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CASE NO.: Appeal (civil)  5187 of 2001

PETITIONER: Panchanan Dhara & Ors.

RESPONDENT: Monmatha Nath Maity (Dead) Th. LRS. & Anr.

DATE OF JUDGMENT: 12/05/2006

BENCH: S.B. Sinha & P.P. Naolekar

JUDGMENT: J U D G M E N T

S.B. SINHA, J :

       This appeal is directed against a judgment and order dated 29th  January, 1998 passed by the Calcutta High Court in Second Appeal No. 887  of 1991 affirming the judgment and order dated 29th June, 1990 passed by  the learned Asstt. District Judge, Ghatal, District Midnapore, West Bengal in  Title Appeal No. 74 of 1989 whereby and whereunder an appeal against the  judgment dated 31st August, 1989 passed by the learned Munsif, Ghatal,  District Midnapore, West Bengal in Title Suit No. 133 of 1985 was  dismissed.

       The basic fact of the matter is not much in dispute.  Respondent No. 2  herein (the company) is a company registered and incorporated under the  Companies Act, 1956.  The said company held and possessed the suit  property situated in the District of Midnapur in the State of West Bengal.  It  intended to sell the said property.  Respondent Nos. 1 and 2 having came to  know of the said intention on the part of the company  entered into an  agreement for sale thereof, wherefor a sum of Rs. 6000/- was paid to the  Company by way of advance.  The balance amount was to be paid within a  period of fourteen months.  As the title of the Respondent No. 2 in respect of  the said property was not clear, the Company instituted a suit against some  persons who were claiming title thereover on or about 22.05.1971.  The said  suit was marked as Title Suit No. 110 of 1971.  In the said suit a  compromise petition was filed on 3.4.1979 which having been accepted by  the concerned court, a consent decree was passed on the basis thereof on  3.5.1979.  Respondent No. 1 thereafter issued several letters being dated  12.11.79, 11.01.80, 05.01.81 and 08.10.84 asking the Company to execute  and register a sale deed in his favour.  The Company in response thereto had  all along been assuring the Respondent No. 1 that it would do so.   

       By a letter dated 16.3.1985, one of the Directors of Respondent No. 2  assured Respondent No. 1 that no apprehension should be entertained by  Respondent No. 1 that the contract between him and the company would not  be honoured.  However, on 21.8.1985, the company refused to execute and  register a deed of sale in favour of Respondent No. 1 on the plea that the  same became barred by limitation.   

       A suit for specific performance of the said agreement for sale dated  18.04.1971 was filed in the Court of Munsif, Ghatal, District Midnapore,  West Bengal which was marked as Title Suit No. 133 of 1985.  It is not in  dispute that not only the Appellant herein had filed a caveat in the said suit,  it purchased the said property on 13.11.1985, i.e., during pendency thereof.   Even in the deed of sale executed in favour of the Appellant by the  Company the factum of the said suit being pending in the court had  specifically been mentioned.  

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       Before the learned Trial Judge, inter alia the following contentions  were raised on behalf of the Appellant:

(i)     the agreement for sale was not enforceable as the provisions of  Sections 46 and 48 of the Companies Act had not been complied  with. (ii)    It was not established that the Respondent No. 1 had all along been  and ready and willing to perform his part of contract. (iii)   The suit was barred by limitation.

       As regards the contention that in executing the said agreement the  provisions of Sections 46 and 48 of the Companies Act had not been  complied with, the learned Trial Judge held that as all the Directors of the  Company were parties to the said agreement, the said provisions are not  attracted.  The plea that the Respondent No. 1 was not ready and willing to  perform his part of contract was also held to have been waived.  The plea of  limitation was also negatived.  

       The appeal preferred thereagainst was also dismissed by the First  Appellate Court.

       In the Second Appeal preferred by the Appellant herein, it does not  appear that any substantial question of law was framed by the High Court as  was mandatorily required under Section 100(4) of the Code of Civil  Procedure.  However, a learned Single Judge of the court dealt with all the  contentions raised on behalf of the Appellant and dismissed the suit.

