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Ram Swarup Gaur and anr. Vs. Ratiram - Court Judgment

LegalCrystal Citation
SubjectContract
CourtAllahabad High Court
Decided On
Case NumberFirst Appeal No. 254 of 1975
Judge
Reported inAIR1984All369
ActsContract Act, 1872 - Sections 56; Transfer of Property Act, 1882 - Sections 54
AppellantRam Swarup Gaur and anr.
RespondentRatiram
Appellant AdvocateA.D. Prabhakar, Adv.
Respondent AdvocateS.R. Misra, Adv.
DispositionAppeal allowed
Excerpt:
.....to sell - section 56 of contract act, 1872 and section 54 of transfer of property act, 1882 - sale deed as well as re-sell agreement entered into - before expiry of period stipulated for re-sell seller asked buyer to resell property to him - cheque issued to that effect - an act restricted transfer of property for a short period of time - buyer did not encash cheque nor executed agreement - seller executed his part of contract - held, enactment was only for temporary period - did not prevent buyer from executing his part of contract. - - the preamble of the agreement clearly states that the plaintiffs being in need of money had sold their house to the defendant and that the plaintiffs were desirous of purchasing the said property. 15. the law is now well settled that an agreement..........show that rs. 10,000/-were paid as earnest money and the balance was to be paid at the time of the sale-deed. the sale-deed was to be executed in favour of the defendant by 15th february, 1969. it was also agreed that the purchaser shall execute separate agreement promising to re-sell the property. clause 7 of the agreement contemplated leasing of the property in favour of the plaintiffs on a monthly rent of rs. 375/-.4. in pursuance of the aforesaid agreement dated 10th february, 1969, the sale-deed was in fact executed on 17th february, 1969. on the same date an agreement to re-sell was also executed which was got registered.5. on 29th june, 1974 the first registered notice was given by the plaintiffs in writing to the defendant for transferring the property in their favour after.....
Judgment:

Khanna, J.

1. The present first appeal has been filed by the plaintiffs against the judgment and decree of the 1st Additional Civil Judge, Dehradun dated 19th February, 1975 dismissing the plaintiffs' suit. It may also be noticed that a cross-objection has also been filed in the present first appeal which challenges the decree passed by the Court below giving a declaration to the plaintiffs that they were not liable to pay rent since 11th October, 1974 till the expiry of the period of appeal or appeals, if any, or till they withdraw the deposited amount whichever is earlier.

2. The plaintiff-appellants filed Suit No. 294 of 1974 for a declaration that the plaintiffs having paid the sale price, the defendant was liable to sell the suit property back to the plaintiffs as soon as the permission for sale was granted or the ban on transfer or urban property at present is imposed by law in force, besides other reliefs which were for a declaration that they were not liable to pay rent any more in respect of the property.

3. According to the plaint case the plaintiffs who were in need of money and on 10th February, 1969 they entered into an agreement with the defendant to sell a portion of their Westlynne Main Building situated at Kulri, Mussoorie for an amount of Rs. 25,000/-. The main terms of the aforesaid agreement governing the parties arc contained in Clauses 1, 2, 4 and 7. The aforesaid Clauses show that Rs. 10,000/-were paid as earnest money and the balance was to be paid at the time of the sale-deed. The sale-deed was to be executed in favour of the defendant by 15th February, 1969. It was also agreed that the purchaser shall execute separate agreement promising to re-sell the property. Clause 7 of the agreement contemplated leasing of the property in favour of the plaintiffs on a monthly rent of Rs. 375/-.

4. In pursuance of the aforesaid agreement dated 10th February, 1969, the sale-deed was in fact executed on 17th February, 1969. On the same date an agreement to re-sell was also executed which was got registered.

5. On 29th June, 1974 the first registered notice was given by the plaintiffs in writing to the defendant for transferring the property in their favour after receiving the balance amount of consideration. The aforesaid notice was received by the defendant and a reply was given by him that he was ready to accept the amount and to perform his part of the contract but due to the restrictions placed by the U. P. Ceiling on Property (Temporary Restrictions on Transfer) Ordinance, 1972 (hereinafter referred to as 'the Ordinance 1972'), there was an inability in the defendant to execute the sale-deed. It transpires that several other notices were given by the plaintiffs in writing to the defendant and finally on 11th October, 1974 a cheque for the balance consideration i.e. Rs. 24,500/- was also sent to the defendant. The defendant, however, neither encashed the cheque nor executed the sale-deed and thus the present suit was filed in December, 1974.

