Full Judgment Text
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CASE NO.:
Appeal (civil) 4262 of 2001
PETITIONER:
India Financial Assn., Seventh Day Adventists
RESPONDENT:
M.A. Unneerikutty & Anr.
DATE OF JUDGMENT: 20/07/2006
BENCH:
ARIJIT PASAYAT & TARUN CHATTERJEE
JUDGMENT:
J U D G M E N T
ARIJIT PASAYAT, J.
Challenge in this appeal is to the judgment rendered by a
Division Bench of the Kerala High Court allowing the appeal
by the respondent who was the plaintiff. It is to be noted that
the suit was dismissed by the trial court.
Background facts in a nutshell are as follows :
The plaint schedule property belonged to the appellant
No.1 i.e. Indian Financial Association of Seventh Day
Adventists, a Company incorporated under the Companies
Act, 1956. The Company was impleaded as defendant No.1 in
the suit and the defendant No.2 was its Power of Attorney. A
school was being run in the property and there were also two
other buildings in the property used by the Company. On
15.4.1985, the defendant No.1 Company passed a resolution
deciding to sell the property. A Power of Attorney was executed
in favour of defendant No.2 conferring on him the right to
negotiate, enter into an agreement to sell, and sell and dispose
of the property for a price acceptable to the Power of Attorney.
It may be noted that this Power of Attorney, defendant No.2,
was the Chairman of the North Kerala Section of the defendant
No.1 Company and he had control and management over 70
churches. Thus, defendant No.2, who was constituted the
Power of Attorney, was a prominent person in the defendant
No.1 company and in the Association for whose welfare the
company had been incorporated. Defendant No.2 negotiated
with the plaintiff for the sale of the property. Negotiations
were done with the help of Mr. P.V. George, who was attached
to the school run by defendant No.1 and who was a member of
the Association. Defendant No.2, for and on behalf of
defendant No.1, agreed to sell the property to the plaintiff for a
price of rupees eight lakhs. On 17.5.1985 a sum of
Rs.10,000/- was paid as a token of the coming into existence
of the agreement and receipt was issued. The receipt was
admittedly signed by defendant No.2 and the witnesses to it
are one Sarathchandra and P.V. George referred to earlier.
The receipt reads as follows:-
"Received a sum of Rupees ten thousand
(Rs.10,000/-)as earnest money from Mr. M.A.
Uneerikutty, Calicut towards the advance of
the sale of land bearing R.S. No. 27/1 having
30 cents of extent which costs 8 lakhs of
rupees."
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This was followed by another agreement dated 21.5.1985,
executed by defendant No.2, in his capacity as the Power of
Attorney Holder of the defendant No.1, and the plaintiff. In
that agreement, after reciting the title of the defendant No.1-
Company represented by its Power of Attorney, it was stated
that it had been decided to sell the property to the plaintiff for
a consideration of Rupees Eight Lakhs and the plaintiff had
agreed to purchase the same. The document also recites that
on that day, the defendant No.1 acting through its Power of
Attorney, had received a sum of Rupees Three Lakhs as
advance towards the sale price. The document was to be
registered on or before 30.9.1985. The Company was to hand
over all the title deeds relating to the property, including the
encumbrance certificate, within one month before registration
of the sale deed. All expenses for registration had to be met by
the plaintiff and if the Company failed to complete the
registration of the sale deed within the agreed period, the
plaintiff had the power to take the necessary legal steps for
getting the sale deed registered and in that event, the
Company would be liable for the expenses and loss incurred in
that behalf. The sum of Rupees Three Lakhs paid as advance
was liable to be recovered as charge on the property. If the
plaintiff fails to pay the balance consideration of Rupees Five
Lakhs to the Company within the agreed period, the plaintiff
was liable to the Company for all the losses incurred and the
company had the full power to recover all the losses from the
plaintiff. As noticed supra, the Power of Attorney signed this
agreement on behalf of the defendant No.1 company and the
witnesses to this agreement were also the same two witnesses
who had signed as witnesses in the receipt. On the same day,
another agreement was also executed by the parties. This
agreement indicated that the company would sell and the
plaintiff would purchase the property for a price of Rupees
Five Lakhs or the price to be adjusted as per the approved
survey of the property. The sale was subject to clear title and
free from all encumbrances. The agreement recites that the
purchaser, the plaintiff, had paid a sum of Rs.10,000/- by
cash and a sum of Rs.40,000/- by way of cheque dated
31.5.1985 as advance, the receipt of which the Company and
the Power of Attorney acknowledged. The balance sale price
was to be paid on or before 30.9.1985. The agreement stated
that time was of the essence of the contract. Clause 5 of this
agreement stated that the Company and its Power of Attorney
were to demolish the existing buildings in the schedule
property, salvage the same and deliver possession of the land
only to the plaintiff at the time of registration of the sale deed.
