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Pushkarnarayan S. Maheshwari Vs. Kubrabai Gulamali - Court Judgment

LegalCrystal Citation
SubjectProperty;Constract
CourtMumbai High Court
Decided On
Case NumberO.C.J. Suit No. 88 of 1963
Judge
Reported in(1969)71BOMLR769
AppellantPushkarnarayan S. Maheshwari
RespondentKubrabai Gulamali
Excerpt:
.....a) clearly specifies the order of performance of the reciprocal promises contained in the suit contract, in so far as it requires that the vendor must produce the necessary wealth tax certificate 'before' the time for completion of the sale. it is well-settled that in order that a decision in a suit between a and b may operate as res judicata in a subsequent suit between a and c, it is necessary to show that c claims under b by a title arising subsequently to the commencement of the first suit. that principle would, however, have no application to a case like the present one in which the purchase by the third party has been effected before the suit was filed. those two persons, however, subsequently sold the property to the appellant, and the respondent filed the said suit..........(exh. a) clearly specifies the order of performance of the reciprocal promises contained in the suit contract, in so far as it requires that the vendor must produce the necessary wealth tax certificate 'before' the time for completion of the sale. the present case is, therefore, not one which falls within section 51 of the contract act, but is one which falls under section 52 of the contract act, as far as the obligation of the vendors to produce the wealth tax certificate is concerned, it being clear on the documentary evidence in the case that that was the only outstanding obligation that remained to be performed by the vendor. in. that view of the matter, unless and until the wealth tax certificate was produced by the vendors no question of the plaintiff being ready and willing to.....
Judgment:

Vimadaial, J.

1. [His Lordship after stating the facts and holding that the defendants had committed breach of contract on November 23, 1960, proceeded.] Though no issue in regard to whether the plaintiff was ready and willing to perform his part of the contract by paying the balance of the purchase price under the agreement for sale and tendering an engrossment of the conveyance for execution by the defendants, was framed by me, Mr. Diwan sought to contend that, even in regard to a claim for damages for breach of contract, it was incumbent on the plaintiff, not only to aver but also to prove, readiness and willingness on his part to perform the contract at the material time which, in this case, in view of my finding in the preceding paragraph, would be November 23, 1960. In support of that proposition, Mr. Diwan has cited several authorities. The first and the most important of them is the decision of the Privy Council in the case of Tan Ah Boon v. Johore State . It may be mentioned that this was an appeal to the Privy Council from the State of Johore which was not a part of British India but was an independent State in the Malayan peninsula, and the case was, therefore, decided in accordance with the English common law, as the Indian Contract Act was not applicable to the same. The facts of that case were that the Collector of Land Revenue had, by a letter written in answer to an application made by the appellant before the Privy Council, signified his approval to the alienation of 110 acres of State land to the appellant on payment of specified sums as and by way of premium as well as rent, and on certain other terms. The premium and the first year's rent was deposited as stipulated, but no grant had actually been executed or registered. The appellant paid the rent for 6 years but did not pay rent thereafter. The Collector then proceeded to attach and sell the land, and on a suit filed by the purchaser, an order for possession was made against the appellant. The purchaser re-sold the land at an enhanced price, and the appellant then brought the action out of which the appeal before the Privy Council arose, for damages for breach of the contract against the State of Johore, on the ground that the Collector's letter approving of the grant amounted to a contract entitling the appellant to grant of the land and to possession of it, and that the sale of the land was wrongful and was a breach of contract on the part of the State.

2. On those facts, the trial Judge held that there was a breach of contract, as alleged, and awarded 17,500 dolars as damages. Upon appeal to the Court of Appeal of the State of Johore, that judgment was reversed and it was held that there was no action wrongfully committed or breach of contract, and that accordingly no damages were recoverable. On appeal to the Privy Council, it was observed in the judgment by Lord Roche that it was unnecessary and undesirable for the Privy Council to express any opinion on the considerable number of questions which were debated before it, and that the case should be decided on a much simpler ground. It was then observed (at p. 237 col. 2),.This is simply a common law action seeking damages for breach of an alleged contract, and nothing else. No plaintiff can maintain such an action unless he can aver and prove that he has performed or has at all times been ready to perform his part of the contract. This the appellant, owing to his serious default in payment of rent, was incapable of doing. In these circumstances then Lordships are of opinion that the appellant was not entitled to succeed in his action and that the Court of Appeal was correct in ordering that the claim should be dismissed.

