Lala Durga Prasad & ANR Vs. Lala
Deep Chand & Ors  INSC 71 (18 November 1953)
BOSE, VIVIAN MUKHERJEA, B.K.
BHAGWATI, NATWARLAL H.
CITATION: 1954 AIR 75 1954 SCR 360
CITATOR INFO :
R 1967 SC 978 (10) F 1971 SC1238 (9) RF 1973
SC 655 (6) RF 1982 SC 818 (2)
Specific performance-Agreement for sale of
land-Suit by purchaser against vendor and subsequent transferee for specific
performance-Form of decree-Refund of money paid by subsequent
transferee-Contract-Dispute arising subsequently as to form of warranty-Whether
A dispute arising, subsequent to a contract
for sale of land, about the particular form in which the warranty of title
should be inserted in the sale deed cannot affect the completeness of the
contract already made, nor can it amount to a repudiation of the contract when
the party who wanted a particular form to be adopted does not persist in it and
expresses his readiness and willingness to perform the contract agreed to. Even
it a party insists on a particular form that would not affect the contract,
though it may in certain circumstances disentitle him to specific performance.
Bindeshri Prasad v. Mahant Jairam Gir (I.L.R.
9 All. 705) referred to.
In a suit instituted by a purchaser against
the vendor and a subsequent purchaser for specific performance of the contract
of sale, if the plaintiff succeeds, the proper form of the decree to be passed
is to direct specific performance of the contract between the vendor and the
plaintiff and direct the subsequent transferee to join in the conveyance so as
to pass on the title which resides in him to the plaintiff. He does not join in
any special covenants made between the Plaintiff and his vendor; all he does is
to pass on his title to the plaintiff.
Kafiladdin v. Samiraddin (A.I.R. 1931 Cal.
67), Potter v. Sanders (67 E.R. 1057) and Kali Charan v. Janak Deo (A.I.R. 1932
All. 694) referred to.
In such a suit it would not be right to lay
down that in every case the balance of the purchase money should be paid to the
subsequent transferee up to the extent of the consideration paid by him. There
may be equities between the vendor and the subsequent transferee which would
make that improper, and unless these are also raised and decided in the case,
the normal rule should be to direct the money to be paid to the vendor.
CIVIL APPELLATE JURISDICTION Civil Appeal No.
86 of 1950.
361 Appeal from the Judgment and Decree,
dated the 12th May, 1949, of the High Court of judicature at Allahabad (Seth, Agarwal
and Wanchoo JJ.) in First Appeal No. 410 of 1943, arising out of the judgment
and Decree, dated the 28th April, 1943, of the Court of the first Civil judge
of Meerut in Original Suit No. 4 ,of 1942.
S. K. Dar (Ram Kumar and B. S. Shastri, with
him) for the appellants.
G.S. Pathak (G. C. Mathur, with him) for
respondent No. Jagdish Chandra for the Custodian of Evacuee Property.
1953 November 18. The judgment of the court
was delivered by BOSE J.-This appeal arises out of a vendee's suit for specific
performance of a contract of sale dated 7th February, 1942. The vendor is the first defendant I whom we will call the Nawab as that is how he has been referred
to in the courts below He is now in Pakistan and his property has been taken
over by the ,Custodian, U. P. The plaintiff is the vendee and the second and
third defendants, who appeal, are subsequent purchasers.
The only question which we are asked to
decide here, except for certain subsidiary matters, is whether the agreement of
7th February, 1942, was a concluded one. The plaintiff's case is that on that
date the Nawab agreed to sell the plaint property to him for Rs. 62,000 and
10,000 as earnest money the same day. Later,
namely on 4th April, 1942, the Nawab sold the same property to the appellants
for a sum of Rs. 72,000. The plaintiff states that the appellants had notice of
his prior agreement.
The appellant's case is that the plaintiff's
so called agreement of 7th February, 1942, was not a concluded one as the
parties never reached finality. They raised a number of other defences such as
misrepresentation and fraud, an agreement with the Nawab prior to that ,of the
plaintiff, lack of knowledge of the plaintiff's 362 agreement and so forth. But
all those positions were abandoned in this court and the only point argued,
aside from certain subsidiary ones with which we shall deal later, was whether
the parties reached finality on 7th February, 1942.
