Supreme Court of India
HPA INTERNATIONALversusBHAGWANDAS FATEH CHAND DASWANI AND ORS.
- Citation
- 2004 INSC 395
- Decided
- 13 July 2004
- Disposal
- Dismissed
- Bench
- SHIVARAJ V PATIL
Holding
The contract was an indivisible contingent agreement; because court sanction was not obtained within a reasonable time, the contract became unenforceable and specific performance of even the vendor's life interest could not be granted.
Summary
The vendor, a life tenant of a property, entered into a sale agreement with HPA International to sell his life interest and the reversionary interest of the remaindermen, subject to obtaining a High Court sanction. The sanction suit was opposed by the reversioners and, after two years of delay, the vendor served a notice terminating the agreement and later sold only his life interest to a subsequent buyer who also paid public taxes. HPA International sought specific performance of the original contract and, alternatively, of only the vendor's life interest. The Supreme Court held that the agreement was a single, indivisible contingent contract whose performance depended on court sanction; the failure to obtain sanction within a reasonable period rendered the contract void, precluding specific performance of either the whole interest or the life interest. Consequently, the decree for specific performance was set aside and the appeals dismissed, with the Court upholding the lower court's directions on restitution and equity.
Issues considered
- The agreement was a contingent contract dependent on court sanction and whether it could be specifically enforced when sanction was not obtained.
- Whether the vendor's termination of the contract constituted a breach justifying specific performance of the life interest.
- Whether Section 12(3) of the Specific Relief Act permits partial specific performance when the contract does not expressly allow segregation of interests.
- Whether the subsequent buyer, aware of the prior agreement, holds the property in trust for the prior vendee.
- Whether the dismissal of the sanction suit as infructuous barred the prior vendee from seeking specific performance.
Legislation cited
- Code of Civil Procedure, 1908s. 11, s. 144
- Constitution of Indias. 136
- Indian Contract Act, 1872s. 31, s. 32, s. 53, s. 56, s. 73
- Indian Trusts Act, 1882s. 90, s. 91, s. 92
- Specific Relief Act, 1963s. 10, s. 12(3), s. 20
- Transfer of Property Act, 1882s. 43, s. 6(a)
Subjects
contingent contractspecific performancepartial performancecontract frustrationcourt sanctionlife interestreversionary interestSection 12(3) Specific Relief ActIndian Trusts Actequitable reliefrestitution
Judgment
HPA INTERNATIONAL A
v.
BHAGWANDAS FATEH CHAND DASWANI AND ORS.
JULY 13, 2004
[SHIVARAJ V. PATIL AND D.M. DHARMADHIKARI, JJ.] B
Contract Act, 1872 :
Ss. 31 and 32-Contingent contract-Enforcement of-Contract for
conveyance of entire life interest of vendor and reversionary interest of
remaindermen though latter not a party to the contract-Conveyance C
contingent on obtaining sanction of Court as to conveyance of interest of
remainder men-Specific pe1formance-Permissibility of-Held, when
sanction could not be obtained for reasons beyond the control of the
parties, contract cannot be directed to be specifically enforced-Specific
' Relief Act, 1963-Ss. 10 and 20. D
Ss. 73, 53, 56 and 32-Fundamental or repudiatory breach-Test for
ascertaining-Consequences if contract rendered unenforceable due to
reasons beyond the control of the parties-Frustration of contract-
Question offacts to be decided in each case. On facts, held, vendor cannot E
be held to be guilty of breach so as to entitle vendor to seek specific
pe1formance of transfer of life interest of vendor-Specific Relief Act,
1963-Section JO and 20.
Section 43-Applicability of-Discussed.
F
Specific Relief Act, 1963-S. 12(3)-Nature of power under-
Explained.
Trusts Act, 1982-Ss. 90, 91 and 92-Property acquired with notice
of existing contract-Constructive trust arising thereby-Parties that are
bound-Discussed. G
Code of Civil Procedure, 1908 :
S. 1I-Finality of decree not appealed agail'st-Ejfect of
S. 144-Reversal ofdecree transferring life interest in property to one H
31
32 SUPREME COURT REPORTS (2004] SUPP. 3 S.C.R.
A vendee-Adjustment and payment ofcost ofconstruction raised on property
by Vendee in period prior to reversal of said decree, ordered by Court
reversing decree-Held, on principle of restitution contained in S. 144
there was no ground to interfere with the said oder of adjustment and
payment.
B Constitution of India-Art. 136-Abuse of process-Direction of
Division Bench of High Court ordering payment of a certain sum in favour
of prior vendee against subsequent vendee for having misled the Court
Held, the direction deserved no interference.
C The vendor of the suit property, grandfather of respondent No.
6 executed a Will and two Codicils on 7.3.1948, under which he was
bequeathed the right of enjoyment during his life, of the estate of the
testator, including the suit property but without powers of alienation.
In the Will, it was provided that after the death of the vendor, his male
D issue living at the time of his death would take all the properties
absolutely. In the absence of any such male issue of the vendor, the
properties would be taken by other descendants, the 'reversioners'.
The testator died on 23.10.1956. On 26.6.1977, the vendor entered
into an agreement of sale of the suit property with the appellant. It was
E clearly recited in the agreement that the sale of the property was
necessitated because of the pressing demands of public authorities
towards dues and tax liabilities on the estate and likelihood of coercive
recovery of public dues by attachment and sale by public auction. The
vendor, therefore, agreed to sell and the purchaser agreed to purchase
F the entire interest in the suit property inclusive of life interest of the
Vendor and the interest of the reversioners (described as remainder
men) free from all encumbrances, for a total price of 5.5 lacs. A sum
of Rupees 25,000 was paid as advance. The balance of the sale
consideration was to be paid by the purchaser by bank drafts in favour
of the concerned public authorities for discharging the public dues and
G taxes. The purchaser agreed to pay Rupees 18,000 to the tenant in.
occupation of the property which was the liability of the vendor. The
vendor agreed to obtain at his own cost and expense the sanction of the
High Court of Madras for sale of life interest of the remainder men
in the property. The agreement further provided that in case the
H sanction of the Court was not accorded for the sale, the agreement shall
HPA INTERNATIONAL v. B.F.C. DASWANl 33
forthwith stand cancelled and the vendors shall return the advance A
amount of Rupees 25,000 to the purchaser.
There was a separate stipulation in.the agreement that if after the
sanction of the Court the vendor commits breach of the contract he
shall return the advance money of Rupees 25,000 and pay a sum of
Rupees 15,000 to the vendee by way of liquidated damages for failure B
to complete the sale. The agreement further provided that if after the
sanction of the Court, vendee commits breach and does not complete
the sale, he shall be liable to pay to the vendor a sum of Rupees 15,000
by way of liquidated damages.
c
At the time of execution of the agreement Ex. Pl dated 26.6.1977
the Testator's only daughter and the three sisters of the vender were
the reversioners in accordance with the terms of the Will because by
that time the vendor had no male issue. The vendor filed a Civil Suit
on the original side of the High Court for seeking sanction of the court D
for sale of full interest in the property inclusive of his own life interest
and the interest of the reversioners. The reversioners were impleaded
as parties to that suit.
As the sanction sought from the Court was opposed by two
reversioners, the vendor sent a lawyer's notice on 11.9.1979. E
The suit was prosecuted by the vendee himself who got himself
transposed in the suit as co-plaintiff. In reply to the lawyer's notice the
vendee alleged breach of contract on the part of the vendor with
intention of selling the property for higher price to third parties. It was p
reiterated that the vendee was always ready to discharge the tax
liability in accordance with the sale agre,ement.
In his reply sent through his lawyer to the lawyer's notice of the
vendor cancelling the agreement, the vendee did not express desire to
purchase life interest of the vendor without insisting on transfer of G
interest of the reversioners which was subject matter of the suit filed
for seeking sanction of the Court.
On 29.12.1979, the vendor sold his life interest in the suit property
for a sum of Rs. 4.40 lacs by execution registered instrument in favour H
34 SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.
A of respondents I to 5. What is apparent from the contents of the
subsequent sale deed is that large part of the sale consideration in
different sums aggregating to Rs. 2.68 lacs was paid directly by the
subsequent vendee to various authorities to discharge public dues and
taxes like Corporation Property Tax, Urban Land Tax and Income
B Tax arrears.
The subsequent vendee by separate release deeds dated 21.10.1980,
22.11.1980, 22.2.1980 and 29.4.1980 obtained surrender of rights
individually from the reversioners by paying each of them a sum of Rs.
20,000. After receiving the lawyer's notice and cancellation of the sale
C agreement, the vendee on 25.3.1981 got himself impleaded as a party-
defendant in the suit which was field to seek sanction of the Court. On
16.8.1981 the vendee filed a Civil Suit seeking Specific Performance of
the Agreement of Sale.
D The two suits seeking court sanction for sale under the agreement
Ex.Pl and Civil Suit No. 423/81 seeking Specific Performance of the
Agreement of Sale, were clubbed and tried together by the Single
Judge.
After the pleadings were completed in the two suits, the vendee
E on 25.11.1986 filed an affidavit purporting to be under Section 12(3)
of the Specific Performance Act of 1963 stating therein that without
prejudice to his claim for transfer of full interest in the suit property
to him the agreement of sale, if he was found not entitled to maintain
the suit seeking sanction of the Court for sale of full interest in the
F property a decree be granted for Specific Performance of transfer of
life interest of the vendor in the suit property.
In view of the averment made in the affidavit filed by the vendee
in which he alternatively claimed lesser relief of transfer of only life
interest in the suit property of the vendor; single judge by common
G judgment dated 6.9.1988 dismissed Civil Suit No. 471177 seeking
sanction of the Court for sale as infructuous.
This part of the common judgment dismissing Civil Suit
No. 471177, in which sanction for sale sought from the Court, has not
H been appealed against bdore this Court although counsel for the
HPA INTERNATIONAL v. B.F.C. DASWANI 35
vendee has contended that no separate appeal was required to be A
i
filed against dismissal of the suit for court's sanction as infructuous
because the common judgment passed in the suit seeking sanction of
the suit for sale and the suit for specific performance is already under
appeal.
B
The single judge by the impugned common judgment decreed
Civil Suit No. 423/81 in favour of the vendee to the extent of directing
conveyance of life interest in the suit properties of the vendor under
the Agreement Ex.Pl. It was further held that as the subsequent vendee
has purchased the property with knowledge of the prior sale agreement
with the vendee the former should join in re-conveying the property C
to the latter.
The subsequent vendee has not disputed in this appeal that the sale
in favour of the subsequent vendee was with notice of the prior sale
agreement Ex.Pl with the vendee. D
Against the judgment granting decree of specific performance of
sale of life interest of vendor in the suit property, an appeal was
preferred by the subsequent vendee to the Division Bench of the High
Court. The Division Bench concluded hearing of the appeal on 22.3.1989 E
but pronounced judgments almost five years after, on 24.1.1994 and
dismissed th!! appeal. The judgment has been set aside by this Court
by order dated 13.1.2000 reported in !2000] 2 SCC 13. This Court
remanded the appeal for re-hearing by the Division Bench of the High
Court. After re-hearing, the Division Bench by the impugned judgment F
dated 24.4.2001 has allowed the appeal preferred by the subsequent
vendee. The decree granted for conveying life interest of the vendor in
the suit property has been set aside. The only relief granted to the
plaintiff, is that out of the rental income realised by the plaintiff during
long pendency of the appeal, a sum of Rs. 5.5. lacs has been deducted
to deprive the subsequent vendee of that sum for his misconduct of G
projecting Bob Daswani and Fateh Chand Daswani as two persons
when, in fact, they were one. Rest of the rental income recovered by
the plaintiff vendee has been directed to be paid to the subsequent
vendee as a consequence of successs of appeal and setting aside of the
decree for specific performance. H
36 SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.
A Dismissing the appeals, the Court
HELD: 1.1. From the recitals of the sale agreement Ex. P-1 and
particularly those requiring the vendee to discharge public debts and
dues directly as part of the consideration of sale, it is clear that the
B necessity of sale for the vendor arose for safeguarding the property
from being put to auction and sale through coercive process of recovery
of public dues. Naturally, the vendor wanted to obtain market price of
the property and desired to avoid sale of the property through a
coercive process at a lesser price. That there were outstanding taxes
and public dues have not been disputed by the vendee and in fact, they
C are acknowledged by him in reply to the lawyer's notice sent by the
vendor terminating the contract. In the reply sent through lawyer by
the vendee, it is clearly acknowledged that tax dues were there but it
is stated that the alleged pressure from tax authority was merely as
an excuse to terminate the agreement. The motive attributed to the
D vendor that he tried to wriggle out of the sale agreement Ex. P-1, only
to obtain higher price of his property by selling it to the subsequent
vendee, is not borne out from the evidence on record. The contends of
the sale-deed Ex. D-1 dated 29.12.197 executed in favour of the subsequent
vendee clearly show that a substantial portion of agreed consideration
E of Rs. 4,40,000 was paid directly by cheques towards the property tax
(Rs. 50,383.98) to Corporation of Madras, Urban Land Tax to Tehsildar
(Rs. 36,860.70) and income tax (Rs. 1,10,000) to Income-Tax Officer.
The above payments made by the subsequent vendee to public authorities
justify the stand of the vendor that there were pressing demands of
public authorities on the property and the sale of the property, well
F before the impending initiation of coercive recovery by public '"'
authorities, was an urgent necessity. [70-G-H; 71-A-DJ
1.2. The recitals of the agreement of sale clearly mention the
necessity of sale arising from the pressure of public dues and taxes. The
G vendor could not have waited for an unreasonably long period of
pendency of sanction suit when commencement ofrecovery proceedings
for public dues and taxes could have commenced any time. There is
no period fixed in the terms of the contract for obtaining sanction of
the court, but keeping in view the other terms of the contract and the
H pressing requirement for sale of the property to clear public dues, it
HPA INTERNATIONAL v. B.F.C. DASWANI 37
has to be held that obtaining of court's sanction within a reasonable A
period and in any case within a period well before commencement of
recovery proceedings for dues and taxes, was in contemplation of the
parties as an implied term. Notice served for terminating the contract,
after waiting for two years for sanction by the court, cannot be held
to be a breach of the contract on the part of the vendor. The argument B
that the vendor rescinded the contract only because he had entered into
secret negotiations with the subsequent vendee to obtain higher price
for the property is not borne out from the evidence. Too much
importance cannot be attached to the fact of initial attempt made by
subsequent vendee to conceal knowledge of the existing contract with C
the vendee when sale-deed was obtained by the former. For the
misconduct of misrepresentation and attempt to mislead the court, the
Division Bench of the High Court has rightly deducted a sum of Rs.
5.5 lacs from the rental income found payable to the subsequent vendee.
