1. The defendants in the three suits O. S. Nos, 521 to 323 of 1951, on the file of the District Munsifs Court, Cuddapah, are the appellants before me. These suits were Instituted separately by the respondents in these second appeals for the specific performance of a contract of sale by directing the execution of proper conveyances by the defendants, of the suit properties. The 1st defendant in all the suits is the owner of the properties. Defendants 2 and 3 are the purchasers subsequent to the alleged agreement. The 3rd' defendant died pending the suit and his legal representative was brought on record.
2. The case of the plaintiff is that there was a binding and concluded contract entered into between the plaintiffs in the three suits and the 1st defendant whereunder the 1st defendant agreed to sell the suit properties to the three plaintiffs and that contrary to that agreement he sold the suit proper ties to defendants 2 and 3 who purchased them with the knowledge of the plaintiff's rights under the con-tract. It was also alleged that the sale deed in favour of defendants 2 and 3 was collusive and ante-dated document, and that defendants 2 and 3 were not bona fide purchasers for value.
3. The case of the 1st defendant Is that there were only negotiations in respect of the purchase of the suit properties by the plaintiffs and that those negotiations had never become crystallized into a concluded and binding agreement, and that, therefore, he was free to sell and convey the properties to defendants 2 and 3. The case of the defendants 2 and 3 is that 'they were bona fide purchasers for value without notice of the alleged rights of the plaintiffs and that the plaintiffs were not entitled to the reliefs prayed for by them.
4. The learned District Munsif found that the agreement of sale pleaded by the plaintiffs was not true; and, therefore, dismissed the suit for specific performance. The defts. claimed compensatory costs which, however, were disallowed. The plaintiffs filed three appeals (A. S. Nos. 144 to 146 of 1954) on the file of the Court of the Subordinate Judge, Cuddapah. The successful defendants filed cross-objections with respect to the disallowance of compensatory costs.
The appeals and the cross-objections were heard together by the learned Subordinate Judge, who held that the agreement pleaded by the plaintiffs was true in fact and that in pursuance thereof the plaintiffs were entitled to a decree for specific performance. He also held that defendants 2 and 3 were not bona fide purchasers for value without notice of the rights of the plaintiffs.
In the view he had taken on the main issues in. the case he reversed the decision of the learned District Munsif and passed an appropriate decree for the deposit of the purchase money by the plaintiffs and the execution of conveyances by defendants in favour of the three plaintiffs. The cross objections filed by the defendants were dismissed. Hence these three second appeals by the three defendants.
5. The questions that fall to be determined by me in these second appeals are (i) whether the agreement pleaded by the plaintiffs is true; (ii) whether that agreement, even if true, constitutes a concluded contract, such as could be enforced by a decree for specific performance; and (iii) whether defendants 2 and 3 are bona fide purchasers for value without notice' of the rights of the plaintiff in respect of the sale of the suit properties.
6. The agreement which is set up by the plaintiffs is not in writing. It is an oral agreement. Therefore, whether there was an agreement in feet, or not, and, if so, what its terms are, can only be established by the evidence on record. The case of the plaintiffs as sought to be proved by the evidence adduced on their behalf is as follows:
7. Survey Nos. 1 to 4 in the village of Ramanapalli. Cuddapab Taluq belonged to one Gangabai, and the 1st defendant in two equal shares. The plaintiff in O. S. 34 of 195J and his maternal uncle had already purchased Ganga Bai's share. 'With respect to the remaining half the 1st defendant executed a usufrtietuary mortgage (Ex, A-1) on 13-7-1944 in favour of Ella Reddy, the plaintiff in O. S. No. 321 of 1951 and P.W. 1 in the case.
On 14-7-1950, the 1st defendant executed a promissory note in favour of P. W. 1 for a sum of Rs. 100/-. The 1st defendant proposed to sell his share of the land and there were negotiations in that behalf. Ultimately the parties came to an agreement on 21-7-1951. whereunder the 1st defendant agreed to sell the suit properties in three equal shares to each one of the plaintiffs in the three suits for a sum of Rs. 2,000/-.
It was also agreed that from and out of the sum of Rs. 2.000/- to be paid by P. W. 1 the amounts due under the usufructuary mortgage and on the promissory note were to he deducted and the balance of Rs. 400/- alone should be paid to the 1st defendant. In pursuance of this agreement the defendant got a draft conveyance prepared by one karnam, Rarnayya. That draft is marked as Ex. A-3. P.W. 6, who is the plaintiff in O. S. No. 322 of 1951, purchased also non-judicial stamp papers for the registration on the same day.
