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Govind Lal Chawla Vs. C.K. Sharma and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty;Contract
CourtAllahabad High Court
Decided On
Case NumberSecond Appeal No. 1379 of 1974
Judge
Reported inAIR1978All446
ActsCode of Civil Procedure (CPC) , 1908 - Sections 100; Contract Act, 1872 - Sections 55
AppellantGovind Lal Chawla
RespondentC.K. Sharma and ors.
Appellant AdvocateB. Dayal and ;V. Sahai, Advs.
Respondent AdvocateN.C. Upadhyaya, ;K.C. Saxena and ;R.K. Dwivedi, Advs.
DispositionAppeal dismissed
Excerpt:
.....respondent, sent a notice to vendors send endorsed its copy to sri c. 11,250/- and to execute the sale deed and be present for registration in the office of the registrar on 26-12-1966. the two ladies did not reach the office of the registrar and failed to execute the sale deed. respondent madanlal as well as the appellant filed the written statements. madanlal claimed that the agreement for sale in favour of himself or his nominee dated 10-1-1966 was a perfectly valid document and subsisted till the sale deed was executed in favour of madanlal or his nominee the appellant in his case. 4. that the first party shall execute the sale deed within a period of six weeks from this date and in case of failure on his part to do so, the second party may adopt legal proceedings for specific..........rs. 750/- was paid to these two ladies towards the earnest money. according to the agreement, the sale deed was to be executed within a period of six weeks from the date of the agreement. subsequently on 1-12-1966 madanlal who is a pro forma respondent, sent a notice to vendors send endorsed its copy to sri c. k. sharma. on 15-12-1966 the vendors in reply to notice dated 1-12-1966 refuted the allegations contained in it. they asserted that respondent madanlal did not get the sale-deed executed within six weeks according to the stipulation contained in the agreement dated 10-1-1966 executed by the aforesaid ladies in his favour. they denied the existence of the agreement and they informed him of the agreement dated 4-8-1966 between the plaintiff-respondent sri c. k. sharma and.....
Judgment:

M.M. Gupta, J.

1. This second appeal has been filed by defendant Govind Lal Chawla against the decree passed by the trial court cancelling the sale deed dated 24-12-1966 executed by respondent No. 2 and Mrs. Lucas, predecessor-in-interest of respondents Nos. 3, 4 and 5 in favour of the appellant. That decree was confirmed by the Additional District Judge, Allahabad. Mrs. C. Gordon and Mrs. Lucas own house No. 34 Muir Road, Allahabad. Its corresponding old Corporation Number was 20. Both these ladies entered into an agreement for sale in favour of respondent Sri C. K. Sharma for a consideration of Rs. 17,000/- on 4-8-1966. A sum of Rs. 5,000/- was paid towards the earnest money. Some time later a further sum of Rs. 750/- was paid to these two ladies towards the earnest money. According to the agreement, the sale deed was to be executed within a period of six weeks from the date of the agreement. Subsequently on 1-12-1966 Madanlal who is a pro forma respondent, sent a notice to vendors send endorsed its copy to Sri C. K. Sharma. On 15-12-1966 the vendors in reply to notice dated 1-12-1966 refuted the allegations contained in it. They asserted that respondent Madanlal did not get the sale-deed executed within six weeks according to the stipulation contained in the agreement dated 10-1-1966 executed by the aforesaid ladies in his favour. They denied the existence of the agreement and they informed him of the agreement dated 4-8-1966 between the plaintiff-respondent Sri C. K. Sharma and themselves. Subsequently, under the influence of some persons the two ladies did not support the fact of the execution of the agreement for sale in favour of the respondent Sri C. K. Sharma. On 20-12-1966 the plaintiff respondent Sri C. K. Sharma sent a registered letter to the two ladiesto receive the sum of Rs. 11,250/- and to execute the sale deed and be present for registration in the office of the Registrar on 26-12-1966. The two ladies did not reach the office of the Registrar and failed to execute the sale deed. Later on the respondent Sri C. K. Sharma received letter dated 31-12-1966 from Mrs. C. Gordon informing him that they had executed the sale deed in favour of the appellant on 24-12-1966. The sale deed, according to the plaintiff-respondent Sri C. K. Sharma was illegal, inoperative and it was not binding on the plaintiff respondent. The sale deed was challenged on the ground that there did not exist any agreement for sale between the two ladies and respondent Madanlal. Even if any such agreement existed, it stood cancelled and vitiated on account of non-compliance with the terms of the agreement. It was also cancelled by these two ladies. Plaintiff respondent Sri C. K. Sharma was entitled to get a valid sale deed executed in his favour under his valid agreement. The sale deed executed in favour of the appellant was void. The vendors were estopped from transferring the property in suit by sale in favour of the appellant. The sale deed, according to the terms of the agreement in favour of respondent Madanlal was to be executed within six weeks but it was not done. The agreement, therefore, stood cancelled. Plaintiff-respondent Sri C. K. Sharma claimed that he was always ready and was still ready to perform his part of the contract. On these allegations the plaintiff respondent claimed relief for a direction to the respondents Nos. 1 and 2 to execute a sale deed in respect of 34 .Muir Road, Allahabad, in favour of the plaintiff-respondent Sri C. K. Sharma on receipt of the sum of Rs. 11,250/- from him. The alternative relief was for the refund of the sum of Rs. 5,750/-.