This Court does not propose to disturb the same. But the aforesaid
misconduct of subsequent vendee does not render the act of vendor in D
rescinding the contract to be an act of breach of contract which can
be said to have been committed solely with desire to obtain higher price
of the property. (71-G-H; 72-A-D]
1.3. Only life interest was sold to the subsequent vendee for higher E
price. Out of the agreed sale consideration, major portion of money
was directly paid by the subsequent vendee to satisfy dues and taxes of
public authorities. The notice served for terminating the contract,
anticipating remote prospect of grant of sanction by the Court within
a reasonable period and after waiting for two years from date of the
contract, cannot be termed to be a breach to justify grant of any F
specific relief to the vendee. It is also relevant to state that although
by lawyer's notice, the vendor terminated the contract and instructed
his lawyer to withdraw the suit for sanction, but in fact, the suit was
not withdrawn. The vendee got himself impleaded initially as defendant
to the suit and then sought his transposition as co-plaintiff. That part G
of the action of the vendee cannot be castigated as self-defeating
because he was naturally interested in prosecuting the suit for sanction
diligently to obtain conveyance of full rights in the property. However,
the further act on the part of the vendee of filing an affidavit restricting
his claim only to life interest resulted in dismissal of the suit for H
38 SUPREME COURT REPORTS [2004) SUPP. 3 S.C.R.
A sanction as infructuous. The learned single judge trying jointly the two
suits came to the conclusion that as the vendee gave up his claim for
transfer of interest of the reversioners, the court's sanction was not
required. [72-E-H; 73-A)
B 2. When decree granted for conveyance of life interest of the
vendor in the suit for specific performance was challenged by the
subsequent vendee before the Division Bench of the High Court, the
vendee could as well have preferred cross appeal against the dismissal
of the suit for sanction as infructuous. He was a co-plaintiff in that suit
C and had an independent right of appeal. The non-filing of any appeal
against dismissal of sanction suit as infructuous is a clear indication
that the vendee was satisfied with the grant of decree merely of specific
performance of conveyance of life interest of the vendor. It is not open
to the vendee now to question the correctness of the dismissal of the
suit for sanction as infructuous. 173-C-EJ
D
3. I. At the time when the sale agreement was entered into, the
parties were conscious that the vendor laid only life interest in the property
and he could not convey more than his own interest. It was open to the
vendee to obtain conveyance of interest of the reversioners by obtaining
E release deeds from them by paying them consideration for surrender
for their interest, as was done by the subsequent vendee. Another course
open to him was to enter into separate agreement with the reversioners
or insist on the reversioners joining the sale agreement. It seems the
vendee entered into a speculative deal for obtaining full interest in the
F property depending upon the sanction to be granted by the court. It
seems to be in contemplation of the parties that if the reversioners
objected, the court might refuse sanction. They could as well foresee
that despite the reversioners' objection, the court might grant sanction.
The transfer of full interest in the property was, therefore, dependent
on sanction of the court. To meet this contingency, there were specific
G terms such as clauses (4) and (6) incorporated in the contract whereby
it was clearly agreed that the vendor shall obtain sanction of the court
at his own expense and costs and ifthe sanction was not accorded by the
court, the agreement would stand cancelled and the advance money
refunded to the vendce. Clause (15) of the agreement could come into
H operation only ifthe court granted sanction and any ofthe parties failed
HPA INTERNATIONAL v. B.F.C. DASWANI 39
to complete the sale. Clause (15) had no operation when the sanction A
was not accorded to the sale. [73-G-H; 74-A-D]
3.2. If the vendee intended to seek conveyance separately of the
life interest of the vendor, the earliest opportunity for him was when
he had received notice dated 11.9.1979 sent through lawyer by the B
vendor cancelling the contract. Assuming that at that time he could not
opt for lesser relief as the suit for sanction was pending, he could have,
in any case, opted for conveyance of life interest of the vendor soon
after he came to know of the negotiations for sale with took place in
the presence of one of the partners of the plaintiff-vendee. Even after C
deriving the knowledge of the execution of the sale deed dated
29.12.1997 Ex. D-1, the option to obtain lesser relief of transfer of life
interest was not exercised. It was exercised as late on 25.11.1986 by
filing an affidavit and at the time when pleadings of the parties were
complete and the joint trial in the two suits had already commenced. D
During long pendency of the suit between 1979 and 1986, the parties
interested in the property changed their positions. The vendor by
executing registered sale deed in favour of the subsequent vendee got
his public dues paid to relieve the pressure on the property and
obtained market price of the property. After obtaining possession of E
the property pursuant to the sale deed, the subsequent vendee has raised
construction and inducted tenants. Accepting the legal stand based on
sections 90, 91& 92 of the Indian Trusts Act that the subsequent vendee,
being a purchase with knowledge of prior agreement, is holding the
... property as a trustee for the benefit of the prior vendee, the vendor,
who changed his position by effecting subsequent sale cannot be F
compelled to convey his life interest when such lesser relief was not
claimed at the earliest opportunity and the terms of the contract did
not contemplate transfer of life interest alone. On duly appreciating
the evidence on record, construing specific terms of the contract and
considering the conduct of the parties, it is concluded that the recession G
of the contract due to non-grant of sanction by the court within two
years after execution of the contract and filing of the suit for sanction,
was not an act of breach of contract on the part of the vendor to justify
grant of relief of specific performance of the contract to the prior
vendee. 174-H; 75-A-F] H
40 SUPREME COURT REPORTS [2004] SOPP. 3 S.C.R.
A 3.3. The subsequent vendee, by his own act in the pending suits,
was responsible for rendering the suit for sanction as infructuous. He
was guilty of lapse in not seeking conveyance of life interest of the
vendor at the earliest opportunity when notice of recession of the
contract was received by him and later when he derived the knowledge
B of execution of registered sale-deed in favour of the subsequent vendee.
The option was exercised conditionally in the midst of the joint trial
of the two suits. There was one integrated and indivisible contract by •
the vendor to convey full interest in the property i.e., his own life
interest and the interest of the reversioners with sanction of the court.
As the court had not granted the sanction, the contract could not be
C specifically enforced. The lesser relief of transfer of life interest was
not claimed within a reasonable time after the vendor had intimated
that the contract, as agreed for full interest, was not possible of
performance. There is neither equity nor law is in favour of the
plaintiff. (75-G-H; 76-A-B)
D
4.1. The reversioners have surrendered their interest by accepting
consideration separately and executed separate release deeds in favour
of the subsequentvendee. Even though the subsequent vendee has acquired
property with knowledge of sale agreement Ex. Pl existing with the
E prior vendee, the latter has no equity in his favour as to bind the
reversioners and in any manner adversely affect their interest. They
were not parties to the sale agreement and have already by separate
release deeds, on accepting separate consideration, surrendered their
interest in favour of the subsequent vendee. Any grant of relief transfer
of life interest of the vendor to the prior vendee would involve the
F reversioners in further litigation. If only life interest of the vendor is
allowed to be conveyed to the prior vendee, after death of vendor, the
reversioners are likely to be involved in litigation in future to help in
restoring possession of the property to the subsequent vendee and
effectuate the release deeds executed in his favour by them. Grant of
G such equitable relief would adversely affect the immediate efficacy of
the release deeds and would create various hurdles in working qut the
rights and remedies of the reversio11ers vis-a-vis the subsequent vendee.
It would not be a proper exercise of discretion by the Court to grant
such partial relief of directing con;veyance of life interest of the vendor
H as that would adversely affect the interest of the reversioners. (77-E-HJ
HPA INTERNATIONAL v. RF.C. DASWANI 41
i
4.2. The contracting parties were fully aware that reversioners, A
who had a mere chance of succession, were not parties to the agreement.
The parties to the contract could have taken care of the eventuality of
refusal of sanction by the Court and possibility of the vendor transferring
only his life interest to the vendee*+, but such eventuality of separate
transfer of life interest is conspicuously absent in the terms of the
B
agreement. Such obligation on the part of the vendor to transfer his
life interest, if sanction for transfer of reversioners' interest was not
granted, cannot be read in the contract by implication and recourse
to Section 12(3) of the Specific Relief Act, therefore, is impermissible.
Sectionl2(3) of the Specific Relief Act can be invoked only where terms
of contract permit segregation of rights and interest of parties in the c
property. The provision cannot be availed of when the terms of the
contract specifically evince intention contrary. to segregating interest
of the vendor having life interest and spes successionis of reversioners.
Neither law nor equity is in favour of the vendee to grant Specific
Performance of the Contract. [78-C-F) D
4.3. The single judge of the High Court was in error in granting
decree of specific performance of transfer of life interest of the vendor
on a finding that the vendor had committed breach by rescinding
contract during pendency of sanction suit. The Division Bench of the
E
High Court, rightly reversed the decree and dismissed the suit. [78-G I
Dalsukh M Pancholi v. The Guarantee Life and Employment Insurance
Co. Ltd. & Ors., AIR (1947) 34 PC 182, relied on .
...
Narain Pattro v. Aukhay Narain Manna & Ors, ILR 152; Sreemati F
Kalidasi Dassee & Ors. V: Sreemati Nobo Kumari Dassee & Ors., 20 CWN
929, approved.
M V. Shankar Bhat & Anr. v. Claude Pinto Since (dead) by LRs. &
Ors., (2003) 4 SCC 86, referred to.
G
5.1. The alternative claim for lesser relief of life interest of vendor
is also rejected. (81-DI
William Graham v. Krishna Chandra Dey, AIR (1925) PC 45; and
Govinda Naicken & Anr. v. Apathsahaya Iyer alias Ayawaiyer, 37 Madras H
42 SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.
A Series 403, referred to. •
5.2. In the present case, the terms ofthl! contract fully indicate that
the parties did contemplate that if the sanction of the court was not
granted for transfer of the interest of the reversioners, the contract
B could not be enforced. Clause (6) specifically provided that in case
sanction by the court was not granted, the advance money of Rs. 25,000
shall be refunded to the purchaser. It was known to the parties that the
vendor had only life interest in the property and the reversioners were
•
not the parties to the agreement. Even with this knowledge of limited
C right to the vendor and the reversioners being not signatories to the sale
agreement, there is no stipulation made in the contract that if court's
sanction was not obtained for transfer of reversioners' interest, the
vendor shall convey his life interest to the vendee. [83-E-Gl
5.3. That the parties had agreed to wait for the whole period
D during which the suit for sanction was pending and till its finalisation
including appeal proceedings, if any. Such a course was not in
contemplation of the parties because the vendor had agreed that the
vendee would directly discharge the tax liabilities form the total amount
of sale consideration. It was not possible for the vendor to have waited
E indefinitely for final orders on the suit for sanction when the reversioners
had objected to the sanction and there was remote possibility of the
grant of sanction in foreseeable near future. [85-A-BI
Suisse At/ant v. NV. Rotterdam, (1966) 2 All ER 61, referred to.
F 5.4. It would be purely in the field of speculation as to what would
have actually happened had the vendor continued to prosecute the suit
despite the objection of the reversioners. The complications in disposal
of sanction suit on merit were created by the vendee himself by getting
himself transposed as co-plaintiff and then filing an affidavit restricting
G his claim to transfer of life interest. It is, thereafter, that the sanction
suit was dismissed as infructuous. If the order of the court refusing
sanction was erroneous and when an appeal was filed by the subsequent
vendee against grant of decree of specific performance oflife interest to
the vendee, the vendee could have appealed against dismissal of suit for
H sanction as infructuous. It is argued that the two suits wer.! clubbed for
HPA INTERNATIONAL v. B.F.C. DASWANI 43
'(
trial and as the lesser relief of transfer of life interest was granted in suit A
for specific performance, it was not necessary for the vendee to have
appealed against dismissal of the sanction suit. There is no need to deal
with this argument any further as the sanction was not granted for sale
by the court within a reasonable period of two years and the possibility
of commencement of coercive proceedings of tax recovery loomed large,
B
the vendor cannot be held to have committed a breach of the contract
when he served a notice of termination of contract. (85-D-G)
5.5. The vendor could not have waited indefinitely for the final
result of the sanction suit as coercive proceedings for recovery of tax
were likely to be initiated at any time. As already held, reasonable c
period for obtaining sanction from the court has to be read as an
implied condition of the contract in view of urgent necessity of sale to
satisfy the tax dues and save the property from coercive recovery. The
vendor had agreed for transfer of full interest in the property including
his own life interest and of the reversioners. As the reversioners objected D
and ultimately the sanction suit failed, the performance of contract, as
agreed for transfer of full interest in the property, had become
impossible. There was no agreement between the parties that if
sanction was not granted, the vendor would transfer his life interest.
On the contrary, the agreement clause specifically stated that if the E
sanction was not obtained, the advance money shall be returned. This
stipulation shows an intention contrary to the parties agreeing for
transfer of life interest of vendor, if transfer of reversioners' interest
.... was not possible for want of court's sanction. (86-E-HI
Satyabratae Ghose v. Mugneeram Bangur & Co., [19541 SCR 310
F
and The Humma Masjid v. Kodimaniandra Deviah, [19621 Supp. 2 SCR
554, referred to.
5.6. This is not a case where the vendor had o·nty right of spes
successionis and after execution of agreement of sale, he subsequently G
acquired full interest in the property to be held bound by section 43
of the Transfer of Property Act. The reversioners were not parties to
the agreement of sale. When in the suit for sanction to transfer their
interest they were made parties and were noticed, they expressly
objected to the proposed transfer. No principle ofestoppel or provisions H
44 SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.
A of section 43 of the Transfer of Property Act can, therefore, operate
against them. So far as the subsequent vendee is concerned, in the course
of suit, he was pushed to a position in which he could not take a stand
that he had no knowledge of the prior agreement with the vendee but
he separately purchased life interest from the vendor and obtained
B separate release deeds, on payment of consideration, from the
reversioners. The reversioners being not parties to the sale agreement
Ex. P-1 entered into with the vendee, the latter could not enforce the
contract Ex. P-1 against the former. [87-F-H; 88-A)
5. 7. It is not found that the vendor was guilty of rendering the suit
C for sanction infructuous. It did terminate the contract pending the suit
for sanction but never withdrew that suit. The vendee himself prosecuted
it and rendered it infructuous by its own filing of an affidavit giving
up his claim for the interest of reversioners. In such a situation where
the vendor was not in any manner guilty of not obtaining the sanction
D and the clause of the contract requiring court's sanction for conveyance ,.
of full interest, being for the benefit of both the parties, the contract
had been rendered unenforceable with the dismissal of the sanction
suit. [88-F-G)
E Dr. Jiwanlal & Ors. v. Brij Mohan Mehra & Anr., [1972) 2 SCC 757,
referred to.
5.8. The vendor waited for a reasonable period for grant of sanction
to the sale by the court. The was a pressing need for sale as the public
F dues and taxes could have been recovered from the property by coercive
process at any time. The vendor, therefore, advisedly withdrew from the
contract, negotiated sale on different terms with the subsequent vendee
and ultimately entered into the contract with the latter. The vendor did
not actually withdraw the suit for sanction. The vendee himself became
co-plaintiff to the suit and unsuccessfully tried to prosecute it. The
G sanction suit was rendered infructuous by vendee's own conduct of
filing affidavit restricting his claim to life interest. He suffered the
dismissal of sanction suit as infructuous and did not question the
correctness of the court's order in appeal before the Division Bench,
although the subsequent vendee, against grant of decree of specific
H performance of life interest, had preferred an appeal. [90-A-C)
HPA INTERNATIONAL v. B.F.C. DASWANI 45
5.9. The vendor cannot be held guilty of breach as to entitle the A
vendee to seek specific performance of life interest of the vendor. The
contract entered into between the parties was for conveying full
interest in the property namely life interest of vendor and chance of
succession of reversioners. The contract was one and indivisible for full
interest. There is no stipulation in the contract that if sanction was not B
obtained, the vendor would transfer only his life interest for the same
or lesser consideration. On the contrary, the contract stipulated that
if the sanction was not granted, the contract shall stand cancelled and
the advance money would be refunded to the purchaser. [90-E-F]
6.1. After execution of the decree and registered sale-deed the
c
vendee plaintiff was placed in possession of the property on 25.2.1995.
