Who may Obtain Specific Performance? – Section 15 | Specific Relief Act

“Under Rule 4 (3) read with Rule 11 of Order XXII, C.P.C. the appeal abates as against the deceased respondent where within the time limited by law no application is made to bring his heirs or legal representatives on record. As pointed out by this Court in the State of Punjab v. Nathu Ram, AIR 1962 SC 89, it is not correct to say that the appeal abates against the other respondents. Under certain cir­cumstances the appeal may not be proceeded with and is liable to be dismissed. But that is so, not because of the procedural defect but because as Mulla has pointed out it is a part of the substantive law.”

It is, therefore, the substantive law which has to be looked into to find out whether a lis is constituted properly or remains to be constituted with all the necessary parties on record. So that it may be disposed off by the Court. It is, therefore, that when a co-plaintiff being a party to a joint and indivisible contract dies and his legal representatives are not brought on record within the prescribed time the suit does not remain properly consti­tuted and becomes liable to be dismissed as a whole as abated in it’s en­tirety.

2. Agreement of repurchase:

When a condition of repurchase is em­bodied in the document which effects or purports to effect a sale, it is always a matter for construction whether a sale was meant or a mortgage. In such a case, the presumption is that it is a mortgage. That presumption can be displaced by clear and express words. If the conditions of Section 58 (c) of the Transfer of Property Act are fulfilled, the deed should be con­strued as a mortgage. In such a case, the real question is not what the parties intended or meant, but what the legal effect of the words used by them is. Surrounding circumstances can be looked to in case of ambiguity.

3. Agreement of sale:

A dispute was pending between the appellant and one Chikkanarayanappa in the High Court. The Central Bank of India obtained a decree for a sum of Rs. 42.000/ – against the appellant. As per the agreement for sale, the respondent was to pay the said amount on behalf of the appellant and get the loan discharged. The appellant was to get only such amount from the respondent which might have been remain­ing after discharge of the loan taken by him from the Central Bank of India.

The sale deed was to be executed within a period of four months. However, if the dispute between the appellant and the said Chikkanarayan­appa was not disposed off within the said period, the appellant was re­quired to have permission from the State.

It is now accepted that no permission at the relevant point of time was required to be obtained from the State, for sale of the land. It is furthermore not in dispute that the litigation pending between the appellant and the said

Chikanarayanappa had not been disposed off within a period of four months. Even if the said dispute, in terms of the stipulation contained in the agree­ment for sale, was not to come to an end, the sale deed was to be executed and the balance sale consideration was to be left with the appellant after deducting the advance amount so as to enable the respondent to pay the same to the Bank till the said dispute comes to an end wherefore a separate agreement was to be entered into.

The notice dated 24.4.1984 must be construed having regard to the aforementioned backdrop of facts. From a perusal of the said notice, it appears that prior thereto, the appellant had received notice from the Court of the Civil Judge, Bangalore, in connection with the said loan. From 1982 to 1984, the respondent did not take any steps to make any inquiry as regard the disposal of the said litigation before the High Court. He did not pay any amount to the Bank.

The appellant, therefore, had good reasons to serve the aforementioned notice calling upon the respondent to deposit the entire amount to the Bank. There is nothing on record to show that despite receipt of the said notice dated 24.4.1984, the respondent took any step to deposit the said amount. He was, thus, not ready and willing to perform his part of contract. He has, deposited a sum of Rs. 10,000/- only in the year 1985, i.e. after more than one year thereafter.

Evidently, he was not interested in payment of the loan amount to the Bank on behalf of the appellant as he was appropriating the usufructs from the land as he was in possession thereof.

Thus, even though the time for performance was not fixed in the agreement for sale, on receipt of the notice, the respondent had notice that the performance was being refused, if he failed to fulfil his obligation under the contract within 15 days of receipt of the notice.

This suit was, therefore, in terms of the requirement of Article 54 of the Limitation Act, should have been filed within a period of three years from the date of expiry of fifteen days from the date of receipt of the said notice.

