Full Judgment Text
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PETITIONER:
HUNGERFORD INVESTMENT TRUST LIMITED (IN VOLUNTARY
Vs.
RESPONDENT:
HARIDAS MUNDHRA & OTHERS
DATE OF JUDGMENT09/03/1972
BENCH:
MATHEW, KUTTYIL KURIEN
BENCH:
MATHEW, KUTTYIL KURIEN
HEGDE, K.S.
CITATION:
1972 AIR 1826 1972 SCR (3) 690
1972 SCC (3) 684
CITATOR INFO :
R 1980 SC 101 (3)
R 1982 SC 818 (27)
F 1983 SC1272 (12)
ACT:
Specific Relief Act (1 of 1877) repealed by Specific Relief
Act (47 of 1963)--Application for rescission of contract and
decree in 1967 under s. 35 of 1877 Act--When dight to
rescission can be said to have accrued under s. 6 of General
Clauses Act, 1897.
Specific Relief Act (47 of 1963) s. 28-Scope of.
Power of Court to order rescission under the law relating
to specific relief--No time fixed in decree for specific
performance -Effect of-Order of rescission by Court--Nature
of.
Decree for specific performance--If could be executed by
defendant as money decree.
HEADNOTE:
The appellant was the owner of 100% shares in Company ’A’ By
an agreement dated October 30, 1956, between the appellant
and the respondent, the respondent purchased 49% of the
shares with an option to purchase the balance of 51 %
shares. The respondent exercised his option but as the
shares were not transferred to him he filed a suit. The
suit was decreed and the decree for specific performance
provided that the 51 % shares should be delivered to the
respondent against payment by him to the appellant of their
value; and an injunction was also granted Restraining the
appellant from voting except in accordance with the
instructions of the respondent. Except as regards the
injunction, the trail court, however, stayed execution of
the decree and the stay was continued by the appellate court
till the appeal was dismissed in 1965.
The appellant filed an application in 1965 praying that the
respondent may be directed to pay the consideration amount
within such time as the Court may direct, but the
application was dismissed.
Meanwhile, there were certain orders of attachment of the
decree, whose effect was that the respondent was prohibited
and restrained from alienating, transferring or charging his
right, title and interest in the decree or from obtaining
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satisfaction thereof. Further, in February 1965, a company
’B’ which bad obtained a decree against a holding company of
the appellant, applied for execution and got the 51% shares
of the appellant attached. The executing court ordered that
those shares should be produced for delivery to the
respondent against payment of the consideration mentioned in
the specific performance decree.
The ’A’ Company also instituted a suit against the appellant
in respect of payment made by ’A’ to the Income-tax
authorities on behalf of the appellant and prayed for
possession and sale of the 51% shares in the
691
exercise of their lien on those shares. A receiver was
appointed in respect of those shares and the Court directed
that the Receiver would be at liberty deliver the 51% shares
to the respondent on payment of the consideration. This
order was communicated by the appellant to the respondent on
January, 11, 1967, and even before that date the appellant
wrote two letters to the respondent asking him to be ready
with the amount to be paid by him and to take delivery of
the shares. Those letters were refused by the respondent
and in reply to the letter dated, January 11, 1967, the
respondent raised the objection that the appellant was not
in a position to give delivery of the shares and that the
order of the Court was not binding on him because he was not
a party to the suit in which that order was passed. By a
letter dated February 11, 1967, addressed to the respondent,
the appellant stated that the respondent had forfeited his
right to purchase the 51% shares under the specific
performance decree as he had failed to fulfil his obligation
in pursuance of the notice of the appellant dated January
11, 1967. Thereafter, in March 1967, the. appellant filed
an application for rescission of the agreement of sale of
1956 as also the decree for specific performance of the
agreement.
The trial court held that the respondent was not keen on
paying the purchase money and get the transfer of 51% shares
for the reason that the injunction granted by the Court
restraining the appellant from voting except under the
instructions of the respondent made the respondent virtually
the owner of the 100% shares in ’A’ company, with full
control, that therefore, the respondent had committed breach
of the contract which he was directed specifically to
perform, that he created a situation which had made it
impossible for him to perform his part of the obligation,
and hence the decree for specific performance must be
rescinded. The trail court appointed the Receiver in the
suit by the ’A’ company against the appellant as Receiver of
the 51% shares and directed the respondent to pay the
consideration money to the Receiver within a fortnight from
the date of the order and directed the Receiver to hand over
the shares to the respondent; and that, in default of such
payment within the time specified the contract and the
decree would stand rescinded, and that the appellant would
be absolved from all obligations thereunder.
The appellate court however held that the application filed
by the appellant for the rescission of the contract and
decree was not maintain,able under the Specific Relief Act
of 1877 or of 1963.
Allowing the appeal to this Court,
HELD: (1) The Specific Relief Act, 1877 was repealed by the
Specific Relief Act of 1963 and the appellant had no accrued
right on the date of the repeal to file the application
under s. 35 of the 1877Act read with s. 6 of the General
Clauses Act, 1897. [700G-H]
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The right to rescind the decree under s. 35 can arise only
if the purchaser makes default in paying the purchase money
ordered to be paid under the decree. But before the lapse
of reasonable time from the date of the decree the appellant
could have no right to have the decree rescinded on the
ground of default. Such a default had not occurred when the
Specific Relief Act, 1877, was repealed as a reasonable time
for the performance of the obligation under the decree had
not elapsed from the date of the decree. There was no
default till 1965 in the Present case, as the execution of
the decree was stayed by orders of the trial court and the
appellate court. [700D-G).
692
(2) Since s. 28 of the Specific Relief Act, 1963, provides
only for an application for rescission, of a decree for
specific performance for sale or lease of immovable property
no application to rescind a decree for specific performance
of an agreement to sell movables would lie under that
section. [7Ol-A-B]
(3) But the Specific Relief Act, 1963, is not an exhaustive
enactment, and under the law relating to specific relief a
Court which passes a decree for specific performance retains
control ever the decree even after the decree had been
passed. Therefore, the Court, in the present case, ’re-
tained control over the matter despite the decree and it was
open to the Court, when it was alleged that the party moved
against had positively refused to complete, the contract, to
entertain the application and order rescission of the decree
if the allegation was proved. [701B-C; 703B-C]
Ramdas Khatau & Co. v. Atlas Mills Co. Led., A.I.R. 1931
Bombay 151; Rahmath Unnissa Begum v. Shimoga Co-operative
Bank Ltd., A.I.R. 1951 Mysore 59; Firm Kishore Chand Shiva
Charan Lal v. Budaun Electric Supply Co., A.I.R. 1944 All.