The basement and ground floor have been constructed by the subsequent
vendee after obtaining possession on the basis of his sale deed. Thereafter
plaintiff - vendee, on obtaining possession pursuant to the execution of D
decree granted by the single judge, has constructed two floors above
<t the ground floor although the construction is said to be not complete
in all respects. According to the plaintiff - vendee, he has incurred an
expenditure of Rs. 46,28,403 for construction of two floors above the
ground floor. As the construction put up by the plaintiff-vendee is to E
ensure for the benefit of the subsequent vendee, and the latter having
succeeded in appeal before the Division Bench of the High Court, the
Division Bench in adjusting equities has directed that on payment of
construction cost incurred by the plaintiff-vendee for two floors above
ground floor, the whole construction will become the sole property of
the subsequent vendee. [91-B-D) F
6.2. From the date of the impugned judgment of the Division
Bench the total rent received from the property has been accounted
for. The whole rental income has been directed to be paid to the
successful party i.e. the subsequent· vendee. Out of the total rental G
income payable to the subseqeunt vendee, apart from adjusting the
construction cost incurred by the plaintiff-vendee, deduction has been
directed towards return of the sale consideration of Rs. 5.5 lacs paid
under the s~le agreement Ex. P-1. A further sum of Rs. 5.5 lacs has
been directed to be deducted for the misconduct of the subsequent H
46 SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.
A vendee in trying to mislead the court that B and D were two different
persons and the subsequent vendees had no knowledge of the prior
agreement. (91-E-Fl
6.3. On the principle of restitution contained in Section 144 of the
B Code of Civil Procedure, there is no ground to interfere with the order
of the Division Bench of the High Court in directing adjustment and
payment by subsequent vendee of the cost of construction incurred by
the plaintiff vendee. The directions for return of full sale consideration
as also deduction towards misconduct of impersonation and misleading
.
the Court also deserve no interference. (91-G-HJ
c
6.4. The directions of the Division Bench of the High Court to
deduct a sum of Rs. 5.5. lakhs for the alleged misconduct of
impersonation and misleading the Court, are maintained. (92-AI
D CIVIL APPELLATE JURISDICTION : Civil Appeal No. 6006 of
2001.
From the Judgment and Order dated 24.4.2001 of the Madras High
Court in O.S.A. 202 of 1988.
E WITH
C.A. No. 336 of 20·02.
K. Parasaran and Gopal Subramaniam and V. Balachandran for the
Appellant in C.A. No. 6006/2001 & Respondent in C.A. No. 336/2002.
F
Soli J. Sorabjee, Attorney General, E.R. Kumar, Saurav Kirpal, P.H.
Parekh, Jayesh Dolia and S. Ramakrishnan, for the Respondent in C.A. No.
600612001 & Appellant in C.A. No. 336/2002.
The Judgment of the Court was delivered by
G
DHARMADHIKARI J. : These two cross appeals have been
preferred against common judgment dated 24.4.2001 passed by the
Division Bench of the High Court of Madras by which decree of Specific
Performance of Contract of Sale of the suit property granted by the learned
H single judge has been set aside with certain directions to adjust the equities
HPA INTERNATIONAL v. B.F.C. DASWANI [DHARMADHJKARI, J.) 47
between the parties. A
The facts of the present case should be an eye opener to functionaries
in law courts at all levels that delay more often defeats justice invariably
adds wmplications to the already complicated issues involved in cases
coming before them, and makes their duties more onerous by requiring B
them to adjust rights and equities arising from delay.
This introductory comment is occasioned by the fact that against the
judgment of the learned single judge passed on 6.9 .1988 the appeal was
earlier heard by the Division Bench of the High Court on 22.3 .1989 but
it passed the judgment after a period of about five years on 24.1.1994. It C
dismissed the appeal and confirmed the decree of Specific Performance of
the Contract granted by the single judge.
In appeal preferred by the defendants, this Court by order passed on
13.1.2000 (reported in 2000 (2) sec 13) remanded the appeal to the D
Division Bench of the High Court for a fresh decision only because oflong
"I gap of five years in hearing arguments and decision of appeal by the High
Court.
After remand the Division Bench reheard the appeal and by the
impugned judgment dated 24.4.200 I has allowed it. The decree granted E
by the learned single judge of partial relief of Specific Performance of
Contract of Sale of life interest of the vendor in the suit properly has been
set aside.
With this background the facts of the case may be stated:-
F
The owner of the suit property namely, Mouna Gurusamy Naicker,
(hereinafter referred to as the 'vendor') grandfather of respondent No. 6
(G. D. Narendra Kullamma Naicker) executed a Will and two Codicils on
7.3.1948. Under the Will, the vendor herein was bequeathed the right of
enjoyment during his life, of the estate of the testator, including the suit G
property (described as Municipal Door No. 36C, Mount Road, Madras-600
002) but without powers of alienation. In the Will, it was provided that
after the death of the vendor, his male issue living at the time of his death
would take all the prope11ies absolutely. In the absence of any such male
issue of the vendor, the properties would be taken by other descendants H
48 SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.
A (hereinafter referred to as the 'reversioners'). •
Shri M.G. Naicker, the testator died on 23.10.1956. On 26.6.1977,
the vendor entered into an agreement of sale of the suit property with the
appellant HPA International, a partnership firm (hereinafter referred to as
R the vendee). It was clearly recited in the agreement that the sale of the
property was necessitated because of the pressing demands of public
authorities towards, dues and tax liabilities on the estate and likelihood of
coercive recovery of public dues by attachment and sale by public auction.
The vendor, therefore, agreed to sell and the purchaser agreed to purchase
the entire interest in the suit property at Mount Road, Madras inclusive of
C life interest of the Vendor and the interest of the reversioners (described
as remainder men) free from all encumbrances, for a total price of 5.5 lacs.
A sum of Rupees 25,000 was paid as advance. The balance of the sale
consideration was to be paid by the purchaser by bank drafts in favour of
the concerned public authorities for discharging the public du.:s and taxes.
D The purchaser agreed to pay Rupees 18,000 to the tenant in occupation of
the property which was the liability of the vendor. The vendor agreed to
obtain at his own cost and expense the sanction of the High Court of
Madras for sale of his life interest and interest of the remainder men in the
property. The agreement further provided that in case the sanction of the
E Court was not accorded for the sale, the agreement shall forthwith stand
cancelled and the vendors shall return the advance amount of Rupees
25,000 to the purchaser.
There was a separate stipulation in the agreement that if after the
F sanction of the Court the vendor commits breach of the contract he shall
return the advance money of Rupees 25,000 and pay a sum of Rupees
15,000 to the vendee by way ofliquidated (iamages for failure to complete
the sale. The agreement further provided that if after the sanction of the
Court, vendee commits breach and does not complete the sale, he shall be
liable to pay to the vendor a sum of Rupees 15,000 by way of liquidated
G damages.
The relevant part of opening recitals and clauses 1, 2, 3, 4, 6, 7, 9
& 15 of the agreement dated 26.6.1977 Ex.P 1 are reproduced hereunder
as rights, and equities of the contesting parties are dependent on its proper
H construction, and understanding:
HPA INTERNATIONAL v. B.F.C. DASWANI [DHARMADHIKARI, J.] 49
AGREEMENT OF SALE A
"THIS AGREEMENT OF SALE executed at Madras this
26th day of June 1977 between G.D. NARENDRA KiJLLAMMA
NAICKER, son of late M. Dorai Pandian alias Subba Naicker,
Hindu, aged about 38 years and now residing at Plot No. 24, B
· Second Stage, Panmanabha Nagar, Ady·ar, Madras-20, hereinafter
... referred to as the VENDOR of the one part and HPA
INTERNATIONAL, a firm having its business office at. No.15/
16, Casa Major Road, Egmore, Madras-8 represented herein by
' its Managing Pa~ner H.A.,~~EE~U?f?I~'. ~er;i~a~_e,i:,c~ll,ed !he C
1
PUTVHASER of the other part:
WHEREAS the Vendor is the Paternal grandson of late
Mounaguruswamy Naidu, Zamindar of Naickarpatti, Madurai
District, whereas the said Mounaguruwamy Naidu owned and
possessed large immovable properties consisting of Houses and D
lands situate in Madurai district and in Madras City.
WHEREAS he executed his last Will and Testament dated
7.3.1948 and two Codicils to the said Will, whereas he had
bequeathed thereunder a life \!State in all the said properties to his E
grandson, the vendor herein, whereas he provided therein that
after the life time of the Vendor, his male issues, if any, who may
survive him, should take all his properties absolutely, whereas he
also provided in the said Will that if the vendor should die without
leaving any male issue, his brothers and in default of brothers, his F
brothers' male issues who may be alive at the time of death of
the vendor should take the property absolutely and in default of
any of them, the testators' daughter and son's daughters then
living at the time of the death of the vendor should take the
property absolutely.
G
WHEREAS the said Mounaguruswami Naidu died on
23.10.1956, Whereas the vendor's father M. Doraipandian alias
~.
Subba Naicker obtained probate to the said Will and Codicils from
the High Court, Madras in OPNo.14of1957 and was administering
the estate until 4. I 2.1963 when he delivered possession of the H
50 SUPREME COURT REPORTS [2004]-SUPP. 3 S.C.R.
A estate to the vendor under orders of the High Court, Madras.
Whereas the vendor is in possession of the said estate ever since
then and has been administering the same.
WHEREAS the vendor has not begotten any issues, male or
female, until now, whereas the vendor's father died on 29.9.1972.
B Whereas the vendor had to spend very large sums of money for
Managing the vast extent of agt icultural lands comprised in the
estate and the net income from the same ever since the vendor
took up management of the same until now has been very
negligible and practically nil.
c WHEREAS the house properties have also not yielded any
surplus income after discharge of liabilities.
WHEREAS large sums of money by way of public cues
such as Agricultural income Tax, Capital Gains Tax, Income-Tax,
D Wealth tax, penalties and interest, property tax, Urban Land Tax,
compulsory deposits, etc., payable on the various assessments
could not be paid and discharged as and where demanded for want
of requisite net income from the estate to meet the same and on
account of paucity of funds in the estate.
E WHEREAS there is now due towards the said Public debts
and public liabilities a sum ofnearly six lakhs, whereas consequent
on the inability of the estate to pay the same, interest on the said
public debts are accruing from day to day thereby increasing the
liability of the estate enormously. Whereas in consequence of the
F inability and failure of the estate to meet the said public debts
within the periods of the respective demands, penalties are also
levied thereby further swelling the public Debt liabilities of the
estate.
WHEREAS the vendor apprehends that eventually the public
G debts and liabilities may swallow up the estate whereas the
payment of all the said Public Debts and dues and public liabilities
is a first charge on the ·entire state.
WHEREAS the vendor also apprehends that in the
H circumstances the State and Public Authorities may take coercive
HPA !NTERNATIONAL v. B.F.C. DASWANI [DHARMADHIKARI, J.] 51
steps and bring the properties comprised i~ the Estate to sale for A
the realisation of the public Debts and Liabilities. Whereas the
vendor also apprehends that if the properties are brought to sale
in public auction by coercive steps by the state they may be sold
away for ridiculously low and nominal prices and that the estate
would thereby be put to enormous loss and damage, whereas the B
vendor has therefore considered it imperative in the interest of the
estate to sell some of the properties of the estate and to discharge
the public dues and liabilities paya~le by the estate from the net
sale proceeds thereof, in order to save the remaining portion of
the estate.
c
WHEREAS house, ground and premises bearing Municipal
Door No. 36-C, Mount Road, Madras-2 and more fully described
in the Schedule hereto is comprised in the said estate.
WHEREAS the vendor has therefore negotiated for a sale of the D
same with a view to utilize the entire net sale proceeds thereof for
discharge of the public debts and dues and public liabilities of the
estate.
WHEREAS the Purchaser has offered to purchase the said
property described in the schedule hereto in its entirety, that is E
inclusive of the interest of the remainder men after the life time
of the vendor and free from all encumbrances, charges or trusts
whatsoever for the net sum ofRs.5.5 lakhs (Rupees five and a half
lakhs) only upon and subject to the performance of all the terms
and conditions mentioned hereinbelow: F
WHEREAS the vendor has considered the said offer to be
fair, reasonable and best according to present market conditions
and in the circumstances of the case.
WHEREAS the vendor has also considered that it is in the G
best interest of and beneficial to the estate to accept the offer in
order to discharge the Public Debts and dues and public Liabilities
of the estate and to save the estate from coercive steps by the State
and from a forced sale of the properties comprised in the estate
in public auction and has therefore deemed it fit, proper and H
52 SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.
A necessary to accept the said offer.
NOW THIS AGREEMENT WITNESSETH as follows in
pursuance of the premises and agreement hereinabove recited:
I. The vendor doth hereby agrees to sell and the purchaser does
B hereby agrees to purchase the entire interest, both present
and future, in house ground and premises bearing Municipal ,..
Door No. 36-C, Mount Road, Madras-2 inclusive of the life
interest of the Vendor and the interests of the remaindermen
and free from all encumbrances, charges of trusts whatsoever
c from the net sum of Rupees five and a half lakhs and subject
to and upon all the. terms and conditions mentioned below:
2. The sale is of the entire interests in the said property namely,
the present interest of the vendor and the interest of the
remaindermen or revesioners after his death.
D
3. This agreement is subject to the passing of the vendor's title
to the property and of the vendor's rights to sell the entire
interest, present and future in the property by the Purchaser's
advocate.
E
4. The vendor shall obtain at his own cost and expense the
sanction of the High Court, Madras for the absolute sale as
aforesaid of the entire interest in the property inclusive of
the interest of the remaindermen or reversioners after tl;e life
time of the vendor.
F
5. The purchaser has this day paid to the vendor a sum of Rs.
25,000 (rupees twenty five thousand only) by bank draft
bearing No.CL/AA 779570 dated 24.6.1977 drawn on the
State Bank oflndia, Adyar, Madras, in favour of the Vendor,
G as advance towards agreement of sale.
6. In case sanction of the Court is not accorded as aforesaid,
this agreement shall forthwith stand cancelled and the
vendor shall forthwith return the advance amount of rupees
H twenty five thousand to the purchaser.
HPA INTERNATIONAL v. B.F.C. DASWANI [DHARMADHIKARI, J.] 53
7. If the sanction of Court is obtained the sale shall be A
completed within a period of three months thereof.
8.
9. The balance of the sale price of Rs. Five lakhs twenty five
thousand shall be paid by the purchaser at or before the B
execution and registration of the sale deed by bank draft
drawn in favour of the respective concerned Public Authorities
on behalf of the vendor for discharge of the public debts and
dues and public liabilities of the said estate and other
liabilities binding on the said property, viz. The advance of C
Rs.18,000 liable to be returned to the tenant of the said
property by the vendor and the commission payable by the
vendor to the broker on this transaction.
10. .. ............... ..
D
11. .. ................ .
12. .. ................ .
13. .................. ..
E
14. .. ................. .
15. If after the sanction of court to the aforesaid sale is obtained
the vendor fails to complete the sale he shall be liable to
... refund forthwith to the Purchaser the advance of rupees F
twenty five thousand and also pay a sum of rupees fifteen
thousand to the Purchaser by way of liquidated damages for
h.is failure to complete the sale. If after the sanction of court
is obtained the purchaser fails to complete the same he shall
be liable to pay to the vendor a sum of rupees fifteen
thousand by way of liquidated damages for his failure to G
complete the same."
