Shoba Viswanathan v. D.P Kingsley

JUDGMENT

S.S Subramani, J.

Defendant in C.S No. 239 of 1982, on the file of this Court, is the appellant. Plaintiff therein is the respondent.

2. For the sake of convenience, in this Appeal parties will be referred to as they are arrayed in the suit.

3. Plaintiff filed the above suit for the following reliefs:— “(1) for specific performance of the contract for sale of the house and premises No. 106, Harrington Road, Madras-31 and in default direct the office of the Hon'ble Court to have the sale deed executed in favour of the plaintiff; (2) for a declaration that the plaintiff is the owner of the house and premises No. 106, Harrington Road, Madras-31 from 1st December 1981; (3) for any other relief or reliefs this Hon'ble Court may deem just and proper; and (4) for costs of this suit”

4. The suit was filed on 22-4-1982, on the following allegations:—

The schedule property admittedly belongs to the appellant and the same was taken on lease by Needle Industries (India) Ltd., for accommodating the office-cum-residence of its Director and Secretary, and he came to occupy the premises from February 1977. The initial period of tenancy with the Company was for three years. The Company terminated the lease with effect from 31-7-1981 and the plaintiff also ceased to be in the service of the Company. With the consent of the defendant, plaintiff continued to be the tenant of the house on the same terms and conditions which were then subsisting between the defendant and the Company. Sometime in the year 1978, the Company enquired with the defendant whether the Schedule premises will be sold to it, and the defendant agreed for the same. It is said that the defendant also was requested to furnish details of the property. However, the idea of purchasing the property by the Company fell out, though as per Engineer's valuation, at that time the value of the property was Rs. 2,15,062/-. It is further alleged that the defendant's husband came to India in the middle of 1980 and he called on the plaintiff. He expressed his desire that the property be sold to the plaintiff and not to the Company. The price offered at that time was Rs. 2,70,000/-. It is said that the plaintiff was not in a position to raise necessary funds at that time and, therefore, the transaction could not materialise. But in January 1981, certain developments happened in the Company and the employment of the plaintiff in the Company was insecure. The services of the plaintiff in the Company were about to be terminated after paying him some monetary compensation. It is aid that it was under those circumstances, plaintiff wanted to purchase the property and on 30-1-1981, evidenced by Ex. P-1 or Ex. D-13, plaintiff wrote to defendant whether she was still interested in selling the house. He also enquired whether there was any possibility of the defendant visiting India so as to negotiate the deal and for a personal discussion in the matter. On receipt of Ex. P-1, defendant, as per Ex. P-2 dated 25-2-1981, informed the plaintiff that she was interested in selling the house. In that letter, it is further said that the schedule property be valued by two authorised appraisers, and the defendant agreed that such valuation could be at her expenses. Pursuant to the same, plaintiff got two Valuation Reports, evidenced by Ex. P-4 and P-5. As per Ex. P-4, the property was valued at Rs. 3,10,443/- (rounded off to Rs. 3,10,500/-) and as per Ex. P-5, it was valued at Rs. 3,69,433/-. It is said that these Valuation Reports were sent to the defendant by the plaintiff.

5. During the relevant time, the original tenant, i.e, the Company gave notice to the defendant regarding its intention to terminate the tenancy with effect from 1-8-1981. At that time, plaintiff informed the defendant that he is interested in continuing the tenancy and requested that he may be allowed to continue to be in the building. Ex. D-5 dated 29-5-1981 is the letter written by the plaintiff wherein he said that whatever happened regarding sale of the premises, he would like to retain the tenancy for a minimum period of one year and he undertook to look after the premises with due care. After receipt of Ex. D-5, defendant wrote to the plaintiff on 14-6-1981, evidenced by Ex. D-18, expressing her consent for the plaintiff continuing in the premises. She further said that she will not be in a position to visit India that year. In that letter, she further wanted the plaintiff to inform her the price for which he was willing to take the property. It is further alleged by the plaintiff that the defendant also sent a cable enquiring about the willingness of the plaintiff to purchase the house, for which the defendant also sent a reply to the plaintiff. Ex. D-6 letter dated 16-6-1981, written by plaintiff to the defendant makes mention of the same. In that letter, plaintiff has stated that he is interested in purchasing the house and that the transaction must be completed sometime before the end of that year. That letter was further followed up by Ex. D-17 dated 7-7-1981. It is said that in that letter, plaintiff has offered a price of Rs. 3,40,000/-, being an average of the valuation made under Ex.:—4 and P05. He wanted the defendant to inform her acceptance about it. He also stated that if the same is not acceptable to the defendant, he has to look after an alternate accommodation. Ex. D-17 was replied by the defendant on 18-7-1981 wherein the defendant accepted the offer. It is said that on the basis of the said letter, there is a concluded contract. It is further averred by the plaintiff that pursuant to the same, he was ready and willing to purchase the property. He wanted the documents to be prepared, and during the end of that year, defendant's husband also came to India with a Power of Attorney. But, at the last moment, the deal could not be had, since the defendant gave a cable to her husband not to proceed with the transaction, but to initiate talks for renewal of the lease with the plaintiff. It is alleged by the plaintiff that the withdrawal by the defendant at the last moment is not legal. It is also said that pursuant to the contract, plaintiff also contacted his advocate for preparing a draft sale deed and P.W 2 (Advocate Mr. T.S Goplalan) also prepared the same It is aid that the defendant's husband met Mr. T.S Gopalan and agreed to produce Income-tax Clearance Certificate. Withdrawal by the defendant at the last moment, according to the plaintiff, is breach of understanding. At the same time, defendant has also filed a suit against the plaintiff for eviction, as O.S No. 1765 of 1982, on the file of the 8th Assistant City Civil Judge, Madras. It is on these allegations, the present suit is filed for above mentioned reliefs.

