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Amritlal Maganlal Vs. Harkisandas Kahandas - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtMumbai
Decided On
Case NumberFirst Appeal No. 231 1944
Judge
Reported inAIR1946Bom149; (1945)47BOMLR878
AppellantAmritlal Maganlal
RespondentHarkisandas Kahandas
DispositionAppeal dismissed
Excerpt:
.....shortly drawn up. those terms were that the plaintiff should bear the cost of the execution of the sale-deed, that the plaintiff should continue the partition suit and that the plaintiff should pay the assessment and take the income of the property after the execution of the sale-deed. it was not contemplated that the terms agreed upon were to be further discussed or varied or that any other terms were to be added. on the question whether in the absence of a pacca agreement which was contemplated, the draft agreement already entered into was binding on the parties:-;that the mere fact that a formal document of contract was to be drawn up embodying all the terms did not render the agreement incomplete, and that as all the terms already agreed upon but not mentioned in the agreement were..........35) to the plaintiff for the sale of his share for rs. 9,999. both hiralal and navanitlal executed sale-deeds in favour of the plaintiff in fulfilment of their agreements without any hitch on june 22 and june 16 respectively. but the defendant's agreement did not run a smooth course, and as he refused to pass a sale-deed, the plaintiff had to institute this suit.2. the defendant resisted the plaintiff's claim on two grounds, namely, that he had been fraudulently misled into agreeing to sell his share for rs. 10,000 on a misrepresentation that his brother hiralal also had agreed to sell his share for rs. 11,000, and that the alleged agreement was not a concluded contract and therefore the plaintiff was not entitled to claim its specific performance. the lower court disallowed both these.....
Judgment:

Lokur, J.

1. This appeal arises out of a suit for specific performance of a contract of sale of the defendant's one-third share in the property called Bapana-Khar in Bassein taluka and for recovery of its possession as well as mesne profits, or in the alternative for the return of the earnest money, together with Rs. 5,250 as damages for breach of contract. The main facts which led to this suit are undisputed. Bapana-Khar was owned in equal shares by the defendant Amritlal, his brother Hiralal and their nephew Navanitlal. They were separated, and had divided their property, but they had kept Bapana-Khar undivided, and wanted to dispose of it. The defendant had already mortgaged his one-third share to his niece Kamalabai, and an estate-broker named Bhagwandas had obtained a money decree against him. So on March 24, 1943, he passed a writing, exhibit 39, to Bhagwandas authorising him to bring about a contract for the sale of his share in Bapana-Khar for Rs. 10,000 within one month. The plaintiff, a business man of Bombay, wanted to invest some money in lands, and had asked his father Kahandas, as well as the broker Nanuram, to negotiate for the purchase of some suitable lands. It was at the instance of Nanuram that Bhagwandas took the agreement, exhibit 39, from the defendant. Then on April 5, 1943, the plaintiff obtained an agreement, exhibit 381, from Hiralal for the sale of his share in Bapana-Khar, together with some other property for Rs. 15,001. On April 10, 1943, the defendant, at the instance of Bhagwandas, passed a writing (exhibit 39) to the plaintiff agreeing to sell his share to him for Rs. 10,000. On April 21, 19143, Navanitlal also passed an agreement (exhibit 35) to the plaintiff for the sale of his share for Rs. 9,999. Both Hiralal and Navanitlal executed sale-deeds in favour of the plaintiff in fulfilment of their agreements without any hitch on June 22 and June 16 respectively. But the defendant's agreement did not run a smooth course, and as he refused to pass a sale-deed, the plaintiff had to institute this suit.

2. The defendant resisted the plaintiff's claim on two grounds, namely, that he had been fraudulently misled into agreeing to sell his share for Rs. 10,000 on a misrepresentation that his brother Hiralal also had agreed to sell his share for Rs. 11,000, and that the alleged agreement was not a concluded contract and therefore the plaintiff was not entitled to claim its specific performance. The lower Court disallowed both these objections and decreed specific performance of the contract on payment Of the balance of the consideration, and also possession of the defendant's one-third share in the Bapana-Khar; but it did not award any damages. The defendant has appealed against the decree and the plaintiff has put in! cross-objections claiming Rs. 2,200 byway of damages.

