Madras High Court
Bhagwandas Fatechand Daswani And 4 ... vs H.P.A. International, A Partnership ... on 24 April, 2001
Author: R. Jayasimha Babu
Bench: R. Jayasimha Babu, F.M. Ibrahim Kalifulla
ORDER R. Jayasimha Babu, J.
1. This appeal is directed against the decree made in C.S.No.423 of 1981 which suit was one for specific performance of an agreement dated 26.7.1977 under which all interest in a property measuring 7 grounds 100 sq ft. on Mount Road, Madras was agreed to be sold for a sum of Rs.5,50,000 to the plaintiff in the suit - HPA International, a partnership firm. The other party to the agreement is Narendra Kullama Naicker who had only a life interest in the property, the reversionary interest, in the absence of any male issue to him, being with five other females in the family, his aunt, his cousin, and his three sisters. All of them were legatees under the will of Narendra's grandfather Mouna Guruswamy Naicker, a wealthy landlord of Palani Taluk in Madurai District, who had executed a will dated 7th March, 1948, which will, after his death on 23.10.1956, had been probated in O. P. No. 14 of 1957. Narendra had taken possession of the properties from his father who was the executor of the will, on 4.12.1963.
2. The reason for entering into this agreement as set out therein, was to save the estate by preventing it's forced safe for recovery of the large arrears of revenue due to local, State and Central Governments. The vendor Narendra was, by Cl.(4) of the agreement, to obtain the sanction of this Court for "...absolute sale of the entire interest in the property inclusive of remaindermen or reversioners after the life time of the vendor...". In the event of sanction not being accorded it was provided in Clause 6 that "the agreement shall forthwith stand cancelled."
3. An originating summons seeking this Court's sanction for the sale of all the interest in the property was taken out by Narendra, on the very next day 27.6.1977. That proceeding was numbered as C.S.No.471 of 1977. That suit was contested by two, of the five reversioners. Narendra did not take any interest in that proceeding after he sent a notice on 11.9.1979 to the proposed vendee terminating the agreement on the ground of pressing demand from the authorities for payment of tax, and the delay in the Court proceeding. Though such termination was not accepted, and the performance of the agreement was insisted upon by the vendee by its reply of 14.9.1979, Narendra proceeded to sell his life interest in the property to the appellants on 29.12.1979 for a sum of Rs.4.40 lakh, of which a substantial part was paid directly to the tax authorities.
4. Fifteen months later, during which period C.S.No.471 of 1977 lay dormant in this Court, HPA on its own application became a party defendant in that suit on 25.3.1986. Three months thereafter it filed the suit for specific performance in C.S.No.423 of 1981 against Narendra, and the appellants herein, on 16.9.1981. Two days later it filed an Application No.3355 of 1981 for transposing itself as second plaintiff in C.S.No.471 of 1977. On 17.12.1981 that application was allowed and HPA became a co-plaintiff in C.S.No.471 of 1977. Later, appellants also became party defendants to that suit. The two suits were tried together, common evidence was recorded and common judgment delivered. Though it had been admitted in the reply filed by HPA to the appellants' written statement in C.S.No.471 of 1977, that permission for such sale of all the interests in the property had been sought in the past by Narendra, and permission had been refused in applications filed in 1962 and 1963, by two learned Judges of this Court, it had been contended that the circumstances in which sanction was now being sought were different. However, no evidence was adduced by HPA in support of the relief that had been sought in the plaint in C.S.No.471 of 1977.
5. Narendra became an insolvent on his own application, on 8.12.1986, and the Official Assignee representing his estate was impleaded as 8th defendant in C.S.No.423 of 1981 on 12.1.1987. The interest of all the reversioners had long prior thereto - even before the institution of the suit for specific performance had been purchased by the appellants under Exhibits D.5 and D.6 dated 21.1.1980, as Ex.D.4 dated 22.2.1980.
6. Nine years after the agreement, and five years after the institution of the Suit No. 423 of 1981, HPA invoked S. 12(3) of the Specific Relief Act and filed an affidavit dated 25.11.1986, of its Managing Partner after he had been examined in chief as P.W.1 on 25.9.1986, wherein, after asserting that the relief prayed for in C.S.No.471 of 1977 could be granted by this Court, it was stated in paragraph 6 of that affidavit thus : - "I state that in the event of this Honourable Court taking the view and coming to the conclusion that the plaintiff herein as the second plaintiff in C.S.No.471 of 1977 is not entitled to maintain the suit, and pray for the relief sought for, then, I submit that this Honourable Court may be pleased to decree the suit C.S.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". Readiness to accept such part performance in full satisfaction of all claims under the agreement, and willingness to pay the agreed price without any abatement, were also averred.
7. The trial Judge relying on that affidavit at paragraph 8 of his common judgment, observed ." In view of the above affidavit filed by M/s. HPA International in C.S.No.423 of 1981, this suit CS.No.471 of 1977 has become infructuous. Further this Court cannot compel the reversioners to part with their interest". The trial Judge proceeded to hold thus : "As such, I find that the suit C.S.No.471 of 1977 has become infructuous, and it is dismissed as infructuous accordingly. No costs". The dismissal of that suit has become final, no appeal having been preferred by any of the parties to that suit. Sanction of the Court for the sale of all the interests in the suit property was thus not given.
8. During the pendency of the suits, the plaintiff had sought an interim injunction. The learned single Judge having declined to grant one, an appeal was preferred in O.S.A. No.168 of 1982, wherein the Division Bench of this Court restrained the appellants from demolishing and/or putting up any new construction. That order was subsequently modified on 17.9.1984, after appellants filed an apology plus undertaking in Contempt Application No.5 of 1983. That order was in the following terms : "Parties are agreed that the respondents are at liberty to complete the ground floor of the building, and if tenant is to be inducted in any part of the ground floor after completion, the tenant will not be inducted unless an undertaking is taken from him that in case the plaintiff succeeds in his suit for specific performance, he will be bound by the result of the litigation." Two tenants - a Raymond Retail shop, and Stale Bank of Travancore Mount Road branch - were thereafter inducted after obtaining the requisite undertakings from them, subsequently, permission was granted by the Court on similar terms to rent out the basement as well.
9. At the trial Aleemudin, the Managing Partner was examined as the only witness for the plaintiffs, as P.W.1. For the defendants Bhagwandas, the first appellant before us was examined as D.W.1. The lawyer through whom notice terminating the agreement had been sent by Narendra was examined as D.W.2. Exhibits P.1 to P. 14 and Ex.D.1 to D. 15 were marked as exhibits.
10. The issues as recast by the trial Judge in the light of the plaintiff limiting its claim to the life interest of Narendra were -(1) Whether the plaintiff is entitled to specific performance of Ex.P.1 agreement restricting it to the life estate of Narendra Kullama Naicker, 1st defendant herein as per the affidavit filed by the plaintiff; (2) Are defendants 3 to 7 unnecessary parties as they are bona fide purchasers of the property for valuable consideration; and (3) Whether Ex.P.1 agreement of sale entered into between the plaintiff and the first defendant has become impossible of performance.
11. The trial Judge Answered, all the issues in favour of the plaintiff and decreed the suit in respect of the life interest of Narendra on 6.9.1988. The appeal against that decree had been dismissed by another Division Bench of this Court earlier. On further appeal to the Apex Court that dismissal was set aside and the matter was sent back to this Court for hearing the appeal afresh.
12. During the pendency of the appeal before the Apex Court, the plaintiff executed the decree and obtained a sale deed through Court. It also obtained possession of the property on 20.2.1995. After obtaining possession, the plaintiff has constructed two floors above the ground floor. Those floors are not ready for occupation and remain untenanted. The equities between the parties with regard to the expenditure incurred on the constructions put up by them, and the income realised by them from the property is also required to be adjusted while disposing of this appeal.
13. The first appellant Bhagwandas Daswani who in his evidence as D.W.1 admitted that he is also known as Bob Daswani, had in his written statement pleaded ignorance of a meeting on 9.9.1979 at Narendra's residence among Narendra, HPA's Managing Partner Aleemuddin and Bob Daswani, prior to the sale by Narendra of his life interest to Daswani, in an affidavit filed by him in October, 1981 he had stated that Bob Daswani was an 'imaginary figure'. That stand necessitated considerable documentary evidence having to be adduced by the plaintiff to show that Bob Daswani and Bhagwandas Daswani are one and the same. Daswani admitted in his evidence that he has been carrying on business at Hong Kong for many years, that he was known there as Bob Daswani, that he regularly visited Madras and stayed with his father-in-law on such visits, and that the money paid for the purchase of this property had been transferred from Hong Kong to India.
14. Appellants clearly had knowledge of the agreement Ex.P.1 dated 26.6.1977 prior to the sale in their favour. They had also not claimed, and rightly, in their written statement that their purchase was 'without notice' of the prior agreement. The trial. Judge has noted that the issue as to whether defendants 3 to 7 were not bona fide purchasers for value without notice was not argued by their counsel. In this appeal the appellant's case was argued on the basis that they had notice of the prior agreement.
15. Mr.Soli Sorabji, learned Attorney General addressed arguments in support of the appeal while Mr.K.Parasaran, learned Senior Counsel and former Attorney General addressed arguments for the plaintiff. We record our appreciation for the very able assistance rendered by these two 'Grand Masters' of the legal profession.
16. Mr.Soli Sorabji submitted that the agreement dated 26.7.1977, in CI.6 contained a 'self destruct' mechanism which having been triggered by the dismissal of C.S.No.471 of 1977 with the observation that reversioners cannot be compelled to part with their interest in the property, the contract has fallen to the ground and in the absence of a subsisting legally enforceable contract, occasion for enforcing specific performance is non-existent. It was submitted that there is a basic distinction between a contingent contract which is dissolved by its internal force and contracts which are frustrated on account of external forces. Sections 31 and 32 in Chapter III of the Contract Act would be applicable to contingent contracts which are dissolved by their internal force, while S. 56 would not apply to such contract, though that Section may, in appropriate cases apply to contingent contracts frustrated on account of external forces. The further submission was that the agreement of 26.6.1977 is a single, indivisible and inseverable agreement which has to stand or fall in its entirety, no new bargain being capable of being made for the parties by the Court.
