Report No. 70
Part Performance as A Defence
The conflict between strict law and equity assumes a new form when the strict law is in the form of a statutory provision prescribing a particular formality for the transfer of property. When a situation presents itself where that formality has not been undergone but the intention to transfer has been implemented in fact, and the transferee, acting in performance of the contract, has taken possession and performed his part, the conflict becomes apparent. Is it, then, equitable that the transferor should be permitted to repudiate the transfer on the ground of a mere technicality?
In some form or other, such conflict between strict law and equity' arises daily. But the peculiarity this time is that there is a specific legislative mandate before the Court, and the Court has to decide the delicate question whether it should disregard the statute and if so, to what extent. In a situation not governed by statute, the solution would not be too difficult, because the Court has the whole jurisprudence of estoppel for its guidance. A person is not allowed to assert his legal rights where to do so would be to allow him to repudiate his own representation which has led a third party to act on it, to his prejudice.
Estoppel having evolved its own set of rules and propositions familiar to lawyers and founded on non-controversial moral postulates, Courts would, in general, find no difficulty in solving a problem by resorting to that doctrine where there is no possibility of a conflict with a specific legislative provision.
49.2. Statutory provision.-
Where, however, there is a statutory provision, the matter creates problems. Difficulty arises because the resort to estoppel is ordinarily not regarded as permissible where a statutory provision has to be complied with. How far can estoppel override a statute is the fundamental question to be considered. In answering this question, the Court must necessarily embark upon an investigation of the object of the particular statutory provision in question. This is the general pattern of the judicial process. In the context of statutory provisions requiring-(i) registration of the instrument of transfer, or (ii) execution of an instrument of transfer (as distinguished from the contract), the specific question to be considered is-What is the object of such requirements?
English Courts, when faced with the problem, assumed that such requirements are primarily intended to prevent fraud. They started giving relief where strict enforcement of those provisions would itself effectuate a fraud. The English doctrine of port performance was evolved to counter the strict provisions of the Statute of Frauds. It may be that statutory language to some extent left scope for such benevolent construction. But that is not an essential aspect. As Lord Cranworth L.C. observed1-
"Though Courts of Equity have held themselves bound by this last enactment (the Statute of Frauds), they have yet in many cases felt themselves at liberty to disregard it where to insist on it would be to make it the means of effecting fraud."
1. Caton v. Caton, (1883) 8 App Cas 467 (475, 476).
It would be observed later that the other party is prevented from setting up the legal invalidity of the contract on the faith of which he intended or allowed the person contracting with him to act. This was a victory of equity over statute. At times, it was described as the result of a process of construction of statutes so as to limit its scope to avoid fraud. But, in substance, it amounted to clipping the wings of the statutory provisions prescribing technicalities.
Such a victory is not achieved easily, since parallel sources of law are in competition. The history of the recognition of this doctrine-which we shall deal with later.-shows how tiresome the process could be. In fact, in India, the longdrawn process culminated in a specific statutory provision in 1929 in the shape of section 53A, so that the movement has now turned a full circle. What began with a construction of statutory provisions has itself ended in another specific statutory provision.
Estoppel is the chief moral justification for the doctrine of part-performance. The Court of Equity felt themselves at liberty to receive parol evidence as to the terms of the contract and to grant relief to the parties on the basis of such contract, such as, by decreeing specific performance of the contract1 or by granting an injunction preventing a party from acting in breach of the contract, because there was, in substance, action in reliance on a promise. In Caton v. Caton, (1866) 35 LJ Ch 292 (395). Lord Cranworth, LC., emphasised the aspect of preventive fraud. He observed:
"This is the ground on which they decree specific performance of parol contracts for the sale or purchase of land, when the contract has been in part performed. The right to relief in such cases rests, not merely on the contract, but on what has been done in pursuance of the contract.
The ground on which the Court holds that part performance takes a contract out of the purview of the Statute of Frauds, is, that when one of the two contracting parties has been induced or allowed by the other2 to alter his position on the faith of the contract; as, for instance, by taking possession of land, expanding money in building, or by other like acts; there, it would be fraud in the other party to set up the legal invalidity of the contract, on the faith of which he induced or allowed the person contracting with him to act."
1. Lawson v. Laude, (1761) 21 ER 303: 1 Dick 346; Gunter v. Halsey, (1739) 27 ER 381; Lackey v. Lackey, (1719) 24 ER 232: Pre Ch 518.
2. Emphasis supplied.
49.6. Section 53A.- To come to the section proper, section 53A reads-
"53A. Where any person contracts to transfer for consideration any immovable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract, then, notwithstanding that the contract, though required to be registered, has not been registered or, where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefore by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract:
Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof."
