01 December 1950
Supreme Court


Case number: Writ Petition(Criminal) 4 of 1950






DATE OF JUDGMENT: 01/12/1950


CITATION:  1951 AIR    1            1950 SCR  840

ACT: Contract-- Specific performanance--Offer to    purchase lease- hold  right-- Stipulation that lesses should obtain  consent of  lesser--Lessor  unreasonably  refusing  consent--Lessee, whether  relieved of liability to assign--Suit for  specific performance       by       purchaser--Maintainability--Lease deed--Covenant  prohibiting  assignment  of  lease   without lessor’s  consent, "such consent, however, not to be  unrea- sonably  withheld in case of respectable  person  "--Meaning and effect of covenant. (1) 47 Cal. 485, at p. 494.      841

HEADNOTE:     The  defendant  had obtained certain premises  on  lease under  a deed which contained a covenant by the lessee  "not to  assign the demised premises or any part thereof  without first  obtaining  the written consent of  the  lessor,  such consent,  however,  not to be unreasonably withheld  in  the ease  of  respectable or responsible person ".   After  some offers  and  counter offers the plaintiff  finally  made  an offer  to  purchase the defendant’s  leasehold  interest  on certain  terms  one of which was that "the  consent  of  the landlord  will be obtained by you before the  completion  of the  sale "; and the offer was unconditionally  accepted  by the defendant.  The defendant subsequently refused to assign on the ground that the lessor had withheld his consent,  and the  plaintiff sued for specific performance of  the  agree- ment:    Held,  (i)  that the agreement was not, for  its  coming into  being, conditional or contingent on the  obtaining  of the lessor’s consent, the obligation to obtain the  lessor’s consent being only a term of the agreement which the defend- ant  had to fulfil; (ii) the words "such  consent,  however, not to be unreasonably withheld in the case of a respectable or responsible person" in the leasedeed did not amount to  a separate or independent covenant by the lessor that he would not refuse consent except on reasonable grounds in the  case of a respectable or responsible person, but only limited  or qualified the leesee’s covenant not to assign with. out  the lessor’s  consent, by relieving him from the burden  of  the



covenant if the lessor withheld his consent unreasonably  in the case of proposed assignment to a respectable or  respon- sible person ; (iii) that, as the plaintiff was admittedly a respectable  and responsible person and on the facts of  the case the lessor’s refusal to give consent was  unreasonable, the  defendant could validly assign the lease  without  such consent;  (iv)  that the court could come to a  decision  on this  matter even though the lessor was not a party  to  the suit  and  the  decision might not bind him;  (v)  that  the defendant  could  not under these  circumstances  plead  the absence  of the lessor’s consent as relieving him  from  the obligation  to  perform  his part of the  agreement  if  the plaintiff  insisted on his carrying out the  agreement  even though the lessor had not given his consent; and the  plain- tiff  was therefore entitled to a decree for  specifie  per- formance of the agreement.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4 of 1950.     Appeal  from  the High Court of Judicature  of  Calcutta (Sir  Trevor Harries C.J. and Mukherjea J.) from a  judgment and  decree  dated May 30, 1948, in Appeal No.  21  of  1947 confirming  with modifications the decree of a single  Judge of  the same High Court (Ormond J.) dated January 24,  1947, in suit No. 1031 of 1945.      108 842     N.C.Catterjee  (Samarendra Nath Mukherje, with him)  for the appellant.     P.L.  Banerjee (Upendra Chandra Mullick, with  him)  for the respondent.     1950.  December 1.  The Judgment of the Court was deliv- ered by     DAS  J.----This is an appeal by the defendant in a  suit for specific performance against the  judgment and decree of the High Court of Judicature at Fort William in Bengal  (Sir Trevor  Hatties C.J.  and Mukherjea J.) dated May 30,  1948, dismissing his appeal and confirming, with certain modifica- tions,  the  judgment and decree  for  specific  performance passed  by Ormond J. on January 24, 1947.  There is no  sub- stantial dispute as to the facts leading up to tim suit  out of which the present appeal has arisen and they may  shortly be stated:     Maharaja Sris Chandra Nandy of Cossimbazar is the  owner of  premises No. 374 Upper Chitpur Road in the town of  Cal- cutta (hereinafter referred to as the "said premises").   By an  Indenture of lease made on April 27, 1931, the  Maharaja as  manager  of the Cossimbazar Raj Wards Estate  which  was then under the management of the Court of Wards demised  tim said premises to one Madan Gopal Daga for a term of 51 years commencing from May 1, 1931, at and for the monthly rent  of Rs. 1,083-5-3 and upon terms and conditions contained there- in.  By sub-clause (6) of clause 2 of the said Indenture the lessee covenanted, amongst other things, "not to assign  the demised premises or any part thereof without first obtaining the  written consent of the lessor, such  consent,  however, not  to be unreasonably withheld in the case of  respectable or  responsible  person  .........  "  There was  the  usual proviso  for  re-entry  for non-payment of  rent  for  three months  or  for  breach of any of  the  lessee’s  covenants, without  prejudice to the lessor’s right of action for  such breach.   On  March  25, 1943, Madan Gopal  Daga,  with  the written consent of the lessor, assigned the unexpired  resi-