The company was to obtain the Clearance Certificate in terms
of Section 230A of the Income Tax Act, 1961. The cost of
registration was to be borne by the plaintiff and in the event of
default on the part of the company to sell the schedule
property after complying with the conditions, the company was
liable to return the advance of Rs.50,000/- as liquidated
damages to the plaintiff. In the event of default on the part of
the plaintiff to buy the schedule property as per the conditions
set out, the plaintiff was to forfeit the advance of Rs.50,000/-
to the company. Thereafter, the company was free to deal with
the property as it pleased. It was also provided that either
party was entitled to enforce specific performance of the
contract. It is seen that on the same day, there is a letter said
to have been signed by defendant No.2. In that letter, it was
stated, after referring to Clause 5 of the other agreement that
the Power of Attorney, defendant No. 2 agrees to demolish only
the church building and the school building and retain
building No.6/64A. There is no dispute that pursuant to the
agreement for sale entered into with the plaintiff, the prior
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documents of title of the Company were handed over to the
plaintiff.
Complaining that the defendants were attempting to sell
the property to another, the plaintiff filed a suit, O.S. 102 of
1985, in the Court of Subordinate Judge, Calicut for perpetual
injunction restraining the defendant No.1 Company from
alienating the said property to any other person. It may be
noted that the last day for performance of the agreement was
30.9.1985. It was after the filing of the earlier suit for
injunction, that the plaintiff filed the present suit O.S. 188 of
1985 on 16.11.1985 in the Court of Subordinate Judge,
Kozhikode for specifically enforcing the agreement for sale.
The prayer in the plaint was to direct the defendants to
specifically perform the contract sued on by executing and
duly registering a sale deed in respect the plaint schedule
property in favour of the plaintiff after receiving the balance
sale consideration due to them and for possession pursuant to
such conveyance. Conveyance was sought of the kanom,
improvement and possessory rights of the defendants. There
is no specific reference to any building in the plaint schedule.
In the plaint, after setting out details of the agreement
between the parties, payment and receipt of Rs.10,000/- as
advance, it was stated that on 21.5.1985 a formal agreement
for sale was entered into showing the consideration as Rupees
Eight Lakhs including the sum of Rs.3,10,000/- already paid
towards the sale price. The plaint further stated that the total
price of Rupees Eight Lakhs was for 30 cents of property and
all the improvements thereon, including a Church building, a
school building and another building. It was stated that the
church and the school were being shifted by the defendant
No.1 from those buildings to some other premises. The plaint
further proceeded to state that for reasons best known to
them, the defendants wanted modification of the deed by re-
fixing the sale consideration to Rupees Five Lakhs and giving
liberty to the defendants to pull down and remove the
buildings existing in the property, so that the material could
be used to build, at another site proposed to be purchased by
the defendant No.1 Company. This agreement was also
entered into on the same day and this was the latter
agreement and the second agreement. It was asserted that the
total consideration paid by the plaintiff to the first defendant
as advance came to Rs.3,50,000/-. If the defendants were to
be permitted to remove the buildings and take away the
materials, the balance amount payable by the plaintiff to the
first defendant company would be Rs.1,50,000/-. If on the
other hand, the defendants did not want to remove the school
building and the church building and would have them
retained in the property, the plaintiff was ready and willing to
pay a further sum of Rs.4,50,000/- to make the total
consideration of Rupees Eight Lakhs for sale of the entire
property including all the improvements. It was pleaded that
while drafting the second agreement, it was mistakenly stated
in Clause 5 that the vendor shall demolish the existing
buildings in the schedule property, salvage the same and
deliver possession of the land to the vendee. According to the
plaint, if this is understood to imply that the land only had
been agreed to be sold by the defendants to the plaintiff, that
was not correct and to clarify the position arising out of the
unclear clause, defendant No.2 wrote a letter to the plaintiff on
the same day. According to the plaint, that letter was intended
to make it clear that building No. 6/64A was included in the
sale and that the church building and the school building
were to be demolished and removed by the defendants.
