HPA International Vs. Bhagwandas Fateh Chand Daswani and Others

Appeal: Civil Appeal No. 6006 of 2001

Petitioner: HPA International

Respondent: Bhagwandas Fateh Chand Daswani and Others

Apeal: Civil Appeal No. 6006 of 2001

Judges: SHIVARAJ V. PATIL & D.M. DHARMADHIKARI, JJ.

Date of Judgment: Jul 13, 2004

Mr. K. Parasaran and Mr. Gopal Subramaniam, Senior Advocates, Mr. V. Balachandran, Advocate with them for the Appellant in C. A. No. 6006/2001 & Respondent in C. A. No. 336/2002
Soli J. Sorabjee, Attorney General, Mr. E. R. Kumar, Mr. Saurav Kirpal, Mr. P. H. Parekh, Mr. Jayesh Dolia, Mr. S. Ramakrishnan, Advocates with him for the Respondent in C. A. No. 6006/2001 & Appellant in C. A. No. 336/2002

CONTRACTS / SPECIFIC PERFORMANCE
Specific Relief Act, 1963
Section 12(3) – Indian Contract Act, 1872 – Sections 31 and 32 – Indian Trusts Act, 1882 – Sections 90, 91 and 92 – Civil Procedure Code, 1908 – Section 144 – Contract for transfer of life interest in property -Specific performance of part of contract – Power to grant partial relief – Scope -Advantages gained by qualified owner – Effect where property is acquired with notice of existing contract – Enforcement of contingent contract – When a person is entitled to relief under equity – Owner of certain property executing a Will – Life interest in the property given to ‘M’ without any right of alienation – Male issue of ‘M’ living at the time of his death to take the property absolutely – In the event of there being no male issue property to be taken by other descendants – Death of testator in 1956 – In 1977, ‘M’ entering into an agreement with a firm (vendee) for sale of the property due to pressing demand of public authorities towards dues and liabilities on the estate – ‘M’ not having any male issue – ‘M’ agreeing to obtain court sanction for sale of his life interest and interest of the remaindermen and filing suit seeking sanction – Reversioners objecting to the grant of sanction – Subsequently ‘M’ rescinding from the agreement and cancelling the same on the ground that the sanction of the court would not be forthcoming – In 1979 ‘M’ selling his life interest to a third party (subsequent vendee) for a sum higher than the sum for which he earlier agreed to sell to the first vendee (firm) – Subsequent vendee obtaining surrender of rights from the reversioners by paying money to them – Vendee (firm) filing suit seeking specific performance – Single Judge of High Court decreeing the suit and directing the subsequent vendee to re-convey the property to the firm – Upon re-conveyance of the property in terms of the judgment of the Single Judge, vendee constructing further floors in the property – Division Bench dismissing the appeal – On remand of the matter by the Supreme Court, Division Bench of High Court allowing the appeal and setting aside the decree for specific performance – Vendee however granted refund of full sale price – High Court directing adjustment and payment by subsequent vendee of the cost of construction incurred by the vendee firm – Court also directing deduction of certain sum for the alleged misconduct of impersonation by the subsequent vendee and misleading the court – Whether High Court correct in setting aside the decree and giving various directions – Whether there was any breach of the contract on the part of the vendor (‘M’) so as to justify the grant of relief of specific performance. Dismissing the appeals and confirming the judgment of the Division Bench including the directions made to adjust the equities held that the non filing of an appeal against dismissal of sanction suit as infructuous was a clear indication that the vendee was satisfied with the grant of decree merely of specific performance of conveyance of the life interest of the vendor and therefore it was not open to the vendee to question the correctness of the dismissal of the suit by the Single Judge. Vendor not guilty of rendering the suit for sanction infructuous. It was the vendee who prosecuted it and rendered it infructuous by his own filing of an affidavit giving up his claim for the interest of the reversioners. Therefore vendor not in any manner guilty of not obtaining the sanction and the clause of the contract requiring court’s sanction for conveyance of the full interest being for the benefit of both parties, the contract had been rendered unenforceable with the dismissal of the sanction suit. Vendor cannot therefore be held guilty of the breach so as to entitle the vendee to seek specific performance of the contract relating to the life interest of the vendor. Division Bench justified in setting aside the decree for specific performance. Directions for return of full sale consideration as also deduction towards misconduct and impersonation of subsequent vendee called for no interference.