due of the lease to the defendant who    843 was  accepted as the lessee by the lessor.  By an  agreement said  to  have been arrived at by  correspondence  exchanged between the plaintiff and the defendant and their respective solicitors  between January 27, 1945, and February 2,  1945, the  defendant is alleged to have agreed to assign the  said lease to the plaintiff for the unexpired residue of the term with  effect from February 1, 1945, at and for the price  of Rs. 1,80,000 and upon terms and conditions contained in  the correspondence  to which reference will be made  in  greater detail hereafter.  On February 21, 1945, the defendant wrote a  letter  to the lessor intimating that he  had  agreed  to assign  his interest in the lease to the plaintiff  and  re- questing  the lessor to give his consent in writing to  such assignment.   On March 5, 1945, the lessor replied that  the question of his giving consent to the transfer of the  lease could  not be entertained as he had already  determined  the lease and that in the circumstances the whole initiative was in the hands of the defendant. This letter clearly indicated that the lease had been determined for non-payment of  rents and  it obviously implied that it was for the  defendant  to get  the lease revived by paying up the arrears of  rent  so that the question of giving consent to an assignment of  the lease might be considered by the lessor.  On March 8,  1945, the defendant by his solicitors’ letter informed the  plain- tiff’s  solicitors  that the defendant  had  approached  the lessor but had failed to secure his consent and that, as  no valid  transfer could be made without such consent  and  the agreement  for  sale was subject to such consent  being  ob- tained,  the defendant was reluctantly compelled  to  cancel the  agreement.  The plaintiff by his solicitors’ letter  of March  10, 1945, maintained that the agreement was not  sub- ject to the alleged condition and that the defendant was not entitled  to cancel the agreement.  It was pointed out  that under the terms of the lease the lessor could not refuse his consent  to  the transfer of the lease to a  respectable  or responsible person which the plaintiff undoubtedly was.   It is not necessary to refer to the further correspondence that followed in which each 844 party maintained his own contention.  On March 17, 1945, the lessor filed a suit (being suit No. 425 of 1945) in the High Court against the defendant for the recovery of the  demised premises  on the ground that the lease had been  determined. It  was  during the pendency of that suit that  on  July  4, 1945, the suit for specific performance of the agreement  to assign the lease out of which the present appeal has  arisen was filed by the plaintiff against the defendant.     On  July 13, 1945, the lessor’s suit for  ejectment  was settled  by  the defendant consenting to a  decree  for  Rs. 59,213-11-0 for arrears of rent which was paid up. There  is no dispute that the forfeiture of the lease for  non-payment of  rent was waived and the lease was  accordingly  revived. Shortly  after  the  settlement of the  ejectment  suit  the defendant  on August 6, 1945, applied to the lessor for  his consent  to the assignment of the lease and on the same  day the  lessor  in reply declined to give his  consent  without assigning  any reason whatever.  The suit for specific  per- formance  came up for disposal before Ormond J. in  November 1946  when it was heard in part and was adjourned.   It  was eventually  further heard in January 1947 and  finally  dis- posed of on January 23, 1947, when Ormond J. passed a decree against the defendant for specific performance of the agree- ment.  The decree provided that in the event of the  defend-



