus, the decisions relied upon by the Appellant are of no avail in the facts of the present case.
In Mrs. Chandnee Widya Vati Madden, v. Dr. C.L.Katial and others, AIR 1964 SC 978 the Hon'ble Supreme Court held:-
"3. The High Court on appeal came to the conclusion that the agreement was a completed contract for sale of the house in question, subject to the sanction of the Chief Commissioner before the sale transaction could be concluded, but that the Trial Court was in error in holding that the agreement was inchoate, and that, therefore, no decree for specific performance of the contract could be granted. The High Court relied mainly on the decision of their Lordships of the Judicial Committee of the Privy Council in Motilal v. Nanhelal, 57 Ind App 333 : (AIR 1930 PC 287) for coming to the conclusion that there was a completed contract between the parties and that the condition in the agreement that the vendor would obtain the sanction of the Chief Commissioner to the transaction of sale did not render the contract incomplete. In pursuance of that term in the agreement, the vendor had to obtain the sanction to the Chief Commissioner and as she had withdrawn her application for the necessary sanction, she was to blame for not having carried out her part of the contract. She had to make an RFA No. 13/1975 Page 17 of 34 application for the necessary permission. The High Court also pointed out that if the Chief Commissioner ultimately refused to grant the sanction to the sale, the plaintiff may not be able to enforce the decree for specific performance of the contract but that was no bar to the Court passing a decree for that relief. Though it was not necessary in the view the High Court took of the rights of the parties, it recorded a finding that a sum of Rs. 5,775/- would be the appropriate amount of damages in the event of the plaintiffs not succeeding in getting their main relief for specific performance of the contract.
4. The main ground of attack on this appeal is that the contract is not enforceable being of a contingent nature and the contingency not having been fulfilled. In our opinion, there is no substance in this contention. So far as the parties to the contract are concerned, they had agreed to bind themselves by the terms of the document executed between them. Under that document it was for the defendant-vendor to make the necessary application for the permission to the Chief Commissioner. She had as a matter of fact made such an application but for reasons of her own decided to withdraw the same. On the findings that the plaintiffs have always been ready and willing to perform their part of the contract, and that it was the defendant who wilfully refused to perform her part of the contract, and that the time was not of the essence of the contract, the Court has got to enforce the terms of the contract and to enjoin upon the defendant-Appellant to make the necessary application to the Chief Commissioner. It will be for the Chief Commissioner to decide whether or not to grant the necessary sanction."
In the present case also a reading of the agreement Ex. P-203 shows that it was a concluded contract and in terms of the concluded contract only a formal sale deed was to be executed. As per clause 3 of the agreement to sell Ex P-203 the vendor was only to procure the willingness and acceptance of his two sons regarding the gift of an open land of the house executed in their favour of which possession had not been given. So far as the contracting parties are concerned, they had agreed to bind themselves by RFA No. 13/1975 Page 18 of 34 the terms of the document executed between them. The agreement to sell Ex P-203 was not subject to fulfillment of this condition. It was for the vendor to have procured the willingness and consent of his two sons. The vendor having failed to perform his part of the agreement, the vendee was entitled to seek remedy thereof in terms of clause 8 of Ex P-203 and as per law.
Thus this issue is also answered against the Appellant. Issue No.3: Was there any breach of the terms of agreement by the vendee?
It is contended by the learned counsel for the Appellant that the vendee sent the draft sale deed for approval vide letter Ex. P-17 belatedly on 26th August, 1966 just five days prior to the date of conclusion of the contract and thus, there was breach of contract on the part of the vendee. Secondly, the vendee inserted contrary clauses in the draft sale deed and insisted thereon. The insistence of the vendee on the clauses contrary to the agreement has been duly reflected in the letter dated 23rd September, 1966, Ex. P-41 written to the vendor. The vendor's objection to the draft sale deed was a bona fide one as the son of the vendor had objected to these clauses.