Though these observations are general in terms, they must be construed in the light of the facts of the case and limited to those facts. The said case was a case of an alleged breach of a contract to make a grant of land, a contract which necessarily involved reciprocal obligations to be simultaneously performed. The obligation on the part of the plaintiff-appellant in that case was to pay the stipulated rent and to observe the other terms, and the obligation of the State of Johore was to make a grant of the land to him and to let him have possession, of it on those terms. This position is clarified if one refers to an earlier judgment of the Privy Council in the case of Abdullah Bey v. Tenenbaum [1984] A.I.R. P.C. 91, which was also an action for breach of a contract to sell land in 'which the purchaser sued for refund of deposit as well as damages. Breach of the contract in question was held to have been established insofar as it was held that the appellant defendant had not offered a transfer which the plaintiff-respondent was bound to accept. In the judgment of the Board, Lord Tomlin went on to observe (at p. 92) that there, however, remained the question as to the readiness and willingness of the respondent to perform his part of the contract, that the said case being an appeal from Palestine and no provisions of Turkish law or any local ordinance having been brought to the notice of their Lordships, the case would have to be decided according to the English law applicable 'in the case of concurrent obligations,' and that 'readiness and willingness to carry out his obligation' has always been a condition precedent to the plaintiff's right to recover damages in respect of breach of one of two concurrent conditions. It is, therefore, clear that, in English law, it is necessary for a plaintiff to prove readiness and willingness to perform his part of the contract only in cases where the contract consists of concurrent obligations which are the same as what the Indian Contract Act calls reciprocal obligations' to be simultaneously performed. Mr. Diwan cited the English case of Howe v. Smith (1884) 27 Ch. D. 89 which was also a case of a contract for the sale of land in which the purchaser being not ready with his purchase money, the vendor, after repealed delays, re-sold the property for the same price, and the original purchaser brought an action for specific performance. The Court of Appeal, confirming the decision of the trial Judge, held that the purchaser had lost by his delay his right to enforce specific performance, and further held that the plaintiff having failed to perform his part within a reasonable time had no right to a return of the deposit. Fry L. J. in his judgment stated (at p. 103) that a purchaser seeking damages may recover if he can prove readiness and willingness to complete the transaction within a reasonable time after the stipulated day and that the inquiry which arose in the said case was, therefore, whether the purchaser can aver and prove such readiness and willingness within a reasonable time. On the facts of the said case, the conclusion of the Court of Appeal (at p. 105) was that there had been such default as justified the vendor in treating the contract as rescinded and the appeal was, therefore, dismissed. The observations of Fry L. J. mentioned by me were quoted with approval by the House of Lords in the case of Stickney v. Keeble [1915] A.C. 386. That was an action by a purchaser for the return of his deposit by reason of the vendor's failure to complete within the time fixed by a notice by the purchaser for completion of the sale, and it was held that there had been unnecessary delay in completion for which the defendant-vendors were responsible and the plaintiff was, therefore entitled to a return of the deposit. As far as decisions of Indian Courts are concerned, there is a considered judgment of a Division Bench of the Nagpur High Court in the case of Arjunsa v. Mohanlal in which English and Indian authorities on the point have been exhaustively reviewed and, after referring to Section 51 of the Contract Act which lays down that in the ease of a contract consisting of reciprocal promises to be simultaneously performed, no promisor need perform Ms promise unless the promisee is ready and willing to perform his reciprocal promise, it was held (at p. 349) that, although it was no longer necessary to prove actual tender of the money by the purchaser, he is required to show readiness and willingness. It was further observed that the purchaser proves readiness and Avillingness when he establishes that the contract was not completed, not because of his fault, but because of the fault of his opponent. It may be mentioned that in Arjmisa's case the suit had been filed by the vendor for damages for breach of a contract for the sale of cotton seeds, by a purchaser refusing to take delivery, but it has not been suggested and indeed, there would be 110 basis for such a suggestion, that the principle in regard to the proof of readiness and willingness is different in the case of contracts for the sale of land from that in the case of a sale of .movables. In my opinion, the learned judges of the Nagpur High Court who decided Arjunsa's case were right when they based their decision on Section 51 of the Contract Act, and held that the plaintiff was entitled to damages as he had proved readiness and willingness to perform his part of the contract. It may be mentioned that the learned judges who decided Arjunsa's case have rightly observed in their judgment (at p. 349) that caution would have to be exercised in applying this principle to cases of anticipatory breach of contract. The learned judges, however, stated that the case before them was one where a party to a contract for sale had called upon his buyer to come and take delivery after the due date for delivery had already passed and was suing for damages for failure to take delivery.