6. In the written statement filed by the defendant, the maintainability of the suit is challenged. It is said that there is no concluded contract between the parties and there was only a negotiation between them. She also said that she has already filed a suit as O.S No. 1765 of 1982 for eviction and it was only after getting notice of that suit, the present suit was filed by the plaintiff as a counterblast. The status of the plaintiff is only that of a tenant. It is further stated that there was no approval of the title deed by the plaintiff and no concluded contract. It is also said that the plaintiff did not have sufficient funds to purchase the property and he was never ready and willing to perform the same. She also denied the so-called proposal for sale of the property anterior to Ex. P1. She said that the consideration of Rs. 3,40,000/- is meager. The property is having an area of nearly 2 grounds, and the building itself will cost more than Rs. 3,00,000/- the value of the site together with the building will be not less than Rs. 10 lakhs. The consideration offered was inadequate. When the plaintiff himself insisted for scrutiny off the title deeds, it shows that the contract was not concluded till the. No follow-up action was taken as alleged by the plaintiff, pursuant to the offer made. She also disputed the claim of the plaintiff getting declaration of his title over the property from 1-12-1981. She said that the suit is an abuse of process of Court, and that the same has been instituted with a mala fide intention to defeat the rights of the defendant. She prayed for dismissal of the suit.

7. The learned Judge before whom evidence was taken, passed a decree in terms of the plaint. But in paragraph 26 of the judgment, the learned Judge said that the relief of declaration of title cannot be maintained. It is better to extract that portion of the judgment wherein the learned Judge has said thus:—

“…. The further relief claimed in the suit is for declaration that plaintiff is the owner of the house and premises at No. 106, Harrington Road, Madras-31 from 1-12-81. The claim for this relief, if I may say so, is preposterous. Sale deed in his favour is yet to be executed.

“While so, it is meaningless to claim that plaintiff has become the owner of the suit property from 1-12-81. If the plaintiff continues to be in possession of the suit property, he will have to pay either rent or damages for use and occupation to the defendant ill his possession becomes that of the owner of the property, he has not parted with the sale price to the defendant. While that being so, apart from the fact that there is no sale deed, his claim that he has become owner of the house from 1-12-81 does not have any merits and has to be rejected.”

Why we extracted this part of the judgment in the Suit will be explained later.

8. It is against the judgment of the learned Judge granting a decree for specific performance, the defendant has preferred this Appeal.

9. Learned counsel for the defendant put forward the following submissions:—

“(1) The claim for declaration of title from 1-12-1981 shows that the plaintiff has come to Court with a mala fide intention and with an ulterior motive of not paying the rent from that date. It is also submitted that such a relief is claimed on the basis of some false allegations in the plaint in paragraph 12. (2) The defendant is not an Indian citizen and any sale of the property has to be approved by the Reserve Bank of India under the Foreign Exchange Regulation Act. If the so-called agreement is implemented, that will be against public policy and if specific performance is permitted, it will defeat the provisions of law and, therefore, barred under S. 23 of the Indian Contract Act. (3) The relationship between the plaintiff and the defendant was of active confidence, and if the transaction is allowed to be gone through, it will amount to an unfair advantage. (4) Specific relief is only a discretionary remedy and the discretion is to be exercised in accordance with settled principles of law, and if the same is followed, the plaintiff will not be entitled to the reliefs.”

10. We will deal with these submissions in seriatim.

11. Submission No. 1:

“In paragraph 12 of the plaint, it is said that on 1-12-1981, defendant's husband called on the plaintiff with the original title deeds and handed over the same to the plaintiff with three copies of Power of Attorney dated 18-11-1981 and not raised on 20-11-1981. It is further stated in that paragraph that when the plaintiff handed over to the Attorney the cheque for November 1981 rent, the attorney informed the plaintiff that whatever payment that the plaintiff might make after that date will be towards the sale price of the property. The understanding was that the sale should be deemed to have been completed before the end of December 1981 and that the plaintiff would be the absolute owner fully entitled to the possession in his own right and ownership of the suit property from 1-12-1981. The same is answered in paragraph 16 of the written statement. Defendant has said that there was no such conversation as alleged and that her husband was sent only to finalise the transaction, the terms of which were never agreed between the parties. It is further stated that there was no understanding that the sale should be deemed to have been completed before the end of December 1981 and the plaintiff should be the absolute owner fully entitled to the ownership of the property from that date.”

12. We have already extracted the finding of the learned Judge who did not accept the case of the plaintiff in this regard. We may say that the said statement also cannot be correct in view of Ex. D-5 dated 29.5.1981 It is a letter written by the plaintiff to the defendant wherein he has said thus:—

“I am writing this letter in haste to inform you that I am interested in continuing the tenancy of your premises at least upto 30th June 1981. In case any of you is likely to visit India, it will be possible for me to discuss matters relating to the purchase of the property from you and I look-forward to your early advice in the matter. Whatever happens to the sale of the premises, I would like to retain the tenancy for a minimum period of one year and I trust you will give me the privilege of being your tenant.”

(Emphasis supplied)

The same is replied under Ex. D-18, wherein the defendant has said thus:—

“You do not have to wait until December or next summer to let me know of you intentions. … …”

In that letter, she has further instructed the plaintiff to inform his ofer. Even in July 1981, as evidenced by Ex. P-3, what the plaintiff wanted was only a definite understanding, and according to him, if it could not materialise, he has to search for an alternate accommodation.

13. Ex. D-20 is the Power of Attorney executed by the defendant in favour of her husband. That Power of Attorney is general in nature. If there was any intention on the part of the defendant to permit the plaintiff to be in possession as owner from 1-12-1981, the name of the purchaser also would have been made mention of along with the consideration to be paid. But Ex. D-20 is completely silent about it. The Power of Attorney authorises the defendant's husband to sell the property to any willing purchaser. Ex. D-20 is dated 18-11-1981. The statement in paragraph 12 of the plaint is also not spoken to by plaintiff while he was examined in chief. Taking into consideration the earlier correspondence and also the lack of evidence, we can safely infer that the plaintiffs case claiming a declaration of title is only with an intention not to pay rent from 1-12-1981.