3. There is no substance in the defendant's contention of misrepresentation and fraud. The alleged representation that Hiralal had sold his share for Rs. 11,000 is not proved, nor can it be said to be false, since the property sold by Hiralal for Rs. 15,001 included not only his one-third share in Bapana-Khar, but also some other property. This ground of defence was candidly given up and was not pressed in this Court.

4. In support of the defendant's second contention that the agreement, exhibit 39, was not a concluded contract, his learned Counsel Mr. Coyajee urged two reasons, namely, that exhibit 39 itself expressly stated that a pacca agreement was to be drawn up later, and that all the terms agreed upon were not embodied in exhibit 39. We find that both these reasons are true, but they do not render the agreement unenforceable. To appreciate this, it is necessary to go into some details.

5. When the defendant entered into the agreement with Bhagwandas on March 24, 1943, he had filed a suit for partition and separate possession of his one-third share in Bapana-Khar against Hiralal and Navanitlal, and the suit was pending. By that agreement (exhibit 39) the defendant authorised Bhagwandas to bring about an agreement of sale of his one-third share in Bapana-Khar for Rs. 10,000 within one month on the following terms:

(1) On the date of the agreement, he should be paid Rs. 1,000 as earnest;

(2) Rs, 3,000 more should be paid to him within seven days thereafter;

(3) the balance of Rs. 6,000 should be paid within one month from the date of agreement and the sale-deed executed;

(4) the vendee should bear the expenses incurred thereafter for the prosecution of the partition suit pending in the Andheri Court;

(5) the vendor should take the income of 1942-43 and thereafter the vendee should take it;

(6) the vendee should pay the Government assessment for 1943-44 and thereafter;

(7) the vendee should bear the cost of the execution of the sale-deed; and

(8) on receipt of Rs. 4,000 as provided above, the defendant should satisfy Kamalabai's mortgage on the land.

6. The defendant agreed to pay brokerage at one per cent. to Bhagwandas if he would get a purchaser on these terms.

7. Accordingly Bhagwandas approached the plaintiff's broker Nanubhai and all the parties including the plaintiff's father Kahandas, and his brother Nagindas, who is a solicitor, met together at Papadi on April 10, 1943, and after a discussion of the terms a draft agreement (exhibit 57) was drawn up. It was written by Bhagwandas, signed by the plaintiff and attested by Nanubhai and another. Its terms were:

(1) On the date of the agreement the plaintiff should pay Rs. 100 as earnest. This amount was paid in cash then and there.

(2) Within seven days, Rs. 400 more should be paid as earnest and pacca, sata-patra (deed of contract) on a one rupee stamp paper should be executed.

(3) Within a fortnight thereafter, the plaintiff should pay Rs. 4,000, with which the defendant should redeem Kamalabai's mortgage, and hand over the mortgage-deed to the plaintiff.

(4) The sale-deed should be executed within three months of the pacca sata-khat, alter the plaintiff is satisfied about the defendant's marketable title.

8. The execution of this agreement is admitted by the defendant. It may be noted that it does not embody the same or all the terms contained in exhibit. 39. The terms regarding the payment of the earnest are different, and it is silent about the prosecution of the suit, the enjoyment of the income, the payment of the assessment and the cost of the execution of the sale-deed. It contemplated the execution of a pacca deed on a stamp paper within seven days.

9. Two days later, on April 12, the parties met again at Papadi and Vagh was called to write out the pacca sata-patra on a stamp paper. The defendant had brought extracts of Record of Rights and gave them to Vagh, who then wrote out the agreement. He read it out to the parties and it was found that he had omitted to refer to the redemption of Kamalabai's mortgage, and to some other details. He said that he would rewrite it, but as it was late, and as the plaintiff and his father were in a hurry to catch the train to Bombay, the idea of a formal pacca sata-khat was given up, and it was settled that the sale-deed itself should be executed as soon as possible. Kahandas was prepared to pay, Rs. 400 as earnest, but the defendant said that the whole of the balance of the price might be paid when the sale-deed was executed. He also asked the plaintiff, his brother Nagindas and his father Kahandas to go to Andheri Court on April 17 to inspect the title deeds and other papers.