       Mr. Santosh Mishra, learned counsel appearing on behalf of the  Appellant, in support of this appeal submitted that the courts below  committed a manifest error in arriving at the finding that the suit was not  barred by limitation, purported to be relying on or on the basis of the first  part of Article 54 of the Limitation Act whereas in this case the second part  thereof could be attracted.  It was urged that the Respondent No. 1 in terms  of the agreement for sale dated 18.04.1971 was required to pay the balance  sum of Rs. 8,000/- within fourteen months therefrom but even assuming that  the deed of sale was to be executed and registered on perfection of title, the  suit filed by the Company against third parties having been decreed on 31st  August, 1979, the period of limitation in terms of Article 54 of the  Limitation Act should have been reckoned from the said date.  Strong  reliance in this behalf has been placed on Ramzan v. Hussaini [(1990) 1  SCC 104], Tarlok Singh v. Vijay Kumar Sabharwal [(1996) 8 SCC 367],  T.L. Muddukrishana and Another v. Lalitha Ramchandra Rao (Smt.) [(1997)  2 SCC 611] and Venkappa Gurappa Hosur v. Kasawwa C/o Rangappa  Kulgod [(1997) 10 SCC 66].

       It was further urged that in the event, the terms and conditions  contained in the said agreement dated 18.04.1971 were found to be  uncertain, the same would be void in terms of Section 29 of the Indian  Contract Act.   

       The learned counsel would furthermore submit that having regard to  the provisions of Sections 46 and 48 of the Companies Act having not been  complied with, the said agreement could not have been enforced.

       Mr. Mishra, as regards the plea of readiness and willingness on the  part of the Respondent No. 1 to perform his part of contract, would submit  that although the said plea is not available so far as the present Appellant is  concerned in view of the decision of this Court in Jugraj Singh and Another  v. Labh Singh and Others [(1995) 2 SCC 31] but it was for the court to see  as to whether the plaintiff has proved his case in this behalf or not.

       Mr. Gourab Banerji, learned Senior Counsel appearing on behalf of  the Respondents, on the other hand, submitted that the question of limitation  being a mixed question of fact and law, the contention that the first part of

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Article 54 of the Limitation Act would not be attracted in this case should  not be permitted to be raised having not been raised before the courts below.   It was submitted that both the courts understood that having regard to the  conduct of the parties, the agreement was kept alive and at all material point  of time the contract was subsisting.  As regards alleged non-compliance of  the provisions of Sections 46 and 48 of the Companies Act, the learned  counsel urged that from the findings of the fact arrived at by all the courts, it  would be evident that all the Directors signed the agreement of sale on  behalf of the Company and in any event they have sufficient authority to do  so.  Even under the Articles of Association of the Company, it was urged,  one of the Directors was entitled to execute the deed of sale on behalf of the  Company.

       The Appellant herein is a subsequent purchaser.  A finding of fact has  been arrived at by all the courts that he had purchased the property with full  notice of the said agreement for sale.   

       The Company has not preferred any appeal against the judgment and  decree passed by the learned Munsif before the appellate court.   

       A deed of sale has already been executed in favour of the First  Respondent in execution of the decree passed by the learned Trial Court.   Before the High Court, as noticed hereinbefore, no substantial question of  law was framed.  The question as regards the applicability of the first part or  the second part of Article 54 of the Limitation Act had also not been raised  before the High Court.  The parties adduced evidence only on that basis.

       So far as the question of limitation is concerned, the learned Trial  Judge held:

"The letters sent by the plaintiff or his brothers on  behalf of the plaintiff (ext. 8 to 11), the letter of  chairman director Purushattam Roy (ext. 7)  coupled with the fact of non issuing of any notice  by defendant no. 1 estate repudiating that contract  proved beyond any trace of doubt that the  agreement between plaintiff and defendant no. 1  estate was subsisting and was still in force and that  the suit was not barred under Article 54 of  Limitation Act."

       We may notice that the learned First Appellate Court as regards the  Appellants’ contention that the suit was barred by limitation held:

"Next, it was vehemently argued before this court  that the suit is barred by limitation as it was recited  in ext. 3 that the transfer would be effective within  14 months after execution of the bainanama (Ext.  3).  But the argument is not tenable in view of the  fact that the time has been expanded by the  respondent no. 2 impliedly by agreeing to transfer  of the suit property as and when time comes.  The  respondent no. 1 and his brother despatched  several letters (Ext. 8,9,10,11) to the respondent  no. 2 for transfer of the suit property to them.   Ultimately, by ext. 7 (a letter sent by the company  to the respondent no. 1) the company has agreed to  extend the time giving the respondent no. 1  assurance that just in time transfer would be made  effective.  Ext. 7 also suggests that the letters (ext  \026 8,9,10,11) sent by the respondent no. 1 and his  brothers were received by the company,  respondent no. 2.  Thus, it can be said safely that  the time which was recited in the ext \026 3 was  extended by respondent no. 2 by ext \026 7 and

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moreover, ext \026 3 suggests unequivocally that time  is not essence of the contract.  Had the time being  the essence, the words "subject to perfection" on  the title of the respondent no. 2 of the suit property  would not have occurred in ext \026 2.  Therefore,  when the ld. Munsif has discussed this point in this  light this court sees nothing to interfere."