17. The other submissions for the appellant were that subsequent purchaser is entitled to question the enforceability of the agreement to the same extent as the vendor could have; that Section 12(3) cannot properly be invoked, and also has not been; that there has been inordinate delay in invoking it, and that the discretionary relief of specific performance should not be granted in this case as granting it, would only confer undue and undeserved benefit to the plaintiff; that the plaintiff having sought the assistance of the Court, his conduct was more relevant than that of the defendants; and that the Court should not be misled into regarding what is otherwise an unenforceable agreement as having become enforceable by reason of the conduct of the defendant in suppressing his other name, and having tendered an apology in the contempt proceedings.
18. Learned counsel for the appellants relied upon the following decisions in support of the appellants' case.
(i) Ram Awdh v. Achhaibar Dubey, . The Court in that case considered the pleas that can be taken by a subsequent purchaser in a suit for specific performance, and held that it was open to such a purchaser to raise the plea that the plaintiff was never ready and willing to perform his part of the contract. The Court held that the readiness and willingness being an obligation imposed by Section 16 of the Act, there was no question of the plea being available to one defendant, and not to another. The Court held that the decision rendered in the case of Jugraj Singh v. Labh Singh, was erroneous and approved the decisions rendered in the case of Ardeshir Mama v. Flora Sassoon, AIR 1928 PC 208, and in the case of Gomathinayagam Pillai v. Palaniswami Nadar, .
(ii) Dadarao v. Ramrao, . The Court in that case held that in a contract, which is sought to be specifically performed, the relationship between the parties is regulated by the terms of the agreement, and where the agreement itself provides as to what is to happen it either the seller refuses to sell, or the purchaser refuses to buy, what was contemplated by the parties must be given effect to. In the contract that was before the Court, it was found that it was very categorical in envisaging that a sale deed is to be executed only if both the parties agree to do so, and in the event of any one of them resiling from the same, there was no question of the other party being compelled to go ahead with the execution of the sale deed. The earnest money was to be refunded and an additional sum was required to be paid. The relevant part of the contract examined by the Court contained the following: "In case the sale deed is not made to you or if you refuse to accept, in addition of earnest money, an amount of Rs.500 shall be given or taken and no sale deed will be executed. The possession of the property has been agreed to be delivered at the time of purchase. This agreement is binding on the legal heirs and successors and assigns." The Court, after noticing the language of the contract, observed thus: "If the agreement had not stipulated as to what is to happen in the event of the sale not going through, then perhaps the plaintiff could have asked the Court for a decree of specific performance but here the parties to the agreement had agreed that even if the seller did not want to execute the sale deed, he would only be required to refund the amount of Rs. 1,000 plus pay Rs.500 in addition therein. There was thus no obligation on B to complete the sale transaction."
(iii) K. Narendra v. Riviera Apartments (P) Ltd. .
The Court held that the doctrine of comparative hardship had been statutorily recognised in India in Section 20 of the Specific Relief Act, 1963. The Court approved the passage in Chitty on Contracts (27th Edn.1994 Vol.1., at p. 1296) which reads thus:
"Severe hardship may be a ground for refusing specific performance even though it results from circumstances which arise after the conclusion of the contract, which affect the person of the defendant rather than the subject-matter of the contract, and for which the plaintiff is in no way responsible."
The Court also reiterated what had been staled by the Court in the case of K.S. Vidyanadam v. Vairavan, wherein, it had been held that the Court should look at all the relevant circumstances including the time-limits specified in the agreement and determine whether it's discretion to grant specific performance should be exercised. It was also noticed therein that in the case of urban properties in India, it was well-known that their prices have been going up sharply over the last few decades - particularly after 1973. In the case of Vidyanadam, the Court had, after taking judicial notice of the inflationary tendencies, observed :
"Indeed, we are inclined to think that the rule evolved by Courts that time is not of the essence of the contract in the case of immovable properties -evolved in times when prices and values were stable and inflation was unknown - requires to be relaxed, if not modified, particularly in the case of urban immovable properties. It is high time, we do so."
The Court took notice of the subsequent rise in prices while exercising it's discretion whether or not to grant specific performance.
A plea made before the Court for granting specific performance in relation to a part of the property was rejected by the Court. At paragraph 37, the Court noticed the fact that part of the property had been rendered inalienable by the owner on account of its having been acquired by the State, and yet another part of the property had been found to be inalienable on account of being in excess of the ceiling limit prescribed by Urban Land Ceiling Regulation Act. Though the Ceiling Act was repealed in 1999, specific performance in the manner sought, it was held, should not be granted. The Court observed, "We are not impressed by the submission. Though the respondents may on their part, in the changed circumstances, be agreeable to have even lesser property being transferred to them, but in our opinion, that is not permissible. The case of non-enforcement except with variation is statutorily covered by Section 18 of the Specific Relief Act, 1963.
The Court held that the case on hand was not covered by that provision. The Court, however, held that the case was a fit one where the respondent should be awarded some compensation in spite of specific performance being refused. The Court referred to the explanation appended to Section 21, which provides that the Court is not precluded from exercising jurisdiction to award compensation even in a case where the contract has been rendered incapable of specific performance.
(iv) Mayavanti v. Kaushalya Devi, . The Court held, "In a case of specific performance it is settled law, and indeed it cannot be doubted, that the jurisdiction to order specific performance of a contract is based on the existence of a valid and enforceable contract. The Law of Contract is based on the ideal of freedom of contract and it provides the limiting principles within which the parties are free to make their own contracts. Where a valid and enforceable contract has not been made, the Court will not make a contract for them. Specific performance will not be ordered if the contract itself suffers from some defect which makes the contract invalid or unenforceable. The discretion of the Court will be there even though the contract is otherwise valid and enforceable and it can pass a decree of specific performance even before there has been any breach of the contract. It is, therefore, necessary first to see whether there has been a valid and enforceable contract and then to see the nature and obligation arising out of it. The contract being the foundation of the obligation the order of specific performance is to enforce that obligation"
The Court, on the facts of that case held that the stipulations in the agreement, which were sought to be enforced were vague, uncertain and ambiguous. The Court observed that as the parties themselves were not ad idem to the subject matter of the contract, the Court cannot order specific performance. Regarding acceptance, the Court observed that the Rule is that the acceptance must be absolute and must correspond with the terms of the offer.
The Court also observed that specific performance of a contract is the actual execution of the contract according to its stipulations and terms, and the Courts direct the party in default to do the very thing which he contracted to do. The stipulations and terms of the contract have, therefore, to be certain and the parties must have consensus ad idem. The burden to show that is on the plaintiff.
(v) Rojasara Ramjibhai Dahyabhai v. Jani Narottamdas, 1986 (3) SCC 300. The Court held that the term necessary to give effect to the contract can be implied, and that a term implied if it is necessary in the business to give efficacy to the contract.
(vi) Naihati Jute Mitts Ltd. v. Khyaliram, . The Apex Court held that Section 56 of the Contract Act lays down a rule of positive law and does not leave the matter to be determined according to the intention of the parties. The Court held that where the contract itself provided that on the happening of certain circumstances the dissolution of the contract would take place under the terms of the contract itself, such cases would fall outside the purview of Section 56. Although in English Law such cases would be treated as cases of frustration, in India, they were to be dealt with under Section 32. The Court also held that the doctrine of discharge by frustration cannot be available where the contract makes full and complete provision, so intended, for a given contingency. The reason is that where there is an express term, the Court cannot find, on construction of the contract, an implied term inconsistent with such express term.
(vii) Dalkush v. Guarantee Life & Employment Insr. Co, AIR 1947 P.C.182 This case is relied upon by counsel for the respondents also. The agreement, which was sought to be specifically enforced in that case was the result of the acceptance by the owner of an offer that had been made by the plaintiff for the purchase of the owner's property. One of the conditions of the offer was that the earnest money would be paid in the Court, which had attached the properties earlier, at the time of it's giving approval to the transaction. That offer was accepted by the owner on the following terms: "I accept this offer and confirm the bargain subject to Court's approval."
The Court having refused the, approval, the property was sold to the respondent in the appeal before the Privy Council.
The Privy Council held on the facts of that case that the clause in the contract, which required the vendor to apply to the attaching Court for securing it's approval for sale was, on a proper construction of the contract not exclusively for the benefit of the plaintiff, and that, he could not by his waiver get rid of the necessity for Court's approval. It was further held that the approval having been refused by the Court, the contract fell to the ground, and had worked itself out.
The Privy Council noted that the evidence in the case showed that investigation had been made regarding the various attachments then subsisting at the time of the contract, and it was 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. That condition, therefore; was an essential one, and was essential not for one party alone, but for both parties. The condition, it was held, was not exclusively for the benefit of the purchaser, it was equally important from the standpoint of the vendor, as the vendor being heavily indebted, it was important to get effective discharge of all the liabilities of the family. It was further held that, "That this was the assumption on which the parties negotiated the transaction is clear, not only from the terms of the letter and the acceptance but also from the evidence given by the parties, the condition being to the advantage of both the parties."
The question as to whether that condition was an essential terra of the agreement was answered by holding that it was indeed essential, and that it was a condition precedent for the sale. After considering the question as to by whose default the contract had been rendered unenforceable, it was held that as an application had been made within a reasonable time to the proper Court for approval, the breach of the condition was not due to the vendor's default, and as "subject to the approval of the Court" was a vital condition of the agreement, it became impossible to fulfill it as contemplated by the parties.
The Privy Council then considered the question whether the plaintiff could waive the benefit of the condition and call upon the vendor to perform the contracts in spite of the failure of the condition. The answer given was that the term being an essential one intended for the benefit of both the parties, the purchaser could not get rid of the necessity for approval of the Court by his waiver. The application for approval having been refused by the attaching Court, the contract "fell to the ground, and had worked itself out."
(viii) Narain Pattor v. Vukkoy Narain, 12 Cal.152. The High Court affirmed the dismissal of the suit for specific performance of a contract which was contingent on the leave of the Court being obtained, by holding that the contract as it stood could not be enforced, that the contract, such as it was, was not a complete contract at any time. After referring to Section 20 of the Specific Relief Act, 1877, it was observed that, "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 S. 26 would not entitle the plaintiff to enforce it with a variation."
(ix) Govinda Naicken v . Apathsahaya Iyer, Vol 37 I.L.R. Madras 403. That was a case where one of two divided brothers of a Hindu family agreed to sell immovable property held by them in common. The suit for specific performance of the contract for the sale of the whole of the property having been brought, it was held that specific performance could not be granted. The sale deed by the defendant would be ineffectual in respect of the moiety not belonging to him, and the Court would not lend its sanction to a transaction devoid of legal effect and improper in itself as calculated to throw a cloud on the title of a third person which would give him a cause of action for a declaratory suit.