Learned counsels for the Respondents on the other hand contend that vide letter dated 6th November, 1966, Ex. P-29 addressed to the vendee whereby the agreement was rescinded, the vendor never cited any breach on the part of the vendee. Even in the letter dated 4th/8th October, 1966 Ex. P-26, the Vendor stated that the vendee was trying to wriggle out of the RFA No. 13/1975 Page 19 of 34 contract and the vendee was called upon by the said notice to submit a proper draft sale deed within a period of a fortnight in consonance with the agreement dated 2nd June, 1966 together with a remittance of `1,55,000/- by a draft of an approved bank. On failure, the agreement was to be deemed to have been cancelled and the sum of `30,000/- paid as earnest money forfeited, the rooms etc. liable to be vacated.
A perusal of the correspondence between the parties show that the vendee sent the draft sale deed on 26th August, 1966 along with Ex. P-17 stating that he had requested his friend Shri Rameshwar Dayal to meet him, if he so desires to finalize the draft. Pursuant to the vendee sending a draft sale deed for approval to the vendor, he returned the same and vide letter dated 28th August, 1966, Ex. P-21, stated that the draft deed of sale was replete with deliberate lies and desired the vendee to send the draft sale deed duly signed on each page by the vendee, whereafter, he would take a decision, whether to accept the draft or reject it. The vendee sent to the vendor the draft sale deed duly signed by him on each page along with a letter dated 29th August, 1966, Ex. P-5 again requesting the vendor to contact Shri Rameshwar Dayal for any amendment, addition and deletion in the draft. On 13th September, 1966, the vendor replied pointing out certain errors disapproving the draft sale deed, however, showing willingness to consider any proper draft sale deed. In further communication the vendee requested the vendor to get prepared a draft sale deed which the vendor vide his letter dated 12th/14th October, 1966 Ex. P-28 replied that it was not RFA No. 13/1975 Page 20 of 34 his duty in terms of the agreement. Thus from the perusal of the documents it cannot be termed to be a breach of the terms of the agreement by the vendee.
Issue No. 4: Whether the conduct of the plaintiff showed readiness and willingness on his part to perform the contract?
Learned counsel for the Appellants contends that there was no readiness and willingness on the part of the vendee to perform his part of the contract. Till date the balance amount has not been deposited and thus the vendor was not willing to perform his part of the contract. It is urged that for a relief of specific performance, it is only the conduct of the plaintiff which has to be seen qua readiness and willingness.
In response, learned counsels for the Respondents state that from the correspondences between the parties, it is evident that the plaintiff always showed his willingness to perform the contract. Even in his letter dated 4th/8th October, 1966, Ex. P-26, by which the agreement is sought to be rescinded, the vendor does not allege that the vendee is not ready and willing to perform his part of the contract. Not only this, the vendee asked the vendor to send his draft sale deed in case the draft sale deed sent by him was not acceptable to the vendor, however, vide Ex. P-28 dated 12th/14th October, 1966, it was replied that it was the duty of the vendor to send the draft. At no point of time, the vendor suggested the changes to be incorporated except saying that the draft sale deed was replete with deliberate lies.
RFA No. 13/1975 Page 21 of 34
In view of the evidence on record, it is apparent that the plaintiff and his legal heirs were always ready and willing to perform their part of the contract. The vendee after paying the earnest money of `30,000/- was to pay the remaining amount at the time of execution of the Sale Deed however he paid another `1,70,000/- on 4th July, 1966 and was handed over the possession of the portions of the suit property which were with the vendor. Along with the draft sale deed sent for approval by the vendee, in his letter dated 26th August, 1966 Exhibit P-17 he stated that as soon as the draft sale deed is approved, he would purchase the necessary stamp and take account of other essential steps to get the sale deed executed by the vendor and then registered. Even in the plaint filed, the plaintiff states that he is always ready and willing to perform his part of the contract and he has already paid a sum of `2,00,000/- out of the sale consideration of `3,55,000/-. A perusal of the correspondence between the vendor and the vendee indicates that the vendor was raising objections one after another to wriggle out of the contract. Thus there is no merit in the contention of the learned counsel for the Appellant.
Issue No.5 Whether the Respondents have elected not to accept part performance and thus cannot seek enforcement of part of the agreement.