At the time of execution of the agreement Ex.PI dated 26.6.1977 the
Testator's only daughter and the three sisters of the vendee were the
reversioners in accordance with the terms of the Will because by that time H
54 SUPREME COURT REPORTS (2004] SUPP. 3 S.C.R.
A the vendor had no male issue.
In accordance with the terms of the sale agreement the vendor filed
Civil Suit No. 471/77 (originating Summons Suit) on the original side of
the High Court for seeking sanction of the court for sale of full interest
B in the property inclusive of his own life interest and the interest of the
reversioners. The reversioners were impleaded as parties to that suit.
On 16.1.11978, one of the reversioners viz., Saraswati Devi filed a
written statement objecting to the grant of sanction for sale and prayed for
dismissal of t~e suit. Another reversioner Prema Gangaiya adopted the
C written statement filed by other reversioner and objected to the sale.
As the sanction sought from the Court was opposed by the above-
named reversioners, the vendor sent a lawyer's notice on 11.9.1979 to the
vendee stating therein as under:
D "In view of the prolonged proceedings in obtaining sanction of
Court, for sale of the above said property and the pressing
demands from Tax Authorities, my client Mr. G.D. Narendra,
hereby cancels the agreement of sale referred to above and the
advance sum of Rs. 25,000 paid by your draft under the above
E said agreement is, therefore, refunded by his check bearing
No ......... dated 11.9.1979."
Soon after issuance of the above lawyer's notice, the vendor, on
12.9.1979, instructed his lawyer stating that the suit seeking sanction of
F the Court was not likely to be decided early and the chances of grant of
sanction being remote, the suit be withdrawn.
It may be mentioned at this very stage that eventually the suit was
not, in fact, withdrawn and, as would be stated in detail hereinafter, the
suit was prosecuted by the vendee himself who got himself transposed in
G the suit as co-plaintiff.
The vendee sent a detailed reply to the lawyer's notice sent by the
vendor canceling the agreement. In his reply, the vendee attributed ma/a
fides to the vendor in rescinding the agreement. In his reply, the vendee
H acknowledged that the sale was necessitated because of public liabilities
HPA INTERNATIONAL v. B.F.C. DASWANI [DHARMADHIKARI, J.] 55
.. towards taxes and other dues in respect of the property but it was alleged A
that there was no such pressing demand from any tax authorities creating
an urgency as to compel the vendor to rescind the contract. It was alleged
in the reply that the vendor was negotiating a sale for higher price with
one Bob Daswani and to effectuate sale in favour of the new purchaser,
one of the partners of the vendor firm was called for discussion. It is B
disclosed from the evidence led in the trial that Bob Daswani and
respondent Fateh Chand Daswani who were shown and impleaded as two
different persons, were one and the same although initially attempt was
made by the defendants to mislead the Court that they were two persons
and the subsequent sale to respondents 1 to 5 was without knowledge of
prior agreement with the vendee. The purchaser of the suit properties shall C
hereinafter be referred as the subsequent vendee.
What is to be taken note of from the lawyer's reply for vendee to
the lawyer's notice for the vendor is that the former had alleged breach
of contract on the part of the vendor with attributing intention to the latter D
of selling the property for higher price to third parties. The other relevant
part of the reply to lawyer's notice sent by the vendee is the acknowledgement
of the fact of necessity of sale of the property for discharging public taxes
and dues although in reply it was reiterated that the vendee was always
ready to discharge the tax liability in accordance with the sale agreement. E
The relevant part of the reply reads thus:
"The very object of the intended sale is for discharge of the
income tax and other tax liabilities and my clients are always
ready to discharge the same as per the sale agreement."
F
It may be mentioned at this very stage that in his reply sent through
his lawyer to the lav.')'er's notice of the vendor cancelling the agreement,
the vendee did not express desire to purchase life interest of the vendor
without insisting on transfer of interest of the reversioners which was
subject matter of the suit filed for seeking sanction of the Court.
G
On 29.12.1979, the vendor sold his life interest in the suit property
for a sum of Rs.4.40 lacs by executing registered instrument in favour of
respondents I to 5 (shot11y referred to as the subsequent vendee). What
-, is apparent from the contents of the subsequent sale deed Ex.D 1 dated
29.12.1979 executed in favour of the subsequent vendee is that large part H
56 SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.
A of the sale consideration in different sums aggregating to Rs.2.68 lacs was
paid directly by the subsequent vendee to various authorities to discharge
•
public dues and taxes like Corporation Property Tax, Urban Land Tax and
Income Tax arrears.
B The subsequent vendee by separate release deeds dated 21.10.1980,
22.1.1980, 22.2.1980 and 29 .4.1980 obtained surrender of rights individu-
ally from the reversioners by paying each of them a sum of Rs. 20,000.
After receiving the lawyer's notice and cancellation of the sale
agreement, the vendee on 25.3.1981 got himself impleaded as a party-
C defendant in Suit No. 471/77 which was filed to seek sanction of the Court.
On 16.8.1981 the vendee filed Civil Suit No.423/81 seeking Specific
performance of the Agreement of Sale agreement Ex.Pl.
Under order dated 17.12.1981 passed in Civil Suit No. 471/77 seeking
D sanction of the Court, the vendor got himself transposed as co-plaintiff.
The two suits i.e. Civil Suit No. 471/77, seeking court sanction for sale
under the agreement Ex.Pl and Civil Suit No. 423/81 seeking Specific
Performance of the Agreement of Sale, were clubbed and tried together by
the learned single judge on the original side of the High Court.
E
After the pleadings were completed in the two suits, the vendee on
25.11.1986 filed an affidavit purporting to be under Section 12(3) of the
Specific Performance Act of 1963 stating therein that without prejudice to
his claim for transfer of full interest in the suit property to him under the
F agreement of sale, if he was found not entitled to maintain the suit seeking
sanction of the CoU1i for sale of full interest in the property a decree be
granted for Specific Performance of transfer of life interest of the vendor
in the suit property. The relevant part of the affidavit claiming lesser relief
of sale of life interest of the vendor reads as under:
G "I submit that the relief as prayed for in CS No. 4 71 of 1977 can
be granted by this Hon. Court. The relief prayed for in the present
suit is for a decree for spe.cific performance in respect of the entire
property with full righfS' of the first defendant and of the rever-
sioners. Without prejliciice to what is stated above, it has become
H necessary for me to file this affidavit before commencement of
HPA INTERNAT!Oi~AL v. B.F.C. DASWANI [DHARMADHIKARI, J.] 57
the trial of the suit 11nder the following circumstances. A
I state that in the event of this Hon. Court taking the view
and coming to the conclusion that the plaintiff herein as the
second plaintiff in CS No. 471 of 1977 is not entitled to maintain
the suit and pray for the relief sought for, then, I submit that this B
Hon. Court may be pleased to decree the suit in CS No. 423 of
1981 for specific performance of the life interest of the first
defendant and direct the defendants in the suit to execute the sale
deed in favour of the plaintiff to the extent of the life interest of
the first defendant."
c
In view of the above averment made in the affidavit filed by the
vendee in which he alternatively claimed lesser relief of transfer of only
.life interest in the suit property of the vendor, the learned single judge by
common judgment dated 6.9.1988 dismissed Civil Suit No. 471177 seeking
sanction of the Court for sale as infructuous. The relevant part of order D
of the learned single judge dismissing Civil Suit for sanction as infructuous
reads thus:
"While so, by affidavit dated 25th November, 1986, Messrs. HPA
International, swore in CS No. 423 of 1981, that in the event of E
/
this Court coming to the conclusion that Messrs. HPA Interna-
tional as 2nd plaintiff in CS No.471 of 1977 is not entitled to
maintain the suit as prayed for, HPA International is restricting
their claim in CS No. 423 of 1981 for specific performance of the
agreement Ex.Pl with reference to the life-estate of Narendra
Kullamma Naicker alone and for a direction to the defendants in F
that suit to execute the sale deed in favour of the plaintiff to the
extent of the life-estate of Narendra Kullamma Naicker as pro-
vided under Section 12(3) of the Specific Relief Act for the
consideration of Rs. 5,50,000 for which he had bargained for the
whole interest in the suit property. G
In view of the above affidavit filed by Messrs. HPA International
in CS No. 423 of 1981, this suit viz., CS No. 471 of 1977 has
become infructuous. Further, this Court cannot compel the
reversioners to part with their interest. H
58 SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.
A As such, I find that the suit in CS No.471 of 1977 has become
infructuous, and it is dismissed as infructuous accordingly. No
costs."
It may be stated that this part of the common judgment dismissing
B Civil Suit No. 471/77, in which sanction for sale was sought from the
Court, has not been appealed against before us although learned counsel
for the vendee has contended that no separate appeal was required to be
filed against dismissal of the suit for court's sanction as infructuous
because the common judgment passed in the suit seeking sanction of the
suit for sale and the suit for specific performance is under appeal before
C us. We shall deal with this argument separately at the appropriate stage
as to whether any separate appeal was required to be filed against dismissal
of suit seeking sanction of the Court for sale, as having been rendered
infructuous.
D The learned single judge by the impugned common judgment decreed
Civil Suit No. 423/81 in favour of the vendee to the extent of directing
conveyance of life interest in the suit properties of the vendor under the
Agreement Ex.PI. It was further held that as the subsequent vendee has
purchased the property with knowledge of the prior sale agreement with
the vendee the former should join in re-conveying the property to the latter.
E
It is necessary to take note of the legal and factual issues decided by
the learned single judge in favour of the vendee. On the issue whether the
vendee can be granted lesser relief directing conveyance of life interest of
property of the vendor, the learned single judge held in favour of the vendee
F thus:
"A perusal of the oral and documentary evidence clearly proves
that DW I has no regard for truth. Further, the built-in clauses
namely clauses 4 & 6 in Ex.Pl have been introduced for the
benefit of the plaintiff. The non-enforcement of those clauses will
G not prejudice the !st defendant. As such I find that the facts of
this case amply illustrate the forethought of the framers of the
Specific Relief Act in introducing Section 12 therein. The failure
to get sanction of the court by the 1st defendant to convey the
whole of the interest of the suit property as contained in clause
H 4 of Ex. Pl agreement is not a bar for the plaintiff herein to
HPA INTERNATIONAL v. B.F.C. DASWANI [DHARMADHIKARI, J.] 59
enforce Ex.Pl.since he has relinquished the benefit that accrues A
to him, which will not prejudice the !st defendant. In view of the
relinquishment of the right given to the plaintiff under clause 4
of Ex. Pl, clause 6 of the agreement becomes otiose."
In granting decree of Specific performance of Conveyance of life B
interest of the vendor, learned single judge further held thus:
"Whereas, the agreement involved in this suit is capable of
f
separation, one consisting of enforceable portion viz. the life
interest of the first defendant and unenforceable portion viz. C
interest of remainder men and reversioners."
The learned single judge found that the equity was in favour of the
vendee as the vendor has been found guilty of misrepresenting Bob
Daswani and Fateh Chand Daswani as two persons when they were the D
same and the negotiations for subsequent sale were held in presence of one
of the partners of the vendee. The learned single judge on this aspect in
the judgment comments thus:
"It is a pity that third defendant who is considered to be an
enlightened citizen having international connections with so much E
of wealth has not come forward to state at the earliest opportunity
that he carries the name Bob Daswani also. That shows the guilty
conscious of the third defendant. Having projected his image as
Bob Daswani, the presence of the first defendant and the plaintiff
on 9.9.1979 he wanted to hoodwink the plaintiff for getting his F
sale-deed in the name of the third defendant so as to plead that
third defendant is bona fide purchaser for value "without notice."
But anticipating that his claim would be exposed he omitted to
mention the aforesaid facts that he and his wife and children are
bona fide purchases for value only. They omitted to state "without G
notice."
It needs to be mentioned at this stage that learned counsel appearing
for the subsequent vendee has not disputed in this appeal that the sale in
favour of the subsequent vendee was with notice of the prior sale agreement H
60 SUPREME COURT REPORTS (2004] SUPP. 3 S.C.R.
A Ex.Pl with the vendee.
Against the judgment granting decree of specific performance of sale
of life interest of vendor in the suit property, an appeal was preferred by
the subsequent vendee to the Division Bench of the High Court. As has
B been mentioned earlier, the Division Bench concluded hearing of the
appeal on 22.3.1989 but pronounced judgments almost five years after on
24.1.1994 and dismissed the appeal. That judgment has been set aside by
this Court by order dated 13.1.2000 reported in 2000(2) SCC 13. This
Court remanded the appeal for re-hearing by the Division Bench of the
High Court. After re-hearing, the Division Bench by the impugned
C judgment dated 24.4.2001 has allowed the appeal preferred by the subsequent
vendee. The decree granted for conveying life interest of the vendor in
the suit property has been set aside. The only relief granted to the plaintiff,
is that out of the rental income realised by the plaintiff during long
pendency of the appeal, a sum of Rs. 5.5 lacs has been deducted to deprive
D the subsequent vendee of that sum for his misconduct of projecting Bob
Daswani and Fateh Chand Daswani as two persons when, in fact, they were
one. Rest of the rental income recovered by the plaintiff vendee has been
directed to be paid to the subs1;quent vende1; as a consequence of success
of appeal and setting aside of the decree for specific performance.
E
Before considering the various grounds urged in this appeal, it is
necessary to briefly indicate the basis on which the Division Bench on re-
hearing of the appeal - reversed the judgment of the learned Single Judge.
Construing the relevant clauses of the contract the Division Bench
F held that clause (6), which placed an obligation on the vendor to approach
the court for sanction of sale of interest of reversioners, was incorporated
not with a view to safeguard interest of the vendee alone but it was a term
meant for benefit of both the parties. The Division Bench in paragraph
31 held thus:
G
"The sanction referred to in the agreement is a sanction which was
clearly meant for the benefit of both the parties to the agreement.
The plaintiff was interested only in the purchase of entire
interests' in the property, had made the agreement subject to such
H interest being lawfully conveyed and accepted liability for pay-
HPA INTERNATIONAL v. B.F.C. DASWANI [DHARMADHIKARI, J.] 61
ment ofliquidated damages ifit failed to obtain the sale deed after A
the sanction was obtained. Plaintiff not having contracted with
the reversioners to buy their interest, could not have secured the
'entire interest' in the property without an order of this Court
directing conveyance of the reversionary interest to the purchaser.
The sanction of the Court was clearly meant for the benefit of the B
purchaser as well as the vendor."
The Division Bench has taken the view that as the sanction for sale
was not granted by the Court as was contemplated by the parties under the
terms of the agreement; the contract was rendered un-enforceable. The
Division Bench concluded thus: C
"Appellants are entitled to contend that the contract is a contingent
one, and that the contingency contemplated by the parties not
having occurred, the contract, regard being had to what had been
. expressly provided by the parties in clause 6 of the agreement, had D
collapsed by implosion, the dismissal of the suit for sanction
having triggered it." '
With regard to dismissal of Civil Suit No. 471/77 seeking sanction
of the Court as infructuous and having attained finality because of non-
preferring of appeal by the vendee-plaintiff in paragraphs 25 & 34, the E
Division Bench held thus:
"It is now a matter of record that the sanction sought for the sale
ofreversionary interest was not given the Civil Suit 471 of 1977
having been dismissed that dismissal has become final. By virtue p
of. clause 6, the suit agreement Ex.Pl, forthwith stood cancelled,
if that clause was meant for the benefit of both the parties to the
contract. If the contract thus stood cancelled the suit for specific
performance had necessarily to be dismissed.