It was further held that even in a case falling within Section 15 of the Specific Relief Act of 1877, the relief by way of a decree for part performance is discretionary and will not be granted where there has been great delay, and a consequent change of circumstances. The Court observed that, "A sale is 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 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. The Court will not lend its sanction to a transaction devoid of legal effect".
(x) Sreemathi Kalidash Dasseee v. Sreemati Nobo Kumari Dassee, Vol.20 Cal.W.N.929 A Full Bench of the Calcutta High Court held that the contract specific performance of which had been sought in that case had become a contingent one having been varied by mutual consent, and as the contingency viz., obtaining the leave of the Court had not happened, the plaintiffs were not entitled to claim specific performance. In the original contract, there was no requirement that the letters of administration be obtained by one of the parties. Subsequently, plaintiff having required it from them, one of them, viz., one of the widows obtained letters of administration and leave to sell thereafter. The widows applied together and obtained leave for sale to the third parties who bought the property with notice of the prior agreement.
(xi) Graham v. Krishna Gounder Dey, I.A 101 90. The Privy Council held that Sections 14 to 17 of the Specific Relief Act, 1877, are both positive and negative in form, and constitute, with regard to specific performance of part of a contract, a complete Code within the terms of which relief of that character must be brought, if it is to be granted. The language of the Sections, it was held, must ultimately prevail even though assistance may be derived from consideration of the English cases. In that case, two plots were agreed to be sold. The contract stated that the plots were of about equal area and defined each by specified boundaries, but the price was a price for both plots together and the other terms of the contract dealt with both plots together. The vendor having failed to make out a title to plot B, the purchaser sued for specific performance or damages and declined to take under Section 15 of the Specific Relief Act a conveyance of plot A only. It was held that specific performance could not be decreed as to plot A with an abatement of price in consequence of the failure to make a good title to plot B, and that Section 16 was not applicable, since it did not appear that the contract as to plot A stood "on a separate and independent footing" so as to be within the terms of Section 16.
The Privy Council observed, "Their Lordships think that before a Court can exercise the power given by S. 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 inquiry, such material might be forthcoming and possibly might be found to be sufficient, and that the words of the section, wide as they are, do not authorize the 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."
(xii) Abdul Haq v. Yehia Khan, AIR 1924 Pat.81. It was observed by the High Court that contract for sale of specific immovable property is not divisible, and that the Court will not as a general rule compel specific performance of a contract, unless it can execute the whole contract. Though it may be that a contract though in form is one and entire, if it is in substance divisible, there is nothing to prevent the Court from carrying into effect, that which is capable of being carried out into effect.
It was found in that case that the defendants had not made any representation whatever that they were entitled to whole interest in the properties.
(xiii) Abdul Aziz v. Abdul Sammad, AIR 1937 Mad.596. A learned single Judge of this Court held that the contract before him was not divisible into two parts, that the Court could not substitute a new bargain and force a new contract on the parties by decreeing the plaintiffs claim with respect to one-third share of the, defendant, on payment of the price in proportion to that share.
The defendant had in that case agreed to sell to the plaintiff a plot of land in which he had only one-third share and the remaining two-third share belonged to his children. The contract was held to have became incapable of performance, as the two sons were unwilling to fulfill it.
(xiv) T.V. Kochuvareed and another v. P. Mariappa Gounder and others, AIR 1954 Tra-Co. 19. Considerable reliance was placed on this judgment by the learned counsel for the appellant. The Court held that the question of specific performance of a contract in whole or in part can arise only when the contract subsists, as a valid and legally enforceable contract.
The contract considered in that case was made subject to the condition of the first defendant being able to persuade the lessee to surrender the properties. The Court held that the oral agreement got engrafted to the original contract, that the oral agreement was admissible under Section 92 Proviso 3 of the Evidence Act, and that the contract does became contingent. The defendant, it was found, could not secure possession of the properties from the lessee so as to be in a position to execute the sale deed in favour of the plaintiff and to put him in possession, as the defendant could not under law and in fact secure possession of the properties from the lessee. Thus, the condition precedent attached to the contract failed, the contract itself ceased to be operative and could not be made the basis of a decree for specific performance.
The Court relied on the decision of the Privy Council in the case of Dalkush v. Guarantee Life and Employment Insurance Co AIR 1947 P.C.182.
The Court also held that the contract had become frustrated, and that Section 56(2) of the Contract Act was attracted to the facts of the case. The Court rejected the alternate claim made by the plaintiff during the course of the hearing of the appeal by way of a statement, in which it was stated that the plaintiff without prejudice to his contentions regarding the truth, legality and enforceability of the alleged leasehold rights of the lessee, the defendant should be directed to execute a sale deed in respect of all the plaint properties and subject to such a direction, the plaintiff relinquished his claims to further performance of the contract and all rights to compensation. The Court observed:
"The question of the specific performance of a contract in whole or in part can arise only when it is found that the contract itself subsists as a valid and legally enforceable contract. It has already been found that the contract which is the basis of the present suit was only a contingent contract and that it fell through on account of the failure of the contingency. There is therefore no contract to be specifically enforced in whole or in part."
It was also found by the Court that the statement filed in the appeal claiming relief under Section 15 of the Specific Relief Act of 1877 did not specifically comply with the condition specified in the Section, as several reservations had been made in the statement. It was held that Section 15 of the Act requires an unconditional undertaking and reservations and qualifications that had been made were inconsistent with the requirement of the Section.
It was further held that Sections 14 and 15 of the Specific Relief Act of 1877 do not involve any questions of public policy, and it is, therefore, perfectly open to the contracting parties to waive the benefits conferred by these sections and to restrict and regulate their rights by inserting suitable provisions in the contract.
(xv) Gostho Behari v. Omiyo Prasad, . The Court in that case considered the effect of delay in seeking specific performance and observed that the grant of specific performance when there had been a change of the status quo since the contract, to which the plaintiff had contributed to a large extent by the dilatory conduct, would be inequitable, and disentitled the plaintiff from claiming the relief of specific performance.
(xvi) Gulab Ray and another v. Muralidhar Modi and others, AIR 1964 Ori.17. It was held that where there is a contract of sale of immovable property between the parties, but the sale requires the permission of some one who is not a party before the Court and is not amenable to the jurisdiction and that permission is refused, specific performance of the contract cannot be granted, and in such a case, neither Section 52 of the Transfer of Property Act, nor Section 91 of the Trusts Act could apply.
It was found in that case that the condition of the agreement regarding the obtaining the permission from the Khas-Mahal was not complied with, as the Khas-Mahal had refused to give the permission to sell the property to the plaintiff. The Court held that after the Khas-Mahal had refused the permission, the Court could not compel the defendant to again apply to the Khas-Mahal for according sanction to sell. It was held that the only remedy to the plaintiff was to seek compensation for breach of the contract.
(xvii) M.M.S. Investments v. Veerappan, . A Division Bench of this Court considered the rights of a subsequent purchaser in a suit for specific performance. It was held by the Court that, "While dealing with the rights of a subsequent purchaser in a suit of specific performance, we may visualise two types of subsequent purchasers. The first would be a purchaser subsequent to an agreement for sale in favour of the plaintiff, but prior to" the filing of the suit and the second would be a purchaser after the filing of the suit for specific performance. The bar of lis pendens would apply only to the second case. As regards "the first category of subsequent alienee prior to the filing of the suit is concerned, there is nothing either under the provisions of the Specific Relief Act, 1963 or the Indian Contract Act or any common law principle which would disentitle him to plead that the prior agreement of sale in favour of another person was illegal and not binding on him. He merely steps into the shoes of the vendor and is bound to suffer a decree as would be enforceable against his vendor. But no disability is cast upon a subsequent purchaser whether he had prior notice of the agreement or not, to plead that the prior sale agreement was illegal and unenforceable..... The vendor as on the date of the agreement may have no capacity to deal with the property. For example, the person who had executed the agreement may be only a limited life estate holder or only a joint owner or the agreement may have become unenforceable by efflux of time or due to the negligence of the buyer not having complied with the condition of the agreement. In such circumstances, the subsequent purchaser, though he is aware of the sale agreement is also aware that the agreements totally illegal and unenforceable and is prepared to take the risk of purchasing the property. There is no reason why he cannot do so as to assail the legality of the prior sale agreement if he is prepared to face the risk by stepping into the shoes of the vendor. "
19. Mr.K.Parasaran submitted that appellant cannot be allowed to contend that the suit agreement is a contingent one as the plea in the written statement was only that it was conditional; that the first defendant Narendra had induced the frustration by not prosecuting the originating summons and therefore appellant cannot rely upon the circumstance of absence of sanction to resist specific relief; that occasion to operate cl.6 of the agreement never arose, as Narendra had instructed his counsel to withdraw C.S.No.471 of 1977 and in collusion with the appellants had abandoned that proceeding; that cl.6 was for the benefit of vendor and could be waived; that even if that clause be regarded as one for the benefit of both parties, the party by whose default sanction failed cannot rely upon absence of sanction to resist specific performance; that a person who has a limited interest in an estate can on behalf of the estate alienate the entire estate in a property to discharge binding debts; that the application to the Court for sanction was not for compelling the reversioners to sell their interest, but to enable the Court to examine the binding nature of debts on and the need to alienate the property; that alienation by Narendra alone would convey the reversioners interests as well if debts were found to be binding on the estate and there was a need for alienating the property; that it is always open to the life interest holder to sell his interest without the sanction of the Court; and that a wrong doer cannot be allowed to take advantage of his own wrong - Narendra having unilaterally abandoned C.S.No.471 of 1977 cannot defeat the rights of the plaintiff by such abandonment.