ant  being  unable within a fortnight from the date  of  the decree  to  obtain  the written consent of  the  lessor  the assignment should be made without such consent.  The defend- ant appealed. After two days’ hearing, "in order to clear up the matter" the appeal Court "gave the plaintiff an opportu- nity  to examine the Maharaja as a witness in this  case  so that  all  relevant facts might be brought  out  and  placed before the Court for the purpose of enabling it to come to a proper decision on this point."  The appeal was  accordingly adjourned and the lessor was examined on commission and  his evidence was filed in the proceedings.  After further  hear- ing  the appeal Court dismissed the defendant’s  appeal  and confirmed the decree for specific performance of the  agree- ment       845 without  the  need for obtaining the consent of  the  lessor prior  to the execution of the deed of assignment in  favour of  the plaintiff.  This decree was subsequently amended  by inserting therein a provision enabling the plaintiff to  set off  from the purchase price the amount of rent  payable  as and from February 1, 1945, until the date of conveyance less all outgoings and interest on the purchase price at four per cent.  per annum from that date to the date of  the  convey- ance.   The  defendant has now come up before us  in  appeal from this judgment and decree of the appeal Court.     The  first point urged by learned counsel  appearing  in support of this appeal is that, being subject to the consent of the lessor, the agreement was contingent on the defendant obtaining such consent and as the defendant could not secure the lessor’s consent no effective agreement came into  being which  could be ordered to be specifically  performed.   The determination  of  this question must depend  on  a  correct analysis and ascertainment of the meaning and import of  the correspondence  by which the agreement is said to have  been arrived at. It was on January 9.7, 1945, that the  plaintiff offered  to purchase the defendant’s leasehold  interest  in the said premises upon terms and conditions set forth in the plaintiff’s  letter of that date.  Clauses 3 and 4 of  those terms were as follows:     "(3).   The  lease will be transferred in my  favour  as from  the  1st February, 1945, and I shall  be  entitled  to recover  rents from the tenants as from that date and  shall pay  the rent to the superior landlord and  municipal  taxes from that date.     (4).  You shall have to obtain the necessary consent for the transfer of the lease in favour of myself or my nominees from  the said Maharaja of Cossimbazar before the  execution of the transfer of lease in my favour. ’ ’     The defendant replied to the plaintiff’s above letter on January 28, 1945.  By this reply the defendant expressed his willingness to transfer the lease to the plaintiff on  terms contained  therein.  Clauses 3 and 4 of this letter were  as follows: 846     "(3)   If your final acceptance as stated above  is  re- ceived  within  30th  January current and if I  am  able  to obtain  the consent of Maharaja Cossimbazar for transfer  of the leasehold interest wi. thin the first week of  February, 1945, I agree to your para 3.     (4)  Your para 4 is agreed to but the name or  names  of the  persons to be mentioned in the sale deed for whom  per- mission  is to be taken from Maharaja Cossimbazar should  be clearly stated with their respective addresses."     It  is  quite clear that no agreement was  concluded  by these  two  letters for the defendant’s letter  was  not  an