4. Agreement to repurchase:

Without words or expressions in the documents indicating prohibition on assignment or transfer of right of re­purchase and in the face of clear provisions of Section 15 (b) of the Specific Relief Act, 1963, an implied prohibition cannot be read into the terms of the documents. Merely because in the documents, there is mention of ‘heirs’ of the contracting parties but not their ‘assignees’ or ‘transferees’, the legal right of assignment available to the benefit of original contracting party under Section 15 (b) of the Act cannot be denied to it.

5. Connotation of:

Specific performance of the contract may be ob­tained by ‘any party thereto’ or ‘their representative in interest’. This ex­pression clearly includes the transferees and assignees from the contract­ing party in whose favour the right exists. Such right of seeking specific performance would, however, be not available in terms of proviso below Clause (b) where the contract provides that the interest shall not be as­signed.

6. Consideration:

In order that a person may be considered a neces­sary party, defendant to the suit, the conditions precedent must be (1) that there must be a right to some relief against him in respect of the dispute involved in the suit; and (2) that his presence should be necessary to en­able the Court to effectually and completely to adjudicate upon and settle all the questions involved in the suit. Since the respondent is not a party to the agreement of sale, it cannot be said that without her presence the disputes as to specific performance cannot be determined. Therefore, she is not a necessary party. The respondent is neither a necessary nor a proper party to adjudicate upon the dispute arising in the suit so as to render an effective and complete adjudication of the dispute involved in this suit.

7. Effect of:

Section 55 of the Contract Act which deals with the con­sequences of failure to perform an executory contract at or before the stipu­lated time provided by the first paragraph:

“When a party to a contract promises to do a certain thing at or before a specified time, or certain things at or before specified times, and fails to do any such thing at or before the specific time, the contract, or so much of it as has not been performed, becomes voidable at the option of the promisee if the intention of the parties was that time should be of the essence of the contract.”

8. Enforcement:

Normally, a contract, in the absence of a contrary intention, express or implied is enforceable by and against parties thereto and their legal heirs and legal representatives including assignees and trans­ferees.

When the agreement is for exclusive benefit of the vendees and not for the benefit of the vendor as well as the vendees, it is open to the plaintiff to waive that benefit and on that account the agreement does not become unenforceable.

9. Enforcement of contract:

A person not a party to a contract cannot subject to certain well recognised exceptions, enforce the terms of the con­tract. The recognised exceptions are that beneficiaries under the terms of the contract or where the contract is a part of the family arrangement may enforce the covenant.

10. Essence of contract:

The-Supreme Court on aspects of time be­ing the essence of contract observed as follows:

“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 the essence of the contract. When a contract relates to sale of immovable property it will normally be presumed that the time is not the essence of the contract. It may also be mentioned that the language used in the agreement is not such as to indicate in unmis­takable terms that the time is of the essence of the contract. The intention to treat time as the essence of the contract may be evi­denced by circumstances which are 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.”

11. Grant of:

The appellant-heirs of original plaintiff are entitled to the decree for specific performance for the entire suit house and not to a limited decree for specific performance confined only to a part of the suit house being its ground floor portion. The reasons are obvious. The earlier agreement dated 12.3.1974 which the defendants executed in favour of the original plaintiff was for the sale of the ground floor portion of the property mentioned in the said document for Rs. 12,000/-. The said agreement clearly recites that the defendants were agreeing to sell the ground floor portion of the suit house to the plaintiff for Rs. 12.000/-. The property sought to be conveyed under that document for total consideration of Rs. 12,000/- was described to comprise the entire ground floor portion along-with the ceil­ing over that portion and also the Chowk portion of the Wada and the room adjoining it. The said agreement further recited that towards the consider­ation of Rs. 12,000/-, Rs. 4,000/- were received by the executants on the same day and on receipt of the balance the sale-deed was to be executed by 16.8.1974. Both the defendants had signed that agreement.