The learned trial judge held, among other
things,, that there was no concluded contract and so dismissed the. suit.
In the High Court the appellate Bench which
heard the appeal differed. Harish Chandra J. held that the parties reached
finality while Kaul J. differing from him agreed with the trial court and held
they had not. The matter was accordingly referred to, a Full Bench of three
Judges. All three held that there was a concluded contract. In view of this,
the appeal was allowed and the plaintiff's suit was decreed on condition that
the plaintiff deposit Rs. 62,000 in court. This he did. Defendants Nos. 2 and
3, who, are subsequent purchasers, appeal.
The plaintiff and the appellants were
prepared to compromise in this court on terms that the plaintiff should get the
property and the apllants be paid Rs. 62,000 to compensate them for the Rs..
58,000 which they said they had paid to the Nawab for their subsequent purchase
and for the loss of the property. (The plaintiff said the appellants paid the
Nawab, Rs. 72,000 and not Rs. 58,000 but there is no finding about this). As
the Nawab's estate has vested in the Custodian, U. P., we thought it proper to
join him in this appeal in case he should later lay claim to the plaintiff's
Rs. 62,000. The fears of the parties regarding the Custodian, U. P., were
justified, for he refused to compromise and claimed the Rs. 62,000 despite the
fact that the Nawab had already been paid Rs. 58,000. His learned counsel
stated that it was for him to decide whether anything had been paid to the
Nawab and if so how much and for him to decide what should be done with the Rs.
In view of that we have been obliged to
proceed with the appeal.
The differing opinions of the various learned
judges who have handled this case show that the evidence is nicely balanced.
The question of burden accordingly assumes importance, as also another guide
363 which Judges of experience have applied through the years.
When the question is one of fact and is of a
simple nature It is useful to collect facts which are admitted or proved beyond
doubt and then see which case fits in with those facts. They are useful as
pointers to show the way.
Now the question here is one of fact. The
plaintiff founds on a contract which the defendants deny. He must therefore
prove it. The initial burden is on him. He relies on two facts in the plaint.
The first is that he paid a sum of Rs. 10,000 to the Nawab on 7th February,
1942, by two cheques.
The Nawab accepted this money and cashed the
cheques and the money went into his own account in his bank. The second is that
the Nawab gave the plaintiff a receipt on that date for this money. These two
facts are admitted.
The receipt (Ex. 35-G) is signed by the Nawab
and is in these terms :
"Received this 7th of February, 1942, a
sum of Rs. 10,000 by two cheques. as earnest money out of Rs. 62,000 for the
contract of sale [of the plaint property] through Babu Chhater Sen and executed
a receipt. 7th February, 1942.
It is further declared that the sale deed
would be executed within three months and that in default the contract would be
deemed cancelled." This is the language of a completed contract and if
there was nothing more the plaintiff would succeed. The burden therefore shifts
because of the Nawab's unqualified admission in this document. We must
accordingly turn to the defendants' pleadings and their, evidence to see how
this burden is discharged.
The Nawab's plea in the main is one of fraud
and misrepresentation. In his written statement he says that there was a
previous contract with the appellants for Rs. 58,000 and that they paid him Rs.
6,000 as earnest money on 5th February, 1942. After this, the plaintiff's
broker Chatter Sen told him (the Nawab) falsely that the appellants had backed
out and that in view of this it would pay the.
Nawab to accept the plaintiff's offer of Rs.
62,000. The Nawab believing this 364 to be true entered into the contract of
7th February, 1942, with the plaintiff and accepted Rs. 10,000 as earnest
He concludes "The talk, on the
plaintiff's behalf, about payment of the earnest money conducted through
Chattar Sen, broker, was wholly based on fraud and deception and so it is not
binding." Stopping there. There is implicit in this plea of fraud and
misrepresentation an averment that the contract was valid and binding till set
aside at the option of the Nawab who was the defrauded party.