20. Further submissions for the respondent were : It is always open to a plaintiff to seek conveyance of such right, title and interest as the defendant has in the property; that the circumstance of the plaintiff having become a co-plaintiff in C.S. No.471 of 1977 was irrelevant, as he could do nothing in that proceeding without co-operation and assistance of Narendra; that the plaintiff having opted to resort to S. 12(3) of the Act and sanction being no longer necessary, Suit No.471 of 1977 could not be prosecuted and became infructuous; that as appellant had obtained the interest of reversioners, Narendra could no longer convey their interest and even de hors S. 12(3) contract had become severable; that CI.4 and 6 ceased to operate and Cl.6 became otiose as soon as plaintiff gave up his claim for purchase of reversionary interest; that the contract is in fact severable as between life interest of Narendra and the reversionary interest; that the prayer under Sec. 12(3) being for a lesser relief no question of delay can arise; that in any event no prejudice by reason of the delay has been shown; that the plaintiff is entitled to the benefit of S. 19(b) of the Specific Relief Act, S. 40 of the Transfer of Property Act, and S. 91 of the Trusts Act and is entitled to claim conveyance from the appellants; that the relief being in equity, the conduct of the defendants disentitles them from any equitable relief, as they having played foul with equity cannot use the same as a shield and they cannot also plead any equity with regard to the construction put up by them or rents received by the plaintiff; that the discretion exercised by the trial Court should not be lightly interfered with; and that even if two views are possible the trial Judge's view should be accepted.
21. Learned counsel for the respondent-plaintiff placed before the Court a large number of authorities in support of the submission made:
(a) Ganga Saran v. Firm Ram Charan Ram Gopal, . The Apex Court held therein on a consideration of the contract before it, that the parties to the contract had riot contemplated the possibility of the goods not being supplied, and that the agreement was not contingent on the happening of an uncertain future event. The Court referred to Sections 32 and 56 of the Indian Contract Act,. 1872 and held that neither of those provisions were attracted on the facts of the case. The Court concluded that the doctrine of frustration cannot avail the defendant and the non-performance of the contract is attributable to his own default.
(b) Satyabrata Ghose v. Mugneeram Bangur and Co. and anr, . The meaning of the term "impossible" in Section 56 of the Contract Act was considered by the Apex Court. It was held that the word "impossible" has not been used in the Section in the sense of physical or literal impossibility, and that "the performance of an act may not be literally impossible but it may be impracticable and useless from the point of view of the object and purpose which the parties had in view, and if an untoward event or change of circumstances totally upsets the very foundation upon which the parties rested their bargain, it can very well be said that the promisor finds it impossible to do the act which he promised to do." The Court held that the doctrine of frustration is really an aspect or part of the law of discharge of contract by reason of supervening impossibility or illegality of the act agreed to be done. The Court held that Section 56 lays down a rule of positive law and does not leave the matter to be determined according to the intention of the parties, and that the relief is given by the Court on the ground of subsequent impossibility when it finds that the whole purpose or basis of a contract was frustrated by the intrusion or occurrence of an unexpected event or change of circumstances which was beyond what was contemplated by the parties at the time they entered into the agreement. The Court also observed that it is well settled that when there is frustration, the dissolution of the contract occurs automatically.
(c) Kalyanpur Lime Works v. State of Bihar, . It was held by the Court that relinquishment of a claim to further performance can be made at any stage of the litigation. The Court approved the law that had been declared by the Lahore High Court in Waryam Singh v. Gopi Chand, AIR 1930 Lah 34. In that case, the High Court had allowed the application under Section 15 of the repealed Specific Relief Act, of 1877, which more or less corresponded to Section 12(3) of the Specific Relief Act, 1963. The application filed in that matter, had inter alia set out that without prejudice to the submissions that had been made by the plaintiff under Section 18 of the Specific Relief Act, an alternative relief under Section 15 of the Act was being claimed: A statement also was made therein that claims to further performance as also all right to compensation for damages was being relinquished.
(d) Durga Prasad & anr. v. Deep Chand & anr, . The Court considered therein, inter alia, the form of the decree in a suit for specific performance by a prior purchaser against his vendor and subsequent purchaser, and held that the proper form of decree is to direct specific performance of the contract between vendor and the plaintiff, and direct the subsequent transferee to join the conveyance so as to pass on the title which resides in him to the plaintiff. It was observed that the subsequent purchaser did not join in any special covenants made between the plaintiff and his vendor and all he does is to pass on his title to the plaintiff.
(e) Sri Venkataramana Davaru & Ors. v. State of Mysore & Ors, . The Constitution Bench at paragraph 14 of the judgment with regard to pleadings held thus: "The object of requiring a party to put forward his pleas in the pleadings is to enable the opposite party to controvert them and to adduce evidence in support of his case. And it would be neither legal nor just to refer to evidence adduced with reference to a matter which was actually in issue and on the basis of that evidence, to come to a finding on a matter which was not in issue.
The Court declined to entertain the contention that the institution in question was not a public institution, but was a private institution.
(f) Mrs. Chandnee Widya Vati v. Dr.C.L. Kattal, . The Apex Court held that the contract before it in that case was not a contingent contract, though it provided that the vendor shall obtain necessary permission of the Government for sale of the suit schedule property, and that if the permission was not forthcoming within the agreed period, it was open to the vendees to extend the dates, or to treat the agreement as cancelled. In that case, the vendor had made an application for permission, but had withdrawn the same without giving reasons therefor. It was held by the Court that there was willful refusal on the part of the vendor to perform the contract that the Court could enforce the terms of the contract, which enjoined the vendor to make the necessary application for permission. The Court further held that "in the event of the sanction being refused, the plaintiff shall be entitled to the damages as decreed by the High Court".
(g) Gopal Krishnaji Ketkar v. Mohamed Haji Latif and others, . The Apex Court considering the effect of Sections 114(g) and 103 of the Evidence Act, 1872 and held inter alia that even if the burden of proof does not lie on a party, the Court may draw an adverse inference, if important documents in his possession which can throw light on the facts in issue had been withheld. The Court also observed that it is not a sound practice for those desiring to rely upon a certain state of affairs to withhold from the Court the best evidence in their possession, which could throw light upon the issues in controversy, and to rely upon the abstract doctrine of onus of proof.
(h) Jiwan Lal v. Brij Mohan, . It was held by the Court, inter alia, that a clause in a contract, which had been inserted for the exclusive benefit of the vendees, and not for the benefit of the vendor as well as the vendees, could be waived by the vendees. Such clause was not a condition precedent. The Privy Council in Dalsukh M. Pancholi v. The Guarantee Life and Employment Insurance Co. Ltd. AIR 1947 P.C.182 had held that the relevant clause in the contract before them was not exclusively for the benefit for the purchaser, and, therefore, could not be waived as a consequence of which the entire contract fell through. The Apex Court held that it would follow that where a stipulation is for the exclusive benefit of one, contracting party and does not create liabilities against him, he can waive it unilaterally. The Clause in the contract that was considered by the Court in that case being Clause 6 of the agreement did not expressly subject the seller's obligation to sell to the contingency of the non-requisitioning of the premises; nor did it say that the contract could come to an end on the requisitioning of the premises.
The Court approved the statement of Lord Selborne in Lindsay Petroleum Co., v. Hard, 1870 5 P.C. 221 @ 239 that, "the doctrine of laches in Courts of equity is not an arbitrary or technical doctrine. Where it would be practically unjust to give a remedy either, because the party has by his conduct done that which might fairly be regarded as an equivalent to a waiver of it, or where by his conduct and neglect he has, though perhaps not waiving that remedy put the other party in a situation in which it would not be reasonable to place him if the remedy were after wards to be asserted, in either of these cases lapse of time and delay are most material".
(i) ML. Devender Singh v. Syed Khaja, . The Apex Court held that when payment is an alternative to carrying out the other terms of the contract, it would exclude, by the terms of the contract itself, specific performance of the contract to convey a property. The Court also observed that the principles contained in Section 20 of the Specific Relief Act of 1877 had been re-enacted in Section 23 of the Act of 1963 in language, which makes it clear that a case where an option is given by a contract to a party either to pay, or to carry out the other terms of the contract, falls outside the purview of Section 20 of the old Act, but, mere specification of a sum of money to be paid for a breach even as liquidated damages in order to compel the performance of the contract to transfer property will not do.
(j) Dollar Company v. Collector, Madras, . A three Judge Bench of the Apex Court observed, inter alia, that a Court of appeal interferes not when the judgment under attack is not right, but only when it is shown to be wrong.
(k) Narandas v. S.A. Kantam, . The Apex Court held that the fiduciary character of the personal obligation created by a contract for sale is recognised in Section 3 of the Specific Relief Act, 1963, and in Section 91 of the Trusts Act. The personal obligation created by a contract of sale is described in Section 40 of the Transfer of Property Act as an obligation arising out of contract and annexed to the ownership of property, but not amounting to an interest or easement therein. The Court held that the conferment of power to sell without intervention of the Court in a mortgage deed by itself will not deprive the mortgagor of his right to redemption, and that the extinction of the right of redemption has to be subsequent to the deed conferring such power. It was also held further that the equity of redemption is not extinguished by mere contract for sale.
(l) Prakash Chandra v. Angadlal, . The Apex Court, while considering the question "whether the relief of specific performance being a discretionary relief granted in equity should be refused to the appellant?", held in paragraph 9 of the judgment thus: The ordinary rule is specific performance should be granted. It ought to be denied only when equitable considerations point to its refusal and the circumstances show that damages would constitute an adequate relief. In the present case, the conduct of the appellant has not been such as to disentitle him to the relief of specific performance. He has acted fairly throughout. Nor is there anything to prove that the performance of the contract would involve the respondents in some hardship, which they did not foresee.
(m) Valliammal Rangarao Ramachar v. Muthukumaraswamy Gounder and anr, . The Apex Court held that in the counterpart agreement on which the vendor relied there had been an interpolation which showed that it had been ante-dated. The Court held that the plaintiff at all times was ready and willing to perform the contract, and decreed specific performance.
(n) Kartar Singh v. Harjinder Singh, . The Apex Court considered the agreement by which the vendor had agreed to sell not only his half share in the land, but also his sister's half share. The agreement was entered into by the vendor on behalf of the sister as well. He held himself responsible for getting the sale deed executed by his sister. The agreement contained a clause that if the sale deed were not to be executed as stipulated, the advance may be refunded together with the amount agreed upon as damages. The vendor declined to execute the sale deed on the ground that the sister had not agreed to sell the property. The High Court had held that the proposed vendee was not entitled to specific performance of that agreement. Reversing the judgment of the High Court, the Apex Court held, inter alia, thus:
".....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 was responsible to get the sale deed executed by his sister and that he would persuade 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."
The Court further observed at paragraph 5 of the judgment that "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 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 sell whole of his property. The two contracts, vie., 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."