Thus as compared to consideration of Rs. 12,000/- mentioned in the earlier document dated 12.3.1974 the plaintiff paid an additional amount of Rs. 4,000/- by the latter agreement dated 16.7.1974. When additional consideration of Rs. 4,000/- passed from the plaintiff to the defendants it is obvious that as compared to the agreement to sell only the ground floor portion of the suit house as per the earlier agreement dated 12.3.1974 the defendants must have agreed to convey at least some additional portion of the suit house by the latter agreement dated 16.7.1974, as it cannot be countenanced that the plaintiff would agree to get a lesser portion or the same portion of the suit property by paying Rs. 4,000/- more, as compared to what she agreed to purchase in March, 1974 for Rs. 12,000/- especially when it is no one’s case that between February and July, 1974 price of the suit house had risen or that the defendants were demanding more price for the same portion of suit property covered by agreement of February, 1974. Therefore, it must be held that the defendants had agreed to sell the entire suit house including the first floor portion thereof to the plaintiff as per agreement. The appellant-heirs of original plaintiff would, therefore, be en­titled to the decree of specific performance for the entire suit house includ­ing the first floor portion.

The obtaining of a decree and acquiring the status as a co-owner dur­ing the pendency of a suit for specific performance, is not obtaining by assignment or creation or by devolution, an interest. Therefore, Order XXII, Rule 10 has no application to this case.

Thus it cannot be said, that the respondent having secured an interest as a co-owner in the land by operation of decree of the Court to effectuate the ultimate decree of the specific performance that may be granted in favour of the petitioners, the respondent is a necessary and proper party, and the High Court, therefore, has committed grievous error in refusing to bring the respondent on record as second defendant.

12. Implied prohibition against assignment—When cannot be in­ferred:

It was held that rending the document as a whole and particularly keeping in view the facts that a long period of ten years was fixed for obtain­ing reconveyance, no implied prohibition of transfer or assignment can be inferred in the document particularly in view of the clear provisions of Sec­tion 15(b) of the Specific Relief Act, 1963.

13. Intention:

Even if there was an intention to create a charge, the Kottayam Bank not being a party to the deed enforce the charge only if it was a beneficiary under the terms of the contract, and it is not claimed that the Bank was a beneficiary under the deed.

14. Interest:

It is true that the pre-emption clause does not expressly state that it is binding upon the assignees or successors-in-interest, but, having regard to the context and the circumstances in which the award was made, it is manifest that the pre-emption clause must be construed as bind­ing upon the assignees or successors-in-interest of the original contracting parties.

Prima facie rights of the parties to a contract are assignable. Section 23 (b) of the Specific Relief Act states:

“23. Except as otherwise provided by this Chapter, the specific” performance of a contract may be obtained by:

(a) The representative-in-interest, or the principal, of any party thereto: provided that, where the learning, skill, solvency or any per­sonal quality of such party is a material ingredient in the con­tract, or where the contract provides that his interest shall not be assigned, his representative-in-interest or his principal shall not be entitled to specific performance of the contract, unless where his part thereof has already been performed.”

Section 27 (b) of the Act is to the following effect:

“27. Except as otherwise provided by this Chapter, specific perfor­mance of a contract may be enforced against:

(a) Any other person claiming under him by a title arising subse­quently to the contract, except a transferee for value who has paid his money in good faith and without notice of the original contract.”

Reference should also be made to Sections 37 and 40 of the Indian Contract Act which are to the following effect:

“37. The parties to a contract must either perform, or offer to per­form, their respective promises, unless such performance is dis­pensed with or excused under the provisions of this Act, or of any other law.

Promises bind the representatives of the promisors in case of the death of such promisors before performance unless a contrary in­tention appears from the contract.”

“40. If it appears from the nature of the case that it was the inten­tion of the parties to any contract that any promise contained in it should be performed by the promisor himself, such promise must be performed by the promisor. In other cases, the promisor or his representatives may employ a competent person to perform it.”

In substance, these statutory provisions lay down that, subject to cer­tain exceptions which are not material in this case, a contract in the ab­sence of a contrary intention express or implied will be enforceable by and against the parties and their legal heirs and legal representatives including assignees and transferees. In the present case, there is nothing in the lan­guage of the pre-emption clause or the other clauses of the award to sug­gest that the parties had any contrary intention. On the other hand a refer­ence to the other clauses of the award shows that the parties intended that the obligations and benefit of the contract should go to the assignees or successors-in-Interest.