Those stamp papers are marked as Ex. A-8. It was also agreed that the sale should be comleted on the 1st defendant's title being approved y the plaintiff's family lawyer, Mr. P. Subba Rao, who was examined as P.W. 3, Accordingly P.W. 1, the 1st defendant and P.W.2, the natural father of the 1st defendant went to the house of P.W.3. P.W.I told P.W.3 about the terms already agreed upon between them.
Thereupon, P.W.3 asked the 1st defendant whether it was so. The 1st defendant said 'yes'. Then P.W. 1 told P.W. 3 that he had some doubt as to the tide of the 1st defendant in view of the litigation in the Nandulur Court and asked him to find out. The 1st defendant said that there was no defect in his title and that Mr. Sitaramayya, who appeared in that litigation may be asked in the matter. P.W. 3 told them that he would contract Mr. Sitaramayya and find out about the Nandulur litigation.
Meanwhile he asked the parties to produce the encumbrance certificate. Five or six days later, P.W. 3 contacted Mr. Sitaramayya who assured him that the title of the 1st defendant to the suit lands was clear. Thereupon P.W. 3 sent word to P.W. 1 through the letter's clerk that the title is all right. P.W, wrote a letter to the 1st defendant to be ready to execute the sale deed. The 1st defendant was not then at home.
P.W. 2 who is the natural father, received the letter and wrote hack to P.W. 1 that his son bad gone to Cuddapah and that he would send him to P.W. 1 after his return. The letter of P.W. 2 is marked as Ex. A-4. The 1st defendant did not meet the P.W. 1 on 1-8-1951. On 2-8-1951, P.W.I went to Cuddapah, There P.W. 4 who is a relation of P.W. 1 went to the Sub-Registrar's Office and found that defendants 1, 2 and 3 were there and a sale deed was being drafted.
He sent word to P.W. 1 and P.W. 1 arrived at the Sub-Registrar's Office and found fault with the defendants, who then demanded a higher price. P.W. 1 did not agree and registered his protest to the Registrar not to register the instrument in view of his anterior claims. The protest was ignored and the instrument registered. The sale deed in favour of defendants 2 and 3 which is marked as Ex. B-l was executed on 1-8-1951.
On 4-8-1951, the three plaintiffs caused a lawyer's notice to be issued to the defendants complaining against the breach of contract and calling upon them to execute a sale deed in favour of each of the three plaintiffs as originally agreed upon between them and the 1st defendant. The defendants sent a reply on 8-8-1951. The suits were filed soon thereafter.
8. The case of the defendant is that there were only negotiations between him and the plaintiff, but they never went beyond that stage. He denied that there was any agreement on 21-7-1951. He denied having gone along with P.Ws. 1 and 2 to the house of P.W. 3. He denied having got Ex. A-3 executed. He also denied having received P.W.l's letter from his father P.W.2 and his suggestion is that the plaintiffs wanted to knock off the property for a cheap price. Besides the 1st defendant who was examined as P.W. 1, only one witness was examined on the side of the defendants and that is one of the attestors of Ex. B-l. His evidence has no bearing upon the real matter in issue. The second and third defendants-did not give evidence.
9. The learned Subordinate Judge found on the evidence that there was a concluded contract on the 21st of July 1951. In doing so, he placed strong reliance on the evidence of P.W.3. As the learned Subordinate Judge has rightly pointed out, if the evidence of P.W. 3 is believed, and I see no reason why it should not have been believed, then, the plaintiffs case as to the agreement and its terms stands established in all particulars. There is also the evidence of P.W. 2, the father or. the 1st defendant. He has corroborated P.W.3. He speaks to the agreement, their conference in-the house of P.W. 3. the receipt of the letter of P.W. 1 and his reply thereto (Ex. A-4).
10. P.W. 3 is a 1st grade pleader, who has been practising in Cuddapah since 1921. The learned-Subordinate Judge thought that he was a respectable witness and there is no reason why be should have spoken anything which is not true. P.W. 2 is the natural father of the 1st defendant and nothing has been elicited from him to show why he-should depose falsely against his son. Now if these two witnesses are believed then the agreement pleaded and the terms thereof must be taken-as proved, apart from other probabilizing circumstances of which there are many,
11. On behalf of the appellants, it has been contended that the learned Subordinate Judge-should not have disturbed the findings of the learned District Munsif, that he failed to notice the discrepancies and inconsistencies in the evidence of some of the witnesses and that he should1 not have placed reliance on P.Ws. 2 and 3. The learned Subordinate Judge as an appellate Judge-is entitled to review that evidence and I am unable to discover that there is anything wrong or erroneous in the conclusions to which he had come;.