14. In a suit for specific performance, if the Court feels that the suit is filed with an ulterior motive, that conduct also will have to be taken into consideration while exercising the discretion. We must understand that at the time when this suit was filed, the defendant had already filed the suit for eviction, and it was after receipt of summons, this suit was filed. That earlier suit filed by the defendant itself was for eviction of the plaintiff on the ground that he had not paid the rent and was, therefore, liable to be evicted. At the time when that suit was filed, the building was exempted from the provisions of the Tamil Nadu Buildings (Lease and Rent Control) Act. But, after the revocation of the Exemption, defendant filed R.C.O.P No. 2788 of 1990 for eviction on the ground that from 1-12-1981 the defendant had not paid rent. The defence in that proceeding also was that he was in possession as owner. The said R.C.O.P was allowed against the plaintiff, against which he preferred an appeal before the Appellate Authority as R.C.A No. 893 of 1993. Even in that proceeding, the plaintiff has taken a contention that he is not bound to pay the rent and that whatever he pays after 1-12-1981 is towards sale consideration. That shows the conduct of the plaintiff. He wanted the entire rent to be appropriated towards the sale consideration and thus get the property free of price. Such a conduct cannot be accepted by a Court of law while exercising equitable and discretionary jurisdiction.

15. The learned Judge who tried the suit himself has held that the claim put forward by the plaintiff is preposterous. Having entered such a finding on the basis of false allegations, the discretionary remedy in favour of the plaintiff should not have been granted. The first submission made by the learned counsel for the defendant therefore, deserves acceptance. In this connection, learned counsel also relied on a decision reported in 1994-2-L.W. 642 (S. Sankaran (died) and 4 others v. N.G Radhakrishnan). That was also a case of specific performance where the plaintiff put forward a contention that he is the owner and not not liable to pay rent, even before the document is taken. That conduct was considered by us as one disentitling the plaintiff from getting a decree for specific performance. Paragraph 13 of the judgment makes mention of the same.

16. In 1937 M.W.N 1158 (Sirigineedi Subbarayadu v. Kopanathi Tatayya and others), a Division Bench of this Court has held thus:—

It is unnecessary to enter into a discussion of the correctness of these findings, because it is quite clear that on other grounds the appellant is not entitled to specific performance of the agreement of the 13th July, 1924. The relief sought lies in the discretion of the Court. The discretion of the court is not arbitrary but sound and reasonable, and must be guided by judicial principles. This is so declared by S. 22 of the Specific Relief Act. Now, in this case the appellant alleged that he tendered the full amount of the purchase consideration Rs. 6,000, within two months of the agreement having been entered into and he supported this allegation on oath in the witness-box. The learned trial Judge refused to believe him and we consider that he was fully justified in so doing. A plaintiff who is capable of setting up a false case cannot expect a court of equity to grant him relief. But the matter does not rest there. The agreement provided that the consideration should be paid within three months. There was a further provision that in the event of there being delay on the part of the appellant in paying, the amount due under the agreement should bear interest The fact that the agreement provided for completion in three months shows that long delay was not contemplated. In this connection the appellant, however, says that the Indian Limitation Act allows him three years in which to file the suit and mere delay is not sufficient to deprive him of relief. Mere delay may not be sufficient in some cases to deprive a plaintiff of relief, but in this case the appellant took no steps to prevent the 1st respondent conveying the property to the 4th respondent, and he sat by while the 4th respondent spent money on improving the property. There was a mortgage on it and the 4th respondent discharged it. How can it be said in such circumstances that the appellant is entitled to a decree compelling the 1st respondent to convey the property to him, ignoring the position of the 4th respondent except so far as the return of the consideration paid by him is concerned? There are, therefore, two main reasons why specific performance should not be granted in this case. One is that the appellant has given false testimony in the witness box, and the other is that to grant him the relief which he asks for would be doing an injustice to the 4th respondent.”

(Emphasis supplied)

17. In 1976-I-M.L.J 243 (Ramaswamy Gounder v. K.M Venkatachalam and others), M.M Ismail, J., as he then was, held thus:—

“.. the falsity of the case put forward by the plaintiff disentitled him from obtaining the discretionary relief of specific performance of agreement.”

18. In A.I.R 1987 S.C 2328 (Parakunnan Veetil Joseph's son Mathew v. Nedumbara Kuruvila's son and others), Their Lordships held thus:—

“S. 20 Specific Relief Act, preserves judicial discretion to Courts as to decreeing specific performance. The Court should meticulously consider all facts and circumstances of the case. The Court is not bound to grant specific performance merely because it is lawful to do so. The motive behind the litigation should also enter into the judicial verdict. The Court should take care to see that it is not used as instrument of oppression to have an unfair advantage to the plaintiff.”

(Emphasis supplied)

19. When this argument is put forward by learned counsel for the defendant, the plaintiff's counsel, at the time of his reply, pleaded before us that he is prepared to pay unconditionally the entire rent that has fallen due from 1-12-1981 and that too with interest. That submission at the last] stage of the argument also shows that the relief in the plaint was to pre-empt the defendant from filing a suit for eviction. A prayer for declaration of title cannot be had in a suit for specific performance. In spite of the same, when such a relief is sought, even without paying a pie towards sale consideration, shows the conduct of the plaintiff that he has filed the suit with an oblique motive.

20. Submission No. 2:

Admittedly, the defendant is a foreign national long before 1981. Plaintiff is also aware of the same. The schedule (immovable) property which belongs to a non-citizen can be conveyed only after obtaining permission of the Reserve Bank of India. S. 31(1) of the Foreign Exchange Regulation Act, 1973 (for short, FERA) reads thus:—

“No person who is not a citizen of India and no company (other than a banking company) which is not incorporated under any law in force in India shall, except with the previous general or special permission of the Reserve Bank, acquire or hold or transfer or dispose of by sale, mortgage, lease, gift, settlement or otherwise an immovable property situate in India.”

21. Sub-sections (1) and (2) of S. 47 of FERA read thus:—

“(1) No person shall enter into any contract or agreement which would directly or indirectly evade or avoid, in any way, the operation of any provision of this Act or of any rule, direction or order made thereunder.

