Full Judgment Text
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PETITIONER:
ROJASARA RAMJIBHAI DAHYABHAI
Vs.
RESPONDENT:
JANI NAROTTAMDAS LALLUBHAI (DEAD)BY LRS. & ANR.
DATE OF JUDGMENT10/04/1986
BENCH:
SEN, A.P. (J)
BENCH:
SEN, A.P. (J)
RAY, B.C. (J)
CITATION:
1986 AIR 1912 1986 SCR (2) 447
1986 SCC (3) 300 1986 SCALE (1)566
ACT:
A. Suit for specific performance - Agreement to sell
contains an implied covenant on the part of the vendor to do
all things necessary to give effect to the Agreement,
including the obtaining of the permission for the transfer
of property - Vendor who has become the statutory occupant
and owner of the land and who has obtained necessary
permission subsequently as such occupant refuses to execute
the sale-deed on the plea that the agreement to sell entered
into by him was interdependent on his earlier Agreement to
purchase the lands from the Girasdar and contingent on his
obtaining the permission and since he failed, the Agreement
to sell is incapable of performance - Contract Act, 1872,
sections 31 & 32 - Whether the Court can order specific
performance of transfer - Specific Relief Act, 1877, section
13 - Doctrine of "feeding the estoppel", applicability.
B. Limitation Act, 1963, Article 113, applicability of
- Computation of period of time from what date, explained.
HEADNOTE:
The appellant-defendant who was the owner of two plots
of land admeasuring 491 and 1599 square yards situate in
village Dudheraj recorded as Girasdari agricultural land
entered into an agreement in writing (Ex.26), on October 19,
1949, with the Girasdar, Rana Mohabat Singh to purchase the
said lands at Rs.2.50 per square yard and paid an earnest
money of Rs.1,001. The agreement stipulated that the vendor
was to apply for permission from the Collector to convert
the agricultural land into village site for non-agricultural
use and that the sale deed was to be executed after
obtaining the requisite permission. On November 14, 1949 the
appellant entered into another agreement to sell some
property to the respondents Jani Narottamdas Lallubhai and
Thakur Dhirajlal Dhaneshvar at Rs. 3.75 per square yard
agreeing to contend that the appellant was to get the land
converted into village site at his own expense and
thereafter executed the sale-deed.
448
In 1950-51 Rana Mohabat Singh applied to the Collector
for grant of permission to convert the land into village
site but since his application was rejected he refunded the
earnest money to the appellant. However, after coming into
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force of the Saurashtra Land Reforms Act, 1951, with effect
from September 1, 1951, the right and title of Rana Mohabat
Singh as the ex-Girasdar were extinguished and the appellant
was recognised to be an occupant thereof under the
provisions of the Bombay Land Revenue Code, 1898. On 13
August, 1957, the appellant made an application to the
revenue authorities for the grant of occupancy certificate,
which was granted on 6.2.58 by the Mamlatdar. The occupancy
certificate was to come into effect from August 1, 1958. On
two applications of the appellant dated June 23, 1958 and
September 10, 1959 revenue authorities granted permission
for converting the lands under his possession into village
site, that is, for non-agricultural use. On 5 October, 1959
the respondents called upon the appellant to execute a
conveyance of the property in accordance with the agreement
of sale between the parties dated 14.11.1949 and on the
appellant’s failure to comply, they filed a suit for
specific performance. The Trial Court upheld the pleas of
the appellant, namely, (i) the suit was barred by
limitation; and (ii) the agreement between the parties was a
contingent contract depending upon the contingency referred
to in the agreement (Ex.26) dated 19 October, 1949 and since
that contract became incapable of execution by virtue of
Rana Mohabat Singh failing to obtain a permission of the
Collector the agreement dated 14 November, 1949, and non-
suited the respondents. On appeal the High Court reversed
the decree and held that the second agreement between the
parties had not been cancelled by mutual consent and that
the suit was within time and that the time started, running
only from 10th September, 1959, as the date on which
requisite permission was obtained from the Collector for the
use of the land as a village site.