66, 77; Mohommadali Sahib v. Abdul Khadir Saheb, (1930) 59
M.L.J. 351; Pearisundari Dassee v. Hari Charan Mazumdar
Chowdhry, I.L.R. 15 Cal. 211; Someshwar Dyal v. Widow of
Lalman shah, A.I.R. 1958 All. 488, Anandilal poddar v.
Gunendra, A.I.R. 1966, Cal. 107 and Tribeni Tewary v.
Ramratan Naina, A.I.R. 1959 Patna 460, referred to.
(4) The respondent had, by his conduct and letter evinced an
intention not to perform his part of the contract.
Therefore, the fact that no time had been fixed in the
decree would not preclude the Court from adjudging the
contract as rescinded. [7O5 E-H]
(a) If a contract does not specify time for performance the
law will imply under s. 46 of the Contract Act that the
parties intended that the obligation under the contract
should he performed within a reasonable time depending on
the circumstances of the case. The Contract between the
parties was not extinguished by the passing of the specific
performance decree and as the contract subsisted despite the
decree, and as the’ decree did not abrogate or modify any
of the express or implied terms of the contract it must be
presumed that the parties to the contract were under the
obligation to complete it within a reasonable time. [7O3E-H]
(b) The respondent, by exercising his option to purchase the
51% shares became entitled to obtain a conveyance of the
share from the appellant on payment of the purchase money.
There was no provision in the agreement as to when
thereafter the appellant should convey the shares.
Therefore, it was open to either party to make time
essential by intimating the other party, after a reasonable
period, about it after expressing its or his readiness and
willingness to. perform its or his obligation under the
contract. The liberty was not taken, away because a decree
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had been passed for specific performance of the contract
without fixing the time for its performance. [7O3H; 704A-C]
Observations in Fry on Specific Performance 6th edn. p. 546
and Halsbury’s Laws of England 3rd edition vol. 36, 351 to
352, explained.
(5) As the receiver had the shares in his possession, and as
there was an order of the Court directing him to deliver
possession ’of the shares on payment of the purchase money,
intimation regarding which was given by the appellant to the
respondent, there is no substance in the objection that the
appellant was not in a position to deliver the shares.,
[705F-G]
693
(6) When. the Court adjudges rescission of a contract or a
decree it is only concerned with the question whether, the
person rescinding it was justified in doing so. In the
present case when the appellant came to the Court with its
application for rescission there was already a rescission of
the contract and the decree by its letter dated February 11,
1967. It only wanted a declaration by adjudgment by the
Court that it was justified in doing so. The Court did not
create any right which the parties did not possess when it
made a declaration that the contract had been validly
rescinded. Merely because it is necessary for the Court to
pass such an order it does not follow that it is the Court
that rescinds the contract. It is only deciding upon the
validity of the rescission already made by the party. [7O6A-
E]
Therefore, the respondent could not complain that, because
the appellant obtain a stay of the order passed by the trial
court giving the respondent a fortnight’s time to pay the
purchase money the appellant prevented him from paying the
purchase money, and resist the prayer for rescission. [7O6A-
B]
Abram Steamship Company Ltd. v. Westville Shipping Company
Ltd. L.R. [1923] A.C. 781, referred to.
(7) There is no substance in the contention of the
respondent that the appellant was not in a position to give
a good title to the shares because ’A’ company claimed a
lien in respect of the shares. [707C-D]
(8) It could not be contended that the remedy of the
appellant was to execute the decree for specific performance
as a decree for money. [7O9B-C]
A decree for specific performance is a decree in favour of
both the plaintiff and defendant in the suit, but it could
be executed only in the manner prescribed by 0.31, r. 32,
C.P.C. The appellant could not have executed the decree
against the respondent as a money decree and realised the
purchase money from him. Therefore, if the respondent
refused to pay the purchase money there was nothing which
prevented the appellant from applying for rescission of the
decree. [7O7E-H; 708G-H; 709]
Heramba Chandra Maitra v. Jyotish Chandra Sinha, A.I.R. 1932
Cal. 579 and Bai Karimabibi v. Abderahman Sayad Banu, A.I.R.
1923 Bom. 26, referred to.
(9) The only question with which the Court was concerned was
whether the respondent had disabled himself from performing
his part of the obligation under the decree. The fact that
attachments of the decree by creditors prevented him from
performing his part of the obligation under the decree or
obtain satisfaction thereof would not him any the less a
defaulter so far as performance of his part of the
obligation under the decree is concerned. [709E-G]
(10) There is no substance in the contention that the
attachment, by B-company of the 51% shares made it
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impossible for, the appellant to deliver the shares to the
respondent as the attachment order directed that the 51%
shares should be produced for delivery to the respondent
against payment of the consideration mentioned in the
specific Performance decree. [709G-H]
JUDGMENT:
CIVIL APPELLATE JUIUSDICTION: Civil Appeal No. 488 of 1971.
--1031 Sup.CI/72
694
Appeal from the judgment and, decree dated September 14,
1970 of the Calcutta High Court in Appeal No. 148 of 1969.
S. Y. Gupte, S. B. Mukherjee, B. N. Garg, K. K. Jain,
D. N. Sinha, Lina Seth, M. M. N. Pombra and H. K. Puri,
for the appellant.
R. C. Dev, Somnath Chatterjee, M. Bose, S. Swarup and P.
C. Bhartari, for respondent No. 1.
A. K. Sen, Shanker Ghosh, D. N. Gupta, N. Khaitan, Krishna
Sen and B. P. Singh, for respondent No. 4.
S. S. Khanduja, Promod Swarup and Lalita Kohli, for respon-
dents Nos. 7 and 8.
Gobind Das and B. D. Sharma, for respondent No. 1.
