REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.  6711          OF 2008 [Arising out of SLP (Civil) No. 776 of 2006]

Hamidkhan …Appellant

Versus

Ashabi & Ors. …Respondents

J U D G M E N T  

S.B. SINHA, J :

1. Leave granted.

2. Defendant  No. 2 in  the Original  Suit  No. 358 of 1988 filed in the

Court of the Additional Civil Judge, Hubli is the appellant, herein.   

Defendant No. 1 - Respondent No. 8 herein is a charitable trust.  By a

registered deed dated 5.07.1951, the plaintiff - respondent No. 1 purchased

the lease hold rights in respect of the land together with the superstructure

standing  thereupon  from Shri  Hasansab  Bepari.   In  the  year  1955,  the

original defendant No. 1 filed a suit against several persons.  Plaintiff got

herself impleaded as a defendant therein.  Defendant No. 1, having regard to

the fact that the plaintiff had already purchased the superstructure, agreed to

sell the land to her by an agreement dated 26.02.1980 for a consideration of

Rs.25,000/-.  Out of the said amount, a sum of Rs.8000/- was paid by way of

earnest money.   

The relevant term of the said agreement reads as under:

“The said Rayanal math, being a public math, the necessary permission required to sell the said math properties  shall  be  obtained  from  the  Charity Commissioner,  Belgaum  and  the  Deputy Commissioner, Dharwad, and after intimating you about  the  same  and  receiving  the  balance consideration amount within one month thereafter, sale deed shall be executed in the presence of the sub-registrar”.

3. Admittedly,  in  terms  of  the  said  agreement,  permission  from  the

Charity Commissioner in terms of Section 36 of the Bombay Public Trust

Act was required to be taken.  On or about 30.10.1982, an order was passed

by the Charity Commissioner directing that the land should be sold in public

auction and the highest bidder should be permitted to purchase the suit land.

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Defendant  No.  1,  purported  to  be  in  pursuance  thereof  and  in

furtherance of the said order, by a notice dated 22.04.1983, stated:

“As stated  above,  the  Charity Commissioner  has granted  permission  subject  to  certain  conditions. Therefore, you are hereby informed that my client intends  to  conduct  the  public  auction  as  per  the order of  the  Charity Commissioner  within  a few days.  If you intend to purchase the said property you may participate  in  the  public  auction.   You will be entitled to adjust the earnest money paid by you  against  the  bid  amount.   In  case  you  are unable to purchase the said properties in the public auction, my client is willing to refund the balance of the earnest money paid by you after deducting appropriate amount as mesne profits you your (sic) occupation till  now.  You are entitled to receive such  amount.   You  may  understand  that  the contracts till now are cancelled.  This notice dated 22.4.1983 is for your information.”

4. Indisputably,  the  said  order  of  the  Charity  Commissioner  was  set

aside by the High Court and the matter was remitted directing it to pass a

fresh  order.   The  Charity  Commissioner  in  his  order  dated  15.04.1987

noticed that the appellant herein had been in possession of the suit property.

A deed of sale was executed in his favour by the defendant  No. 1 on or

about 12.05.1988.   

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5. Plaintiff  -  Respondent  No.  1  thereafter  filed  a  suit  for  specific

performance  of  the  said  agreement  dated  26.02.1980  and  furthermore

questioned  the  validity  of  the  said  deed  of  sale  dated  12.05.1988  in  the

Court of Principal Civil Judge, Hubli,  praying inter alia for the following

reliefs:

