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Abdul Kayum Ahmad Mohammad Siddik Husan v. Damodhar Paikaji Kinhekar

Bombay High Court
Dec 6, 1962
Smart Summary (Beta)

Opinion Summary — Paranjpe, J.

Factual and Procedural Background

On December 26, 1952, defendant No. 1 entered into a registered agreement to sell a house to the plaintiff for Rs. 2,000; Rs. 1,900 was paid as earnest money before the Sub-Registrar and Rs. 100 remained payable on registration of the sale-deed within two years. While the agreement subsisted, the house underwent attachments in execution of decrees against defendant No. 1 and later by the mother of the present appellants (defendants Nos. 2–4). The plaintiff released an earlier attachment by depositing the decretal amount (Rs. 186-10-0) on November 18, 1953, and it was agreed that Rs. 100 of that deposit be appropriated towards the price.

Defendant No. 1 sought and obtained an extension (letter dated December 26, 1954) to April 21, 1955. The house was auctioned on March 18, 1955, knocked down to the decree-holder (the appellants' mother). The plaintiff gave multiple notices in April 1955 reminding defendant No. 1 to execute the sale and warning that, if the auction sale was not set aside, he might demand return of the consideration. On April 16, 1955, defendant No. 1 deposited the decretal amount plus 5% under Order XXI, Rule 89, Code of Civil Procedure to get the auction set aside. Despite notices (including one dated April 30, 1955) given to defendants Nos. 2–4, defendant No. 1 executed a sale-deed on their behalf for Rs. 2,200; the formal order setting aside the auction sale was ultimately passed on July 1, 1955.

The plaintiff sued for specific performance, alleging he had performed his obligations but defendant No. 1 sold the house to defendants Nos. 2–4 who had knowledge of the prior agreement. Defendant No. 1 denied receipt of Rs. 1,900 and alleged collusion in the original agreement; defendants Nos. 2–4 claimed to be bona fide purchasers for value and alleged the prior agreement was collusive. The trial Court and the Court below found defendants Nos. 2–4 were not bona fide purchasers for value without notice, and decreed specific performance. The present second appeal by defendants Nos. 2–4 challenges whether monetary compensation would have been a more appropriate relief than specific performance.

Legal Issues Presented

  1. Whether monetary compensation for breach of the agreement would have been a more appropriate relief than a decree for specific performance (the principal question framed in the appeal).
  2. Whether the appellate Court should interfere with the discretion exercised by the Courts below in granting specific performance, i.e., whether the discretion was exercised arbitrarily or capriciously.

Arguments of the Parties

Appellants (Defendants Nos. 2–4) — Principal Arguments

  • They contended the Courts below erred in exercising their discretion in favour of specific performance and that, under the Specific Relief Act, a decree for monetary compensation should have been passed instead.
  • Counsel relied on s. 21(a) and s. 12(c) of the Specific Relief Act to argue that compensation in money was an adequate relief and specific performance therefore should not have been granted.
  • They asserted they were bona fide purchasers for value, and the prior agreement in favour of the plaintiff was collusive and bogus.
  • Counsel also suggested (for the first time in this appeal) that the decretal amount and 5% deposited under O. XXI, r. 89, were paid by the appellants or their mother to save the property for defendant No. 1.
  • When pressed, counsel sought as an alternative condition that, if specific performance were affirmed, the plaintiff should pay back the consideration to the appellants or at least Rs. 900 (alleged to have been deposited in Court).

Defendant No. 1 — Arguments as reflected in the record

  • Initially denied receipt of Rs. 1,900 at the time of the agreement.
  • Alleged that the agreement dated December 26, 1952, was collusively made to shield his property from other creditors.

