Full Judgment Text
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PETITIONER:
LALA DURGA PRASAD AND ANOTHER
Vs.
RESPONDENT:
LALA DEEP CHAND AND OTHERS.
DATE OF JUDGMENT:
18/11/1953
BENCH:
BOSE, VIVIAN
BENCH:
BOSE, VIVIAN
MUKHERJEA, B.K.
BHAGWATI, NATWARLAL H.
CITATION:
1954 AIR 75 1954 SCR 360
CITATOR INFO :
R 1967 SC 978 (10)
F 1971 SC1238 (9)
RF 1973 SC 655 (6)
RF 1982 SC 818 (2)
ACT:
Specific performance-Agreement for sale of land-Suit by
purchaser against vendor and subsequent transferee for
specific performance-Form of decree-Refund of money paid by
subsequent transferee-Contract-Dispute arising subsequently
as to form of warranty-Whether repudiation.
HEADNOTE:
A dispute arising, subsequent to a contract for sale of
land, about the particular form in which the warranty of
title should be inserted in the sale deed cannot affect the
completeness of the contract already made, nor can it amount
to a repudiation of the contract when the party who wanted a
particular form to be adopted does not persist in it and
expresses his readiness and willingness to perform the
contract agreed to. Even it a party insists on a particular
form that would not affect the contract, though it may in
certain circumstances disentitle him to specific
performance.
Bindeshri Prasad v. Mahant Jairam Gir (I.L.R. 9 All. 705)
referred to.
In a suit instituted by a purchaser against the vendor and
a subsequent purchaser for specific performance of the
contract of sale, if the plaintiff succeeds, the proper form
of the decree to be passed is to direct specific performance
of the contract between the vendor and the plaintiff and
direct the subsequent transferee to join in the conveyance
so as to pass on the title which resides in him to the
plaintiff. He does not join in any special covenants made
between the Plaintiff and his vendor; all he does is to pass
on his title to the plaintiff.
Kafiladdin v. Samiraddin (A.I.R. 1931 Cal. 67), Potter v.
Sanders (67 E.R. 1057) and Kali Charan v. Janak Deo (A.I.R.
1932 All. 694) referred to.
In such a suit it would not be right to lay down that in
every case the balance of the purchase money should be paid
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to the subsequent transferee up to the extent of the
consideration paid by him. There may be equities between
the vendor and the subsequent transferee which would make
that improper, and unless these are also raised and decided
in the case, the normal rule should be to direct the money
to be paid to the vendor.
JUDGMENT:
CIVIL APPELLATE JURISDICTION Civil Appeal No. 86
of 1950.
361
Appeal from the Judgment and Decree, dated the 12th May,
1949, of the High Court of judicature at Allahabad (Seth,
Agarwal and Wanchoo JJ.) in First Appeal No. 410 of 1943,
arising out of the judgment and Decree, dated the 28th
April, 1943, of the Court of the first Civil judge of Meerut
in Original Suit No. 4 ,of 1942.
S. K. Dar (Ram Kumar and B. S. Shastri, with him) for the
appellants.
G.S. Pathak (G. C. Mathur, with him) for respondent No.
1.
Jagdish Chandra for the Custodian of Evacuee Property.
1953 November 18. The judgment of the court was
delivered by
BOSE J.-This appeal arises out of a vendee’s suit for
specific performance of a contract of sale dated 7th
February, 1942. The vendor is the first defendant I whom we
will call the Nawab as that is how he has been referred to
in the courts below He is now in Pakistan and his property
has been taken over by the ,Custodian, U. P. The plaintiff
is the vendee and the second and third defendants, who
appeal, are subsequent purchasers.
The only question which we are asked to decide here, except
for certain subsidiary matters, is whether the agreement of
7th February, 1942, was a concluded one. The plaintiff’s
case is that on that date the Nawab agreed to sell the
plaint property to him for Rs. 62,000 and accepted Rs.
10,000 as earnest money the same day. Later, namely on 4th
April, 1942, the Nawab sold the same property to the
appellants for a sum of Rs. 72,000. The plaintiff states
that the appellants had notice of his prior agreement.
