Skip to content


Vithaldas Vishram Vs. Jagjivan Gordhandas - Court Judgment

LegalCrystal Citation
SubjectContract
CourtMumbai
Decided On
Case NumberO.C.J. Suit No. 702 of 1937
Judge
Reported inAIR1939Bom84; (1939)41BOMLR33
AppellantVithaldas Vishram
RespondentJagjivan Gordhandas
Excerpt:
indian sale of goods act (iii of 1930), section 55 - sale of goods-suit to recover price -sale of decree-time fixed for payment of money-sale out and out-insolvency of judgment-debtor before payment of money-property in decree passing to purchaser-suit by vendor for price-sale of decree can be oral-civil procedure code (act v of 1908), order xxi, rule 16.;there may be an oral contract for the sale of a decree. though the transferee of a decree must, if he wishes to execute it against the judgment-debtor, arm himself with an assignment of the decree in writing, such assignment in writing is required only for purposes of procedure, and does not affect the substantive rights of the parties so far as the agreement itself is concerned, if that agreement had previously been entered into..........the liquidator of a company, which had been dissolved, after an agreement by the liquidator to sell a decree, could execute an assignment of the decree after dissolution of the company for the purpose of enabling the transferee of the decree to execute the decree. in the judgment it was pointed out that the decree was transferred by auction on february 1, 1922, when the company was not dissolved, and following earlier decisions which were cited in the judgment the court held that a decree is not an actionable claim within the meaning of the transfer of property act, and therefore an assignment of a decree need not be in writing, from which it followed that the assignment was valid and complete, though not in writing. the judgment then proceeded to draw attention to the fact that for.....
Judgment:

Blackwell, J.

1. In this case the plaintiff sues to recover the sum of Rs. 3,750 the price of a decree alleged to have been bargained and sold by him to the defendant. In the alternative he claims a like sum as damages.

2. The defence to the suit put shortly is that the agreement was a mere agreement to sell and not a sale out and out, that it was subject to an implied condition between the parties that the decree should remain capable of execution, and that before the agreement to sell matured into a sale the judgment-debtor became insolvent, and the basis of the agreement consequently fell through, and the parties were relieved from their respective obligations under the agreement.

3. It is agreed between the parties that I should first decide whether the agreement was an out and out sale or an agreement to sell, and that the alternative claim for damages should stand over until after my decision on this question.

4. The material facts may be briefly stated : On June 26, 1936, the plaintiff in summary suit No. 578 of 1936 obtained a decree against one Mulraj Gordhandas Kapadia for Rs. 9,335-8-0 with interest thereon at six per cent. per annum from the date of the decree till payment. In execution of that decree by a warrant of attachment dated July 4, 1936, the right, title and interest of the judgment-debtor in two immoveable properties in Bombay were attached. The judgment-debtor having failed to satisfy the decree, the Sheriff of Bombay was directed to sell by public auction the right, title and interest of the judgment-debtor in those immoveable properties by a warrant of sale dated September 25, 1936. On October 9, 1936, the Commissioner for taking accounts with whom the warrant of sale had been filed issued a notice to claimants in certain newspapers inviting claims in respect of the said two properties. As a result of the notice the defendant, who is a brother of the judgment-debtor, on or about December 3, 1936, filed an affidavit of claim in which he claimed to be a secured creditor, and also claimed priority over the plaintiff in respect of a mortgage dated July 31, 1936, executed by the judgment-debtor in his favour. The plaintiff disputed the defendant's claim to priority. During the investigation of the claim before the Commissioner the defendant, who obviously wished to buy off the plaintiff, came to a settlement with the plaintiff, the terms of which were recorded in a writing signed by the respective attorneys of the plaintiff and the defendant on March 2, 1937. The terms of this settlement constitute the agreement the nature of which is in dispute between the parties. It has been put in as exhibit (A).

5. That agreement is headed, 'Consent terms.' It provides (1) that the applicant (i.e., the defendant) was to pay Rs. 3,750 to the plaintiff within four weeks in full settlement of his claim, (2) that on such payment as aforesaid the plaintiff was to execute an assignment of the judgment debt with all the benefits of the decree within four weeks, and the applicant was to be at liberty to raise the attachment at his cost, and lastly, each party was to bear his costs including the cost of assignment.