(o) Vannarakkal Kallalathil Sreedharan v. Chandramaath Balakrishnan and another, . It was held by the Apex Court that where under a contract of sale entered into before attachment, the conveyance was executed after attachment such conveyance passed on good title. It was observed at paragraph 9 of the judgment thus:
"The agreement for sale indeed creates an obligation attached to the ownership of property and since the attaching creditor is entitled to attach only the right, title and interest of the judgment-debtor, the attachment cannot be free from the obligations incurred under the contract for sale:"
(p) S.P. Chengalvaraya Naidu v. Jagannath, . It was held that a judgment and decree obtained by fraud is to be treated as nullity, and can be questioned even in collateral proceedings.
(q) Sardar Singh v. Krishna Devi, . The Court held that the circumstances specified in Section 20 of the Specific Relief Act, 1963 are only illustrative and not exhaustive, and that while exercising discretion under Section 20 of the Act, the Court would take into consideration the circumstances in each case, the conduct of the parties and the respective interest under the contract. In that case, the decree for specific performance against one of the two brothers, who had a half share in the property had become final. The Court held that the other brother, who had a half share in the property could not be compelled to sell his share, and that the specific performance which had been decreed by the Courts below in respect of his share as well, was set aside. The subject matter of the suit there was a house, which was found to be divisible. The Court held that the contract was divisible, and that the only right, title and interest of the contracting party could be directed to be conveyed.
(r) Dhananjay Sharma v. State of Haryana and others, . In that case which arose under the Contempt of Courts Act, it was observed that, "Anyone who makes an attempt to impede or undermine or obstruct the free flow of the unsoiled stream of justice by resorting to the filing of false evidence, commits criminal contempt of the Court and renders himself liable to be dealt with in accordance with the Act."
In that case, false affidavits had been filed in the Apex Court by the police to cover up their illegal acts. In the concurring opinion, it was observed that 'the Court expects candour and frankness from the parties to the litigation before it.
(s) S.V.R. Mudaliar v. Rajabu Buhari, . The Court held that what has been stated in Sub-Sections (2) and (3) of Section 20 of the Specific Relief Act, 1952 is not exhaustive, but is illustrative, yet the intention of the legislature has been well reflected in those provisions, both as regards the granting of the relief, and not non-granting of the same.' Where granting of specific performance is inequitable, the Court may not grant the relief. The Court further held that - if merely because the prices have risen during the pendency of litigation, Court were to deny the relief of specific performance if otherwise due, this relief could hardly be granted in any case, because by the time the litigation comes to an end a sufficiently long period is likely to elapse in most of the cases. This factor, therefore, should not normally weigh against the suitor in exercise of discretion by a Court in a case of the present nature.
The Court further held that parties, who play foul with equity cannot be allowed to use the shield of equity to protect them. It was found by the Court in that case that the conduct of one of the parties was tainted inasmuch as it had departed from truth to bolster its case, and went to the extent of not complying with the desire of the trial Judge in allowing the person to be examined even as a Court witness.
The contract which was considered in that case was one for reconveyance, which contract was titled as a "Record of fact' recording a "gentlemen's understanding" that in case the purchase amounts as per the sale deeds in favour of the defendant in that suit were repaid within three years, the properties would be re-conveyed to the original owner, who would also have to pay in addition to sale price 10% thereof as solatium on the actual amount spent on improvement if any. The suit had been instituted in the year 1966, and nearly 30 years had elapsed by the time the matter attained finality in the Supreme Court.
(t) Gujarat Bottling Co. Ltd. v. Coca Cola Co. and others, . It was observed by the Apex Court in the context of a claim for interim injunction, that 'Since the, relief is wholly equitable in nature,' the party invoking the jurisdiction of the Court has to show that he himself was not at fault and that he himself was not responsible for bringing about the state of things complained of and that he was not unfair or inequitable in his dealings with the party against whom he was seeking relief. His conduct should be fair and honest'.
(u) Indian Bank v. Satyam Fibres (India) Pvt. Ltd., . The Court in that case observed that fraud and justice can never dwell together and that Courts have power to recall judgments obtained by fraud.
(v) Manzoor Ahmed Magray v. Ghulam Hassan Aram and others, . The Court held that even when there is a clause in a contract providing for payment of damages, specific performance can still be enforced. That case was one, which arose under the Jammu and Kashmir Specific Relief Act, 1977. The Court in that case reiterated the law that had been stated in the case of M.LDevender Singh v. Syed Khaja, . The Court also referred to the case of Prakash Chandra v. Angadlal, in which specific performance was granted after observing that even if the sum had been named in the contract for sale as the amount to be paid in case of breach the appellant was entitled in law to the enforcement of the agreement.
The Court also referred to with approval, the case of Kartar Singh v. Harjinder Singh, , wherein, it had been held that Section 12 of the Specific Relief Act, 1963 would not apply to a case where the contract was found to be divisible, as that type of case would be the case of specific performance of the whole of the contract so far as the contracting party is concerned. The Court also held that the maintainability of the suit would not be affected by the fact that the contract envisaged permission of an authority being obtained before the execution of the conveyance. The Court observed that permission can be obtained by filing proper application after the decree is passed.
(w) United India Insurance v. Rajendra Singh, 100 Comp. Cases 705. The Court dealing with an award of a Claims Tribunal under the Motor Vehicles Act held that no Court or Tribunal can be regarded as powerless to recall it's own order, if it is convinced that the order was obtained through fraud or misrepresentation of such a dimension, as would affect the very basis of the claim.
(x) Sardar Gurbakhsh Singh v. Gurdial Singh, AIR 1927 P.C. 230. The Privy Council observed in that case that the manoeuvre sometimes adopted by the parties or their counsel not to call essential witnesses and endeavouring to force the other party to call in the witness, and so suffer the discomfiture of having him treated as his, the other party's own witness is a bad and degrading practice.
(y) Motilal v. Nanhelal, AIR 1930 P.C. 287. It was held by the Privy Council that as the contract was for transfer of the cultivating rights in sir land, there was an implied covenant on his part to do all things necessary to effect such transfer, which would include an, application to the Revenue Officer to sanction the transfer according to Tenancy Act. The Court upheld the decree for specific performance that had been made by the High Court.
(za) Sirigineedi Subbarayadu v. Kopanathi Talayya and others, 1937 MWN 1158. This Court held that the plaintiff, who had given false testimony would not be granted the relief of specific performance when the granting of such relief would be doing injustice to the defendant. The Court also observed that the relief of specific performance lies in the discretion of the Court, and that the plaintiff who is capable of setting up a false case cannot expect the Court of equity to grant him the relief.
(zb) Shankartal Narayandas Mundade v. The New Mofussil Co. Ltd. and others, AIR 1946 P.C.97. The Court held that where a owner contracts to sell his property to one person, and thereafter, sells it to another in a suit for specific performance brought by the first proposed vendee, the burden of proving good faith and lack of notice is on the subsequent purchaser.
(zc) V.K.Kandaswami Chettiar v. Shanmuga Thevar, AIR 1949 Mad. 302, a decision by a learned single Judge of this Court. The Court there considered a clause in the agreement specific performance of which was sought and which clause was in the following terms : "In case there is default in completing the sale deed within aforesaid due date as aforesaid the individual -who commits default shall pay the other individual Rs.100 as damages, and in addition this contract shall become void." The Court held that default of one party could not result in imposing a disability on the others to enforce the contract, and that defendant could not be permitted to take advantage of her own wrong and prevent the plaintiff from exercising his undoubted right under the law.
(zd) Muni Samappa v. Gurunanjappa, . The Court, while considering the argument that the vendor could not be compelled to sell his son's interest in ihe property, after noticing that there was no allegation in the plaint that the agreement to sell executed by defendant No.l was binding on his son's interest, held, approving the observations of Krishnaswami Nayudu, J in Balusami lyer v. Lakshmana lyer, 44 Mad. 605 that - "Where a person sues for specific performance of an agreement to convey and simply impleads the party bound to carry out the agreement there is no necessity to deiermine the question of the vendor's title, and the fact that the title which the purchaser may acquire might be defeasible by a third party is no ground for refusing specific performance if the purchaser is willing to take such title as the vendor has.
(ze) Sri Amuruvi Perumal Devasthanam v. K.R. Sabapathi Pillai and another, . This Court in that case held that a plea of discharge of contract by frustration should be pleaded, as if the impossibility of performance which is one form of discharge of contract is not so pleaded, the opposite party would get no opportunity to show that frustration was due to the neglect or default of the party pleading the defence. It was further held that before applying the doctrine of frustration, the Court has to ascertain the facts forming the basis of the contract, and see how far the change in the circumstances would have the effect of removing the very foundation of the contract itself. The Court also observed that 'It is the essence of the doctrine that the event which causes frustration must have occurred without the fault of either party. Therefore, the Court ought to see whether it is a case of self-induced frustration as such in case there will be no breach at all.' The Court also held that there is no frustration where performance of the contract remains physically and legally possible, though commercially unprofitable.
(zf) Veeramalai Vanniar v. Thadikara Vanniar, . It was held by this Court that if a person as the owner of the property has entered into an agreement to sell his property, he cannot thereafter convey the same property to any other person, as after the prior agreement of sale, he cannot be said to be a free owner of the property.
(zg) Ramanathapuram Market Committee Vs. East India. Corporation Ltd, AIR 1976 Mad. 323. In that case the effect of Section 72 of the Contract Act was considered. It was held that the burden of proof is on the person alleging the mistake to establish the date of discovery of such mistake.
(zh) Ramani Ammal v. Sustlammal, 1991 (2) L.W. 43. It was found in that case that the contract, specific performance of which is sought, could not be regarded as a contingent one. It had been recited in the agreement that the defendant, should deliver vacant possession after vacating the tenant at the time of execution of the sale deed, and within the time specified therein. The defendant had not taken any steps to vacate the tenant, but wanted to cancel the agreement on the ground that the tenant had not vacated. It was held that the owner could not take advantage of her own wrong in and not taking steps to vacate the tenant, and in the circumstances, the plaintiff was entitled to get a decree for specific performance by paying the full agreed consideration, but without being able to secure vacant possession and with the tenancy of the tenant continuing, by applying Section 12(3) of the Specific Relief Act.