The recitals of the agreement of 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 of the court, but keeping in view the other terms of the contract and the pressing requirement for sale of the property to clear public dues, it has to be held 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 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 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 initial attempt made by subsequent vendee to conceal knowledge of the existing contract with 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. 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. (Para 27)

Only life interest was sold to the 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 from date of the contract, cannot be termed to be a breach to justify grant of any specific relief to the vendee. (Para 28)

On behalf of the vendee it is now contended that had 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 suffered the alleged wrongful dismissal of suit for sanction as infructuous. 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 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 by the learned single judge. (Para 30)

In the present case, the terms of the 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 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 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. (Para 55)

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 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. (Para 58)

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. 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 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 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 parties agreeing for transfer of life interest of vendor, if transfer of reversioners’ interest was not possible for want of court’s sanction. (Para 62)
We have not found that the vendor was guilty 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 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. (Para 67)

Where the clause requiring obtaining of sanction was to protect interest of both the parties and when the sanction could not be obtained for reasons beyond the control of the parties, the contract cannot be directed 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 by their act or omission to frustrate the contact, the contract cannot be directed to be specifically enforced. (Para 68)

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 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 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. (Para 71)

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 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 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. (Para 72)
Lastly, the stage has arrived for considering the question of adjustment 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 court in favour of the vendee has also been issued. Possession of the property has been obtained by the vendee on execution of decree granted by the single judge of the High Court. The Division Bench of the High Court in adjusting the equities in paragraphs 62 to 68 of its judgment has taken note of the above relevant facts and subsequent events. (Para 73)

After execution of the decree and registered sale-deed the 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 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 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 incurred by the plaintiff- vendee for two floors above ground floor, the whole construction will become the sole property of the subsequent vendee. (Para 74)

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 of full sale consideration as also deduction towards misconduct of impersonation and misleading the court also deserve no interference. (Para 76)

We maintain the directions of the Division Bench of the High Court to deduct a sum of Rs.5.5 lacs for the alleged misconduct of impersonation and misleading the court. (Para 77)

In the result, both the appeals are dismissed. (Para 79)

1. M.V. Shankar Bhat & Anr. v. Claude Pinto Since (dead) by LRs. & Ors. (JT 2003 (2) SC 213) (Para 51)
2. Surjit Kaur v. Naurata Singh & Anr. (JT 2000 (10) SC 520) (Para 20)
3. S.P. Chengalvarya Naidu v. Jagannath (JT 1993 (6) SC 331) (Para 14)
4. Narandas Karsondas v. S. A. Kamtam (1977 (3) SCC 247) (Para 10)
5. Dr. Jiwanlal & Ors. v. Brij Mohan Mehra & Anr. (1972 (2) SCC 757) (Para 66)
6. Soni Lalji Jetha v. Sonkalidas Devchand (1967 (1) SCR 873 at pg. 879) (Para 10)
7. Golab Ray & Anr v. Muralidhar Modi & Ors. (AIR 1964 Orissa 176 at pp. 180 & 181) (Para 17)
8. Mrs. Chandnee Widya Vatee Madden v. Dr. C.L. Kataial & Ors. (1964 (2) SCR 495) (Para 18)
9. Jhumma Masjid v. Kodimaniandra Devaiah (1962 Supp (2) SCR 554 at pg. 570) (Para 10)
10. The Humma Masjid v. Kodimaniandra Deviah (1962 Supp.(2) SCR 554) (Para 64)
11. Lala Durga Prasad v. Lala Deep Chand (1954 SCR 360 at pg. 367) (Para 10)
12. Satyabrata Ghose v. Mugneeram Bangur & Co. (1954 SCR 310) (Para 61)
13. T.V. Kochuvareed & Anr. v. P. Mariappa Gounder & Ors. (AIR 1954 TC 10, para 40) (Para 20)
14, Ganga Saran v. Ramcharan Ram Gopal (1952 SCR 36 at pg. 42) (Para 14)
15. Dalsukh M. Pancholi v. Guarantee Life & Employment Insurance & Co. (AIR 1947 PC 182 at pg. 186) (Para 17)
16. Bolla Narayan Murthy v. Cannamaneedi Madhavayya & Anr. (1947 (2) MLJ 347) (Para 20)
17. Dalsukh M. Pancholi v. The Guarantee Life and Employment Insurance Co. Ltd., & Ors.(AIR (34) 1947 PC 182) (Para 46)
18. Hiralal Lachmiram Pardesi v. Janardhan Govind Nerlekar & Anr. (AIR 1938 Bombay 134) (Para 19)
19. William Graham v. Krishna Chandra Dey (1925 PC 45) (Paras 19, 52)
20. Abdul Haq v. Mohammed Yehia Khan & Ors. (AIR 1924 Patna 81 at pg. 84) (Para 19)
21. Sheoparsan v. Ramnandan (AIR 1916 PC 78 at pg. 81) (Para 14)
22. Shardaprasad v. Sikandar (Nagpur AIR 1915 Nagpur 15 ) (Para 54)
23. Narain Pattro v. Aukhoy Narain Manna (ILR 12 Calcutta 153 at pg. 155) (Para 17)
24. Sreemati Kalidasi Dassee v. Sreemati Nobo Kumari Dassee (20 CWN 929 at pgg. 937, 938 & 939) (Para 17, 50)
25. (Narain Pattro v. Aukhoy Narain Manna & Ors. (ILR 152 ) (Para 49)
26. Govinda Naicken & Anr. v. Apathsahaya Iyer alias Ayawaiyer (37 Madras Series 403) (Para 53)
Foreign Case Referred:
1. Suisse Atlant v. N. V. Rotterdam (1966 (2) ALL. ER 61) (Para 56)
2. New Zealand Shipping Co. Ltd. v. Societe Des Ateliers Et. Chantiers De France (1918-19 All ER 552) (Para 68)