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According to the plaintiff since he found that defendant No.2
and the other representatives of defendant No.1, namely
Sarathchandra and P.V. George who were witnesses to the
agreement, were highly educated respectable persons, he did
not think it necessary to have a formal agreement drawn up.
The plaintiff had no reason to believe that the defendants
would go back on their promise. The plaintiff came to know
that the defendants have the intention to retract from the
agreement. It was in this context that he filed the suit O.S.
102 of 1985 seeking to restrain the defendants from alienating
the property. The plaintiff was ready and willing to pay the
balance amount due for execution of the sale deed. The
plaintiff was always ready and willing to perform his part of
the contract. In case the defendants do not agree to demolish
and remove the church building and the school building, the
plaintiff was ready and willing to pay the further sum of
Rupees three lakhs to make the total consideration of Rupees
Eight Lakhs for the entire property including all the
improvements. Thus, the plaintiff was entitled to a specific
performance of the agreement for sale. He valued the suit at
Rupees Five Lakhs under Section 42 of the Kerala Court Fees
and Suits Valuation Act (in short the ’Valuation Act’) being the
consideration for the sale.
In its written statement the defendant No.1 admitted the
receipt and the two agreements for sale. It also admitted that
defendant no.2 had been constituted as the Power of Attorney
of the company. It was, however, pleaded that Power of
Attorney was void as contrary and opposed to the
Memorandum and Articles of Association of the Company.
The conditions of Article 19A(i) of the Articles and
Memorandum of Association had not been complied with. All
actions pursuant to the resolution of the Company dated
15.4.1985 deciding to sell the property were invalid in law and
were otherwise ineffective and void. The agreements referred
to in the plaint were thus void ab initio and were not
enforceable under law. It transpires that the sale agreements
referred to in the plaint were drawn up at the same time and
place as parts of the same transaction with the plaintiff
conspiring with Mr. P.V. George, who was at that time
attached to the school of the defendant No.1. There was a
conspiracy to commit fraud and to cheat the defendant No.1
and deprive the State Government of the legitimate stamp duty
payable. The sale agreements were set up and devised by the
plaintiff with objects which were opposed to public policy and
were prohibited by statutes like Kerala Stamp Act and Income
Tax Act, 1961 and were void under Section 24 of the Indian
Contract Act, 1872 (in short the ’Contract Act’). The three
buildings in the property were solid constructions. The
demolition of the buildings was inconceivable and defendant
No.2 was never authorized to demolish or consent to
demolition of the buildings. The alleged agreements to take
the property after demolition of the buildings was a
transaction devised by the plaintiff for infringing law and
hence could not be enforced. The two agreements referred to
in the plaint were brought into existence on account of the
undue influence, coercion and fraud played by the plaintiff
and George. The truth as gathered from defendant No.2 was
that at the time of the two agreements. Rupees Three lakhs
was made over in cash by the plaintiff to George, who
managed to obtain three demand drafts, each for a sum of
Rupees one Lakh, from the Malabar Gramin Bank, Kozhikode,
where the school run by the first defendant company had its
accounts. The paying of Rupees Three Lakhs in cash violated
the provisions of the Income Tax Act, 1961. The clause about
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demolition of the building was fraudulently introduced into the
agreement where the consideration for sale was fixed at
Rupees Five Lakhs. The agreements were vitiated by fraud and
were void and unenforceable. The case of the plaintiff that the
earlier agreement was modified by the subsequent agreement
was not supported by the recitals in the subsequent
agreement. Defendant No.1 did not intend to sell the property
and did not take any steps to sell the property and the filing of
O.S. 102 of 1985 was wholly ill-conceived. The plaintiff has
come to court with unclean hands. Defendant No.1 had no
intention to retain the monies received. Defendant No.1 was
willing to refund all the monies received in conformity with any
condition that may be imposed by the Court. The suit was
speculative. The frame of the suit was not proper.