6. It is agreed between the parties that a decree, by reason of Section 3(34) of the General Clauses Act (X of 1897), is 'moveable property,' and that as such it falls within the definition of 'goods' in Section 2(7) of the Indian Sale of Goods Act of 1930, in which 'goods' is defined as meaning every kind of moveable property other than actionable claims and money. Both the parties have argued this case upon the footing that the agreement was either an out and out sale of goods, or an agreement to sell goods.

7. In considering the question whether this agreement is a sale or a mere agreement to sell it is to be observed that it has been laid down in Krishnaswami Naidu v. Andi Chetti I.L.R. (1927) Mad. 681 that a sale of a decree may be made orally. The question in that case was whether the liquidator of a company, which had been dissolved, after an agreement by the liquidator to sell a decree, could execute an assignment of the decree after dissolution of the company for the purpose of enabling the transferee of the decree to execute the decree. In the judgment it was pointed out that the decree was transferred by auction on February 1, 1922, when the company was not dissolved, and following earlier decisions which were cited in the judgment the Court held that a decree is not an actionable claim within the meaning of the Transfer of Property Act, and therefore an assignment of a decree need not be in writing, from which it followed that the assignment was valid and complete, though not in writing. The judgment then proceeded to draw attention to the fact that for purposes of execution under Order XXI, Rule 16, of the Civil Procedure Code, a transferee must be able to produce to the Court which passed the decree for the purpose of enabling him to execute the decree a transfer in writing. It is plain, I think, on the construction of the terms of Order XXI, Rule 16, that the requirement of a transfer in writing is a mere requirement of procedure. It is not a substantive enactment which says that unless there is an assignment in writing of a decree a transfer, though made orally, shall be inoperative or void. Rule 16 of Order XXI, which reproduces Section 232 of the Civil Procedure Code of 1882, provides among other things that where a decree is transferred by assignment in writing or by operation of law, the transferee may apply for execution of the decree to the Court which passed it, and the decree may then be executed in the same manner and subject to the same conditions as if the application were made by such decree-holder. The Court in the Madras case, to which I have referred, obviously treated Rule 16 of Order XXI as a mere rule of procedure, and as not affecting the substantive law as to the transfer of decrees, and I entirely agree with that decision.

8. It has been contended by Mr. Khambatta, who has argued this case with great ability on behalf of the defendant, that I am precluded, by a decision of the Privy Council in Jatindra Nath Basu v. Peyer Deye Debt , from holding that the agreement in question is a sale and not a mere agreement to sell. It is therefore important to see what the nature of that case was, and what the decision in regard to it was. The suit was brought by the plaintiffs-respondents against the defendants-appellants for a decree for specific performance of a contract, dated June 20, 1895, whereby the respondents or their representatives agreed to sell a mortgage decree, dated July 17, 1893, to the appellants' representative, one Trailokya Nath Bose, who agreed to buy it for Rs. 19,000. Subsequent to this agreement on an application by the respondents dated June 8, 1898, for execution of the decree of July 17, 1893, it was held that that decree had become time-barred on June 1, 1898. As the result of this the appellants contended that as the decree agreed to be sold had been barred by limitation they were under no obligation to carry out the agreement. Mr. Justice Chitty, who tried the suit, held that it was the duty of the vendors to keep the decree alive and dismissed the suit on the ground that at the date of the suit the decree was barred by limitation. On appeal his decision was reversed, and the suit was decreed, whereupon the appellants appealed to His Majesty in Council.

9. It is to be observed that their Lordships of the Privy Council, as appears from the judgment delivered by Sir John Edge, approached the case as one in which the agreement of which specific performance was sought was an executory agreement, for the completion of which something remained to be done in order to put the parties in a position relative to each other in which, by the preliminary agreement of June 21, 1895, they were intended to be placed. Reference was made to the observations of Lord Selborne L. C. in Wolverhampton and Walsall Railway Co. v. London and North-Western Railway Co. (1873) L.R. 16 Eq. 433, in which it was said that the expression 'specific performance,' as applied to suits known by that name, presupposes an executory as distinct from an executed agreement, something remaining to be done, such as the execution of a deed or a conveyance, in order to put the parties in the position relative to each other in which by the preliminary agreement they were intended to be placed.

