Rojasara Ramjibhai Dahyabhai Vs. Jani
Narottamdas Lallubhai & ANR [1986] INSC 70 (10 April 1986)
SEN, A.P. (J) SEN, A.P. (J) RAY, B.C. (J)
CITATION: 1986 AIR 1912 1986 SCR (2) 447 1986
SCC (3) 300 1986 SCALE (1)566
ACT:
A. Suit for specific performance - Agreement
to sell contains an implied covenant on the part of the vendor to do all things
necessary to give effect to the Agreement, including the obtaining of the
permission for the transfer of property - Vendor who has become the statutory
occupant and owner of the land and who has obtained necessary permission
subsequently as such occupant refuses to execute the sale-deed on the plea that
the agreement to sell entered into by him was interdependent on his earlier
Agreement to purchase the lands from the Girasdar and contingent on his
obtaining the permission and since he failed, the Agreement to sell is
incapable of performance - Contract Act, 1872, sections 31 & 32 - Whether
the Court can order specific performance of transfer - Specific Relief Act,
1877, section 13 - Doctrine of "feeding the estoppel", applicability.
B. Limitation Act, 1963, Article 113,
applicability of - Computation of period of time from what date, explained.
HEADNOTE:
The appellant-defendant who was the owner of
two plots of land admeasuring 491 and 1599 square yards situate in village
Dudheraj recorded as Girasdari agricultural land entered into an agreement in
writing (Ex.26), on October 19, 1949, with the Girasdar, Rana Mohabat Singh to
purchase the said lands at Rs.2.50 per square yard and paid an earnest money of
Rs.1,001. The agreement stipulated that the vendor was to apply for permission
from the Collector to convert the agricultural land into village site for
non-agricultural use and that the sale deed was to be executed after obtaining
the requisite permission. On November 14, 1949 the appellant entered into
another agreement to sell some property to the respondents Jani Narottamdas
Lallubhai and Thakur Dhirajlal Dhaneshvar at Rs. 3.75 per square yard agreeing
to contend that the appellant was to get the land converted into village site
at his own expense and thereafter executed the sale-deed.
448 In 1950-51 Rana Mohabat Singh applied to
the Collector for grant of permission to convert the land into village site but
since his application was rejected he refunded the earnest money to the
appellant. However, after coming into force of the Saurashtra Land Reforms Act,
1951, with effect from September 1, 1951, the right and title of Rana Mohabat
Singh as the ex-Girasdar were extinguished and the appellant was recognised to
be an occupant thereof under the provisions of the Bombay Land Revenue Code,
1898. On 13 August, 1957, the appellant made an application to the revenue
authorities for the grant of occupancy certificate, which was granted on 6.2.58
by the Mamlatdar. The occupancy certificate was to come into effect from August
1, 1958. On two applications of the appellant dated June 23, 1958 and September
10, 1959 revenue authorities granted permission for converting the lands under
his possession into village site, that is, for non-agricultural use. On 5
October, 1959 the respondents called upon the appellant to execute a conveyance
of the property in accordance with the agreement of sale between the parties
dated 14.11.1949 and on the appellant's failure to comply, they filed a suit
for specific performance. The Trial Court upheld the pleas of the appellant,
namely, (i) the suit was barred by limitation; and (ii) the agreement between
the parties was a contingent contract depending upon the contingency referred
to in the agreement (Ex.26) dated 19 October, 1949 and since that contract became
incapable of execution by virtue of Rana Mohabat Singh failing to obtain a
permission of the Collector the agreement dated 14 November, 1949, and non-
suited the respondents. On appeal the High Court reversed the decree and held
that the second agreement between the parties had not been cancelled by mutual
consent and that the suit was within time and that the time started, running
only from 10th September, 1959, as the date on which requisite permission was
obtained from the Collector for the use of the land as a village site.