Defendant No.2, in addition to adopting the written
statement filed on behalf of defendant No.1 stated that he
bonafide believed that the conditions prescribed in the Articles
and Memorandum of Association of the defendant No.1
Company for sale of the property had been duly complied with.
He was completely misled by P.V. George to enter into two
agreements on the same day as part of the same transaction.
He had already requested defendant No.1 to refund to the
plaintiff all the amounts received from the plaintiff. The suit
was liable to be dismissed.
The High Court held that the view of the trial court that
Exhibit A-5 was executed to defraud payment of Stamp duty
and the Income Tax and it was opposed to public policy in the
background of Section 23 of the Contract Act, is not tenable. It
was noted that the suit was one for specific performance of
contract and there was full disclosure of both Exhibits A-4 and
A-5 in the plaint. It was noted that there was no case of
inadequacy of price, on the facts, Section 20 of the Specific
Relief Act, 1963 (in short ’Specific Relief Act’) was not
applicable. The agreement was for sale of the property for a
price of Rs.8 lakh and the substantial portion of the amount
has been paid as advance. The evidence clearly established
that the plaintiff was already ready and willing to pay the
balance. The suit for specific performance of contract was
decreed. Direction was also given for payment of the balance
court fee on the plaint as well as in the appeal on the basis
that the consideration for sale is Rs.8 lakh and not Rs.5 lakhs.
Learned counsel for the appellant questioned correctness
of the judgment rendered by the Division Bench on the ground
that the agreements were pre-planned and executed
simultaneously as one integrated inseverable transaction.
Stamp papers were purchased on the same day. The
defendant No. 2 though an employee of the appellant No.1\026
Institution was a party to the illegal transaction. Obvious
intention was to declare only the reduced amount of Rs.5
lakhs as the apparent sale price and to pay Rs.3 lakhs as
uncounted money. In the meantime to have hold on each
other another agreement was prepared declaring the actual
price of Rs.8 lakhs. It was further urged that Section 23 read
with Section 24 of the Contract Act rendered the agreements
void. The High Court should have noted that the agreements
were immoral or opposed to public policy. This is the essence
of Section 23 of the Contract Act. Similarly, Section 24
postulates that the agreement would be void if the
considerations and the object are unlawful in part. Closing
down a well-running school managed by dedicated
missionaries and closing a functional church would cause
comparatively more hardships as against the specific
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performance of a tainted transaction. Same cannot be
enforced in a suit for specific performance of contract.
In reply learned counsel submitted that the trial court
proceeded for three reasons to dismiss the suit; first was that
the plaintiff was not ready and willing and, therefore,
requirements of Section 16 of the Specific Relief Act were not
complied with. This was a case where greater hardship would
be caused to the defendants if the suit is decreed and in any
event the agreement was opposed to public policy. On the
other hand the High Court had noted that there was full and
frank disclosure and the payment of Rs.3 lakhs was accounted
for in books of account and the payments were made by
demand drafts. There was no question of agreement being
opposed to public policy in view of the aforesaid fact. There
was really no evidence regarding the shifting of the building
and, therefore, two agreements were entered into. The draft
deed was not required to be prepared by the plaintiff as was
wrongly noted by the trial court. There was a resolution for
sale of the land and the defendant No.2 purchased the stamp
papers of the proposed agreements. As is evident from the
materials on record, there was no dispute that the plaintiff
had the capacity to pay and in the written statement filed in
the suit the stand taken was not disputed. Therefore the trial
court should not have concluded any undue hardship on the
same being executed. It was clearly stated in the plaint about
the statement in the earlier written statement. If there was
any dispute amongst the members of the Association, the
plaintiff is not a party to the same and that cannot be a
ground to deny the decree for specific performance of the
contract. Trial Court disbelieved the evidence of DW1 who was
the defendant No. 2 and if that evidence is kept out of
consideration, nothing further was brought on record by the
defendants.