3. There were several other decisions of Indian Courts which were cited before me by Mr. Diwan, but it is not necessary for me to discuss the same. It would suffice if the same are merely mentioned. Those cases were: Lakshmikanthan v. Narayanaswami Iyer [1926] A.T.R. Mad. 1109, Ganesh Das-Ishar Das v. Ram Nath I.L.R. [1927] Lah. 148, Firm Kanwar Bhan v. Firm Ganpat Rao [1926] A.T.R. Lah. 318, Jagannath v. Aaron & Co. A.I.R. [1940] Rang. 284 Md. Ismail Khan v. Hasan Ali A.I.R. [1923] All. 220 and A. B. G. K. & Co. v. M. Sitharamayya A.I.R.[1958] A.P. 427. It may, however, be mentioned that each one of those cases was a ease governed by Section 51 of the Contract Act, in so far as it related to a contract consisting of reciprocal promises which had to be simultaneously performed. In fact, in both the decisions of the Lahore High Court cited above, as well as in the decisions of the Andhra Pradesh and Rangoon High Courts also cited above, Section 51 of the Contract Act has been expressly referred to in the judgment. It may in this connection be mentioned that, in view of the provisions of Order VI Rule 6 of the Code of Civil Procedure, it is no longer necessary to aver readiness and willingness on the part of the plaintiff in a suit for damages for breach of contract even in a ease falling under Section 51 of the Contract Act, but if readiness and willingness on the part of the plaintiff is denied in the written statement, the onus would lie on the plaintiff in such a suit to prove the same. The principle that a plaintiff suing for damages for breach of contract must prove readiness and willingness to perform his own part of the contract can, however, have no application to a contract which is not of the nature specified in Section 51 of the Contract Act, but is one which expressly fixes the order in which reciprocal promises are to be performed so as to fall within the terms of Section 52 of that Act. In the case of such contracts, Section 54 of the said Act lays down in the clearest possible terms that, if the promisor of the promise which was to be first performed fails to perform it, he cannot claim performance of the reciprocal promise and is liable in damages for breach of contract to the other party. Mr. Daji has substantiated this legal position in the course of an able argument on the point, and Mr. Diwan has not been able to cite a single ease to the contrary.

4. The question 'that arises for my consideration, therefore, is, under which of the two categories does the contract in suit in the present case fall? Clause 7 of the agreement for sale (Exh. A) clearly specifies the order of performance of the reciprocal promises contained in the suit contract, in so far as it requires that the vendor must produce the necessary Wealth Tax Certificate 'before' the time for completion of the sale. The present case is, therefore, not one which falls within Section 51 of the Contract Act, but is one which falls under Section 52 of the Contract Act, as far as the obligation of the vendors to produce the Wealth Tax Certificate is concerned, it being clear on the documentary evidence in the case that that was the only outstanding obligation that remained to be performed by the vendor. In. that view of the matter, unless and until the Wealth Tax Certificate was produced by the vendors no question of the plaintiff being ready and willing to perform his part of the contract by payment of the price and the tendering of an engrossment of the conveyance arises at all, haying regard to the provisions of Section 54 of the Contract Act. It may be mentioned that, relying upon a decision of a single judge of this Court in the case of Rustamji v. Haji Hussein (1910) 2S Bom. L.R. 1165, Mr. Daji went further and sought to contend that if a party without justification cancels the contract, he disables himself from setting up any defence which he might otherwise have had to an action for damages. Having regard to the view which I have taken on the facts of the present case, viz. that it was not obligatory on the plaintiff to be ready and willing to pay the price and tender an engrossment of the conveyance until the defendants had produced the 'Wealth Tax Certificate as required by Clause 7 of the agreement for sale (Exh. A), it is not necessary for me to decide this point which raises a larger question of considerable importance.