The Judgment of the Court was delivered by
Mathew, J.- This is an appeal with certificate- from a
judgment of a Division Bench of the Calcutta High Court,
setting aside the order of a single judge of the Court
allowing an application filed by the appellant for
rescission of an agreement for sale dated October 30, 1956,
as also the decree dated February 25, 1964, for specific
performance of the agreement and for other alternative
reliefs specified in the application.
Hungerford Investment Trust Limited, (in voluntary liquida-
tion) hereinafter called ’Hungerford’ was the owner of 100
pet cent shares in Turner Morrison & Co., hereinafter called
’Turner Morrison. John Geoffrey Turner and Nigel Frederic
Turner, both since deceased, were the owners of the 100 per
cent shares of Hungerford. The entire share capital of
Turner Morrison consisted of 4,500 fully paid up ordinary
shares of Rs. 1,000/each.
By exchange of letters it was agreed that Haridas Mundhra,
hereinafter called ’Mundhra’ would purchase from
’Hungerford, 49 per cent shares of Turner Morrison. The
agreement also provided for an option to Mundhra to purchase
from Hungerford, the balance of 51 per cent shares of Turner
Morrison within 5 years. A formal agreement dated October
30, 1956, was ’executed between Hungerford, John Geoffrey
Turner and Nigel Frederic Turner on the one hand, and
British India Corporation and Haridas Mundhra on the other,
embodying the terms of the agreement. Pursuant to this
agreement, 49 per cent of the shares in Turner Morrison was
sold and transferred to Mundhra and his nominee British
India Corporation. Thereafter, Mundhra exercised his option
to purchase, the 51 per cent shares. But the
695
shares were not sold or transferred to him. So, on April
19, 1961, Mundhra filed a suit. against Hungerford, Turner
Morrison and others for specific performance of the
agreement to sell the 51 per cent shares (Suit No. 600 of
1961). As Mundhra did not want to proceed against Turner
Morrison, the suit was dismissed as against that company and
a decree was passed on February 25, 1964. The decree
provided that the agreement relating to the sale of 51 per
cent ordinary shares of Turner Morrison ought to be
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specifically performed and directed Hungerford to deliver to
Mundhra, the 51 per cent shares against payment of the
consideration of Rs. 86,60,000/-. An injunction was also
granted restraining Hungerford and the other defendants in
the suit from voting except in accordance with the
instruction of Mundhra and restraining Hungerford from
selling the shares to any person other than Mundhra. The
decree, except as regards the injunction, was stayed by the
trial judge, on the application of the appellant, for 3
weeks.
Hungerford, along with some other defendants, filed an
appeal from the decree on March 18, 1964 (Appeal No. 69 of
1964) and obtained a stay of execution of the decree except
in so far as it related to the injunction, until the
disposal of the appeal. The appeal was dismissed on August
26, 1964, for the reason that it was withdrawn by the
appellant, leaving Mundhra free to perform his part of the
obligation under the decree.
By a Master’s summons dated August 30, 1965, Hungerford made
an application praying that Mundhra may be directed to
implement the decree by paying Rs. 86,60,000/, the unpaid
purchase money, within such time as the Court may direct,
that Hungerford be directed to execute proper transfer deeds
in respect of the 5 1 per cent shares within such time as
the Court may direct; and that in default of payment of Rs.
86,60,000/- by Mundhra within the period to be fixed, the
Court may order the rescission of the agreement and the
decree. The application was dismissed on September 28,
1965, by Justice Ray, holding that the application was one
for execution of the decree in Suit No. 600 of 1961 and must
be in a tabular form and "that any imposition of time limit
Would be to engraft something on the decree which does not
exist in the decree’. Hungerford preferred an appeal
against the said order (Appeal No. 286 of 1965). The appeal
was dismissed on August 8, 1966. The application of
Hungerford for leave to appeal to this Court was also
dismissed on November 25, 1968.
Before the dismissal of appeal No. 69 of 1964 filed against
the decree for specific performance in suit No. 600 of 1961,
the Certificate Officer, 24 Parganas had attached that
decree, as Mundhra failed to satisfy six certificates then
pending against him.
696
In pursuance to a Memorandum issued by the Certificate
Officer.Ray, J. made an order dated March 2, 1964, staying
the execution of the decree until cancellation of the notice
by the Certificate Officer or until the Certificate Officer
or the debtor applied for execution of the decree. The
decree in suit No. 600 of 1961 was also attached in
execution of three other decrees, namely the decree obtained
by Champaran Sugar Co. Ltd. and B British India Corporation
Ltd. in suit No. 179 of 1960 of the Court of Civil Judge,
Kanpur and those obtained by Kanpur Sugar Works Ltd. and
British India Corporation Ltd. in suit No. 178 of 1960 in
the Court of Second Civil Judge, Kanpur and the Life
Insurance Corporation of India in special. appeal No. 299 of
1961 of the High Court of Allahabad. The effect of these
orders of -attachment was that the decree-holder Mundhra
was prohibited and restrained from alienating, transferring
or charging his right, title and interest in the decree in
suit No. 600 of 1961 or from obtaining satisfaction thereof.
In February, 1965, Bank Hoffman A.G. obtained a decree D
from Queen’s Bench Division, London, for pound 657,345-17-
9d.with interest at 41 per cent per annum from the date of
decree against Romanigo Holdings S.A.H., a holding company
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of Hungerford and also against Hungerford. Bank Hoffman
executed the decree in the Court of District Judge, Delhi,
and got the 51 per cent shares of Hungerford attached. The
District Judge ordered the attachment and directed that the
51 per cent shares be produced in the High Court of Calcutta
for delivery to Mundhra against payment of consideration
mentioned in the specific performance decree.
Hungerford was in control of Turner Morrison upto February
25, 1964, when the injunction in regard to voting rights was
granted. It had kept scripts of 707 shares out of 2,295
shares in the office of Turner Morrison. When Mundhra got
control of Turner Morrison, these scripts went under his
control and power. The Liquidators of Hungerford wrote on
December 12, 1964, to Turner Morrison to deliver the scripts
of 707 shares to M/s Sanderson and Margon, solicitors of
Hungerford. The request for delivery of 707 shares was
repeated by Sanderson and Margon on December 22, 1964.
Turner Morrison wrote a letter on January ll, 1965 to K. N.