Dismissing the appeal, on certificate, the
Court, ^
HELD: 1.1 The agreement embodied in the suit
Banakhat (Ex.25) dated November 14, 1949 was not a contingent contract; the
contract was an absolute and unconditional one, and there was no question of
its performance being dependent on the fulfilment of the condition under the
earlier agreement 449 (Ex.26) by which the appellant's vendor Rana Mohabat
Singh had undertaken upon himself the obligation of procuring the necessary
sanction from the Collector. Under the terms of the suit Banakhat (Ex.25), the
appellant had undertaken the obligation of getting the agricultural land
converted into village site. Under the Saurashtra Land Reforms Act, 1951 there
was an extinguishment of the right and title of Rana Mohabat Singh as a
girasdar of the suit land and the appellant was recognised to be an occupant
thereof under the provisions of the Bombay Land Revenue Code. The contention
that the appellant had an imperfect title is therefore without any basis
whatever. As such occupant, it is undisputed that the appellant applied for and
obtained the requisite permission from the revenue authorities for conversion
of the disputed land into village site. There was therefore no legal impediment
to the specific performance of the contract between the parties. [454 C; 454 H;
455 A; E-F]
1.2 There is always in such contracts, an
implied covenant on the part of the vendor to do all things necessary to give
effect to the agreement, including the obtaining of the permission for the
transfer of the property. Ex.25, the suit Banakhat embodies an express covenant
to that effect. [457 C-D] Dalsukh M. Pancholi v. The Guarantee Life &
Employment Insurance Company Ltd. & Ors., A.I.R. 1947 P.C. 182, distinguished.
F. Ranchhodas v. Nattmal Hirachand & Co.,
[1951] Bom.
L.R. 491; Motilal v. Nanhelal Ghasiram, L.R.
[1930] 57 Indian Appeals 333; Mrs. Chandnee Widya Wati Madden v. Dr.
C.L. Katial, [1964] 2 S.C.R. 495; and Ramesh
Chandiok & Anr.
v. Chuni Lal Sabharwal (Dead) by his Lrs.
& Ors., [1971] 2 S.C.R. 573, referred to.
1.3 In the facts and circumstances of the
case, it could not be said that the respondents' suit for specific performance
filed on September 6, 1960 was barred by limitation inasmuch as permission to
convert a portion of the disputed land was obtained on August 26, 1958 and for
the remaining portion on September 10, 1959, and the suit was therefore brought
within three years from the date when the cause of action arose. The cause of
action for the suit arose 450 after the appellant had obtained the requisite
permission from the revenue authorities upon conferral of rights of an occupant
on him. [459 F-H]
CIVIL APPELLATE JURISDICTION : Civil Appeal
No. 315 of 1971.
From the Judgment and Decree dated 3/4
December, 1969 of the Gujarat High Court in Appeal No. 160 of 1961.
S.H. Sheth, Vandana Sharma and M.V. Goswami
for the Appellant.
S.T. Desai and B.B. Singh for the
Respondents.
The Judgment of the Court was delivered by
SEN, J. This appeal on certificate is directed against the judgment and decree
of the Gujarat High Court dated February 1, 1971 reversing those of the Civil
Judge, Senior Division, Surendranagar dated January 31, 1961, and decreeing the
plaintiffs' suit for specific performance.
Put very shortly, the essential facts are
these. By an agreement in writing (Exh.26) dated October 19, 1949, the
appellant who was the defendant entered into an agreement to purchase two plots
of land admeasuring 491 and 1599 square yards situate in Village Dudheraj
recorded as Girasdari agricultural land of which he was the tenant @ Rs. 2.50
per square yard from the Girasdar, Rana Mohabat Singh and paid Rs.1,001 by way
of earnest money in lieu thereof. The agreement stipulated that the vendor Rana
Mohabat Singh was to apply for permission from the Collector to convert this
agricultural land into village site i.e. for non- agricultural use. The
sale-deed was to be executed by Rana Mohabat Singh after he had obtained the
requisite permission from the Collector. Within about a month therefrom i.e. on
November 14, 1949, the appellant by a contract (Exh.25) covenanted to sell the
same property to the respondents Jani Narottamdas Lallubhai and Thakur
Dhirajlal Dhaneshvar who were the plaintiffs @ Rs. 3.75 per square yard. The
agreement provided that the vendor i.e. the appellant was to get the land
converted into village site at his own expense.
451 IN 1950-51, Rana Mohabat Singh applied to
the Collector for grant of permission to convert the land into village site but
his application was rejected and thereafter he refunded the earnest amount to
the appellant. The Saurashtra Land Reforms Act, 1951 came into force w.e.f.