Dismissing the appeal, on certificate, the Court,
^
HELD: 1.1 The agreement embodied in the suit Banakhat
(Ex.25) dated November 14, 1949 was not a contingent
contract; the contract was an absolute and unconditional
one, and there was no question of its performance being
dependent on the fulfilment of the condition under the
earlier agreement
449
(Ex.26) by which the appellant’s vendor Rana Mohabat Singh
had undertaken upon himself the obligation of procuring the
necessary sanction from the Collector. Under the terms of
the suit Banakhat (Ex.25), the appellant had undertaken the
obligation of getting the agricultural land converted into
village site. Under the Saurashtra Land Reforms Act, 1951
there was an extinguishment of the right and title of Rana
Mohabat Singh as a girasdar of the suit land and the
appellant was recognised to be an occupant thereof under the
provisions of the Bombay Land Revenue Code. The contention
that the appellant had an imperfect title is therefore
without any basis whatever. As such occupant, it is
undisputed that the appellant applied for and obtained the
requisite permission from the revenue authorities for
conversion of the disputed land into village site. There was
therefore no legal impediment to the specific performance of
the contract between the parties. [454 C; 454 H; 455 A; E-F]
1.2 There is always in such contracts, an implied
covenant on the part of the vendor to do all things
necessary to give effect to the agreement, including the
obtaining of the permission for the transfer of the
property. Ex.25, the suit Banakhat embodies an express
covenant to that effect. [457 C-D]
Dalsukh M. Pancholi v. The Guarantee Life & Employment
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Insurance Company Ltd. & Ors., A.I.R. 1947 P.C. 182,
distinguished.
F. Ranchhodas v. Nattmal Hirachand & Co., [1951] Bom.
L.R. 491; Motilal v. Nanhelal Ghasiram, L.R. [1930] 57
Indian Appeals 333; Mrs. Chandnee Widya Wati Madden v. Dr.
C.L. Katial, [1964] 2 S.C.R. 495; and Ramesh Chandiok & Anr.
v. Chuni Lal Sabharwal (Dead) by his Lrs. & Ors., [1971] 2
S.C.R. 573, referred to.
1.3 In the facts and circumstances of the case, it
could not be said that the respondents’ suit for specific
performance filed on September 6, 1960 was barred by
limitation inasmuch as permission to convert a portion of
the disputed land was obtained on August 26, 1958 and for
the remaining portion on September 10, 1959, and the suit
was therefore brought within three years from the date when
the cause of action arose. The cause of action for the suit
arose
450
after the appellant had obtained the requisite permission
from the revenue authorities upon conferral of rights of an
occupant on him. [459 F-H]
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 315 of
1971.
From the Judgment and Decree dated 3/4 December, 1969
of the Gujarat High Court in Appeal No. 160 of 1961.
S.H. Sheth, Vandana Sharma and M.V. Goswami for the
Appellant.
S.T. Desai and B.B. Singh for the Respondents.
The Judgment of the Court was delivered by
SEN, J. This appeal on certificate is directed against
the judgment and decree of the Gujarat High Court dated
February 1, 1971 reversing those of the Civil Judge, Senior
Division, Surendranagar dated January 31, 1961, and
decreeing the plaintiffs’ suit for specific performance.
Put very shortly, the essential facts are these. By an
agreement in writing (Exh.26) dated October 19, 1949, the
appellant who was the defendant entered into an agreement to
purchase two plots of land admeasuring 491 and 1599 square
yards situate in Village Dudheraj recorded as Girasdari
agricultural land of which he was the tenant @ Rs. 2.50 per
square yard from the Girasdar, Rana Mohabat Singh and paid
Rs.1,001 by way of earnest money in lieu thereof. The
agreement stipulated that the vendor Rana Mohabat Singh was
to apply for permission from the Collector to convert this
agricultural land into village site i.e. for non-
agricultural use. The sale-deed was to be executed by Rana
Mohabat Singh after he had obtained the requisite permission
from the Collector. Within about a month therefrom i.e. on
November 14, 1949, the appellant by a contract (Exh.25)
covenanted to sell the same property to the respondents Jani
Narottamdas Lallubhai and Thakur Dhirajlal Dhaneshvar who
were the plaintiffs @ Rs. 3.75 per square yard. The
agreement provided that the vendor i.e. the appellant was to
get the land converted into village site at his own expense.