That suit for sanction, CS No. 471 of 1977, was in fact prosecuted G
by the respondent herein, who after becoming a party to that
proceeding, had itself transposed as a co-plaintiff. Having thus
put itself in a position where it could seek sanction, plaintiff's
failure to lead evidence on the justification for sanction, on the
ground that it had invoked S.12(3) of the specific Relief Act, is H
62 SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.
A a default which cannot now be turned to its advantage, after the
suit for sanction was dismissed."
The claim allowed for grant of lesser relief of conveyance of life
interest of the vendor in the suit propl!rty, was negatived by the Division
B Bench and the decree granted by single judge was reversed by recording
the following conclusion:
"The suit agreement being an integrated whole was one and
indivisible incapable of being split into an agreement for sale of
life interest and another for the sale of reversionary interest. What
c perished was the whole of the contract and not only a part. What
was contemplated by the parties to the agreement was the sale of
'entire interest' in the property provided sanction was given, and
in the event of sanction not being given the agreement stood
cancelled as a whole leaving each of the parties to arrange their
D affairs as they thought fit wholly unhampered by anything
contained in the agreement. The agreement contemplated the sale
of all interests in the property if sanction was forthcoming, and
no sale of any part of the property in case sanction was not given.
The b~.rgain was for all or nothing. It was not open to the court
to make a new contract for the parties after the contract in its
E entirety had perished."
The Division Bench negatived the claim seeking conveyance of life
interest in the property of the vendor, also on the ground of delay and
equity by observing thus:
F
"Plaintiff cannot be allowed to claim performance in part several
years later. Had the plaintiff been earnest about relinquishing its
claim for reversionary interest, it could have obtained Narendra's
life interest in 1977 itself, and at any time up to the execution of
G the sale deed by Narendra In favour of appellants in 1979.
Narendra was eager to sell and had been waiting for the plaintiff
to take a sale deed from him. The sale by Narendra to appellants
was for the purpose inter alia, of raising the monies required for
paying the arrears of revenue - funds which the plaintiff could
have provided by obtaining conveyance of his life interest, but
H
HPA INTERNATIONAL v. B.F.C. DASWANI [DHARMADHIKARI, J.] 63
was not so provided. Having regard to these facts the prayer for A
part perfonnance made during the course of the trial at a stage
when it was evident that the suit as laid was doomed to failure,
was not one which could be acceded to. The trial court was in
error in granting that prayer by ignoring the plaintiffs conduct."
As a result of the conclusion reached as mentioned above, the B
Division Bench allowed the appeal and set aside the decree of granting
Specific Performance of the Contract Ex.Pl to the extent of conveyance
of life interest of the vendor. A decree of refund of full sale price to the
vendee was however granted. Since pending the appeal, the decree granted
by the learned single judge had been executed and possession had been C
obtained by the vendee, who had raised further construction on the property
and collected rents from the tenants, the Division Bench in paragraph 63
made directions to adjust the rights and equities between the parties with
regard to the amounts spent by each of them on putting up their own
constructions and rental income realised by each of them from the D
property. We shall separately deal with that aspect at appropriate stage of
our judgment.
We have heard the learned counsel appearing for the contesting
parties at great length. Apart from long oral arg!lments, written submissions
have been made and plethora of case law has been placed before us on E
various legal contentions advanced. Considering the view that we propose
to take and the conclusions reached by us, we do not consider it necessary
to deal with each of the rulings cited before us by the learned counsel at
the Bar. We will confine our consideration to certain rulings directly on
the issues and few others touching them. F
In substance, the main submission advanced by learned counsel Shri
K. Parasaran on behalf of the vendee is that the vendor clearly committed
a breach of the terms of the sale agreement Ex. P-1. During pendency of
the suit seeking sanction of the court, the contract was formally terminated
by lawyer's notice dated 11.9 .1979 sent by him. It is submitted that actions G
such as of sending notice of terminating the contract, thereafter instructing
his lawyer to withdraw the suit for sanction followed by the negotiations
~. which were proved to have been held to sell the suit property to the
subsequent vendee, were clearly ma/a fide attempts on the part of the
vendor to resile from the contract for getting higher price for the property. H
64 SUPREME COURT REPORTS [2004) SUPP. 3 S.C.R.
A It is pointed out that an attempt was made to mislead the Court by creating
confusion that Bob Daswani and Bhagwandas Daswani were two different
persons and the subsequent vendee had no knowledge of the prior
agreement entered with the plaintiff- vendee. This deception sought to be
practised on the opposite party and the court was exposed during trial and
B the learned single judge has imposed penalty on the subsequent vendee
for the misconduct of misleading the court. It is submitted that the
subsequent vendee having purchased the property with knowledge of the
prior agreement holds the property in trust for the benefit of the prior
vendee and is obliged in law to make over the property to the prior vendee
C under decree for specific performance of the prior contract. Sections 90,
91 & 92 of the Indian Trusts Act are relied for the above proposition and
need reproduction at this stage for better appreciation of the arguments
advanced on this point on behalf of the vendee :-
"Section 90. Advantage gained by qualified owner.- Where a
D tenant for life, co-owner, mortgagee or other qualified owner of
any property, by availing himself of his position as such, gains
an advantage in derogation of the rights of the other persons
interested in the property, or where any such owner, as represent-
ing all persons interested in such property, gains any advantage
he must hold, for the benefit of all persons so interested, the
E advantage so gained, but subject to repayment by such persons of
their due share of the expenses properly incurred, and to an
indemnity by the same persons against liabilities properly con-
tracted, in gaining such advantage.
F Section 91. Property acquired with notice of existing contract.-
Where a person acquires property with notice that another person
has entered into an existing contract affecting that property, of
which specific performance could be enforced, the former must
hold the. property for the benefit of the latter to the extent
G necessary to give effect to the contract.
Section 92. Purchase by person contracting to buy property to be
held on trust.-Where a person contracts to buy property to be
held on trust for ce1tain beneficiaries and buys the property
accordingly, he must hold the property for their benefit to the
H extent necessary to give effect to the contract."
HPA INTERNATIONAL v. B.F.C. DASW AN! [DHARMADHIKARI, J.] 65
> In elaborating the above argument to support claim of specific A
performance of the contract, the further submission made is that the act
of rescinding contract, pending suit for sanction of the court and selling
the property with only life interest to the subsequent vendee, who later
on, obtained surrender deeds from the reversioners by independently
paying them, were acts done in conspiracy between vendor and the B
subsequent vendee. They were self-induced actions to render the suit for
seeking sanction as infructuous and frustrate the contract. It is contended
that in such a situation, the prior vendee can take. recourse to section 90
read with sections 91 & 92 of the Indian Trusts Act, and is entitled to
seek specific performance of the contract of full rights of the property i.e. C
life interest of the vendor and spes successionis of the reversioners. To
give effect to the right of the vendee to specific performance-the vendor,
reversioners and subsequent vendee can be compelled in law to convey
full title of the property to the plaintiff.
The alternative argument advanced on behalf of the plaintiff- vendor D
... is that although the petitioner is, in law, entitled to conveyance of full title
in the property by the vendor, the reversioners and the subsequent vendee,
he has restricted his claim to the lesser relief of seeking conveyance only
of life interest in the property of the vendor. Such relief can be granted
under section 12(3) of the Specific Relief Act as the vendee is willing to E
pay full agreed consideration for lesser relief of c~nveyance of life interest
in the property. Reliance is placed on Lala Durga Prasad v. Lala Deep
Chand, (1954] SCR 360 at pg. 367; Jhumma Masjid v. Kodimaniandra
Devaiah, (1962] Supp 2 SCR 554 at pg. 570; Soni Lalji Jetha v. Sonkalidas
Devchand, (1967] I SCR 873 at pg. 879 and Narandas Karsondas v. F
S.A. Kamtam, (1977] 3 SCC 247.
It is argued that the Division Bench of the Madras High Court was
wrong in coming to the conclusion that the contract was a contingent one
and as the court did not grant sanction for sale of reversioners' interest
and dismissed the suit seeking sanction as infructuous, the contract failed. G
The contention advanced is that where the grant of sanction of the court
was frustrated by the vendor himself by prematurely rescinding the
contract and instructing his lawyer not to prosecute the sanction suit, the
dismissal of the suit as infructuous was self-induced by the vendor. The
vendor cannot be allowed to take advantage of his own wrong. The law H
66 SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.
A and equity is in favour of the plaintiff- vendee. Reliance is placed on Ganga
Saran v. Ramcharan Ram Gopa/, [1952] SCR 36 at pg. 42.
Alternatively, it is submitted that even though sanction could not be
obtained from the court for transferring interest of the reversioners, the
B law permits the equity court to grant lesser relief of directing conveyance
of life,intcrest of the vendor on payment of full agreed consideration, in
accordance with section 12(3) of the Specific Relief Act. In this respect,
it is contended that the Division Bench of the High Court was wrong in
holding that there was undue delay on the part of the plaintiff- vendee in
C exercising the option for lesser relief of transfer of life interest of the
vendor. Further it is also contended that the option exercised for lesser
relief was not 'conditional,' as is sought to be projected by the other side.
It is submitted that when both suits for seeking sa'lction and for specific
performance were jointly tried, exercise of option by filing affidavit stating
that it was without prejudice to the right of obtaining full title with sanction
D of tht court, cannot be said to be conditional to deny relief under section
12(3) of the Specific Relief Act.
In support of the claim for lesser relief of transfer of life interest, it
is submitted that the clause in the contract requiring sanction of the Court
E for transfer ofreversioners' interest was a condition solely in favour of the
plaintiff-vendee which he could waive and the vendor could not insist on
fulfilment of that condition as a fundamental term of the contract.
In reply to the plea of the finality of the decree of dismissal of sanction
F suit as infructuous, being not appealed against, it is submitted that the
proceedings for sanction are summary in nature, under the rules and
procedures of Madras High Court framed for its original side. That suit for
sanction which was of summary nature happened to be clubbed with the
suit for specific performance. The two suits were jointly tried. A common
judgment was passed dismissing the sanction suit as infructuous and partly
G decreeing the suit for specific performance. An appeal was filed against
the common judgment. Therefore, non-filing of appeal against the dismissal
of sanction suit as infructuous does not operate as res judicata and is no
ground to refuse specific performance of the grant of decree of specific
performance of contract for transfer of life interest for which no sanction
H of the court was needed. Reliance is plll{;ed on S.P. Chengalvarya Naidu
HPA INTERNATIONAL v. B.F.C. DASWANI[DHARMADHIKARI, J.) 67
v.Jagannath, [1994] I sec 1 andSheoparsanv.Ramnandan, AIR(1916) A
PC 78 at pg. 81.
Rest of the contentions advanced at the Bar on behalf of the plaintiff-
vendee, in our opinion, are not required to be separately dealt with because
of the view we propose to take and the conclusion reached by us which
shall be elaborated hereinafter. B
Learned senior counsel Shri Soli J. Sorabjee appearing for the
subsequent vendee rested his argumenf on his main submission that the sale
agreement was a contingent contract - the contingency named being
sanction of the court which did not materialize. Upon failure of that C
contingency, the agreement stood cancelled forthwith under clause (6) of
the agreement. On failure of the happening of the contingency, the
agreement had been rendered unenforceable in accordance with section 32
of the Indian Contract Act read with definition of 'Contingent Contract'
contained in section 31 of the said Act :-
D
...
"Section 31.- A 'contingent contract' is a contract to do or not
do something, if some event, collateral to such contract, does or
does not happen.
Section 32. Enforcement of contracts contingent on an event E
happening.- Contingent contracts to do or not to do anything if
an uncertain future event happens cannot be enforced by law
unless and until that event has happened.
If the event becomes impossible, such contracts become void." F
Heavy reliance is placed on decisions of Privy Council reported in
v.
Dalsukh M Pancholi Guarantee Life & Employment Insurance & Co.
AIR (1947) PC 182 at pg. 186; Narain Pattro v. Aukhoy Narain Manna,
ILR 12 Calcutta 153 at pg. 155; Sreemati Kalidasi Dassee v. Sreemati
Nobo Kumari Dassee, 20 CWN 929 at pp. 937, 938 & 939 and Golab Ray G
& Anr. v. Muralidhar Modi & Ors., AIR (1964) Orissa 176 at pg. 180 &
181.
The decision cited by the other side in the case of Mrs. Chandnee
Widya Vatee Madden v. Dr. C.L. Kataial & Ors., [1964] 2 SCR 495, is H
•
68 SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.
A sought to be distinguished on the ground that there the vendor without
sufficient reason withdrew the application made to the Chief Commissioner
for sanction and therefore, the relief granted was to direct the vendor to
make the necessary application for sanction. In that case, it was further
made clear that ultimately if the sanction was refused, the plaintiffs would
B be entitled only to damages as decreed by the High Court.
With regard to the claim allowed for grant of lesser relief of transfer
of life interest, the contention in reply is that the agreement Ex. P-1 was
a single indivisible and inseparable contract based on sanction of the court.
By segregating the contract, no new contract can be created by the court
C and take ~ecourse to section 12(4) of the Specific Relief Act is impermissible.
Reliance is placed on William Graham v. Krishna Chandra Dey, (I 925)
PC 45; Abdul Haq v. Mohammed Yehia Khan & Ors., AIR (1924) Patna
81 at pg. 84 and Hiralal Lachmiram Pardesi v. Janardhan Govind
Nerlekar & Anr., AIR (1938) Bombay 134.
D •
The claim for conveyance of life interest is also opposed on the
ground that the option exercised under section 12(3) of the Specific Relief
Act was not unconditional and without reservations. There was no
surrender of claim to the interest of the reversioners. Such a conditional
E claim for lesser relief was rightly rejected by the Division Bench of the
High Court. Reliance is placed on TV Kochuvareed & Anr. v. P. Mariappa
Gounder & Ors., AIR (1954) TC 10, para 40; Bolla Narayan Murthy v.
Cannamaneedi Madhavayya & Anr., (1947) 2 MLJ 347 and Surjith Kaur
v. Naurata Singh & Anr., [2000] 7 SCC 379.
F The additional ground urged to oppose claim for lesser relief of the
conveyance of life interest is that such option under section I2(3) of the
Specific Relief Act was not exercised at the first available opportunity
when a formal legal notice was given by the vendor to terminate the
contract anticipating remote possibility of grant of sanction. It is submitted
G that the option for lesser relief was claimed when the joint trial had already
commrnced in the suits and all the pleadings of the parties had been
completed. It was not an unconditional offer to obtain life interest. The
provisions of Section 12(3)(b)(i) & (ii) of the Specific Relief Act were thus
not fully complied with which require for obtaining partial relief of specific
H performance, unconditional surrender of remaining part of the contract.