The appellant’s case is that the plaintiff’s so called
agreement of 7th February, 1942, was not a concluded one as
the parties never reached finality. They raised a number of
other defences such as misrepresentation and fraud, an
agreement with the Nawab prior to that ,of the plaintiff,
lack of knowledge of the plaintiff’s
362
agreement and so forth. But all those positions were
abandoned in this court and the only point argued, aside
from certain subsidiary ones with which we shall deal later,
was whether the parties reached finality on 7th February,
1942.
The learned trial judge held, among other things,, that
there was no concluded contract and so dismissed the. suit.
In the High Court the appellate Bench which heard the appeal
differed. Harish Chandra J. held that the parties reached
finality while Kaul J. differing from him agreed with the
trial court and held they had not. The matter was
accordingly referred to, a Full Bench of three Judges. All
three held that there was a concluded contract. In view of
this, the appeal was allowed and the plaintiff’s suit was
decreed on condition that the plaintiff deposit Rs. 62,000
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in court. This he did. Defendants Nos. 2 and 3, who, are
subsequent purchasers, appeal.
The plaintiff and the appellants were prepared to compromise
in this court on terms that the plaintiff should get the
property and the apllants be paid Rs. 62,000 to compensate
them for the Rs.. 58,000 which they said they had paid to
the Nawab for their subsequent purchase and for the loss of
the property. (The plaintiff said the appellants paid the
Nawab, Rs. 72,000 and not Rs. 58,000 but there is no finding
about this). As the Nawab’s estate has vested in the
Custodian, U. P., we thought it proper to join him in this
appeal in case he should later lay claim to the plaintiff’s
Rs. 62,000. The fears of the parties regarding the
Custodian, U. P., were justified, for he refused to
compromise and claimed the Rs. 62,000 despite the fact that
the Nawab had already been paid Rs. 58,000. His learned
counsel stated that it was for him to decide whether
anything had been paid to the Nawab and if so how much and
for him to decide what should be done with the Rs. 62,000.
In view of that we have been obliged to proceed with the
appeal.
The differing opinions of the various learned judges who
have handled this case show that the evidence is nicely
balanced. The question of burden accordingly assumes
importance, as also another guide
363
which Judges of experience have applied through the years.
When the question is one of fact and is of a simple nature
It is useful to collect facts which are admitted or proved
beyond doubt and then see which case fits in with those
facts. They are useful as pointers to show the way.
Now the question here is one of fact. The plaintiff founds
on a contract which the defendants deny. He must therefore
prove it. The initial burden is on him. He relies on two
facts in the plaint. The first is that he paid a sum of Rs.
10,000 to the Nawab on 7th February, 1942, by two cheques.
The Nawab accepted this money and cashed the cheques and the
money went into his own account in his bank. The second is
that the Nawab gave the plaintiff a receipt on that date for
this money. These two facts are admitted.
The receipt (Ex. 35-G) is signed by the Nawab and is in
these terms :
"Received this 7th of February, 1942, a sum of Rs.
10,000 by two cheques. as earnest money out of Rs. 62,000
for the contract of sale [of the plaint property] through
Babu Chhater Sen and executed a receipt. 7th February, 1942.
It is further declared that the sale deed would be executed
within three months and that in default the contract would
be deemed cancelled."
This is the language of a completed contract and if there
was nothing more the plaintiff would succeed. The burden
therefore shifts because of the Nawab’s unqualified
admission in this document. We must accordingly turn to the
defendants’ pleadings and their, evidence to see how this
burden is discharged.
The Nawab’s plea in the main is one of fraud and
misrepresentation. In his written statement he says that
there was a previous contract with the appellants for Rs.
58,000 and that they paid him Rs. 6,000 as earnest money on
5th February, 1942. After this, the plaintiff’s broker
Chatter Sen told him (the Nawab) falsely that the appellants
had backed out and that in view of this it would pay the.
Nawab to accept the plaintiff’s offer of Rs. 62,000. The
Nawab believing this
364
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to be true entered into the contract of 7th February, 1942,
with the plaintiff and accepted Rs. 10,000 as earnest money.
He concludes
"The talk, on the plaintiff’s behalf, about payment of the
earnest money conducted through Chattar Sen, broker, was
wholly based on fraud and deception and so it is not
binding."
Stopping there. There is implicit in this plea of fraud and
misrepresentation an averment that the contract was valid
and binding till set aside at the option of the Nawab who
was the defrauded party.
