(1) Defendants 1 to 3 have filed this appeal against the judgment and decree of the learned subordinate Judge, Erode, in O. S. 24 of 1956. The plaintiffs filed the suit for specific performance of a contract of sale. The plaint allegations were briefly as follows.
Defendants 1 to 3, who formed an undivided Hindu family, owned the suit properties. The first defendant was the manager. Defendants 1 to 3, the first defendant acting on behalf of his minor sons, sold them to one Arumugham Chettiar for Rs. 5000 on 15-7-1948. Simultaneously, Arumugham Chettiar executed an agreement of reconveyance of the properties to the defendants 1 to 3 for a consideration of Rs. 5000 and also subject to the condition that the sale price should be paid in any Chitrai month within ten years of the date of the agreement. On 11-7-1949, defendants 1 to 3 assigned their rights under this agreement to the plaintiffs for a consideration of Rs. 14,912-8-0. There were specific directions in this agreement regarding the manner and the time of the payment of this item of consideration with liabilities inter se provided in case of default of the payment in the manner stipulated in this agreement. We shall refer, a little later in this judgment to these special conditions, as they play an important part in the decision of this case. In accordance with this agreement, the plaintiffs, after having paid Rs. 5000 as advance at the time of the agreement itself, got ready the balance of the sale price. Rs. 9912-8-0 before the date stipulated in the agreement for that payment, and informed defendants 1 to 3 of that fact. But they defaulted.
They also defaulted in the performance of other obligations which were enjoined in the agreement, including the obligation to contact Arumugham Chettiar and obtaining a conveyance from him to the plaintiffs. Thus, the plaint proceeded on the principal basis, that the plaintiffs were ever ready and willing to keep up to their terms of the bargain, but that defendants 1 to 3 committed breach of the contract. Plaintiffs were willing and ready to perform their part of the bargain and they filed the suit for specific performance of this agreement dated 11-7-1949. There was also a plea that, as defendants 1 to 3 committed breach of the contract, they would have according to the terms of the contract, to forgo Rs. 4912-8-0 out of the consideration and be content with Rs. 10000, of which, as has been just now mentioned, Rs. 5000 was paid as advance at the time of the agreement, and the balance of Rs. 5000 was deposited by the plaintiff: in the Coimbatore City Co-operative Bank.
(2) The plaintiffs further alleged that, after the death of Arumugha Chettiar, which occurred three months before the suit, his heirs, defendants 4 to 6, were bound to conveyed the suit properties to the plaintiffs as per the agreement aforementioned. However, defendants 1 to 3, after defaulting in their agreement with the plaintiffs, subsequently assigned their rights to the 7th defendant. This assignment will not avail against the plaintiffs right to obtain specific performance.
(3) Defendants 1 to 3, in their written statement, contended that the default in keeping up the terms of the bargain, was on the part of the plaintiffs. They denied the plaintiffs' allegation about the plaintiffs having been ready to perform the terms of the agreement as recited in the plaint. They next contended that in the agreement, time was of the essence of the contract. There was a plea that, as the agreement to the plaintiffs purported to assign a right in immovable property, the agreement was a void one. No doubt, it was not specifically alleged in the written statement that the agreement consequently was void for want of registration. But such a contention appears to be implicit in the plea, and it was raised specifically both in the Memorandum of appeal as well as in the arguments advanced before us by the learned counsel for the appellants (defendants 1 to 3). It was next contended that the agreement was a contract to enter into another contract, and such a bargain was not known to law. A further plea was that the agreement to resell was special to Arumugham Chettiar and could not be enforced against his heirs.
(4) Defendants 4 to 6, who are the heirs of Arumugham Chettiar, took a neutral attitude. They had no objection to execute a sale, according to the terms of the agreement of reconveyance with defendants 1 to 3, to whomsoever the Court might decide to be so entitled. They, however, claimed their costs in the suit.
(5) The lower court found that time was not of the essence of the contract, that on the evidence it would appear that the plaintiffs had fulfilled their part of the bargain, and that it was the defendants who were in default. The lower court also found that the suit agreement was not illegal, on any of the grounds mentioned above in the written statement of defendants 1 to 3. But it did not give a specific decision on the question about the agreement being void for non-registration. Presumably this omission to give a finding was due to an assumption by the lower court that the deed of assignment was a registered document. But, on examining the actual document, that is, Ex.A4, we find it to be an unregistered document. The lower court was of the opinion that, for obtaining specific performance of the agreement to sell, the two amounts of money paid by the plaintiffs, Rs.5000 as advance and Rs. 5000 as deposit, would suffice for the purpose of consideration, and that defendants 1 to 3 would forfeit the balance of Rupees 4942-8-0. But the lower court did not give any specific reasons or enter into any discussion as to why the defendants should forfeit this part of the consideration. It thereafter passed a decree for specific performance in favor of the plaintiffs in a particular form, to which we will refer to, because it is one of the grounds urged in the appeal, that the decree thus drafted is not properly workable and requires modification. It may also be pointed out that in the decree, the lower court has directed the plaintiffs to get mesne profits as claimed in this suit. This also is one of the groups to which objection has been taken and which we will refer to presently.