451
IN 1950-51, Rana Mohabat Singh applied to the Collector
for grant of permission to convert the land into village
site but his application was rejected and thereafter he
refunded the earnest amount to the appellant. The Saurashtra
Land Reforms Act, 1951 came into force w.e.f. September 1,
1951. Under the provisions of the Act, there was an
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extinguishment of the right and title of Rana Mohabat Singh
as the ex-Girasdar of the land and the appellant was
recognised to be an occupant thereof under the provisions of
the Bombay Land Revenue Code, 1898. On August 13, 1957, the
appellant made an application to the revenue authorities for
the grant of an occupancy certificate. The Mamlatdar by his
order dated February 6, 1958 directed the issue of an
occupancy certificate in favour of the appellant on
condition of his paying occupancy price in accordance with
the provisions of the Saurashtra Land Reforms Act. On that
very day i.e. on February 6, 1958, the occupancy certificate
was issued to the appellant on such payment being made but
it was to come into effect from August 1, 1958. On June 23,
1958, the appellant applied for converting 1000 square yards
out of the two plots which prior to 1958 were agricultural
land into village site, and on August 26, 1958 the revenue
authorities granted such permission. Thereafter, on
September 10, 1959 the revenue authorities granted
permission for converting the remaining area of land into
village site. Thus, by September 10, 1959 the appellant
obtained permission for converting both the plots for non-
agricultural use. On October 5, 1959 the respondents called
upon the appellant to execute a conveyance of the property
in accordance with the agreement of sale between the parties
and on his failing to comply, commenced the present suit on
September 6, 1960.
The material terms of the agreement between the parties
are to be found in the suit Banakhat (Exh.25) and they are
to the effect :
"You can construct a house or building or a
factory or put up a park, garden etc. on this land
after getting it converted into village site land.
The sale-deed in respect of this land is to be
executed after the land has been converted into
such use . . . . . The title of the land is free
from any doubt. No one has any right, title or
interest
452
therein. If any amount is to be paid either to the
Government or to the Darbar in respect of the
land, then you are not liable for the same, but
this agreement has been entered into with you on
the footing that the land is to be considered as
village site land. We have to give you a certified
copy of the permission whereby the land is
converted into village site land and all expenses
in connection with the grant of such conversion
are to be borne by us."
It is common ground that the word "we" refers to the vendor
i.e. the appellant and "you" refers to the respondents i.e.
the purchasers.
The appellant contested the suit on various grounds. He
pleaded inter alia that (1) the agreement between the
parties as per Banakhat (Exh.26) was a contingent contract
and not an absolute contract and that the appellant’s vendor
Rana Mohabat Singh having failed to obtain permission of the
Collector in terms of the agreement (Exh.25) entered into by
him with the appellant for converting the land into village
site, and execute a sale-deed in his favour, the agreement
between the parties was incapable of performance and (2) the
suit was barred by limitation. The Courts below have
differed in their conclusion. The learned Civil Judge who
tried the suit upheld these pleas and non-suited the
respondents. He held that the suit was barred by limitation
and further that the contract between the parties being a
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contingent contract, the agreement in view of the events
that had happened made it unenforceable.
On appeal, the High Court reversed the decree and held
that the agreement between the parties had not been
cancelled by mutual consent and that finding has not been
challenged before us. On the question as to whether the
agreement was a contingent contract or a contract creating
absolute liabilities as between the parties without
contemplating any contingency, the High Court reproduced the
material portion of the agreement (Exh.25) set out above and
held that the agreement clearly contemplated that the sale-
deed was to be executed after the requisite permission was
obtained from the Collector for use of the land as a village
site and that the land was not to be sold as agricultural
land but as village
453
site. In coming to that conclusion the High Court took into
consideration the agreement between the appellant and Rana
Mohabat Singh (Exh.26) which contained the recital :
"I will execute the registered sale-deed in your
favour immediately after permission to convert
these plots into village site land has been
obtained."
In the light of that recital, it held that the agreement
between the parties (Exh.25) contemplated that the sale-deed
was to be executed after permission was obtained from the
revenue authorities for use of the land as a village site
and it was not being sold as agricultural land.
Following the decision of Chagla, CJ. in F. Ranchhodas
v. Natmal Hirachand & Co., [1951] Bom. LR 491 the High Court
held that the words "after the permission is obtained" in
Exh. 26 and the words "after the land is converted" in Exh.