9. On the 17th they all went to Andheri Court and the defendant's pleader Mr. Karnik showed them the papers of the partition suit, and Nagindas told Mr. Karnik the terms of the sale that had been agreed upon. Nagindas then returned to Bombay, and all the others went to Mr. Karnik's house. There at Mr. Karnik's dictation, the defendant's clerk, Bhole, wrote out the points to be included in the sale-deed. That document is exhibit 67, and among the points noted in it are that the plaintiff should get his name brought on the record of the partition suit pending in the Andheri Court and proceed with it, that he should pay future Government assessment, and that the plaintiff should take the income up to the date of the sale-deed.

10. According to the plaintiff, they were to meet on the next day, Kamalabai's dues were to be paid off and the sale-deed was to Joe (executed ; but the defendant avoided it. In the correspondence that followed, the defendant never alleged that there was no completed contract for sale, but complained that the plaintiff had broken it. On April 10, 1943, he sent a notice (exhibit 59) to the plaintiff through his pleader Mr. Karnik, in which he stated that the plaintiff had made an agreement on April 10, 1943, to purchase his Bapana-Khar for Rs. 10,000 and had failed to observe the conditions of the contract, that the said agreement should, therefore, be treated as cancelled and that the earnest of Rs. 100 paid by the plaintiff was forfeited. The plaintiff sent a reply to it on the next day stating that he had not broken the contract and calling upon him to satisfy Kamalabai's mortgage, receive the balance of the price fixed and execute a sale-deed. When the plaintiff sent him some more notices and threatened to file a suit, the defendant replied on May 21, 1943, that there was no completed contract of sale, and that he had been misinformed by the plaintiff that Hiralal had sold his share for Rs. 11,000 only. After some further correspondence the plaintiff filed this suit.

11. The suit is based on the agreement of April 10, 1943, (exhibit 39), and some of the formal terms which had been agreed upon were not set out in it, as a formal sata-khat on a stamp paper was intended to be shortly drawn up. Bhagwandas himself has stated in his deposition what those terms were. He says that in the pakka sata-khat it was to be mentioned that the purchaser should bear the cost of the execution of the document, that the purchaser should continue the partition suit in the Andheri Court, that the vendor should take the income of 1942-43, and that thereafter the purchaser should pay the assessment and take the income. All these terms were agreed upon before the agreement was written out on April 10, 1943. The mere fact that a formal document of contract was to be drawn up embodying all the terms does not render the agreement incomplete. In Gavind Luxman v. Harichand Mancharam : AIR1919Bom40 Marten J. held that such an agreement did not amount to a contract since the reference to the drawing up of a bargain paper prevented the completion of the contract until such a bargain paper was executed. That decision was set aside in appeal, and in Harichand Mancharam v. Govind Luxman Gokhale (1922) L.R. 50 IndAp 25:25 Bom. L.R. 531 the Privy Council held that where a contract of sale of land contained all the necessary terms and provided that the bargain paper should be prepared by a vakil, that provision could not be construed as a condition precedent, and that the purchaser was entitled to have specific performance of the contract.

12. The writing, exhibit 39, read by itself, contains a complete contract. If there were some other terms, which had been agreed upon, but were not included in the writing as another formal pacca sata-khat was to be drawn, it is open to the parties to prove what those terms were, provided they were clearly agreed upon and are not inconsistent with the written agreement. They would clearly fall within the second proviso to Section 92 of the Indian Evidence Act, as pointed out by Pontifex J. in Cutts v. Brown I.L.R (1880) Cal. 328.

13. A large number of cases were cited at the bar as to whether in the absence of a formal deed of agreement which was contemplated, an agreement already entered into is not binding on the parties and is, therefore, unenforceable. The effect of the English cases on the subject is accurately summed up in Halsbury, Vol. XXIX, p. 237, paragraphs 321 and 322, as follows:

An acceptance must be absolute and unqualified. There is no completed contract if the acceptance is ' subject to approval of terms of contract', or ' subject to a formal contract being prepared and signed by both parties as approved by their solicitors', or simply ' subject to contract', or where it otherwise appears that all the terms of the contract are not definitely settled or that additional terms are to be agreed to and inserted in the formal contract.

On the other hand, if it appears that the parties have agreed upon the essential terms of the sale a mere intimation of a desire that the agreement shall be embodied in another docu-ment of a more formal nature, or the expression of what is necessarily a condition, not of the acceptance, but of the contract itself, does not prevent the agreement being enforceable.

