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Bai Mangu Vs. Bai Viji and ors. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtGujarat High Court
Decided On
Case NumberSecond Appeal No. 245 of 1960
Judge
Reported inAIR1967Guj81; (1965)GLR915
ActsIndian Contract Act, 1872 - Sections 29; Arbitration Act - Sections 8 and 9; Transfer of Property Act, 1882 - Sections 10 and 14; Specific Relief Act, 1877 - Sections 21
AppellantBai Mangu
RespondentBai Viji and ors.
Appellant Advocate S.B. Majumdar, Adv. for; N.R. Oza, Adv.
Respondent Advocate J.U. Mehta, Adv. for; V.T. Gambhirwala, Adv.
Cases ReferredAmbalal Shankarlal v. Baldeodas Chhaganlal
Excerpt:
.....of an arbitrator by the court in such a contingency. the first case was a case in which the parties had agreed to get the price fixed by valuers and it was held that the parties having failed to appoint the valuers, there was no concluded contract. the plea which defendants raised and failed to substantiate was that the agreement was void for uncertainty. now is there anything to show that there has been a failure in law of the arbitration clause. majumdar, however, placed strong reliance on the case. this argument is nothing but a rehash of the argument based upon section 29 of the indian contract act. however, after i began dictating this judgment on 30th june 1965 and it had to be adjourned for want of time, on the next day, i noticed the last paragraph of section 21 of the..........the relevant sections of the indian arbitration act under which, in case of a dispute between the parties, price could be got fixed. having regard to these features of the case, it is not possible to say that the contract was so much dependent upon the volition of the parties that its terms cannot be specifically enforced. but mr. majumdar contended that the contract was dependent upon the volition of the arbitrators and, though clause (b) does not apply in terms, on the same principle on which a contract is enjoined not to be specifically performed when it is dependent upon the volition of the parties, a contract which is dependent upon the volition of third party must a fortiori be refused to be specifically performed. in support of this contention, mr. majumdar again relied upon the.....
Judgment:

(1) This Second Appeal is directed against the decision dated 10th December 1957 recorded by the learned District Judge, Broach, in Regular Civil Appeal No. 42 of 1957. The facts necessary to be stated in order to understand the disputes between the parties may be stated at first. Defendants Nos. 1 and 2 are the sisters of the husband of plaintiff. Plaintiff filed Civil Suit No. 105 of 1954 against defendants Nos. 1, 2 and 3 for partition of certain properties mentioned in the plaint of the suit and separate possession of her 1/2 share therein. Defendant No. 3 was joined as a party because defendants Nos. 1 and 2 had mortgaged some of the aforesaid suit properties with him. The suit ended in a compromise and a consent decree, of which Ex. 23 is a certified copy, was passed on 25th of July 1955. By this decree plaintiff was made the exclusive owner of lot No. `B' in that suit and defendants Nos. 1 and 2 were made exclusive owners of lot No. `C' therein. A latrine which was lot No. `D' was kept common between the parties. This compromise decree contained the following agreement which plaintiff seeks to enforce specifically in the suit from out of which this second Appeal arises. The agreement is as follows:

'Each party has to sell to the other, respective portions of the properties which have come to their share as above at a price fixed by two members of the Panchas when either party wants to sell its share.'

On 17th January, 1956, defendants Nos. 1 and 2 sold property comprised in lot No. `C' and their share in the property comprised in lot No. `D' by a sale deed of that date, which is Ex. 33 in the case. The sale was made for Rs.1,800. Plaintiff's case, however, was that though the sale purported to be for Rs. 1,800, the actual price stipulated and paid was Rs.1,300 only. Both the lower Courts have found that plaintiff was right in this contention. On 23rd May, 1956, plaintiff gave a notice to defendants and called upon them to honour the agreement contained in the aforesaid compromise decree. As defendant No. 3 gave a reply and refused to pass a sale deed in favour of plaintiff, she instituted the from out of which this Second Appeal arises.

(2) All the three defendants resisted the claim on a number of grounds, some of them legal and others on merits. The trial Court rejected all the contentions of defendants and decreed the claim for specific performance. Defendants Nos. 1 and 3 preferred the aforesaid appeal to the District Court at Broach, but the appeal was dismissed. I am no longer concerned with the dispute between the parties regarding the merits of the case. The present appeal is preferred by defendant No. 1 alone. Mr. Majumdar, the learned counsel for defendant No. 1 attacks the appellate decree on the same legal grounds on which the suit was attacked in the two lower Courts and in addition, he has raised one or two more points, which will be dealt with at their proper place. I propose to take up the contention raised by Mr. Majumdar one by one.