(6) Against the above said decision, defendants 1 to 3 have appealed to this court. Learned counsel Sri S. Rajagopalan who appears for the appellants before us, urged the following specific grounds: (1) The agreement of recoveyance to the plaintiffs involves a conveyance of an interest in immovable properties and therefore it is not enforceable under S. 17 of the Registration Act, for want of registration. (2) The right which defendants 1 to 3 got from Arumugham Chettiar under the agreement Ex. A. 3 was personal as against Arumugham Chettiar, and could not be enforced against the legal representatives of Arumugham Chettiar. (3) The bargain between defendants 1 to 3 and Arumugham Chettiar being one of an agreement of reconveyance of property already sold, the general rule that time was not of the essence of the contract in documents of conveyance of immovable properties will not apply, and, on the other hand, time should be deemed to be of the essence of the bargain. (4) The finding of the lower court on the facts, that the plaintiffs had complied with the terms of the contract, is erroneous. (5) Even assuming that time is not of the essence of the contract, the plaintiffs, not having offered to pay the entire consideration, and thereby not having expressed their willingness to perform the contract, the suit for specific performance should fail. (6) The provision for mesne profits made in the final decree should be modified so as to operate from the date of the sale, and not from the date of the suit as claimed in the plaint, because until the title of the plaintiffs is established, there could not be any mesne profits decreed in the favor. (7) The final decree should be suitably modified to make it workable in execution.
(7) Before we take up these contentions for consideration, it will be useful to give a gist of the suit agreement. There is no necessity to give an extract of the agreement between Arumugham Chettiar and defendants 1 to 3 under Ex. A.3, because it is in substance a simple agreement of reconveyance of the property already sold to Arumugham Chettiar on payment of Rs. 5000 during the Chitrai month of any year within ten years from the date of the agreement. But Ex. A.4. which is the suit agreement, dated 11-7-1949, contains more complicated terms, and it is necessary to give its gist briefly. The plaint itself gives a summary of the terms of this contract and we will extract it below. (a) defendants 1 to should cause Arumugha Chettiar to convey the suit properties to the plaintiffs for a consideration of Rs. 14,912-8-0; (b) out of this consideration, defendants 1 to 3 should receive Rs. 5000 on the date of the agreement itself as advance; (c) if the balance of Rs. 9912-8-0 was paid on any date in the month of Chitrai of Vikruti year (between 12-4-1960 and 12-5-1960) by the plaintiffs, defendants 1 to 3 would procure Arumaugham Chettiar to execute a sale of the suit properties to the plaintiffs at the plaintiffs' cost; (d) If plaintiffs are ready, but defendants commit default, the plaintiffs would be entitled to get a sale from Arumugham Chettiar on paying a sum of Rs. 5000 and defendants 1 to 3 would forfeit the balance of Rs. 4912-8-0 of the consideration; (e) If Arumugham Chettiar refused to convey the properties, defendants 1 to 3 would forfeit the advance of Rs. 5000 and also pay expenses and damages to the plaintiffs.
(8) The terms of this agreement would show that basically it is an agreement involving the assignment of rights which defendants 1 to 3 got under Ex A.3 in the matter of reconveyance from Arumugham Chettiar, but for a more advantageous consideration of Rs. 14,912-8-0, involving a clear profit to defendants 2 to 3 of Rs. 9912-8-0. But to this main purport of the agreement under item (a) above, that is an agreement to transfer the rights of defendants 1 to 3 under Ex. A.3, to the plaintiffs, for specified consideration, the conditions supra added under clauses (b) (c) (d) and (e) really refer to the manner of payment of the stipulated consideration for the agreement and importing at every one of three successive stages therein, some penalty for non-compliance with the terms stipulated. In the first place, the original agreement of reconveyance of properties by Arumugham Chettiar to defendants 1 to 3 is merely an agreement to sell immovable property and does not involve the conveyance of an interest in immovable property. Therefore, the document which assigns such a right, as Ex. A. 4 really does, cannot create any new right in immovable property which the assignor did not have.