(2) Any provision of, or having effect under this Act that a thing shall not be done without the permission of the Central Government or the Reserve Bank, shall not render invalid any agreement by any person to do that thing, if it is a term of the agreement that thing shall not be done unless permission is granted by the Central Government or the Reserve Bank, as the case may be; and it shall be an implied term of every contract governed by the law of any part of India that anything agreed to be done by any term of that contract which is prohibited to be done by or under any of the provisions of this Act except with the permission of the Central Government or the Reserve Bank, shall not be done unless such permission is granted.”

22. S. 50 of FERA says that if any person contravenes any of the provisions of the Act, he shall be liable for penalty. The said Section reads thus:—

If any person contravenes any of the provisions of this Act (other than S. 13, clause (a) of sub-section (1) of S. 18, section 18A and clause (a) of sub-Section (1) of S. 19 or of any rule, direction or order made thereunder, he shall be liable to such penalty not exceeding five times the amount or value involved in any such contravention of five thousand rupees, whichever is more as may be adjudged by the Director of Enforcement or any other oficer of Enforcement not below the rank of an Assistant Director of Enforcement specially empowered in this behalf by order of the Central Government (in either case hereinafter referred to as the adjudicating oficer).”

Rules have also been framed under FERA for getting permission. As per directions of the Reserve Bank of India, under Section 23 A.1, permission must be obtained anterior to any transaction contemplated under S. 31 of FERA. There are also prescribed Forms as to how to make the applications and what is to be done about the sale proceeds. Unless and until the said Form is filled up, and permission is granted, no sale of a property by a foreigner can be recognised. Even if as between two contracting parties, the title may pass, while exercising the discretion under S. 20 of the Specific Relief Act, Court will have to consider whether it should be a party to a transaction for which permission is not obtained from the Reserve Bank of India.

23. Not only that the transaction without permission is prohibited, certain penal consequences are also imposed under law. We find that earlier, Courts of law did not treat the mere imposition of penalty as an act prohibited by law or against public interest. But the said view seems to have changed in course of time and the scope of ‘public policy’ or ‘public interest’ has also enlarged.

24. In one of the earliest decisions, namely, 1973 Tax. L.R 498 (P.C Kapoor v. The Commissioner of I.T, Lucknow.), a Full Bench of that High Court considered the scope of S. 23 of the Contract Act. Paragraphs 25 to 27 of the said decision may usefully be extracted thus:—

“S. 23 of the Contract Act lays down that consideration or object of an agreement is unlawful if it is forbidden by law or is of such a nature that if permitted it would defeat the provision of any law or is fraudulent or involves or implies injury to the person or property of another or the Court regards it as immoral or opposed to public policy. A law can prohibit an act either expressly or by necessary implication. Once it is held that various provisions contained in the Excise Manual relied upon by the learned counsel for the Revenue are not statutory, it cannot be said that there is a law which expressly prohibits a licensee from entering into a partnership in respect of the business carried on by him under the license. The question, however, that remains for consideration is whether when the Act make, a breach of any condition of a licence punishable, it by necessary implication prohibits the act which results in such breach. The law on the point has been summed up in Halsbury's Laws of England, III Edition, Vol. VII paragraph 245, at page 141, as follows:

“Where a penalty is imposed by statute upon any person who does a particular act, this may or may not imply a prohibition of that act. It is a question of contraction in each case whether the Legislature intended to prohibit the doing of the act altogether, or merely to make the person who did it liable to pay the penalty. If the penalty is recurrent, that is to say, if it is imposed not merely once for all but as often as the act is done, this amounts to a prohibition. Where the object of the Legislature in imposing the penalty is merely the protection of the Revenue the statute will not be construed as prohibiting the act in respect of which the penalty is imposed, but where the penalty is imposed with the object of protecting the public, though it may also be for the protection of the revenue, the act must be taken to be prohibited and no action can be maintained by the of ending party on a contract which is made in contravention of the statute.”

Anson has stated the law on the points in the following words:—

“The statute may impose a penalty on the parties to a contract without declaring it to be illegal or void. The effect of such a case depends upon the proper contraction of the particular statute. Where the words of a statute leave from for doubt as to its intention it is material to ask weather the object of the Act in imposing the penalty is merely to protect the revenue or whether one of its objects is to protect the general public or some class of the general public by requiring that the contract shall be accompanied by certain formalities or conditions since it was registration in the case of a money lender. In the latter case it is probable that the act of the doing of which the penalty is imposed is impliedly prohibited by the statute and therefore illegal. It may also be useful to ask whether the penalty in imposed once for all or whether it is a recurring penalty imposed every time the act is done. In the latter case it is that the act should be prohibited.” (Principles of English Law of Contract 21st Edn. page 278).

According to Pollock and Mulla (Indian Contract Act, VII Edn. page 158) same principles apply so far as the expression ‘forbidden by law’ occurring in S. 23 of the Contract Act are concerned. The principle is stated thus:—

“Parties are not as a rule so foolish as to commit themselves to agreements to do anything obviously illegal or at any rate to bring them into Court; so the kind of the question which arises in practice under this head is whether an act or some part of series of acts, agreed upon between the parties does or does not contravene some legislative enactment or regulation made by lawful authority. The decision may turn on the construction of the agreement itself or of the terms of the act or other authoritative document in question or on both. In particular it may have to be considered whether the intention of the Legislature was to prevent certain things from being done or only to lay down terms and conditions on which it may be done.. …. Broadly speaking that which has been forbidden in public interest cannot be made lawful by paying the penalty for it.”

In view of these authorities the position appears to be well settled that when an enactment merely imposes a penalty without declaring a contract made in contravention of it to be illegal or void, the imposition of penalty by itself and without more does not necessarily imply a prohibition of the contract. In such cases the question always is whether the Legislature intended to prohibit the contract. This must be decided upon a construction of the Statute. If the object of the enactment or one of its objects in imposing penalty is to protect the general public or any class thereof it will be construed in the absence of any other indication expressed in the statute as implying a prohibition of the contract. On the other hand, if the object of imposing the penalty is merely the protection of the revenue the contract will (not?) be regarded as prohibited by implication.”

In that case, the Full Bench held that merely because a penalty is imposed, that should not be taken as something prohibited by law. Their Lordships were of the view:

“If the object of penalty is only to protect the Revenue, the contract will not be regarded as prohibited by implication.”