Plaintiff (Respondent) — Arguments

  • The plaintiff alleged he had performed his part by paying the full consideration (Rs. 1,900 then appropriation of Rs. 100 from the decretal deposit), and defendant No. 1 failed to execute the sale-deed and instead caused sale to defendants Nos. 2–4 who had notice of the prior agreement.
  • The plaintiff sent notices (including exh. P-7 and the April 30, 1955 notice) urging defendant No. 1 to set aside the auction and to execute the sale in his favour, and also warned the subsequent purchasers not to take a sale of that house because of the subsisting agreement.
  • The plaintiff treated the remedies for non-execution as including seeking to set aside the auction sale and, if necessary, recovery of the consideration.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The Court began by noting that relief in the nature of specific performance is discretionary and that an appellate court will not interfere with the exercise of discretion by the Courts below unless that discretion was exercised arbitrarily or capriciously. The appellants did not demonstrate that the lower Courts had acted in such an arbitrary manner; on the contrary, the Judge found the discretion had been judiciously and reasonably exercised.

The Court then considered the appellants' reliance on s. 12(c) and s. 21(a) of the Specific Relief Act (both quoted in the opinion). Those provisions respectively permit specific performance where pecuniary compensation would not afford adequate relief (s. 12(c)) and exclude specific enforcement where compensation in money is an adequate relief (s. 21(a)). The Court reasoned these provisions are principally for the benefit of the promisor (the vendor) to preserve the subject-matter for him and to allow monetary compensation where appropriate. They are not provisions a subsequent purchaser with notice can invoke on behalf of the promisor to prevent specific performance in favour of the original promisee.

The Court observed that defendant No. 1 (the promisor) had not sought the protection of those provisions and had not joined the appellants' prayer that only money relief be given. Furthermore, nothing on record showed defendant No. 1 would be in a position to pay monetary compensation if a decree for compensation were made. Thus, the statutory exceptions (s. 12(c) and s. 21(a)) were inapplicable on the facts.

The Court rejected the appellants' attempted construction of the plaintiff's notice (exh. P-7) as evidence that the plaintiff preferred money to specific performance. The notice expressly called on defendant No. 1 to take steps to set aside the auction sale so the property would be available for the plaintiff; defendant No. 1 acted on that advice by depositing the decretal amount plus 5% on April 16, 1955.

The Court refused to admit a new factual contention advanced in the second appeal — that the appellants or their mother had paid the decretal deposit to save the property for defendant No. 1 — because that case was not pleaded in the trial Court and could not properly be raised for the first time on appeal. The Court also found it implausible that the appellants had paid the deposit to save the property for defendant No. 1 because, ultimately, the appellants themselves obtained a sale-deed in their favour.

On the question of bona fides and notice, the Court noted the appellants had actual notice of the plaintiff's agreement and further received a personal notice from the plaintiff on April 30, 1955. The sale at auction (March 18, 1955) had not been set aside when the appellants obtained the sale-deed (June 21, 1955); the order setting aside that auction was passed only on July 1, 1955. Because the auction sale was still in force (sale pendente lite) at the time the appellants took the sale-deed, the sale was pendent lite and did not affect the plaintiff's rights arising from the registered agreement dated December 26, 1952.

The Court found the appellants failed to establish that the alleged prior agreement was collusive. Instead, the circumstances suggested collusion between defendant No. 1 and the appellants to defeat the plaintiff's prior right. The appellants did not respond to the plaintiff's notice, did not return the plaintiff's consideration, and did not seek the plaintiff's consent; they procured the sale in their favour despite knowledge of the prior agreement. In the Court's view, these facts negatived bona fides and established that the appellants had failed to come with clean hands.

The Court further held that the mere fact that the appellants allegedly paid a higher price (Rs. 2,200) did not confer superior equities when they purchased with knowledge of the plaintiff's subsisting right. The appellants' asserted equities were not substantiated and were defeated by their conduct and pleaded defences, some of which were found to be false.

Finally, the Court declined to impose conditions on the decree for specific performance (such as requiring the plaintiff to repay the appellants) because the appellants had not proven any entitlement to such repayment, had not shown that they had deposited any part of the decretal amount on behalf of defendant No. 1, and had engaged in conduct that disentitled them from such equitable relief. The Court observed that, if the appellants had any remedy against defendant No. 1 for any loss, they were free to pursue it, but there was no basis to alter the decree in their favour.