It is contended on behalf of the Appellants that for acceptance of performance of the contract, the vendee is required to elect at the first available opportunity. The vendee ought to have exercised his option to RFA No. 13/1975 Page 22 of 34 avail part performance when Shri S.N. Anand refused to sign the sale deed. This was not done. The Respondents went to the extent of challenging the judgment and decree for part performance by filing an Appeal. Doctrine of election is invoked to contend that in the absence of election of part performance, the learned trial court erred in granting specific performance of part of the contract. The following passage from Halsbury's Laws of England 4th Edition page 1012 is referred to:
"Thus, a plaintiff, having two inconsistent claims, who elects to abandon one and pursue the other may not, in general, afterwards choose to return to the former claim and sue on it; but this rule of election does not apply where the two claims are not inconsistent and the circumstances do not show an intention to abandon one of them."
It is stated by learned counsel for the Respondents that in the appeal filed by them which has been withdrawn i.e., RFA No. 17/1975, it was never urged that part performance was not acceptable to the legal heirs of the plaintiff. It was only prayed that the remaining part of the contract should also be directed to be specifically performed.
As is evident from the passage relied upon by the learned counsel for the Appellants, the doctrine of election is applicable where the plaintiff opts for two inconsistent claims. The Hon'ble Supreme Court in Transcore v. Union of India and Anr. (2008) 1 SCC 125 observed:
64. In the light of the above discussion, we now examine the doctrine of election. There are three elements of election, namely, existence of two or more remedies; inconsistencies RFA No. 13/1975 Page 23 of 34 between such remedies and a choice of one of them. If any one of the three elements is not there, the doctrine will not apply.
According to American Jurisprudence, 2d, Vol. 25, page 652, if in truth there is only one remedy, then the doctrine of election does not apply. In the present case, as stated above, the NPA Act is an additional remedy to the DRT Act. Together they constitute one remedy and, therefore, the doctrine of election does not apply. Even according to Snell's Equity (31st Edition, page 119), the doctrine of election of remedies is applicable only when there are two or more co-existent remedies available to the litigants at the time of election which are repugnant and inconsistent. In any event, there is no repugnancy nor inconsistency between the two remedies, therefore, the doctrine of election has no application.
The plea of specific performance of a contract or a part performance thereof cannot be said to be inconsistent or repugnant to each other. In fact, the relief of part performance is embedded in the relief of complete performance.
At this stage it would be also appropriate to reproduce the observations of the Hon'ble Supreme Court in Surjit Kaur vs. Naurata Singh and another, (2000) 7 SCC 379 relied upon by both the parties:
11. Relying on Section 12 of the Specific Relief Act. Mr. Gupta submitted that a party can elect to accept part performance at any stage of the litigation. He submitted that mere filing of a Suit for specific performance of the agreement and not averring that the party was willing to accept performance in part does not preclude a party from subsequently electing to accept performance in part. He submitted that such election can be made even at the stage of appeal. In support of his contention he had relied upon the cases of Kalyanpur Lime Works Ltd.
v. State of Bihar AIR 1954 SC 165, Jiwan Lal (Dr.) and Ors. v. Brij Mohan Mehra (1972) 2 SCC 757, Ram Niwas v. Smt. Omkari AIR 1983 All 310, T.K. Santha v. A.G. Rathnam AIR 1990 Ker 69, Ramani Ammal v. Susilamal : AIR 1991 Mad 163 RFA No. 13/1975 Page 24 of 34 and Purnima Rani Dutta v. Lakshmi Bala Dasi AIR 1988 Cal
148.
12. There can be no dispute with the broad proposition of law. All these cases support the broad proposition. Thus the facts of each case need not be set out. It must be mentioned that in many of these cases the option had been exercised at the appellate stage. An exercise of option at the appellate stage has been upheld on the ground that a party could elect to accept part performance at any stage of the litigation. However, it is to be noted that in all these cases the party exercising the option had not earlier elected not to accept part performance. Mr. Rao could not show to Court even a single case where a party had elected not to accept part performance had insisted on full performance and finding that the Courts were against him, then elected to accept part-performance.