2. The respondent-vendors claimed that the appellant was a bona fide purchaser of the said property on the basis of the agreement dated 10-1-1966. The agreement provided that the sale deed would be executed in favour of respondent Madanlal or his nominee. The agreement with the respondent Madanlal dated 10-1-1966 contained the condition that the vendors would get their names mutated and they would satisfy a mortgage-debt due to Sri G. Alphanzo. It was claimed further that under the agreement dated 10-1-1966 the time was not the essence of the contract. Plaintiff-respondent Shi C. K. Sharma had know-ledge of the agreement dated 10-1-1966. The respondent, however, got another agreement for sale executed subsequently for a consideration of Rs. 17,000/-. The subsequent agreement was inoperative, void and ineffective. The agreement dated 4-8-1966 was not binding on the vendors. The plaintiff-respondent prevented the vendors from complying with the agreement in favour of respondent Madanlal. Respondent Madanlal as well as the appellant filed the written statements. Madanlal claimed that the agreement for sale in favour of himself or his nominee dated 10-1-1966 was a perfectly valid document and subsisted till the sale deed was executed in favour of Madanlal or his nominee the appellant in his case. Under that agreement it was incumbent upon the vendors to satisfy Madanlal or his nominee about their title and its being free from any incumbrance and as such time was not the essence of the contract under agreement dated 10-1-1966. That agreement was never cancelled. Plaintiff-respondent Sri C. K. Sharma had full knowledge of the said agreement. The agreement was not binding on respondent Madanlal. Respondent No. 1 had no right to purchase the property and he had no cause of action. To similar effect is the written statement of the appellant,

3. The main issues that arose before the trial court which are relevant for the purposes of this appeal related to the questions whether under agreement dated 10-1-1966 the time was the essence of the contract; and, whether the vendors had cancelled that agreement. The other questions related to the question whether the agreement in favour of the plaintiff-respondent was void.

4. In appeal before the lower appellate court the following points arose for decision :

'1. Whether time was the essence of the contract between the defendants Nos. 1 and 2/1 to 2/3 and the defendant No. 3 ?

2. Whether the agreement for sale in favour of the defendant No. 3 was revoked ?

3. Whether the sale executed in favour of the defendant No. 4 was validly executed according to the terms of agreement dated 10-1-1966 ?

4. Whether the agreement dated 4-8-1966 in favour of the plaintiff is void

5. Appellant's relief, if any ?' 5. On these points the learned Additional District Judge who heard the appeal held that the time was the essenceof the contract between the vendors and Madanlal. On point No. 2 it was held that the agreement in favour of Mandanlal stood revoked. On point No. 3 also it was held that the sale deed executed in favour of the appellant is against the terms of the agreement dated 10-1-1966. Point No. 4 was also decided against the appellant. As a result of these findings the appeal was dismissed.