Dharmadhikari, J.
1. 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 single judge has been set aside with certain directions to adjust the equities between the parties.
2. 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 complications to the already complicated issues involved in cases coming before them, and makes their duties more onerous by requiring them to adjust rights and equities arising from delay.
3. 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 dismissed the appeal and confirmed the decree of specific performance of the contract granted by the single judge.
4. In appeal preferred by the defendants, this Court by order passed on 13.1.2000 (reported in JT 2000 (1) SC 266) remanded the appeal to the Division Bench of the High Court for a fresh decision only because of long gap of five years in hearing arguments and decision of appeal by the High
Court.
5. After remand the Division Bench reheard the appeal and by the impugned judgment dated 24.4.2001 has allowed it. The decree granted 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.
6. With this background the facts of the case may be stated:-
6.1 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 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 properties absolutely. In the absence of any such male issue of the vendor, the properties would be taken by other descendants (hereinafter referred to as the ‘reversioners’).
6.2 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 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 life interest of the Vendor and the interest of the reversioners (described as remaindermen) 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 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 his life interest and interest of the remaindermen in the property. The agreement further provided that in case the sanction of the 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.
6.3 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 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.
6.4 The relevant part of opening recitals and clauses 1,2,3,4,6,7,9 & 15 of the agreement dated 26.6.1977 exhibit P1 are reproduced hereunder as rights, and equities of the contesting parties are dependent on its proper construction, and understanding:
AGREEMENT OF SALE “THIS AGREEMENT OF SALE executed at Madras this 26th day of June 1977 between G.D. NARENDRA KULLAMMA NAICKER, son of late M. Dorai Pandian alias Subba Naicker, Hindu, aged about 38 years and now residing at plot no.24, Second Stage, Panmanabha Nagar, Adyar, 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 partner H.A. ALEEMUDDIN, hereinafter called the PURCHASER of the other part: WHEREAS the Vendor is the paternal grandson of late Mouna Gurusamy Naicker, Zamindar of Naickarpatti, Madurai District, whereas the said Mouna Gurusamy Naicker owned and possessed large immovable properties consisting of Houses and 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 estate in all the said properties to his 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 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.
WHEREAS the said Mouna Gurusamy Naicker died on 23.10.1956, Whereas the vendor’s father M. Dorai Pandian alias Subba Naicker obtained probate to the said Will and Codicils from the High Court, Madras in OP No.14 of 1957 and was administering the estate until 4.12.1963 when he delivered possession of the 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. Whereas the vendor had to spend very large sums of money for managing the vast extent of agricultural 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.
WHEREAS the house properties have also not yielded any surplus income after discharge of liabilities.
WHEREAS large sums of money by way of public dues such as Agricultural income Tax, Capital Gains Tax, Income-Tax, 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 when demanded for want of requisite net income from the estate to meet the same and on account of paucity of funds in the estate.
WHEREAS there is now due towards the said Public debts and public liabilities a sum of nearly six lacs, whereas consequent to 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 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 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 estate.
WHEREAS the vendor also apprehends that in the circumstances the State and public authorities may take coercive steps and bring the properties comprised in the estate to sale for 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 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 payable by the estate from the net sale proceeds thereof, in order to save the remaining portion of the estate.
WHEREAS house, ground and premises bearing Municipal Door No.36C, 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 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 inclusive of the interest of the remaindermen after the life time of the vendor and free from all encumbrances, charges or trusts whatsoever for the net sum of Rs.5.5 lacs (rupees five and a half lacs) only upon and subject to the performance of all the terms and conditions mentioned hereinbelow:
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 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 necessary to accept the said offer.
NOW THIS AGREEMENT WITNESSETH as follows in pursuance of the premises and agreement hereinabove recited:
1. The vendor doth hereby agrees to sell and the purchaser does hereby agrees to purchase the entire interest, both present and future, in house, ground and premises bearing municipal Door No.36C, 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 for the net sum of rupees five and a half lacs 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 reversioners after his death.
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.
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 the life time of the vendor.
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 of India, Adyar, Madras, in favour of the vendor, 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 twenty five thousand to the purchaser.
7. If the sanction of court is obtained the sale shall be completed within a period of three months thereof.
8………………..
9. The balance of the sale price of Rs. five lacs twenty five thousand shall be paid by the purchaser at or before the 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 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. ……………….
11. ……………….
12. ……………….
13. ………………..
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 twenty five thousand and also pay a sum of rupees fifteen thousand to the purchaser by way of liquidated damages for his 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 complete the same.”