14. It must be clarified that this Court is not saying that merely because in correspondence or orally a party has insisted on performance of the whole contract he cannot thereafter elect to accept performance in part. A mere assertion that contract must be performed in full or even a filing of a suit for specific performance of the whole contract without averring that the plaintiff is willing to accept performance in part may not amount to electing not to accept performance in part. It is only in cases where a party has categorically refused to accept performance in part i.e. he has unambiguously elected not to accept part performance that he will be precluded from subsequently turning around and electing to accept performance in part. Whether a party has categorically elected or not will depend on facts of each case."
We find no force in the contention of learned counsel that by filing the present appeal the appellant has elected not to accept part performance of the contract.
Issue No. 6 Whether the court could have granted specific performance of a part of the contract.
RFA No. 13/1975 Page 25 of 34 The learned counsel for the Appellant states that the learned Single Judge having held that the Gift Deeds were valid, and thus the vendor was not the owner of the entire property, this portion of the land being an integral part of the property, it erred in granting the relief of specific performance of part of the contract. Since the plaint prayed for an alternative plea of damages, the relief of specific performance should not be granted. Reliance is placed on HPA International v. Bhagwandas Fateh Chand Daswani and Ors. (2004) 6 SCC 537; Shanmughasundaram and Ors v. Diravia Nadar (Dead) by L.Rs. and Anr AIR 2005 SC 1836 and Bolla Narayana Murthy v. Cannamaneedi Madhavayya & Ors 1947 MLJ 366.
Learned counsels for the Respondents contend that for a prayer under Section 12 of the Act, no separate issue is required to be framed. It is one of the prayers in the plaint. It is the discretion of the court to grant the relief of specific performance. Out of 5700 sq yards of the land only around 850 sq yards was given by the vendor to his sons by way of gift and the learned Single Judge rightly held that these portions were separable from the rest of the suit property and granted the relief of part performance of the contract. The vendee has paid substantial sum of the purchase price and was also given the possession of the suit property in possession of the vendor. Reference is made to the Parliamentary Debate which necessitated bringing the amendment to Section 12 of the Specific Relief Act. Reliance is placed on Kartar Singh vs. Harjinder Singh and others, AIR 1999 SC 854 RFA No. 13/1975 Page 26 of 34 and P.C. Verghese vs. Devaki Amma Batambika Devi and others, AIR 2006 SC 145.
Section 12 of the Specific Relief Act reads:
"12. Specific performance of part of contract.--(1) Except as otherwise hereinafter provided in this section the court shall not direct the specific performance of a part of a contract.
(2) Where a party to a contract is unable to perform the whole of his part of it, but the part which must be left unperformed by only a small proportion to the whole in value and admits of compensation in money, the court may, at the suit of either party, direct the specific performance of so much of the contract as can be performed, and award compensation in money for the deficiency.
(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 ether-
(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 in 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, ether for the deficiency or for the loss or damage sustained by him through the default of the defendant.
RFA No. 13/1975 Page 27 of 34 (4) When a part of a contract which, taken by itself, can and ought to be specifically performed, stands on a separate and independent footing from another part of the same contract which cannot or ought not to be specifically performed, the court may direct specific performance of the former part." In HPA International (supra) it was held that it was one integrated and individual contract by the vendor to convey full interest in the property, that is, his own life interest and reversionary interest of the remaindermen with the sanction of the Court. As the Court did not grant the sanction the contract cannot 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. Thus, it was held that neither equity nor law was in favour of the Plaintiff/vendee. In the present case the vendor never communicated that he cannot perform the entire contract and would agree to part performance of the contract. Moreover, the vendee in the plaint filed, had in the alternative prayed for part performance of the contract and thus, this decision has no application to the facts of the present case.
Similarly, in Shanmughasundaram (supra) the Hon'ble Supreme Court held that Section 12 of the Specific Relief Act cannot be invoked by the vendee to obtain sale deed of undivided share of the two brothers with a right to force partition on the sisters who were not parties to the agreement to sell. However, in the present case the shares of the parties are defined. The portions of the property given in gift to his two sons were earmarked RFA No. 13/1975 Page 28 of 34 and thus, this judgment also has no application to the facts of the present case.