Next, it appears to us that this transaction clearly falls within S. 17(2)(v) of the Registration act, which refers to any document not itself creating, declaring, assigning, limiting, etc. any title or interest in immovable property of the value of Rs. 100 and above, but merely creating a right to obtain another document which will, when executed, create, declare, assign etc, any such right, title or interest. There is also an explanation added to this section, which was evidently the consequence of certain doubts thrown upon the meaning of S. 17(2)(v) by a Privy Council decision. This explanation is to the effect that a document purporting or operating to effect a contract for the sale of immovable property shall not be deemed to require or ever to have required registration by reason only of the fact that such document contains a recital of the payment of any earnest money or of the whole or any part of the purchase money. No doubt, Ex. A. 3 is a registered document. But that by itself will not make it a document conveying an interest in the immovable properties as its plain terms, as already mentioned, amount only to an agreement to reconvey land and Ex. A. 4 the terms of which have been extracted above, does not convey any present interest in immovable property, but only a promise of conveying such interest in the future, by getting a sale deed executed from Arumuga Chettiar for the stated consideration.
We are of opinion, therefore, that the said agreement under Ex. A.4 is a valid one and it does not require to be registered. Learned counsel for the appellants referred to two decisions on this aspect of registration: Sambayya v. Gangayya, ILR 13 Mad 308 an early decision of this High Court, which dealt with an unregistered lease agreement for over three years followed by a covenant to reconvey. It was held that the conveyance to reconvey was linked up with the unregistered agreement of lease and the lease agreement required registration and therefore the plaintiff would not get any right on the agreement to reconvey without the lease itself being registered. The decision in Parashram v. Ganpat, ILR 21 Bom 533 dealt with a different set of facts. It dealt with a receipt which did in fact create or declare or extinguish a right to immovable property with a super-added covenant to execute a stamped document to the same effect on a future occasion. Obviously, the facts therein also were different.
(9) We will now take up the second point raised by Sri Rajagopalan namely, that the agreement of reconveyance was special only to Arumugham Chettiar and could not bind his heirs. Learned counsel for the appellants wanted to treat the right under Ex. A.3 as a personal right or privilege, as explained by the Federal Court in Shanmugam Pillai v. Annalakshmi Ammal 1950-1 Mad LJ 683" (Air 1950 FC 38) where their Lordships, on a construction of the agreement in that particular case, distinguished between transactions which are in the nature of a privilege or a license, and transactions which are in the nature of an agreement which binds both parties hand and foot with mutual rights. To the latter type of contracts, the rule about transactions which convey privileges or licence would not apply. It appears to us that Ex. A.3 agreement in this case is not one which would be considered as a privilege or a licence. It has got all the features of an agreement or reconveyance for a consideration with mutual rights and obligations between the parties thereto and such contracts cannot be considered to be special to the parties.
The general rule in such cases that an agreement to repurchase properties is prima facie assignable will, apply. Both the parties, by the terms of the contract, could so restrict the rights as to make it a personal one. Per contra, our attention has been drawn to a prior decision of this court, to which one of us was a party, in Andalammal v. Alamelu Ammal, which dealt with a document of sale and an agreement to reconvey, and it was held that the rights under the document could be held by the vendor and his heirs and that the right of reconveyance is assignable. No doubt, the question dealt with in that decision was about the assignability of the right. But what the learned counsel for the appellants urges in the present case is that the right of reconveyance could be enforced only against Arumugham Chettiar, but cannot be enforced against his heirs. These grounds, apart, there is the further fact in this case, that Arumugham Chettiar's heirs are now on record and they do not express any disinclination to carry out the terms of the bargain with their father. In fact, they have very fairly agreed before the court, to execute a conveyance according to the terms of Ex. A. 3, to whichever party the court declares to be so entitled. Therefore, this argument does not appeal to us.
(10) So far as the right to specific performance is concerned, Sri S. Rajagopalan, learned counsel for the appellants, referred to S. 24(b) of the Specific Relief Act, and contended that since the plaintiffs had violated the essential terms of the contract regarding payment of the purchase money, this will be a case where specific performance of a contract could not be enforced. He referred to the terms of S. 24(b), which runs thus:
"Specific performance of a contract cannot be enforced in favour of a person who has become incapable of performing, or violates, any essential term of the contract that on his part remains to be performed"
We shall presently find that the plea about the plaintiffs' violation of the contract has not been substantiated, and the finding of the lower court, which we are prepared to uphold, is that there was no such violation. Apart from that, it appears to us that S. 24(b) will not apply to a contract of the present kind. That section refers to a violation by the plaintiff of an essential term of the contract, that is a term which is absolutely vital to the bargain, and whose violation will alter the mutual relationship of the parties in such a material manner that it would be no longer equitable to decree specific performance as if their mutual relationship continued to be the same as it was at the time when the bargain was entered into. The illustrations given in the section make it clear that this will be the meaning of that provision, and that it cannot apply to a case like the present, where the violation, if any, related only to the manner of payment of the consideration, for an agreement to sell immovable property and for which, liabilities in the nature of a penalty by forgoing part of the consideration was provided.