“It  is,  therefore,  humbly prayed that,  the  sale  in favour of Defendant No. 2 by the Defendant No. 1 being  not  binding  upon  the  plaintiff,  as  it  is  in derogation of the right of the plaintiff to purchase the  suit  property  by  a  sale  agreement  dated 26.2.1980;  be  cancelled  by  a  decree  with  an ancillary  relief  of  a  decree  for  specific performance  against  the  Defendant  No.  1, directing  the  Defendant  No.  1  to  sell  the  suit property to  plaintiff  at  the value at  which it  has been sold to the Defendant No. 2.  In case, if the Defendant  No. 1 declines to or does not execute the  sale  deed  of  the  suit  property  on  receipt  of balance of consideration in pursuance of a contract of sale dated 26.2.1980, a Court Commissioner, it is  prayed,  shall  be appointed  to  execute  the  sale deed on behalf of the Defendant No. 1 in favour of the plaintiff at the cost of Defendant No. 1 or in the  alternative,  if  this  Hon’ble  Court  does  not grant a decree for specific performance, the decree for refund of the earnest money of Rs. 8000/- from Defendant No. 1 payable to plaintiff, at the rate of interest of Rs. 18% per annum on the principle of Rs. 8000/- from 26.2.1980, be passed.”

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It is not in dispute that the appellant was a nephew of the husband of

the  plaintiff.   He  was  not  in  sound  financial  position.   Only  out  of

compassion, the husband of the plaintiff - respondent No. 1 permitted the

appellant and his father to live in the suit premises as licensees for a short

period.  After his father’s death, the appellant requested for some more time

to vacate.

Appellant, however, connived with the defendant No. 1 and managed

to get the suit property transferred in his name.  Appellant in the said suit

not only denied and disputed the right of the respondent No. 1 to obtain a

decree for specific performance of contract but put forth a plea that he was a

bona fide purchaser for value without notice.  It was furthermore contended

that the suit was barred by limitation.

6. The learned Trial Judge in view of the rival pleadings of the parties

inter alia framed the following issues:

“(i) Whether the plaintiff proves that defendant No.  1  executed  an  agreement  of  sale  on  26th February, 1980?

(ii) Whether  the  plaintiff  proves  that  she  was ever ready and willing to perform her part of the contract?

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(iii) Whether the plaintiff  proves that  when the agreement  of  sale  in  her  favour  was  in  force, defendant  No. 1 executed sale deed in  favour  of defendant No. 2 on 12.5.1988?

(iv) Whether  the  plaintiff  proves  that  the  sale deed in favour of defendant No. 2 is not binding on her?

(v) Whether the defendant No. 2 proves that the order of the Charity Commissioner is final?

(vi) Whether the defendant No. 2 proves that he is in possession of suit property from the date of sale in his favour?”

7. By reason of a judgment and decree dated 22.01.1993, the said suit

was decreed by the learned Trial Judge, stating:

“28. In the light of the above position of law, we have  to  come  to  a  just  decision  of  the  case. Defendant No. 1 says that the execution of the sale deed in favour of the plaintiff become impossible since the charity commissioner did not permit to sell,  but  asked  to  sell  by  public  auction.   The record goes to show that the order of the charity commissioner  dated  30-10-1982  as  above  was quashed in Cr. P.  On the other hand, the Hon’ble High  Court  observed  that  the  present  defendant No. 1 stands himself committed to the petitioner and  the  charity  commissioner  is  required  to consider  the  agreement  of  sale.   Under  the circumstances,  there  was  an  opportunity  to defendant No. 1 to call upon the plaintiff to get the sale  deed  executed,  but  he  did  not.   Even

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otherwise,  the  order  dated  15-4-1987  also  is  no way restrain  defendant  No.  1  in  selling  the  suit properties  to  the  plaintiff  subject  to  settlement concerning price.  At this juncture as well,  there was an opportunity for defendant No. 1 in asking the plaintiff to get the sale deed executed, but he did  not.   We do not  find any direction from the charity  commissioner  either  in  the  order  dated 30.10.1982 or order dated 15-4-1987 that the suit properties should be sold to defendant No. 2 only. In spite  of  these  circumstances,  defendant  No. 1 selected defendant No. 2 to sell the suit properties. There  was  no  pre-existing  right  with  defendant No.  2  to  purchase  the  suit  properties  from defendant No. 1.  In this connection, counsel for plaintiff has argued that it is a plot created by the defendants and there upon (sic) have brought the sale deed in favour of defendant no. 2.  To put in other words, the order dated 15-4-1987 was not so fundamental as to be regarded by law as striking at the root of the contract.  Thus, execution of sale deed in favour of the plaintiff was not impossible from the point of view of defendant No. 1.  When there was possibility in performing his part of the contract  on  the  part  of  defendant  No.  1,  where would  be  the  question  of  application  of  the doctrine  of  frustration.   Doctrine  of  frustration would  be  applicable  only  when  the  contract  is between  defendant  No.  1  and  the  plaintiff  is cancelled.   We find  no  such  cancellation  of  the said agreement even till today.”