(3) The contention of Mr. Majumdar was that the suit contract was void for uncertainty. The contention which was urged in the first appellate Court was that the suit contract was uncertain in regard to price. The exact price to be paid for the sale of the property has not been mentioned in the agreement. The argument was that the price was an essential term of a contract for sale and the price not having been definitely stated in the agreement, the contract was void on the ground that one of the material terms was uncertain. This argument was repelled by the learned District Judge by reference to illustration (e) to Section 29 of the Indian Contract Act. That illustration says that if 'A' agrees to sell to 'B' 1000 maunds of rice at a price to be fixed by 'C', there is no uncertainty in the agreement because the price was capable of being made certain. The illustration illustrates the applicability of the second part of section 29 which states that agreements which are not capable of being made certain are void. Perhaps, because of the force of the argument in the judgment of the learned District Judge, Mr. Majumdar did not repeat the aforesaid contention. The contention which he urged in support of this appeal was slightly different from the aforesaid contention. Mr. Majumdar urged that the contract was uncertain because the person or persons who were to fix the price were uncertain and were not capable of being made certain. It is the validity of this argument of Mr. Majumdar which requires to be considered in this appeal. This contention is also based on section 29 of the Indian Contract Act. That section enacts that agreements the meaning of which is not certain or capable of being made certain are void. Mr. Majumdar's contention is that when we have a case where the valuer's identity is not fixed, then, the contract must be regarded as one which is uncertain as to who the valuer is and consequently the agreement would be ambiguous in the matter of identity of the person who was to fix the price and such an agreement would at once come within the mischief of section 29 of the Indian Contract Act. I agree with Mr. Majumdar's contention that the identity of the persons who are to fix the price has not been made definite by the aforesaid contract. But that does not necessarily mean that section 29 applies in toto. In order that the section may apply, it is not enough to show that its meaning is uncertain, but it must further be shown that it is incapable of being made certain and the question for consideration is whether the terms of the aforesaid contract are such that the identity of the Panchas cannot be made certain. If this cannot be done, then, I agree with Mr. Majumdar that on the aforesaid illustration (e) to section 29 on which the judgment of the learned District Judge is based will not be applicable. The distinguishing feature between the present case and the aforesaid illustration would be that, in the illustration, the person who was to fix the price is a definite individual. But, before we can answer or solve the aforesaid problem, it is first of all, necessary to ascertain what the meaning of the aforesaid part of the contract is. It is only after an attempt is made to understand the meaning and if the Judge is not in a position to come to a conclusion that the identity of the valuer cannot be made certain by any process of law, then, the contract would be void on the ground of uncertainty. Now, as I read the aforesaid agreement, I have no doubt whatsoever that the aforesaid part provides for the appointment of arbitrators by the two contracting parties for fixation of the price. Mr. Majumdar contended that such a meaning cannot be given to the aforesaid clause. He contended that 'Panch' literally means five persons and the clause literally construed would mean two members of five persons. However, though the original meaning of the word 'Panch' is five, the secondary meaning of that word now is an arbitrator and this is borne out by the two dictionaries which have been consulted on the subject (vide Bhagvandomandal, Part 6, at page 5470 and The Modern Gujarati-English Dictionary, Volume II, published in 1925 page 920). It is true, that the aforesaid clause does not specify who is to appoint the 'Panchas'. One way of reading the clause would be that each party was to appoint one 'Panch' and the two 'Panchas' together were to fix the price. If this is the correct meaning, I assume that defendants being unwilling to perform their part of the contract would not appoint a 'Panch' on their behalf. But this contract of defendants will not necessarily lead to the non-fixation of identity of their arbitrator. Section 9 of the Arbitration Act provides for a contingency of the aforesaid kind. In such a case, plaintiff would have the right of appointing a sole arbitrator and getting the price fixed. Even on the assumption that the aforesaid interpretation is not correct and that the correct interpretation is that the two parties have agreed to refer the question to the arbitration of two 'Panchas' and that both the 'Panchas' were to be appointed by the consent of the two sides, even then, the aforesaid clause would not fail because section 8 of the Arbitration Act makes a provision for the appointment of an arbitrator by the Court in such a contingency. Therefore, having regard to my construction of the aforesaid clause that it embodies an arbitration agreement between the parties and having regard to the provisions contained in the Arbitration Act, I have come to the conclusion that there is no distinction between the present case and illustration (e) to section 29 of the Indian Contract Act on which the learned District Judge has relied. In this connection, Mr. Majumdar drew my attention to the discussion in paragraph 10 at page 643 of the judgment of Their Lordships of the Supreme Court in Damodhar Tukaram v. State of Bombay : AIR1959SC639 . In that case, Their Lordships were called upon to decide whether a contract which appoints a way of determining the price can be specifically enforced, and Their Lordships observed that the English decisions to which their attention had been drawn were on two lines. In Milnes v. Grey (1807) 14 Ves 400: 34 ER 574, the contract provided that the price shall be valued by two different persons to be nominated and if they happened to disagree, then, those two persons should choose a third person whose determination shall be final. The Master of the Rolls decided in that case that the only agreement which the parties had entered was to purchase at a price to be ascertained in a specific mode and, on the facts of the case, the price not having been agreed upon that mode, there was no completed or concluded contract between the parties and, therefore, the contract could not be specified. In Taylor v. Brewer (1813) 1 M & S 290: 105 ER 108, a claim to compensation was founded on the resolution of a committee which provided that 'such remuneration be made as should be deemed right'. It was held that the engagement was one of honour and no claim could be founded on such an agreement. Mr. Majumdar contended that the present case came within the purview of the aforesaid line decisions. I am unable to accept this argument. In my judgment, there is a clear distinction between the present case and the aforesaid two sets of cases. None of those two cases was a case in which the price was to be fixed by the appointment of arbitrators. The first case was a case in which the parties had agreed to get the price fixed by valuers and it was held that the parties having failed to appoint the valuers, there was no concluded contract. In the present case, no such plea that there was no concluded contract between the parties was ever raised by the defendants. The plea which defendants raised and failed to substantiate was that the agreement was void for uncertainty. In the second of the aforesaid two cases, the price was to be fixed as should be deemed right. That certainty left the price to be fixed ambiguous and, in the absence of any proper mode by which the price could be specifically fixed, it was held that the contract could not be specifically enforced. In my judgment, the facts of the present case come within the purview of the case Gourlay v. Duke of Somerset (1815) 19 Ves 429: 34 ER 576, and the observations which Their Lordships have quoted in the Supreme Court case : AIR1959SC639 aforesaid are pertinent to the facts of the present case. The observation of Sir William Grant, Master of Rolls, were as follows:

'When the agreement is that the price of the estate shall be fixed by arbitrators, and they do not fix it, there is no contract as the price is of the essence of a contract of sale, and the Court cannot make a contract where there is none; but where the Court has determined that the agreement is binding and concluded and such as ought to be executed, it does not require foreign aid to carry the details into execution. Gale's agency is not of the essence of this contract. X X X X If the parties had gone to Gale and got him to settle a lease and one of them had objected to the covenants as improper and the Bill had been filed by the other, the Court would have inspected the lease; and if it were found unreasonable, would not have decreed an execution of the agreement.'

In this connection, it is to be noticed that in the present case, the arbitrators have not refused to fix the price as arbitrators have not still been appointed by the parties at all. Now is there anything to show that there has been a failure in law of the arbitration clause. It is true that if the price does not get fixed by reference to the arbitration, then, the contract cannot be specifically enforced. In this connection, it is important to notice that, in the present case, defendants have never alleged that the fixation of the price by the 'Panchas' was a condition precedent for the performance on their part of the contract to sell, nor, as already pointed out, did they contend that there was no concluded contract on that account. Therefore, so long as the aforesaid clause is capable of being enforced by resort to arbitration by getting the price fixed by them, it cannot be said that the aforesaid contract is void on the ground that the price is incapable of being fixed. Mr. Majumdar also drew my attention to the case Shree Ambarnath Mills Corporation, Bombay v. D.B. Goldble, : AIR1957Bom119 . The question for consideration in that case was whether an agreement arrived at between some displaced persons and the Custodian of Evacuee Properties was enforceable or not. One of the terms of the agreement was that the price of sale was to be determined by an expert on that behalf by the Government of India, Ministry of Rehabilitation. Whilst deciding the aforesaid point, shah J. (as he then was) took a number of circumstances into account for holding that the agreement was indefinite and one of the grounds which the learned Judge has adduced in support of his decision was that the Government of India was not a party to the agreement and was under no obligation to appoint any person to determine the market value of the properties and on this and some other grounds, the learned Judge held that the agreement was indefinite. In my judgment this case also was not a case where the price was to be fixed by reference to arbitration. The case is more analogous to the first of the two English cases on which Mr. Majumdar relies. Therefore, there is no merit in the first contention of Mr. Majumdar that the contract of sale was vitiated by section 29 of the Indian Contract Act.