(11) So far as the actual violation of the terms of the agreement is concerned, oral evidence, besides the documentary evidence, was adduced by the parties. The gist of the plaintiff's claim is that after paying as advance Rupees 5000 the plaintiffs made ready the balance of Rs. 9222-8-0 before 17-4-1950, and informed defendants 1 to 3 of that fact and requested them to go to the Sub Registrar's office at Bhavani for the purpose. They waited in the house of one Chellam Iyengar, a document writer, near the Sub Registrar's office. Defendants 1 to 3 came there and informed them that they had sent a car to fetch Arumugham Chettiar. Arumugham Chettiar did not appear, and then defendants 1 to 3 who went away on the pretext of going for meals, did not return thereafter. Before this meeting, notices were exchanged between, notices were exchanged between the parties, and in the letter Ex. A. 13 dated 6-5-1950 the first defendant informed the plaintiffs, in reply to their letter, that they had got the money ready, that he had no objection to receive the money. It was after this exchange of letters that the aforesaid meeting in the house of Chellam Iyengar at Bhavani near the Sub Registrar's office took place.
The first plaintiff, P. W. 1, had examined P. W. 2, who took Rs. 5000, and P. W. 3, who deposed that one Marappa brought Rs. 5000 to pay to the plaintiffs. These two witnesses were present with the first plaintiff at Bavani, when the incidents mentioned by the first plaintiff took place supra. The plaintiffs also produced the stamp papers purchased for the sale transaction. After the above mentioned incident at Bhavani, on 15-5-1950, that is tree days later, plaintiffs sent a notice by their counsel to defendants 1 to 3 setting out the details of the incident. The reply of the defendants repudiating this is Ex. A. 16 dated 20-5-1950. But the most significant part of the evidence on this aspect of the case is the admission of D. W. 1 himself in the witness box. D. W. 1. being the third defendant. He admitted that he had been to the house of the stamp vendor Chellam Iyengar in Bhavani for two days, on Friday and Saturday, which are just the days mentioned by the first plaintiff in his evidence. He also stated in cross-examination that he saw both P. W. 1 and P. W. 2 at Bhavani at that time. He added that Arumugham Chettiar did not come to Bhavani, but they had told Arumugham Chettiar that they would send a car and that he could come. He also told P. W. 1 that they had sent a car to fetch Arumugham Chettiar.
Then he told the plaintiffs that he would go to take meals at 5-30 p.m. but not at 12-30 p.m. Though a car was sent, Arumugham Chettiar did not come. Thereafter D. W. 1 went by cycle, and asked him not to come. These admissions of the defendants would bring the circumstances which happened at Bhavani into very close proximity to the plaintiff's own version of the happenings. If the defendants did send for Arumugham Chettiar and also sent a car for that purpose, that would have been only after they had become satisfied that the plaintiffs had come to Bhavani with money for completing the transaction. Otherwise, there was no point in sending a car in the first place to Arumugham Chettiar and thereafter going by cycle to contact him. Therefore, the contention of the defendants that the plaintiffs never came to Bhavani and that the plaintiffs were never ready to perform the transaction appears to be quite untenable, and we are inclined to accept the finding of the lower court on this point. Therefore, so far as the plaintiff's part of the bargain is concerted they were willing and ready to pay the balance of the consideration before the 30th Chitrai of Vikruthi, the date prescribed for completing the transaction, but it was defendants 1 to 3 who defaulted.