Srivastava, Income Tax Officer, if the 707 shares’ scripts
could be delivered to Hungerford and if the Income Tax
Officer had any objection to such delivery. On January 13,
1965, Turner Morrison’s solicitors wrote to M/s. Sanderson
and Morgan that 707 shares, had become the property of
Mundhra and, for the first time, also claimed: that there
was a lien on the shares. On January 18, 1956 K. N.
Srivastava, the Income Tax.
697
Officer, wrote a letter raising objection to the delivery of
707 .shares to Hungerford although the Income Tax
Department had no claim on these shares.
Turner Morrison instituted a suit against Hungerford (Suit
No. 2005 of 1965) in the Calcutta High Court claiming Rs.,
79,70,802 as principal and Rs. 47,96,250.16 as interest, in
respect of payment made by Turner Morrison to Income Tax
authorities on behalf of Hungerford under section 23(a) of
the Indian Income Tax Act, 1922. A claim was also made in
the suit for possession and sale of the 2,295 shares in the
exercise of their lien on those shares under Article 22 of
the Articles of Association of the Company. Mundhra was not
a party to the suit. Turner Morrison made an ex-parte
application in the suit on July 8, 1966, for appointment of
a receiver in respect of the 2,295 shares. Mr. K. B. Bose
was appointed receiver, and he took possession of 1,588
shares from the First National City Bank. and 707 shares
from the Police. On July 13, 1966, Sen J. passed an order
confirming the order of appointment of the receiver and
directing that the receiver will be at liberty to deliver
the 51 per cent of shares to Mundhra on payment of Rs.
86,60,000/- in performance of his part of the obligation
under the decree, if so required by the Court hearing appeal
No. 286 of 1965. The order also provided that if Mundhra
takes the shares on payment of the price directed to be paid
by the decree, or in direction of the Court of appeal, the
lien if any, as claimed by Turner Morrison will shift on to
the money which the receiver would get from Mundhra.
Turner Morrison preferred an appeal against the order and
applied for stay of the order. The stay was refused but the
appeal was partly allowed on September 2, 1968, by setting
aside the direction given to the receiver to tender the
shares to Mundhra as also the direction that the lien of
Turner Morrison would shift to the purchase money to be paid
by Mundhra.
On March 21, 1967, the application from which the present
appeal arises, was made by Hungerford (the appellant hero,-)
be fore the High Court. The prayers in the application
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were inartistically worded. It was prayed that the
agreement dated October 30, 1956, and the decree dated
February 25, 1964, passed in suit No. 600 of 1961 be
rescinded, that the injunction granted by the decree in the
suit be vacated unless Mundhra (the 1st respondent here)
deposits Rs. 86,60,000/. in the Court or with the receiver
in suit No. 2005 of 1965, that the receiver appointed in
suit No. 2005 of 1965 be appointed as receiver in the suit
for specific performance in respect of the said 2,295
shares, that the receiver be directed to tender, on a day
certain, the said shares to
698
Mundra, and Mundhra be directed to pay the sum of Rs.
86,60,000/- to the receiver on that day and to declare that
if Mundhra failed to pay the amount to the receiver on or
before ,the day, the agreement dated October 30, 1956 and
the decree dated February 25, 1964, would stand rescinded.
This application was allowed by Masood J.
The learned judge overruled the objection of Mundhra that
the application was not maintainable and held that it was
maintainable under- section 35 of the Specific Relief Act,
1877, notwithstanding the repeal of that Act by the Specific
Relief Act, 1963, as the appellant had, an accrued right
under the section to make the application even before the
repeal.
The learned judge then found that Mundhra was not keen in
paying the purchase money and getting transfer of the 51 per
cent shares for the reason that the injunction granted by
the Court in the decree in suit No. 600 of 1961 restraining
the appellant from voting except in accordance with the
instruction of Mundhra made him virtually the owner of 100
per cent shares in Turner Morrison, and if without paying
any amount for the 51 per cent shares of Turner Morrison, he
got control of Turner Morrison, it was to his interest not
to pay anything to the appellant.
As regards the objection by Mundhra that since Turner Morri-
son claimed a lien on the 51 per cent shares and, therefore; the
appellant was not in a position to deliver the shares
free from encumbrance, he held that there was no bona-fides
in the claim of Turner Morrison : firstly because the lien
was not set up by Turner Morrison in its written statement
in the suit filed by Mundhra for specific performance,
secondly because in the suit filed by Turner Morrison
claiming,the lien, Mundhra, who was interested in the shares
upon which the lien was claimed was not made a party and
thirdly for the reason that by his letter dated November 29,
1955, Mundhra had agreed that Turner Morrison would pay the
income tax liabilities of Hungerford to the extent of Rs. 46
lakhs. The learned Judge found it impossible to believe
that Mundhra had no knowledge about the suit filed by Turner
Morrison claiming the lien as he was in complete control of
Turner Morrison at the time the suit was filed and said that
Turner Morrison and Mundhra were colluding with each other
to defeat the appellant in its attempt to get the purchase
money from Mundhra and that suit No. 2005 of 1965 was
instituted with the connivance, of Mundhra. The learned
judge also found that even if Turner Morrison had a lien on
those shares, since there was no covenant for tide, Mundhra
was :not justified in declining to take delivery of the
shares on the score that Turner’Morrison had a lien upon the
shares.
699
The learned judge, after evaluating all the circumstances
ultimately came to the conclusion that Mundhra committed
breach of the contract which he was directed specifically to
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perform, that he created a situation which made it
practically impossible for him to perform his part of the
obligation under the decree land that the agreement dated
October 30, 1956 and the decree dated February 25, 1964, for
specific performance must be rescinded. The learned judge,
therefore, appointed the receiver in suit No. 2005 of 1965
as receiver of the 51 per cent shares and directed Mundhra
to pay Rs. 86,60,000/- to the receiver within a fortnight
from the date of the order and the receiver to hand over the
51 per cent of the shares to Mundhra’s solicitors if the
amount was paid as directed. The receiver was also directed
to pay the amount to the solicitors of Hungerford. The stay
order passed by Ray J. on March 2, 1964, was vacated and
liberty was given to the Certificate Officer or the Tax
Recovery Officer, 24 Parganas to take such steps against
Mundhra as he thought fit. In default of payment of Rs.