The court noticed that the defendant No. 1 did not examine himself as

a witness in the suit and opined:

“…If defendant No. 1 had entered into the witness box, cat would have been let  out of the bag.  In

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view  of  the  foregoing  reasons,  we  hold  that plaintiff  has  proved  that  when  the  agreement  of sale in her  favour was in force, defendant  No. 1 executed a sale deed in favour of defendant No. 2 and  we  hold  that  plaintiff  has  proved  that  sale deed in favour of defendant No. 2 is not binding on  her  and  accordingly,  issues  3  and  4  are answered.”

It was furthermore held that the appellant is not a bona fide purchaser

for value without notice, stating:

“…Under  the  circumstances,  it  is  impossible  to come to  a  conclusion  that  defendant  No.  2  is  a bonafide  purchaser  without  notice,  of  a  valid agreement between plaintiff and defendant No. 2. These facts themselves go to show that defendant No.  2  purchased  unlawfully,  unauthorisedly  and illegally.  In this view of the matter, it is held that plaintiff  is  entitled  to  a  declaration  that  sale  in favour of  defendant  No. 2 is  not  binding on her and accordingly, it is held that plaintiff has proved issue no. 7.”

8. On the premise that the defendant No. 1 did not obtain the permission

of the Charity Commissioner in which event only the plaintiff -respondent

No. 1 could perform her part of contract, the suit was held to be not barred

by the law of limitation.

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9. An appeal preferred thereagainst was dismissed by the Ist Addl. Distt.

Judge, Dharwad and by a judgment and order dated 22.12.2001, the learned

Appellate Court categorically held:

“24. It is important to note that the plaintiff had purchased not only the leasehold right of the land in question and also the superstructure under Ex. P-4  sale  deed.   The  sale  deed  is  dated  5-7-51. Thereafter, continuously, her name finds place in the records and it is evidenced by Ex. P-2 and 3. Nowhere  at  any  point  of  time,  the  name  of defendant no. 2 appear in any of the records.  It is very well within the knowledge of Deft. No. 1 that the plaintiff had purchased not only the leasehold rights, but also the superstructure.  And thereafter, she entered into a sale agreement to purchase the suit property.  That being so, how could Deft. No. 1 determine that Deft. No. 2 one was the occupant of  the  suit  property.   None  of  the  defendants appear  to  have  applied  their  mind  to  verify  the records to see as to who is in actual possession of the suit property.  Further, Deft. No. 2 also appears to  have not  made reasonable  enquiries  about the title  of  the  suit  property.  Therefore, the  learned trial  Judge has  rightly held that  he could not  be bonafide purchaser of the suit property.  Deft. No. 1 before executing the sale deed in favour of Deft. No.  2  could  have  verified  as  to  the  nature  of possession or occupation Deft. No. 2 was having. Being very well  aware  of  the  subsistence of  the sale agreement, it could not have executed the sale deed in favour of Deft. No. 2 in respect of the suit property.   Therefore,  it  has  to  be  held  that  the transaction  between  the  defendants  in  respect  of the suit  property was nothing but  suppression of material facts and somehow managed to complete the  sale.   Therefore,  the  learned  trial  judge  has rightly  held  that  Deft.  No.  2  purchased  the  suit

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property unlawfully and unauthorisedly and, thus, it  was  not  binding  on  the  plaintiff.   It  is  also important to note that the plaintiff has specifically pleaded  in  the  plaint  and  it  has  come  in  the evidence of PW-1 that they were always ready and willing to perform their part of the contract…”

10. The  second  appeal  filed  by  the  appellant  thereagainst  has  been

dismissed by the High Court by reason of the impugned judgment.