5. The next question that I must proceed to consider is, what is the relief to which the plaintiff is entitled in this suit. Mr. Daji has not pressed his client's claim for damages for breach of contract, but has contended that he is entitled not merely to a return of the deposit, but to a declaration of the statutory charge for payment of the same under Section 55(6)(b) of the Transfer of Property Act, and to enforcement of that charge. Mr. Diwan for the defendants has, on the other hand, contended that the plaintiff is not entitled either to a declaration of charge or to relief by way of enforcement of that charge, in the absence of the subsequent purchaser who has not been made a party to this suit. Section 55(6)(b) of the Transfer of Property Act creates a statutory charge in favour of the buyer in a contract of purchase of immovable property on that property itself 'as against the seller and all persona claiming under him to the extent of seller's interest in the property' for the amount of any purchase money properly paid by the buyer in anticipation of the delivery. It may be mentioned that the words 'with notice of the payment' which occurred after the words 'claiming under him' have been deleted by an amendment, with the result that the charge of the buyer for price pre-paid is effective, not only against the seller, but against all persons claiming under him, irrespective of notice. The question that arises in the present case, however, is whether the statutory charge claimed by the plaintiff can be enforced in the present suit to which the transferee of the property is not a party. In this connection, it is important to bear in mind that the transfer of the suit property in favour of one Hasanalli took place on November 5, 1962, whereas the present suit was filed on April 4, 1963. Mr. Daji has, in support of his contention that he is entitled to enforce this charge in the present suit even in the absence of Hasanalli on the record, relied on three decisions of this Court. The first of them is a decision of Wassoodew J. in the case of Hari v. Bhagu (1986) 88 Bom. L.R. 1200, but it may be pointed out that the purchase by the third party in the said case was subsequent to the decree and the question which arose was whether the charge that was created by the decree could be executed against that purchaser. The real question which was decided in that case was that the statutory charge created under Section 55(6)(b) of the Transfer of Property Act could be executed against a person claiming benefit under the seller, even though he may have no notice of the charge and that the requirement of notice under Section 100 of that Act had no application to the same. That case is, however, of no assistance for the purpose of deciding the question which arises before me, viz. whether the purchaser was a necessary party to this suit and whether a decree could be passed at all enforcing the charge in the absence of the purchaser from the record. It is well-settled that in order that a decision in a suit between A and B may operate as res judicata in a subsequent suit between A and C, it is necessary to show that C claims under B by a title arising subsequently to the commencement of the first suit. The decree in the ease of Hari v. Bhagu would, on that principle, operate as res judicata in any subsequent suit between the purchaser and the plaintiff to such a suit. That principle would, however, have no application to a case like the present one in which the purchase by the third party has been effected before the suit was filed. The next decision which was relied upon by Mr. Daji was the decision of Dixit J. in the case of Abdul Hamid Khan v. Mahomed Ali : AIR1952Bom67 . The facts of the case show that the sale in favour of the third party was effected in that case 8 days before the suit was filed and the position is, therefore, similar to that which prevails in the present case. Two persons had, in that case, agreed to sell the property to the respondent before Dixit J., and the respondent had actually paid Rs. 1,700 as; earnest money towards the price thereof. Those two persons, however, subsequently sold the property to the appellant, and the respondent filed the said suit against those two persons for refund of earnest money on the ground that they had failed to fulfil the stipulated conditions, but the appellant was not made a party to that suit. A decree was passed in that suit in favour of the respondent and a charge was declared on the property for the decretal amount. When the respondent filed execution proceedings against those two persons and the appellant, the appellant contended that that decree was not binding- upon him, as he was not a party to the suit, and that he had purchased the property before the date of the suit. The trial Court held that the decree was binding upon the appellant though he was not a party to the suit and had no notice of the agreement for sale, and ordered the sale of the charged property. On appeal, the Assistant Judge confirmed that decision. On further appeal to the High Court, Dixit J. dismissed the appeal holding that on a true construction of Section 55(6)(b) of the Transfer of Property Act the statutory charge which had been created was one which arose by operation of law and was enforceable, not only against the seller, but against all persons claiming under him, so that from the moment the purchase took place the purchaser