The only other plea relevant to this matter
is the following :
"All the conditions of the sale can
under no circumstance be taken as fulfilled and deemed as fait accompli between
the plaintiff and the answering defendant ; and, for this reason also, the talk
between them about the moabeda is not enforceable".
This is as vague as it can be and is the kind
of woolly pleading which a party who is not sure of his facts and case usually
makes; no particulars are furnished. But apart from that, here again the motif
of the theme is that there was a concluded contract which fell to the ground
because certain conditions, presumably conditions precedent, were not
fulfilled. In any case, this does not explain the receipt and the circumstances
in which it came to be given apart from the explanation which is contained in
the plea of fraud. But that, as we have said, imports the important averment
that there as a concluded contract which bound both sides until it was set
aside at the option of the defrauded party.
The appellants' pleas follow the same
pattern. It is true that in paragraph 26 of their written statement they start
by saying that "No agreement was entered into etc...
but they explain that by saying that
"whatever proceedings were taken concerning the plaintiff's moabeda.....
were taken by defrauding and misrepresenting etc.... and consequently the
moabeda relied on by the plaintiff is legally invalid." 365 The same theme
of fraud and misrepresentation is ,carried through to paragraphs 27 and 28.
There is no clear cut plea that there was never at any time a concluded
agreement and there is no attempt to explain away the receipt, Exhibit 35G, or
to show the circumstances in which it came to be made.
The issues reflect these pleadings and no
issue asks in clear cut terms whether the parties had reached finality, nor is
the burden anywhere laid on the Nawab and the appellants to explain away the
receipt, Exhibit 35-G.
[Their Lordships then reviewed the evidence.]
A question was also raised about the plaintiff. demanding a warranty of title
and the Nawab refusing. But this had nothing to do with the bargain struck on
7th February, 1942.
The question of warranty arose in this way.
When the sale deed was in the course of preparation, in March, 1942, Chattar
Sen brought a draft containing a warranty in a form to which the Nawab's
manager objected because the plaintiff was insisting on it; but there the
matter ended. It is usual to insert a warranty of title in most sale deeds and
when that is not done the law imports one; and in some deeds there is a
covenant for quiet enjoyment as well. All that happened here was that the kind
of warranty inserted by Chattar Sen in the draft was not acceptable to the
other side. But nobody suggested either in the evidence or the pleadings that
the plaintiff refused to accept a sale deed unless the exact form of warranty
placed in the draft was given. As we have said, this question arose subsequent
to the contract for sale and the plaintiff's insistence on this form of
warranty at that stage could not affect the contract of 7th February, 1942. It
might in a given case disentitle him to specific performance as it did in
Bindeshri Prasad v. Mahant Jairam Gir(1). But that would depend upon whether his
proposal regarding a form of warranty to which he was not entitled was a mere
proposal regarding the form of the sale deed or was a refusal to perform
without it. No question of repudiation or refusal to perform was raised in the
pleadings nor is (1) I.L.R. 9 All. 705.
366 that to be found in the evidence. On the
contrary, the plaintiff's letter, dated 22nd April, 1942, Ex. 25 calls upon the
Nawab to complete the conveyance "as agreed to";
and the plaint is to the same effect; it says
nothing about a warranty. In the circumstances, a dispute arising subsequent to
the contract for salt about a particular clause in the deed during the
negotiations about the form the deed should take cannot affect the completeness
of the contract already made, nor can it amount to repudiation when it is not
persisted in and the plaintiff later expresses his readiness and willingness to
perform the contract "agreed to".
It was also argued that there was no
concluded contract because the only parties who were competent to contract
never met. On the 7th Chatter Sen met the Nawab and the defendants' learned
counsel argued that Chattar Sen had no authority to contract on behalf of the
plaintiff. The later meeting was between the plaintiff and the Nawab's manager
and it was saidt that the manager had no authority to conclude the bargain.
There is nothing in this point. The plaint
states quite definitely that Chattar Sen was sent by the. plaintiff with Rs.