Holding and Implications

Holding: The appeal is dismissed and the decree for specific performance granted by the Courts below is upheld. The appeal was dismissed with costs.

Implications and direct effects:

  • The plaintiff's claim for specific performance (arising from the registered agreement dated December 26, 1952) stands affirmed; the plaintiff retains the right to have the sale executed in his favour.
  • Defendants Nos. 2–4 (the appellants) are unsuccessful: they are not entitled to compensation in lieu of specific performance nor to any repayment from the plaintiff for consideration which they have not proven to have paid on behalf of defendant No. 1.
  • The Court did not grant any conditional decree (for example, requiring the plaintiff to repay any part of the decretal deposit) and indicated that any remedy the appellants may have against defendant No. 1 for collusion or loss is a matter between them and defendant No. 1.
  • No new legal precedent was proclaimed by the Court beyond the application of well-known principles governing discretionary relief of specific performance, the inapplicability of s. 12(c) and s. 21(a) of the Specific Relief Act to parties in the appellants' position with notice, and the established rule that appellate interference with discretion is limited to cases of arbitrary or capricious exercise; the decision accordingly resolves the dispute between these parties on the facts presented.

This summary is derived exclusively from the text of the provided opinion and does not add facts or authorities beyond those contained therein.

Show all summary ...

Paranjpe, J.:— In this second appeal by defendants Nos. 2 to 4 against two concurrent decisions granting a specific performance of an agreement to sell the house to the plaintiff, the only question raised before me was whether a monetary compensation for breach of agreement would have been a more appropriate relief than a decree for specific performance.

2. On December 26, 1952, defendant No. 1, who owned the house in suit, entered into an agreement with the plaintiff to sell that house to the plaintiff for a consideration of Rs. 2,000. The sale-deed was to be executed within two years. That agreement was registered and Rs. 1,900 out of the agreed price of Rs. 2,000 were paid as earnest money before the Sub-Registrar, the balance of Rs. 100 being payable at the time of the registration of the sale-deed. In the meantime a creditor of defendant No. 1 attached the suit house in execution of a decree in Civil Suit No. 46-B of 1946 and the plaintiff got that house released from attachment on November 18, 1953, by depositing the decretal amount of Rs. 186-10-0 for and on behalf of the judgment-debtor. It was agreed between the plaintiff and defendant No. 1 that Rs. 100 out of this deposit of Rs. 186-10-0 was to be appropriated towards the balance of the price of the suit house. On December 26, 1954, defendant No. 1 wrote a letter to the plaintiff to extend the time for executing the sale-deed till April, 21, 1955, and the plaintiff granted that extension. In the meantime, the house in suit was again attached by the mother of the present appellants-defendants Nos. 2 to 4 on August 9, 1954, in execution of her decree in Civil Suit No. 115-A of 1953. That house was put to sale and was auctioned by the executing Court on March 18, 1955, the auction being knocked in favour of the decree-holder who had bid with the permission of the Court. On April 15, 1955, the plaintiff gave the notice (exh. P-7) to defendant No. 1 to remind him that the sale in his favour was to be executed by April 21, 1955, and to say that it would not be possible to execute that sale as per the agreement dated December 26, 1952, unless the auction sale was set aside in the meantime. He also said in that notice that, in case, the auction stood and was confirmed, the plaintiff will have no alternative but to demand back the consideration for the sale. On April 16, 1955, defendant No. 1, who was a judgment-debtor, deposited the decretal amount plus 5 per cent thereof as per O. XXI, r. 89, of the Code of Civil Procedure in order to get the sale set aside. On April 28, 1955, the plaintiff gave another notice to defendant No. 1 to call upon him to execute the sale in his favour as per the agreement dated December 26, 1952. The plaintiff also gave one notice, dated April 30, 1955, to defendant No. 2 to intimate to him his prior agreement with defendant No. 1 for the purchase of the suit house and to tell him not to take a sale of that house because of the subsisting agreement, dated December 26, 1952. However, these notices were disregarded by defendants and defendant No. 1 executed the sale-deed (exh. P-4) in favour of defendants Nos. 2 to 4 with respect to the suit house for a consideration of Rs. 2,200. The executing Court had not passed an order setting aside the sale in favour of the decree-holder on that day but that order was passed on July 1, 1955. These facts were found by the Courts below and cannot be questioned in this second appeal. The plaintiff had sued for specific, performance of his agreement on the allegation that he had performed his part of the contract by paying the full consideration, but defendant No. 1 had not carried out his part and had instead sold the house to defendants Nos. 2 to 4 despite their having knowledge about the prior agreement in favour of the plaintiff. Defendant No. 1 had contested the suit first by denying that he had received Rs. 1,900 at the time of the agreement and by further alleging that the agreement, dated December 26, 1952, was collusively brought, about for shielding his property from his other creditors. Defendants Nos. 2 to 4, who are the appellants in this Court, claimed that they were bona fide purchasers for value and the prior agreement in favour of the plaintiff was bogus and collusive. The Courts below overruled these defences and decreed the claim for specific performance on the finding that defendants Nos. 2 to 4 were not bona fide purchasers for value without notice of the plaintiff's right.