We may note the observations of the Hon'ble Supreme Court in P.C. Verghese (supra) wherein it was held that Section 12 (3) of the Specific Relief Act, has been enacted for the benefit of the purchaser and this cannot operate to his detriment. Under the old Specific Relief Act the plaintiff was not only required to relinquish his claim of specific contract as regards that part of the contract which could not be performed but was also required to pay the entire amount of consideration whereas in terms of the Section 12(3) of the new Specific Relief Act, 1963 he is now required to pay the amount of consideration proportionately. In the said report it was also held that an alternative plea of refund of earnest amount and damage cannot itself be a bar to claim a decree for specific performance of contract. The Hon'ble Supreme Court in Kartar Singh (supra) held:
"4. We are afraid that the very foundation of the reasoning of the Division Bench of the High Court is defective. It was never disputed that the respondent and his sister had each half share in the suit properties. Hence a mere failure to mention in the agreement that they had such share in the property would not entitle one to come to the conclusion that they did not have that share. When the property is owned jointly, unless it is shown to the contrary, it has to be held that each one of the joint owners owns a moiety of the property. In the present case, there is neither a pleading nor a contention that the respondent and his sister did not own the property in equal shares. Secondly, the agreement of sale clearly mentions that respondent was entering into the agreement both on behalf of himself and his sister, and that he was, under the agreement, selling the whole of his share and also the whole of the share of his sister in the property. Further in the agreement itself he had stated that he RFA No. 13/1975 Page 29 of 34 was responsible to get the sale-deed executed by his sister and that he would pursuade her to do so. This being the case, the properties agreed to be sold were clearly distinguishable by the shares of the respective vendors. In the circumstances when the absentee vendor, for some reason or the other, refused to accept the agreement, there is no reason why the agreement should not be enforced against the vendor who had signed it and whose property is identifiable by his specific share.
5. We are, therefore, of the view that this is not a case which is covered by S. 12 of the Act. It is clear from S.12 that it relates to the specific performance of a part of a contract. The present is not a case of the performance of a part of the contract but of the whole of the contract so far as the contracting party, namely, the respondent is concerned. Under the agreement, he had contracted to sale whole of his property. The two contracts, viz. for the sale of his share and of his sister's share were separate and were severable from each other although they were incorporated in one agreement. In fact, there was no contract between the appellant and the respondent's sister and the only valid contract was with respondent in respect of his share in the property."
The decision in Kartar Singh (Supra) was further clarified in Surinder Singh vs. Kapoor Singh (Dead) through LRs and others, 2005 (5) SCC 142 clarified and held that Kartar Singh "should not be held to lay down a law to effect that even in a case where a part of the contract is held to be invalid Section 12 will have no application." In Sardar Singh vs. Smt. Krishna Devi and another, 1994 (4) SCC 18 it was held that under Section 20 (1) of the Act the jurisdiction to decree specific performance is discretionary, and the Court is not bound to grant such relief merely because it is lawful to do so, but the discretion of the Court is not arbitrary but sound and reasonable, guided by judicial principles and capable of correction by a Court of Appeal. The circumstances specified in Section 20 are only illustrative and not exhaustive. The Court would take into account the circumstances in each RFA No. 13/1975 Page 30 of 34 case, the conduct of the parties and the respective interest under the contract. It was also held that the agreement to sell entered into by the brother did not bind the Appellant therein however, the house being divisible, Appellant not being a party to the contract, equity and justice demand partial enforcement of the contract, instead of refusing specific performance in its entirety which would meet the ends of justice.
Thus, Section 12 (3) of the Specific Relief Act and the law laid down by the Hon'ble Supreme Court mandates specific performance of a part of the contract and the learned Single Judge committed no error in granting the same.
Issue No.7: Whether in view of the changed circumstances immense hardship would be caused to the Appellants and thus the contract should be avoided?