86,60,000/- by Mundhra to the receiver with in the time
specified, the Court directed that the contract and the
decree would stand rescinded and Hungerford absolved from
all obligations under the said contract and the decree.
Against the decision, the appellant filed appeal No. 148 of
1969 before a Division Bench of the Court and Mundhra filed
a cross-objection.
The appellate Court found that if Mundhra was really inte-
rested in getting transfer of the shares by paying the
money, he would not have allowed the opportunity to acquire
the shares under the order dated July 13, 1966, to slip by,
that Mundhra knew of the order of July 13, 1966, and also of
the opportunity given to him by the order to get delivery of
the shares on payment of the purchase money, but that he did
not avail of the opportunity for the reason that, if without
paying money, he could virtually enjoy the same advantage,
it would be foolish from a businessman’s point of view to
invest any amount in purchasing the shares. The Court
observed
"A businessman who files a suit for specific
performance of a contract to buy sh
ares and
prosecutes that suit to a successful
termination in his, favour, will not fritter
away the benefit under the decree except for a
higher or superior advantage and that
advantage Mundhra got under the decree in suit
No. 600 of 1961."
The Court then held that application filed by the appellant
for rescission of the contract and the decree was _not main-
tainable. The reasoning of the Court was two-fold. no Court
700
said that the appellant had no accrued, right to apply for
rescission under section 35 of the Specific Relief Act,
1877, which would survive the repeal of that Act by the
Specific Relief Act, 1963, and so, no application for
rescission would lie under section 35 of the old Act read
with section 6 of the General Clauses Act, 1897. It
then,held that since section 28 of the Specific Relief Act,
1963, only provided for rescission of a decree for specific
performance of a contract for the sale or lease of immovable
property, the application was incompetent under the section
and allowed the appeal and cross-objection in part.
We do not think that the appellant had an accrued right for
rescission of the contract or the decree for specific
performance under section 35 of the Specific Relief Act,
1877, when the Act was repealed by the Specific Relief Act,
1963, on March 1, 1964. It may be recalled that the decree
in suit No. 600 of 1961 was passed on February 25, 1964 and
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that the application for rescission of the decree was filed
on March 21, 1967. Section 35 of the Specific Relief Act,
1877, so far as it is material for the purpose of this case,
provided that where a decree for specific performance of a
contract of sale or of a contract to take a lease has been
made and the purchaser or lessee makes default in payment of
the purchase money, which the Court has ordered him to pay,
the decree may be rescinded as regards the party in default
either by a suit or by an application. The right to rescind
the decree under the section can arise only if the purchaser
makes default in paying the purchase money ordered to be
paid under the decree. Before the lapse of a reasonable
time from the date of the decree, the appellant could have
no right to have the decree rescinded on the ground of
default of the purchaser. To put it in other words, the
right of the,appellant to have the decree rescinded was
dependent upon the default of the purchaser in paying the
purchase money. Such a default had not occurred when the
Specific Relief Act, 1877, was repealed, as a reasonable
time for the performance of the obligation under the decree
had not elapsed from the date of the decree. The more
important reason why there was no default in this case was
that the execution of the decree in suit No. 600 of 1961 was
stayed by orders of the trial and appellate Court till
August 26, 1964. We, therefore, agree with the finding of
the Division Bench that the appellant had no accrued right
on the date of the repeal to file an application under
section 35 of. the Specific Relief Act 1877, which was saved
under section 6 of the General Clauses Act, 1891. The mere
right to take advantage of the provisions of an Act is not accru
ed right [see Abbott v. The Minister for plans(1)].
(1) [1895] A.C. 425.
701
We also agree with the finding of the Division Bench that
since section 28 of the Specific Relief Art. 1963, provides
only for An application for rescission of a decree for
specific performance for the sale or lease of immovable
property, no application to rescind a decree for specific
performance of an agreement to sell movables, would lie
under that section.
The question then is whether the application was maintain-
able under any other provision of the law. The Specific
Relief Act, 1963, is not an exhaustive enactment. It does
not consolidate the whole law on the subject. As the
preamble Would indicate, it is an Act "to define and amend
the law relating to certain kinds of specific relief". It
does not purport to lay down the law relating to specific
relief in all its ramifications. In Ramdas Khatau & Co. v.
Atlas Mills Co. Ltd.(1) it was held that the Specific Relief
Act, 1877, was not exhaustive. In Rahmath Unnissa Begum v.
Shimoga Co-operative Bank Ltd. another(2) the Court said
that the Specific Relief Act, 1877, is founded on English
equity jurisprudence and that it is permissible to refer to
English Law on the subject wherever the Act did not deal
specifically with any topic [see also Firm Kishore Chand
Shiva Charan Lal and another v. Budaun Electric Supply Co.
Ltd.(3)]. Although a matter on which the Act defines the law
it might generally be exhaustive, the Act as a whole cannot
be considered as exhaustive of the whole branch of the law
of specific performance.
It is settled by a long course of decisions of the Indian
High Courts that the Court which passes a decree for
specific performance retains control over the decree even
after the decree has been passed. In Mahommadalli Sahib v.
Abdul Khadir Saheb(4) it was held that the Court which
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passes a decree for specific performance has the power to
extend the time, fixed in the decree for the reason that
Court retains control over the decree, that the contract
between the parties is not extinguished by the passing of a
decree for specific performance and that the contract
subsists notwithstanding the passing of the decree. In
Pearisundari Dassee v. Hari Charan Mozumdar Chowdhry(5) the
Calcutta High Court said that the Court retains control over
the proceedings even after a decree for specific performance
has been passed, that the decree passed in a suit for
specific performance is not a final decree and that the suit
must, be deemed to be pending even after the decree. The
same view was taken in Someshwar Dayal and others v. Widow
of Lalman Shahand others(6).. In Anandilal Poddar v.
Gunendra Kr. Roy and another(7) Raj J, speaking
(1) A.I.R.1931 Bombay 151.
(2) A.I.R. 1951 Mysore 59.
(3) A.I.R. (31) 1944 Allahabad 66 at p. 77.
(4) (1930) M.L.J. Vol. 59, p. 351.