6.5. At the time of execution of the agreement exhibit P1 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 the vendor had no male issue.
6.6. 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 in the property inclusive of his own life interest and the interest of the reversioners. The reversioners were impleaded as parties to that suit.
6.7. On 16.1.1978, one of the reversioners viz., Saraswati Devi filed a written statement objecting to the grant of sanction for sale and prayed for dismissal of the suit. Another reversioner Prema Gangaiya adopted the written statement filed by other reversioner and objected to the sale.
6.8. 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:
“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 said agreement is, therefore, refunded by his cheque bearing No……dated 11.9.1979.”
6.9. 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 the court was not likely to be decided early and the chances of grant of sanction being remote, the suit be withdrawn.
6.10. 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 the suit as co-plaintiff.
6.11. The vendee sent a detailed reply to the lawyer’s notice sent by the vendor cancelling the agreement. In his reply, the vendee attributed mala fides to the vendor in rescinding the agreement. In his reply, the vendee acknowledged that the sale was necessitated because of public liabilities towards taxes and other dues in respect of the property but it was alleged 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 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 hereinafter be referred as the subsequent vendee.
6.12. 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 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. 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.”
6.13. It may be mentioned at this very stage that 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 interest of the reversioners which was subject matter of the suit filed for seeking sanction of the court.
6.14. 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 1 to 5 (shortly referred to as the subsequent vendee). What is apparent from the contents of the subsequent sale deed exhibit D1 dated 29.12.1979 executed in favour of the subsequent vendee 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 Tax arrears.
6.15. 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 individually from the reversioners by paying each of them a sum of Rs. 20,000/-.
6.16. After receiving the lawyer’s notice and cancellation of the sale agreement, the vendee on 25.3.1981 got himself impleaded as a party-defendant in suit no.471/77 which was filed to seek sanction of the court.
6.17. On 16.8.1981 the vendee filed civil suit no. 423/81 seeking specific performance of the agreement of sale agreement exhibit P1.
6.18. Under order dated 17.12.1981 passed in civil suit no.471/77 seeking 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 exhibit P1 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.
6.19. 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 Relief Act of 1963 stating therein that without prejudice to his claim for transfer of full interest in the suit property to him under 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 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:
“I submit that the relief as prayed for in CS No.471 of 1977 can be granted by this Hon. Court. The relief prayed for in the present suit is for a decree for specific performance in respect of the entire property with full rights of the first defendant and of the reversioners. Without prejudice to what is stated above, it has become necessary for me to file this affidavit before commencement of the trial of the suit under the following circumstances.
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 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.”
6.20. 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.471/77 seeking sanction of the court for sale as infructuous. The relevant part of order 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 this Court coming to the conclusion that Messrs. HPA International 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 exhibit P1 with reference to the life-estate of Narendra Kullamma Naicker alone and for a direction to the defendants in that suit to execute the sale deed in favour of the plaintiff to the extent of the life-estate of Narendra Kullamma Naicker as provided 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.
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. 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.”
6.21. It may be stated that this part of the common judgment dismissing 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 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.
6.22. 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 exhibit P1. 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.
6.23. 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 thus:
“A perusal of the oral and documentary evidence clearly proves that DW 1 has no regard for truth. Further, the built-in clauses namely clauses 4 & 6 in exhibit P1 have been introduced for the benefit of the plaintiff. The non-enforcement of those clauses will not prejudice the Ist 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 Ist defendant to convey the whole of the interest of the suit property as contained in clause 4 of exhibit P1 agreement is not a bar for the plaintiff herein to enforce exhibit P1. since he has relinquished the benefit that accrues to him, which will not prejudice the Ist defendant. In view of the relinquishment of the right given to the plaintiff under clause 4 of exhibit P1, clause 6 of the agreement becomes otiose.”
6.24. In granting decree of specific performance of conveyance of life interest of the vendor, learned single judge further held thus:
“Whereas, the agreement involved in this suit is capable of separation, one consisting of enforceable portion viz. the life interest of the first defendant and unenforceable portion viz. interest of remaindermen and reversioners.”
6.25. 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 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 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 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 notice.”
6.26. 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 exhibit P1 with the vendee.
6.27. 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 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 JT 2000 (1) SC 266. 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 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 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 success of appeal and setting aside of the decree for specific performance.
6.28. 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.