(4) The second contention which Mr. Majumdar urged was that the aforesaid agreement was hit by the provision contained in section 10 of the Transfer of property Act. I notice that this point, though raised in the memo of appeal in the first appellate Court, was not presented before the learned District Judge. But the learned District Judge has made a passing reference about this in paragraph 12 of his judgment. However, Mr. Majumdar is right in saying that the point being purely one of law, defendants were not bound by the concessions made by their Advocate and I permitted Mr. Majumdar to address me on this topic. In my judgment, there is no merit in this contention also. Section 10 makes void a condition or limitation embodied in a transfer absolutely restraining the transferee or his successor from parting with or disposing of his interest in the property. In the first instance, the aforesaid section does not apply because this is not a case of a transfer of property. The impugned condition is embodied in an agreement and not in a document of transfer. Secondly, the aforesaid agreement does not amount to an absolute restraint. It is a clause which embodies an agreement of pre-emption. It does not prohibit transfer altogether but says that, in case a transfer is to be made, the transfer shall be made to the person with whom the agreement is made at a price to be fixed by the Panchas. Thirdly, even assuming that the agreement comes within the mischief of section 10 of the Transfer of Property Act, there is an authority of the High Court of Bombay, which is binding on me, which specifically decides that section 10 of the Transfer of Property Act does not apply to an agreement embodied in a compromise decree. That case is Govind Waman v Murlidhar Shrinivas : AIR1953Bom412 . In this case, Their Lordships held that a compromise decree passed by a Court competent jurisdiction which contains a term contrary to the provision of section 10 of the Transfer of property Act is not a nullity and is binding as between the parties unless it is set aside by proper procedure. In view of this authority, I am bound to reject the contention of Mr. Majumdar that the agreement is hit by section 10 of the Transfer of Property Act.

(5) Then the next contention of Mr. Majumdar is that the agreement is hit by section 14 of the Transfer of Property Act. That section enacts the rule against perpetuity. In my judgment, this section is not applicable also to the facts of the present case. In the first instance, this section applies to a transfer and not to an agreement. In the second instance there is nothing in the aforesaid agreement to show that it was to ensure for a time beyond the lifetime of the contracting parties. Thirdly, the contention deserves to be negatived on the same principle on which the contention based on section 10 was negatived in the aforesaid case : AIR1953Bom412 . Apart from all these considerations, there is another authority of the Bombay High Court which again is binding on me, which directly negatives the contention of Mr. Majumdar and that case is Rakhama Sitaram v Laxman Sitaram, AIR 1960 Bom 105. In this case, it was held that under the Transfer of Property Act, an agreement to sell immovable property does not by itself create an interest in or charge on such property. It was further held that the rule against perpetuity prohibits the creation of certain remote interest in immovable property. On these two grounds, it was held that a bare agreement to sell immovable property in future by a party to the agreement cannot infringe the rule against perpetuity. Mr. Majumdar, however, placed strong reliance on the case. Ambalal Shankarlal v. Baldeodas Chhaganlal : AIR1947Bom191 . In this case, however, neither Section 10 nor section 14 of the Transfer of Property Act was applied. Their Lordships, however, came to the conclusion that the contract was invalid as it offended against the English common law rule of perpetuity and the rule against restraint on alienation. Mr. Majumdar stated that, in case there was a conflict between the two authorities, I should refer the matter to a larger Bench for resolving the conflict. I am unable to see any conflict between the parties but a family arrangement and Mr. Majumdar has not been able to show to me that a contract of pre-emption of the kind aforesaid was void in law when embodied in a family arrangement. Therefore, in my judgment, the contention of Mr. Majumdar that the agreement was hit by section 14 of the Transfer of Property Act must be negatived.