25 both indicate the point of time at which the sale-deed
within the contemplation of the parties had to be executed
in accordance with the terms of the document. In the
circumstances, the High court held that the contract could
not be interpreted as a contingnent contract. Upon that
view, it held that there was no contingency whatsoever and
even though Rana Mohabat Singh had failed to obtain the
requisite permission to convert the land into village site,
as and when such permission was obtained by the appellant,
the rights of the respondents for the performance of the
agreement came into existence. It also held that the
respondents were entitled to rely on the doctrine of
’feeding the estoppel’ embodied in s.13 of the Specific
Relief Act, 1963. It held that at the time when the
agreement was entered into between the parties in 1949, the
appellant had only a right to get the land in suit conveyed
to him by Rana Mohabat Singh in pursuance of the agreement
(Exh.26). However, by virtue of the provisions of the
Saurashtra Land Reforms Act, his title as an occupant became
complete and he had obtained the permission to convert the
land into village site and the respondents were therefore
entitled to get specific performance of the agreement in
respect of the rights which he had at the date of the suit.
It further held that the permission to convert the disputed
land into village site having been obtained on August 26,
1958,
454
insofar as a part of the land was concerned and on September
10, 1959, as regards the balance thereof it could not be
said that the respondents suit was barred by limitation.
Upon these findings, the High court reversed the decree of
the learned Civil Judge and decreed the respondents suit for
specific performance.
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Two questions are raised upon this appeal. First of
these is whether the agreement embodied in the suit Banakhat
(Exh.25) dated November 14, 1949 was a contingent contract
and as the contingency failed, there was no contract which
could be made the basis for a decree for specific
performance, and the second is that the suit as framed was
barred by limitation under Art.113 of the Limitation Act,
1963. As to the first contention, it is urged that the High
Court proceeded on the erroneous belief that the grant of
permission by the Collector was a certain event and
therefore its finding that the contract was an absolute and
unconditional one, is vitiated. It is said that the
appellant’s vendor Rana Mohabat Singh having failed to
obtain permission from the Collector in 1950-51 in terms of
the agreement (Exh.26) entered into by him with the
appellant for converting the land into village site and
execute a deed of conveyance in his favour, the appellant
had an imperfect title and therefore the right to specific
performance of the suit Banakhat (Exh.25) did not arise
inasmuch as the conversion of the Girasdari lands at the
instance of Rana Mohabat Singh was a condition on which the
mutual rights and obligations of the parties would arise.
The submission proceeds on the basis that the two
transactions were interdependent and Rana Mohabat Singh’s
application for permission for conversion of the
agricultural land to non-agricultural purposes having been
rejected, the appellant was relieved of his obligation to
convey the suit lands under the Banakhat (Exh.25). In
support of the contention, reliance is placed on the
decision of the Privy Council in Dalsukh M. Pancholi v. The
Guarantee Life & Employment Insurance Company Ltd. & Ors.,
A.I.R. 1947 P.C. 182.
We do not see any basis for the submission that the
contract between the parties as embodied in the suit
Banakhat (Exh.25) was a contingent contract, the performance
of which was dependent upon fulfilment of the condition
under the
455
earlier agreement (Exh.26) by which the appellant’s
vendor Rana Mohabat Singh had undertaken upon himself the
obligation of procuring the necessary sanction from the
Collector. As to the appellant having an imperfect title the
question is purely hypothetical. May be, initially the two
transactions were not independent of each other but were
inter-dependent, for the performance of one depended upon
the fulfilment of the other agreement. If there was no
abolition of proprietory rights, it could well be said that
the suit Banakhat (Exh.25), being subject to the fulfilment
by Rana Mohabat Singh of the terms of the earlier agreement
(Exh.26), the appellant had an imperfect title and therefore
the contract between the parties was contingent on Rana
Mohabat Singh obtaining the approval of the Collector and as
he could not secure such approval and execute a conveyance
in favour of the appellant, no effective agreement came into
being which could be ordered to be specifically enforced.
But the contention that unless the appellant’s vendor Rana
Mohabat Singh conveyed title by execution of a proper
conveyance, the contract as between the parties became
impossible of performance and further that for want of such
conveyance the appellant had an imperfect title, does not
take into account the subsequent events.
It is common ground that shortly thereafter, the
Saurashtra Land Reforms Act, 1951 came into force w.e.f.