6.29. Construing the relevant clauses of the contract the Division Bench 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:
“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 interest being lawfully conveyed and accepted liability for payment of liquidated damages if it failed to obtain the sale deed after 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 purchaser as well as the vendor.”
6.30. 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 unenforceable. The Division Bench concluded thus:
“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 collapsed by implosion, the dismissal of the suit for sanction having triggered it.”
6.31. 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 Division Bench held thus:
“It is now a matter of record that the sanction sought for the sale of reversionary interest was not given in the civil suit no. 471 of 1977 having been dismissed that dismissal has become final. By virtue of clause 6, the suit agreement exhibit P1, 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 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 section 12(3) of the specific Relief Act, is a default which cannot now be turned to its advantage, after the suit for sanction was dismissed.”
6.32. The claim allowed for grant of lesser relief of conveyance of life interest of the vendor in the suit property, was negatived by the Division 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 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 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 bargain 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 entirety had perished.”
6.33. 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:
“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 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 was not so provided. Having regard to these facts the prayer for part performance 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 plaintiff’s conduct.”
6.34. As a result of the conclusion reached as mentioned above, the Division Bench allowed the appeal and set aside the decree of granting specific performance of the contract exhibit P1 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 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 property. We shall separately deal with that aspect at appropriate stage of our judgment.
7. We have heard the learned counsel appearing for the contesting parties at great length. Apart from long oral arguments, written submissions have been made and plethora of case law has been placed before us on 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.
8. 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 exhibit 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 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 mala fide attempts on the part of the vendor to resile from the contract for getting higher price for the property. 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 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 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 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 representing all persons interested in such property, gains any advantage he must hold, for the benefit of all persons so interested, the 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 contracted, in gaining such advantage.
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 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 certain beneficiaries and buys the property accordingly, he must hold the property for their benefit to the extent necessary to give effect to the contract.”
9. In elaborating the above argument to support claim of specific 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 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. 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.
10. The alternative argument advanced on behalf of the plaintiff- vendor 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 pay full agreed consideration for lesser relief of conveyance of life interest in the property. Reliance is placed on Lala Durga Prasad v. Lala Deep Chand1; Jhumma Masjid v. Kodimaniandra Devaiah2; Soni Lalji Jetha v. Sonkalidas Devchand3; and Narandas Karsondas v. S. A. Kamtam4.
11. 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. 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 and equity is in favour of the plaintiff- vendee. Reliance is placed on Ganga Saran v. Ramcharan Ram Gopal5.
12. Alternatively, it is submitted that even though sanction could not be obtained from the court for transferring interest of the reversioners, the law permits the equity court to grant lesser relief of directing conveyance of life interest 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 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 sanction 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 of the court, cannot be said to be conditional to deny relief under section 12(3) of the Specific Relief Act.
13. 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 for transfer of reversioners’ interest was a condition solely in favour of the plaintiff- vendee which he could waive and the vendor could not insist on fulfillment of that condition as a fundamental term of the contract.
14. In reply to the plea of the finality of the decree of dismissal of sanction 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 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 of the court was needed. Reliance is placed on S.P. Chengalvarya Naidu v. Jagannath1 and Sheoparsan v. Ramnandan2.
15. 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.
16. Learned senior counsel Shri Soli J. Sorabjee appearing for the subsequent vendee rested his argument 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 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 :-
“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 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.”
17. Heavy reliance is placed on decisions of Privy Council reported in Dalsukh M. Pancholi v. Guarantee Life & Employment Insurance & Co.3; Narain Pattro v. Aukhoy Narain Manna4; Sreemati Kalidasi Dassee v. Sreemati Nobo Kumari Dassee5; and Golab Ray & Anr v. Muralidhar Modi & Ors.6 .
18. The decision cited by the other side in the case of Mrs. Chandnee Widya Vatee Madden v. Dr. C.L. Kataial & Ors.7, is 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 be entitled only to damages as decreed by the High Court.
19. With regard to the claim allowed for grant of lesser relief of transfer of life interest, the contention in reply is that the agreement exhibit 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 and take recourse to section 12(4) of the Specific Relief Act is impermissible. Reliance is placed on William Graham v. Krishna Chandra Dey1; Abdul Haq v. Mohammed Yehia Khan & Ors.2; and Hiralal Lachmiram Pardesi v. Janardhan Govind Nerlekar & Anr.3 .