became the representative of the seller and the charge could be enforced against him. Mr. Daji has also relied upon a decision of a Division Bench of this Court in the case of Mahomed Ebrahim v. pl (1960) 68 Bom. L.R. 798 but apart from the fact that the decision in the said case turned to some extent upon the provisions of the Administration of Evacuee Property Act, the purchase in that case was effected pendente lite, with the result that, as in the case of Hari v. Bhagu referred to above, oil well-established principles relating to the doctrine of res judicata, the purchaser could be said to be bound by the result of that suit. The question as to whether the purchaser should be joined as a party to a suit to enforce a statutory charge under Section 55(6)(b) of the Transfer of Property Act in a case in which purchase takes place before the filing of the suit did not arise for consideration either in the case of Hari v. Bhagu, or in Mahomed Ebrahim's case, but arose only in Abdul Hamid Khan's case before Dixit J, With respect to that learned judge, however, the judgment of Dixit J. in the said case overlooks certain statutory provisions which were directly applicable in regard to the question as to whether a third party who has purchased the property before the filing of the suit was a necessary party to a suit to enforce the statutory charge under Section 55(6)(b) of the Transfer of Property Act. Order XXXIV, Rule 15 of the Code of Civil Procedure makes all the provisions of that Order relating to a simple mortgage applicable to a charge within the meaning of Section 100 of the Transfer of Property Act. Section 100 of the Transfer of Property Act in clear terms covers, not only a charge created by act of parties, but also a charge which arises by operation of law. The position, therefore, is that Order XXXIV, Rule 15 of the Civil Procedure Code is applicable to a suit to enforce a statutory charge under Section 55(6)(b) of the Transfer of Property Act. In fact, in the case of Ram Raghubir Lal v. United Refineries (Burma) Ltd. : (1933)35BOMLR753 the decision that in a suit to enforce a charge, a preliminary decree for sale, as in a suit on mortgage, should be passed by reason of Section 100 of the Transfer of Property Act read with Order XXXIV, Rule 15 of the Code of Civil Procedure, has been tacitly approved by the Privy Council. Order XXXIV. Rule 1 of the Civil Procedure Code enacts that, in a suit relating to a mortgage, all persons having an interest either in the mortgage, security or in the right of redemption, must be joined as parties. There can be no doubt that a purchaser of a mortgaged property under a transfer which was effected prior to the filing of a suit to enforce the mortgage has an interest in the right of redemption of the mortgaged property, and the position would be the same in regard to a charge by virtue of the provisions of Order XXXIV, Rule 15 of the Code of Civil Procedure read with Section 100 of the Transfer of Property Act. These statutory provisions have, with respect to the learned judge, been completely overlooked in Abdul Hamid Khan's case. As stated in Halsbury's Laws of England (3rd Edn.) Vol. 22, pp. 799-800, a decision given in ignorance of the terms of a statute must be held to be a decision given per incuriam. The decision of Dixit J. in Abdul Hamid Khan's case which was given without reference to the provisions of Order XXXIV Rules 1 and 15 of the Civil Procedure Code read with Section 100 of the Transfer of Property Act must, therefore, be held to have been given per incuriam and, as such, it is not binding upon me. I hold that in a case in which the vendor has re-sold the property before the filing of a suit by the purchaser to enforce a statutory charge for pre-paid money, the transferee from the vendor is a necessary party to the suit, and no relief, either by way of declaration of the charge, or by way of enforcement thereof, can be granted in such a suit if the transferee has not been made a party thereto. In that view of the matter, Mr. Daji is not entitled to the relief which he claims by way of declaration or enforcement of a charge for the refund of the sum of Bs. 15,000 which he had paid as and by way of earnest as well as part-payment towards the price of the said property, or for the costs of the suit. As Mr. Daji has not pressed the relief for damages for breach of contract, the only relief to which he will be entitled in the present suit will be a money decree for the sum of Rs. 15,000 with interest. I would, however, like to clarify that I am not deciding, on merits, the question as to whether or not the plaintiff would be entitled to a declaration of the charge or to enforcement thereof, but I have declined to grant any relief based on the statutory charge only on the ground of the non-joinder of Hasanalli in the present suit.

6. I pass a decree in favour of the plaintiff against the defendants for the sum of Rs. 15,000 with interest thereon at the rate of 6 per cent, from the date of suit till payment. In view of the fact that the plaintiff had to file the present suit for specific performance and for return of the deposit which the defendants wrongfully claimed to have forfeited, though he has in the course of the hearing before me given up the claim for damages for breach of contract, he is entitled to the costs of the suit, I order accordingly.


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