The only other plea relevant to this matter is the
following :
"All the conditions of the sale can under no cir-
cumstance be taken as fulfilled and deemed as fait accompli
between the plaintiff and the answering defendant ; and, for
this reason also, the talk between them about the moabeda is
not enforceable".
This is as vague as it can be and is the kind of woolly
pleading which a party who is not sure of his facts and case
usually makes; no particulars are furnished. But apart from
that, here again the motif of the theme is that there was a
concluded contract which fell to the ground because certain
conditions, presumably conditions precedent, were not
fulfilled. In any case, this does not explain the receipt
and the circumstances in which it came to be given apart
from the explanation which is contained in the plea of
fraud. But that, as we have said, imports the important
averment that there as a concluded contract which bound both
sides until it was set aside at the option of the defrauded
party.
The appellants’ pleas follow the same pattern. It is
true that in paragraph 26 of their written statement they
start by saying that "No agreement was entered into etc...
but they explain that by saying that "whatever proceedings
were taken concerning the plaintiff’s moabeda..... were
taken by defrauding and misrepresenting etc.... and
consequently the moabeda relied on by the plaintiffis
legally invalid."
365
The same theme of fraud and misrepresentation is ,carried
through to paragraphs 27 and 28. There is no clear cut plea
that there was never at any time a concluded agreement and
there is no attempt to explain away the receipt, Exhibit
35G, or to show the circumstances in which it came to be
made.
The issues reflect these pleadings and no issue asks in
clear cut terms whether the parties had reached finality,
nor is the burden anywhere laid on the Nawab and the
appellants to explain away the receipt, Exhibit 35-G.
[Their Lordships then reviewed the evidence.]
A question was also raised about the plaintiff. demanding a
warranty of title and the Nawab refusing. But this had
nothing to do with the bargain struck on 7th February, 1942.
The question of warranty arose in this way. When the sale
deed was in the course of preparation, in March, 1942,
Chattar Sen brought a draft containing a warranty in a form
to which the Nawab’s manager objected because the plaintiff
was insisting on it; but there the matter ended. It is
usual to insert a warranty of title in most sale deeds and
when that is not done the law imports one; and in some deeds
there is a covenant for quiet enjoyment as well. All that
happened here was that the kind of warranty inserted by
Chattar Sen in the draft was not acceptable to the other
side. But nobody suggested either in the evidence or the
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pleadings that the plaintiff refused to accept a sale deed
unless the exact form of warranty placed in the draft was
given. As we have said, this question arose subsequent to
the contract for sale and the plaintiff’s insistence on this
form of warranty at that stage could not affect the contract
of 7th February, 1942. It might in a given case disentitle
him to specific performance as it did in Bindeshri Prasad v.
Mahant Jairam Gir(1). But that would depend upon whether
his proposal regarding a form of warranty to which he was
not entitled was a mere proposal regarding the form of the
sale deed or was a refusal to perform without it. No
question of repudiation or refusal to perform was raised in
the pleadings nor is
(1) I.L.R. 9 All. 705.
366
that to be found in the evidence. On the contrary, the
plaintiff’s letter, dated 22nd April, 1942, Ex. 25 calls
upon the Nawab to complete the conveyance "as agreed to";
and the plaint is to the same effect; it says nothing about
a warranty. In the circumstances, a dispute arising
subsequent to the contract for salt about a particular
clause in the deed during the negotiations about the form
the deed should take cannot affect the completeness of the
contract already made, nor can it amount to repudiation when
it is not persisted in and the plaintiff later expresses his
readiness and willingness to perform the contract "agreed
to".
It was also argued that there was no concluded contract
because the only parties who were competent to contract
never met. On the 7th Chatter Sen met the Nawab and the
defendants’ learned counsel argued that Chattar Sen had no
authority to contract on behalf of the plaintiff. The later
meeting was between the plaintiff and the Nawab’s manager
and it was saidt that the manager had no authority to
conclude the bargain.