unconditional  acceptance  of  the  plaintiff’s  offer   but amounted  in law to only a counter-offer.  By clause  3  the defendant offered to transfer the lease to the plaintiff  as from  February  1, 1945, so as to entitle the  plaintiff  to realize the rents from that date and to be liable to pay the rent  to the lessor also from that date on  two  conditions, namely, that the plaintiff’s acceptance was received  within January  30, 1945, and the defendant was able to obtain  the lessor’s  consent within the first week of  February,  1945. This clause did not make the offer itself contingent on  the obtaining  of the lessor’s consent but made one of the terms of the offer, namely, that the lease would be transferred as from  February 1, 1945, conditional on the obtaining of  the lessor’s  consent within the first week of  February,  1945. Likewise, subject to the name of the assignee being  clearly stated  the  defendant  by clause 4 offered  to  obtain  the lessor’s  consent to the assignment of the lease.  Clause  4 of  the defendant’s letter was not so expressed as  to  make the  defendant’s offer contingent on his obtaining the  les- sor’s consent.  On the contrary, clause 4 constituted one of the  terms of the offer which, on the offer being  accepted, would become binding on the defendant as one of the terms of the  agreement. The plaintiff, however, does not  appear  to have  accepted the defendant’s counter offer but on  January 29,  1945,  through  his solicitors made a  fresh  offer  to purchase the defendant’s leasehold interest at Rs.  1,80,000 on the following terms:       847 "(a)  That the earnest money will be Rs. 5,000 (Rupees  five thousand) instead of Rs. 30,000.     (b)  Our  client  will have the conveyance  in  his  own favour.  The consent of the landlord will be obtained by you before the completion of sale.     (c) That your client will complete the conveyance within a  month after the receipt by us of all the  original  title deeds with you.     (d)  That the transfer of the property in favour of  our client will take effect on and from the 1st February,  1945, irrespective  of the date of the conveyance, he being  enti- tled  to all the rents, issues and profits and being  liable for  all the liabilities in respect thereof since  the  said date. (e)  That our client will not be liable to pay your  Solici- tor’s Bill of cost in respect of the sale."     Again,  it will be noticed that by clause (b) the  offer was  not  made contingent on the obtaining of  the  lessor’s consent  but  the plaintiff  insisted   on  the  defendant’s obtaining such consent as a substantive term of his offer so that  if the offer by being accepted ripened into an  agree- ment  the  defendant would be bound to obtain  the  lessor’s consent  as a term of such agreement.  The defendant by  his solicitors’  letter  dated February 1,  1945,  purported  to accept   the  plaintiff’s   last   offer   with   a   slight reservation, namely ,--     "As  regards clause (d) of your said letter, it is  dis- tinctly  understood that the same should be given effect  to only in case the conveyance is completed in terms of  clause (c) of your said letter."     On  February 2, 1945, the plaintiff by  his  solicitors’ letter  of that date unconditionally accepted this  reserva- tion and so a concluded agreement was arrived at between the parties.  This agreement was not, for its coming into being, contingent  or conditional on the obtaining of the  lessor’s consent.  The obligation to obtain the lessor’s consent  was cast upon the defendant as a term of the agreement.  In  our



judgment  the  Court  below was right in  holding  that  the agreement 848 itself was not contingent as contended for by the appellant.     The contentions next advanced by learned counsel for the appellant relate to the lessee’s covenant contained in  sub- clause  (6) of clause 2 of the lease to which reference  has already  been made.  The legal incidents of such a  covenant are  now well established by judicial decisions referred  to in the judgment of the High Court and it is not necessary to refer to them in detail.  Suffice it to say, that the  words "such  consent, however, not to be unreasonably withheld  in the case of respectable or responsible person" contained  in the  covenant  do not amount to a  separate  or  independent covenant  by  the lessor that he would  not  refuse  consent except upon reasonable grounds in the case of respectable or responsible  person, but that those words limit  or  qualify the  lessee’s  covenant not to assign the  demised  premises without  the  consent in writing of the  lessor.   In  other words,  those words have the effect of relieving the  lessee from the burden of this covenant if the lessor withholds his consent  unreasonably  in case of proposed assignment  to  a respectable  or  responsible person.  In this  view  of  the matter, the plaintiff contended that he being a  respectable and responsible person the lessor had unreasonably  withheld his  consent  to the proposed assignment to  him   and   had consequently relieved  the defendant from the burden of  his covenant  so  that the defendant could legally  and  validly assign the lease to him without such consent of the lessor.     The  first  objection  taken by the  appellant  to  this contention of the plaintiff is that in his plaint the plain- tiff  insisted   on  the defendant  obtaining  the  lessor’s consent  and that he should not have been permitted to  make this new case at the hearing.  Both the trial Court and  the appeal  Court  held that there was,  strictly  speaking,  no element  of  surprise, particularly  because  the  plaintiff relied  upon  facts  admitted and proved  by  the  defendant himself  and that it was open to him to take this point.  We may  also add that this point was in a manner  indicated  in the plaint      849 itself  for in paragraph 11 thereof it was pleaded that  the plaintiff was a responsible and respectable person and  that if consent to assign in his favour was withdrawn such  with- drawal  would  be unreasonable and would not  be  valid  and binding.  In view of such pleading we are unable to say that the  point raised by the plaintiff at the trial was  an  en- tirely  new  point or that the defendant was taken  by  sur- prise.     The next objection of the appellant was that this  point should  not have been allowed to be raised and  no  evidence should  have been permitted to be adduced on this  point  in the absence of the lessor as a party to the suit.  We do not think that there is any force in this objection.  The  Court had  to decide whether it was a case where relief by way  of specific performance should be given.  The  Court could  not force  the defendant to apply to the lessor for his  consent nor  could  the Court force the lessor to give  his  consent and,  if the matter only depended on the consent, the  Court would not have ordinarily, in those circumstances,  directed the  agreement for assignment to be  specifically  enforced. The Court, therefore, had also to consider, for the purposes of  this case, as to whether the circumstances were such  as would  indicate that the defendant had been relieved of  the burden of his covenant by reason of the lessor having unrea-