10,000 earnest money and relies on the contract effected by him. Chattar Sens
authority to contract was not questioned. We cannot allow it to be questioned
here. That means that there was an effective and concluded contract on the 7th
between Chattar Sen, on the plaintiff's behalf, and the Nawab direct, both of
whom were competent to seal the.
bargain. The question whether the Nawab's
managerhad authority to complete the contract on the Nawab's beha when he met
the plaintiff after this does not arise, for on that date there was already a
binding contract in existence.
Disagreeing with the trial court, and
agreeing with the majority of the judges in the High Court, we hold that there
was a completed contract on 7th February, 1942, which the plaintiff is entitled
to have specifically, performed.
Now arises a question which touches the
Custodian, Uttar Pradesh. The contract was for' Rs. 62,000. The:
367 plaintiff paid Rs. 10,000 as earnest
money but this was later returned, so Rs. 62,000 is still due. But there is a
conveyance outstanding in favour of the appellants for which they have paid,
according to their case, Rs. 58,000. If the Rs. 62,000 due to the Nawab is paid
to him, or to the Custodian, U. P., who represents his estate, it is evident
that the Nawab, who is at fault, will be paid twice over for the same property
and his estate will benefit accordingly while the appellants will be left to
pursue their remedies against the Nawab or his estate. The question is whether
we have power to direct that the Rs. 58,000 be paid to the appellants. instead
of to the Nawab and thus obviate further, and possibly fruitless litigation.
But before we decide that, we will consider another question which is bound up
with it, namely, the proper form of decree in such cases.
The practice of the courts in India has not
been uniform and three distinct lines of thought emerge. (We are of course
confining our attention to a Purchaser's suit for specific performance).
According to one point of view, the proper form of decree is to declare the
subsequent purchase void as against the plaintiff and direct conveyance by the
vendor alone. A second considers that both vendor and vendee should join, while
a third would limit execution of the conveyance to the subsequent purchaser.
The only statutory provisions which bear on
this point are section 91 of the Indian Trusts Act, 1882, section 3 of the Specific
Relief Act, 1877, illustration (g), and section 27 of that Act, and section 40
of the Transfer of Property Act.
Section 91 of the Trusts Act, does not make
the subsequent purchaser with notice a trustee properly so called but saddles
him with an obligation in the nature of a trust (because of section 80) and
directs that he must hold the property for the benefit of the prior
"contractor", if we may so describe the plaintiff,. "to the
extent necessary to give effect to the contract." Section 3 illustration
(g) of the Specific Relief Act makes him a trustee for the plaintiff but only
for 'the 368 purposes of that Act. Section 40 of the Transfer of Property Act
enacts that this obligation can be enforced against a subsequent transferee
with notice but not against one who holds for consideration and without notice.
Section 27 of the Specific Relief Act does not carry the matter any further.
All it savs is that specific performance may be enforced against "
"(a) either party thereto;
(b)any other person claiming under him by a
title arising subsequently to the contract, except a transferee for value who
has paid his money in good faith and without notice of the original
None of this helps because none of these
provisions directly relate to the form of the decree. It will therefore be
necessary to analyse each form in the light of other provisions of law.
First, we reach the position that the title
to the property has validly passed from the vendor and resides in the
subsequent transferee. The sale to him is not void but only voidable at the
option of the earlier "contractor". As the title no longer rests in
the vendor it would be illogical from a conveyancing point of view to compel
him to convey to the plaintiff unless steps are taken to re-vest the title in
him either by cancellation of the subsequent sale or by reconveyance from the
subsequent purchaser to him. We do not know of any case in which a
reconveyance. to the vendor was ordered but Sulaiman C. adopted the other
course in Kali Charan v. Janak Deo(1). He directed cancellation of the
subsequent sale and conveyance to the plaintiff by the vendor in accordance
with the. contract of sale of which the plaintiff sought. :specific
But though this sounds logical the objection
to it is that it might bring in its train complications between the vendor and
the subsequent purchaser. There may be covenants in the deed between them which
it would be inequitable to disturb by cancellation of their deed. Accordingly,
we do not think that is a desirable solution.
(1) A.I.R. 1932 All. 694.