11. The  substantial  questions  of  law  which  were  framed  for  its

consideration, were:

“1. Whether  the  courts  below  could  have decreed  the  suit  for  specific  performance  when admittedly  the  suit  agreement  dated  26-2-1980 between the  plaintiff  and  the  2nd  defendant  has been terminated by a cancellation notice dated 22- 4-1983 and in the circumstances whether the suit for specific performance could be said to be within limitation”

2. Whether  the  property  belonging  to  2nd defendant  which  is  a  charitable  institution registered under the Bombay Trusts Act, could be sold  without  the  permission  of  the  charity commissioner?

3. Whether the courts below had jurisdiction to alter the terms of the contract as done now in the impugned decree?”

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The  High  Court  answered  all  the  said  questions  in  favour  of  the

respondent No.1, opining:

“In  the  instant  case,  as  noticed,  the  contract entered into is  more in the form of a contingent contract.  The first permission which was accorded by the  charity  commissioner  was  not  in  a  good spirit  as  held  by  this  Court  and  the  same  was quashed  in  the  writ  petition.   Thereafter,  the second permission was  granted in  the  year  1987 which  was  almost  nearer  to  the  terms  of  the contract entered into between the plaintiff and 1st defendant  except  the  variation  in  the  rate  of  the land and the condition that the sale could be made in favour of the occupant of the property.  The suit is  filed subsequently i.e. within 1 ½ years and it cannot  be  said  that  it  is  beyond  limitation.   As such,  the  first  substantial  question  has  to  be answered in favour of the respondent.

It is seen that both the trial court as well as the  lower  appellate  court  have  held  that  the plaintiff was ready and willing to perform her part of  the  contract  and  also  that  the  sale  by  1st defendant  in  favour  of  2nd  defendant  is  not binding on the  plaintiff.   There is  also a finding that the 2nd defendant has not proved that he is in possession of the suit property.  While decreeing the  suit  for  specific  performance,  the  trial  court has  observed  that  the  2nd  defendant  is  not  a bonafide purchaser for value without notice.  This is  more a  question  of  fact  finding  the  same has been confirmed by the lower appellate court.  It is also noticed that the contract is subsisting between the plaintiff and the 1st defendant and that the 1st defendant  illegally  executed  the  sale  deed  in favour  of  the  2nd  defendant.   The  trial  court

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having  noticed  that  the  relief  of  specific performance is a matter of discretion and has to be exercised  sparingly,  has  come to  the  conclusion that  there  are  no  valid  and  cogent  grounds  to refuse the decree of specific performance in favour of the plaintiff.”   

12. Mr. Sunil Kumar, learned senior counsel appearing on behalf of the

appellant, would contend:

(i) Having regard to Article 54(2) of the Limitation Act, 1963,  the

suit being barred by limitation, no decree for specific performance

of contract could have been passed, and

(ii) In  any  event,  it  was  not  a  case  where  the  court  should  have

exercised  its  discretionary  jurisdiction  under  Section  20  of  the

Specific Relief Act, 1963

13. Mr.  Rajesh  Mahale,  learned  counsel  appearing  on  behalf  of  the

respondents, on the other hand, urged:

(i) By reason of the purported notice dated 22.04.1983, the agreement

was not legally cancelled.   

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(ii) In any event, the said purported notice being passed on the order

of the Charity Commissioner dated 30.10.1982 which having been

set  aside,  limitation  would  run  only  from  the  date  when  the

Charity Commissioner passed its order dated 15.04.1987 and not

prior thereto.   