(5) I.L.R. Calcutta Series, Vol. XV, p. 211.
(6) A.I.R. 1958 Allahabad 488.
(7) A.I.R. 1966 Calcutta 107.
702
for the Court, said that the court retains control over the
matter even after passing ’a decree for specific performance
and that virtually, the decree is in the nature of a
preliminary one,. In Tribeni Tewary and others v. Ramratan
Nonia and others(1) it was held that the Court retains
seisin of the case notwithstanding the fact that a decree
for specific performance has been passed and that the decree
is really in the nature of a preliminary decree. Fry in’
his book(2) on Specific Performance states the law in
England as follows
"It may and not unfrequently does happen that after judgment
has been given for the-specific performance of a contract,
some further relief becomes necessary, in consequence of one
or other of the parties making default in the performance of
something which ought under the judgment to be performed by
him or on his part; as for instance, where a vendor refuses
or is unable to execute a proper conveyance of the
property, or a purchaser to pay the purchase money.....
"There are two kinds of relief after judgment for specific
performance of which either party to the contract may, in a
proper case, avail himself :
(i) He may obtain (on motion in the action) on order
appointing a definite time and place for the completion of
the contract by payment of the un-paid purchase-money and
delivery over of the executed conveyance and title deeds, or
a period within which the judgment is to be obeyed, and, if
the other party fails to obey the order, may thereupon at
once issue a writ of sequestration against the defaulting
party’s estate And effects........"
(ii) He may apply to the Court (by motion in the action) for
an order rescinding the contract. On an application of
kind, if it appears that the party moved against has
positively refused to complete the contract, its immediate
rescission may be ordered; otherwise, the order will be for
rescission default of completion within a limited
time......"
(1) A.I.R. 1959 Patna 460.
(2) Fry on Specific Performance, 6th ed. p.546.
703
In Halsbury’s laws of England(1) the law is
stated as under
"Ancillary relief may be obtained after
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judgment in an action for, specific
performance where such further relief becomes
necessary........
Either party may also obtain an order
rescinding the contract in default of
completion within a fixed time."
As the Court retained control over the matter despite the
decree, it was open to the Court, when it was alleged that
them party moved against has positively refused to complete
the contract to entertain the application and order
rescission of the decree if the allegation was proved. We,
therefore, think that the application of the appellant was
competent.
It was contended on behalf of Mundhra that he was always
ready and willing to pay the purchase money, but since the
decree did not specify any time for payment of the money,
there was no default on. his part. In other words, the
contention was that since the decree did not specify a time
within. which the purchase money should be paid and, since
an application for fixing the time was made by the appellant
and dismissed by the Court, Mundhra cannot be Said to have
been ’in default in not paying the purchase money so that
the appellant might apply for rescission of the decree. If
a contract does not specify the time for performance, the
law will imply that the parties intended that the
obligation, under the contract should be performed within a
reasonable time. Section 46 of the Contract Act provides
that where, by a contract, a promisor is to perform
his,promise without application by the promisee, and no time
for performance is specified, the engagement must be
performed within a reasonable time and the question " what
is reasonable time" is, in each particular case, a question
of’ fact. We have already indicated that the contract
between the parties was not extinguished by the passing of
the decree, that it subsisted notwithstanding the decree.
It was an implied term of’ the contract and, therefore, of
the decree passed thereon that the parties would perform the
contract within a reasonable time. To, put it in other
words, as the contract subsisted despite the decree and as
the decree did not abrogate or modify any of the express or
implied terms of the contract, it must be presumed that the
parties to the decree had the obligation, to complete the
contract within, a reasonable time.
The matter can be looked at from another angle. Mundhra by
exercising the option to purchase the 51 per cent shares,
became entitled to obtain a conveyance of the shares from
the apellant on payment of the purchase money. ’Mere was no
(1) Halsbury’s Laws of England 3rd Ed,, Vol, 36. 351-52.
704
vision in the agreement at what time or within what period
after the exercise of the option the appellant should convey
the shares against the payment of the purchase money. But
it was open to either party to make time essential by
intimating the other party after a reasonable period about
it after expressing its or his readiness and willingness to
perform its or his obligation under the contract. That
liberty was not taken away because a decree has been passed
for specific performance of the contract without fixing the
time for the performance. The appellant could, therefore,
have called upon Mundhra to pay the purchase money and take
delivery of the shares within reasonable time. The fact
that the decree did not fix a time for completing the
contract did not prevent either party from demanding
performance from other party within a reasonable time and
thus make time essential, as the parties had that liberty
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before the decree was passed and the decree did not abrog
ate that liberty in any way, and if the party ’from whom
performance was demanded evinced by his conduct that he was
unwilling to perform his part, then it was open to the party
claiming performance to rescind the contract and obtain an
,order from the Court adjudging rescission of the contract
and the decree thereon. We do not think, in case the Court
comes to the conclusion that the party moved against has by
conduct evinced an intention not to perform his part of the
contract, the fact that no time has been fixed in the
decree would preclude it from adjudging the contract as
rescinded. The observation of Fry already quoted does not
mean that unless a time is specified in the decree there can
be no default. It only means that if the conduct of the
party moved against is equivocal, an order for rescission
will be made only in default of completion within a
specified time. Nor can the observation quoted above from
Halsbury’s Laws of England bear any other construction. We
have already indicated that section 28 of the Specific
Relief Act. 1963, deals only with rescission of a decree for
specific performance "of an agreement to sell or lease
immovable property and so the terms of the section are
hardly relevant in deciding the question whether there can
be default without fixing the time for performance in a
decree for specific performance of an agreement to sell
movables. We think it unnecessary to decide the question
whether, under arty circumstances, there can be default of
performance where a decree for specific performance of an
agreement to sell or lease immovable property does not
specify the time of performance for the purpose of an
application for rescission of the decree.