It is a question of construction whether the parties have come to a final agreement, though they intend to have a more formal document drawn up.

14. The law is the same in India, except that there being no statutory provision corresponding to the statute of frauds, the agreement need not be in writing. Mr. Coyajee,. for the appellant, cited several cases which fall within the first of the three paragraphs quoted above, while in our opinion the facts of the present case bring it under the second paragraph. The test of the difference between the two cases is clearly expressed; by Jessel M.R. in Winn v. Bull (1877) 7 Ch. D. 29 as follows (p. 32):

.where you have a proposal or agreement made in writing expressed to be subject to a formal contract being prepared, it means what it says ; it is subject to and is dependent upon a formal contract being prepared. When it is not expressly stated to be subject to a formal contract it becomes a question of construction whether the parties intended that the terms agreed on should merely be put into form, or whether they should be subject to a new agreement the terms of which are not expressed in detail.

15. The same view was expressed in Von Hatzfeldt-Wildenburg v. Alexander [1912] 1 Ch. 284 and Ross-dak v. Denny [1921] 1 Ch. 57. The principles laid down in these cases were applied in Harichand Mancharam v. Govind Luxman (1922) L.R. 50 IndAp 25: 25 Bom. L.R. 531 and their Lordships of the Privy Council observed (p. 31):

Exhibits A and A-l show clearly that the parties had come to a definite and complete agreement on the subject of the sale. They embodied in the documents that were exchanged the principal terms of the bargain on which they were in absolute agreement, and regarding which they did not contemplate any variation or change. The reservation in respect of a formal document to be prepared by a vakil only means that it should be put into proper shape and legal phraseology, with any subsidiary terms that the vakil might consider necessary for insertion in a formal document.

16. These remarks are aptly applicable to the agreement in the present case. The three terms referred to by Bhagwandas and also by the defendant regarding the cost of the execution of the document, the continuation of the Andheri suit and the appropriation of the income, which were to be embodied in the agreement to be drawn up on a stamp paper, were only subsidiary. Even in the absence of any express mention, those terms would have been implied as a legal consequence of the sale. Under Section 29 of the Indian Stamp Act, the purchaser has to bear the cost of the execution of the sale-deed. Under Section 55 of the Transfer of Property Act, the vendor takes the income till the execution of the sale-deed, and thereafter the purchaser. After the sale, the vendor would have no interest left in the land, and the purchaser would necessarily have to get his name substituted in the suit about the property purchased by him and to proceed with the suit. In fact after purchasing the shares of Hiralal and Navanitlal, the plaintiff joined the suit as a defendant in their place, and had the defendant sold his share, the plaintiff would have become the owner of the whole of BapanaKhar and the suit for its partition would not have survived. The complaint of the defendant that he had to carry on the suit is groundless, since the plaintiff could not get his name substituted for him, until he got the sale-deed from him. He must thank himself if he was put to any expense in prosecuting the suit until it was compromised.

17. Moreover the defendant expressly admits in his statement that all these terms had been agreed upon before exhibit 39 was written out. To quote his own words:

These paints were settled between us and decided already on April 10. Only our decisions were to be embodied in the formal agreement of sale which was to be drawn up later.

18. Bhagwandas says that although all the terms had been settled, the pakka sata-khat could not be written on April 10 as the survey numbers of the lands to be sold were not available. It is thus evident that all the principal terms of the agreement were noted down on the 10th and a formal deed of agreement, embodying the subsidiary terms also, was to be drawn up after the defendant supplied the information about the survey numbers of the lands. It was not contemplated that the terms agreed upon were to be further discussed or varied or that any other terms were to be added.