It was also held that the plaintiff could exercise the option under Section 12(3) of the Act even at the appellate stage and the option so exercised could be accepted at the appellate stage. The agreement was held to be capable of enforcement, and that there was no question of impossibility in performing the agreement (zi) Elayalwar V.K v. N. Govindarajulu & Others, 1993 (2) L.W.430 it was held in that case by this Court that it is too well settled that it is the bounden duty of the party personally knowing the whole circumstances of the case, to give evidence on his own behalf and to submit himself to cross-examination and his non-appearance as a witness would be the strongest possible circumstances to discredit the truth of his case.
It was also held that under Section 19(b), specific performance of a contract cannot be enforced against a transferee for value, who has paid money in good faith and without notice of the original contract. Similar exception is provided in Ss. 30 and 53 of the Sale of Goods Act was also adverted to. Section 96 of the Indian Trusts Act was also referred to as containing a similar provision. It was also emphasised by the Court that the burden is on the subsequent transferees to prove that they are purchasers in good faith for value without notice. It was further held that the language of Section 52 of the Transfer of Property Act would not exclude from it's purview even bona fide transferees without knowledge of the pending proceedings, and that the principle underlying the Section would apply even to moveables.
It was further held that having regard to Section 91 of the Indian Trusts Act, the subsequent transferee must hold the property for the benefit of the plaintiff to the extent necessary to give effect to the contract, and that subsequent transferee was bound to render an account as such. The Court also found that the first defendant in that suit had played fraud on the Court to carry out his sinister scheme of transferring the buses and permit, which was the subject matter of the suit in order to defeat the rights of the plaintiff.
(zj) R.Velammal v. R.Deivasighamani, . The Court found that the contingencies alleged in that case had not taken place and also observed that fact that contract being contingent not having been pleaded nor argued before trial court the same could not be raised before the appellate Court.
(zk) Waryam Singh v. Gopi Chand, AIR 1930 Lah. 34 The Court referring to Section 15 of the Specific Relief Act of 1877 observed:
"I cannot find anything in S. 15, Specific Relief Act, or any other provision of the law limiting action under S. 15 to any particular stage of the proceedings. It seems to me that it is open to the plaintiff to relinquish his claim to any part of the property in suit on the conditions specified in S.15, at any time before the suit is finally decided by the Court of appeal."
The Court, on the facts of that case, held that there are no equities in favour of the defendant which would justify the refusal of equitable relief under Section 15 of the Specific Relief Act to them. The Court allowed the plaintiff to obtain relief under Section 15 of the Act and secure specific performance of 2/3rds of the land mentioned in the agreement of sale, as the holder of the l/3rd share in the land had not consented to the transfer of his share, the other two brothers having contracted to sell not only their share, but also that of their brother.
(zl) In re Cary-Elwes' Contract,l906 (2) Ch.143. A learned Judge of the Chancery Court, in that case where a public body had paid the purchase money into the Court for the acquisition of certain lands and of certain easements over the lands of the vendor, and even after taking possession, refused to take the conveyance on the ground of expense, it was held by the Court that the public body was bound to take a conveyance, and that the terms of the conveyance must be settled by the Court in case the parties differed.
It was held that, it is an implied term of every contract for the sale of real property, if not expressed, that the contract shall be followed by a deed of conveyance conveying the property to a purchaser, and this may be enforced by a suit for specific performance. In Wolverhampton and Walsall Ry. Co. v. tendon and North Western Ry. Co. 1873 L.R. 16 Eq. 433, 439 Lord Selbome said:
"The common expression, 'specific performance,' as applied to suits known by that name, presupposes an executory as distinct from an executed agreement, something remaining to be done, such as the execution of a deed or a conveyance, in order to put the parties in the position relative to each other in which by the preliminary agreement they were intended to be placed."
The intention of the parties in an ordinary contract for the sale and purchase of real property, is that the purchaser shall pay the purchase-money and that the property shall be conveyed by a duly executed deed to the purchaser. Equity looks upon things agreed to be done as actually performed; consequently, when a contract is made for sale of an estate, equity considers the vendor as a trustee for the purchaser of the estate sold, and the purchaser as a trustee of the purchase-money for the vendor: Sugden's Vendors and Purchasers, 14th ed.p. 175.' (zm) Maritime National Fish Limited v. Ocean Trawlers Limited, 1935 A.C.524 a decision rendered by the Privy Council on appeal from the Supreme Court of Nova Scotia. The Privy Council approved the decision appealed against, in which, it had been pointed out that '......discharge of contract by reason of the frustration of the contemplated adventure follows automatically when the relevant event happens and does not depend on the volition or election of either party.' On the facts of that case, it was held that there was no frustration, as the defendants when they renewed the charter for a ship were well informed of the legislation consisting of an amendment of the Fisheries Act which in substance made it a punishable offence to leave or depart from any port in Canada with intent to fish with" a vessel that uses an otter or other similar trawl for catching fish, except under licence from the Minister; and that it was left to the Minister to determine the number of such vessels eligible to be licensed. When the defendant had renewed the charter at a reduced rate, and had not inserted any protecting clause in regard to the effect of the Minister not granting the licence for the subject vessel, the defendant must be deemed to have taken the risk that a licence would not be granted. It was also held that even if there was frustration of the adventure, it resulted from the deliberate act of the defendants in selecting the three trawlers for which they desired licences were issued. It was held that the charter had not been frustrated, and that the vessel was available to be made such use of, as the defendant desired and was able to make.
The Privy Council also noticed the Coronation case in Krett v. Henry, 1903 (2) K.B.740 and the doubt expressed in later decisions regarding the correctness of the decision rendered in the Coronation Cases, such doubt having been expressed by Lord Finlay in Larrinaga v. Societe Franco-Americaine des Phosphates 1922 29 Com.Case.l, 7. that - It may be that the parties contracted in the expectation that a particular event would happen, each taking his chance, but that the actual happening of the event was not made the basis of the contract.' The Privy Council referred to with approval the observations of Lord Sumner in Hirji Mulji v. Cheong Yue Steamship Co. 1926 A.C. 497, 510 that equity is a device, by which the rules as to absolute contracts are reconciled with a special exception which justice demands.
The Privy Council then observed, "In a case such as the present it may be questioned whether the Court should imply a condition resolutive of the contract (which is what is involved in frustration) when the parties might have inserted an express condition to that effect but did not do so, though the possibility that things might happen as they did, was present in their minds when they made the contract."
The Privy Council did not, however, answer that question, as it was held on the facts of that case that it was the act and election of the appellants which prevented the vessel from being licensed for fishing .
The Privy Council in that case also referred to the speech of Lord Sumner in the case of Bank Line, Ltd. v. Arthur Capel & Co. 1919 A.C.435,452, wherein it was said :
"I think it is now well sealed that the principle of frustration of an adventure assumes that the frustration arises without blame or fault on either side. Reliance cannot be placed on a self-induced frustration; Indeed, such conduct might give the other party the option to treat the contract as repudiated."
22. We have carefully considered the submissions made by learned counsel, as also the large number of authorities cited by them.
23. The foundation for a decree for specific performance is a subsisting legally enforceable contract. Absent such a contract, there can be no decree for specific performance for part or whole. The plaintiffs suit when instituted was maintainable. The contract that was relied upon was legal and enforceable on its terms. The condition requiring the vendor to obtain sanction of the Court for the sale of reversionary interest was a condition subject to which a decree for specific performance could have been made. Such a decree would have directed the vendor to apply to the Court, for sanction, and if sanction was forthcoming, then execute the sale deed. In the event of sanction not being accorded compensation if justified would be the only remedy that would have been available to the plaintiff. That such is the legal position is evident from the decision of the Apex Court in the case of Mrs.Chandnee Widya Vati v, Dr.C.L. Kattal, .
24. In this case a direction to the proposed vendor was rendered unnecessary as the necessary application in the form of originating summons in C.S.No.471 of 1977 was filed by the vendor the very next day after the agreement. That proceeding was continued by none other than the proposed vendee - plaintiff who fully recognised the necessity for such sanction of the Court for sale of reversionary interest for obtaining the sale deed to the property, as the contract provided in C1.6, that in the event of sanction not being given the agreement would forthwith stand cancelled. The plaintiff in the suit for specific performance was thus the co-plaintiff in the suit in which sanction was sought. At the request of the plainliff the two suits were tried together and common evidence recorded. The plaintiff - proposed vendee did not choose to lead any evidence on the justification for the sanction sought even though it was aware that sanction had been refused on two earlier occasions, and the stand taken by it in the reply filed by it in the suit seeking sanction was that circumstances in which sanction was now being sought were different and justified grant of sanction. The plaintiff was fully aware that it's success in the suit for specific performance was directly linked to it's success in the suit for sanction.
25. 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.P.l, forthwith stood cancelled, if that clause was meant for the benefit of the both parties to the contract. If the contract thus stood cancelled the suit for specific performance had necessarily to be dismissed.
26. Whether Clause 6 of the contract was meant for the benefit of the vendor alone, as contended for the plaintiff, has now to be examined.
27. The agreement of sale which runs into eight pages is an elaborate one. It traces the title of the vendor with emphasis on the fact that he is a limited owner with only a life interest, it refers to the large estate which is burdened with liability for payment of arrears of tax to local, State, and Central Governments, quantifies the same as Rupees six lakhs, refers to the imminent threat to the estate by the coercive steps that Revenue is about to initiate, and to the urgent necessity to sell the suit property.
28. The agreement then set out the offer made by the plaintiff thus:
"Whereas the purchaser has offered to purchase that property described in the schedule hereto in it's entirety, that is inclusive of the interest of the remaindermen after the life time of the vendor, and free from all encumbrances, charges, or Inist whatsoever for the sum of Rs.5-1/2 lakhs (Rupees five and half lakhs only) upon and subject to performance of all the terms and conditions mentioned hereinbelow."
29. After setting out the acceptance of that offer by the vendor, the terms are set out. Clauses 1,2, 3, 4, 6, 9, and 15 are relevant:
(1) The vendor doth hereby agree to sell and the purchaser did hereby agree to purchase the entire interest of the vendor and the interests of the remainder men and free from all encumbrances, charges or trusts whatsoever for the net sum of Rs.5 lakhs subject to and upon all the terms and conditions mentioned below.
(2) the sale is of the entire interests of the said property namely the present interest of the vendor and the interest of the remainder men or reversion-ers after his death.
(3) This agreement is subject to the passing of the title to the property and the vendor's rights to sell the entire interest, present and future in the property by the purchaser Advocate.