10. Stopping there for a moment, it will be observed that the plaintiffs in that case had themselves treated the agreement as an agreement to sell and not an out and out sale, and their Lordships of the Privy Council were discussing the case upon that footing. The only question which fell to be decided by them was whether the plaintiffs, who conceded that the agreement was an agreement to sell and not a sale, were entitled to ask for specific performance of the agreement when by their own default in failing to keep the decree, the subject-matter of that agreement, alive they were not ready and willing at the time when that agreement to sell was to mature into a sale to hand over or assign a decree which was still alive. That was the only point for decision by their Lordships, and therefore certain other observations in the judgment, to which I will now proceed to refer, must, in my opinion, be regarded merely as obiter.

11. Their Lordships went on to observe in the judgment that what remained to be done in that case was, on payment by Trailokya Nath Bose of the agreed price, the transference to him of the decree for sale of July 17, 1893. The judgment then proceeds as follows (p. 515):

Such a transfer of the decree to Trailokya Nath Bose could, by reason of Section 232 of the Code of Civil Procedure, 1882, be effected only by an assignment in writing. On and after the 1st June, 1898, the decree, as a decree capable of being executed, could not by reason of the bar of limitation be assigned to Trailokya Nath Bose. It had become a dead decree: whereas the decree, whatever might be its value, which he had agreed to purchase, and which the executors had agreed to assign to him, was a decree capable of execution.

12. Mr. Khambatta has not unnaturally strongly relied upon this passage, and has submitted that it lays down as a matter of law that a transfer of a decree can be effected only by an assignment in writing. The observations of their Lordships in this respect are, I think, purely obiter for reasons which I have already given, and this view of the matter is in conflict with the view taken by the Madras High Court in Krishnaswami Naidu v. Andi Chetti I.L.R. (1927) Mad. 681, a case in which the question was directly in point. With the greatest respect, therefore, I do not feel myself precluded from approaching this question afresh in a suit, which is not a suit for specific performance, but is a suit for the price of a decree alleged to have been bargained and sold, and in which the plaintiff bases his claim upon an out and out sale, and not upon an agreement to sell. I hold that there may be an oral contract for the sale of a decree, and that though the transferee of the decree must, if he wishes to execute it against the judgment-debtor, arm himself with an assignment of the decree in writing, such assignment in writing is required only for purposes of procedure, and does not affect the substantive rights of the parties so far as the agreement itself is concerned, if that agreement had previously been entered into orally.

13. In considering whether the consent terms in question constitute an out and out sale, or a mere agreement to sell, I apprehend that the Court must endeavour to ascertain when it was the intention of the parties that the property in the goods, the subject-matter of the sale, was to be transferred. I think it is plain from the consent terms that from the time when they were entered into the plaintiff could not have proceeded with the sale of the right, title and interest of the judgment-debtor. Had he attempted to do so the defendant could clearly have restrained him by injunction immediately. Further by the consent terms the defendant was to be at liberty to raise the attachment at his own cost at any moment. Both these matters in my opinion indicate that the intention of the parties was that the property in the decree should pass from the plaintiff to the defendant forthwith. It is true that the defendant was given four weeks within which to pay the money. But that was an option given to him, and I think, that provision merely amounts to the plaintiff having agreed to give credit to the defendant for four weeks for payment of the price of the decree which he had sold to him orally out and out.

14. It has been argued by Mr. Khambatta that the defendant could not raise the attachment until he had got an assignment in writing. That no doubt is perfectly true. But it was open to the defendant at any moment he chose, after those consent terms were signed on March 2, to pay the money and receive from the plaintiff an assignment of the judgment-debt. No elaborate assignment was necessary. All that the plaintiff had to do was to express in writing that he had sold the decree with all the benefits of it to the defendant-a mere matter of procedure in my opinion for the purpose of enabling the defendant himself to apply for execution. As a matter of construction of these consent terms, therefore, I have come to the conclusion that the parties intended to enter into and did enter into an oral agreement for sale of the decree on March 2, credit being given to the defendant at his option for four weeks, and the plaintiff undertaking to give to the defendant an assignment of the judgment-debt in writing upon payment within four weeks.