There is nothing in this point. The plaint states quite
definitely that Chattar Sen was sent by the. plaintiff with
Rs. 10,000 earnest money and relies on the contract effected
by him. Chattar Sens authority to contract was not
questioned. We cannot allow it to be questioned here. That
means that there was an effective and concluded contract on
the 7th between Chattar Sen, on the plaintiff’s behalf, and
the Nawab direct, both of whom were competent to seal the.
bargain. The question whether the Nawab’s managerhad
authority to complete the contract on the Nawab’s beha when
he met the plaintiff after this does not arise, for on that
date there was already a binding contract in existence.
Disagreeing with the trial court, and agreeing with the
majority of the judges in the High Court, we hold that there
was a completed contract on 7th February, 1942, which the
plaintiff is entitled to have specifically, performed.
Now arises a question which touches the Custodian, Uttar
Pradesh. The contract was for’ Rs. 62,000. The:
367
plaintiff paid Rs. 10,000 as earnest money but this was
later returned, so Rs. 62,000 is still due. But there is a
conveyance outstanding in favour of the appellants for which
they have paid, according to their case, Rs. 58,000. If the
Rs. 62,000 due to the Nawab is paid to him, or to the
Custodian, U. P., who represents his estate, it is evident
that the Nawab, who is at fault, will be paid twice over for
the same property and his estate will benefit accordingly
while the appellants will be left to pursue their remedies
against the Nawab or his estate. The question is whether we
have power to direct that the Rs. 58,000 be paid to the
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appellants. instead of to the Nawab and thus obviate
further, and possibly fruitless litigation. But before we
decide that, we will consider another question which is
bound up with it, namely, the proper form of decree in such
cases.
The practice of the courts in India has not been uniform and
three distinct lines of thought emerge. (We are of course
confining our attention to a Purchaser’s suit for specific
performance). According to one point of view, the proper
form of decree is to declare the subsequent purchase void as
against the plaintiff and direct conveyance by the vendor
alone. A second considers that both vendor and vendee
should join, while a third would limit execution of the
conveyance to the subsequent purchaser.
The only statutory provisions which bear on this point are
section 91 of the Indian Trusts Act, 1882, section 3 of the
Specific Relief Act, 1877, illustration (g), and section 27
of that Act, and section 40 of the Transfer of Property Act.
Section 91 of the Trusts Act, does not make the subsequent
purchaser with notice a trustee properly so called but
saddles him with an obligation in the nature of a trust
(because of section 80) and directs that he must hold the
property for the benefit of the prior "contractor", if we
may so describe the plaintiff,. "to the extent necessary to
give effect to the contract."
Section 3 illustration (g) of the Specific Relief Act makes
him a trustee for the plaintiff but only for ’the
368
purposes of that Act. Section 40 of the Transfer of
Property Act enacts that this obligation can be enforced
against a subsequent transferee with notice but not against
one who holds for consideration and without notice. Section
27 of the Specific Relief Act does not carry the matter any
further. All it savs is that specific performance may be
enforced against "
"(a) either party thereto;
(b)any other person claiming under him by a title arising
subsequently to the contract, except a transferee for value
who has paid his money in good faith and without notice of
the original contract".
None of this helps because none of these provisions
directly relate to the form of the decree. It will there-
fore be necessary to analyse each form in the light of other
provisions of law.
First, we reach the position that the title to the
property has validly passed from the vendor and resides in
the subsequent transferee. The sale to him is not void but
only voidable at the option of the earlier "contractor". As
the title no longer rests in the vendor it would be
illogical from a conveyancing point of view to compel him to
convey to the plaintiff unless steps are taken to re-vest
the title in him either by cancellation of the subsequent
sale or by reconveyance from the subsequent purchaser to
him. We do not know of any case in which a reconveyance. to
the vendor was ordered but Sulaiman C. adopted the other
course in Kali Charan v. Janak Deo(1). He directed
cancellation of the subsequent sale and conveyance to the
plaintiff by the vendor in accordance with the. contract of
sale of which the plaintiff sought. :specific performance.
But though this sounds logical the objection to it is that
it might bring in its train complications between the vendor
and the subsequent purchaser. There may be covenants in the
deed between them which it would be inequitable to disturb
by cancellation of their deed. Accordingly, we do not think
that is a desirable solution.
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(1) A.I.R. 1932 All. 694.