(4) The vendor shall obtain at his own cost and expenses the sanction of the High Court, Madras, for the absolute sale as aforesaid of the entire interest of the property inclusive of the interest of the remainder men or reversioners after the life time of the vendor.
(6) In case the sanction of Court is not accorded for the sale as aforesaid this agreement shall forthwith stand cancelled and the vendors shall forthwith return the advance amount of rupees twenty five thousand only.
(9) The balance of sale price of rupees five lakhs and twenty-five thousand only 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 liability 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 sale transaction.
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 Courts is obtained the purchaser fails to complete the sale 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 sale.
30. What the plaintiff offered to buy and what was agreed by the vendor to be sold is clearly all the interests in the property which fact was emphasised and re-emphasised in several clauses of the agreement. After setting out in C1.2 that the sale is of 'the entire interests' in the property it is made clear by C1.3 that the agreement is one and indivisible - that what has to be sold is the entire interest, and that the agreement is subject to vendor being able to convey the entire interest, present and future in the property. C14 obligates the vendor to obtain sanction of the Court for the absolute sale of the entire interest in the property at his own expense. Then comes clause 6 which provides the entire agreement 'shall forthwith stand cancelled' in case sanction is not accorded for the sale. That the occasion to claim performance will arise if, and only if, sanction is granted is further made clear by Clause 15 which requires payment of liquidated damages, if either party fails to complete the transaction after the sanction is obtained.
31. 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.
32. Sanction for the conveyance of all the reversionary interest was thus crucial to make the agreement enforceable. That condition is an essential term of the agreement and a condition precedent for the sale. The consequence of failure to obtain the sanction having been set out in C1.6, full effect must be given to that clause.
33. Plaintiff seeks to avoid the consequence of sanction not having been given by the Court by contending that Narendra's failure to prosecute the originating summons after 1979, disentitles the appellant from raising the question of sanction. While deciding the question of existence of a legally enforceable contract, the Court is bound to take note of the outcome of the proceeding that had been initiated for securing, sanction and the Court cannot disregard the order made on the originating summons by which sanction was sought. That proceeding was not dismissed for default on the part of Narendra to prosecute the same.
34. That suit for sanction, C.S.No.471of 1977, was in fact prosecuted by the respondent herein who after becoming a party to that proceeding, had itself transposed as a co-plaintiff. Having thus put itself in a position where it could seek sanction, plaintiffs 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.
35. The observation made by the court while dismissing that suit that "Court cannot compel the reversioners to part with their interest" would show that whatever be the extent to which the estate was burdened, sanction could not be given for the sale of the reversionary interest, against the wishes of the reversioners. That view is also consistent with the view taken by two other learned Judges of this Court who had earlier on similar applications filed by Narendra declined to grant sanction. Plaintiff moreover has accepted the dismissal of that suit, and the Court's decision dismissing the prayer for sanction has become final.
36. Though counsel for plaintiff respondent contended that sanction was unnecessary and Narendra could, having regard to the pressure on the estate, have validly conveyed the interests of reversioners, that question does not arise for consideration here. Suffice it to say that prima facie that proposition appears to be untenable. Assuming that Narendra could have conveyed the interest of the Reversioners, the plaintiffs own insistence upon making the enforceability of the agreement conditional upon the grant of sanction, precludes the plaintiff from raising such a contention now.
37. The plaintiff therefore cannot take advantage of absence of Narendra's active participation in C.S.No.471 of 1977 to wriggle out of the impact on the suit agreement of the dismissal of that suit, which had been prosecuted by the plaintiff, and which dismissal was in part brought about by it, by taking the stand that suit had become infructuous. The plaintiff cannot also avoid the impact and legal consequence of the Court's finding that reversioners cannot be compelled by the court to sell their reversionary interest. Having regard to this legal and factual position, appellant is not in any way disentitled from contending that the agreement ceased to exist the moment the suit for sanction was dismissed by the learned single Judge, whose decision has become final.
38. Cases cited by learned counsel for the plaintiff respondent in support of the submission that a party cannot be allowed to take advantage of his own wrong, and that frustration which is self induced cannot and does not disable the innocent party from claiming the benefit of the agreement by ignoring the state of affairs brought about the unilateral act or omission of the party in breach do not advance the case for the plaintiff respondent any further.
39. Learned counsel for the plaintiff-respondent submitted that this Court should not entertain or consider the arguments advanced for the appellant that the contract ceased to exist by reason of want of sanction, as in the written statement filed by the appellant there was no plea that the contract was contingent. This submission ignores the fact that it had been clearly pleaded by the appellants in their written statement that the contract was a conditional one. The distinction sought to be drawn between a conditional contract and a contingent contract is a distinction without a difference. All contingent contracts are conditional. It is the nature of the condition that renders the contract contingent. Even the Privy Council in the case of Dalkush, AIR 1947 P.C.182, a case involving a contingent contract referred to the contract as conditional.
40. Though before the trial Judge the case appears to have been argued mainly on the ground that contract had become impossible of performance, it is evident from the observations contained in the judgment under appeal that the condition set out in clauses 4 and 6 of the agreement and their effect, had in fact also been argued. The Court has observed that "...in view of the relinquishment of the right given to plaintiff under CI.4 of Ex.P.l, CI.6 of the agreement becomes otiose". That is a patently incorrect view.
41. 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.
42. The learned single Judge having dismissed the suit in C.S.No.471 of 1977, after holding that court cannot compel the reversioners to sell their interest, and after holding that that suit had become infructuous by reason of the application filed by the plaintiff in the suit for specific performance, under Section 12(3) of the Specific Relief Act, ought to have declined to grant specific performance in whole or in part, as after the dismissal of C.S.No.471 of 1977, the agreement specific performance of which had been sought, no longer existed by reason of the contingency contemplated by the parties not having occurred. After the collapse of the contract, there was nothing left of the agreement on which the Court could act. No new contract could be conjured from the ashes of the one that had imploded, for the purpose of conferring a benefit on the plaintiff.
43. 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 it's entirety had perished.
44. Section 32 of the Contract Act which is clearly attracted to the facts of this case sets out in the most unambiguous terms, the enforceability of contracts contingent on an event happening. The section reads thus :
"Contingent contracts to do or not (o 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 contract becomes void."
45. Section 31 defines contingent contract thus: A "contingent contract" is a contract to do or not to do something, if some event, collateral to such contract does or does not happen." The suit agreement enforceability of which was dependant on an uncertain future event, namely sanction of the court for the sale of reversionary interest, was clearly a contingent contract. It was incapable of being enforced until and unless that event had occurred. That event not having happened, the contract - all of it - became unenforceable, and was incapable of being resurrected in whole or in part.
46. The trial Judge had rightly rejected the argument that the suit agreement had become impossible of performance and therefore void. However, the suit agreement, as rightly urged by the learned counsel for appellants, became unenforceable not on account of the occurrence of an external event rendering the agreement impossible of performance as provided for in the latter part of Section 32 and in S. 56 of the Contract Act, but by reason of the express stipulation in the agreement that the agreement would stand cancelled if sanction for sale of the reversionary interest was not accorded by the Court.
47. Once the contract ceased to exist, the plaintiffs prayer for performance of part of agreement by invoking Section 12(3) of the Specific Relief Act which presumes the existence of a legally enforceable contract, was not a prayer which could have been considered by the Court. That prayer had no legs to stand on, and no right in the plaintiff to claim specific performance could have been recognised by allowing the plaintiff to invoke Section 12(3) of the Specific Relief Act.
48. The very averments in the affidavit dated 25.11.1986 of the Managing Partner of plaintiff filed after he had been examined in part as P.W.I also do not warrant the grant of any relief, even if it could be assumed for a moment that it was open to the Court to consider grant of relief under Section 12(3). In that affidavit it had been, inter alia, stated that".... in the event of this High Court taking the view and coming to the conclusion that the plaintiff herein as the second plaintiff in C.S.No.47l of 1977 is not entitled to maintain the suit and pray for the relief sought for, then,... ..this Court may be pleased to decree the suit namely C.S.No.423 of 1981 for specific performance of the life interest of the first defendant and to 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." This prayer of the plaintiff was clearly conditional upon the" Court finding that the plaintiff was not entitled to maintain C.S.No.471 of 1977. The Court did not hold that the plaintiff is not entitled to maintain the suit. The occasion for considering the plaintiffs prayer under Section 12(3) therefore never arose.
49. Learned counsel for respondent submitted that conditional prayer can be made and considered. Reliance was placed on the decision of the apex Court in Kalyanpur Lime Works v. State of Bihar, , and the approval given therein to the decision of the Lahore High Court in Waryam Singh v. Gopi Chand, AIR 1930 Lah.34. In the case before Lahore High court it had been stated that the prayer for performance of part of the contract was being made without prejudice to the claim made in the suit for specific performance of the whole. In this case besides making such a reservation, plaintiff has made the prayer conditional upon the Court finding that it is not entitled to maintain the suit for sanction for sale of reversionary interest. This condition is clearly different from asserting that prayer made for a lesser relief, is made without prejudice to the claim for a larger relief. Condition set out by the plaintiff was a positive finding by the Court that plaintiff was not entitled to maintain the suit for sanction.
50. The Apex Court in the case of Kalyanpur Lime Works v. State of Bihar, held that "Relinquishment of the claim for further performance can be made at any stage of the litigation". It was in that context the Court referred to the case of Kalyan Singh vs. Gopi Chand, AIR 1930 Lah.34. The Apex Court did not lay down that relinquishments made subject to the condition stipulated by the plaintiff should be accepted by ignoring the condition. In the case before the apex Court the prayer was unconditional. In the Lahore case there was no stipulation requiring sanction of any other authority. The High Court granted relief under Section 15 of the Specific Relief Act acting on the ground taken in the appeal memorandum which reiterated the contents of an application filed in the trial Court at the time of arguments, wherein it was stated that in the event of defendants being found to be incompetent to sell the whole of the land, plaintiff would be conferred with a decree for sale of that part to which defendants had title. The trial Court had found that defendant had title to only 2/3rd, but had refused specific performance. It was only in that context that the High Court held that plaintiff should be given the benefit of Section 15 of the Specific Relief Act, 1877. The Court in that case also had no occasion to examine the question whether a conditional relinquishment could be made, as no such argument had been raised.