6. The main contentions that have been raised in this appeal relate to the question whether in the agreement dated 10-1-1966 time was the essence of the contract and whether the agreement dated 10-1-1966 stood revoked. The third contention relates to the validity of the sale deed executed in favour of the appellant on 24-12-1966. Before dealing with the question whether in this case time was essence of the contract or not, I shall deal with the objection raised by the counsel for the respondent. He has contended that the question whether the time was the essence of the contract or not is a finding of fact and there being the concurrent findings of the two courts below, the question cannot be agitated in second appeal. He has relied on Beni Sah v. Sew Sah (AIR 1949 Cal 661). It was held by Blank J. in that case, that the question whether the time was of the essence of the contract depended on the intention of the parties. The intention of the parties is a question of fact and this court will be bound by the proceedings of the courts below on the matter of fact. While taking this view the learned Judge distinguished the Privy Council case-- Jamshed Kodaram Irani v. Burjorji Dhunjibhai (AIR 1915 PC 83). He also placed reliance on Jwala Ram v. Mathura Das (AIR 1931 Lah 696). In that case it was held that while interpreting the terms of a compromise decree, the question whether a default has or has not taken place is one of fact to be decided on facts of each case. It cannot be laid down as a matter of law that the time was not the essence of the contract in such cases. In these cases the question jof interpretation of a compromise decree arose. They were not the cases in which the terms of a mere agreement between the parties came up for interpretation. It has, however, been held in numerous cases by the Supreme Court that the construction of a document is a question of law. If any cases are needed to be cited for this proposition they are to be found in : AIR1962SC1314 , Chuni Lal V. Mehta and Sons Ltd. v. Century Spinning and. and : [1964]5SCR905 , Bhusawal Borough Municipality v. Amalgamated Electricity Co. Ltd. Bhusawal. It has been laid down in these cases that the construction of a document of title or of a document which is the foundation of the rights of parties necessarily raises a question of law.

7. I now proceed to examine whether the time was of the essence of the contract under the agreement in question. The vendors in this case had executed an agreement in favour of one Madanlal on 10-1-1966. The terms of the agreement Ex. B-20 have to be construed. The agreement was executed by Mrs. M. Lucas and Mrs. C. Gordon who claim to be the owners of 20, Muir Road. The agreement was executed in favour of Madanlal. According to the agreement the sale deed was to be executed in favour of Madanlal and/or his nominee or nominees. The consideration for sale was to be Rupees 16,000/-. The sum of Rs. 500/- was paid as earnest money. The stipulations in the deed of agreement were as below :--

'1. That in pursuance of the said agreement and in consideration of the said sura of Rs. 16,000 (Rupees sixteen thousand only), to be paid by the second party and/or the nominee or nominees of the second party, the first party shall transfer by way of absolute sale, the said premises No. 20, Muir Road, Allahabad, together with all the rights of the First Party in the land, and constructions to the Second Party and/or the nominee or nominees of the Second Party free of enumbrances.'

2. That, out of the said sum of Rupees 16,000/- the First Party has this day been paid a sum of Rs. 500/- (Rupees five hundred only) by way of earnest money, and the balance of Rs. 15,500/- (Rupees fifteen thousand and five hundred only) shall be paid to the First Party on the execution of the sale-deed, before the Sub-Registrar, Allahabad.

3. That the said property is subject to a mortgage in favour of Mr, G. Alphanzo and the dues of the mortgagee will be cleared and paid by the First Party before the execution of the sale-deed.

4. That the First Party shall execute the sale deed within a period of six weeks from this date and in case of failure on his part to do so, the Second Party may adopt legal proceedings for specific performance or refund of his earnest money, as he may choose.