September 1, 1951. Under the provisions of the Act, there was an extinguishment
of the right and title of Rana Mohabat Singh as the ex-Girasdar of the land and
the appellant was recognised to be an occupant thereof under the provisions of
the Bombay Land Revenue Code, 1898. On August 13, 1957, the appellant made an
application to the revenue authorities for the grant of an occupancy
certificate. The Mamlatdar by his order dated February 6, 1958 directed the
issue of an occupancy certificate in favour of the appellant on condition of
his paying occupancy price in accordance with the provisions of the Saurashtra
Land Reforms Act. On that very day i.e. on February 6, 1958, the occupancy
certificate was issued to the appellant on such payment being made but it was
to come into effect from August 1, 1958. On June 23, 1958, the appellant
applied for converting 1000 square yards out of the two plots which prior to
1958 were agricultural land into village site, and on August 26, 1958 the
revenue authorities granted such permission. Thereafter, on September 10, 1959
the revenue authorities granted permission for converting the remaining area of
land into village site. Thus, by September 10, 1959 the appellant obtained
permission for converting both the plots for non- agricultural use. On October
5, 1959 the respondents called upon the appellant to execute a conveyance of
the property in accordance with the agreement of sale between the parties and
on his failing to comply, commenced the present suit on September 6, 1960.
The material terms of the agreement between
the parties are to be found in the suit Banakhat (Exh.25) and they are to the
effect :
"You can construct a house or building
or a factory or put up a park, garden etc. on this land after getting it
converted into village site land.
The sale-deed in respect of this land is to
be executed after the land has been converted into such use . . . . . The title
of the land is free from any doubt. No one has any right, title or interest 452
therein. If any amount is to be paid either to the Government or to the Darbar
in respect of the land, then you are not liable for the same, but this
agreement has been entered into with you on the footing that the land is to be
considered as village site land. We have to give you a certified copy of the
permission whereby the land is converted into village site land and all expenses
in connection with the grant of such conversion are to be borne by us." It
is common ground that the word "we" refers to the vendor i.e. the
appellant and "you" refers to the respondents i.e.
the purchasers.
The appellant contested the suit on various
grounds. He pleaded inter alia that (1) the agreement between the parties as
per Banakhat (Exh.26) was a contingent contract and not an absolute contract
and that the appellant's vendor Rana Mohabat Singh having failed to obtain
permission of the Collector in terms of the agreement (Exh.25) entered into by
him with the appellant for converting the land into village site, and execute a
sale-deed in his favour, the agreement between the parties was incapable of
performance and (2) the suit was barred by limitation. The Courts below have
differed in their conclusion. The learned Civil Judge who tried the suit upheld
these pleas and non-suited the respondents. He held that the suit was barred by
limitation and further that the contract between the parties being a contingent
contract, the agreement in view of the events that had happened made it
unenforceable.
On appeal, the High Court reversed the decree
and held that the agreement between the parties had not been cancelled by
mutual consent and that finding has not been challenged before us. On the
question as to whether the agreement was a contingent contract or a contract
creating absolute liabilities as between the parties without contemplating any
contingency, the High Court reproduced the material portion of the agreement
(Exh.25) set out above and held that the agreement clearly contemplated that
the sale- deed was to be executed after the requisite permission was obtained
from the Collector for use of the land as a village site and that the land was
not to be sold as agricultural land but as village 453 site. In coming to that
conclusion the High Court took into consideration the agreement between the
appellant and Rana Mohabat Singh (Exh.26) which contained the recital :
"I will execute the registered sale-deed
in your favour immediately after permission to convert these plots into village
site land has been obtained." In the light of that recital, it held that
the agreement between the parties (Exh.25) contemplated that the sale-deed was
to be executed after permission was obtained from the revenue authorities for
use of the land as a village site and it was not being sold as agricultural
land.
Following the decision of Chagla, CJ. in F.
Ranchhodas v. Natmal Hirachand & Co., [1951] Bom. LR 491 the High Court
held that the words "after the permission is obtained" in Exh. 26 and
the words "after the land is converted" in Exh.