       The High Court has also accepted the said reasonings of the learned  lower appellate court stating:

"As regards the second point urged by Mr.  Mukherjee, in my opinion, the same is also without  any force.  The respondent no. 1 having made  specific case that the company refused to perform  its part of the contract in the year 1985 and having  produced letters written on behalf of the company  showing that the agreement was subsisting and no  person having come forward to depose on behalf  of the company to convert those statements, in my  opinion, the learned courts below rightly found  that the suit is not barred by limitation."

       Contention of Mr. Mishra as regard the applicability of the first or the  second part of Article 54 of the Limitation Act will have to be judged having  regard to the aforementioned findings of fact.  A plea of limitation is a  mixed question of law and fact.  The question as to whether a suit for  specific performance of contract will be barred by limitation or not would  not only depend upon the nature of the agreement but also the conduct of the  parties and also as to how they understood the terms and conditions of the  agreement.  It is not in dispute that the suit for specific performance of  contract would be governed by Article 54 of the Limitation Act, 1964.   While determining the applicability of the first or the second part of the said  provision, the court will firstly see as to whether any time was fixed for  performance of the agreement of sale and if it was so fixed, whether the suit  was filed beyond the prescribed period unless any case of extension of time  for performance was pleaded and established.  When, however, no time is  fixed for performance of contract, the court may determine the date on  which the plaintiff had notice of refusal on the part of the defendant to  perform the contract and in that event the suit is required to be filed within a  period of three years therefrom.   

       In this case, before the Trial Court, the parties proceeded on the basis  that the Second Respondent herein refused to execute and register a deed of  sale in terms of the said agreement on 21.8.1985.  The courts below have  also arrived at a finding of fact that the time for performance of the said  agreement for sale had all along been extended and even as on 16.3.1985, a  Director of the Second Respondent assured the First Respondent that it  would be honored.  In a suit for specific performance of contract in respect  of any immovable property, time would ordinarily not be the essence of  the  contract.  The Appellant herein also did not raise any plea to the said effect.  

       A bare perusal of Article 54 of the Limitation Act would show that the  period of limitation begins to run from the date on which the contract was to  be specifically performed.  In terms of Article 54 of the Limitation Act, the  period prescribed therein shall begin from the date fixed for the performance  of the contract.  The contract is to be performed by both the parties to the  agreement.  In this case, the First Respondent was to offer the balance  amount to the Company, which would be subject to its showing that it had a  perfect title over the property.  We have noticed hereinbefore that the courts  below arrived at a finding of fact that the period of performance of the  agreement has been extended. Extension of contract is not necessarily to be  inferred from written document.  It could be implied also.  The conduct of  the parties in this behalf is relevant.  Once a finding of fact has been arrived

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at, that the time for performance of the said contract had been extended by  the parties, the time to file a suit shall be deemed to start running only when  the plaintiff had notice that performance had been refused.  Performance of  the said contract was refused by the Company only on 21.8.1985.  The suit  was filed soon thereafter.  The submission of Mr. Mishra that the time fixed  for completion of the transaction was determinable with reference to the  event of perfection of title of the Second Respondent cannot be accepted.   The said plea had never been raised before the courts below.  Had such a  plea been raised, an appropriate issue could have been framed.  The parties  could have adduced evidence thereupon.  Such a plea for the first time  before this Court cannot be allowed to be raised.  Even otherwise on a bare  perusal of the agreement for sale dated 18.4.1971, it does not appear that it  was intended by the parties that the limitation would begin to run from the  date of perfection of title.

       In Ramzan (supra), Sharma, J., (as the learned Chief Justice then was),  opined that the date fixed for the parties for performance of the agreement  should be ascertained on the basis of the terms of the contract.  On an  interpretation of the agreement in sale, which was the subject matter of the  said suit, the same was held to be a contingent contract within the meaning  of Section 31 of the Indian Contract Act.  Therein, the property was placed  under a mortgage and the defendant had agreed to execute a deed of sale on  the redemption of the mortgage by her.  The mortgage was redeemed in  1970.  It was in the aforementioned fact situation, the doctrine of id certum  est quod certum redid potest (certainty need not be ascertained at the time)  was applied.  The said decision, therefore, is not applicable in the instant  case.

       In Tarlok Singh (supra), an agreement was entered into by the parties  on 21.12.1984.  A proceeding was pending in respect of the suit land.  The  time for performance was extended by an agreement dated 18.8.1984  stipulating that the Appellant therein would be required to execute the same  within the 15 days of the order vacating the injunction which had been  passed.  In view of the said admitted fact, it was held that the date for  performance of the contract was fixed.  The order granting injunction having  been vacated on 6.4.1986, the suit which was instituted on 25.8.1989, was  held to be barred by limitation.