369
We are not enamoured of the next alternative either, namely,
conveyance by the subsequent purchaser alone to the
plaintiff. It is true that would have the effect of vesting
the title to the property in the plaintiff but it might be
inequitable to compel the subsequent transferee to enter
into terms and covenants in the vendor’s agreement with the
plaintiff to which he would never have agreed had he been a
free agent; and if the original contract is varied by
altering or omitting such terms the court will be remaking
the contract, a thing it has no power to do; and in any case
it will no longer be specifically enforcing the original
contract but another and different one.
In our opinion, the proper form of decree is to direct
specific performance of the contract between the vendor and
the plaintiff and direct the subsequent transferee to join
in the conveyance so as to pass on the title which resides
in him to the plaintiff. He does not join in any special
covenants made between the plaintiff and his vendor; all he
does is to pass on his title to the plaintiff. This was the
course followed by the Calcutta High Courtin Kafiladdin v.
Samiraddin (I), and appears to be the English practice. See
Fry on Specific Performance, 6th edition, page 90, Paragraph
207 ; also Potter v. Sanders( 2 ). We direct accordingly.
That brings us to the question of the Rs. 62,000. We do not
think it would be right to lay down that in every case the
balance of the purchase money should be paid to the
subsequent transferee up to the extent of the consideration
paid by him. There may be equities between the vendor and
the subsequent transferee which would make that improper,
so, unlessthey fight the question out as between
themselvesand it is decided as an issue in the case, the
normalrule should be to require that the money be paid to
the vendor. But the circumstances here are peculiar. The
parties before us were prepared to compromise, and had the
Nawab been here it is more than probable that he would have
been glad to agree so as to avoid further litigation. But
he is in Pakistan and is.
(1) A. I. R. 1931 Cal. 67
(2) 67 E. R. 1057
370
beyond the jurisdiction of the Indian courts. We think it
would be inequitable to leave the appellants to pursue what
in all probability is only a will thewisp and for us to
augment the Nawab’s estate by what would appear to be an
unjust enrichment. This is an equitable relief and we have
a wide discretion. We joined the Custodian, U. P., to
afford him the opportunity of showing why we should not take
what appears to be the just and equitable course. We have
afforded him an opportunity of showing how the Nawab could
have defended a suit by the appellants for refund of the
consideration. As he has not been able to show us anything
in the contract between the Nawab and the appellants, or in
the covenants of their deed, which would disentitle the
appellants from claiming Rs. 58,000 from the Nawab, we
consider it right that Rs. 58,000 should be paid to them and
Rs. 4,000 to the Custodian, U. P. All that the Custodian, U.
P., was able to urge was that the whole amount had vested in
him and so was his. But that is not so. The plaintiff was
directed to pay a sum of Rs. 62,000 into court as a
condition precedent to the execution of a sale deed in his
favour. Curiously enough, the decree does not say what is
to be done with the money when it is paid into court. But
so long as it is in court under those conditions it lies
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there subject to such decree as may ultimately be passed in
appeal. We therefore have full power to direct payment of
Rs. 58,000 to the appellants instead of to the Nawab,
especially as there is this lacuna in the decree.
The High Court’s decree will now be modified as follows :-
(1) The Nawab will be directed to execute a sale
deed in the plaintiff’s favour in accordance with the terms
of the contract entered into between them.
(2) The appellants will be directed to join in the
conveyance to the extent indicated above.
(3) After the conveyance has been executed, the
appellants will be paid Rs. 58,000 out of the Rs. 62,000 now
lying in deposit in court as compensation for the loss they
had suffered, without prejudice to any
371
further rights they may have against the Nawab or his
estate.
(4)After this has been done, the Custodian, U. P., will be
at liberty to withdraw the balance of the Rs. 62,000.
Except for these modifications, the decree stands and the
rest of the appeal is dismissed.
The modifications we have made here do not affect the
plaintiffs rights under the decree except to his
advantage. As against him, the appellants
have failed. We accordingly direct that the appellants
pay the plaintiff the costs of this appeal.
There is an application for amendment of the High Court’s
decree. This will be disposed of by the High Court.
Decree of High Court modified.
Agent for the appellant: B. P. Maheshwari.
Agent for respondent No. 1: N. C. Jain.
Agent for the Custodian of Evacuee Property, U. P. C. P.
Lal.
Appeal dismissed