25. A reading of the decision reported in (1989) 66 Company Cases 349 (Joaquim Mascarenhas Fiuza v. Smt. Jaime Rebello and another), shows that the provisions of FERA will have to be granted taking into consideration the penal provisions. It was held in the said decision that FERA was not basically a penal Statute though some ofences were mentioned and penalties prescribed for them. It was further held that under S. 31 of the FERA if a foreigner had already acquired and had title and possession over property at the commencement of the Act, he would be entitled to continue to hold it only if he made the declaration required under sub-S. (4). That was also a suit for injunction where their Lordships refused to exercise the discretion under Specific Relief Act.

26. In 1986 (2) ALT 241 (Beharijaj Maudgil v. The Secretary to Govt. of A.P, Home Department, Hyderabad and others), a learned Judge of the Andhra Pradesh High Court held that the provisions of the FERA are mandatory in nature and have to be scrupulously followed. It was further held that the purpose of the Act was to ensure economic health of the nation. The relevant portion of the said decision reads thus:—

A perusal of the Act in general and S. 31 in particular would show that a person who is not a citizen of India cannot purchase immovable property in India without the permission of the Reserve Bank. There is nothing in the language of S. 31 limiting that prohibition to only business organisations. Secular profit or religious salvation are hardly relevant factors for the purpose of ensuring the economic health of the nation. The provisions of S. 31 extend to all transactions of purchase of immovable property by all persons who are not the citizens of India.”

27. What is ‘public policy’ came for consideration in the decision reported in A.I.R 1959 S.C 781 (Gherulal Parakh v. Mahadeodas Maiya and others), wherein it was held thus:—

“Public policy or the policy of the law is an illusive concept; it has been described as “untrustworthy guide”, “variable quality”, “uncertain one”, “unruly horse”, etc. The primary duty of a Court of Law is to enforce a promise which the parties have made and to uphold the sanctity of contracts which form the basis of society, but in certain cases, the Court may relieve them of their duty on a rule founded on public policy; the doctrine of public policy is extended not only to harmful cases but also to harmful tendencies; this doctrine of public policy is only a branch of common law, and, just like any other branch of common law, it is governed by precedents; the principles have been crystallized under different heads and though it is permissible for Courts to expound and apply them to different situations, it should only be invoked in clear and incontestable cases of harm to the public; though the heads are not closed and though theoretically it may be permissible to evolve a new head under exceptional circumstances of a changing world, it is advisable in the interest of stability of society not to make any attempt to discover new heads in these days.”

28. In Anson's ‘Law of Contract’ - 25th Edn. (1979) - at pages 347 and 348, the learned Author has said thus:—

“At the present time, however, there is an increasing recognition of the positive function of the Courts in matters of public policy: ‘The law relating to public policy cannot remain immutable. It must change with the passage of time. The wind of change blows upon it’. Some aspects of public policy are more susceptible to change than others, though the policy of the law has, on certain subjects, been worked into a set of tolerably definite rules. The principles applicable to the agreements in restraint of trade, for example, have on a number of occasions been modified or extended to accord with prevailing economic conditions, and this process still continues. For the rest, the application of canons of public policy to particular instances necessarily varies with the progressive development of public opinion and morality, but, as Lord Wright has said extra judicially: ‘Public policy like any other branch of the common law ought to be, and I think is, governed by the judicial use of precedents…. If it is said that rules of public policy have to be moulded to suit new conditions of changing world, that is true; but the same is true of the principles of the common law generally.”

29. In G.H Trietel on “The Law of Contract’ - 6th Edn. (1983) at page 361, the learned Author has dealt with the scope of the doctrine of Public Policy. The relevant portion reads thus:—

“Public policy is a variable notion, depending on changing manners, morals and economic conditions….”

Further down the learned Author goes on to say thus:—

“… the law does adapt itself to changes in economic and social conditions, as can be seen particularly from the development of the rules as to contracts in restraint of trade. This flexibility of the doctrine of public policy has often been recognised judicially. Thus Lord Haldane has said: “What the law recognises as contrary to public policy turns out to vary greatly from time to time.” And Lord Denning has put a similar point of view: “With a good man in the saddle, the unruly horse can be kept in control. It can jump over obstacles.”

“The present attitude of courts represents a compromise between the flexibility inherent in the notion of public policy and the need to certainty in commercial affairs.”

30. In Chitty on Contracts - 25th Edn. (1983) - Volume 1, at pages 547 and 4548, the learned Author has stated thus:—

Broadly speaking, there are two conflicting positions, that have been referred to as the “narrow view” and “the broad view”. According to the former, the courts cannot create new heads of public policy, whereas the latter countenances judicial law-making in this area. To a large extent this debate is verbal. There is a general agreement that the courts may extend existing public policy to new situations. ..”

31. The law enunciated in the above texts is seen followed by the Supreme Court in the following decisions and ultimately the Supreme Court has now held that the provisions of the FERA are mandatory in nature, and any violation of the same will amount to breach of public policy and public interest.

32. In (1991) 3 S.C.C 67 = 1991-1-L.W. 614 (Rattan Chand Hira Chand v. Askar Nawaz Jung (Dead) by L.Rs and others), Their Lordships while considering ‘Public policy’, held thus:—

“A contract which has a tendency to injure public interests or public welfare is one against public policy. What constitutes an injury to public interests of welfare would depend upon the times and climes. The social milieu in which the contract is sought to be enforced would decide the factum, the nature and the degree of the injury. It is contrary to the concept of public policy to contend that it is immutable, since it must vary with the varying needs of the society. What those needs are would depend upon the consensus value judgments of the enlightened section of the society.