(6) The next contention of Mr. Majumdar was that, in any case, the contract should not be specifically enforced. He relied upon clauses (b) and (c) of section 21 of the Specific Relief Act, 1877, which was the Act in force at the time when the suit was filed. The same provisions are continued in section 14 of the Specific Relief Act, 1963. Clause (c) of section 21 says that a contract the terms of which the Court cannot find with certainly cannot be specifically enforced. This argument is nothing but a rehash of the argument based upon section 29 of the Indian Contract Act. I have already held that the impugned clause in the aforesaid agreement cannot be said to be uncertain in the sense that the meaning thereof cannot be ascertained with reasonable certainty. Therefore, that part of Mr. Majumdar's argument deserves to be rejected. Clause (b) of section 21 enacts inter alia that a contract which is so dependent on the volition of the parties or is otherwise from its nature such that the Court cannot enforce specific performance of its material terms cannot be enforced. I am quoting only that part of clause (b) of section 21 of the Specific Relief Act on which Mr. Majumdar placed reliance. I have no doubt whatsoever that it cannot be stated that the performance of the suit contract was dependent upon the volition of any one of the two parties only. I have construed the impugned clause as an agreement to refer the fixation of price to arbitration. I have also mentioned the relevant sections of the Indian Arbitration Act under which, in case of a dispute between the parties, price could be got fixed. Having regard to these features of the case, it is not possible to say that the contract was so much dependent upon the volition of the parties that its terms cannot be specifically enforced. But Mr. Majumdar contended that the Contract was dependent upon the volition of the arbitrators and, though clause (b) does not apply in terms, on the same principle on which a contract is enjoined not to be specifically performed when it is dependent upon the volition of the parties, a contract which is dependent upon the volition of third party must a fortiori be refused to be specifically performed. In support of this contention, Mr. Majumdar again relied upon the same case in AIR 1957 Bom 119, already referred to. I have already drawn attention to the fact that that was not a case for referring the dispute to arbitration. I am unable to agree that when a matter has got to be agreed to be decided by arbitrators, then, the matter is dependent upon the volition of such persons. There is a clear distinction between volition and decision. Arbitrators would be in a position of Judges and what the contract contemplates is the decision of arbitrators in the matter of price and it cannot be stated that such a decision is a matter of volition only with arbitrators. Therefore, in my judgment, there is no substance in the aforesaid contention of Mr. Majumdar also.

(7) I have stated before that the defendants had not raised any dispute on the ground that there was no concluded contract between the parties. I may mention that Mr. Majumdar did make an attempt in this court to raise that question. However, I did not permit him to do so. In my judgment, if the point is now permitted to be raised at this stage, grave injustice is likely to occur to plaintiff who has been fighting this litigation since last about nine years. I may also mention that it was never contended at any stage even in this Court that fixation of price by the arbitrators was a condition precedent which had to be complied with by plaintiff before suing for specific performance. If any of these two contentions had been raised at the proper stage, it is quite clear that plaintiff would have taken steps for the purpose of getting the aforesaid clause decided by arbitrators and then would have filed a suit for specific performance within time. I am not quite sure as to what exactly would be the effect if a point of limitation were to be raised if the present suit comes to be dismissed and if the plea of non-concluded contract is to be upheld at this stage and a suit for specific performance happens to be brought after the matter of price is got fixed by arbitrators.

(8) The aforesaid points were the only points which were urged by Mr. Majumdar in support of the present appeal. However, after I began dictating this judgment on 30th June 1965 and it had to be adjourned for want of time, on the next day, I noticed the last paragraph of section 21 of the Specific Relief Act which had not come to be read and in order that a wrong decree may not come to be confirmed, I requested on the next day the learned Advocates on both the sides to help me by studying the relevant law on the subject embodied in the last paragraph and both of them were good enough to agree to do so. Therefore, I gave a short adjournment for the purpose. I have heard Mr. Majumdar on the subject and on the basis of the decisions arrived at by me on the various points urged, I have confined my attention to only one subject and that is that, a decree does not come to be passed which is contrary to law embodied in the aforesaid last paragraph. I have carefully considered the decree passed by the trial Court and confirmed by the learned District Judge. The only caution which is to be exercised is to see that the Courts in the present case do not grant specific performance of that clause in the agreement which has been construed to be a clause to refer the matter of price to arbitration specifically performed. I am not satisfied that the decree of the Court grants any specific performance in that matter. The first part of the paragraph which is relevant states that 'Save as provided by the Arbitration Act, 1940, no contract to refer present or future differences to arbitration shall be specifically enforced.' Section 14 of the new Specific Relief Act embodies a provision to the same effect. This is not a case where the whole of the contract can be decided by the arbitrators. The assistance of the Court for the specific performance of the agreement to sell is not excluded by the aforesaid paragraph. In fact, even after the arbitrators fix the price and defendants refuse to sell the property, plaintiff is bound to come to the ordinary Court for the purpose of getting a decree for the specific performance of the contract. The matter would have been different if it had been contended that there was no concluded contract or that the fixation of price was a condition precedent. But, having regard to the way in which questions have been raised and fought in the present litigation and that no plea was based on the aforesaid last paragraph and that the narrow question which I have got to consider is that the decree which comes to be passed does not offend against that paragraph. I have looked at this question from the narrow angle of the terms in which the decree is to be passed. However, in order that there may be no doubt left on the subject. I propose that a direction should be introduced in the decree itself, stating that, in case, the parties do not get the matter of price fixed by the panchas, the executing Court will not undertake to get the same done and that if plaintiff wants to pursue the matter of fixation of price, she should do so in accordance with the provisions of the Indian Arbitration Act. Subject to his modification, the appeal will stand dismissed.

(9) Appeal dismissed with costs.

(10) Appeal dismissed.


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