6. The defence of the defendant in his written-statement was mainly that the contract stood frustrated because of the change in law which made the transfer unlawful. It was also stated that the permission sought for transferring the property was refused.

7. The trial Court recorded a finding that the amount was tendered and was in fact deposited in court on 3rd February, 1975 and thus the plaintiffs had performed their part of the contract. However, the trial Court held that the agreement to sell dated 17th February, 1964 became impracticable and impossible of performance on account of the enforcement of the Ordinance 1972 and the said agreement became void and unenforceable having been frustrated. The trial Court, however, found that the plaintiffs were entitled to the declaration that they will not be liable to pay rent from 11th October, 1974 till they withdraw the amount or till the expiry of the period of appeal or appeals, if any, whichever is earlier.

8. As far as the appeal filed by the plaintiffs is concerned, the only question which arises for determination is as to whether looking to the entire facts and circumstances of the case, the agreement to sell dated 17th February. 1969 became impracticable and impossible of performance on account of the enforcement, of the Ordinance 1972.

9. The essential idea upon which the doctrine of frustration is based and the provisions of law which are applicable in India have been laid down by the Supreme Court in the leading case reported in AIR 1954 SC 44 (Satyabrata Ghose v. Mugneeram Bangur and Co.). It has been laid down by the Supreme Court that the differences in the way of formulating legal theories for understanding the doctrine of frustration as enunciated in the decisions given by the English Courts have no concern in India as we have statutory provisions in the Indian Contract Act. It has been held that in deciding cases in India the only doctrine that we have to go by is that of supervening impossibility or illegality as laid down in Section 56 of the Contract Act, taking the word 'impossible' in its practical and not literal sense. The real test laid down for finding out whether a contract stands frustrated is to find out as to whether the fundamental basis upon which the agreement rested has been knocked down by the intervening events.

10. The first question, therefore, which has to be examined in this case is as to what is the fundamental basis upon which the agreement rested. For the purposes of finding out the answer to the aforesaid question one will have to examine the agreement to sell which had been executed between the parties. The preamble of the agreement clearly states that the plaintiffs being in need of money had sold their house to the defendant and that the plaintiffs were desirous of purchasing the said property. It may also be mentioned that the sale-deed and the agreement to sell had been executed on the same day. The property had been agreed to be sold by the defendant for the same amount for which he had purchased the same from the plaintiffs. The property remained in possession of the plaintiffs as the lease deed was also executed on the same day and the plaintiffs had to pay rent to the defendant for remaining in possession of the property as on that day the defendant had become owner of the property.

11. Clause 1 of the aforesaid agreement says that the purchasers shall have a right to re-purchase the property on payment of Rs. 25,000/- at any time within a period of six years.

12. Clause 2 says that in such event the defendant shall sell the said properly by executing a sale-deed in favour of the plaintiffs or their nominee or nominees.

13. Clause 5 says that the plaintiffs will have a right to specifically enforce the agreement against the defendant in a court of law if the defendant refuses to re-sell the said properly.

14. Clause 6 says that the purchasers shall cease to claim a right to re-purchase the said property from the owner at the expiry of six years or such further period as may be agreed upon between the parties in writing in future.

15. The law is now well settled that an agreement to sell is a concession which is granted by a purchaser to the seller for repurchase of the properly in case he fulfils his part assigned in the agreement within the time grained by the purchaser.

16. From the Clauses of the agreement which have been set out above it will thus be seen that the fundamental basis upon which the agreement rested was mainly that the concession given by the seller to the purchaser was to be availed within a period of six years by performing his part of the contract and in case the concession was not mailed within the period of six years the right to claim re-purchase of the property would come to an end. There is no dispute in this case that the plaintiffs have exercised the right within a period of six years and have even performed their part of the contract by depositing the entire amount of balance sale consideration in the Court itself.

17. The other thing which has now to be seen is as to whether the intervening laws frustrated the entire contract in the sense of knocking down the fundamental basis upon which the agreement rested. The learned counsel for the respondent on this aspect of the matter has relied upon two decisions of the Supreme Court reported in AIR 1965 SC 1523 and AIR 1980 SC 17. It has been argued that because of the promulgation of the Ordinance 1972 it became unlawful to execute the sale-deed in respect of the property in dispute and thus the contract had become impossible of performance and the provisions of Rule 52 of the Transfer of Property Act clearly applies.