49.7. History in India.-
The history of the doctrine of part performance in India is a history of fluctuation of views in the courts. Incidentally, it shows that where the law on a particular subject is codified incompletely, controversies are likely to arise on those topics which are left out of codification. It would be tedious to discuss here all the judicial decisions on the subject preceding the introduction of section 53A. It will suffice to refer to a few important judgments, representing the following stages-
(a) Before the passing of the Act, the doctrine of part performance was, speaking broadly, regarded as applicable in India, as would appear from cases decided before the Act1. or cases decided after the Act relating to pre-Act transactions.2
(b) After the passing of the Act but before the insertion of section 53A in 1929, the position remained fluid. The applicability of the doctrine was recognised in a judgment of the Privy Council3 of 1901, though on the facts, no valid contract was held to be established.
(c) There arose a conflict of views amongst the High Courts on the subject; the main reason for the conflict being the difference of approach on the basic question whether the express provisions of a statute can be overridden by equitable considerations.
The doctrine was applied in Mahomed Musa v. Aghora Kumar Ganguli, AIR 1914 PC 27 (30), by the Privy Council to a compromise by which certain mortgage debts were to be extinguished and certain property divided in specific shares. No conveyance was executed, but possession of their respective shares was taken by the parties who enjoyed them in accordance therewith. The observations of the Privy Council were, however, ambiguous. The same doctrine was applied4 in 1916.
(d) Conflict of decisions arose as to the exact scope of the doctrine in some of its aspects, namely, whether it was confined to use as a ground of defence, effect on limitation and so on.
(e) More serious doubt was thrown by a decision of the Privy Council on an appeal from Ceylon5. The relevant Ceylon Ordinance required that a contract for the transfer of immovable property should be made in writing and attested by a notary. In the absence of compliance with those formalities, the contract was "of no force or avail in law". On this statutory provision, the Privy Council held that the doctrine of part performance could not be invoked.
(f) In 1929, section 53A was introduced in the Indian Act, placing the law on a statutory footing. We need not refer to the controversy that arose as to its retrospective operation. But questions that have arisen with reference to some of the ingredients of the section will be discussed in due course.
1. (1861) 9 MIA 43 (65).
2. 1901 ILR 28 Cal 693 (705) (PC).
3. Immudipatran Thiruganga v. Periya Doraiswami, 1901 ILR 24 Mad 377 (385) (PC).
4. Venkayyamma v. Appa Rao, AIR 1916 PC 9 (13).
5. John H. Arseculeratue v. Pereira, AIR 1928 PC 273 (275).
It will be useful to draw attention to the important ingredients of the section. We are deliberately stating them below in language which does not purport to adhere necessarily to the actual wording of the section-
(1) There should be a contract for the transfer of immovable property.
(2) The contract should be in writing signed by the party sought to be charged therewith and from it the terms should be ascertainable with reasonable certainty.
(3) The transferee should, in part performance of the contract,
(a) take possession, or
(b) continue in possession and do some act in furtherance of the contract.
(4) The transferee should perform, or be willing to perform, his part of the bargain as contained in the writing.
(5) The application of the doctrine should not affect the right of a transferee for consideration without notice of the contract or of the part performance thereof.
Subject to these conditions and reservations, the effect of the section is that notwithstanding that the transaction has not been completed according to law, all rights and liabilities under the contract should arise and be enforceable as between the parties to the contract and persons claiming under them.
The transferee, however, does not get a good title unless the transfer is completed according to law. Non-registration means that the title has not passed. Part performance means that certain equities have arisen, which the courts, recognise. Such recognition of the equities, however, does not convert the contract into a conveyance. In order that the law of registration is not evaded, the section takes care to ensure that the transferee does not get a perfect title which he could have obtained by a registered transfer. This it ensures by protecting subsequent bona fide transferees for value.
49.10. English law.-
There are certain important differences between the English law and section 53A, which may be usefully noted at this stage-
(a) In England, the contract could be oral1, in India, it must be in writing.
(b) In England, the doctrine can be used as a shield and also as a sword, inasmuch as both the parties can claim that the contract be carried into execution and each can resort to a suit claiming rights in violation of the contract.2 In India, the section can be said to be ambiguous as some judicial decisions3 seem to have taken a wider view in this regard. The section, as it now stands, is non-commital as to any positive rights arising in favour, of the transferee.
(c) In England, the doctrine is uncodified in its content, though referred to in statute.4 In India, it is codified.
1. Caton v. Caton, (1866) 35 LJ Ch 292 (295).
2. AIR 1938 Cal 97 (103).
3. See infra.
4. Section 40, Law of Property Act, 1925.