-
HPA INTERNATIONAL v. B.F.C. DASWANI [DHARMADHIK.ARI, J] 69
> In reply to the argument that the sanction suit was not prosecuted by A
the vendor deliberately to render it infructuous with a design to back out
from the contract in conspiracy with the subsequent vendee, it is pointed
out that despite service of notice terminating the contract, the suit was not
in fact withdrawn. Soon thereafter the vendee got himself imp leaded and
later transposed in the suit as co-plaintiff. In the course of trial of sanction B
suit with suit for specific performance, the vendee exercised option by an
affidavit of claiming lesser relief of life interest. He himself was thus
responsible for rendering the sanction suit infructuous. It is argued that if
it was possible to obtain sanction of the court on the ground of continuous
pressure on the property for recoveiy of public dues, the order of the single C
judge on original side dismissing the sanction suit as infructuous should
have been challenged in appeal by the vendee. In any case when the
subsequent vendee had gone in appeal against the decree granted for life
interest in the suit for specific performance, the vendee could not have
allowed the dismissal of th.e sanction suit to attain finality by not filing
cross appeal against the same. Even in this Court, there is no appeal D
preferred and no ground urged challenging the dismissal of the sanction
suit as infructuous. It is, therefore, submitted that one of the essential terms
of the contract of obtaining sanction of the court having been rendered
impossible of performance, the contract for sale of the property was rightly
held by the Di vision Bench of the High Court to have failed rendering it E
incapable of specific performance.
Lastly, it is submitted that grant of specific relief being discretionary
the court should decline the relief to the plaintiff- vendee as the sanction
·-..i suit got delayed and ultimately no sanction was granted. The vendor had
no other option but to sell the property to clear the taxes and public dues F
for saving the property from being attached and sold through coercive
process of recovery of public dues and possibly at a price less than the
prevailing market price. The subsequent vendee has purchased separately
the life interest of the vendor which alone he could convey and obtained
separate surrender-deeds from the reversioners by paying each of them G
price of their interest. In the agreement Ex.P- l entered with the vendee,
as also in the sale-deed obtained by subsequent vendee, there is clear
mention of the fact of pressure on the property for recovery of taxes and
··~
public dues. In the sale-deed obtained by the subsequent vendee, there is
recital that taxes and public dues were directly paid by the subsequent H
70 SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.
A vendee to the public authorities. The contents of the agreement of sale Ex.
P-1 and the sale-deed Ex. D-1 are evidence of the fact that early disposal
of the property was the pressing necessity to ward off coercive recovery
from the property.
B The additional argument advanced in opposing the claim for lesser
relief of conveyance of life interest is that the clause requiring the sanction
of the court for transfer of the reversioners' interest was a term of contract
for the benefit of both the vendor and the vendee. The court's sanction
would have protected the vendor from claims and possible legal proceedings
against him by the reversioners. Court's sanction was also for the benefit
C of the vendee to ensure effectuation of the agreement of sale which
purported to sell entire interest that is life interest of vendor and spes
succession is of reversioners. The term of seeking court's sanction being
a term in common interest - both of vendor and the vendee, the vendee
could not be allowed to unilaterally waive it by restricting his claim to life
D interest. There is also no pleading and evidence to justify claim set up by
the vendee. The dismissal of sanction suit as infructuous was induced by
the vendee becoming a co-plaintiff and filing an affidavit restricting his
claim to life interest. It was, therefore, a self-defeating act on the part of
the vendee and the Division Bench of the High Court rightly dismissed
E the suit for specific performance for the life interest.
After hearing the argument at length advanced by the counsel for the
parties and perusing the record of the case, the basic question that first
needs consideration is whether there was any breach of contract on the part
of the vendor so as to justify the grant of relief of specific performance
F of the contract of sale. We do not consider it necessary to deal with the
legal contention whether clause (4) of the contract requiring vendor to
obtain sanction of the court was an exception clause or a fundamental term
of the contract. From the recitals of the sale agreement Ex. P-1 and
particularly those requiring the vendee to discharge public debts and dues
G directly as part of the consideration of sale, it is clear that the necessity
of sale for the vendor arose for safeguarding the property from being put
to auction and sale through coercive process of recovery of public dues.
Naturally, the vendor wanted to obtain market price of the property and ,;....
desired to avoid sale of the property through a coercive process at a lesser
H price. That there were outstanding taxes and public dues have not been
HPA INTERNATIONAL v. B.F.C. DASWANI [DHARMADH!KARI, J.] 71
disputed by the vendee and in fact, they are acknowledged by him in reply A
to the lawyer's notice sent by the vendor terminating the contract. In the
reply sent through lawyer by the vendee, it is clearly acknowledged that
tax dues were there but it is stated that the alleged pressure from tax
authority was merely as an excuse to terminate the agreement. The motive
attributed to the vendor that he tried to wriggle out of the sale agreement B
Ex. P-1, only to obtain higher price of his property by selling it to the
subsequent vendee, is not borne out from the evidence on record. The
contents of the sale-deed Ex. D-1 dated 29.12.1979 executed in favour of
the subsequent vendee clearly show that a substantial portion of agreed
consideration of Rs. 4,40,000 was paid directly by cheques towards the C
property tax [Rs.50,383.98] to Corporation of Madras, Urban Land Tax to
Tehsildar [Rs. 36,860.70] and income tax [Rs. I, 10,000] to Income-Tax
Officer. The above payments made by the subsequent vendee to public
authorities justify the stand of the vendor that there were pressing demands
of public authorities on the property and the sale of the property, well
.. before the impending initiation of coercive recovery by public authorities, D
was an urgent necessity.
The main contention advanced against the vendor is that the contract
term clause (4) imposed a liability on him to seek sanction of the court
for transfer of full title in the property. During pendency of suit for E
sanction, actions on the part of the vendor such as terminating the contract
by sending a lawyer's notice and instructing his lawyer to withdraw the
suit for sanction, amounted to committing breach of the contract.
The agreement was entered into on 26.6.1976. The reversioners
opposed sanction by filing written statements on 16.1.1978. It is long after, F
on 11.9.1979 by lawyer's notice, the vendor terminated the contract. The
sanction suit was pending from 26.6.1976. Even after two years, the
sanction was not granted. The question is whether the agreement Ex.P-1
contemplated that the vendor should have waited for grant of sanction by
the court for an indefinite period of time. The recitals of the agreement of G
sale clearly mention the necessity of sale arising from the pressure of public
dues and taxes. The vendor could not have waited for an unreasonably
long period of pendency of sanction suit when commencement of recovery
proceedings for public dues and taxes could have commenced any time.
There is no period fixed in the terms of the contract for obtaining sanction H
72 SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.
A of the court, but keeping in view the other tenns of the contract and the
pressing requirement for sale of the property to clear public dues, it has
to be ~eld that obtaining of court's sanction within a reasonable period and
in any case within a period well before commencement of recovery
proceedings for dues and taxes, was in contemplation of the parties as an
B implied term. Notice served for ten11inating the contract, after waiting for
two years for sanction by the court, cannot be held to be a breach of the
contract on the part of the vendor. The argument that the vendor rescinded
the contract only because he had entered into secret negotiations with the
subsequent vendee to obtain higher price for the property is not borne out
from the evidence. We cannot attach too much importance to the fact of
C initial attempt made by subsequent vendee to conceal knowledge of the
existing contract with the vendee when sale-deed was obtained by the
fonner. For the misconduct of misrepresentation and attempt to mislead
the court, the Division Bench of the High Court has rightly deducted a sum
of Rs. 5.5 lacs from the rental income found payable to the subsequent
D vendee. We propose not to disturb the same. But the aforesaid misconduct
of subsequent vendee does not render the act of vendor in rescinding the
contract to be an act of breach of contract which can be said to have been
committed solely with desire to obtain higher price of the property.
As we have mentioned above, only life interest was sold to the
E
subsequent vendee for higher price. Out of the agreed sale consideration,
major portion of money was directly paid by the subsequent vendee to
satisfy dues and taxes of public authorities. The notice served for
terminating the contract, anticipating remote prospect of grant of sanction
by the Court within a reasonable period and after waiting for two years
F from date of the contract, cannot be termed to be a breach to justify grant
of any specific relief to the vendee.
In this respect, it is also relevant to state that although by lawyer's
notice, the vendor terminated the contract and instructed his lawyer to
G withdraw the suit for sanction, but in fact, the suit was not withdrawn. The
vendee got himself impleaded initially as defendant to the suit and then
sought his transposition as co-plaintiff. That part of the action of the vendee
cannot be castigated as self-defeating because he was naturally interested
in prosecuting the suit for sanctio,n_ diligently to obtain conveyance of full
H rights in the property. However, .the. fu11her act on the part of the vendee
HPA INTERNATIONAL v. B.F.C. DASWANI [DHARMADHIKARI, J.] 73
of filing an affidavit restricting his claim only to life interest resulted in A
dismissal of the suit for sanction as infructuous. The learned single judge
trying jointly the two suits came to the conclusion that as the vendee gave
up his claim for transfer of interest of the reversioners, the court's sanction
was not required. He dismissed the suit for sanction as infructuous.
In this appeal on behalf of the vendee it is now contended that had
B
the suit for sanction been prosecuted by the vendor bona fide and diligently,
-' as stipulated in the terms of the contract, the court might have granted
sanction despite objection of the reversioners because there was likelihood
of loss of the property in process of recovery of public dues by auction
and sale. If that was the legal position, the vendee ought not to have C
suffered the alleged wrongful dismissal of suit for sanction as infructuous.
When decree granted for conveyance of life intere~t of the vendor in the
suit for specific performance was challenged by the subsequent vendee
before the Division Bench of the High Court, the vendee could as well
have preferred cross appeal against the dismissal of the suit for sanction D
,. as infructuous. He was a co-plaintiff in that suit and had an independent
right of appeal. The non-filing of any appeal against dismissal of sanction
suit as infructuous is a clear indication that the vendee was satisfied with
the grant cif decree merely of specific performance of conveyance of life
interest of the vendor. It is not open to the vendee now to question the E
correctness of the dismissal of the suit for sanction as infructuous by the
learned single judge.
The next question that arises is whether the terms of the contract
justify grant of decree of specific performance for lesser relief of conveyance
of life interest of the vendor. F
The argument advanced on behalf of the subsequent vendee seems
prima facie acceptable that the contract Ex.P-1 is one single indivisible
contract for sale of full interest in the property that is life interest of the
vendor and spes successionis of the reversioners with sanction of the court. G
The reversioners were not parties to the sale agreement Ex.P-1 entered
with the vendee. At the time when the sale agreement was entered into,
- the parties were conscious that the vendor had only life interest in the
property and he could not convey more than his own interest. It was open
to the vendee to obtain conveyance of interest of the reversioners by H
74 SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.
A obtaining release deeds from them by paying them consideration for
surrender of their interest, as was done by the subsequent vendee. Another
course open to him was to enter into separate agreement with the
reversioners or insist on the reversioners joining the sale agreement. It
seems the vendee entered into a speculative deal for obtaining full interest
B in the property depending upon the sanction to be granted by the court.
It seems to be in contemplation of the parties that if the reversioners
objected, the court might refuse sanction. They could as well foresee that
despite the reversioners' objection, the court might grant sanction. The
transfer of full interest in the property was, therefore, dependent on
sanction of the court. To meet this contingency, there were specific terms
C such as clauses (4) and (6) incorporated in the contract whereby it was
clearly agreed that the vendor shall obtain sanction of the court at his own
expense and costs and if the sanction was not accorded by the court, the
agreement would stand cancelled and the advance money refunded to the
vendee. Clause (15) of the agreement could come into operation only if
D the court granted sanction and any of the parities failed to complete the
sale. Clause ( 15) had no operation when the sanction was not accorded to
the sale.·
As has been seen from the facts of this case, the vendor did apply
for sanction, waited for two years and when it found that the reversioners
E opposed the grant of sanction, cancelled the contract. The sanction suit,
despite instructions to his lawyer was not, in fact, withdrawn. The suit for
sanction frustrated not because the vendee became co-plaintiff but because
he filed an affidavit restricting his claim to life interest of vendor. The
life interest was not agreed to be separately sold apart from the interest of
F the reversioners. The terms of sale agreement Ex.P-1 clearly stipulate sale
offull interest in the property. Whatever may be the reasons, the sanction
of the court could not be obtained for sale of interest of the reversioners.
The reversioners were not parties to the sale agreement Ex.P-1. In such
a situation, the question is whether in law and equity, the vendee can insist
G that the vendor should convey, if not full interest, his own life interest in
the property.
If the vendee intended to seek conveyance separately of the life
interest of the vendor, the earliest opportunity for him was when he had -
received notice dated I 1.9.1979 sent through lawyer by the vendor
H cancelling the contract. Assuming that at that time he could not opt for
HPA INTERNATIONAL v. B.F.C. DASW AN! [DHARMADHIKARI,J.] 15
lesser relief as the suit for sanction was pending, he could have, in any case, A
opted for conveyance of life interest of the vendor soon after he came to
know of the negotiations for sale with Bob Daswani, which took place in
the presence of one of the partners of the plaintiff-vendee. Even after
deriving the knowledge of the execution of the sale deed dated 29.12.1979
Ex. D-1, the option to obtain lesser relief of transfer of life interest was B
not exercised. It was exercised as late on 25.11.J 986 by filing an affidavit
and at the time when pleadings of the parties were completed and the joint
trial in the two suits had already commenced. During long pendency of the
suits between 1979 to 1986, the parties interested in the property changed
their positions. The vendor by executing registered sale deed in favour of
the subsequent vendee got his public dues paid to relieve the pressure on C
the property and obtained market price of the property. After obtaining
possession of the property pursuant to the sale deed, the subsequent vendee
has raised constn1ction and inducted tenants. Accepting the legal stand
based on sectioiis.90, 91 & 92 of the Indian Trusts Act that the subsequent
vendee, being a purchaser with knowledge of prior agreement, is holding D
• the property as a trustee for the benefit of the prior vendee, the vendor,
who changed his position by effecting subsequent sale cannot be compelled
to convey his life interest when such lesser relief was not claimed at the
earliest opportunity and the terms of the contract did not contemplate
transfer of life interest alone.
E
On duly appreciating of the evidence on record, construing specific
terms of the contract and considering the conduct of the parties, we have
arrived at the conclusion that the recession of the contract, due to non-grant
of sanction by the court within two years after execution of the contract
and filing of the suit for sanction, was not an act of breach of contract on p
the part of the vendor to justify grant of relief of specific performance of
the contract to the prior vendee.
We are also of the view that the subsequent vendee, by his own act
in the pending suits, was responsible for rendering the suit for sanction as
infructuous. He was guilty of lapse in not seeking conveyance of life G
interest of the vendor at the earliest opportunity when notice of recession
-
of the contract was received by him and later when he derived the
knowledge of execution ofregistered sale-deed in favour of the subsequent
vendee. The option was exercised conditionally in the midst of the joint
trial of the two suits. H
76 SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.
A There was one integrated and indivisible contract by the vendor to
convey full interest in the property i.e., his own life interest and the interest
of the reversioners with sanction of the court. As the court had not granted
the sanction, the contract could not be specifically enforced. The lesser
relief of transfer of life interest was not claimed within a reasonable time
B after the vendor had intimated that the contract, as agreed for full interest,
was not possible of performance. We find neither equity nor law is in
favour of the plaintiff-vendee.
Section 12(3)(a)(b)(i)(ii) of the Specific Relief Act read thus :-
"12. Specific pe1formance of part of contract.-
c
( 1) ................. .
(2) ................. .