15. Joint award—Legality of:

In the case, certain land belonging to two brothers jointly was acquired for military purpose. The matter was re­ferred to an arbitrator who passed a joint award granting higher compensa­tion against which the State Government went in appeal to the High Court. During the pendency of the appeal, on of the two brothers died and his legal representatives were not brought on record within time. It was held that the appeal against both the brothers had abated and that the appeal against both the brothers could not proceed. It was observed that to get rid of the joint decree, it was essential for the appellant State to implead both the joint decree-holders and in the absence of one, the appeal was not properly constituted. In paragraph 6 of the judgment their Lordships ob­served:

“The question whether a Court can deal with such matters or not, will depend on facts of each case and, therefore, no exhaustive statement can be made about the circumstances when this is pos­sible or is not possible. It may, however, be stated that ordinarily the considerations which may weigh with the Court in deciding upon this question are whether the appeal between the appellants and the respondents other than the deceased can be said to be properly constituted or can be said to have all the necessary parties for a decision of the controversy before the Court.”

When the principle is applied to the suits it is necessary to see whether in such cases the suit continues to be properly constituted with all the necessary parties, i.e., whether all the parties in whose favour the right to sue survives in the case where one of the co-plaintiffs dies in a case of contract which is joint and indivisible are on record or not.

16. Jurisdiction of Court:

The relief sought by the plaintiff is for specific performance of agreement respecting immovable property by directing the defendant No. 1 to execute sale deed in favour of the plaintiff and to deliver possession to him. The trial Court was, therefore, right in holding that the suit was covered by Clause (d) of Section 16 of the Code and the proviso had no application.

The submission of the Counsel for the appellant that the parties had agreed that Delhi Court alone had jurisdiction in the matters arising out of the transaction has also no force. Such a provision, would apply to those cases where two or more Courts have jurisdiction to entertain a suit and the parties have agreed to submit to the jurisdiction of one Court.

17. Legal right of assignment—Denial of:

In the absence of any words 0Ã expressions in the documents indicating prohibition on assignment or transfer of right of repurchase and in the face of clear provisions of Section 15(b) of the Act, 1963, an implied prohibition cannot be read into the terms of the documents. Merely because in the documents, there is mention of ‘heirs’ of the contracting parties but not their ‘assignees’ or ‘transferees’. The legal right of assignment available to the benefit of original contracting party under Section 15(b) of the Act cannot be denied to it.

18. Permissibility of:

Assignment permissible in terms of the lease that the assignee is a representative in interest acquiring valid title to claim specific performance.

19. Personal right:

It was held that the right of pre-emption was not a personal right on the part of the pre-emptor to get the re-transfer of the property from the vendee who has already become of the owner of the same.

20. Play foul with equity:

In the present case, the assignees them­selves applied to this Court for impleading them as appellants and put on record the deeds of assignment, a perusal of which shows that the need for assignment was felt for pressing reasons. There has been no hide and seek with the Court and the legal representatives of the original plaintiff having received a sum of about Rs. 13 lacs pursuant to the contract of assign­ments entered between September to November 1988.

It is impossible to think if Courts could be justified in refusing the relief of specific performance, if the conduct of the respondents is also borne in mind, about which one could say that the same is tainted inasmuch as they departed from truth to bolster their case. Such parties who play foul with equity cannot be allowed to use the shield of equity to protected them.

21. Question of:

Bank A of which the appellant was the manager had an overdraft account with Bank B. The appellant’s father had executed from time to time letters of guarantee in favour of Bank  agreeing to pay amounts due by Bank A under the overdraft arrangement. Bank  filed a suit against Bank A, the appellant and his father.

It was held on an interpretation of the letter of guarantee that it was not intended to create a charge on properties to which the letters of guarantee related, in favour of the Bank A for the amount which may fall due under the letter of guarantee. The letter of guar­antee created merely a personal obligation and the father had no intention to create a charge or to encumber any of the properties for debt which may become due to the Bank.

It may be noted that during the pendency of that suit the father had died and the suit was prosecuted against his widow, daughter and sons and one of the questions that arise was whether the charge, assuming that a charge arises is enforceable by the Bank when it was not a party to the deed. It was held that Bank  not being a party to the deed was not bound by the covenants. It was laid down:

“It is settled law that a person not a party to a contract cannot sub­ject to certain well-recognised exceptions enforce the terms of the contract: the recognised exceptions are that beneficiaries under the terms of contract or where the contract is a part of the family arrangement may enforce the covenant.”