(12) The next contention of the learned counsel is that the suit agreement being an agreement to reconvey the lands, it should be treated as an exception to the general rule in such cases, and time should be deemed to be of the essence of the transaction. Learned counsel for the appellants referred us to a decision of Mack and Krishnaswami Naidu JJ. in Balasundara Mudaliar v. Muthuvenkatachala Mudaliar, where Krishnaswami Naidu J. delivering the judgment of the Bench after referring to the dicta of Lord Cairns in Tilley v. Thomas, (1867) 3 Ch A 61 and also the judgment of Sadasiva Iyer, J. in Samarapuri Chettiar v. Sutharsana Chettiar, AIR 1919 Mad 544 observed:
"The object of time not being made the essence of the contract is to do justice between the parties as observed by Lord Cairns in 1867-3 Ch A 61 and if we hold that in respect of an agreement of reconveyance executed by a purchaser who has obtained a sale he must wait not till the expiry of the period fixed but for a reasonable time, we consider we may not be doing justice between the parties for, as already observed, the purchaser's title could not become perfected not until the expiry of the time fixed but until he expiry of reasonable time which is indefinite and elastic. One point of view will be that the suit agreement and Ex. A. 4 being an agreement derived from Ex. A. 3, the rule about the time being of the essence will a fortiori apply to Ex. A. 4. But however, there will be this distinction to be borne in mind. Ex. A. 3 itself gave a period of ten years for fulfilling the agreement. It is Ex. A.4 which restricted the period in a much more narrow manner shortening it to a period of one month. But this restriction applied only to the payment of consideration, and we have already given a finding that the plaintiffs had in fact complied with this condition. Therefore, it is not quite material for the purpose of this case to decide whether time is of the essence of the contract or not.
(13) The next point raised by Sri S. Rajagopalan for the plaintiffs is that the plaintiffs have in any event not shown that they were ever ready and willing to perform their part of the bargain. For this purpose he relies upon the Privy Council decision in Ardeshir II Mama v. Flora Sassoon, 55 mad LJ 523 (AIR 1928 PC 208) where it has been held that in a suit for specific performance the plaintiff has to allege and to prove a continuous readiness and willingness, from the date of contract to the time of the hearing, to perform the contract on his part. Failure to make good that averment brought with it the inevitable dismissal of the suit. We have already referred to the fact that so far as the plaintiffs were concerned, they were willing to perform their part of the bargain. But after the defendants defaulted, they came to court with the offer of only Rs. 10000 out of the purchase money, holding that the defendants having been at fault, should forfeit the balance of Rs. 4912, as a penalty according to the terms of the agreement.
The plaintiffs considered themselves with some justification entitled to take this view of the agreement, and therefore, the omission of the plaintiffs to deposit Rs. 4912 our of the consideration before the filing of the plaint cannot be construed as an omission on their part to make an offer of their willingness to perform their part of the bargain. On the other hand, during the course of the hearing of the argument in this case learned counsel Sri. R. Gopalaswami Iyengar, appearing for the plaintiffs has made an offer that Rs. 4912 will be paid by his clients to defendants 1 to 3 but no interest should be charged on this amount. We are of the opinion that this offer is a fair one in the circumstances of this case and that this is not a case where the plaintiff's claim should be non-suited on the ground of their unwillingness to perform their part of the contract.
(14) So far as the decree drafter by the lower court is concerned it includes a direction for the calculation of mesne profits presumably from the date of suit. Learned counsel for the appellants points out that the liability for mesne profits in a contract for specific performance of an agreement to sell immovable property will arise only from the execution of the instrument. In this connection, the observations in Halsbury, Vol 36 page 240 paragraph 502 were referred to us. The principle laid down there is that between the date of the contract, being one of which specific performance can be decreed, and the conveyance, the legal estate remains in the vendor, but the equitable estate passes to the purchase; and as it is inequitable that the same person should enjoy both the rents and profits of the property and also the interest fixed for completion, or if no time is fixed, upto the time at which completion ought to take lace, that is, as a rule when a good title is shown, the vendor is entitled to the rents and profits, but be inequitable in this case to award mesne profits to the plaintiffs only form the date when the plaintiffs put or deposit into court the balance of Rs. 4912-8-0 and not before. The decree for means profits will be modified so as to direct it to be calculated form the date when the plaintiffs pay to defendants 1 to 3 or deposit the court the above balance of the consideration.
(15) Another contention in regard to the form of the decree is this. The decree proceeds to say that defendants 4 to 6 should convey the properties, and that defendants 1 to 3 should compel defendants 4 to 6 to execute the conveyance. In view of the admission of defendants 4 to 6 about their willingness to execute a conveyance to any one whom the court might declare to be entitled it is unnecessary to give a direction for compelling them. The simplest way of working out the relief in this suit is, therefore, to direct defendants 4 to 6 to execute a conveyance in favor of the plaintiffs on receipt of Rs. 5000, the stipulated amount payable to them as per Ex. A. 3, and this would follow, after the plaintiffs have paid or deposited into court the balance of Rs. 4912-8-0. Defendants 1 to 3 will be entitled to take this amount as well as Rs. 5000 which the plaintiffs have deposited into the co-operative bank and which has now been brought to the account of the suit. The appellants will pay proportionate costs to the contesting respondents, that is, the plaintiffs, in the appeal.
(16) Order accordingly.