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T. Periasamy Nadar And 5 Others v. T.D Ramasubramaniam

Madras High Court
Apr 24, 1996
Judgment
Subsequent
References
CaseIQ
Case Information
CITATION CODES
citation codes
CASE NO.

L.P Appeal Nos. 5 to 8 of 1996.

Attorney(S)

Mr. N.S Varadachari, Advocate for the Appellants.

Mr. V.S Subramanian, assisted for Mr. V. Ramesh Advocate for the respondent.

JUDGES

K.A Swami

CJ. & Kanakaraj, J.

ACTS

provisions of the Tamil Nadu Urban Land (Ceiling and Regulation) Act, 1976.

provisions contained in Sub S. (2) of S. 22 of the Specific Relief Act,

provisions contained in S. 22 of the Specific Relief Act.

sub S. (2) of S. 22 of the Specific Relief Act.

provisions contained in S. 26 of 1976 Act,

S. 22 of the Specific Relief Act, 1963

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Factual and Procedural Background

These four Letters Patent Appeals challenge a common judgment dated 19.4.1991 passed in A.S. Nos. 427 to 430 of 1981, which arose from the judgment and decree in O.S. Nos. 3811 to 3814 of 1978. All four original suits (filed on 17.4.1978) sought specific performance of sale agreements dated 10.8.1977. The plaintiffs (T. Periasamy Nadar, T. Murugesan and T. Thangaraj in various combinations) — three brothers — had purchased different portions of the property bearing door number 15/8, Sir Thiagaraya Road, Pondy Bazaar, Madras. The trial court dismissed the suits; the single judge in appeal also refused to grant specific performance. These appeals challenge the refusal by the two courts below to decree specific performance.

Legal Issues Presented

  1. Whether the court below was justified in refusing to grant a decree for specific performance.
  2. Whether any other relief could have been granted to the plaintiffs/appellants (notably refund of the advance/earnest money).

Arguments of the Parties

Plaintiffs' Arguments

  • The agreements dated 10.8.1977 were valid and not disputed; refusal of permission to alienate under the 1976 Act did not disentitle plaintiffs to specific performance.
  • The defendant made misrepresentations and suppressed necessary facts in the permission application, and did not pursue an appeal against the refusal, showing lack of bona fides.
  • The mere rejection of the application for permission did not terminate the agreements; the defendant could have appealed the refusal.
  • Following the subsequent enactment of Act 24 of 1978 (which removed the requirement for permission), the appellate court could take that development into account and grant specific performance; consequently the courts below erred in refusing relief.
  • The trial court's finding that the agreements were illegal and unenforceable was wrong and unsustainable in law (as per plaintiffs' contentions).

Defendant's Arguments (as reflected in the opinion)

  • Pursuant to the agreements, the defendant applied for permission to alienate under the Tamil Nadu Urban Land (Ceiling and Regulation) Act, 1976; the competent authority refused permission.
  • Following refusal, by notice dated 19.10.1977 the defendant cancelled the agreements and returned the cheques for Rs. 1,600 each; the plaintiffs did not accept the cheques and returned them.
  • The defendant contended that he had acted in accordance with the agreements and the law as it stood at the time; the cancellation followed the refusal of permission and was justified.
  • At the stage of judgment the defendant was willing to refund the earnest money (and even furnished computations of interest), but the plaintiffs had not amended their plaints to claim that relief under S. 22 of the Specific Relief Act, 1963.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Ramjibhai v. Narottamdas, AIR 1986 SC 1912 Relied upon by the appellants' counsel to support the contention that subsequent legal developments can be considered by an appellate court (i.e., taking account of Act 24 of 1978). The court observed the decision was cited by counsel but held it was unnecessary to advert to this decision for disposing of the present case.
Bhim Singhji v. Union of India, AIR 1981 SC 234 Relied upon by counsel in support of the argument concerning subsequent developments in law affecting enforceability. The court noted the decision was placed before it but stated it was not necessary to consider it in reaching the result in these appeals.
Vejanla Piothi Raju v. V.B. Raju, 1969 (II) S.C.W.R. 200 Principle that a High Court in a second appeal can interfere only if the discretion exercised by the lower court is arbitrary or patently erroneous in law. The court applied this principle and concluded that the two courts below had not exercised their discretion arbitrarily; therefore interference was not warranted.