12. In any view, his finding as to the agreement and its terms are findings of fact. It is not permissible for me sitting in second appeal to decline to be bound by them, even though on a fresh appraisal of the evidence, I may be inclined to take a different view, which in this case, I am not.
13. It now remains to be considered whether the agreement represents a concluded contract such as could be enforced by a decree for specific performance. The learned counsel for the appellant has very strenuously contended before me that there was no concluded contract which, is enforceable in law for the reason that on the plaintiffs own showing the agreement was 'subject to the title of the 1st defendant being approved by the plaintiffs family lawyer'. It is argued that by reason of that reservation there was no-unqualified and absolute acceptance of the offer so as to form a binding contract. It is also argued' that in any case this is a conditional contract and' the condition was not fulfilled.
14. The true meaning and the legal effect of a provision in an agreement for the sale of land' that it is 'subject to the approval of the title by. the purchaser's lawyer' had come in for consideration by the courts in England and India.
15. There is a conflict of view in England as to the meaning of a provision in the agreement that is subject to the title of the vendor being approved by the solicitor of the purchaser. One view is that it is only indicative of the intention on the part of the purchaser to safeguard his rights and it means no more than what the law allows him, viz., the right to examine the title of the vendor and satisfy himself that it is good, with . the assistance of his solicitor or lawyer. The other view is that such a reservation constitutes a term of the contract, the fulfilment of which alone would result in an enforceable agreement.
16. The divergence of opinion above indicated is well illustrated in the decisions of Court of Appeal and the House of Lords in the well-known case of Hussey v. Home Payne (1879) 4 AC311. It will be necessary to set out in brief outline the facts of that case for a proper appreciation of the opinions expressed by the Court of Appeal and the House of Lords:--
Horne Payne owned a free-hold property called the Mornington estate; Hussey wanted to purchase it; There were negotiations. Home Payne wrote a letter on 4th October 1870 intimating to the prospective purchaser that she was prepared to accept 37,500/- for the entire property, or . 34.000/- for the property without the house and some ground.
The agent of Hussey wrote to Home Payne a letter on the 6th October 1876, definitely accepting to purchase the whole property for 37.500/-'subject to the title being approved by the solicitor.' There was no reply to that letter from Home Payne. Subsequently there were negotiations as to the mode of payment of the purchase money by installments. Those negotiations did not end in a definite settlement and the transaction fell through. Hussey thereupon filed an action for specific performance. Home Payne demurred that there was no memorandum or note in writing of the agreement signed by the defendants within the meaning of Statute of Frauds and therefore, no action for specific performance could lie. Vice Chancellor Malins, who tried the action took the view that by reason of the letter of Home Payne dated 4th October 1876, there was a concluded contract and that the subsequent negotiations as to the payment by instalments did not amount to a recession or abandonment of the original contract.
In that view he directed a decree for the specific performance. Home Payne appealed. The Court of Appeal consisting of Sir George Jessel, M.R., Cotton and Thesiger, L.JJ. reversed the decision of the Vice Chancellor. They took the view that the term 'subject to the title being approved by our socilitor' was a new term which required the acceptance or the assent of the vendor. ,No such assent was given by the vendor. Therefore, the learned Judges came to the conclusion that there was no concluded contract at all.
17. The matter was carried in appeal to the House of Lords. The Lord Chancellor, with whose opinion Lord Selborne concurred, held that in a case where the contract has to be spelled out of correspondence, it is not permissible to draw a line at one point and say there is a concluded contract, but the whole of the correspondence must be looked into and construed.
Applying that principle, they held that the discussion subsequent to the letters of the 4th and 6th October, were with respect to what the parties regarded as a material portion of the bargain and since no agreement was arrived at on those questions, there was no enforceable contract at all. But in his speech the Lord Chancellor expressed serious doubts as to the correctness of the view that a clause like 'subject to the title being approved by our solicitor' is a term of the contract.
18. In a wellknown passage he has stated his view in these words: --
'My Lords, I have not desired to put the opinion which I have offered to your Lordship upon that ground, and I should doubt very much myself, if it were necessary to decide it, whether the opinion of the Court of Appeal in this respect could be maintained. I feel great difficulty in thinking that any person could have intended term of this kind to have that operation, became as was pointed out in the course of the argument; it virtually would reduce the agreement to that which is illusory. It would make the vendor bound by the agreement, but it would leave the purchaser perfectly free. He might appoint any solicitor he pleased -- he might change his solicitor from time to time. There is no directio 'personarum; there is no appointment of any arbihrator in whom both sides might be supposed to have confidence. It would be simply leaving the purchaser, through the medium of his solicitors, at liberty to say from caprice at any moment, we do not like the title, we do not approve of the title and, therefore, the agreement goes for nothing. My Lords, I have great difficulty in thinking that of person would agree to a term which would have that operation. But it appears to me very doubtful whether the words have that meaning. I am disposed rather to look upon them, and the case which was cited from Ireland would be authority if authority were needed for that view. I am disposed to look upon the words as meaning nothing more than a guard against its being supposed that the tide was to be accepted without investigation. as meaning in fact the title must be investigated and approved of in the usual way, which would be by the solicitor of the purchaser. Of course that would be subject to any objection which the solicitor made being submitted to decision by a proper Court, if the objection was not agreed to'.
19. From the above passage it would be dear that Lord Cairns regarded such a term as nothing more than a provision for the investigation of the tide by the purchaser in the usual way.
20. The view of the Lord Chancellor finds justification in the duty that rests on the vendor to show good title. In Indian law that duty b enjoined by statute. Section 25(b) of the Specific Relief Act enacts that a contract for the lease or sale of immovable property cannot be specifically enforced in favour of a lessor or vendor, as the case may be; who cannot at the time fixed for completion of sale or lease give the purchaser or the lessee a tide free from doubt.
Under Section 55(2) of the Transfer of Property Act, the seller is deemed to contract with the buyer that the seller has a subsisting interest in the property sought to be transferred and that he has power to transfer the same. In Subayya Chowdary v. Veerayya, 1955 Andh WR 502 at p. 525-: (S) AIR 1957 Andh Pra 307 at p. 323), Chandra Reddy J. (as he then was) on difference between Subbarao C. J., and Umamaheswaram J., After a review of several authorities held that the statutory covenant under Section 55(2) of the Transfer of Property Act attaches not only to conveyances, but to contracts of sale as well.
So there can be no doubt that the duty of showing marketable title rests on the vendor. But does that statutory duty render a clause in an agreement that it is subject to the title being approved by the purchasers solicitor a mere surplusage, or, only an expression of what in law is implicit? The answer is to be found in me words of Sir George Jessel M. R. from the following passage: --
'The law does not give a right to the purchaser to say that the title shall be approved by any one, either by his solicitor or his conveyancing counsel, or any one else. All that he is entitled to require is what is called a marketable title, or, as it is sometimes called, a good title. Therefore, when he puts in 'subject to the tide being approved by our solicitors', he must be taken to mean what he says, that is, to make it a condition that solicitors of his own selection shall approve of the title.'
21. Cotton L. J. has put the objection in a more pointed form. He observed that the rule of law is
'that the Judge, subject to the ordinary right of appeal, is the person to decide whether or not a good title can be made. That is what the law provides independently of stipulation, but this stipulation would make the solicitor, provided he acted reasonably and bona fide, the sole and absolute Judge as to whether there was or was not a good title'.
In other words, the law gives the right to the purchaser to demand of his vendor a good and marketable title. Whether, in a given case there is a god and marketable tide or not is a matter for the court to deride. But where the parties come to an agreement that the purchaser's solicitor shall be the judge of that title and on his approval alone the contract will be completed, it is introducing a term which is more than what the law implies.
22. The view of Lord Cairns was followed by Wright J., in Chipperfield v. Carter, 1895-72 LT 487. There the expressions were : 'the lease to fee approved in the customary way by my solicitor.' Wright J., came to the conclusion that on the facts of that case there was already a concluded contract and that these words did not import any qualification or add a new term.
23. In Von Hatzfeldt Wildenburg v. Alexander, (1912) 1 Ch. 284 at p. 289 Lord Parker said as follows :--
'There is some authority for saying that where a purchaser stipulates that his solicitor shall approve the title of the property such stipulation may possible be construed as a recognition that the title will be examined in the usual way and need not be construed as a condition at all.' Parker J., did not specify what the authorities were. Presumably he was referring to the opinion of the Lord Chancellor. The decision in that case, however, turned mainly on another point. It was found that the contract in question was conditional upon the execution of a more formal contract. Such a provision, it was held, could not amount to a concluded contract and fell within the principle of the decision in Winn v. Bull, (1877) 7 Ch. D. 29 and other similar cases.
24. In Curtis Moffat v. Wheeler. (1929) 2 Ch. 224 at p. 234, Maugham J., held that of the two views expressed by the Court of Appeal and the Lord Chancellor he felt bound by the opinion of the Court of Appeal and the view expressed by the Lord Chancellor was regarded as merely obiter. These words of his make his meaning clear:--
'It is true that when the case came before the House of Lords. (1879) 4 AC 311. Lord Cairns, then Lord Chancellor, expressed a strong doubt whether the opinion of the Court of Appeal in that respect could be maintained, but the appeal was dismissed on a different ground, namely, that the correspondence as a whole amounted merely to negotiation. It may he observed that Lord Sel-borne expressed no opinion on the meaning of the phrase in question, and that Lord Cairns did no more than express doubts. In my view I am clearly bound by the decision of the Court of Appeal until it is overruled; and I may perhaps add that it is not altogether surprising to find a great lawyer, once in a way, mistaking the meaning of an uninstructed and perhaps inaccurate layman.'
25. In Hudson v. Buck, (1877) 7 Ch. D. 683 Fry., J., took the same view that such a reservation constitutes a condition. In Bartlett v. Greene, (1874) 30 LT 553, Coleridge, L. C. J. and Brett, ).. took the same view. To the same effect are tns observations of Farwell J., in Caney v. Leith. 1937-2 All ER 532 :--
'As a matter of construction I have not the smallest doubt that the word 'lease' as used in this document refers to the existing lease, which is to be assigned by the plaintiffs to the defendant, and not to some other lease which has to be obtained. In my judgment, the condition is a condition that the solicitors of the purchaser are to approve a document which is in existence and which neither the plaintiffs nor the defendant had any power to alter or vary in any way. It is this document which has to be approved, and which the solicitors of the purchaser have not approved. It is, however, said that, although the solicitors have net approved the lease, the contract is now enforceable, because the solicitors ought to have approved the lease, and that, by not approving the lease, they must be taken to have acted unreasonably, and, consequently, that the condition must be treated as having been properly fulfilled. In support of that view I have been referred to certain authorities, but before I deal with them I should like to state my view as to the effect of a contract of this kind. The contract is one which is clearly conditional on the purchaser's solicitors approving the lease, and unless and until that approval is obtained there is no enforceable contract at all. The effect of such a condition as that is that the parties have agreed that the purchaser's solicitors shall be the persons who shall determine whether the lease is one of which they approve or not. Prima facie, if they express their disapproval, that is an end of the matter, because the condition is not fulfilled. In my judgment, if parties choose, when they make a contract, to make it subject to a condition of that sort, whether it is wise or not, they are bound by the condition, and unless the condition is fulfilled the contract never becomes one that is enforceable.'
26. It, therefore, seems to me that the weight of English authority is in support of the view that the expression 'subject to the approval of the title by the purchaser's solicitors' is not a mere surplusage or means no more than what the law Implies, but is really a term of the contract which must first be assented to by the vendor and secondly the fulfilment of which is necessary for the enforcetnent of the contract. In Clack v. Wood-0882) 9 QBD 27(5. the position has been summed up by Lindley L. J., in these words ; --
'The plaintiff sues on a written agreement; which contains the words 'subject to the title being approved by my solicitor'. What had the plaintiff to do at the trial? He ought either to have proved that the title was approved or that , there was such a title tendered as made it unrea- ' sonable not to approve it.'
27. I shall now refer to a few Indian decisions on this question. In Sreeeopal Mullick v. Ram Chilian Nuskur, ILR 8 Cal 856, Wilson J., had to interpret a similar term. He held that it implied a condition. -'In arriving at that opinion the learned Judge relied upon the decision of Fry J.. in (1877) 7 Ch. D. 683 and of the Court of Appeal in (1879? 4 AC 311. He felt bound to follow the authority of Court of Appeal, and in his opinion, the view expressed by Lord Chancellor were merely observations and not strictly ratio decidendi in the case.
28. In Koylash Chunder Doss v. Tariney Chum Singhee. ILR 10 Cal 588, (here was a reference to the title deeds and other papers being brought to the house of the attorney. But the decision in that case really rested upon the stipulation as to the payment of earnest money as an clement of the contract and since the earnest money was never agreed to there was no question of a concluded contract.
29. In Treacher and Co. Ltd. v. Mahommed Ally Adamji Peerbhoy, ILR 35 Bom 110, Dayar J. had to consider a similar clause, and on a review of some of the English authorities referred to above, he held that such a provision constituted a condition the fulfilment of which was necessary for the enforcement of the contract. In W.P. Abro v. Promotho Nath Mukherjee, 18 Cal WN 568 at pp. 572 and 573: (AIR 1914 Cal 777 (2) at pp. 778-780), Chaudhuri J., has taken the same view,
30. In Krishnaji v. Ramachandra, (AIR 1933 Bom 51), Wadia J., followed the decision of the Bombay High Court in ILR 35 Bom 110 (supra) and held that the words 'to the satisfaction of the purchaser's attorneys' were not what merely the law implies, but they constituted a term of the agreement.
31. Mr. Subrahmanyam's contention is that such a term would not be an absolute and unqualified acceptance of the offer, but would be a condition of the acceptance of the offer in the nature of a counter offer. This argument is based upon a misapprehension. If such a reservation is not assented to by the vendor, then there is no concluded contract not because it amounts to a conditional contract, but because the parties were not adrdem on that very term. In such a case there cannot by a contract. It is a clear case. In fact, that is the case in (1879) 4 A.C. 311 as decided by the Court of Appeal.
32. In the present case, we have no such difficulty. The evidence tendered on behalf of the plaintiffs and in particular the testimony of P. W. 3 clearly shows that when P.W. 1, the 1st defendant and P. W. 2, came to the house of P W. 3, amongst the terms mentioned was one relating to the advice of P. W. 3 as to the title of the 1st defendant. Therefore, there is no question here as in the case of (1879) 4 A. C. 311 (supra) of the vendor not assenting to a term providing for the contract being subject to the approval of the purchaser's lawyer.
Further, it is not the case of the vendor that he did not assent to the term. His case was a total denial of the agreement, which has been rightly rejected by the learned Subordinate Judge. So on the evidence of P. W. 1 and P. W. 3, it must be taken as proved that the 1st defendant had assented to this term.
33. If, therefore, the agreement is subject to the title of the 1st defendant being approved by the plaintiff's lawyer, what is its effect? At the outset in a case like this, it must be determined as to what is the intention of the parties. The intention may be that the approval by the lawyer of the title of the vendor is a condition precedent to the execution of the conveyance of sale. In other words the approval by the lawyer is a condition, the fulfilment of which alone would render the contract of sale enforceable.
From the decisions in (1882) 9 QBD 276; (1929) 2 Ch. 224 at p. 234 and 1937-2 All ER 532, it is clear that the contract of sale cannot be enforced unless it is proved that the solicitor OP-' the lawyer has approved of the title of the vendor.-These vases proceed upon the footing that the approval by the purchaser's lawyer is a condition precedent to the enforceability of the contract for sale and when such an approval has been given the contract of sale becomes enforceable.
34. In some cases a view has been taken that a provision that the contract is subject to the ap-proval by the purchaser's solicitor may be a condition subsequent to the contract, the non-fulfil-ment of which provides for the discharge and cancellation of the contract. In an old English case' in Williams v. Edwards (1827) 2 Sim. 78 at p. 83 the contract between the parties contained a clause in the following effect:
'If the counsel of the defendant shall be of opinion that a marketable title cannot be made by the time appointed for the completion of the said purchase, this agreement shall be void and cancelled.'
Speaking of that clause. Vice Chancellor, said as follows:
'There appears to be nothing unreasonable in that. There might be circumstances which might make it very proper for both parties to insert that term; and jt was the contract of both the parties, this court cannot make a new contract for them.'
35. So, in a concluded contract it is open to, parties to provide for the discharge of the contractual obligation on the footing of a contingency within a particular time. That principle is embodied in Section 35 if the Indian Contract Act. In Marten v. Whale (1917) 1 KB 544, Powlatt J-, in construing a contract Eor the purchase of a plot of land containing a term 'subject to the purchaser's solicitor's approval of title and restrictions' observed that what one has of see in the case of such a reservation is whether be parties had intended to bind themselves in praesenti, and without any further reservation.
In such a case there would be a concluded contract with a condition which is a part of the contract and is not precedent to the existence of it that the title and restrictions shall be approved. (In Williams on the law of 'Vendor and Purchaser' a term like this has been construed as a condition subsequent, the non-fulfilment of which discharges the contract (vide chapter 19).
36. Whether the fulfilment of the term is a condition precedent to the contract of sale or whether it is a condition subsequent to the contract, the non-fulfilment of which discharges the contract, can only be ascertained from the intention of the parties. In this case the evidence of the plaintiff which was accepted by the learned Subordinate Judge is that it was agreed that the sale should be completed on his counsel, P. W. 3, approving the title of the van-dor. Therefore, it 'seems to me that in this case, it is a condition precedent to the enforceability of the contract and that condition having been fulfilled the contract bad become enforceable.
37. On behalf of the appellant considerable reliance has been placed upon a decision of the Calcutta High Court in Baijnath v. Kshetrahari Sar-kar, : AIR1955Cal210 and in particular on the following passage of Mukherjee J..:
'Under Section 25, Specific Relief Act, a lessor is bound to give the lessee a title free from reasonable doubt, and where a prospective lessee demands title deeds from the prospective lessor for his investigation and approval, if cannot he said that there has been a final and concluded agreement between them, although most other material terms may have been agreed upon by them. In such a case the lessee is free to back out of the contract if he is not satisfied about the lessor's title, and so long as one party is left free to back out of a contract at his choice, it cannot be said that any binding contract has been arrived at between the parties.'
I do not find in this decision reference to the pre-vioes cases or any full discussion of the implications of that term. In view of the authorities, English and Indian, referred to supra, I do not find that the insertion of a term like the one in question is open to any objection. With great respect to the learned Judge, I am unable to follow the observations contained in the passage extracted above.
38. Mr. Subrahrnanyam, contends that if the contract is conditional upon the title being examined by the purchaser's solicitor, the latter would be constituted the sole arbiter and it may be possible Aat by caprice or want of good faith, he may turn down a good title. In such a case, the vendor has no remedy at all. This contention does not appear to be correct at all.
The lawyer's approval is no doubt necessary for its enforcement. If such an approval is obtained the purchaser as well as the vendor can both claim that the condition stipulated had been fulfilled and, therefore, there is an enforceable contract. If the assent of the lawyer is unreasonably withheld it is always open to the vendor to seek his remedy at law.
39. It is next contended by Mr. Subrahmanyam dm on the facts disclosed in the evidence of the plaintiff, there was no time fixed within which the plaintiff should obtain the approval of his lawyer. He argues that it cannot be the intention of the parties to keep the contract in a state of suspended animation and to imply a promise on. behalf of the vendor that the purchaser can take his own time to get the title deeds duly approved by his lawyer. it is true that in ,the agreement set up by the plain-tiff there is no reference to the time within which the lawyer's approval had to be obtained.
In such a case it is fair to both sides to assume that the intention was that the approval should be obtained within a reasonable time. It has been held that even where a particular time is fixed for the completion of a contract of sale of land, the courts of equity may ignore the time and give relief where justice requires it. In the case of Jamsheed Kodaram v. Burjorji Dhunjibhai, 30 Mad LJ 18th at p. 190: (AIR 1915 PC 83 at p. 84) the Privy Council has observed as follows:
Their Lordships do not think that this section lays down any principle which differs from, those which obtain under the law of England as regards contracts to sell land. Under that law equity, which governs the right of the parties in cases of specific performance of contracts to sell real estate, looks not af the letter but at the substance of the agreement in order to ascertain whether the parties notwithstanding that they named as specific time within which completion was to take place, really and in substance intended more than that it should take place within a reasonable time'. In Sugden on Vendors (14th Ed. page 268) the rule is stated as follows:
'Where time is not made of the essence of a contract by the contract itself, although a day for performance is flamed, of course neither party can strictly make it so after the contract, but if either party is guilty of delay a distinct written notice by the other, that he shall consider the contract at an end if it be not completed within a reasonable time to be named, would be treated in equity as binding on the party to whom it is given; but a reasonable time must be allowed.' Whit that reasonable time is must depend naturally upon the facts of each case; In Smith v. Batsford.
(1897) 76 LT 179 it was held that notice by the vendor requiring the purchaser to complete the contract in 10 days was held quite reasonable. The contract in this case is stated to have been settled on the 21st of July 1951. P. W. 3, contracted Mr. Sitaramayya within five or six days. P. W- 1 wrote to the 1st defendant on the 1st of August 1951 to be ready to execute the conveyance. The time that elapsed' between the agreement and the approval of the lawyer was about 10 days. In the circum-stances of this case, there has been no unreasonable' delay.
40. Lastly, it was contended by Mr. Subrahmanyam that the agreement set up even if proved as a conditional contract, the condition stipulated had not been fulfilled. I am unable to see any force, whatever, in this contention. Having regard to the evidence of P. W. 3, and the intimation of the approval of the lawyer by P. W. 1 to the 1st defendant, it is meaningless to contend that the condition as to the approval by the lawyer has not been fulfilled. There was some comment made that there is no evidence that Mr. Sitaramayya was. consulted by P. W. 3 and that Sitaramayya was not called. I am unable to understand this argument.
P. W. 3 definitely stated that he consulted Sitaramayya, and after finding out the nature of the Nandalur suit he sent word to P. W. 1 that the title of the 1st defendant was clear. In the course of his arguments, a fleeting reference was made to the encumbrance certificate not having been produced. It is not the case of the plaintiff that the production of the encumbrance certificate was a condition of the contract. What the lawyer requires for the formation of his opinion is a matter exclusively for the lawyer to decide.
41. I am, therefore, of the opinion that the term providing for the approval by the lawyer is a condition of the contract, and as pointed out by Farwell J. in 1937-2 All ER 532 the contract cannot bo performed unless the condition is fulfilled. As a corollary it follows that if the condition is fulfilled the contract becomes enforceable. In this case that condition has been fulfilled and, therefore, the contract can be enforced. I hold that the learned Subordinate Judge is right in his conclusions.
42. The third question is whether defendants 2 and 3 are bona fide purchasers for value without notice. I must, in, the first place, observe that defendants 2 and 3 did not do into the witness box. The evidence, therefore, of P. W. 1 and other witnesses as to the protest that was lodged by them with the sub-registrar on 2-8-1951, stands practically uncontradicted except for the evidence of D. W. 1, which the learned Subordinate Judge has rejected.
Further, Ex. A-5 is the petition bearing a stamp that is stated to have been filed on 2-8-1951 in the office of the Sub-Registrar. The learned Subordinate Judge has carefully considered the evidence relating to this question and has come to the conclusion that defendants 2 and 3 are not bona fide purchasers for value without notice of the claims of the plaintiffs with respect to the suit lands.
43. Mr. Krishna Rao, the learned counsel for the respondents urges that under the terms of Section 27(b) of the Specific Relief Act, it is incumbent that a transferee for value without notice of the original contract should have paid his money in good faith. In this case it is argued by him that defendants 2 and 3 had not paid the entire consideration in cash. The 1st defendant as D. W. 1 has stated that only Rs. 1,500/- were paid to him in cash and for the balance a promissory note was executed by defendants 2 and 3,
That being so it is argued that defendants 2 and 3 are not entitled to the protection afforded to bona fide purchasers for value who have paid the money in good faith without notice of the claim of the original contract. In support of this contention he has placed reliance on: Himatlal Motilal v. Vasudev Ganesh, ILR 36 Bom 446; and Ranga Reddy v. Pichee Reddy, 1 Mad L W 879: (AIR 1915 Mad 37).
44. Mr. Subrahmanyam has invited by attention to a decision of the Madras High Court in Aru-nachala v. Madappa, AIR 1936 Mad 949 and of Horwill J. in Sumermal Jamatraj v. Thukkappa, AIR 1944 Mad 391 (2). I am unable to see the relevance of these cases to the facts of the present case. In the latter case Horwill J., held 'that where the transferee paid the consideration partly in adjustment of an outstanding debt and the balance in cash, the requirements of Section 27 of the Specific Relief Act, are satisfied. In a very recent case decided hy the Madras High Court in Mary Joseph v. Mohd. Hajee Moosa and Co., : AIR1959Mad86 a Bench of the Madras High Court have affirmed the view of Horwill J., in AIR 1944 Mad 391 (2) (Supra). The facts of this case are different.
45. It is not necessary to pursue the matter 'further because on the findings of the learned Subordinate Judge, defendants 2 and 3 cannot be considered as bona fide purchasers without notice.
46. In the result, the three appeals fail and are dismissed with costs. Leave refused