It is no doubt true that after the, decree in suit No. 600
of 1 96 1, a stay was’obtained by the appellant preventing
the execution of the decree: an appeal was also prefer-red
against that decree and a stay obtained for the same
purpose, from the appellate court and
705
that the order continued in force till the, disposal of the
appeal Oil August 26, 1965. Till then, there can be no
question of Mundhra being in default because he was not
required by the orders of Court to perform his part of the
obligation under the decree. But the: question is, was he
in default after August 26, 1965, in performing his part of
the obligation under the decree ? Counsel for Mundhra relied
upon the observations in the order of Ray J. passed on the
application on the Master’s summons as well as in the order
passed in the appeal (No. 286 of 1965) therefrom on August
18, 1966, to show that there was no offer by the appellant
to deliver the shares. and, therefore, Mundhra was not in
default in paying the purchase money. It will be recalled
that on July 13, 1966, Son J. passed the order in suit No.
2005 of 1965 directing Mundhra to pay the purchase price and
take delivery of the shares from the receiver. The learned
judge further directed that the lien, if any, of Turner
Morrison would shift to the purchase money to be paid to the
receiver. This order, though passed in suit No. 2005 of
1965 in which Mundhra was not a party, was communicated to
him by the letter of the appellant dated January It, 1967.
Even before that, two letters had been sent on July 28 and
July 29, 1966, by the appellant’s solicitors to Mundhra
asking him to be ready with the sum to take delivery of the
shares before the Court hearing appeal No. 286 of 1965.
This was refused by Mundhra by his letter dated’ August 2,
1966. In the reply of Mundhra dated January 25, 1967, to
the letter dated January 11, 1967, from the appellant, he
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raised the objection that the appellant was not in a
position to give delivery of the shares and that the order
dated July 13, 1966, was not binding on him, as he was not a
party to the suit in which the order was passed. As the
receiver had the shares in his possession, there was no
point in the objection raised by Mundhra that the appellant
was not in a position to deliver the shares. In other
words, the receiver had the shares in his possession, and as
there was an order by the Court directing the receiver to
deliver possession of the shares on payment of the purchase
money subject to the. order of the Court hearing appeal No.
286 of 1965, there was no substance in the objection that
the appellant was not in a opposition to deliver the
shares. Mundhra did not raise any objection on the score
that the appellate court has not made any direction asking
him to pay the purchase money as against the delivery of
the shares by the receiver or that the receiver was not
directed by that Court to deliver the shares. The only
legitimate inference from his conduct is that Mundhra was
deliberately putting forward the plea that the appellant was
not in a position to deliver the share-, and that it was
not ready and willing to perform its part of the contract
only to avoid payment.of the purchase money. Nor is there
any substance in the contention of counsel for Mundhra that
because the appellant obtained a stay of the order passed by
Masud T. giving-
706
Mundhra a fortnight’s time to pay the purchase money for
taking delivery of the shares, the appellant- was precluded
from contending that Mundhra committed default in the
payment of the amount. In other words, there is no point in
the contention of counsel that since the appellant itself
obtained a stay of the order passed by Masud J. giving
liberty to Mundhra to pay the purchase money within a
fortnight from the date of the order, the appellant pre-
vented Mundhra from performing his part of the obligation
under the decree in suit No. 600 of 1961. When the
appellant came to the Court with its application for
rescission, there was already a rescission of the contract
and the decree by its letter dated February 11, 1967,
stating that Mundhra had forfeited his right to purchase the
51 per cent shares in pursuance of the decree in suit No.
600 of 1961, as he failed to fulfil his obligation in
pursuance to the notice ’of the appellant on January 11,
1967. it only wanted a declaration by adjudgment by the
Court that it was justified in doing so. A court generally
adjudicates upon the antecedent rights of the parties. When
a Court adjudges rescission of a contract or a decree, it is
only concerned with the question whether the person
rescinding it was justified in doing so. The Court does not
create any right which parties did not possess when it makes
a declaration that a contract has been validly rescinded.
Merely because it is necessary for the Court to pass an
order of rescission, when a controversy arises, it does not
follow that it is the Court that rescinds the contract. The
Court is only passing upon the validity of the rescission
already made by the party. In Abram Steamship Company Ltd.
and another v. Westville Shipping Company Ltd.(1), their
Lordships of the House of Lords said
Where one party to a contract expresses by
word or art in an unequivocal manner that by
reason of fraud or essential error of a
material kind inducing him to enter into the
contract he has resolved to rescind it, and
refuses to be bound by it, the expression of
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his election, if justified by the facts,
terminates the contract, puts the parties in
status quo ante and restores things, as
between them, to the position in which they
stood before the con-, tract was entered into.
It may be that the facts impose upon the party
desiring to rescind the duty of making
restitution in integrum. If so, be must
discharge that duty before the rescission is,
in effect accomplished. But if the other
party to the contract questions the right of
the first. to rescind, thus obliging the
latter to bring an action at law to enforce
the right he has secured for himself by his
election, and he later gets a verdict, it is
an entire mistake to suppose that it is this
verdict which by itself terminates the
contract and restores the antecedent
(1) Law Reports, Appeal Cases, 1923, p. 773 at p. 781.
707
status. The verdict is merely the judicial
determination of the fact that the expression
by the plaintiff of his election to rescind
was justified, was effective, and put an end
to the contract........"
The rights of the parties became crystallized when the
appellant, by its letter dated February 11, 1967, rescinded
the contract and the decree based thereon and when Masud J.
adjudged that the contract and the decree be rescinded.
Mundhra cannot, therefore, complain that he was prevented by
appellant from paying the purchase money in pursuance of the
order of Masud J. and resist the prayer for rescission.
There is no substance in the contention of counsel for
Mundhra that the appellant was not in a position to give a
good title to the shares because Turner Morrison has a lien
upon the shares. The question whether Turner Morrison has a
lien upon the shares has been finally decided by this Court
in Appeal No. 1223 (N) of 1970 filed by Turner Morrison,
holding that they have no lien in respect of these shares.
It was contended that if Mundhra committed default in pay-
ment of the purchase money, the remedy of the appellant was
to execute the decree for specific performance as the decree
was a decree in favour of both the appellant and Mundhra and
that the decree in favour of the appellant was a decree for
money.
A decree for specific performance is a decree in favour of
both the plaintiff and the defendant in the suit. In
Heramba Chandra Maitra v. Jyotish Chandra Sinha and
others(1) Rankin C.J., speaking for the Court, said that a
decree for specific performance operates in favour of both
plaintiff and defendant and that the decree is capable of
being executed by either [see also Bai Karimabibi v.