19. Mr. Coyajee has relied upon the ruling of this Court in New Mofussil Co. Ltd. v. Shankarlal Narayandas Mundade [1941] Bom. 361: 43 Bom. L.R. 293. That case bears some resemblance to the facts of this case, but can be easily distinguished. In that case Broomfield J. has laid great stress upon the ruling in Coope v. Ridout [1921] 1 Ch. 291, and has significantly remarked that it was not cited before their Lordships of the Privy Council when they decided Harichand's case. With respect, we do not think that Coope v. Ridout lays down any different principle. The facts of that case show that the agreement of sale was subject to the condition that a written contract made inter partes should be formally entered into, and in the absence of such a document it was held that there was no enforceable contract. The other case relied upon by Broomfield J. was Chillingworth v. Esche [1924] 1 Ch. 97. There too there was an agreement to purchase land 'subject to a proper contract to be prepared by the vendor's solicitors', It was held that in the absence of such an executed agreement, either party was entitled to break off negotiations on the simple ground that there was no contract capable of enforcement. These cases clearly fall under the first of the three paragraphs quoted above from Halsbury. Broomfield J. has also referred to Halsbury's footnote to the said paragraph 322, which says:

In practice the reference to a future contract is now treated as making the acceptance conditional on the signing of a formal contract.

20. We respectfully prefer to follow the ruling of the Privy Council in Harichand Man-charam's case, which is binding on us. As pointed out by Mr. Justice Parker (afterwards Lord Parker) in Von Hatzfeldt-Wildenburg v. Alenxander [1912] 1 Ch. 284, if the document relied upon as constituting a contract contemplates the execution of a further document between the parties, it is always a question of construction whether the execution of the further contract is a condition or term of the bargain or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will in fact go through. In the former case there is no enforceable contract either because the condition is unfulfilled or because the law does not recognise a contract to enter into a contract. In the latter case there is a binding contract, and the reference to the more formal document may be ignored. The reference to a formal document in exhibit 39 belongs to the latter class.

21. In New Mofussil Co. Ltd. v. Shankerlal Narayandas Mundade [1941] Bom. 361: S.C. 43 Bom. L.R. 293 Broomfield J. observed (p. 372):-

It will be seen that there are a number of other terms besides those agreed on between Nandurdikar and Sir Shapurji. Some of them may be said to be matters of form, that is terms which would have been implied anyhow under the Transfer of Property Act. But this does not by any means apply to all of them, for instance the provision about the fire policy and about the press pool and ginning pool agreements.

22. Divatia J. also distinguished the Privy Council case on the ground that the terms alleged to have been agreed to in the first instance were not all the terms embodied in the draft agreement and they could not be regarded as merely subsidiary. In the present case, as already pointed out, all the terms already agreed upon but not mentioned in exhibit 39 were only subsidiary and hence exhibit 39 must be deemed to contain a completed and enforceable contract.

23. In New Mofussil Co. Ltd. v. Shankerlal Narayandas specific performance was refused also on the ground that the plaintiff had asked for specific performance not of the terms agreed to between his broker and the defendant, but of the terms in the draft agreement. Mr. Coyajee argues that here too the plaintiff has sought specific performance of the agreement contained in exhibit 39, ignoring the other terms orally agreed upon. But those are only subsidiary terms which legally follow the sale, though not specified, and the plaintiff has never refused to abide by them.

24. As admitted in the written statement, the plaintiff was ready to pay the balance of the earnest, but the defendant refused to accept it. If the defendant had passed the sale-deed, there would have been no need to prosecute the Andheri suit. The plaintiff is not shown to have broken the contract, but the defendant's notice to the plaintiff shows that he wanted to back out of it, on the false excuse that a false representation had been made to him that Hiralal had agreed to sell his share for Rs. 11,100. The plea that there was no completed contract of sale was an afterthought, and as both the grounds of defence have failed, the plaintiff is rightly given a decree for specific performance and other ancillary reliefs granted by the lower Court.

25. The plaintiff had claimed Rs. 2,200 as mesne profits, but the lower Court refused to award him any mesne profits on the ground that the defendant's possession was not wrongful till the sale-deed was executed. The plaintiff has put in cross-objections claiming that amount in this appeal. Technically the view of the lower Court is cor-rect, but when the plaintiff produced the balance of the purchase money in Court, he became entitled to the execution of the sale-deed and possession of the property. Hence the proper order would be to award to the plaintiff damages equivalent to mesne profits from the date of his paying to the defendant or into the Court the unpaid balance of the purchase money as ordered by the lower Court till the recovery of possession, the amount to be determined in execution proceedings.

26. With this modification, we confirm the decree of the lower Court and dismiss the appeal with costs. The parties shall bear their own costs of the cross-objections.


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