Principles relating to enforcement of a tainted transaction
have been dealt with by this Court in various cases.
In A.C. Arulappan v. Ahalya Naik (Smt.) [2001(6) SCC
600] it was noted as follows :
"In Parakunnan Veetill Joseph’s Son Mathew v.
Nedumbara Kuruvila’s Son & Ors. [1987 Supp. SCC
340] this Court cautioned and observed as under:
"Section 20 of the Specific Relief Act, 1963
preserves judicial discretion to Courts as to
decreeing specific performance. The Court
should meticulously consider all facts and
circumstances of the case. The Court is not
bound to grant specific performance merely
because it is lawful to do so. The motive
behind the litigation should also enter in the
judicial verdict. The Court should take care to
see that it is not used as an instrument of
oppression to have an unfair advantage to the
plaintiff".
In Gobind Ram vs. Gian Chand [(2000)7 SCC 548],
it was observed in paragraph 7 of the judgment that
grant of a decree for specific performance of
contract is not automatic and is one of the
discretions of the court and the court has consider
whether it would be fair, just and equitable. The
court is guided by the principles of justice, equity
and good conscience.
Granting of specific performance is an equitable
relief, though the same is now governed by the
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statutory provisions of the Specific Relief Act, 1963.
These equitable principles are nicely incorporated in
Section 20 of the Act. While granting a decree for
specific performance, these salutary guidelines shall
be in the forefront of the mind of the court. The trial
court which had the added advantage of recording
the evidence and seeing the demeanour of the
witnesses considered the relevant facts and reached
a conclusion. The appellate court should not have
reversed that decision disregarding these facts and,
in our view, the appellate court seriously flawed in
its decision. Therefore, we hold that the respondent
is not entitled to a decree of specific performance of
the contract."
Earlier in K. Narendra v. Riviera Apartments (P) Ltd.
[(1999) 5 SCC 77] it was noted as follows :
"In our opinion, there has been a default on the part
of the respondents in performing their obligations
under the contract. The period lost between
25.7.1972 (the date of the agreement) and the years
1979 and 1980 when the litigation commenced,
cannot be termed a reasonable period for which the
appellant could have waited awaiting performance
by the respondents though there was not a defined
time limit for performance laid down by the
agreement. The agreement contemplated several
sanctions and clearances which were certainly not
within the power of the parties and both the parties
knew it well that they were the respondents who
were being depended on for securing such
sanctions/clearances. Part of the land forming
subject matter of the agreement was an excess land
within the meaning of ULCRA and hence could not
have been sold. Part of the land has been acquired
by the State and to that extent the agreement has
been rendered incapable of performance. The
feasibility of a multi-storeyed complex as is
proposed and planned by the respondents appears
to be an impracticality. If the respondents would not
be able to construct and deliver to the appellant
some of the flats as contemplated by the novated
agreement how and in what manner the remaining
part of consideration shall be offered/paid by the
respondents to the appellant is a question that
defies answer on the material available on record.