25 both indicate the point of time at which
the sale-deed within the contemplation of the parties had to be executed in
accordance with the terms of the document. In the circumstances, the High court
held that the contract could not be interpreted as a contingnent contract. Upon
that view, it held that there was no contingency whatsoever and even though
Rana Mohabat Singh had failed to obtain the requisite permission to convert the
land into village site, as and when such permission was obtained by the
appellant, the rights of the respondents for the performance of the agreement
came into existence. It also held that the respondents were entitled to rely on
the doctrine of 'feeding the estoppel' embodied in s.13 of the Specific Relief
Act, 1963. It held that at the time when the agreement was entered into between
the parties in 1949, the appellant had only a right to get the land in suit
conveyed to him by Rana Mohabat Singh in pursuance of the agreement (Exh.26).
However, by virtue of the provisions of the Saurashtra Land Reforms Act, his
title as an occupant became complete and he had obtained the permission to
convert the land into village site and the respondents were therefore entitled
to get specific performance of the agreement in respect of the rights which he
had at the date of the suit.
It further held that the permission to
convert the disputed land into village site having been obtained on August 26,
1958, 454 insofar as a part of the land was concerned and on September 10,
1959, as regards the balance thereof it could not be said that the respondents
suit was barred by limitation.
Upon these findings, the High court reversed
the decree of the learned Civil Judge and decreed the respondents suit for
specific performance.
Two questions are raised upon this appeal.
First of these is whether the agreement embodied in the suit Banakhat (Exh.25)
dated November 14, 1949 was a contingent contract and as the contingency
failed, there was no contract which could be made the basis for a decree for specific
performance, and the second is that the suit as framed was barred by limitation
under Art.113 of the Limitation Act, 1963. As to the first contention, it is
urged that the High Court proceeded on the erroneous belief that the grant of
permission by the Collector was a certain event and therefore its finding that
the contract was an absolute and unconditional one, is vitiated. It is said
that the appellant's vendor Rana Mohabat Singh having failed to obtain
permission from the Collector in 1950-51 in terms of the agreement (Exh.26)
entered into by him with the appellant for converting the land into village
site and execute a deed of conveyance in his favour, the appellant had an
imperfect title and therefore the right to specific performance of the suit
Banakhat (Exh.25) did not arise inasmuch as the conversion of the Girasdari
lands at the instance of Rana Mohabat Singh was a condition on which the mutual
rights and obligations of the parties would arise.
The submission proceeds on the basis that the
two transactions were interdependent and Rana Mohabat Singh's application for
permission for conversion of the agricultural land to non-agricultural purposes
having been rejected, the appellant was relieved of his obligation to convey
the suit lands under the Banakhat (Exh.25). In support of the contention,
reliance is placed on the decision of the Privy Council in Dalsukh M. Pancholi
v. The Guarantee Life & Employment Insurance Company Ltd. & Ors.,
A.I.R. 1947 P.C. 182.
We do not see any basis for the submission
that the contract between the parties as embodied in the suit Banakhat (Exh.25)
was a contingent contract, the performance of which was dependent upon
fulfilment of the condition under the 455 earlier agreement (Exh.26) by which
the appellant's vendor Rana Mohabat Singh had undertaken upon himself the
obligation of procuring the necessary sanction from the Collector. As to the
appellant having an imperfect title the question is purely hypothetical. May
be, initially the two transactions were not independent of each other but were
inter-dependent, for the performance of one depended upon the fulfilment of the
other agreement. If there was no abolition of proprietory rights, it could well
be said that the suit Banakhat (Exh.25), being subject to the fulfilment by
Rana Mohabat Singh of the terms of the earlier agreement (Exh.26), the
appellant had an imperfect title and therefore the contract between the parties
was contingent on Rana Mohabat Singh obtaining the approval of the Collector
and as he could not secure such approval and execute a conveyance in favour of
the appellant, no effective agreement came into being which could be ordered to
be specifically enforced.
But the contention that unless the
appellant's vendor Rana Mohabat Singh conveyed title by execution of a proper
conveyance, the contract as between the parties became impossible of
performance and further that for want of such conveyance the appellant had an
imperfect title, does not take into account the subsequent events.
It is common ground that shortly thereafter,
the Saurashtra Land Reforms Act, 1951 came into force w.e.f. September 1, 1951.