These values may sometimes get incorporated in the legislation, but sometimes they may not. The Legislature often fails to keep pace with the changing needs and values nor is it realistic to expect that it will have provided for all contingencies and eventualities. It is, therefore, not only necessary but obligatory on the courts to step into fill the lacuna. All courts have at one time or the other felt the need to bridge the gap between what is and what is intended to be. The courts cannot in such circumstances shirk from their duty and refuse to fill the gap. When courts perform this function undoubtedly the legislature judicially. But that is a kind of legislation which stands implicity delegated to them to further the object of the legislation and to promote the goals of the society, or to put it negatively, to prevent the frustration of the legislation or perversion of the goals and values of the society. So long as the courts keep themselves tethered to the ethos of the society and do not travel of its course, so long as they attempt to furnish the felt necessities of the time and do not refurbish them, their role in this respect has to be welcomed.”

33. The decision reported in 1973 Tax. L.R 498 (supra) may not be the correct legal position at present in view of the changing policy. We are taking that view in the light of the decision of the Supreme Court reported in (1986) 1 S.C.C 264 (Life Insurance Corporation of India v. Escorts Ltd. and others). In paragraph 63 of the said decision, Their Lordships have said thus:—

“FERA is enacted in the national economic interest. When enacting such a statute, Courts have necessarily to take the broad factual situations contemplated by the Act and interpret its provisions so as to advance and not to thwart the particular national interest whose advancement is proposed by the legislation. Traditional norms of statutory interpretation must yield to broader notions of the national interest.

34. Considering S. 12 of FERA, the Supreme Court again in (1987) 1 S.C.C 542= 1988-2-L.W. 3 (S.N) (M.G Wagh and others v. Jay Engineering Works Ltd.), at page 546 has held thus:—

“The avowed and the evident object of Section 12 is to ensure that the nation does not lose foreign exchange which is very much essential for the economic survival of the nation. .. .. ..”

35. In 1994 Supp. (1) S.C.C 644 (Renusagar Power Co. Ltd. v. General Electric Co.), in paragraphs 75 and 76 (at page 685), Their Lordships held thus:—

“As laid down by this Court, FERA is a statute enacted for the “national economic interest” and the object of various provisions in the said Act is to ensure that the nation does not lose foreign exchange which is very much essential for the economic survival of the nation. (See: LIC of India v. Escorts Ltd. and M.G Wagh v. Jay Engineering Works Ltd.)

Keeping in view the aforesaid objects underlying FERA and the principles governing enforcement of exchange control laws followed in other countries, we are of the view that the provisions contained in FERA have been enacted to safeguard the economic interest of India and any violation of the said provisions would be contrary to the public policy of India as envisaged in S. 7(1) (b)(ii) of the Act.

(Emphasis supplied)

36. If a specific performance decree is passed, that will amount to allowing the parties to bypass the provisions of FERA. The question whether permission has to be granted or not is matter which has to be decided only by the Reserve Bank of India, and the Court cannot supervise the exercise of such statutory powers by the Reserve Bank of India When a transaction is permitted only after obtaining permission from a Statutory Authority over whom the Court has no control, the relief of specific performance will not be usually granted. It is not enforcing a contract alone, it has to take into consideration the rights of the Reserve Bank of India and also the national interest.

37. The learned counsel for the defendant also brought to our notice a decision of the Delhi High Court reported in A.I.R 1990 Delhi 42 (Ajit Prashad Jain v. N.K Widhani and others) corresponding to 1990 (26) ECC 284. Paragraph 26 of the judgment was read before us. In that case, it was held that S. 31 of FERA is not a bar for granting a decree for specific performance and the question whether there was any violation of the Act will arise only at the time of execution of the sale deed. The learned Judge held in the said decision that under S. 54 of the Transfer of Property Act, an agreement itself will not create an interest in the property and, therefore, the agreement cannot be termed as void and the provisions of S. 31 of FERA do not bar the grant of relief of specific performance and the question of permission of Reserve Bank of India will arise only at the time of execution. With due respect to the learned Judge, we cannot agree with the view taken by the learned Judge. No Court shall pass a decree which cannot be executed. While exercising the discretion, the Court will also see whether it could pass an executable decree, and if ultimately the Reserve Bank of India refuses permission, the decree in effect becomes a waste paper. The discretion exercised under Specific Relief Act is judicial discretion, and this also will have to be taken into consideration while granting the relief.

38. In this connection, it is also proper to consider a decision of this Court reported in 1994-1-L.W. 391 (Mariamma Varghese v. K.V Balasurbamaniam and 11 others) and also the decision reported in 1994-1-L.W. 392 (Hamsaraj Bokaria (deed), etc. v. The Government of Tamil Nadu, etc. & 3 others). In both these cases, the question that came for consideration was, whether a decree for specific performance could be granted when the same will violate the provisions of Tamil Nadu Urban Land (Ceiling and Regulation) Act. The earlier case was by a Division bench. In that case, it was held that when it of ends the provisions of another Statute, a decree cannot be granted. Their Lordships said that if such a decree is granted, it will nullify a statutory provision. The same was followed by one of us (Srinivasan, J.) in the later case. In the later case, the learned Judge had also taken into consideration the other judgments of this Court. Paragraph 21 (at pages 397 and 398) of that judgment is relevant for our purpose. It reads thus:—

“Division Bench of this Court refused to grant specific performance in Mariamma Varghese v. K.V Balasubramanian and others (A.S 862 of 1981 - judgment dated 11-1-1990). The appellant in that case was the plaintiff who prayed for a specific performance. The trial Court dismissed the suit and he preferred the appeal. But, the agreement of sale was dated 29.6.1978 The Division Bench held that there was a legal impediment to the grant of specific performance in the provisions of the Act and consequently dismissed the appeal. On the same day i.e, 11-1-1990, the Division Bench also dismissed a writ petition (W.P 1963 of 1984) preferred by the same person, reported in Mariamma Varghese v. The Commissioner of Land Reforms and 2 others ((1990 Writ L.R 279). Claiming right under the agreement dated 29.6.1978, the petitioner in the writ petition wanted exclusion of the lands which were subject matter of the agreement in her favour from the proceedings under the Act and filed the writ petition against the authorities under the Act. Taking note of the rigor of the language of S. 6 of the Act, the Bench dismissed the writ petition.”