18. To determine this question we may first see the provisions of the intervening laws.

19. On 11th July, 1972 an Ordinance was promulgated by the Governor of Uttar Pradesh known as the U. P. Ceiling on Property (Temporary Restrictions on Transfers Ordinance, 1972. The object of the aforesaid Ordinance was also published which stated :

'An Ordinance to restrict, during a temporary period, certain transfers of agricultural land and urban properties and to provide for purposes connected therewith.'

20. Clause 3 of the aforesaid Ordinance only places restriction for a limited period of three months from the date of the commencement of the Ordinance. Clause 4 gave the State Government a power to grant exempt ion by a general or special order. The aforesaid Ordinance took the shape of an Act. known as U. P. Act No. 36 of 1972 which contained exactly similar provisions except that the restrictions on transfers was limited during a period of three months from July 12, 1972. An Amending Act, namely, U. P. Act No. 45 of 1972 was thereafter enacted. The aforesaid Amending Act placed restriction on transfers during the period from July 12, 1972 to January 31, 1973 and gave further power to the Commissioner of the Division to give permission for transfer to any person on being satisfied that the present market value of urban property held by any person along with the members of his family on April 1, 1969 as well as on the date of the commencement of this Act, does not exceed two lakhs of rupees. By the subsequent Amending Act the date was extended till September 30, 1973. Thereafter Third Amendment Act (President's Act No. 18 of 1973) extended the date uptil Sep. 30, 1974 and increased the figure of rupees Two lakhs to rupees three lakhs in Sub-section (5) of Section 3 of the Act. By U. P. Act No. 30 of 1974 the State Legislature re-enacted the Third Amendment Act and extended the period of restriction up till March 31, 1975. Thereafter by U. P. Act No. 15 of 1975 the life of the Act was extended until December 31, 1975 and Section 3 of the aforesaid Act provided that the Act shall expire on December 31, 1975.

21. From the aforesaid it is, therefore, clear that there is no restriction on transfer after 31st December 1975. The question which thus arises for consideration is as to whether by coming into force of the aforesaid enactments, including the Amendment Acts, the agreement to sell which had been arrived at between the parties came to an end in the sense that it was impracticable and impossible for the parties to perform their part of the contract. There is no room for doubt that the legislation which had been enacted by the State Legislature putting restriction on transfer of property are temporary legislations. One can see that the restrictions were imposed for very short periods. By no stretch of imagination it can be said that the Legislature had ever contemplated of a complete ban on the transfers of the properties as the ban which was being imposed was for short period. It could thus not be said that placing of ban on the transfers of the properties for a short period could shake the foundation of the contract so as to make it impossible of performance or unlawful for all times to come. On the other hand, the legislation clearly enacted that the restriction imposed was only temporary for a short period and thus after the expiry of the aforesaid period the parties could perform their part of agreement. Further, even during this temporary period the ban was not absolute because transfers were legally permissible with the permission of the Competent Authority under the power of exemption given in Section 3 of the Act.

22. It, however, does not dispose of the entire controversy in this case inasmuch as it has still to be seen that during the period of six years from the date of the agreement the defendant could not execute a sale-deed as there was a restriction placed on him and it has to be examined as to whether because of the defendant's inability the contract could be said to have been frustrated in view of Section 54 of the Transfer of Property Act.

23. As has been observed above, the restriction which had been placed by the agreement to sell was on the purchaser. They were given a right to claim repurchase of the property within a period of six years. If they laid their claim well within a period of six years, their claim for re-purchasing the property subsisted under the agreement. It has next to be seen as to whether the intention of the parties was also this that the sale-deed also should be executed within a period of six years. We are unable to see any such clause in the aforesaid agreement to sell nor we could come to the aforesaid conclusion from the entire facts and circumstances of the case including the intention of the parties. As far as the facts and circumstances and the intention of the parties are concerned and the admitted facts lead to only one conclusion. The defendant had granted a concession to the plaintiffs and had asked them to exercise their right by availing that concession within a fixed period. If they failed to exercise that right within that fixed period, their claim to re-purchase the property came to an end. It was nowhere contemplated in the agreement to sell that in case the sale-deed could not be executed within a period of six years the entire contract would stand frustrated. This could not be so if one examines the agreement by taking an example. Supposing the plaintiffs had exercised their right of re-purchasing the property on the last day of the expiry of six years from the date of the agreement, could it be said by the defendant that as they (plaintiffs) have intimated him (defendant) about their desire to claim the right of repurchasing on the last date, say by 12 O'clock in the night, he cannot execute the sale-deed within six years. Such a plea by the defendant would have been negatived by replying that the time limit is for only claiming the concession within a specified period and that concession having been claimed within the specified period, the plaintiffs were liable to execute the sale-deed even though the period of six years may have expired. As has been observed above, the answer would be in favour of the plaintiffs because there is no restriction placed under the agreement in so far as the actual execution of the sale-deed is concerned. We are not in the present first appeal faced with the question as to whether the actual execution of the sale-deed could be deferred for any indefinite period as in the present case the admitted case of the parties before us is that there was absolutely no restriction placed by the State Legislature in respect of the transfer after 31st December, 1975 and the sale-deed in this case, therefore, could be executed within a reasonable time.