Court's Reasoning and Analysis

The court proceeded stepwise and adhered closely to the facts and statutory framework as they existed at relevant times:

  1. The agreements dated 10.8.1977 were not disputed on their terms. Under those agreements the defendant was to obtain permission to alienate the properties from the competent authority under the Tamil Nadu Urban Land (Ceiling and Regulation) Act, 1976.
  2. The defendant did apply for permission; that application was refused by the Authority. Following the refusal, by notice dated 19.10.1977 the defendant cancelled the agreements and returned the advance cheques of Rs. 1,600 in each case (which the plaintiffs did not accept and returned to the defendant). These facts were admitted and undisputed.
  3. Plaintiffs contended that the defendant lacked bona fides: that he misrepresented facts in the permission application and did not pursue an appeal, and that later legislative change (Act 24 of 1978) removed the need for permission making specific performance possible. The courts below negatived the plaintiffs' contentions regarding lack of bona fides and found that the defendant had applied for permission but the application was refused.
  4. The court analysed the statutory position as at the time of cancellation. Section 26 of the 1976 Act required permission to alienate where land had a building on it. The court accepted that on the date the 1976 Act came into force the subject matter of the agreements had a building (whether erected by the defendant or by a tenant), and therefore permission was required. Because permission was refused, performance of the agreements was not possible under the law as it then stood.
  5. The agreements were cancelled on 19.10.1977, well before Act 24 of 1978 came into force on 17.5.1978. The court emphasised that while an appellate court may take subsequent developments in law into account, it cannot reverse events which took place before the change in law; in particular it cannot resurrect an agreement that had been validly cancelled when performance was impossible under the law then in force.
  6. Because cancellation occurred when the law (S. 26 of the 1976 Act) made performance impossible, the cancellation could not be held illegal. Consequently, the subsequent repeal or change in law (Act 24 of 1978) could not retrospectively validate performance rights or require the court to grant specific performance of agreements already cancelled in good faith under the earlier law.
  7. The court applied the principle from Vejanla Piothi Raju that interference in a second appeal is warranted only where the lower courts' exercise of discretion is arbitrary or patently erroneous. Having found that both courts below had reasonably concluded that the defendant had not defaulted and was justified in cancelling the agreements following the refusal of permission, the court found no ground to interfere.
  8. On the alternative relief point, the court noted that plaintiffs had not claimed relief under S. 22 of the Specific Relief Act, 1963 in their plaints. The court repeatedly adjourned and allowed opportunities (including specific orders dated in March and April 1996) for plaintiffs to amend their plaints to claim refund of the advance/earnest money (with interest) under sub‑section (2) and its proviso. Despite these opportunities, plaintiffs did not move to amend. In the absence of an amended plaint claiming under S. 22(1)(a) or (b), the court held it could not grant the refund relief—even though the defendant was willing and had provided computations—because the statute requires such relief to be specifically claimed, subject only to the court's power to permit amendment which the plaintiffs failed to invoke.

Holding and Implications

Holding: The appeals are dismissed and the judgments and decrees of the courts below refusing specific performance are upheld. APPEALS DISMISSED. There will be no order as to costs.

Implications:

  • The direct legal effect is that the decree for specific performance was correctly refused by the courts below and is affirmed by this court; the defendant's cancellation of the agreements (following the refusal of permission under the 1976 Act) stands.
  • Although the legislation subsequently changed (Act 24 of 1978) removing the need for prior permission, that change could not retroactively revive agreements that had been validly cancelled before the change in law.
  • The court declined to grant alternative relief (refund of earnest money with interest) because the plaintiffs failed to amend their plaints to claim that remedy under S. 22 of the Specific Relief Act; the court had afforded multiple opportunities to do so. Thus no refund decree was passed despite the defendant's readiness to refund.
  • No broader precedent altering the tested principles was announced; the court applied established principles (including the restraint on interference in a second appeal) to the facts before it.

Reference: Opinion authored by K.A. Swami, C.J., disposing of L.P. Appeals arising from O.S. Nos. 3811–3814 of 1978 and A.S. Nos. 427–430 of 1981.

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K.A Swami, C.J

These 4 L.P As are preferred against the common judgment dt. 19.4.1991 passed in A.S Nos. 427 to 430 of 1981 respectively. Those 4 appeals were preferred against the judgment and decree passed in O.S Nos. 3811 to 3814 of 1978. All these suits were filed for specific performance of the agreements dt. 10.8.1977 O.S No. 3811 of 1978 was filed by T. Periasamy Nadar, T. Murugesan and T. Thangaraj, whereas O.S 3812 of 1978 was filed by T. Murugesan, O.S 3813 of 1978 was filed by T. Thangaraj and O.S 3814 of 1978 was filed by Periasamy. All the three are brothers and they have purchased different bits comprised in the property bearing door number 15/8, situate at Sir Thiagaraya Road, Pondy Bazaar, Madras. All these suits were filed on 17.4.1978 The trial court dismissed the suits. So also the learned single judge. Hence, these L.P As. Thus, the two courts below have refused to grant a decree for specific performance.