20. 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 claim for lesser relief was rightly rejected by the Division Bench of the High Court. Reliance is placed on T.V. Kochuvareed & Anr. v. P. Mariappa Gounder & Ors.4; Bolla Narayan Murthy v. Cannamaneedi Madhavayya & Anr.5; and Surjit Kaur v. Naurata Singh & Anr.6.
21. The additional ground urged to oppose claim for lesser relief of the conveyance of life interest is that such option under section 12(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 that the option for lesser relief was claimed when the joint trial had already commenced 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 performance, unconditional surrender of remaining part of the contract.
22. In reply to the argument that the sanction suit was not prosecuted by 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 impleaded and later transposed in the suit as co-plaintiff. In the course of trial of sanction 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 recovery of public dues, the order of the single 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 the sanction suit to attain finality by not filing cross appeal against the same. Even in this Court, there is no appeal 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 Division Bench of the High Court to have failed rendering it incapable of specific performance.
23. Lastly, it is submitted that grant of specific relief being discretionary the court should decline the relief to the plaintiff- vendee as the sanction 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 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 price of their interest. In the agreement exhibit P-1 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 vendee to the public authorities. The contents of the agreement of sale exhibit P-1 and the sale-deed exhibit 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.
24. 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 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 successionis 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 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 the suit for specific performance for the life interest.
25. 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 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 exhibit 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 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 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 vendor that he tried to wriggle out of the sale agreement exhibit 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 exhibit 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 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 before the impending initiation of coercive recovery by public authorities, was an urgent necessity.
26. 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 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.
27. 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, 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 exhibit 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 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 of the court, but keeping in view the other terms of the contract and the pressing requirement for sale of the property to clear public dues, it has to be held 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 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 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 initial attempt made by subsequent vendee to conceal knowledge of the existing contract with 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. 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.
28. As we have mentioned above, only life interest was sold to the 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 from date of the contract, cannot be termed to be a breach to justify grant of any specific relief to the vendee.
29. 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 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 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 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.
30. In this appeal on behalf of the vendee it is now contended that had 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 suffered the alleged wrongful dismissal of suit for sanction as infructuous. 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 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 by the learned single judge.
31. 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.
32. The argument advanced on behalf of the subsequent vendee seems prima facie acceptable that the contract exhibit 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. The reversioners were not parties to the sale agreement exhibit 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 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 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 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 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.
33. 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 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 the reversioners. The terms of sale agreement exhibit P-1 clearly stipulate sale of full 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 exhibit P-1. In such a situation, the question is whether in law and equity, the vendee can insist that the vendor should convey, if not full interest, his own life interest in the property.
34. 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 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 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 exhibit 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 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 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 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 purchaser 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 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.
35. 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 the part of the vendor to justify grant of relief of specific performance of the contract to the prior vendee.
36. 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 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 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.
37. 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 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.
38. Section 12(3)(a)(b)(i)(ii) of the Specific Relief Act read thus :-
“12. Specific performance of part of contract.-
(1) ………………
(2) ………………
(3) Where a party to a contract is unable to perform the whole of his part of it, and the part which must be left unperformed either –