(3) Where a party to a contract is unable to perform the whole
D of his part of it, and the part which must be left unperformed
either-
(a) forms a considerable part of the whole, though admit-
ting of compensation in money; or
E (b) does not admit of compensation in money;
he is not entitled to obtain a decree for specific performance; but
the court may, at the suit of other party, direct the party in default
to perform specifically so much of his part of the contract as he
F can perform, if the other party -
(i) in a case falling under clause (a), pays or has paid the
agreed consideration for the whole of the contract
reduced by the consideration for the part which must
be left unperformed and a case falling under clause (b ),
G [pays or had paid] the consideration for the whole of
the contract without any abatement; and
H
(ii) in either case, relinquishes all claims to the perform-
ance of the remaining part of the contract and all right
to compensation, either for the deficiency or for the
-
HPA INTERNATIONAL v. B.F.C. DASWANJ [DHARMADHIKARI, J.] 77
loss or damage sustained by him through the default of A
the defendant."
[Emphasis added]
The power to grant partial relief, from the very language of the
Section 12(3) is discretionary with the Court to be exercised keeping in B
view the facts and circumstances of each case and the rights and interests
of the parties involved.
What is most important to be taken note of is that the reversioners
were not parties to the sale agreement Ex.Pl. In the sanction suit they filed
written statement opposing the proposed sale as adversely affecting their C
spes successionis.
The Court dismissed the sanction suit rightly or wrongly but the
matter having not been carried further in appeal, the subject of grant or
refusal of sanction is no longer open to consideration in this appeal
preferred only against the decision of the Division Bench in appeal refusing D
• decree of Specific Performance of Sale of life interest.
The reversioners have surrendered their interest by accepting consid-
eration separately and executed separate release deeds in favour of the
subsequent vendee. Even though the subsequent vendee has acquired
property with knowledge of sale agreement Ex.Pl existing with the prior E
vendee, the latter has no equity in his favour as to bind the reversioners
and in any manner adversely affect their interest. They were not parties
to the sale agreement and have already by separate release deeds, on
accepting separate consideration, surrendered their interest in favour of the
subsequent vendee. Any grant of relief of transfer of life interest of the F
vendor to the prior vendee would involve the reversioners in further
litigation. If only life interest of the vendor is allowt;d to be conveyed to
the prior vendee, after death of vendor, the reversioners are likely to be
involved in litigation in future to help in restoring possession of the
property to the subsequent vendee and effectuate the release deeds executed
in his favour by them. Grant of such equitable relief would adversely affect G
the immediate efficacy of the release deeds and would create various
hurdles in working out the rights and remedies of the reversioners vis-a-
vis the subsequent vendee. It would not be a proper exercise of discretion
by the Court to grant such pa1iial relief of directing conveyance of life
interest of the vendor as that would adversely affect the interest of the H
78 SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.
A reversioners.
We have already held above while construing the terms of sale
agreement Ex.Pl that as the reversioners' interest in the property was
likely to be affected, the contracting parties never intended piecemeal
transfer oflife interest of the vendor and spes succession is of reversioners.
B What the contracting parties intended and stipulated was transfer of full
interest in the property i.e. vendor's life interest and reversioners' spes
successionis with sanction of the Court. It is for the above reason that
parties very clearly agreed by specific clause (6) in the agreement that if
the sanction of the Court was not accorded, the agreement shall forthwith
C stand cancelled and the advance money re;:eived shall be returned to the
purchaser. The contracting parties were fully aware that reversioners, who
had a mere chance of succession, were not parties to the agreement. The
parties to the contract could have taken care of the eventuality of refusal
of sanction by the Court and possibility of the vendor transferring only
D his life interest to the vendee, but such eventuality of separate transfer of
life interest is conspicuously absent in the terms of the agreement. Such
•
obligation on the part of the vendor to transfer his life interest, if sanction
for transfer of reversioners' interest was not granted, cannot be read in the
contract by implication and recourse to Section 12(3) of the Specific Relief
Act, therefore, is impermissible.
E
Jn our considered opinion, Sectio~ 12(3) of the Specific Relief Act
can be inv0ked only where terms of contract permit segregation of rights
and interest of parties in the property. The provision cannot be availed
of when the terms of the contract specifically evince a intention contrary
to segregating interest of the vendor having life interest and spes succession is
F of reversioners. Neither law nor equity is in favour of the vendee to grant
Specific Perfonnance of the Contract.
On these facts, in our opinion, the learned single judge of the High
Court was in error in granting decree of specific performance of transfer
G of life interest of the vendor on a finding that the vendor had committed
breach by rescinding contract during pendency of sanction suit. The
Division Bench of the High Court, in our considered opinion, rightly
reversed the decree and dismissed the suit.
We are fortified in our conclusion by the decisions of Privy Council
H reported in AIR (34) 1947 PC 182 [Dalsukh M. Pancholi v. The Guarantee
HPA INTERNATIONAL v. B.F.C. DASWANI [DHARMADHIKARI, J.] 79
Life and Employment Insurance Co. Ltd., & Ors.] in which facts were A
somewhat similar requiring court's approval for performance of the
agreement of the sale. Two questions were posed by the court - (a) was
the term "subject to the Court's approval" an essential term of the
agreement?; and (b) if it was essential, by whose default did it fail? The
Privy Council answered the questions saying - " No wonder that the B
approval of the 'attaching court' was insisted on as a necessary condition
for effecting the sale, for without it, the title to the property was not at all
safe. In their Lordships' opinion there can be no doubt that the condition
was an essential one."
The Privy Council then recorded the following conclusions on the C
questions posed :-
"The person to apply to the 'attaching Court" for securing the
approval of the Court was the vendor; on the construction of the
contract, the provision for approval by the Court was not exclu- D
sively for the benefit of the purchaser, and therefore, the purchaser
cannot by his waiver get rid of the necessity for the Court's
approval; the Court contemplated, was the Court having charge
of the mortgage proceedings, as that Court alone could get rid of
the Order for public sale; application was made by the vendor E
to the proper Court and was refused; the contract then fell to the
ground and had worked itselfout. In their Lordships' opinion, the
contract 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 appellant's suit has to be F
dismissed. In this view, it is unnecessary to consider the second
question, or any other point in the case."
The above Privy Council decision was sought to be distinguished on
the ground that it was not a case where the vendor was not in a position
to convey his own interest in the property without the court's sanction. In G
our opinion, however, that aspect is not of much importance because our
conclusion is that the agreement was indivisible, for sale of full interest
in the prope11y i.e. vendor's life interest and reversioners spes successionis .
,,..,,
.
As the cou11's sanction was not obtained within a reasonable time, the
contract became unenforceable. H
80 SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.
A The decision of the Calcutta High Court reported in !LR 152 [Narain
Pattro v. Aukhoy Narain Manna & Ors.] also supports the respondents.
When the sanction as contemplated was not obtained from the court, the
contract even with variations could not be directed to be enforced. See the
following observations of the Calcutta High Court :-
B "It is not necessary for us to express any opinion as to whether the
suit was barred by clause ( e) of section 21 or clause (b) of section
27 of the Specific Relief Act, for in our opinion the Judge was quite
right in saying that the contract as it stood could not be enforced,
and that section 26 had no application to the case. The contract such
c as it was, was not a complete contract at any time. It was contingent
upon the permission of the court. The court's permission did not
extend to the whole contract as set out in the shuttanamah. The
defendants, therefore, could not be compelled to carry out the
terms of the original agreement, nor could they have insisted upon
the plaintiffs carrying out the terms sanctioned by the court.
D Section 26, upon which the vakeel for the appellant relies, sets out ..
cases in which contracts cannot be specifically enforced except
with a variation; and there are five particular cases set out in which
a contract may be enforced subject to a variation, such variation
being in favour of the defendant, and the section in our opinion
E assumes that the parties or vakeels representing them are agreed as
to the existence of the contract, but not agreed as to specific terms.
The section provides that, when fraud or mistake of fact, or
misrepresentation has induced the defendant to sign an agreement,
that agreement can only be enforced on the terms which the
F defendant intended to agree to. There is no provision of law of
which we are aware which entitles the plaintiff to claim a variation
in the terms of his contract, when he finds that the contract itself
cannot be carried out. In the present case the plaintiff by his plaint
sought to enforce the original contract without any variation. It
seems to us, therefore, that the Judge was right in holding that the
G agreement in the shuttanamah could not be enforced as it stood,
and that section 26 would not entitle the plaintiff to enforce it with
a variation.
The case of Narain Pattro (supra) was relied by the same Calcutta
H High Court in the case of Sreemati Kalidasi Dassee & Ors. v. Sreemati
HPA INTERNATIONAL v. B.F.C. DASWANI[DHARMADHIKARI, J.] 81
Nobo Kumari Dassee & Ors., 20 CWN 929 wherein on similar circumstances A
for not obtaining letters of administration from the Court, tl)e contract was
held to have failed.
In the case M V. Shankar Bhat & Anr. v. Claude Pinto Since (dead)
by LRs. & Ors., [2003] 4 sec 86, the agreement for sale was subject to B
ratification by co-heirs and this Court concluded in para 31 as under :-
"When an agreement is entered into subject to ratification by
others, a concluded contract is not arrived at. Whenever ratifica-
tion by some other persons, who are not parties to the agreement
is required, such a clause must be held to be a condition precedent C
for coming into force of a concluded contract."
The alternative claim for lesser relief of life interest of vendor has
been rejected by us. We find support for our conclusion from the following
observations of Privy Council reported in AIR 1925 PC 45 [William D
Graham v. Krishna Chandra Dey], where on similar provisions of section
16 of the old Specific Relief Act, such claim for lesser relief was negatived
on the ground that it would amount to creating a different contract between
the parties not in contemplation by them when they entered into the
contract in question, which is sought to be enforced. E
"Their Lordships think (1) that before a Court can exercise the
power given by section 16 it must have before it some material
tending to establish these propositions, and cannot apply the
section on a mere surmise that, if opportunity were given for F
further enquiry, such material might be forthcoming and possibly
might be found to be sufficient; and (2) that the words of the
section wide as they are, do not authorise the Court to take action
otherwise than judicially, and in particular do not permit it to
make for the parties, or to enforce upon them a contract, which
in substance they have not already made for themselves ............. . G
Hence section 16, both because it must be something not covered
by section 14 and because no court can act unjudicially without H
82 SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.
A either statutory warrant or consensual authority, must be limited
and the expression "stands on a separate and independent footing"
points to a limitation, which would exclude any new bargain, that
cannot be said to be contained in the old one."
B As the lesser relief was claimed after long delay and the contract was
found to be indivisible and inseparable, the partial relief was denied in the
case of Govinda Naicken & Anr. v. Apathsahaya Iyer alias Ayawaiyer, 37
Madras Series 403.
"But when the family is divided as here, section 17 distinctly
c prohibits a Court from directing the specific performance of a part
of a contract except in accordance with the preceding sections.
Even in cases where the conditions of section 15 are fulfilled the
use of the word 'may' indicates that the granting of a decree for
part performance is discretionary with the Court, and we should
D hold that when there has been great delay in attempting to
enforce a contract and circumstances have greatly changed either
from a rise of prices or other causes in the interval, the Courts
would be justifi-ed in refusing to given legal effect to an inequitable
arrangement.
E
Now the plaintiff in the present case wants the Court to compel
the defendant to execute a deed of sale for the whole property and
if he refuses, to is.sue one in his name under th.: seal of the court,
and to allow him to make what he can out of the title thus
conveyed. Such a request is quite inadmissible. A sale is a transfer
F of ownership in exchange for a price (section 54, Transfer of
Property Act). The defendant has nothing which he is capable of
transferring in the moiety of the property of which he is not the
owner and is not in possession. It is impossible to sever the
execution of the deed from the transfer to be effected thereby and
G to treat them as separate acts of the same person.
[Emphasis added}
H
An old decision of Judicial Commissioner, Nagpur reported in AIR
(1915) Nappur 15 [Shardaprasad v. Sikandar] is being referred only
because it has some persuasive value and the facts of that case are to a great
-
HPA INTERNATIONAL v. B.F.C. DASWANI fDHARMADHIKARI, J.] 83
extent nearer to the facts of the present case. The pertinent observations A
in that case are :-
"The first defendant made two undertakings. The first was to apply
for sanction for the sale to the plaintiffs of Sir land without reservation
of occupancy rights. This part of his contract he duly performed.
The second undertaking was that, if sanction were granted, he B
would sell his share with cultivating rights in Sr. No provision was
made for the event of sanction being applied for and refused. This
part of the contract was purely a contingent contract, and if the
future event provided for became impossible the contract fell
through. Sections 14 and 15 ofthe Specific ReliefAct appear to me C
to refer to cases where the inability to perform the whole contract
was not contemplated by the contracting parties. Where, as here,
the contracting parties knew ofand contemplated the possibility of
the whole contract being incapable of performance, for reasons
beyond the control of either of the parties, the sections have no D
application. They apply to unforeseen contingencies, not to foreseen
contingencies. The parties should have provided in the contract for
such an eventuality, but failed to do so.
[Emphasis added]
In the present case, the terms of the contract fully indicate that the E
pat1ies did contemplate that if the sanction of the court was not granted
for transfer of the interest of the reversioners, the contract could not be
enforced. Clause (6) specifically provided that in case sanction by the court
was not granted, the advance money of Rs. 25,000 shall be refunded to
the purchaser. It was known to the parties that the vendor had only life F
interest in the property and the reversioners were not the parties to the
agreement. Even with this knowledge of limited right of the vendor and
the reversioners being not signatories to the sale agreement, there is no
stipulation made in the contract that if court's sanction was not obtained
for transfer of reversioners' interest, the vendor shall convey his life
interest to the vendee. G
On behalf of the plaintiff-vendee, strong reliance was placed on Suisse
Atlant v. N. V. Rotterdam, [ 1966] 2 ALL. ER 61. It has been argued that
seeking sanction of the cou11 for transfer of reversioner's interest was an
obligation on the vendor and if it deliberately acted in a manner to get H
84 SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.
A relieved of that obligation by not prosecuting sanction suit and prematurely
terminating the contract, the vendee has a right to waive that condition
and ask for transfer of life interest of the vendor which he could alienate
to the vendee. in other words, it is submitted that even ifthe clause seeking
sanction of the court was a fundamental term of the contract, its breach
B was deliberately committed by the vendor and the vendee was, therefore,
entitled to insist on fulfilment of the contract to the extent the vendor is
in a position to fulfil.
We have gone through the opinions expressed by Hon'ble Judges of
the House of Lords in the case of Suisse At/ant (supra). On the evidence,
C in the present, we do not find that the decision of the House of Lords, can
be taken aid of for claiming specific relief of transfer of life interest. We
have found from the evidence discussed above that there was pressure on
the property for recovery of taxes. It was not expected or in contemplation,
of the parties, as can be gathered from the terms of the contract, to wait
D for an uncertain period of time and to expose the property to coercive
public recovery proceedings. The vendor applied for sanction but the
reversioners had opposed. Finding, no possibility of grant of sanction, the
vendor terminated the contract but did not withdraw the sanction suit,
although his lawyer was instructed accordingly. We are, therefore, not
E prepared to accept that the vendor had committed any breach of the
contract as has been sought to be urged on behalf of the vendee. It is not
possible to accept allegations of fraud, conspiracy or bad faith on the part
of the vendor for which there is no firm foundation in the pleadings or
the evidence led. In this respect, the following observations of the Lord
F Reid in the House of Lords' decision (supra) are pertinent :-
"I think that it would be open to the arbitrators to find that the
respondents had committed a fundamental or repudiatory breach.