2. In the light of the contentions urged, the points that arise for consideration in these appeals are (1) whether the court below is justified in refusing to grant a decree for specific performance and (ii) whether any other relief could have been granted to the plaintiffs/appellants.

Point (i):—

3. In these appeals, the agreements are not disputed. Even according to the case of the plaintiffs, pursuant to the agreements dt. 10.8.1977, the defendant did apply for permission to alienate the properties concerned in the 4 agreements under the provisions of the Tamil Nadu Urban Land (Ceiling and Regulation) Act, 1976. The application filed for permission was refused by the Authority under the Act. Therefore, the defendant sent a nottice dt. 19.10.1977 to the plaintiffs stating that as the application for permission to sell had been rejected, it was not possible to perform the agreement, hence the cancelled the agreement and also returned the cheque for Rs. 1,600/- in each case received as advance under the agreements. However, the plaintiffs did not accept the cheques and returned them to the defendant. These facts are not in dispute. The other grievance of the plaintiffs was that in the application filed for permission, the defendant did not mention all the facts correctly and also did not pursue the matter by way of appeal, therefore there were no bona fides on his part in perforating his part of the agreement. It may be pointed out here that both the courts below have negatived the contention of the plaintiff and have held that there was no lack of bona fides on the part of the defendant that as per the agreement, he did apply for permission to alienate, but, the same was refused. Therefore, he was justified in cancelling the agreement.

4. We may refer to the various findings recorded by the learned single judge. The following points were urged before the learned single judge: (i) that as per the agreements, Exs. A.1 to A.4, the defendant was to obtain permission to sell from the Competent Authority, though as per law, no such permission was required to be obtained, the fact that the permission was not granted, did not disentitle the plaintiffs to seek specific performance, (ii) that the defendant wantonly made a misrepresentation and suppressed necessary facts, manoeuvred to get a rejection order, therefore it was not open to the the defendant to take advantage of his own fault and on that basis, the court could not refuse a decree for specific performance, (iii) that the mere rejection of an agreement for permission to sell did not bring the agreements to end and the defendant would have taken steps to file the appeals and (iv) that whatever might be the position under the Act 34 of 1976 under the new Act 24 of 1978, no permission was necessary to sell the property and such refusal to grant permission had no effect in the eye of law and the defendant was not justified in refusing to perform the agreements; that the finding of the trial court that the agreements were illegal and therefore, they were not enforceable, was wrong and not sustainable in law. Learned single judge has negatived these contentions.

5. Before us, it is urged that having regard to the provisions contained in Act 24 of 1978, the decree of the courts below refusing to grant specific performance is not valid in law and the Appellate Court can take into consideration the subsequent development in law and on the basis of the provisions contained in Act 24 of 1978 and in view of the fact that the execution of the agreement and receipt of the advance have not been denied, the decrees passed by the courts below be reversed and the decrees for specific performance be passed. Learned counsel has placed reliance on the decisions of the Supreme Court in Ramjibhai v. Narottamdas (AIR 1986 SC 1912), Bhim Singhji v. Union of India (AIR 1981 SC 234).

6. We are of the view that it is not at aal necessary to advert to these decisions. This is a case, in which as per the agreements, the defendant was required to obtain permission for executing the sale deeds and the 1976 Act did provide for such a permission in the case of the land having the construction over it. In the instant case, it is the case of the plaintiffs that there was a construction put up though not by the defendant, but by the tenant of the property. Whatever may be, whether the construction was put up by the defendant or the tenant of the property, on the date the 1976 Act came into force, the subject matter of the agreements was land wiith the building thereon, therefore as per the provisions contained in S. 26 of 1976 Act, the permission was required to be obtained. Accordingly, the defendant did apply for permission, but, the same was refused. Pursuant to that, before the 1978 Act came into force, the agreements were cancelled by the notice dt. 19.10.1977, whereas the 1978 Act came into force on 17th May, 1978, long after the cancellation of the agreements. It may be pointed out here that though it is open to the Appellate Court to take into consideration the subsequent development in law, but the court cannot reverse the situation that hhad taken place before the subsequent development of the law. Here is a case, before May, 1978, the agreements were cancelled, because of refusal to grant permission to alienate. When once an agreement is cancelled, court cannot reconnstruct the agreement, not it can make the parties to enter into agreement. Court can only enforce the agreement, which is existing or the cancellation of the same is found to be bad in law. However, in the instant case, cancellation of the agreements cannot be held to be illegal because as the law stood on the date the agreements were cancelled, the agreements could not have been performed, without the permission to sell as per S. 26 of the 1976 Act. As pointed out above the permission sought was refused. Therefore, the agreements were cancelled by the defendant because the permission was refused. The subsequent development in law removing the requirement as to seeking permission for alienation will not have the effect of resurrecting the agreements which had been cancelled. Therefore, we are of the view that the subsequent development of law will not be of any assistance to the plaintiffs. In this view of the matter, it is noot possible to hold that the discretion exercised by the courts below refusing to grant a decree for specific performance suffers from any illegality or arbitratiness.