51. The facts of this case are clearly different. The condition imposed by the plaintiff was not one which had been fulfilled, unlike in the Lahore case. The Court here not having found that plaintiff could not maintain C.S.No.471 of 1977 a condition subject to which plaintiff sought the benefit of Section 12(3) erred in proceeding to grant relief, assuming for a moment that there was a subsisting enforceable contract. Also in our view, Section 12(3) of the Specific Relief Act does not contemplate conditional relinquishment. A plaintiff who seeks the benefit of that provision must declare unequivocally that he or she has relinquished all claim 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.
52. The consequence of the delay in making the prayer for performance in part, assuming that such a prayer could have been entertain, also requires consideration. Section 12 of the Act does not prescribe any period of limitation prior to or after the institution of the suit, the period prescribed in the Limitation Act for instituting a suit for specific performance would obviously apply also to a suit wherein the prayer is for performance of a part of the contract. If such a prayer is not made in the plaint, the period within which such a prayer may be made is not prescribed in this Act or in any other statutory provision.
53. This Court in the case of Govinda Naicker v. Aparthsaya lyer, 1903 ILR 37 Mad.403 took the view that under Section 15 of the Specific Relief Act, 1877 a decree for part performance is discretionary, and will not be granted where there has been great delay and a consequent change of circumstances. The Lahore High court in the case of Waryan Singh v. Gopi Chand, AIR 1930 Lah.34 observed that it did not find anything in Section 15 of the Specific Relief Act or any other provision, limiting action under Section 15 of the Specific Relief Act, 1877 to any particular stage of the proceedings, and that relinquishment under that provision may be made at any time before the suit is finally decided in appeal. That view of the Lahore High court was approved by the apex Court in the case of Kalyanpur Lime Works vs. State of Bihar, . However the Apex Court on the facts of this case before it declined to grant specific performance.
54. The Apex Court did not hold in that case that the Court must grant the prayer for performance of, part of the contract as and when a plaintiff chooses to make such a prayer. The discretion to grant or not to grant specific performance was available to the Court under Section 22 of the 1877 Act now Section 20 of 1963 is available to the Court, also while considering prayers for performance in part. Moreover Section 12 in it's several sub-clauses provides that the Court 'may' grant performance in part, thereby re-emphasising the discretion of the Court. The apex Court in the case of Satyanarayana v. Yeloji Rao, has while considering the scope of discretionary power of the Court under Section 22 of the 1877 Act observed, "It is really difficult to define that field. Diverse situations may arise which may induce a Court not to exercise the discretion in favour of the plaintiff. It may be better left undefined, except to state what the section says, namely discretion of the Court is not arbitrary, but sound and reasonable, guided by Judicial Principles and capable of correction' by a Court of law.
55. The prayer for performance of the contract in part made by the plaintiff though not one which could be thrown out at the threshold solely on the ground of delay, was one which at the time of it's consideration did not rule out the consideration of the effect of the delay on the plaintiffs right in so far as the exercise of discretion of the Court is concerned.
56. The conduct of the plaintiff in relation to the contract is very much relevant in this context. The agreement elaborately sets out the fact that the Estate in which Narendra had a life interest was in danger of being lost by reason of coercive steps about to be initiated by local, State and Central Governments for recovery of arrears of revenue. The plaintiff had stuck to its stand that it would not do anything till sanction of the Court was given in C.S.No.471 of 1977 even when Narendra gave a notice of termination on account of the delay in Court proceedings and the continuing pressure on the estate for payment of arrears of Revenue. The plaintiff could have, if he wanted to, limit his claim to the life interest, and offered to purchase that life interest by relinquishing its claim to the rest. Plaintiff on the other hand wanted the whole in accordance with the agreement.
57. Narendra thereafter sold the life interest to appellants. A substantial part of the consideration was directly paid to the concerned authorities towards arrears of revenue due from the estate.
58. Plaintiff cannot be allowed to claim performance in part several years later. Had the plaintiff been earnest about relinquishing it's claim for reversionary interest, it could have obtained Narendra's life interest in 1977 itself, and at any time upto 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 plaintiffs conduct.
59. Learned counsel for the plaintiff respondent laid great emphasis on the misconduct on the part of the appellant in the course of the trial, in denying his identity as Bob Daswani, and his conduct in proceeding with the construction despite the interim injunction, and submitted that the lack of candour and dishonesty in his pleadings and affidavits, disentitles him to any relief in equity, as one who plays foul with equity cannot use it as a shield. This submission though relevant to the grant or withholding of discretionary relief, where the plaintiff is otherwise not disentitled in law or equity to such relief, cannot be regarded as relevant for the purpose of deciding the existence or otherwise of a legally enforceable contract at the time the trial court granted the decree for specific performance. What does not exist in the eye of law cannot be deemed to exist, because of the acts of omission or commission of the defendant during the course of the trial. If the plaintiff having regard to it's own conduct is not entitled to the relief, the misconduct of the defendants cannot result in plaintiff becoming entitled to such relief.
60. A subsequent purchaser - even one who has purchased with knowledge of the agreement, is entitled to plead by way of defence any ground available to him under the law relating to contract. Section 9 of the Specific Relief Act confers that right on the person against whom the relief is claimed. Relief having been claimed against the purchaser, plea regarding existence of an enforceable contract can be raised by the purchasers. It has been held by the Apex Court in the case of Ram Awdh v. AcMiaibar Dubey, that the lack of readiness and willingness on the part of the plaintiff can be raised by the subsequent purchaser, as that is an essential requirement that should be satisfied by anyone claiming specific performance. The subsistence of a legally enforceable contract being the very foundation for the grant of refief, it is the duty of the plaintiff to establish the same and a subsequent purchaser defendant is entitled to raise a plea in that regard. The conduct of the defendant during the trial has no bearing whatsoever on the determination of that question.
61. The plaintiff is therefore not entitled to a decree for specific performance of the suit agreement, whether in whole or in part. The trial Court was in error in granting a decree for conveyance of the life interest of the vendor. The decree granted by the trial court is liable to be and is set aside. The only relief that can be granted for plaintiff in terms of C1.6 of the agreement is to direct the appellants to refund the advance of Rs.25,000 to the plaintiff.
62. The sale deed obtained by the plaintiff by executing the decree under appeal shall stand cancelled. The Registrar of this Court shall execute a deed of cancellation and have the same registered at the cost and expense of the appellants. The plaintiff will be entitled to the refund of the sum of Rs.5.25 lakhs. That sum as also the advance of Rs.25,000 shall be" set off against the amount payable by the plaintiff to appellants as quantified in the paragraph below.
63. We have now to adjust the equities between the parties with regard to the amounts spent by each of them on the construction put up by them on this property, and income realised by them from that property. Plaintiff has produced letters from the tenants to show that upto 2.12.1991 appellants had realised a total sum of Rs.96,49,990 by way of rentals. According to the appellants the amount received by them is Rs.83,73,474.00. Appellants have stated that they had spent a sum of Rs.16.00 lakhs on the construction put up by them, namely the ground floor and the first floor. Having regard to our conclusion that plaintiff is not entitled to specific performance whether in whole or in part, plaintiff has no right in law or equity to claim any part of the benefits realised or income earned by the appellants from the construction put up by the appellants. Admittedly appellants have not received any income from the construction put up by the plaintiff.
64. The plaintiff was put in possession of me suit property on 25.2.1995. Since that date plaintiff have been receiving the rentals from the two tenants inducted by the appellants in the ground floor of the construction put up by the appellants, that ground floor as also the basement beneath it having been put up by the appellants at their cost. Plaintiff, after obtaining possession has constructed, two floors above the ground floor. That construction is not complete in all respects and remains unused. Plaintiff has claimed that it has incurred an expenditure of Rs.46,28,403 on that construction, of which Rs.8,87,268 is said to be 'finance charges'. Plaintiff has received rentals from the two tenants aggregating to. Rs.92,700 per month from February, 1995 to December, 1998. The amount so received aggregate to Rs.43,56,900. From June, 1999 onwards the total receipts by way of rental per month is Rs.1.90 lakh. For the period from 1st January, 1995 to 30th April, 2001, the rent so received is Rs.53.2 lakhs. Thus the plaintiff has received in all Rs.96.76 lakh as rental from the construction put up by the appellants.
65. The construction put up by the plaintiff though incomplete, will now enure to the benefit of the appellants, to whom plaintiff shall without in any way damaging the building, deliver possession before the end of May, 2001. The rentals shall be payable by the existing tenants to the appellants for the month of May and for future months.
66. The question now is as to the extent to which should the plaintiff should be held liable to the appellants in respect of the income received by the plaintiff from the construction that had been put up by the appellants. After excluding the claim for finance charges as part of the value of his construction put up by plaintiffs the value of the construction put up by the plaintiff, which construction plaintiff will now hand over to the appellant, would be Rs.37.41 lakhs. This amount will have to be deducted from the total sum of Rs.96.76 lakhs received by the plaintiff as rentals from the tenants. After such deduction the amount would be Rs.59.35 lakhs. From this is also to be deducted the sum of Rs.5.50 lakh to which the plaintiff is entitled by reason of the decree for specific performance having been set aside. After such deduction the amount would be Rs.53.85 lakh.
67. It is at this point we must take note of the misconduct of the appellant during the course of the trial. That misconduct cannot be ignored. As rightly submitted by the learned counsel for the plaintiff, no litigant can be permitted to mislead or flout the orders of the Court.
68. Though we have, as required of us, while administering justice according to law and with an even hand, not allowed that misconduct to enter the scales while deciding as to whether a legally enforceable agreement subsisted on the date of the decree for specific performance, and whether plaintiffs conduct was such as to permit a decree for performance in part being made even if a legally enforceable contract is assumed to subsist that misconduct needs must be taken note of while adjusting the equities between the parties with regard to the income realised by the plaintiff during the pendency of the appeal. The sum of Rs.53.85 lakhs otherwise payable by the plaintiff to appellants, shall therefore be reduced by an amount equal to consideration agreed to be paid under the suit agreement. The appellants shall be entitled to recover only the sum of Rs.53.85 lakh - Rs.5.5. lakh = Rs,48.35 lakh. Sums deposited by the plaintiff from the rentals pursuant to the order of the Apex Court while remanding the matter shall be set off against that sum. Appellants will be at liberty to withdraw the sums so deposited by the plaintiff. If the balance sum is not paid within four months from today, that sum shall carry interest at the rate of Rs.12% till the dale of payment and there will be decree for that sum with interest at that rate against the plaintiff.
69. The parties shall bear their respective costs in this appeal as also in the trial court.