Added to all this is the factum of astronomical rise
in the value of the land which none of the parties
would have fore contemplated at the time of
entering into the agreement. We are not in the least
holding that the consideration agreed upon between
the parties was inadequate on the date of the
agreement. We are only noticing the subsequent
event. Possession over a meagre part of the property
was delivered by the appellant to the respondents,
not simultaneously with the agreement but
subsequently at some point of time. To that extent,
the recital in the agreement and the averments
made in the plaint filed by the respondents are
false. On a major part of the property, the appellant
has continued to remain in possession. As opposed
to this, the respondents have neither pleaded nor
brought material on record to hold that they have
acted in such a way as to render inequitable the
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denial of specific performance and to hold that
theirs would be a case of greater hardship over the
hardship of the appellant. Upon an evaluation of the
totality of the circumstances, we are of the opinion
that the performance of the contract would involve
such hardship on the appellant as he did not
foresee while the non performance would not involve
such hardship on the respondents. The contract
though valid at the time when it was entered, is
engrossed into such circumstances that the
performance thereof cannot be secured with
precision. The present one is a case where the
discretionary jurisdiction to decree the specific
performance ought not to be exercised in favour of
the respondents. During the course of hearing the
learned senior counsel for the respondents time and
again emphasized and appealed to the court that
respondents were builders of repute and in the
event of the specific performance being denied, they
run a grave risk of losing their reputation as their
proposed building plan "Girnar" would not
materialise and they will not be able to show their
face to their prospective flat buyers. This is hardly a
consideration which can weigh against the several
circumstances which we have set out herein above.
If a multi-storeyed complex cannot come up on the
suit property, the respondents’ plans are going to
fail in any case.
In Mannalal Khetan and Others v. Kedar Nath Khetan
and Others. [(1977) 2 SCC 424] it was noted as follows:
"In Raza Buland Sugar Co. Ltd. v. Municipal Board,
Rampur [(1965) 1 SCR 1970] this Court referred to
various tests for finding out when a provision is
mandatory or directory. The purpose for which the
provision has been made, its
rom reading the provision one way or the other, the
relation of the particular provision to other
provisions dealing with the same subject and the
language of the provision are all to be considered.
Prohibition and negative words can rarely be
directory. It has been aptly stated that there it is
one way to obey the command and that it is
completely to refrain from doing the forbidden act.
Therefore, native, prohibitory and exclusive words
are indicative of the legislative intent when the
statute is mandatory (See Maxwell on Interpretation
of Statutes, 11th Ed., p. 362 seq.; Crawford
Statutory Construction, Interpretation of Laws, p.
523 and Seth Bikhraj Jaipuria v. Union of India
[AIR 1962 SC 113]
The High Court said that the provisions contained
in Section 108 of the Act are directory because non-
compliance with Section 108 of the Act is not
declared an offence. The reason given by the High
Court is that when the law does not prescribe the
consequences or does not lay down penalty for non-
compliance with the provision contained in Section
108 of the Act the provision is to be considered as
directory. The High Court failed to consider the
provision contained in Section 629(A) of the Act.
Section 629(A) of the Act prescribes the penalty
where no specific penalty is provided elsewhere in
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the Act. It is a question of construction in each case
whether the legislature intended to prohibit the
doing of the act altogether, or merely to make the
person who did it liable to pay the penalty.
Where a contract, express or implied, is expressly or
by implication forbidden by statute, no court will
lend its assistance to give it effect. (See Mellis v.
Shirley L. B. ([1885] 16 QBD 446 : 55 LJQB 143 : 2
TLR 360)). A contract is void if prohibited by a
statute, under a penalty, even without express
declaration that the contract is void, because such a
penalty implies a prohibition. The penalty may be
imposed with intent merely to deter persons from
entering into the contract or for the purposes of
revenue or so that the contract shall not be entered
into so as to be valid at law. A distinction is
sometimes made between contracts entered into
with the object of committing an illegal act and
contracts expressly or impliedly prohibited by
statute. The distinction is that in the former class
one has only to look and see what acts the statute
prohibits; it does not matter whether or not it
prohibits a contract; if a contract is made to do a
prohibited act, that contract will be unenforceable.
In the latter class, one has to consider not what act
the statute prohibits, but what contracts it
prohibits. One is not concerned at all with the
intent of the parties, if the parties enter into a
prohibited contract, that contract is unenforceable.
(See St. John Shipping Corporation v. Joseph Rank.
([1957] 1 QB 267)) (See also Halsbury’s Laws of
England, Third Edition, Vol. 8, p. 141.)