It is contended that the Appellants have now assigned their rights to a third party in terms of Order XXII Rules 2, 10 & 11 and Section 146 of the CPC and over the years property prices have escalated. In view of Section 20 of the Specific Relief Act as the contract in the changed circumstances will cause immense hardship to the transposed Appellant, prayer D of the plaint i.e., alternate relief of damages be granted instead of specific performance of the contract. Reliance is placed on Kanshi Ram v. Om Prakash Jawal & Ors., 1996 Vol. 4 SCC 593; K.S.Vidyanadam & Ors. v. Vairavan, 1997 Vol. 3 SCC 1 and K. Narendra v. Riviera Apartments (P) Ltd., AIR 1999 SC 2309. It is also stated that the transposed Appellant was RFA No. 13/1975 Page 31 of 34 aware of the decree passed in favour of the Respondents and thus the same cannot be a ground to contend hardship in performance of the contract.
Learned counsels for the Respondents relying on S.V.R. Mudaliar (dead) by LRs. and others vs. Mrs. Rajabu F. Buhari (dead) by LRs. and others, JT 1995 (3) S.C. 614 contends that because the prices have risen during the pendency of the litigation, the relief of specific performance if otherwise due, should not be denied to them, because by the time the litigation comes to an end sufficiently long period is likely to elapse in most of the cases and thus this factor should not weigh against the suitor in exercise of discretion by the Court. It is also stated that the transposed Appellant was aware of the decree passed in favour of the Respondents and thus the same cannot be a ground to contend hardship in performance of the contract.
In the present case, immediately on the agreement being entered into substantial sum of money had been parted by the vendee as `2,00,000/- out of the total sale consideration of `3,55,000/- had been paid and possession of substantial portion of the property taken. From the correspondence between the parties after entering into the agreement, it is evident that the attitude of the vendor was to avoid the agreement. The agreement is dated 2nd July, 1966 and the suit was decreed in favour of the Respondents on 3 rd October, 1974. At this stage to say that because of the price rise, the appellant/intervenor will face hardship, is invited for. The vendee at that time would have got similar property on the rates on which he had RFA No. 13/1975 Page 32 of 34 contracted with the vendor. The vendee got more than half his money stuck up in this contract. It would be onerous and hard to the vendee if this relief of specific performance of part of contract is not permitted. Reliance is placed P.D. Souza vs. Shondrilo Naidu (2004) 6 SCC 649 . The Hon'ble Supreme Court in the said decision, clarifying its earlier decision in Nirmala Anand v. Advent Corporation Pvt. Ltd. & Ors. (2002) 5 SCC 481, held that the Supreme Court in the said case laid down no law in absolute terms that in all such cases, the court should either refuse to grant specific performance or direct the plaintiff to pay a higher sum. It was held:
"39. It is not a case where the defendant did not foresee the hardship. It is furthermore not a case that non-performance of the agreement would not cause any hardship to the plaintiff. The defendant was a landlord of the plaintiff. He had accepted part payments from the plaintiff from time to time without any demur whatsoever. He redeemed the mortgage only upon receipt of requisite payment from the plaintiff. Even in August, 1981, i.e. just two months prior to the institution of suit, he had accepted Rs. 20,000/- from the Plaintiff. It is, therefore, too late for the Appellant now to suggest that having regard to the escalation in price, the Respondent should be denied the benefit of the decree passed in his favour. Explanation 1 appended to Section 20 clearly stipulates that merely inadequacy of consideration, or the mere fact that the contract is onerous to the defendant or improvident in its nature would not constitute an unfair advantage within the meaning of sub-section (2) of Section 20."
Moreover Explanation 2 to Sec. 20 states that the question whether the performance of a contract would involve hardship on the defendant within the meaning of clause (b) shall, except in cases where the hardship has resulted from any act of the plaintiff, subsequent to the contract, be determined with reference to the circumstances existing at the time of the RFA No. 13/1975 Page 33 of 34 contract. In the present case the hardship has not resulted from any act of the Respondents, thus this subsequent assignment in favour of the transposed appellant cannot be a ground to decline specific performance of the contract.
In view of our findings as aforesaid, we find no infirmity in the impugned judgment. Accordingly, the appeal is dismissed.
(MUKTA GUPTA) JUDGE (VIKRAMAJIT SEN) JUDGE DECEMBER 24, 2010 'raj' RFA No. 13/1975 Page 34 of 34