Abderehman Sayad Banu(2)]. Counsel for Mundhra, therefore,
argued that it was open to the appellant to have executed
the decree and realised the purchase money from Mundhra
instead of resorting to the remedy of rescission. Order 21,
rule 30 provides for execution of a decree for money. That
rule can possibly have no application to the execution of a
decree for specific performance, firstly for the reason that
a specific mode for execution of a decree for specific
performance is provided by Order 21, Rule 32 and secondly,
because no decree for money is passed in a suit for specific
performance. Order 21, Rule 32 provides as follows :-
"(1) Where the party against whom a decree for
the specific performance of a contract, ’or
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for restitution of conjugal rights, or for an
injunction, has been passed, has had an
opportunity of obeying the decree and has
(1) A.I.R. 1932 Calcutta 579.
(2) A.I.R. 1923 Bombay ;6.
708
wilfully & Red to obey it, the decree may be
enforced in the case of a decree for
restitution of conjugal rights by the
attachment of his property or, in the case of
a decree for the specific performance of a
contract or for an injunction by his detention
in the civil prison, or by the attachment of
his property or by both.
(2) Where the party against whom a decree for
specific performance or for an injunction has
been passed is a corporation, the decree may
be enforced by the attachment of the property
of the corporation or, with the leave of the
Court, by the detention in the civil prison of
the directors or other principal officers
thereof, or by both attachment and detention.
(3) Where any attachment under sub-rule (1) or
sub-rule (2) has remained in force for one
year, if the judgment-debtor has not obeyed
the decree and the decree-holder has applied
to have the attached property sold, such
property may be sold; and out of the proceeds
the court may award to the decree-holder such
compensation as it thinks fit, and shall pay
the balance (if any) to the judgment-debtor on
his application.
(4) Where the judgment-debtor has obeyed the
decree and paid all costs of executing the
same which he is bound to pay, or where, at
the end of one year from the date of the
attachment, no application to have the
property
sold has been made, or if made has been
refused, the attachment shall cease.
(5) Where a decree for the specific
performance of a contract or for an injunction
has not been obeyed, the Court may, in lieu of
or in addition to all or any, of the processes
aforesaid, direct that the act required to be
done may be done so far as practicable by the
decree-holder or some other person appointed
by the Court, at the cost of the judgment-
debtor, and upon the act being done the
expenses incurred may be ascertained in such
manner as the Court may direct and may be
recovered as if they were included in the
decree."
The execution of a decree for specific performance can only
be in the manner prescribed by this rule sub-rule (1) of the
rule says that if a decree for specific performance is not
obeyed, the decree is to be enforced by the detention of the
party in default in the civil prison or by attachment of his
property or by both. The detention in the civil prison of
the party who failed to obey the decree and the attachment
of his property are simply the means
709
to compel him to obey the decree. That is made clear by
Subrule (3) which says that if the judgment-debtor has
failed to obey the decree when the attachment has remained
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in force for one year the property attached may be, sold and
out of the proceeds the decree-holder may be awarded such
compensation as the Court thinks fit. Sub-rule (5) which
provides that the Court may direct the act required to be
done may be done by the decree-holder or some other person
appointed by the craft can only refer to an act other than
an act of payment of money. We do not think that the
appellant could have executed the- decree against Mundhra as
a money decree and realised the purchase money from him.
Therefore, it Mundhra refused to pay the purchase money,
there was nothing which prevented the appellant from
applying for rescission of the decree.
It was then contended that the attachments of the decree in
suit No. 600 of 1961 by the creditors of Mundhra prevented
him from tendering the purchase money to the appellant and
take delivery of the shares as the attachments prevented
him from obtaining satisfaction of the decree by paying the
purchase money and obtaining delivery of the shares. In
other words, the contention was that because of the
attachments Mundhra could not have paid the purchase money
to the appellant as that would have been in contravention of
the orders of the Court attaching the decree. We do not
think that there is any substance in this contention. If the
creditors of Mundhra attached the decree and he was
prevented from tendering the money because of the
attachment, he has only to blame himself. The only question
with which the Court is concerned is whether Mundhra has
disabled himself from performing his part of the obligation
under the decree. The inability to pay off the creditors was
the proximate cause of the attachments and the
responsibility for the same was that of Mundhra. The fact
that the attachments prevented him from performing his part
of the obligation under the decree or obtaining satisfaction
thereof would not make him any the less a defaulter, so far
as the performance of his part of the obligation under the
decree is concerned. Nor is there any substance in the
contention of counsel for Mundhra that the attachment by
Bank Hoffman of the 51 per cent shares under the order of
the District Judge of Delhi made it impossible for the
appellant to deliver the shares to Mundhra, as the
attachment order directed that the 51 per cent shares should
be produced before the Calcutta High Court for delivery to
Mundra against payment of the consideration mentioned in the
decree in suit No. 600 of 1961.
We, therefore, allow the appeal and set aside the judgment
under appeal and order the rescission of the decree for
specific performance passed in suit No. 600 of 1961. We
direct Shri K. B. Bose, Barrister, Member, Bar Library Club,
Calcutta High
17-L1031SupCI/72
710
Court, the receiver appointed in suit No. 2005 of 1965 and
who was appointed as receiver of the shares ’by the
proceedings dated July 14, 1969, of Masud J. in suit No. 600
of 1961, to produce the 2,295 shares before this Court and
give custody of the same to the Registrar of this Court.
The Registrar will hand them over to the appellant.
The Receiver has informed this Court that the remuneration
the shares in this Court in pursuance of this judgment.
We allow the appeal with costs.
ORDER
In modification of our earlier order dated March 9, 1972 we
now direct the Receiver to deliver the shares to the
Registrar of the Calcutta High Court on the original side
within 10 days from this date. The Registrar will hand-over
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the shares to Mr. B. M. Bagaria, a Solicitor of the Calcutta
High Court, on behalf of Hungerford Investment Trust Ltd.
(The Receiver has informed this Court that the remuneration
(due to him has not yet been paid. The Receiver may move
the (Calcutta High Court for necessary orders in this
connection.
In modification of our earlier order dated March 9, 1972
regarding costs’ we direct that in Civil Appeal No. 488 of
1971 the costs will be paid by the contesting defendants,
V.P.S.
711