September 1, 1951. Under the provisions of the Act, there
was an extinguishment of the right and title of Rana Mohabat
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Singh as a Girasdar of the suit land and the appellant was
recognised to be an occupant thereof under the provisions of
the Bombay Land Revenue Code. It would, therefore, appear
that the contention that the appellant had an imperfect
title is without any basis whatever. With the extinction of
the title of Rana Mohabat Singh and the conferral of the
rights of an occupant on the appellant, the property became
transferable by him. As such occupant, it is undisputed that
the appellant made an application to the revenue authorities
permitting the conversion of the disputed land into village
site. Thereafter, there was no legal impediment in the way
of the appellant in executing a sale-deed. Under the terms
of the suit Banakhat (Exh.25), the appellant had undertaken
the obligation of getting the land converted into village
site. As indicated, the word ’we’ in the document (Exh.25)
refers to the vendor i.e. the appellant and ’you’ refers to
the respondents. The
456
terms of the document are clear and explicit and admit of no
ambiguity. The appellant had by the contract bound himself
to furnish a certified copy of the permission whereby the
land was converted into village site apart from bearing all
expenses in connection with the grant of such permission.
In our opinion, the decision in Dalsukh M. Pancholi’s
case is clearly distinguishable on facts. It is clear from
the terms of the offer and acceptance in that case, that the
parties had contemplated that, to make the contract
effective the ’approval of the attaching Court’ must be
obtained. The learned Subordinate Judge held that the term
’subject to the approval of the Court’ was not an essential
condition, but in the High Court it was conceded that it was
an essential term. The facts of the case show that there was
good reason for insisting on this condition for at the time
of execution of the agreement it was well-known to the
parties that the property was under attachment by various
courts. In those circumstances, the Privy Council observed :
"In their Lordships’ opinion there can be no doubt
that the condition was an essential one. It was
essential not for one party alone, but for both
parties. From the point of view of the purchaser
it is unnecessary to observe that he would get a
clear title to the property only if the creditors,
through the Court, consented to take Rs. 6,50,000
in full satisfaction of their decrees against the
vendor’s family. The purchaser was not willing to
risk even the payment of the earnest money without
the knowledge of the attaching Court for it was to
be paid only to the nominee of the Court named at
the time of giving the approval to the
transaction. The condition was not exclusively for
the benefit of the purchaser; it was equally
important from the standpoint of the vendors also.
Ram Jas would accept the offer only with the
proviso "subject to the approval of the Court".
The family was heavily indebted. It was important
for Ram Jas that he should get effective discharge
of all the liabilities of the family by the
payment of Rs.6,50,000; thus, it was necessary
from his standpoint also, that the sale should be
subject to
457
the approval of the attaching Court."
It was accordingly held that the contract was a contingent
one and as the contingency failed, there was no contract
which could be made the basis for a decree for specific
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performance.
Although Rana Mohabat Singh having failed to fulfil the
terms of his contract with the appellant and execute a sale-
deed in his favour might have rendered the contract between
them incapable of performance, but with the extinction of
the title of Rana Mohabat Singh and the conferral of the
rights of an occupant on the appellant, the property became
transferable subject, of course, to the express covenant on
the part of the appellant to do all things necessary to give
effect to the agreement. Here, the suit Banakhat (Exh. 25)
embodies an express covenant to that effect. There is always
in such contracts an implied covenant on the part of the
vendor to do all things necessary to give effect to the
agreement, including the obtaining of the permission for the
transfer of the property. The principles on which a term of
this nature may be implied in contracts are well-settled. It
is enough to refer to Halsbury’s Law of England, Vol. 8, 3rd
Edn., p. 121 where the principles are summarised as follows
:
"In construing a contract, a term or condition not
expressly stated may, under certain circumstances
be implied by the Court, if it is clear from the
nature of the transaction or from something actual
found in the document that the contracting parties
must have intended such a term or condition to be
part of the agreement between them. Such an
implication must in all cases be founded on the
presumed intention of the parties and upon reason,
and will only be made when it is necessary in
order to give the transaction that efficacy that
both the parties must have intended it to have,
and to prevent such a failure of consideration as
could not have been within the contemplation of
the parties."