22. Refusal of:

While refusing relief of specific performance, the Court has to bear in mind the conduct of respondents. If in a case, the act of third party could be regarded akin to champertous, the relief of specific perfor­mance may be refused. Such parties who play foul with equity cannot be allowed to use the shield of equity to protect them. Therefore, suit for spe­cific performance was decreed.

23. Rejection of:

In the instant case, the father of the petitioner filed Civil Suit for specific performance of a contract of sale said to have been executed agreeing to sell 7.17 acres of the land. Pending decision in the suit. The petitioner came on record as legal representative. He filed an application under Order VI, Rule 17, C.P.C. seeking leave to amend the plaint by impleading respondent also as a party defendant in the suit.

In this case the petitioner is merely seeking the specific performance of the agreement of sale. Section 15 of the Specific Relief Act, 1963, pro­vides that except as otherwise provided by this Chapter, the specific perfor­mance of a contract may be obtained by—”any party thereto”, and under Section 16 the Court has been given discretion and personal bars to relief. Therefore, based on the fact situation, the Court would mould the relief.

24. Rights:

In this case, the Supreme Court has observed that rights under a contract are assignable unless the contract is personal in its nature, or rights are by their very nature incapable of being assigned.

25. Scope of:

Agreement of repurchase not containing any clause showing that right of repurchase is personal right. Assignee of that right thus exercises that right being a ‘representative-in-interest’, by filing a suit for specific performance.

26. Specific performance:

Order I, Rule 3 is not applicable to the suit for specific performance because admittedly, the respondent was not a party to the contract. In this case, since the suit is based on agreement of sale said to have been executed by the sole defendant in the suit, the subsequent interest said to have been acquired by the respondent by virtue of a decree of the Court is not a matter arising out of or in respect of the same act or transaction or series of acts or transactions in relation to the claim made in the suit.

27. Specific performance of the Contract:

As is to be seen from the provisions of Section 15(b) of the Specific Relief Act, 1963, specific perfor­mance of the contract may be obtained by ‘any party thereto’ or ‘their rep­resentative in interest.’ This expression clearly includes the transferees and assignees from the contracting party in whose favour the right exists. Such right of seeking specific performance would, however, be not available in terms of proviso below Cl. (b) where ‘the contract provides that the ‘interest shall not be assigned.

28. Suit for specific performance:

The judgments reported in Jagdeo Singh and others vs. Bisambhar and others and Smt. Hirmala Bala Dasi and another vs. Sudarsan Jana and others permit one or more co-contractors to file a suit seeking specific performance. There cannot be any debate over this proposition. The present respondents 1 and 2 were and are co-contrac­tors with deceased appellant Mo. 1 and his wife insofar as the fresh agreement dated 20-12-1981 is concerned and accordingly they filed suit for specific performance, after realising that the vendors have not abided by the said agreement and have executed sale deed dated 19-11-1982 in favour of deceased-appellant No. 1 and his wife. I, therefore, find that the suit for specific performance filed by the present respondents 1 and 2 can­not be said to be improper. In view of provisions of either sections 15 or section 31, on the basis of sale deed dated 19-11-1982 obtained by the deceased appellant No. 1 and his wife, they cannot contend that they have established title and interest in immovable property. It is therefore apparent that the rights of present appellants to seek specific performance of agree­ment under section 15 of the Specific Relief Act flowing from agreement dated 5-12-1980 was extinguished because of subsequent agreement and in any case, the sale deed in their favour was voidable. I, therefore, find that in view of section 31 of the Specific Relief Act, the present respondents 1 and 2 were entitled to seek relief of declaration of cancellation of the said sale deed.

29. Term and nature:

In the case of sale of immovable property there is no presumption as to time being the essence of the contract. Even if it is not of the essence of the contract the Court may infer that it is to be per­formed in a reasonable time if the conditions are:

1. From the express terms of the contract,

2. From the nature of the property, and

3. From the surrounding circumstances, for example: the object of making the contract.

30. Transaction:

Proviso to Section 58 (c) Transfer of Property Act, makes it clear that the transaction cannot be a mortgage if the sale and agreement to repurchase had been embodied in separate documents. The contention raised on behalf of the appellant that the transaction between him and the defendants was a mortgage by conditional sale, cannot be accepted.