3. Shri B.R Mandlekar, learned counsel for the appellants, urged that the Courts below had erred in exercising their discretion in favour of the plaintiff and they should have exercised their discretion by only passing a decree for money in favour of the plaintiff. A relief for specific performance is, doubtless, a discretionary one, but it is also settled law that an appellate Court will not interfere with the discretion of the Courts below unless it were to be shown that the discretion was exercised by them arbitrarily or capriciously. In the instant case, it was not even attempted to be shown that the Courts below had exercised their discretion wrongfully in that manner. As I would show in the sequel, I find that the discretion was exercised by the Courts below judiciously and on proper and reasonable grounds and, therefore, I do not think that this Court can interfere with that discretion even if it were to be said that some other view of the matter could have been taken.

4. Coming to the merits of the question, Shri Mandlekar brought to my notice s. 21(a) and s. 12(c) of the Specific Relief Act and urged that in view of these two provisions, specific relief ought not to have been granted and only a decree for compensation for money should have been passed. Those provisions are in the following words:

Section 12. “Except as otherwise provided in this Chapter, the specific performance of any contract may in the discretion of the Court be enforced—…

(c) when the act agreed to be done is such that pecuniary compensation for its non-performance would not afford adequate relief;…”

Section 21. “The following contracts cannot be specifically enforced:—

(a) a contract for the non-performance of which compensation in money is an adequate relief;”

5. According to him, granting pecuniary compensation for non-performance of the agreement would afford adequate relief to the plaintiff and, therefore, specific performance ought not to be allowed. Shri Mandlekar submitted that these sections require the Court to consider the equities between the parties to the agreement, so that the subject-matter of the agreement may be saved for the promisor and the promisee may be adequately compensated in money. Upon this very argument, these sections appear to me to be entirely inapplicable to the facts of the present case. Here the promisor, defendant No. 1, has already parted with the house in favour of the appellants and there is no question of saving that house for the promisor, who cannot get back the house even if he were to be required to give to the plaintiff monetary compensation only. The submission of Shri Mandlekar seemed to imply that these sections could also be availed of by the subsequent purchasers, even if they had purchased the property with full knowledge of the prior agreement by the vendor. No authority was shown in support of that suggestion. These sections appear to be only for the benefit of the promisor, so that the property may be saved for him and not for the benefit of subsequent purchasers, particularly when they have entered upon the venture of the purchase with full knowledge of the prior agreement. The appellants, who are subsequent purchasers, cannot claim to take up cudgels for defendant No. 1 and to urge on his behalf that only a decree for monetary compensation should be passed against him. It would be interesting to note that defendant No. 1, who alone could have sought protection of those sections, has not cared to do so and has not joined in this prayer of the appellants. Moreover, there is nothing on record to show that defendant No. 1 is or would be in a position to pay monetary compensation, if decreed.