In T.K Singaran v. The Urban Land Ceiling Tribunal, Chepauk, Madras-5 and others (1992 Writ L.R 389), another Division bench of this Court had occasion to consider the provisions of S. 43 of the Act. The Bench after extracting the Section, observed as follows:—

“As would be seen from a plain reading of the Section, the Urban Land Ceiling Act overrides the other laws for the time being in force or any custom, usage or agreement or decree or order of a Court, Tribunal or other authority. In view of S. 43 of the Urban Land Ceiling Act, the Urban Land Ceiling Act has to be given a full play and any proceedings which are pending on the date would have to cease in case the Urban Land Ceiling Act applied to those proceedings to the extent of such application and declaration of the excess land. A provision similar to S. 43 of the Urban Land Ceiling Act is available in S. 4 of the Tamil Nadu Land Reforms (Fixation of Ceiling on Land) Act, 1961.”

39. Learned counsel for the defendant has also brought to our notice certain English decisions. Even though they are not necessary in view of the fact that this Court as well as the Supreme Court has taken the same view, for the sake of completion, we make mention of the same also.

40. In 1900 (Q.B.D) 214 (Gedge and others v. Royal Exchange Assurance Corpn.) it is held thus:—

“Where, on the trial of an action, the plaintiff's case discloses that the transaction which is the basis of his claim is illegal, the Court cannot properly ignore the illegality or give effect to the claim, even in the illegality be not pleaded or relied on by the defendants.”

41. In 1963 (3) All E.R 50 (Snell v. Unity Finance, Ltd.), at page 59, it was held by Diplock, L.J thus:—

“The principle of law is clear. The courts, which exercise the judicial power of the Crown, will not enforce a contract that Parliament, which exercises the legislative power of the Crown, has made unlawful. In the words of Lord Mansfield in Holaman v. Johnson:

“The principle of public policy is this; ex dolo malo non oritur actio. No court will lend its aid to a maid who founds his cause of action upon an immoral or an illegal act.

42. In (1965) 1 All E.R 638 (Shaw v. Shaw), the question that came for consideration was, whether the plaintiff was entitled to return of money which he had paid to the defendant in violation of sub-Section (1) of S. 7 of Exchange Control Act, 1947. While dealing with the same, their Lordships held thus:—

“The claim was based on nothing but the payment, which by virtue of S. 7 of the Exchange Control Act, 1947, was an illegal payment, and the statement of claim would be struck out. .. …”

43. The position of law is clear that when the enforcement of the contract is against any provision of law, that will amount to enforcement of an illegal contract. The contract perse may not be illegal. But its enforcement requires compliance of statutory conditions, failure of which will amount to statutory violation. A Court which is expected to enforce the law, cannot be a party to such a decree.

44. Learned counsel for the plaintiff submitted that no plea regarding illegality has been pleaded and, therefore, the same cannot be raised for the first time in appeal.

45. We cannot accept the said argument, in view of the decision reported in A.I.R 1965 S.C 1364. (Surasaibalini Debi (Smt) v. Phanindra Mohan Majumdar ) that if on the available evidence the illegality can be found, there need not be any pleading. In paragraph 23 of the said decision, (at page 1370), Their Lordships held thus:—

“First as to the point that in the absence of a pleading the defendant was not entitled to rely on the taint of illegality in the transaction for persuading the Court to refuse relief to the plaintiff: I see force in the submission of learned Counsel for the appellant on this question. The law on the point as to pleading is quite clear and has been stated in decisions of the highest authority on several occasions and it is sufficient to summarise, the underlying principles. Where a contract or transaction ex facie is illegal there need be no pleading of the parties raising the issue of illegality and the Court is bound to take judicial notice of the maker of the contract or transaction and mould its relief according to the circumstances.”

The law declared by the Supreme Court is sufficient answer for the contention of the learned counsel for the plaintiff. Before the learned Judge, the matter was argued without any objection, though the finding was in favour of the plaintiff.

46. Even if we taken the view of the Allahabad High Court reported in 1973 Tax L.R 498 (supra), the result would be that the decree for specific performance, even if not opposed to public policy, would defeat the provision of law. Even if FERA is intended to protect the revenue as observed by the Allahabad High Court and the agreement is also valid as held by the Delhi High Court in the decision reported in AIR 1990 Delhi 42 (Supra), the net result will be the implementation of the same, amounting to violation of the provisions of S. 31 of FERA.

47. For the reasons mentioned above, we accept the submission of learned counsel for the defendant that if a decree is granted as prayed for it will be against the provisions of S. 23 of the Indian Contract Act. The Court will be reluctant to exercise a discretion in favour of the plaintiff in such a case.

48. Submission No. 3:

Form the year 1977, the building was occupied by the plaintiff. Originally he was a Director-cum-Secretary of a Company, and after the ceasing of his connection with the Company, he became a tenant on the same terms and conditions. The defendant obtained right over the property on the basis of a gift deed executed by her mother. Except for the fact that she obtained a gift, it is seen that she was all along in States and she knew nothing about the property. She was only in possession of the title deed, and for all purposes she was a foreigner.

49. When the plaintiff enquired the defendant whether she was interested in selling the property, she could not stipulate any price, for, she was not aware of the market value of the property in that locality, even for fixing the price, she only requested the plaintiff to get Valuation Reports from two approved Appraisers and wanted them to be sent to her. This shows her complete ignorance about the market value of the property, and that she was solely depending on the plaintiff for the same. We must understand that their relationship was also very cordial and she had absolute faith in the plaintiff. What the plaintiff did was, he got a report under Ex. P-4. It is in evidence that the said Report Ex. P-4 was prepared by the very same valuers who were also the Valuers for the Company in which the plaintiff was a Director-cum-Secretary. We do not know on what basis such valuation was made. In that Report (Ex. P-4), the ground value is estimated at Rs. 50,00/- per ground. Ex. P-5 is another valuation wherein the ground value is given as Rs. 80,000/- per ground. So, one thing is clear, namely, that everything depended upon the Reports of the Valuers, and the defendant could only rely on those Reports. That dependency can further be proved when the plaintiff ofered an average price arrived at between Exs. P-4 and P-5 Reports. That shows as to what extent she believed the plaintiff.