5. That in case the second party commits a default, the earnest money shall be forfeited.'

Conditions 3 and 4 are quite important, According to Condition 3, the mortgage deed in favour of Sri G. Alphanzo was to be cleared and paid by the vendors before the execution of the sale-deed. According to Condition 4, the vendors were to execute the sale deed within a period of six weeks from the date of the agreement and in case of his failure to do so, the Second Party was to adopt legal pro-ceedings, and, according to the fifth condition in case of default of the vendees, the earnest money was to be forfeited. These stipulations show that before the sale deed could be executed the mortgage of Sri G. Alphanzo was to be satisfied and the sale deed was to be executed by the vendors within six weeks. Thus, in a case like the one before me the time could not be the essence of the contract. So far as the vendee in this case is concerned, he had to be satisfied about the fact that mortgage was cleared. It is also stated that before the sale deed could be executed the vendors had to get their names mutated over the property. These conditions had therefore to be satisfied, and, till they were satisfied the sale deed could not be executed. In Govind Prasad v. Hari Dutt : [1977]2SCR877 following Gomathinayagam Pillai v. Palaniswami Nadar : [1967]1SCR227 it was held that, it is settled law that, 'the fixation of the period within which the contract has to be performed does not make the stipulation as to time of the essence of the contract. If the contract relates to sale of immoveable property it would normally be presumed that time is not of the essence of the contract. The intention to treat time as the essence of the contract may be evidenced by circumstances which should be sufficiently strong to displace the normal presumption that in a contract of sale of land stipulation as to time is not the essence of the contract.' The lower appellate court has committed a grievous error by ignoring the basic rule laid down in these two cases, about presumption that in cases of immovable property time is not the essence of the contract. It has therefore to be inferred from the terms of the agreement and circumstances whether the time was the essence of the contract or not. So far as this case is concerned, as I have observed above, the time could not be the essenceof the contract.

8. The next question that needs consideration is whether the agreement dated 10-1-1966 stood revoked. It is obvious that within six weeks, as mentioned in the deed of agreement dated 10-1-1966, the sale deed by the vendors was not executed in favour of Madanlal. Madanlal was bound to get the deed executed after the conditions of redeeming the mortgage and mutation were satisfied. Madanlal, however, on behalf of the appellant sent letter Ex. 1 dated 1-12-1966. This letter is a letter of demand against the vendors requiring them to execute the sale deed in their favour. This letter starts bv referring to his registered letter dated 18-2-1966 sent to the vendors through his legal advisor. Although a copy of letter Ex. B-19 dated 18-2-1966 was filed by the appellant but the courts below have not found that any such letter was sent. In letter Ex. 1 there is no mention about the conditions of redeeming of the mortgage or of the mutation. In reply to this notice the vendors sent reply Ex. 11 dated 15-12-1966, In letter Ex. 11 it was denied that any letter dated 18-2-1966 referred to in Ex. 1 was received. It was admitted that the vendors had entered into an agreement dated 10-1-1966 for sale of premises known as 20, Muir Road and also for having received earnest money of Rs. 500. It was, however, asserted in this letter that the sale deed was to be executed within six weeks and the earnest money was to be forfeited on his failure to get the sale deed executed. He had failed to get the sale deed executed within that period. It was asserted that Madanlal had not paid the balance nor he has fixed any date on which he will be ready with the money in the registration office within the stipulated period. He was accused of having no ready money with him. It was further asserted that since he failed to get the sale deed executed within the stipulated time his right to get the sale deed executed was lost. It was also mentioned that the mortgage deed was redeemed in time but he still failed to get the sale deed executed after paying the balance of the agreed consideration. It was also mentioned that since the vendors were in urgent need of money they entered into another agreement with the plaintiff Mr. C. K. Sharma who is a tenant in those premises. It was further mentioned that on account of failure of Madanlal to get the sale deed executed the vendors had no other option but to honour the agreement entered into with Mr. C. K. Sharma,It appears that a copy of this letter was also sent to Mr. C. K. Sharma. After this letter things developed differently against Mr. C. K. Sharma. The sale deed was executed in favour of the appellant Govind Lal Chawla who claimed to be the nominee of Madanlal. From the correspondence it does not appear that at any stage the vendors had given notice to Madanlal about their having satisfied the conditions of the agreement that the mortgage in favour of Mr. G. Alphanzo was redeemed by them and also that they had got their names mutated. Unless Madanlal had intimation of the satisfac--tion of these conditions he could not get the sale deed executed. It is also wrongly mentioned in Ex. 11 that the mortgage was satisfied in time as Mr. G. Gordon, the witness (D. W. 1), who is the husband of one of tbe vendors, has stated that the mortgage in favour of Mr. G. Alphanzo was redeemed after the agreement for sale was executed in favour of Mr. C. K. Sharma. Thus, it is obvious that the agreement subsisted and it was open to Madanlal to get the sale deed executed within the period of limitation of three years. The lower appellate court has observed that the appellant or Madanlal were bound by the statement of the vendors contained in the statement in his agreement. This is queer logic that the notices were bound by the statement of the person, who gave them notice for revoking the contract. The mere fact that at a later stage the vendors executed the sale deed in their favour would not place them in such a position which would estop them from challenging the statement contained in Ex. 11. I have therefore no hesitation in coming to the conclusion that the agreement dated 10-1-1966 did not stand revoked. Section 39 of the Indian Contract Act lays down that when a party to the contract has refused to perform, or disabled himself from performing his promise in its entirety, the promises may put to an end to the contract, unless he has signified by words or conduct, his acquiescence in its continuance. This section gives a right to repudiate a contract when a party to the contract has not performed his part of the contract or has disabled himself from performing the contract. So far as this case is concerned, there was no disability on the part of the vendee to perform any part of the contract. The conditions under the agreement had to be performed by the vendors and they did not give notice to the vendee of satisfying theconditions of the agreement. The vendee had only to get the sale deed executed. The agreement could not, therefore, be repudiated by the vendors on the ground that the vendee had not performed his part of the contract.