Under the provisions of the Act, there was an extinguishment of the right and
title of Rana Mohabat Singh as a Girasdar of the suit land and the appellant
was recognised to be an occupant thereof under the provisions of the Bombay
Land Revenue Code. It would, therefore, appear that the contention that the
appellant had an imperfect title is without any basis whatever. With the
extinction of the title of Rana Mohabat Singh and the conferral of the rights
of an occupant on the appellant, the property became transferable by him. As
such occupant, it is undisputed that the appellant made an application to the
revenue authorities permitting the conversion of the disputed land into village
site. Thereafter, there was no legal impediment in the way of the appellant in executing
a sale-deed. Under the terms of the suit Banakhat (Exh.25), the appellant had
undertaken the obligation of getting the land converted into village site. As
indicated, the word 'we' in the document (Exh.25) refers to the vendor i.e. the
appellant and 'you' refers to the respondents. The 456 terms of the document
are clear and explicit and admit of no ambiguity. The appellant had by the
contract bound himself to furnish a certified copy of the permission whereby
the land was converted into village site apart from bearing all expenses in
connection with the grant of such permission.
In our opinion, the decision in Dalsukh M.
Pancholi's case is clearly distinguishable on facts. It is clear from the terms
of the offer and acceptance in that case, that the parties had contemplated
that, to make the contract effective the 'approval of the attaching Court' must
be obtained. The learned Subordinate Judge held that the term 'subject to the
approval of the Court' was not an essential condition, but in the High Court it
was conceded that it was an essential term. The facts of the case show that
there was good reason for insisting on this condition for at the time of
execution of the agreement it was well-known to the parties that the property
was under attachment by various courts. In those circumstances, the Privy
Council observed :
"In their Lordships' opinion there can
be no doubt that the condition was an essential one. It was essential not for
one party alone, but for both parties. From the point of view of the purchaser
it is unnecessary to observe that he would get a clear title to the property
only if the creditors, through the Court, consented to take Rs. 6,50,000 in
full satisfaction of their decrees against the vendor's family. The purchaser
was not willing to risk even the payment of the earnest money without the
knowledge of the attaching Court for it was to be paid only to the nominee of
the Court named at the time of giving the approval to the transaction. The
condition was not exclusively for the benefit of the purchaser; it was equally
important from the standpoint of the vendors also.
Ram Jas would accept the offer only with the
proviso "subject to the approval of the Court".
The family was heavily indebted. It was
important for Ram Jas that he should get effective discharge of all the
liabilities of the family by the payment of Rs.6,50,000; thus, it was necessary
from his standpoint also, that the sale should be subject to 457 the approval
of the attaching Court." It was accordingly held that the contract was a
contingent one and as the contingency failed, there was no contract which could
be made the basis for a decree for specific performance.
Although Rana Mohabat Singh having failed to
fulfil the terms of his contract with the appellant and execute a sale- deed in
his favour might have rendered the contract between them incapable of
performance, but with the extinction of the title of Rana Mohabat Singh and the
conferral of the rights of an occupant on the appellant, the property became transferable
subject, of course, to the express covenant on the part of the appellant to do
all things necessary to give effect to the agreement. Here, the suit Banakhat
(Exh. 25) embodies an express covenant to that effect. There is always in such
contracts an implied covenant on the part of the vendor to do all things
necessary to give effect to the agreement, including the obtaining of the
permission for the transfer of the property. The principles on which a term of
this nature may be implied in contracts are well-settled. It is enough to refer
to Halsbury's Law of England, Vol. 8, 3rd Edn., p. 121 where the principles are
summarised as follows :
"In construing a contract, a term or
condition not expressly stated may, under certain circumstances be implied by
the Court, if it is clear from the nature of the transaction or from something
actual found in the document that the contracting parties must have intended
such a term or condition to be part of the agreement between them. Such an
implication must in all cases be founded on the presumed intention of the
parties and upon reason, and will only be made when it is necessary in order to
give the transaction that efficacy that both the parties must have intended it
to have, and to prevent such a failure of consideration as could not have been
within the contemplation of the parties." Chitty on Contract, Vol.1, 23rd
Edn., paragraphs 694-95 points out that a term would be implied if it is
necessary in the business sense, to give efficacy to the contract.