24. The first decision of the Supreme Court on which the learned counsel for the respondent has relied is the case of Mugneeram Bangur and Co., (AIR 1954 SC 44) (supra). In our opinion this case instead of helping him goes against him. Even though the property had been requisitioned by the Government it was held that since the requisition was temporary it did not frustrate the contract. It was laid down that no time limit was fixed for the execution of the sale-deed and the only time limit which was fixed was only after the land had been developed. It has been held that considering that war was going and the fact that the land was requisitioned for some time by the Government resulted in the possession of the land being given to the Government and this did not frustrate the contract. The principle laid down in the aforesaid case applies with full force to the facts of the present case. In the present case time limit has been fixed only for availing of the concession. As has been observed above that concession had been availed by the plaintiffs within the time limit fixed but no time limit had been fixed for the execution of the sale-deed and under Section 46 of the Contract Act it could be done within' a reasonable period. If one could come to the conclusion that it could not be done at all, the conclusion could have been that there was a permanent inability in the defendant to execute the sale-deed and thus the contract stood frustrated. However, the restriction being temporary and the time limit having been fixed for which the restriction was placed it could not be said that permanent inability had arisen due to which the defendant could not execute the sale-deed. The first Ordinance was only for a period of three months and the subsequent Acts and the Amending Acts are also for very short periods. From the intervening laws it can be inferred that the defendant would be able to execute the sale-deed within a short period. The intervening laws thus by no stretch of imagination could be said to have knocked down the fundamental basis upon which the agreement rested. It may be noticed that the other case on which reliance has been placed by the learned counsel for the respondent also does not help the respondent inasmuch as by the issuing of the injunction the appellants could not have tendered 90% of the tendered amount, i.e. balance of the price, by the stipulated date or taken delivery of the jewellery so long as the injunction lasted. In this case there was no stipulated date by which a sale-deed had to be executed and in view of Section 46 of the Contract Act it had to be executed within a reasonable time. In our opinion therefore the agreement to re-purchase subsisted and the plaintiffs admittedly having exercised their claim within the specified period of six years were entitled to get the relief claimed by them. The plaintiffs are accordingly entitled to a decree for specific performance and the defendant is directed to execute a sale-deed in favour of the plaintiffs within three months failing which the plaintiffs will be entitled to get the sale-deed executed through Court. The defendant will be entitled to withdraw the balance sale consideration which has already been deposited by the plaintiffs in court on the execution of the sale-deed.

25. As far as the cross-objection filed by the defendant is concerned, in our opinion the same deserves to be allowed. The Court below has found the defendant not entitled to receive rent inasmuch as the plaintiffs were made entitled to withdraw the amount of balance of sale consideration deposited in the Court. It has come to the conclusion that as the plaintiffs' money is lying deposited in Court and the defendant has failed to encash the same, the plaintiffs suffered a loss of interest by disentitling the defendant to the rent from the property. We are unable to accept the aforesaid reason given by the trial Court. The defendant was entitled to receive rent of the property till the time the plaintiffs had not become owners of the property. The plaintiffs will become owners of the property only after execution of the sale-deed by the defendant in favour of the plaintiffs. The defendant is thus clearly entitled to the rent till the date of execution of sale-deed by the defendant in favour of the plaintiffs under this decree.

26. For the reasons stated above, the present first appeal and the cross-objection are allowed. The plaintiffs' suit is decreed for specific performance of the agreement to sell dated 17th February, 1969. The defendant shall execute the sale-deed in favour of the plaintiffs within a period of three months from the date of decree failing which the plaintiffs will be entitled to get the sale-deed executed through Court. The defendant will be entitled to withdraw the amount deposited in Court by the plaintiffs towards balance sale consideration. The plaintiffs' suit so far as it seeks a declaration that they are not liable to pay rent is dismissed and it is held that the plaintiffs are liable to pay rent till the date of execution of the sale-deed by the defendant in favour of the plaintiffs under this decree. Looking to the entire facts and circumstances of the case the parties shall bear their own costs throughout.


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