9. I now take up the last question about the competence of the appellant vendee Govind Lal Chawla to get the sale deed executed in his favour. The agreement mentioned that the vendors had agreed to sell their said property to the second party and/or the nominee or nominees of the second party. The agreement was between Madanlal and the vendors but the sale-deed was to be executed in favour of either Madanlal or his nominee or nominees. Madanlal has not been examined. The only witness examined is the appellant himself. He has stated in his ex amination-in-chief that he was the real purchaser. The agreement dated 10-1-1966 was entered by Madanlal on his behalf. It was a Benami transaction in his favour. Madanlal was not the real purchaser. He was the real purchaser. He has also stated that on 8-1-1966 he had himself paid the sum of Rs. 500/- to Madanlal for passing it on as earnest money to the vendors. In his cross-examination he has also stated that he had a feeling that if his name was mentioned directly in the agreement the vendors may show their unwillingness to execute the agreement in his favour. The only writing giving an authority to the appellant to get the sale-deed executed from Madanlal is Ex B-16. This document is dated 8-12-1966. It is stated in it; In reality I made the contract on behalf of Sri Govind Lal Chawla, resident of 20, Muir Road, Allahabad ('He was the tenant in the premises in dispute) Benami for certain reasons.' It was also stated in case the vendors did not execute the contract of their own accord the executant will file a suit for specific performance of the contract and make the appellant a co-plaintiff with him, who will properly look after the case with him provided Sri Chawla spent money over litigation in court expenses and if the fails in that suit appellant would be responsible for the costs of the suit. This document does not mention anywhere that Chawla was the nominee of Madanlal and all that was mentioned in it was that the agreement was entered into Benami in favour of Ghawla although the vendee shown inthe agreement was Madanlal. All thatthe agreement dated 10-1-1966 means is that the sale-deed would be executed in favour of Madanlal and/or his nominee or nominees. That only means that the nominee would get the sale-deed executed on behalf of Madanlal and not in his own right. Moreover, there is no document of nomination in favour of the appellant to get the sale-deed executed which might have been executed by Madanlal. The appellant had admitted in his statement on oath that there was no need for him to obtain any nomination in writing in his favour. A peculiar feature of this case is also the admission of Sri Chawla that before getting the sale-deed executed in his favour on 24-12-1966 he had threatened the vendors. His statement is:

'Main 22-12-1966 Ko personally Party No. 1 Va Do Ko Threaten Kar Aaya Ki Agar Vey Mere Hak Men Bainama Na Karenge to Main Unke Khilaf Fauzdari Va Dewani Karyawaii Karenge.'

It is perhaps in this background that he succeeded in getting the sale-deed executed in his favour after the vendees had sent letter Ex. B-11 on 15-12-1966. The courts below were perfectly justified in holding that the appellant was not the nominee of Madanlal. Madanlal had a right to get the sale-deed executed in his favour in preference to plaintiff-respondent but the appellant had no right to get any preference over the agreement executed in favour of the plaintiff-respondent. Both the courts were, therefore, perfectly justified in cancelling the sale-deed executed in favour of the appellant.

10. The appeal is, therefore, dismissed. However, in the circumstances of the case, the parties are ordered to bear their own costs.


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