(a) forms a considerable part of the whole, though admitting of compensation in money; or
(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 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), (pays or had paid) the consideration for the whole of the contract without any abatement; and
(ii) in either case, relinquishes all claims to the performance of the remaining part of the contract and all rights to compensation, either for the deficiency or for the loss or damage sustained by him through the default of the defendant.” (Emphasis added)
39. 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 view the facts and circumstances of each case and the rights and interests of the parties involved.
40. What is most important to be taken note of is that the reversioners were not parties to the sale agreement exhibit P1. In the sanction suit they filed written statement opposing the proposed sale as adversely affecting their spes successionis.
41. 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 decree of specific performance of sale of life interest.
42. The reversioners have surrendered their interest by accepting consideration 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 exhibit P1 existing with the 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 of transfer of life interest of the vendor to the prior vendee would involve the 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 such equitable relief would adversely affect 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 partial relief of directing conveyance of life interest of the vendor as that would adversely affect the interest of the reversioners.
43. We have already held above while construing the terms of sale agreement exhibit P1 that as the reversioners’ interest in the property was likely to be affected, the contracting parties never intended piecemeal transfer of life interest of the vendor and spes successionis of reversioners. 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 stand cancelled and the advance money received 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 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.
44. In our considered opinion, section 12(3) of the Specific Relief Act can be invoked 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 successionis of reversioners. Neither law nor equity is in favour of the vendee to grant specific performance of the contract.
45. 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 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.
46. We are fortified in our conclusion by the decisions of Privy Council reported in Dalsukh M. Pancholi v. The Guarantee Life and Employment Insurance Co. Ltd., & Ors.1 in which facts were 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 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.”
47. The Privy Council then recorded the following conclusions on the 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 exclusively 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 to the proper court and was refused; the contract then fell to the ground and had worked itself out. 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 dismissed. In this view, it is unnecessary to consider the second question, or any other point in the case.”
48. 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 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 property i.e. vendor’s life interest and reversioners spes successionis. As the court’s sanction was not obtained within a reasonable time, the contract became unenforceable.
49. The decision of the Calcutta High Court in Narain Pattro v. Aukhoy Narain Manna & Ors.2 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 :-
“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 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 plaintiff’s carrying out the terms sanctioned by the court. 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 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 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 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.”
50. The case of Narain Pattro (supra) was relied by the same Calcutta High Court in the case of Sreemati Kalidasi Dassee & Ors. v. Sreemati Nobo Kumari Dassee & Ors. (supra) wherein on similar circumstances for not obtaining letters of administration from the court, the contract was held to have failed.
51. In the case M.V. Shankar Bhat & Anr. v. Claude Pinto Since (dead) by LRs. & Ors.1, the agreement for sale was subject to ratification by coheirs 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 ratification by some other persons, who are not parties to the agreement is required, such a clause must be held to be a condition precedent for coming into force of a concluded contract.”
52. 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 in William Graham v. Krishna Chandra Dey (supra), 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.
“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 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.
………….
……………
Hence section 16, both because it must be something not covered by section 14 and because no court can act unjudicially without 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.”
53. 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 Ayawaiyer1.
“But when the family is divided as here, section 17 distinctly 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 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 justified in refusing to given legal effect to an inequitable arrangement.
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 issue one in his name under the 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 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 to treat them as separate acts of the same person. (Emphasis added)
54. An old decision of judicial commissioner, Nagpur in Shardaprasad v. Sikandar2, is being referred only because it has some persuasive value and the facts of that case are to a great extent nearer to the facts of the present case. The pertinent observations 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 would sell his share with cultivating rights in Sir. 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 of the Specific Relief Act appear to me 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 of and 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 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)
55. In the present case, the terms of the 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 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 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.