One way of looking at the matter would be to ask whether the
G pa1iy in breach has by his breach produced a situation fundamen-
tally different from anything which the parties could as reasonable
men have contemplated when the contract was made. Then one
would have to ask not only what had already happened but also
what was likely to happen in future. And there the fact that the
H breach was deliberate might be of great importance".
HPA INTERNATIONAL v. B.F.C. DASWANI [DHARMADHIKARI, J.] 85
Applying the above test to the terms of the contract and the conduct A
of the parties under consideration before us, we do not find that the parties
had agreed to wait for the whole period during which the suit for sanction
was pending and till its finalisation including appeal proceedings, if any.
Such a course was not in contemplation of the parties because the vendor
had agreed that the vendee would directly discharge the tax liabilities from B
the total amount of sale consideration. It was not possible for the vendor
to have waited indefinitely for final orders on the suit for sanction when
the reversioners had objected to the sanction and there was remote
possibility of the grant of sanction in foreseeable near future.
It is argued that the Court could have granted sanction even though C
the reversioners objected because there was threat of coercive sale of the
property for recovery of tax dues and taxes.
It would be purely in field of speculation as to what would have
actually happened had the vendor continued to prosecute the suit despite D
the objection of the reversioners. As we have mentioned above the
complications in disposal of sanction suit on merit were created by the
vendee himself by getting himself transposed as co-plaintiff and then filing
an affidavit restricting his claim to transfer of life interest. It is, thereafter,
that the sanction suit was dismissed as infructuous. If the order of the court E
refusing sanction was erroneous and when an appeal was filed by the
subsequent vendee against grant of decree of specific performance of life
interest to the vendee, the vendee could have appealed against dismissal
of suit for sanction as infructuous. It is argued that the two suits were
clubbed for trial and as the lesser relief of transfer of life interest was F
granted in suit for specific performance, it was not necessary for the vendee
to have appealed against dismissal of the sanction suit. We need not deal
with this argument any further, as in our view, as the sanction was not
granted for sale by the court within a reasonable period of two years and
the possibility of commencement of coercive proceedings of tax recovery
loomed large, the vendor cannot be held to have committed a breach of G
the contract when he served a notice of termination of contract.
On behalf of the vendee, reliance is heavily placed on Satyabrata
Ghose v. Mugneeram Bangur & Co., [1954] SCR 310. The decision is
distinguishable. In that case, the defendant company for the purpose of H
86 SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.
A developing certain land, entered into the contract with plaintiff for sale of
its plot. The sale-deed was to be executed after construction of drains and
roads. After the execution of the agreement and when construction of
public roads and ·drains was half done, the land was requisitioned by the
government for military purposes. The defendant company could not
B further undertake the road construction work and therefore, wrote to the
plaintiff to treat agreement as cancelled. It is on these facts that this court
held :-
"that having regard to the nature and terms of the contract, the
c actual existence of war conditions at the time when it was entered
into, the extent of the work involved in the scheme fixing no time
limit in the agreement for the construction of the roads etc., and
the fact that the order of requisition was in its very nature of a
temporary character, the requisition did not affect the fundamental
basis of the contract; nor did the performance of the contract
D become illegal by reason of the requisition, and the contract had
not, therefore, become impossible within the meaning of section
56 of the Indian Contract Act."
Such is not the position in the present case. The vendor could not
E have waited indefinitely for the final result of the sanction suit as coercive
proceedings for recovery of tax were likely to be initiated at any time. We
have held above that reasonable period for obtaining sanction from the
court has to be read as an implied condition of the contract in view of the
urgent necessity of sale to satisfy the tax dues and save the property from
F coercive recovery. The vendor had agreed for transfer of full interest in
the property including his own life interest and of the reversioners. As
the reversioners objected and ultimately the sanction suit failed, the
performance of contract, as agreed for transfer of full interest in the
property, had become impossible. There was no agreement between the
G parties that if sanction was not granted, the vendor would transfer his life
interest. On the contrary, the agreement clause specifically stated that if
the sanction was not obtained, the advance money shall be returned. This
stipulation shows an intention contrary to the pa11ies agreeing for transfer
of life interest of vendor, if transfer of reversioners' interest was not
H possible for want of court's sanction.
HPA INTERNATIONAL v. B.F.C. OASWANI [DHARMADHIKARI, J.) 87
Another argument advanced is that the reversioners had merely a A
chance of succession and had no transferable interest in the property.
Reference is made to section 6(a) of the Transfer of Property Act which
states :-
"6. What may be transferred-Property of any kind may be B
transferred, except as otherwise provided by this Act or by any
other law for the time being in force, -
(a) The chance of an heir-apparent succeeding to an estate, the
chance of a relation obtaining a legacy on the death of a kinsman, C
or any other mere possibility of a like nature, cannot be trans-
ferred."
Elaborating this argument further, it is argued that as the vendor
erroneously represented and agreed for transfer of spes successionis of the
reversioners, on the principle of section 43 of the Transfer of Property Act D
read with sections 90, 91 & 92 of the Indian Trusts Act, the vendor, the
subsequent vendee and the reversioners, who have surrendered whatever
right they had in the property, are bound by estoppel and are obliged in
law by the provisions of Specific Relief Act to transfer full interest in the
property to the prior vendee. Reliance is placed on The Jumma Masjid v. E
Kodimaniandra Deviah, [1962] Supp. 2 SCR 554.
The above argument has no merit and the aforesaid decision is hardly
of any help to the vendee. This is not a case where the vendor had only
right of spes successionis and after execution of agreement of sale, he F
subsequently acquired full interest in the property to be held bound by
section 43 of the Transfer of Property Act. In the case before us, the
reversioners were not parties to the agreement of sale. When in the suit
for sanction to transfer their interest they were made parties and were
noticed, they expressly objected to the proposed transfer. No principle of
estoppel or provisions of section 43 of the Transfer of Property Act can, G
therefore, operate against them. So far as the subsequent vendee is
concerned, in the course of suit, he was pushed to a position in which he
could not take a stand that he had no knowledge of the prior agreement
with the vendee but he has separately purchased life interest from the
vendor and obtained separate release deeds, on payment of consideration, H
88 SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.
A from the reversioners. The reversioners being not parties to the sale
agreement Ex. P-1 entered into with the vendee, the latter could not
enforce the contract Ex. P-1 against the former.
The decision in Dr. Jiwanlal & Ors. v. Brij Mohan Mehra & Anr.,
B [1972] 2 sec 757 is also distinguishable on the facts of that case. There
clauses (5) & (6) of the agreement provided for execution of sale-deed
within three months from the date the premises agreed to be sold were
vacated by the Income-Tax Authorities . It was fu1ther provided that if the
income-tax authorities did not vacate the premises or they stood requisitioned
C by the Government before registration of sale-deed - the vendor shall
refund the consideration to the purchaser. As the premises were requisitioned
by the government, the stand taken by the vendor was that it was
contingent contract and on requisition of the premises, the contract failed.
On the evidence of the parties, the finding reached was that the vendor
had manipulated requisition of the premises. This Court, therefore, in
D appeal held that the contract did not provide that the sale would be effected
only if the premises remain non-requisitioned or that on requisition of the
premises, the contract would come to an end. The clause providing for
refund of consideration if the premises were not vacated by the income-
tax authorities or subsequently requisitioned by the government was held
E to be solely for the benefit of the vendee. It was held that if the vendor
manipulated the requisition, the vendee could waive that condition and
insist on sale of premises in the condition of it having been requisitioned.
In the case before us, we have not found that the vendor was guilty
F of rendering the suit for sanction infructuous. It did terminate the contract
pending the suit for sanction but never withdrew that suit. The vendee
himself prosecuted it and rendered it infructuous by his own filing of an
affidavit giving up his claim for the interest of reversioners. In such a
situation where the vendor was not in any manner guilty of not obtaining
the sanction and the clause of the contract requiring court's sanction for
G conveyance of full interest, being for the benefit of both the parties, the
contract had been rendered unenforceable with the dismissal of the sanction
suit.
Where the clause requmng obtaining of sanction was to protect
H interest of both the parties and when the sanction could not be obtained
HPA INTERNATIONAL v. B.F.C. DASWANI [DHARMADHIKARI, J.] 89
for reasons beyond the control of the parties, the contract cannot be directed A
to be specifically enforced. House of Lords in the case of New Zealand
Shipping Co. Ltd. v. Societe Des Ateliers Et. Chantiers De France, 1918-
19 All ER 552, in similar circumstances, negatived the claim of specific
performance. It was held in that case that where two parties are equally
blameless and none of them could be said to have brought about a situation B
by their act or omission to frustrate the contact, the contract cannot be
directed to be specifically enforced.
On behalf of the vendee, support for his claim was sought from the
following observations of Lord Atkinson :-
"The application to contracts such as these of the principle that
c
a man shall not be permitted to take advantage of his own wrong
thus necessarily leaves to the blameless party an option whether
he will or will not insist on the stipulation that the contract shall
be void on the happening of the named event. To deprive him of D
.
)
that option would be but to effectuate the purpose of the blame-
able party. When this option is left to the blameless party it is said
that the contract is voidance, but that is only another way of saying
that the blameable party cannot have the contract made void
himself, cannot force the other party to do so, and cannot deprive
the latter of his right to do so. Of course the parties may expressly E
or impliedly stipulate that the contract shall be voidance at the
option of any party to it. I am not dealing with such a case as that.
It may well be that question whether the particular event upon the
happening of which the contract is to be void was brought about
by the act or omission of either party to it may involve a p
determination of a question of fact.
As has been observed by Lord Atkinson, it.is always a question of
fact to be determined in each case as to who is guilty of the act or omission
to render the contract void or unenforceable. In the case of New Zealand
Shipping Co. Ltd. (supra) on facts the ultimate conclusion reached G
unanimously by their Lordships was that the clause of the contract in that
case, was a stipulation in favour of both the parties and the situation was
not brought about by any of the parties to give rise to avoidance. It was
found that the failure to fulfil the contract was not due to any fault on the
part of the respondents but was due to a cause beyond their control. H
90 SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.
A In the present case also, we have come to conclusion that the vendor
waited for a reasonable period for grant of sanction to the sale by the court.
There was a pressing need for sale as the public dues and taxes could have
been recovered from the property by coercive process at any time. The
vendor, therefore, advisedly withdrew from the contract, negotiated sale
B on different terms with the subsequent vendee and ultimately entered into
the contract with the latter. The vendor did not actually withdraw the suit
for sanction. The vendee himself became co-plaintiff to the suit and
unsuccessfully tried to prosecute it. The sanction suit was rendered
infructuous by vendee's own conduct of filing affidavit restricting his
claim to life interest. He suffered the dismissal of sanction suit as
c infructuous and did not question the correctness of the court's order in
appeal before the Division Bench, although the subsequent vendee, against
grant of decree of specific performance of life interest, had preferred an
appeal.
D In this situation, even if we come to a conclusion that the vendee
had rightly tried his utmost to obtain court's sanction and cannot be blamed ••
for transposing him as a co-plaintiff and prosecuting the sanction suit, the
sanction sought could not be obtained for reasons beyond the control of
the parties. The vendor can not be held guilty of the breach as to entitle
E the vendee to seek specific performance of life interest of the vendor.
The contract entered into between the parties was for conveying full
interest in the property namely life interest of vendor and chance of
succession of reversioners. The contract was one and indivisible for full
interest. There is no stipulation in the contract that if sanction was not
F obtained, the vendor would transfer only his life interest for the same or
lesser consideration. On the contrary, the contract stipulated that if the
sanction was not granted, the contract shall stand cancelled and the advance
money would be refunded to the purchaser.
Lastly, the stage has arrived for considering the question of adjustment
G of equities between the parties because of the change of positions by them
in the course of a very long period of litigation. The decree for specific
relief of conveyance of life interest, has been executed and registered sale
deed through the coU11 in favour of the vendee has also been issued.
Possession of the prope11y has been obtained by the vendee on execution
H of decree granted by the single judge of the High Court. The Division
HPA INTERNATIONAL v, B.f,(;, DASWANI (DHARMADHIKARI, J.) 91
Bench of the High Court in adjusting the equities in paragraphs 62 to 68 A
of its judgment has taken note of the above relevant facts and subsequent
events.
After execution of the decree and registered sale-deed the vendee
plaintiff was placed in possession of the property on 25.2.1995. · The B
basement and ground floor have been constructed by the subsequent
vendee after obtaining possession on the basis of his sale deed. Thereafter
_) plaintiff-vendee, on obtaining possession pursuant to the execution of
decree granted by the learned single judge, has constructed two floors
above the ground floor although the construction is said to be not complete
in all respects. According to the plaintiff-vendee, he has incurred an C
expenditure of Rs. 46,28,403 for construction of two floors above the
ground floor. As the construction put up by the plaintiff-vendee is to ensure
for the benefit of the subsequent vendee, and the latter having succeeded
in appeal before the Division Bench of the High Court, the Division Bench
in adjusting equities has directed that on payment of construction cost D
, t incurred by the plaintiff-vendee for two floors above ground floor, the
whole construction will become the sole property of the subsequent
vendee.
From the date of the impugned judgment of the Division Bench the
total rent received from' the property has been accounted for. The whole E
rental income has been directed to be paid to the successful party i.e. the
subsequent vendee, Out of the total rental income payable to the
subsequent vendee, apart from adjusting the construction cost incurred by
the plaintiff-vendee, deduction has been directed towards return of the sale
consideration of Rs.5.5 lacs paid under the sale agreement Ex. P-1 A F
further sum of Rs.5.5 lacs has been directed to be deducted for the
misconduct of the subsequent vendee in trying to mislead the court that
Bob Daswani and F.C. Daswani were two different persons and the
subsequent vendees had no knowledge of the prior agreement.
On the principle of restitution contained in Section 144 of the Code G
of Civil Procedure, we find no ground to interfere with the order of the
Division Bench of the High Court in directing adjustment and payment by
subsequent vendee of the cost of construction incurred by the plaintiff
vendee. The directions for return offull sale consideration as also deduction
towards misconduct of impersonation and misleading the Court also H
92 SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.
A deserve no interference.
We maintain the directions of the Division Bench of the High Court
to deduct a sum ofRs.5.5 lakhs for the alleged misconduct of impersonation
and misleading the Court. The Civil Appeal No.336 of 2002 preferred by
the subsequent vendees only against the above impugned directions
B deserves to be dismissed.
During pendency of these appeals, various interim orders were passed
by this Court on 27.8.2001, 11.1.2002 and 17.2.2003. In pursuance of \__
those orders, rental income derived from the property has been collected
C and paid to the subsequent vendee, subject to the result of these appeals.
Learned counsel appearing for the subsequent vendee, at the conclusion
of the arguments, has handed over to this Court a chart mentioning the
figures of total rent received up to February 2004 and separately shown
the amount deposited in the Court. The figures submitted in the chart by
the subsequent vendees are open to verification by the prior vendee. With
D dismissal of these appeals, we confirm the judgment of Division Bench
of the High Court including the directions made to adjust equities with
regard to the construction cost and the rental income derived from the suit
property.
E In the result, both the appeals are dismissed. In the circumstances,
we direct the parties to bear their own costs in these appeals.
G.N. Appeals dismissed.
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