Chitty on Contract, Vol.1, 23rd Edn., paragraphs 694-95
points out that a term would be implied if it is necessary
in the business sense, to give efficacy to the contract.
458
In this context reference may be made to the decision
of the Privy Council in Motilal v. Nanhelal Ghasiram, L.R.
[1930] 57 Indian Appeals 333. There, the facts were these.
In that case, the plaintiff Mst. Jankibai entered into an
agreement to purchase from Raibahadur Seth Jiwandas of
Jabalpur four annas proprietary share of Mauja Raisalpur
together with the sir and khudkast lands appurtenant
thereto, with cultivating rights in the sir lands. The
property was subject to the provisions of the Central
Provinces Tenancy Act, 1920. She filed a suit for specific
performance of the said contract. The Privy Council held
that the contract was for a transfer of the sir lands
without reservation of the right of occupancy, and that the
sanction of the Revenue Officer to the transfer was
necessary under s. 50(1) of the Act, which was in these
terms :
" S. 50(1) : If a proprietor desires to transfer
the proprietary rights in any portion of his sir
land without reservation of the right of occupancy
specified in s. 49, he may apply to a revenue
officer and, if such revenue-officer is satisfied
that the transferor is not wholly or mainly an
agriculturist, or that the property is self-
acquired or has been acquired within the twenty
years last preceding, he shall sanction the
transfer."
It was contended before the Privy Council that a decree for
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specific performance of the agreement of sale could not be
made, because such performance would necessitate an
application by or on behalf of the vendor to the Revenue
Officer for sanction to transfer the cultivating rights in
the sir land, and that the Court had no jurisdiction to
require the vendor to make such an application. In repelling
the contention, the Privy Council observed that in view of
their construction of the agreement, namely, that the vendor
agreed to transfer the cultivating rights in the sir land :
"(T)here was, in their Lordships’ opinion, an
implied covenant on the part of the vendor to do
all things necessary to effect such transfer,
which would include an application to the Revenue
Officer to sanction the transfer."
459
It was further observed that it was not necessary for their
Lordships to decide whether in that case the application for
sanction to transfer must succeed, but that it was material
to mention that no facts were brought to their Lordships’
notice which would go to show that there was any reason why
such sanction should not be granted. After making the said
observations, the Privy Council held that in those
circumstances the Court had jurisdiction to enforce the
contract under the Specific Relief Act, 1877 and Order 21,
r. 35 of the Code of Civil Procedure, 1908 by a decree
ordering the vendor to apply for sanction and to execute a
conveyance on receipt of such sanction. The decision of the
Privy Council in Motilal v. Nanehalal Ghasiram, supra,
therefore is an authority for the proposition that if the
vendor agrees to sell the property which can be transferred
only with the sanction of some Government authority, the
Court has jurisdiction to order the vendor to apply to the
authority within a specified period, and if the sanction is
forthcoming to convey to the purchaser within a certain
time. See also : Mrs. Chandnee Widya Vati Madden v. Dr. C.L.
Katial, [1964] 2 S.C.R. 495 and Ramesh Chandra Chandiok &
Anr. v. Chuni Lal Sabharwal (dead) by his Lrs. & Ors.,
[1971] 2 S.C.R. 573 where this Court following the Privy
Council decision in Motilal v. Nanehlal Ghasiram’s case
supra, reiterated the same principle.
The next and the last contention that the suit brought
by the appellant was barred by limitation is wholly devoid
of substance. Under Art. 113 of the Limitation Act, 1963,
the limitation prescribed for a suit for specific
performance is a period of three years which runs from the
date when the cause of action accrues. In the facts and
circumstances of the case, the respondents were required to
have a conveyance executed immediately upon the conferral of
occupancy rights on the abolition and the permission granted
by the revenue authorities to him to convert the suit land
into village site. As already stated, the permission to
convert the disputed land into village site having been
obtained on August 26, 1958 insofar as a part of the land
admeasuring 1,000 square yards and on September 10, 1959 as
regards the remaining portion, it could not be said that the
respondents’ suit filed on September 6, 1960 was barred by
limitation.
460
The result therefore is that the appeal must fail and
is dismissed. The judgment and decree of the High Court
decreeing the plaintiff’s suit for specific performance are
upheld. The respondents shall be entitled to their costs
throughout.
S.R. Appeal dismissed.
461
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