6. Shri Mandlekar then submitted that in the notice (exh. P-7), the plaintiff himself had pointed out to defendant No. 1 that in case the sale in favour of the mother of the present appellants was not set aside, it may not be possible for him to enforce the agreement and he would have to fall back on the other relief of return of the consideration. Shri Mandlekar wanted to construe this notice to mean that the plaintiff himself was not keen on getting the property but was only content with getting back his money. I am afraid that is not a proper interpretation of the notice and it ignores the first part of the notice wherein the plaintiff had called upon defendant No. 1 to get the sale set aside by taking proper steps. That advice was given to him by the plaintiff. It would be pertinent to note in this connection that on receipt of this letter on April 16, 1954, the decretal amount plus 5 per cent thereof was deposited in the Court that very day by defendant No. 1. Apparently, therefore, it would mean that defendant No. 1 accepted the advice given by the plaintiff and took steps to deposit the amount under O. XXI, r. 89, of the Code of Civil Procedure, so that the property would be free and would be available to the plaintiff as per the original agreement, dated December 26, 1962.

7. Shri Mandlekar then strenuously urged that the decretal amount and the 5 per-cent commission deposited on April 16, 1955, had come from these appellants or from their mother and had been deposited by them for saving the property for defendant No. 1. In the first place, that was not the case of the appellants in the Courts below and I cannot permit this entirely new case on facte to be put forth in this second appeal for the first time. I have gone through the written statement of these appellants with Shri Mandlekar in Court and he had to admit that no such case had been set up in the trial Court. He, however, wanted me to infer that this amount must have been deposited by the appellants alone. It is impossible for me to accept this suggestion because, in case the appellants deposited that money for saving the property for defendant No. 1, as was contended by Shri Mandlekar, that purpose was completely lost because the property was not saved for defendant No. 1 but a sale-deed thereof was taken by the defendants-appellants subsequently. There was no warrant for the suggestion that this amount was paid by the defendants-appellants for and on behalf of the original defendant No. 1.

8. Shri Mandlekar again reiterated that stand for supporting his claim that the defendants-appellants were bona fide purchasers for value. I may mention that no question of their bona fides would arise in the context of the established facts. If the decree-holder wanted to set aside the sale for saving the property of defendant No. 1, who was the judgment-debtor, there was no necessity at all for depositing any amount under O. XXI, r. 89, of the Code of Civil Procedure for payment to the purchaser, because the decree-holder herself was the purchaser in that case and the sale could have been set aside on a joint request of the decree-holder, that is, the mother of the present appellants and defendant No. 1, but that had not happened. Instead, the judgment-debtor was required to deposit the amount as per O. XXI, r. 89, of the Civil Procedure Code which would mean that these appellants or their mother were not consenting to have the sale set aside and that was managed by defendant No. 1 only in accordance with the advice given to him by the plaintiff in the notice (exh. P-7) to which I have already referred earlier. If there were any bona fides on the part of the defendants-appellants, as was being repeatedly urged on their behalf, I should have expected them to go to the plaintiff at least after receiving the notice, dated April 30, 1955, from him and then either return his consideration or to obtain his consent to the sale which was eventually brought about in their favour. Nothing of the sort was done. On the contrary, these appellants did not even care to reply to the plaintiff's notice, dated April 30, 1955, and took the sale-deed behind the back of the plaintiff and without even informing him about it.