It is well established that a contract which involves
in its fulfillment the doing of an act prohibited by
statute is void. The legal maxim A pactis
privatorum publico juri non derogatur means that
private agreements cannot alter the general law.
Where a contract, express or implied, is expressly or
by implication forbidden by statute, no court can
lend its assistance to give it effect. What is done in
contravention of the provisions of an Act of the
legislature cannot be made the subject of an
action."
In a recent case in Aniglase Yohannan v. Ramlatha and
Others. [(2005)7SCC 534] it was noted as follows:
"In order to appreciate the rival submissions
Section 16(c) needs to be quoted along with the
Explanations. The same reads as follows:
"16. Personal bars to relief:
(a) .........
(b) .........
(c) who fails to aver and prove that he has
performed or has always been ready and
willing to perform the essential terms of
the contract which are to be performed by
him, other than terms of the performance
of which has been prevented or waived by
the defendant.
Explanation- For the purpose of clause (c)-
(i) where a contract involves the
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payment of money, it is not essential
for the plaintiff to actually tender to
the defendant or to deposit in Court
any money except when so directed
by the Court;
(ii) the plaintiff must aver performance
of, or readiness and willingness to
perform, the contract accordingly to
its true construction."
The basic principle behind Section 16(c) read
with Explanation (ii) is that any person seeking
benefit of the specific performance of contract must
manifest that his conduct has been blemishless
throughout entitling him to the specific relief. The
provision imposes a personal bar. The Court is to
grant relief on the basis of the conduct of the person
seeking relief. If the pleadings manifest that the
conduct of the plaintiff entitles him to get the relief
on perusal of the plaint he should not be denied the
relief."
Section 23 of the Contract Act lays down that the object
of an agreement becomes unlawful if it was of such a nature
that, if permitted, it would defeat the provisions of any law.
The term ’public policy has an entirely different and more
extensive meaning from the policy of the law. Winfield defined
it as a principle of judicial legislation or interpretation founded
on the current needs of the community. It does not remain
static in any given community and varies from generation to
generation. Judges, as trusted interpreters of the law, have to
interpret it. While doing so precedents will also guide them to
a substantial extent.
The following passage from Maxwell "Interpretation of
Statutes", may also be quoted to advantage here:-
"Everyone has a right to waive and to agree
to waive the advantage of a law or rule made
solely for the benefit and protection of the
individual in his private capacity which may
be dispensed with without infringing any
public right or pubic policy. Where there is
no express prohibition against contracting
out of it, it is necessary to consider whether
the Act is one which is intended to deal with
private rights only or whether it is an Act
which is intended as a matter of public
policy\005.."
The doctrine of public policy may be summarized thus:
Public policy or the policy of the law is an illusive concept: it
has been described as "untrustworthy guide". "variable
quality", "uncertain one", "unruly house", etc., the primary
duty of a Court of a law is to enforce a promise which the
parties have made and to uphold the sanctity of contract
which form the basis of society, but in certain cases, the Court
may relieve them of their duty on a rule founded on what is
called the public policy, but the doctrine is extended not only
to harmful cases but also to harmful tendencies. This doctrine
of public policy is only a branch of common law, and just like
any other branch of common law it is governed by precedents.
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The principles have been crystallized under different heads
and though it is permissible for Courts to expound and apply
them to different situations, it should only be invoked in clear
and incontestable cases of harm to the public.
Section 24 provides that if any part of a single
consideration for one or more objects, or any one or any part
of any one of several considerations for a single object, is
unlawful, the agreement is void.
In view of the findings recorded by the High Court more
particularly mention of all the relevant details relating to
Exhibits A-4 and A-5 and the evidence clearly establishing
that plaintiff had capacity to pay and was ready and willing to
pay the balance amount and the absence of any material to
show that the defendant No.2 was not acting in unauthorized
manner in view of the clear resolution of the appellant No.1,
the judgment of the High Court cannot be faulted. The appeal
is, therefore, dismissed without any order as to costs.