       In T.L. Muddukrishana (supra), Tarlok Singh (supra) was followed.

       In Venkappa Gurappa Hosur (supra), a finding of fact was arrived at  that the agreement was refused to be executed as far back in 1959 and in that  view of the matter it was held that the issuance of a notice in August, 1972  did not stop running of the period of limitation.  The said decision, therefore,  has no application in the present case.

       Performance of a contract may be dependent upon several factors  including grant of permission by the statutory authority in appropriate cases.   If a certain statutory formality is required to be complied with or permission  is required to be obtained, a deed of sale cannot be registered till the said  requirements are complied with.  In a given situation, the vendor may not be  permitted to take advantage of his own wrong in not taking steps for  complying the statutory provisions and then to raise a plea of limitation.   

       An almost identical question came up for consideration before a  Division Bench of this Court in S. Brahmanand and Others v. K.R.  Muthugopal (Dead) and Others [(2005) 12 SCC 764] wherein this Court laid  down the law:

"Thus, this was a situation where the original  agreement of 10-3-1989 had a "fixed date" for  performance, but by the subsequent letter of 18-6- 1992 the defendants made a request for postponing  the performance to a future date without fixing any

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further date for performance. This was accepted by  the plaintiffs by their act of forbearance and not  insisting on performance forthwith. There is  nothing strange in time for performance being  extended, even though originally the agreement  had a fixed date. Section 63 of the Contract Act,  1872 provides that every promisee may extend  time for the performance of the contract. Such an  agreement to extend time need not necessarily be  reduced to writing, but may be proved by oral  evidence or, in some cases, even by evidence of  conduct including forbearance on the part of the  other party.  Thus, in this case there was a  variation in the date of performance by express  representation by the defendants, agreed to by the  act of forbearance on the part of the plaintiffs.  What was originally covered by the first part of  Article 54, now fell within the purview of the  second part of the article\005"  

       In R.K. Parvatharaj Gupta v. K.C. Jayadeva Reddy [(2006) 2 SCALE  156], wherein one of us was a member, it was observed:

"       In terms of the said Article, a suit for  specific performance of a contract is required to be  filed within three years;  in the event no date is  fixed for the performance,  within a period of three  years from the date when the plaintiff has notice  that performance is refused.  The notice dated  24.04.1984, thus, is required to be construed in the  context of the agreement dated  13.10.1982 entered  into by and between the parties.   

       There cannot be any doubt whatsoever that  in respect of a contract for sale of immovable  property, time is not of the essence of the contract,  but the question as regard the conduct of the  Appellant must be considered in the backdrop of  the events noticed hereinbefore."

       The said decision has again been noticed in Gunwantbhai Mulchand  Shah & Ors. v. Anton Elis Farel & Ors. [(2006) 3 SCALE 82] wherein it has  been held:

"We may straightaway say that the manner in  which the question of limitation has been dealt  with by the courts below is highly unsatisfactory.  It was rightly noticed that the suit was governed by  Article 54 of the Limitation Act, 1963. Then, the  enquiry should have been, first, whether any time  was fixed for performance in the agreement for  sale, and if it was so fixed, to hold that a suit filed  beyond three years of the date was barred by  limitation unless any case of extension was  pleaded and established. But in a case where no  time for performance was fixed, the court had to  find the date on which the plaintiff had notice that  the performance was refused and on finding that  date, to see whether the suit was filed within three  years thereof. We have explained the position in  the recent decision in R.K. Parvatharaj Gupta v.  K.C. Jayadeva Reddy 2006 (2) Scale 156. In the  case on hand, there is no dispute that no date for  performance is fixed in the agreement and if so,

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the suit could be held to be barred by limitation  only on a finding that the plaintiffs had notice that  the defendants were refusing performance of the  agreement. In a case of that nature normally, the  question of limitation could be decided only after  taking evidence and recording a finding as to the  date on which the plaintiff had such notice. We are  not unmindful of the fact that a statement appears  to have been filed on behalf of the plaintiffs that  they do not want to lead any evidence. The  defendants, of course, took the stand that they also  did not want to lead any evidence. As we see it, the  trial court should have insisted on the parties  leading evidence, on this question or the court  ought to have postponed the consideration of the  issue of limitation along with the other issues  arising in the suit, after a trial."

       In view of the aforementioned pronouncements of this Court, we are  of the opinion that the plea raised by the learned counsel for the Appellant  that the suit was barred by limitation cannot be accepted as all the courts  have arrived at a finding of fact that the period for execution of the deed of  sale had been extended.