9. The learned counsel for the appellants was ignoring one important legal position when advancing his case of the supposed bona fides of the appellants. It will have to be remembered that the sale was held on March 18, 1955. Under O. XXI, r. 92, of the Civil Procedure Code, a sale shall be confirmed unless it is set aside under O. XXI, rr. 89, 90 and 91. In this case, the amount was deposited within thirty days as per O. XXI, r. 89, of the Civil Procedure Code but the sale had not yet been set aside and the matter was still sub judice. The formal order of setting aside the sale, which could have been passed on April 16, 1955, was actually passed on July 1, 1955, and these appellants took the sale in their favour on June 21, 1955, while that auction sale was still in force and had not been set aside. That would mean that it was a sale pendent lite and it would not affect the rights or interest of the plaintiff which was acquired by the registered agreement, dated December 26, 1952. That aspect also must be kept in view while considering the question of the alleged bona fides.

10. It was not the case of the appellants that they had no notice of the plaintiff's agreement. Their only stand was that the agreement was collusive and bogus and they have failed in establishing that allegation. They have, therefore, not explained why or how they purchased the property with notice of that agreement, particularly after the plaintiff gave them another personal notice on April 30, 1955. When they purchased this house in spite of the knowledge of the prior agreement in favour of the plaintiff, they obviously did so at their own risk and it was now not open to them to say that they were poor persons who were being put to a loss due to the collusion as between the plaintiff and defendant No. 1. It is quite clear that there was some collusion, but it was not between the plaintiff and defendant No. 1 and it appeared to be between defendant No. 1 on the one hand and the present appellants on the other. Apparently, after carrying out the advice of the plaintiff as per the notice (exh. P-7) by depositing the amount under O. XXI, r. 89, of the Civil Procedure Code for getting the auction-sale set aside, defendant No. 1 seems to have got in touch with the present appellants who had managed to get him round and to secure the sale of the house in their favour to the detriment of the plaintiff. This conduct on their part would certainly not be an indication of bona fides.

11. The learned counsel for the appellants then urged that there were more equities in favour of the defendant-appellants than in favour of the plaintiff. However, he did not show which were those greater equities in favour of the appellants as claimed. The only thing which he could pin-point in this connection was that the appellants had paid Rs. 2,200 while the plaintiff had paid Rs. 2,000 as per the findings of the Courts below. The mere fact that the appellants had paid Rs. 2,200 would be neither here nor there when it would be seen that they did it, if at all they had paid that or any consideration, with the knowledge that the plaintiff had acquired a right to get a sale-deed of this house on the strength of the agreement, dated December 26, 1952. By merely purporting to pay a larger consideration for that house, defendants Nos. 2 to 4 cannot say that equities are more in their favour. Again, a person claiming equities must come with clean hands. In the instant case, these appellants have not only tried to steal a march over the plaintiff by securing this sale in the circumstances which I have discussed at considerable length but they had gone to the length of raising false defences in the suit. Under the circumstances, no question of equities in favour of the appellants could arise.

12. I would like to point out that, in the trial Court, the defendants-appellants had not raised this contention that the decree for specific performance should not be passed or that a decree for money only should be passed. They are raising this point for the first time in this Court. For the reasons which I have explained above, it is not possible to accept their submission.

13. Shri Mandlekar then submitted that, in case, the decree for specific performance is to be affirmed, it should be made conditional on the plaintiff paying back the consideration to the defendants-appellants or on the condition that the plaintiff at least paid Rs. 900 which was deposited in the Court on April 16, 1955, for having the sale set aside. As adumbrated, defendants Nos. 2 to 4 entered upon this venture with full knowledge of the plaintiff's agreement and the rights thereunder and obviously they did it at their own risk. I do not think that there would be any question of ordering any payment to defendants Nos. 2 to 4 who apparently came to the rescue of defendant No. 1 but really they wanted the sale for their own benefit.

14. Moreover, the assumption that these appellants had paid Rs. 900 or any part of the amount deposited in Court on April 16, 1955, had no foundation in the record and they could not claim any part of the amount which they have not proved to have deposited on behalf of defendant No. 1. If they have lost the consideration or any part of it as a result of their colluding with defendant No. 1, it is open to them to seek their own remedies against defendant No. 1. I find that there is no reason to levy any condition to the decree for specific performance.

15. The appeal is devoid of substance and is dismissed with costs.

16. Appeal dismissed.