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PETITIONER: LALA DURGA PRASAD AND ANOTHER

       Vs.

RESPONDENT: LALA DEEP CHAND AND OTHERS.

DATE OF JUDGMENT: 18/11/1953

BENCH: BOSE, VIVIAN BENCH: 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)

ACT:  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 repudiation.

HEADNOTE:    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

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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.

JUDGMENT: 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. 1.    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  accepted  Rs. 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

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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.  62,000. 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

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to be true entered into the contract of 7th February,  1942, with the plaintiff and accepted Rs. 10,000 as earnest money. 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  cir- cumstance 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 plaintiffis 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

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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

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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 contract".      None  of  this helps because none of  these  provisions directly  relate to the form of the decree.  It will  there- fore 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  performance. 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.

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(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,   unlessthey   fight  the  question   out   as   between themselvesand  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

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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 between them.    (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 estate. (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. Lal.                                      Appeal dismissed