       Similarly, the applicability of the provisions of Section 29 of the  Indian Contract Act having not been raised, the same cannot be permitted to  be raised for the first time before this Court.  Even otherwise we do not see,  on a plain reading of the said agreement of sale dated 18.04.1971, that the  terms thereof were uncertain or vague so as to attract the provisions of  Section 29 of the Indian Contract Act.

       Sections 46 and 48 of the Companies Act, read as under:

"46. Form of contracts. \027(1) Contracts on behalf  of a company may be made as follows: \027  (a)   a contract which, if made between private  persons, would by law be required to be in writing  signed by the parties to be charged therewith, may  be made on behalf of the company in writing  signed by any person acting under its authority,  express or implied, and may in the same manner be  varied or discharged;  (b)  a contract which, if made between private  persons, would by law be valid although made by  parole only and not reduced into writing, may be  made by parole on behalf of the company by any  person acting under its authority, express or  implied, and may in the same manner be varied or  discharged.  (2) A contract made according to this section shall  bind the company.

48. Execution of deeds. \027(1) A company may, by  writing under its common seal, empower any  person, either generally or in respect of any  specified matters, as its attorney, to execute deeds  on its behalf in any place either in or outside India.  (2) A deed signed by such an attorney on behalf of  the company and under his seal where sealing is  required, shall bind the company and have the  same effect as if it were under its common seal."   

       Section 46 merely lays down the mode of signing contract on behalf  of the company.  Once a deed is executed on behalf of the company, it is

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company and not the persons signing can sue or be sued on the contract if  the evidence is clear that the signature was only that of the company.   

       An oral agreement for sale is permissible in law.  There is furthermore  no dispute that the agreement for sale was entered into by three directors of  the company.  The subsequent letters written on behalf of the Company  clearly demonstrate that all the directors were aware of the said agreement.   The company before the Trial Court never chose to file any written  statement or dispute the contentions raised in the plaint.  The Company,  thus, never denied or disputed the correctness or otherwise of the contents of  the said agreement.  The Company never denied or disputed the terms of the  agreement nor raised any plea that the agreement was not binding on the  company or the same was illegal.  In fact in the deeds executed in favour of  the agreement, it had clearly been stated that the suit for specific  performance of contract filed by Respondent No. 1 was pending.

       In Chairman, Life Insurance Corpn. and Others v. Rajiv Kumar  Bhasker [(2005) 6 SCC 188], this Court held:

"Agency as is well settled, is a legal concept which  is employed by the Court when it becomes  necessary to explain and resolve the problems  created by certain fact situations. In other words,  when the existence of an agency relationship  would help to decide an individual problem, and  the facts permits a court to conclude that such a  relationship existed at a material time, then  whether or not any express or implied consent to  the creation of an agency may have been given by  one party to another, the Court is entitled to  conclude that such relationship was in existence at  the time, and for the purpose in question. [See  Establishing Agency by GHL Fridman \027 1968  (84) Law Quarterly Review 224 at p.     231.]"

       It is not in dispute that the contract was executed in the name of the  company.  It has furthermore not disputed that all the five directors executed  the agreement.  The company was a private limited company.  The Trial  Court held:

"\005As all the directors of the company took part in  execution of ext. \026 3 there was not necessity of  giving any special authorization either u/s 46 or u/s  48 of the Companies Act for entering into or for  execution of the contract.  It is true that at the time  of execution of the documents in favour of the  party defendants (ext. A series) there was a  resolution of the company.  The copy of the said  resolution was marked (ext. \026 1).  On plain reading  of Ext. \026 1 it is found that as 4 directors out of the  5 directors of the company were empowered to  execute those documents said resolution was  necessary u/s. 48 of the Companies Act."

       Before the courts below, execution of the agreement was not denied.   Thus, even in the absence of resolution the contract could not have been held  to be invalid or illegal.   

       So far as the question of putting up of the seal of the Company is  concerned, it is a relic of the days when mediaeval barons, who could not  read or write, used their rings to make a characteristic impress. Even in  absence of a seal, the Company may still be held to be liable having regard  to the nature of transaction and the authority of those who had executed it.   If the act of the Directors is not ultra vires or no public policy is involved,

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the parties acting thereupon cannot be left at large.  [See Probodh Chandra v.  Roadoils (India) Ltd., AIR 1930 Cal 782 and OTV Birwel Co. Ltd. v.  Technical and General Guarantee Co. Ltd., (2002) 4 All ER 668].

       For the reasons aforementioned, we do not find any merit in this  appeal which is dismissed accordingly.  No costs.