(iii) In the suit, the plaintiff – respondent No. 1 having not only prayed

for  a  decree  for  specific  performance  of  contract  but  also  for

cancellation of the deed of sale, it was for the defendant No. 2 to

show that he had acquired a valid title thereto.   

(iv) In any event, the courts below having arrived at a finding of fact

that it was the plaintiff alone who was in possession of the land

even in terms of the order of the Charity Commissioner, the land

in suit  should have been transferred in favour of the respondent

No. 1.

14. In terms of the aforementioned agreement dated 26.02.1980, it  was

obligatory on the part of the defendant No. 1 to obtain the permission of the

Charity Commissioner in terms of Section 36 of the Bombay Public Trust

Act, which reads as under:

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“(1) Notwithstanding  anything  contained  in  the instrument of trust,

(a) No sale, exchange or gift of any immovable property; and

(b) No lease for a period exceeding ten years in the  case  of  agriculture  land  or  for  a  period exceeding  three  years  in  the  case  of  non agriculture  land  or  a  building  belonging  to  a public  trust,  shall  be  valid  without  the  previous sanction  of  the  charity  commissioner  may  be accorded subject to such condition as the charity commissioner  may  think  fit  to  impose,  regard being had to the interest, benefit or protection of the trust.

(c) If the charity commissioner is satisfied that in the interest of any public trust any immovable property thereof should be disposed of, he may on application,  authorise  any  trustee  to  dispose  of such property subject to such condition as he may think fit to impose, regard being had to the interest or benefit or protection of the trust.”

15. The  fact  that  as  far  back  as  in  1951,  the  plaintiff  purchased  the

superstructure standing on the land is not in dispute.  Defendant no. 1 had

filed a suit against the alleged trespassers.  Originally, the plaintiff was not

impleaded as a party therein.  She got herself impleaded as a party at a later

stage  of  the  suit.   She  was  arrayed  as  the  defendant  No.  3.   Plaintiff

evidently was not found to be a trespasser.  Only because the land on which

the superstructure stood belonged to the trust,  the agreement of  sale was

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entered into.  It was the only sensible way of doing justice to the parties.

Respondent No. 1 is a lady.  She must have relied upon the defendant No. 1.

16. In view of the concurrent finding of fact, there is no escape from the

conclusion that the defendant No. 2 – appellant was a licensee under the

plaintiff.   He,  therefore,  did  not  have  any  independent  title  or  legal

possession.  Even if he and his father were in possession of a part of the

property, the same was for and on behalf of the plaintiff.   

It may be true that the Charity Commissioner directed that instead of

giving effect to the agreement dated 26.02.1980, the same should be sold in

auction but we have noticed hereinbefore that the said order has been set

aside by the High Court.  It was non est in the eye of law.  If that order has

been  set  aside  by  the  High  Court  pursuant  whereto  and  in  furtherance

whereof the purported notice dated 22.04.1983 was issued, the performance

of contract became dependant upon a fresh order which was to be passed by

the  Charity  Commissioner.   The  Charity  Commissioner  could  not  have

ignored the fact that the superstructure standing on the land was owned and

possessed by the plaintiff – respondent No. 1.  It was, therefore, fair and

equitable to allow the said agreement to be given effect to.  Even otherwise

the Charity Commissioner was to grant permission to the defendant No. 1 to

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sell  the  property  in  favour  of  the  plaintiff.   It  could  not  have  issued  a

direction which was otherwise not sustainable.  It could not have ignored

the fact that the plaintiff was the owner of the superstructure of the property

and  was,  thus,  in  lawful  possession  thereof  as  well  as  the  fact  that  the

defendant No. 2 was a mere licensee.  We do now know what transpired

before the Charity Commissioner but even if his order dated 15.04.1987 was

to be enforced, the same could be done irrespective of the aforementioned

agreement dated 26.02.1980.  Even in terms of the said order, it  was the

plaintiff and the plaintiff alone in whose favour the deed of sale could be

executed.  Inter alia on a wrong premise that the appellant herein was in

possession  of  the  said  property,  the  deed  of  sale  was  executed  on

12.05.1988 for  the sum of Rs. 75,000/-.   Evidently,  the defendant  No. 1

obtained a higher amount.   He even had not  refunded the earnest  money

paid by the plaintiff – respondent No. 1.  There was no occasion for him to

put the appellant in independent possession of the property, as he himself

was not in possession thereof, at least since 1951. Even otherwise, being in

continuous  possession  of  the  superstructure  from 1951,  the  title  of  the

defendant No. 1 became extinguished.   

17. Defendant  No.  1  for  reasons  best  known  to  him did  not  examine

himself in the suit.  It is not in dispute that he had served similar notices to

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other persons in whose favour, having regard to the judgment passed in the

suit bearing No. L.C. No. 11 of 1955, agreements for sale were entered into.

Once the said order of the Charity Commissioner was set aside, steps taken

pursuant  thereto  also  became non  est  in  the  eye  of  law  as  the  Charity

Commissioner was to apply his mind afresh for enabling him to exercise his

jurisdiction in terms of Section 36 of the Bombay Public Trust Act.

Relationship of vendor and vendee between defendant No.1 and the

plaintiff,  therefore,  continued.   If  that  be  so,  the  suit  for  specific

performance was maintainable.   

18. Even otherwise in a case of this nature, it is eminently fit and proper

that  this  court  with  a  view  to  do  complete  justice  to  the  parties  should

exercise its discretionary jurisdiction under Article 142 of the Constitution

of India.  Equity in this case, however, has to be balanced.  On the one hand,

the defendant No. 1 is an old lady and her interest is required to be upheld,

on the other, the appellant has also invested a sum of Rs. 75,000/- in 1988

and since then  he has  been  in  possession  of  a  part  of  the  property as  a

vendee in terms of the said registered deed of sale dated 12.05.1988.  We,

therefore, are of the opinion that the interest of justice would be subserved if

the plaintiff – respondent No. 1 is directed to pay a sum of Rs. 2,25,000/- by

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way of compensation to the appellant.  For arriving at the said figure, we

have not only taken into consideration the inflation in real estate market, but

also  the  fact  that  the  appellant  has  been  in  possession  of  a  part  of  the

property as a licensee of plaintiff – respondent No. 1.   

Although the appellant is a party to the illegality, we do not intend to

deprive him of the amount which he had invested and that is the principal

reason we thought  that  he would be fully  compensated  if  the  plaintiff  –

respondent No. 1 is directed to pay a sum of Rs. 2,25,000/- in his favour

being three times of the amount that he had paid to the defendant No. 1 by

way of consideration for the execution of the deed of sale dated 12.05.1988.

We direct accordingly.   

Appellant shall vacate the premises within one month from the date

of deposit of the amount of Rs.2,25,000/- by the plaintiff – respondent No. 1

in the Court of learned Trial Judge and execute a registered deed of sale in

favour of the plaintiff – respondent No. 1.  In the event, appellant vacates

the premises he would be entitled to withdraw the said sum failing which it

would be open to the respondent No. 1 to execute the decree passed in her

favour by the learned Trial Judge forthwith and in which event he would be

liable to pay all costs to the plaintiff including the costs incurred by him in

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this Court.  Defendant No. 1 shall also refund the amount of earnest money

of Rs. 8000/- to the plaintiff with interest at the rate of 9% per annum from

the date of institution of suit  till  realisation as he cannot be permitted to

enrich himself unjustly.   

19. For the reasons aforementioned, this appeal is allowed in part and to

the  extent  mentioned  hereinbefore  as  also  with  the  aforementioned

observations and directions.  No costs.   

………………………….J. [S.B. Sinha]

..…………………………J.     [Cyriac Joseph]

New Delhi; November 19, 2008

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