7. In the case of Vejanla Piothi Raju v. V.B Raju reported in 1969 (II) S.C.W.R 200, it has been held thatt the High Court can interfere in Second Appeal, only if the discretion is exercised arbitrarily or patently erroneous in law. That case also arose out of a suit for specific performance. Thus, the decision squarely applies to the facts of the case. As the two courts below have on the facts held that the defendant has not committed any default in performing his part of the agreements and is justified in cancelling the agreements on the refusal to grant permission by the Competent Authority under the 1976 Act, we see no reason to interfere with the discretion, exercised judiciously in refusing to grant the specific relief. In view of this, we do not consider it necessary to refer to any other contentions.

8. Point (i) is, accordingly, answered in the affirmative.

Point (ii):—

9. Though no plea was raised in the plaints based upon S. 22 of the Specific Relief Act, 1963 for refund of the advance amount in the event of refusal to grant a decree for specific performance, we specifically adjourned these appeals, after they were heard fully, to enable the plaintiffs to amend the plaints to seek relief for refund of the advance amount with interest. A specific order was also passed on 19.3.1996 in the following terms:—

“Though these appeals were heard and posted for judgment to be dictated in open court, it was at this stage noticed that there was no alternative prayer made for refund of the advance amount in the light of the provisions contained in S. 22 of the Specific Relief Act. In the event, this Court were to come to the conclusion that the appellants are not entitled to specific relief, the decree for refund of the earnest money has to be passed as in these cases, admittedly, a sum of Rs. 16,000/- was paid in respect of each agreement as earnest money. As per sub S. (2) of S. 22 of the Act in the event no such prayer is made in the plaint, the court shall at any stage of the proceedings, allow the plaintiff to amend the plaint on such terms as may be just for including a claim for such relief. Therefore, without prejudice to the contentions of the appellants/plaintiffs and without expressing any view on the merits of the contentions advanced before us by both sides, we only adjourn these appeals to enable the appellants to avail the alternative remedy by amending the plaint as contemplated in sub S. (2) of S. 22 of the Specific Relief Act. Call on 2.4.1996”.

Again, on 2.4.1996, the following order was passed and the matter was adjourned to 8.4.1996

“Even though an opportunity was given by the order dt. 14.3.96 to the plaintiffs appellants to seek an amendment of the plaint in terms of the aforesaid order, no such applications are filed. Therefore, we proceed to deliver the judgment. Accordingly, post these appeals for judgment on 8.4.96”.

Even on 8.4.1996, for this purpose, the matter was adjourned by passing the following order:—

“One of the appellants T. Periaswami has appeared in person and also has sent a telegram. He has been told that if he wants to file an application seeking relief alternatively, without prejudice to the right already sought in the suit, under S. 22 of the Act, he can do so by filing an application on 3.4.1996 Finally call on 23.4.96 at 2.15 pm”.

Accordingly, these appeals have come up today for judgment. Even to this day also, the plaintiffs have not filed applications seeking amendment to the plaints. No doubt, we could not have hesitated to grant a decree for refund of the advance amount in favour of the plaintiffs with interest, for which the defendant had also no objection. In fact, he furnished the computation of the amount on the basis of the interest at the rate of 12% and 15%. But, in the absence of the amendment to the plaints, it is not possible to grant such a decree in the light of the provisions contained in Sub S. (2) of S. 22 of the Specific Relief Act, which specifically states that no relief under clause (a) or clause (b) of sub S. (1) shall be granted by the court, unless it has been specifically claimed. The Proviso thereto specifically provides that if the plaintiffs has not claimed any such relief in the plaint, the court shall at any stage of the proceedings allow him to amend the plaint on such terms as may be just for including a claim for such relief. It is in the light of this provision contained in the proviso to sub S. (2) of S. 22 of the Act, we adjourned these appeals more than once. It is unfortunate that the plaintiffs have not taken advantage of it. In view of this, we only regret that we cannot pass a decree, even though the defendant is ready and willing for such a decree being passed.

10. Point (ii) is answered accordingly.

11. For the reasons stated above, these appeals fail and the same are dismissed. However, there will be no order as to costs.

KA/RR/VCS

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