15. As Mr. Khambatta argued that the agreement was subject to an implied condition that the decree should remain capable of execution I will briefly discuss this question, although strictly speaking it would only arise if the agreement between the parties were held to be an agreement to sell and not a sale. After the agreement was entered into and before the lapse of the four weeks from March 2, 1937, the judgment-debtor on March 19 was adjudicated insolvent. Mr. Khambatta argued that the agreement to sell, as he calls it, was subject to an implied condition between the parties that the decree should remain capable of execution up to the time when the agreement to sell matured into a sale. He relied on the class of cases of which Krell v. Henry [1903] 2 K.B. 740 is an example. He referred to para. (2) of Section 56 of the Indian Contract Act which provides that a contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful. He contended that the word ' impossible' as used in this section does not mean merely physically impossible or literally impossible, but also means commercially impossible or impossible having regard to the state of things which the parties must have had in contemplation when they made the agreement.

16. Mr. Khambatta relied upon the undertaking by the plaintiff in the consent terms to execute an assignment of the judgment-debt 'with all the benefits of the decree ', and submitted that inasmuch as the judgment-debtor had become insolvent it would be no longer possible for the transferee of the decree to execute the decree against the judgment-debtor, and that this must have been an event which the parties had in contemplation when they entered into the agreement. It must, however, be remembered as was decided in Raghunath v. Gangaram : AIR1923Bom404 that no benefit of an attachment already made passes to the transferee of a decree, that the transferee cannot continue any proceedings previously commenced, and must himself make a substantive application to the Court which passed the decree if he in his turn wishes to execute the decree. It is, therefore, clear I think that when the parties entered into these consent terms neither of them contemplated that the defendant would be able himself to proceed with the attachment proceedings previously instituted by the decree-holder. The argument of the defendant really involves the supposition that the plaintiff guaranteed to the defendant the full benefit of the decree which was the subject-matter of the consent terms. The absurdity of such a supposition is I think apparent from the ' fact that for the sum of Rs, 3,750 the plaintiff was giving to the defendant all his rights in a decree for Rs. 9,355-8-0, and it is difficult to understand why the plaintiff should have sold for so small a sum a decree of that amount if the intention of the parties was that he should in substance guarantee to the defendant that the defendant would reap the full fruits of that decree. In my opinion neither party had any such matter in view. I think that the circumstances show that the defendant wished to buy the plaintiff off, and that the intention of the parties to be gathered from the consent terms was that the defendant was to take the decree as it then was on March 2, 1937, with the right to enforce it as it then was in any way he could, the defendant taking his chance as to what he might ultimately get out of it. Neither of the parties, in my view, had in contemplation the possibility that the judgment-debtor might subsequently to the date of the consent terms become insolvent, and in my view those consent terms were certainly not subject to any implied condition that the debtor should remain solvent. The result in my opinion therefore is that even if Mr. Khambatta were right in his contention that the agreement was a mere agreement to sell and not a sale, he still would not in my view be able to establish that the parties were relieved altogether from their obligations under the agreement by reason of the basis of the contract having come to an end upon the insolvency of the judgment-debtor, as he has contended, I need not, however, pursue this matter further as no question of damages arises in view of my holding that this agreement was an agreement of sale out and out.

17. I think that this suit falls within Section 55(1) of the Indian Sale of Goods Act, and that the buyer having wrongfully, as I hold, refused to pay the price of the decree the plaintiff is entitled to maintain an action for the price. Even if the property in the goods had not passed, as I hold it did, I am also of opinion that in the circumstances of this case the plaintiff would nevertheless be entitled to maintain this claim under Section 55(2) of the Sale of Goods Act. In my view, however, he brings his case under Section 55(1).

18. The first issue raised the question whether the suit as framed was maintainable. Mr. Khambatta, however, at an early stage in the argument abandoned that contention. I answer that issue therefore in the affirmative.

19. The plaintiff is entitled to a decree in terms of prayer (a) of the plaint. I pass a decree accordingly, and the plaintiff will undertake to execute an assignment of the decree in favour of the defendant on payment of Rs. 3,750.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //