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Jhandoo and anr. Vs. Ramesh Chandra and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty;Contract
CourtAllahabad High Court
Decided On
Case NumberSecond Appeal No. 163 of 1964
Judge
Reported inAIR1971All189
ActsSpecific Relief Act, 1877 - Sections 19 and 27; Transfer of Property Act, 1882 - Sections 53(6), 54 and 100
AppellantJhandoo and anr.
RespondentRamesh Chandra and ors.
Appellant AdvocateG.P. Bhargava and ;A.N. Bhargava, Advs.
Respondent AdvocateRamashanker Mishra, Adv.
DispositionAppeal allowed
Excerpt:
property - relief under section 27 clause b - section 27 (b) and 19 of specific relief act, 1877 - transferee after obtaining the possession of a land - demolished the old construction - built a new structure by investing a substantial amount - plaintiff did not object for three years - plaintiff not entitled for relief under section 27 clause b - only remedy available with the court is to pass decree for compensation under section 19 as a substitute of specific performance - privity of contract between plaintiff and defendant must be established for awarding compensation against the defendant. - - the vendor, however, had incurred an additional liability under section 19 of the specific relief act, 1877. the question before me is whether liability under section 19.....m.h. beg, j.1. this is a defendants' second appeal arising out of a suit for specific performance of a contract dated 29-6-1956 to sell some plots of land and a house for a sum of rs. 5000/- to the plaintiffs by their owner deo karan, thefather of defendant-respondent no. 3, smt. sukhdei. an amount of rs. 4000/-was paid at the time of the execution of the agreement for sale. subsequently, this very property was sold to the defendants-appellants on 2-7-1956. in the suit for specific performance, filed on 26th of may, 1959, the plaintiffs impleaded the vendor, deo karan, with whom they had entered into the contract of sale and to whom they had paid rs. 4000/- and also the subsequent transferees, the defendants-appellants, jhandoo and chhittar, who claimed to be bona fide purchasers for.....
Judgment:

M.H. Beg, J.

1. This is a defendants' second appeal arising out of a suit for specific performance of a contract dated 29-6-1956 to sell some plots of land and a house for a sum of Rs. 5000/- to the plaintiffs by their owner Deo Karan, thefather of defendant-respondent No. 3, Smt. Sukhdei. An amount of Rs. 4000/-was paid at the time of the execution of the agreement for sale. Subsequently, this very property was sold to the defendants-appellants on 2-7-1956. In the suit for specific performance, filed on 26th of May, 1959, the plaintiffs impleaded the vendor, Deo Karan, with whom they had entered into the contract of sale and to whom they had paid Rs. 4000/- and also the subsequent transferees, the defendants-appellants, Jhandoo and Chhittar, who claimed to be bona fide purchasers for value without notice of the prior agreement for sale. Both the courts below have hold that the defendants-appellants had notice of the agreement to sell between the plaintiffs-respondents and Deo Karan. now represented by his heir Smt. Sukhdei, defendant-respondent No. 3. It is true that the finding that the appellants had notice of the prior agreement to sell in favour of the plaintiffs-respondents is based largely on circumstantial evidence, and in particular, on the fact that a reply was sent by Deo Karan to a notice given by the defendants-appellants to him, in which it is alleged that they had challenged the right of Deo Karan to make a transfer. Since neither the actual notice sent by the defendants-appellants to Deo Karan nor its copy has been placed on record, it is difficult to say what was actually communicated to Deo Karan whose reply is on record. The reply also does not definitely fix the knowledge of the contract to sell upon the defendants-appellants. Nevertheless, inasmuch as there is sufficient circumstantial evidence to warrant the inference that the defendants-appellants knew of the previous contract to sell in favour of the plaintiffs-respondents, it is not open for me to disturb that finding of fact in second appeal.

2. Both the courts below had, however, refused to grant specific performance of the contract against the defendants-appellants who had after purchasing the property, obtained possession of the land, demolished the dilapidated structure on it, and built a new one in its place. The lower appellate court dealt with this aspect of the matter and found that the plaintiffs-respondents had stood by without objecting or giving any notice to the defendants-appellants, for nearly three years, until the defendants-appellants had invested a substantial amount in their constructions on the land purchased. In other words, the lower appellate court had invoked the Principle of an equitable estoppel against the plaintiffs-respondents in refusing to order specific performance of the contract to convey the property to the plaintiffs-respondents after a lapse of nearly three years. Indeed, the contract could not be specifically performed inasmuch as the character of the property itself had changed substantially since its purchase. Therefore, although the plaintiffs-respondents would have been entitled to the specific performance of the contract against the defendants-appellants under Section 27, Sub-section (b) of the Specific Relief Act if the plaintiff's were vigilant because the defendants-appellants were held to have notice of the prior agreement to sell, yet, the contract could not be specifically enforced against the defendants-appellants after equities had appeared in their favour. The conduct of the plaintiffs-respondents had, it was rightly held, disentitled them from obtaining relief under Section 27(b) of the Specific Relief Act against the defendants-appellants. And, of course, no specific relief could have been granted against Deo Karan or his heir, defendant-respondent No. 3, Smt. Sukhdei, who had already parted with the property in favour of the defendants-appellants. The only course open to the courts below was to pass a decree awarding compensation under Section 19 of the Specific Relief Act of 1877 as a substitute for specific performance. They awarded this compensation, not against the vendor of the defendants-appellants, who was also bound by the previous contract in favour of the plaintiffs-respondents, but against the purchasers, that is to say, the defendants-appellants who were not parties to that contract. The lower appellate court had even awarded a decree for interest under Section 55(6)(b) of the Transfer of Property Act against the defendants-appellants. I do not see how this provision was applicable at all to the defendants-appellants in this case. The provision deals with liabilities of a defaulting seller to a purchaser.

3. Learned counsel for the defendants-appellants has contended that his clients purchased the property free from any charge. My attention was invited to the provisions of Section 54 of the Transfer of Property Act which deals with the contract of pale in the following words;--

'A contract for the sale of immovable property is a contract that a sale of such property shall take place on terms settled between the parties.

It does not, of itself, create any interest in or charge on such property. ' Again, Section 100 of the Transfer of Property Act was referred to. Here, it is laid down: --

'Where immovable property of one person is by act of parties or operation of law made security for the payment of money to another, and the transactiondoes not amount to a mortgage, the latter person is said to have a charge on the property; and all the provisions hereinbefore contained which apply to a simple mortgage shall, so far as may be, apply to such charge.'

Learned counsel placed the contract to sell the property before me and pointed out that there was nothing in this contract to lead to the inference that there was any charge created on the property agreed to be sold.

4. Reliance was also placed on Satyabrata Ghose v. M. Bangur and Co., AIR 1954 SC 44 and R. L. Toshniwal v. S. R. Alshi, AIR 1960 SC 1368 for the proposition that a contract of sale does not create any charge on immovable property to be sold. In view of the clear words of Section 54, no authority is really needed to substantiate the proposition: The Courts below, however, seem to have dealt with the case as though the contract for sale itself created some charge on the property to be sold and that the defendants-appellants, having stepped into the shoes of the vendor, were also bound to discharge even the obligations incurred by the vendor in entering into an agreement to sell to the plaintiffs-respondents. Under the law, the obligation of the defendants-appellants was confined to the liability to have the contract for specific performance enforced against them instead of enforcing it against their vendor. That liability arose under Section 27(b) of the Specific Relief Act. The vendor, however, had incurred an additional liability under Section 19 of the Specific Relief Act, 1877. The question before me is whether liability under Section 19 could be fastened upon the purchasers as well when the contract, which could have been enforced against them if the plaintiffs' conduct in acquiescing and standing by when the constructions were going up, had not disentitled them from obtaining specific performance.

5. Section 19 of the Specific Relief Act, 1877, reads as follows:--

'Any person suing for the specific performance of a contract may also ask for compensation for its breach, either in addition to, or in substitution for, such performance.

If in any such suit the court decides that specific performance ought not to be granted, but that there is a contract between the parties which has been broken by the defendant and that the plaintiff is entitled to compensation for that breach, it shall award him compensation accordingly.

'If in any such suit the Court decides that specific performance ought to be granted, but that it is not sufficient tosatisfy the justice of the case, and that some compensation for breach of the contract should also be made to the plaintiff, it shall award him such compensation accordingly.

Compensation awarded under this section may be assessed in such manner as the court may direct.

Explanation:-- The circumstance that the contract has become incapable of specific performance does not preclude the court from exercising the jurisdiction conferred by this section.'

6. It is clear that the first part of Section 19 only enables the person suing for specific performance to ask for compensation for its breach. He may do so either in addition or in substitution for such performance. The plaintiffs, in the instant case had not asked specifically for compensation for the breach of any contract and had not set out any grounds, legal or equitable, for making the defendants-appellants responsible for payment of any compensation to them. There was no privity of contract between the plaintiffs-respondents and the defendants-appellants. The next part of Section 19 imposes a mandatory duty upon the court to award compensation, whether it is asked for or not, provided three conditions are satisfied. They are: the court must decide that specific performance ought not to be granted; there must be a contract between the parties which must have been broken by the defendant against whom the compensation is to be granted; and, the plaintiff must have proved his right to the compensation to be awarded. It seems to me to be obvious that this part of Section 19 conies into play only when there is privity of contract between a party against which an order for compensation in lieu of damages for breach of contract can be passed. In fact, the compensation here spoken of is really the damage incurred by a party because the other contracting party has broken it. It follows that it should be awarded only against the party which has broken it. A third party, which has not broken the contract, may place itself in such a position that the contract may be specifically enforced against it as though it had entered into the contract. Nevertheless, there is no corresponding provision which would transfer the damages to be paid as compensation for breach of contract from the shoulders of the party actually responsible for the breach on to those of the party which had merely taken the benefit of that breach. To make the subsequent purchasers liable to pay damages or compensation under Section 19 of the Specific Relief Act would be nothing short of enforcing a charge upon the property purchased by them. Thiswould, in my opinion, be illegal. Moreover, if the plaintiffs-respondents had disentitled themselves, in equity, from obtaining any specific relief against the defendants-appellants, they could not be held to have automatically entitled them-selves, in equity, to obtain compensation from a party which had not broken the contract. Jurisdiction under Section 19 can be certainly exercised only against a party which has broken the contract to sell. The plaintiffs' case was not for damages for inducing any breach of contract which may be payable outside Section 19 of the Specific Relief Act of 1877. 6A. The result is that the letter of law as well as equity require, in the instant case, that the liability to compensate or pay damages should rest upon the shoulders of the party which had undertaken to pay back under the contract entered into by it with the plaintiffs-respondents. That party is, as already indicated, now represented by Smt. Sukhdei, defendant-respondent No. 3.

7. I, therefore, allow this appeal and set aside the decree passed against the defendants-appellants who will not be liable to pay anything. The amount awarded is however, decreed against defendant-respondent No. 3. Smt. Sukhdei, who I understand, is the only heir and representative now of Deo Karan, deceased. She will be liable only to the extent of the assets of her father which came into her hands. Parties will bear their own costs.


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