369 We are not enamoured of the next
alternative either, namely, conveyance by the subsequent purchaser alone to the
plaintiff. It is true that would have the effect of vesting the title to the
property in the plaintiff but it might be inequitable to compel the subsequent
transferee to enter into terms and covenants in the vendor's agreement with the
plaintiff to which he would never have agreed had he been a free agent; and if
the original contract is varied by altering or omitting such terms the court
will be remaking the contract, a thing it has no power to do; and in any case
it will no longer be specifically enforcing the original contract but another
and different one.
In our opinion, the proper form of decree is
to direct specific performance of the contract between the vendor and the
plaintiff and direct the subsequent transferee to join in the conveyance so as
to pass on the title which resides in him to the plaintiff. He does not join in
any special covenants made between the plaintiff and his vendor; all he does is
to pass on his title to the plaintiff. This was the course followed by the
Calcutta High Courtin Kafiladdin v. Samiraddin (I), and appears to be the
English practice. See Fry on Specific Performance, 6th edition, page 90,
Paragraph 207 ; also Potter v. Sanders( 2 ). We direct accordingly.
That brings us to the question of the Rs.
62,000. We do not think it would be right to lay down that in every case the
balance of the purchase money should be paid to the subsequent transferee up to
the extent of the consideration paid by him. There may be equities between the
vendor and the subsequent transferee which would make that improper, so, unless
they fight the question out as between themselves and it is decided as an issue
in the case, the normalrule should be to require that the money be paid to the
vendor. But the circumstances here are peculiar. The parties before us were prepared
to compromise, and had the Nawab been here it is more than probable that he
would have been glad to agree so as to avoid further litigation. But he is in
Pakistan and is.
(1) A. I. R. 1931 Cal. 67 (2) 67 E. R. 1057
370 beyond the jurisdiction of the Indian courts. We think it would be
inequitable to leave the appellants to pursue what in all probability is only a
will thewisp and for us to augment the Nawab's estate by what would appear to
be an unjust enrichment. This is an equitable relief and we have a wide
discretion. We joined the Custodian, U. P., to afford him the opportunity of
showing why we should not take what appears to be the just and equitable
course. We have afforded him an opportunity of showing how the Nawab could have
defended a suit by the appellants for refund of the consideration. As he has
not been able to show us anything in the contract between the Nawab and the
appellants, or in the covenants of their deed, which would disentitle the
appellants from claiming Rs. 58,000 from the Nawab, we consider it right that
Rs. 58,000 should be paid to them and Rs. 4,000 to the Custodian, U. P. All
that the Custodian, U. P., was able to urge was that the whole amount had
vested in him and so was his. But that is not so. The plaintiff was directed to
pay a sum of Rs. 62,000 into court as a condition precedent to the execution of
a sale deed in his favour. Curiously enough, the decree does not say what is to
be done with the money when it is paid into court. But so long as it is in
court under those conditions it lies there subject to such decree as may
ultimately be passed in appeal. We therefore have full power to direct payment
of Rs. 58,000 to the appellants instead of to the Nawab, especially as there is
this lacuna in the decree.
The High Court's decree will now be modified
as follows :(1) The Nawab will be directed to execute a sale deed in the
plaintiff's favour in accordance with the terms of the contract entered into
(2) The appellants will be directed to join
in the conveyance to the extent indicated above.
(3) After the conveyance has been executed,
the appellants will be paid Rs. 58,000 out of the Rs. 62,000 now lying in
deposit in court as compensation for the loss they had suffered, without
prejudice to any 371 further rights they may have against the Nawab or his
(4)After this has been done, the Custodian,
U. P., will be at liberty to withdraw the balance of the Rs. 62,000.
Except for these modifications, the decree
stands and the rest of the appeal is dismissed.
The modifications we have made here do not
affect the plaintiffs rights under the decree except to his advantage. As
against him, the appellants have failed. We accordingly direct that the
appellants pay the plaintiff the costs of this appeal.
There is an application for amendment of the
High Court's decree. This will be disposed of by the High Court.
Decree of High Court modified.
Agent for the appellant: B. P. Maheshwari.
Agent for respondent No. 1: N. C. Jain.
Agent for the Custodian of Evacuee Property,
U. P. C. P.