458 In this context reference may be made to
the decision of the Privy Council in Motilal v. Nanhelal Ghasiram, L.R. [1930]
57 Indian Appeals 333. There, the facts were these.
In that case, the plaintiff Mst. Jankibai
entered into an agreement to purchase from Raibahadur Seth Jiwandas of Jabalpur
four annas proprietary share of Mauja Raisalpur together with the sir and
khudkast lands appurtenant thereto, with cultivating rights in the sir lands.
The property was subject to the provisions of the Central Provinces Tenancy
Act, 1920. She filed a suit for specific performance of the said contract. The
Privy Council held that the contract was for a transfer of the sir lands
without reservation of the right of occupancy, and that the sanction of the
Revenue Officer to the transfer was necessary under s. 50(1) of the Act, which
was in these terms :
" S. 50(1) : If a proprietor desires to
transfer the proprietary rights in any portion of his sir land without
reservation of the right of occupancy specified in s. 49, he may apply to a
revenue officer and, if such revenue-officer is satisfied that the transferor
is not wholly or mainly an agriculturist, or that the property is self-
acquired or has been acquired within the twenty years last preceding, he shall
sanction the transfer." It was contended before the Privy Council that a
decree for specific performance of the agreement of sale could not be made,
because such performance would necessitate an application by or on behalf of
the vendor to the Revenue Officer for sanction to transfer the cultivating
rights in the sir land, and that the Court had no jurisdiction to require the
vendor to make such an application. In repelling the contention, the Privy
Council observed that in view of their construction of the agreement, namely,
that the vendor agreed to transfer the cultivating rights in the sir land :
"(T)here was, in their Lordships'
opinion, an implied covenant on the part of the vendor to do all things
necessary to effect such transfer, which would include an application to the
Revenue Officer to sanction the transfer." 459 It was further observed
that it was not necessary for their Lordships to decide whether in that case
the application for sanction to transfer must succeed, but that it was material
to mention that no facts were brought to their Lordships' notice which would go
to show that there was any reason why such sanction should not be granted.
After making the said observations, the Privy Council held that in those
circumstances the Court had jurisdiction to enforce the contract under the Specific
Relief Act, 1877 and Order 21, r. 35 of the Code of Civil Procedure, 1908 by a
decree ordering the vendor to apply for sanction and to execute a conveyance on
receipt of such sanction. The decision of the Privy Council in Motilal v.
Nanehalal Ghasiram, supra, therefore is an authority for the proposition that
if the vendor agrees to sell the property which can be transferred only with
the sanction of some Government authority, the Court has jurisdiction to order
the vendor to apply to the authority within a specified period, and if the
sanction is forthcoming to convey to the purchaser within a certain time. See
also : Mrs. Chandnee Widya Vati Madden v. Dr. C.L. Katial, [1964] 2 S.C.R. 495
and Ramesh Chandra Chandiok & Anr. v. Chuni Lal Sabharwal (dead) by his
Lrs. & Ors., [1971] 2 S.C.R. 573 where this Court following the Privy
Council decision in Motilal v. Nanehlal Ghasiram's case supra, reiterated the
same principle.
The next and the last contention that the
suit brought by the appellant was barred by limitation is wholly devoid of
substance. Under Art. 113 of the Limitation Act, 1963, the limitation
prescribed for a suit for specific performance is a period of three years which
runs from the date when the cause of action accrues. In the facts and
circumstances of the case, the respondents were required to have a conveyance
executed immediately upon the conferral of occupancy rights on the abolition
and the permission granted by the revenue authorities to him to convert the
suit land into village site. As already stated, the permission to convert the
disputed land into village site having been obtained on August 26, 1958 insofar
as a part of the land admeasuring 1,000 square yards and on September 10, 1959
as regards the remaining portion, it could not be said that the respondents'
suit filed on September 6, 1960 was barred by limitation.
460 The result therefore is that the appeal
must fail and is dismissed. The judgment and decree of the High Court decreeing
the plaintiff's suit for specific performance are upheld. The respondents shall
be entitled to their costs throughout.
S.R. Appeal dismissed.
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