50. When the defendant wants the plaintiff to get Valuation Reports and also informs him that he can make his ofer, he acts as an agent of the defendant. To that extent, there is a confidential relationship between them. Naturally, it is the duty of the plaintiff to explain to the defendant whether the Valuation Reports sent by him represented the real market value of the land. The defendant who is in a foreign country is entitled to know whether those Reports are correct, and whether they were based on relevant materials. As an agent, plaintiff is also bound to explain the same to the defendant. Merely because she accepted the valuation of Rs. 3,40,000/- on the basis of correspondence, especially considering the confidential relationship between them, it cannot be said that three was a valid contract as enjoined under law. A mere ofer and acceptance is not sufficient for enforcement of the contract. If the acceptance is one the basis of the confidential relationship between the defendant and the plaintiff, a corresponding duty is also there on the part of the plaintiff to explain that the Valuation Reports are correct. Absolutely no evidence has been let in this regard.

51. learned counsel for the plaintiff relied on Ex. P-6 and P-7, to prove that the market value mentioned in Exx. P-4 and P-5 is the real marked value. It is true that Exx. P-6 and P-7 which came into existence after the institution of the suit reflect more or less the rates mentioned in Exx. P-4 and P-5. But one thing is clear, namely, that the plaintiff ought not to have relied on Exx. P-6 and P-7. For, they came into existence long after Exx. P-4 and P-5. The circumstances under which those documents were executed, and whether they represent the real marked value are also not proved by any evidence.

52. In (1995)-5-S.C.C 311 (Union of India and others v. Sunil Chandra Saha and another), the Supreme Court said that the mere marking of sale deedis not sufficient proof of the contents of the documents and the same will not amount to represent the real market value. In the said decision, it was held thus:—

“…. Both the claimants and the Land Acquisition oficer merely marked the sale deeds without examining either the vendor or the vendee to bring on record the circumstances in which the sale deeds came to be executed, the distance of the land to the acquired land, the nature of the respective lands and whether they would ofer comparable sales to determine just and fair market value to the acquired lands. In the absence of such relevant and material evidence, it would be difficult to determine compensation in respect of the acquired lands.

Even though the decision was arrived at in a land acquisition case, the same principle applies here also. When the defendant has a definite case that during the relevant time, the market value of the property in question will be not less than Rs. 10 lakhs, better evidence on the part of the plaintiff is expected.

53. It is contended by the learned counsel for the plaintiff that Exx. P-6 and P-7 are in respect of adjoining properties and they command the same facilities. The same is disputed by learned counsel for the defendant. Nobody speaks about the circumstances under which these documents came into existence. It is well-known that for the purpose of reducing stamp duty, parties agree to mention lesser amount as consideration. When the plaintiff himself cannot rely on Exx. P-6 and P-7 as the same were not in contemplation at the time when Exx. P-4 and P-5 came into existence, mere production of those documents will be of no use in this case.

54. One more circumstance may be considered in this case. That is, the defendant, in her letter, accepted the ofer of Rs. 3,40,000/- on the belief that it represented the proper market value. For, that is the basis of Ex. P-2 (Ex. D-14). Defendant's husband also comes to India in the last week of November 1981 and enters into discussion with the plaintiff regarding the sale of the property. At that time, the defendant's husband comes to know that the market value is not that much low as stated by the plaintiff and, therefore, informs the defendant about the same, Immediately the defendant sends a telex message to stop execution of the sale deed. There is nothing to disbelieve that statement of the defendant, especially when we taken note of the fact that the defendant's husband comes to India with a Power of Attorney to execute a deed. That also shows that the defendant blindly believed the plaintiff, and there is no other circumstances to break the contract, except the information which the defendant husband gets about the real market value. In the absence of better evidence, about the basis for preparing Exx. P-4 and P-5, it cannot be said that there is a binding and enforceable contract. There was no consensus ad idem: What the defendant wanted was the real market price that prevailed in the particular locality where the suit property is situated, at the time of contract, and not Exx. P-4 and P-5 or its average price ofered by the plaintiff.

55. A sum of Rs. 3,40,000/- is ofered by the plaintiff even without looking into the title deeds of the defendant. Under normal circumstances, an honest and willing purchaser will ofer a price only after satisfying himself about the title of the vendor. Here, it is on the reverse. The defendant asks for the title deeds from the plaintiff. This circumstance also shows that the intention of the plaintiff was only to get at the property by some means or other. His possession of the property as a tenant and the absolute faith which the defendant had reposed in him were made use of by him.

56. It may not be inappropriate to refer one more circumstance. P.W 2 is an Advocate. He is stated to be the person who prepared the draft sale deed. It is said that the defendant's husband approved the draft and agreed to execute a sale deed on the basis of the Power of Attorney given to him by the defendant, after getting the income-tax clearance certificate. Even when the draft was prepared, P.W 2 was not informed by the plaintiff about the price for which the house is sold. Whey that was kept as a secret even with P.W 2 shocks the conscience of everyone. On submission No. 1, we have already held that the motive of the plaintiff was to get unfair advantage. The absence of evidence regarding market value also supports our view that the plaintiff was exploiting his confidential relationship which the defendant had with him.

57. Submission No. 4:

The above submission is answered by us in the earlier portion of this judgment. This is a case where the discretionary remedy should not be granted in favour of the plaintiff. He has not come to Court with clean hands. The defendant is a foreign national. She being a non-citizen, plaintiff is well aware that the defendant cannot hold the property in India except with the permission of R.B.I hold that property in India. That position is exploited by him as a tenant in possession, and also the absolute faith which the defendant had reposed in him.

58. We may also note that even before the present suit was instituted, defendant had earlier instituted a suit for eviction, and this is only a counterblast for the eviction suit.

59. For all the reasons mentioned above, we hold that the suit filed by the plaintiff is misconceived, and this Court should not lend its support to him by granting the relief prayed for in the suit.

60. In the result, the Appeal is allowed. The judgment of the learned Judge is set aside. The suit is dismissed. The appellant is allowed her costs. We fix the Counsel's fee at Rs. 5,000/- (Rupees Five thousand).

KA/RR/VCS