sonably withheld his consent.  It is true that a decision on that  question  in  this suit would not be  binding  on  the lessor, but nevertheless the Court had to come to a decision on  that question for the purposes of this suit  as  between the parties thereto in order to award the relief of specific performance to the plaintiff.     The third objection of the appellant is that the  appeal Court  should not have allowed the plaintiff to adduce  fur- ther  evidence.  It will be recalled that the  appeal  Court directed  the evidence of the Maharaja of Cossimbazar to  be taken during the hearing of the appeal.  The judgment of the appeal Court clearly indicates that it was the appeal  Court that  "required"  the  evidence "in order to  clear  up  the matter"  and 109 850 "for the purpose of enabling it to come to a proper decision on this point ". The matter, therefore, is fully covered  by Order  XLI,  rule 27 of the Code of Civil Procedure  and  no objection  can be taken to the course adopted by the  appeal Court  on that ground.  We do not think there is any  reason to interfere in the exercise of the Court’s discretion.     The fourth objection is that the High Court was wrong in holding  that the term in the agreement that  the  defendant must  obtain the consent of the lessor before executing  the assignment  to the plaintiff was a term for the  benefit  of the  plaintiff  only.  It will be recalled that that  was  a term which was introduced by the plaintiff in his offer that eventually  ripened  into  an agreement. The  term  was  not expressed in a manner indicating that it was inserted in the agreement  for the protection of the  defendant.   In  other words, the objection that the consent of the lessor had  not been  obtained  was  one which could be availed  of  by  the plaintiff  who could rescind the contract and claim  damages for  the breach thereof. We cannot see how, in view  of  the language  used  in the correspondence, the  defendant  could plead  the absence of the lessor’s consent as relieving  him from the obligation of performing his part of the  agreement if  the plaintiff waived the objection and insisted  on  his carrying  out  the  agreement. The absence  of  consent  may amount to a defect in the title of the defendant, but  which the plaintiff was willing to accept.     Finally  it is said that by directing the specific  per- formance of the agreement the Court has exposed the  defend- ant  to  the  risk of an action for damages  for  breach  of covenant.   If the assignment of the lease by the  defendant to the plaintiff without the lessor’s consent amounted to  a breach  of covenant, the lessor could forfeit the lease  and sue  for  possession. Such a course would  affect  only  the plaintiff  but not the defendant, for he had already  parted with the lease for valuable consideration.  It is said  that the lessor could sue the defendant for damages for breach of that    851 covenant  and  the Court should not, by  decreeing  specific performance,  have put the defendant in that perilous  posi- tion,   There appear to us to  be two answers to this  argu- ment, namely, (1) that the defendant should have, by  proper language,   made  his obligation to  transfer  dependent  or conditional  upon  his  being able to  obtain  the  lessor’s consent which he did not do and (2) that the plaintiff being a  respectable and responsible person of means, the  measure of damages could  only be a problematic conjecture.  Indeed, it may have been precisely for this very consideration  that the  defendant   had  unconditionally agreed to  obtain  the



consent  of  the lessor and to assign his  interest  in  the lease.  That the plaintiff was a respectable and responsible person  cannot, on the evidence before the Court, be  denied or  disputed and, indeed, learned counsel for the  appellant did not so contend.  We find ourselves in agreement with the High Court that in the circumstances and on the evidence  on record  the lessor had unreasonably withheld his consent  so as to enable the defendant to assign the lease without  such consent.   In the circumstances, we are satisfied that  both the trial Court and the appeal Court exercised their discre- tion properly and no ground has been made out for our inter- fering with the judgment of the High Court.  The  appeal  is accordingly  dismissed.  The appellant to pay the  costs  of this appeal.                                   Appeal dismissed.       Agent for the appellant: P.K. Chatterjee.      Agent for the respondent: S.K. Ghosh. 852