56. On behalf of the plaintiff- vendee, strong reliance was placed on Suisse Atlant v. N. V. Rotterdam1. It has been argued that seeking sanction of the court for transfer of reversioner’s interest was an obligation on the vendor and if it deliberately acted in a manner to get 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 if the clause seeking sanction of the court was a fundamental term of the contract, its breach 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.
57. We have gone through the opinions expressed by Hon’ble judges of the House of Lords in the case of Suisse Atlant (supra). On the evidence, 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 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 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 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 party in breach has by his breach produced a situation fundamentally 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 breach was deliberate might be of great importance”.
58. Applying the above test to the terms of the contract and the conduct 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 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.
59. It is argued that the court could have granted sanction even though the reversioners objected because there was threat of coercive sale of the property for recovery of tax dues and taxes.
60. It would be purely in field of speculation as to what would have actually happened had the vendor continued to prosecute the suit despite 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 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 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 the contract when he served a notice of termination of contract.
61. On behalf of the vendee, reliance is heavily placed on Satyabrata Ghose v. Mugneeram Bangur & Co.1. The decision is distinguishable. In that case, the defendant company for the purpose of 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 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 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 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.”
62. Such is not the position in the present case. 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. 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 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 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 parties agreeing for transfer of life interest of vendor, if transfer of reversioners’ interest was not possible for want of court’s sanction.
63. Another argument advanced is that the reversioners had merely 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 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, or any other mere possibility of a like nature, cannot be transferred.”
64. 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 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 Humma Masjid v. Kodimaniandra Deviah1.
65. 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 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, 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, from the reversioners. The reversioners being not parties to the sale agreement exhibit P-1 entered into with the vendee, the latter could not enforce the contract exhibit P-1 against the former.
66. The decision in Dr. Jiwanlal & Ors. v. Brij Mohan Mehra & Anr.2 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 further provided that if the income-tax authorities did not vacate the premises or they stood requisitioned 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 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 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.
67. In the case before us, we have not found that the vendor was guilty 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 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.
68. Where the clause requiring obtaining of sanction was to protect interest of both the parties and when the sanction could not be obtained for reasons beyond the control of the parties, the contract cannot be directed to be specifically enforced. House of Lords in the case of New Zealand Shipping Co. Ltd. v. Societe Des Ateliers Et. Chantiers De France1, 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 by their act or omission to frustrate the contact, the contract cannot be directed to be specifically enforced.
69. 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 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 that option would be but to effectuate the purpose of the blameable 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 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 determination of a question of fact.
70. 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 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.
71. 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 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 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.
72. 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 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 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.
73. Lastly, the stage has arrived for considering the question of adjustment 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 court in favour of the vendee has also been issued. Possession of the property has been obtained by the vendee on execution of decree granted by the single judge of the High Court. The Division Bench of the High Court in adjusting the equities in paragraphs 62 to 68 of its judgment has taken note of the above relevant facts and subsequent events.
74. After execution of the decree and registered sale-deed the 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 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 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 incurred by the plaintiff- vendee for two floors above ground floor, the whole construction will become the sole property of the subsequent vendee.
75. 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 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 exhibit P-I. A 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.
76. On the principle of restitution contained in section 144 of the Code 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 of full sale consideration as also deduction towards misconduct of impersonation and misleading the court also deserve no interference.
77. We maintain the directions of the Division Bench of the High Court to deduct a sum of Rs.5.5 lacs 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 deserves to be dismissed.
78. 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 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 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.
79. In the result, both the appeals are dismissed. In the circumstances, we direct the parties to bear their own costs in these appeals.