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Prasanta Kumar Sur v. International Contractors Ltd.
Factual and Procedural Background
The plaintiff (appellant) brought a suit for specific performance of an agreement for the sale of the northern portion of Premises No. 83, Bagmari Road, Calcutta. The property originally belonged to the plaintiff and his co-sharers; the northern portion came into the plaintiff's sole possession. On or about 4 February 1941 the plaintiff executed a conveyance in favour of the defendant-company for Rs. 10,000. The plaintiff's case was that he required Rs. 10,000 urgently and had proposed to the defendant an advance on mortgage; the defendant refused a mortgage but agreed to pay Rs. 10,000 on the plaintiff executing a conveyance and simultaneously to execute an agreement for re-sale for Rs. 10,001 provided the consideration was paid and the transfer obtained within two years.
The plaintiff executed the conveyance on 4 February 1941 and the agreement (Exh. 1) was signed on 10 February 1941. Within the twenty-two months (on 26 November 1942) the plaintiff offered to complete the purchase and sent a draft conveyance for approval. Letters were exchanged and on 18 December 1942 the defendant refused to complete the transaction, alleging there had been no valid agreement. The suit was filed on 10 June 1943 (four months after expiry of the two-year period). The plaintiff claimed specific performance on payment of Rs. 10,001, and alternatively prayed for a decree for redemption on the footing that the transaction was in reality a mortgage.
The learned Subordinate Judge found (inter alia) that: (a) the plaintiff's story that the original proposal was for a loan on mortgage was true; (b) the transaction was in substance a mortgage by conditional sale but could not be treated as such because of the proviso to section 58(c) of the Transfer of Property Act as amended; (c) the agreement Exh. 1 was genuine and valid; (d) the plaintiff had not tendered the full amount required by the agreement and therefore was not entitled to specific performance; and (e) by interpretation Exh. 1 had become inoperative and stood cancelled on 10 February 1943, so the plaint filed after that date was not entertainable. The plaintiff appealed.
Legal Issues Presented
- Whether, where the vendor (defendant) has repudiated the contract before completion, the purchaser (plaintiff) must still make a formal tender of the consideration to maintain a suit for specific performance.
- Whether clause 4 of Exh. 1 (stating the agreement becomes inoperative and stands cancelled after 10 February 1943) and the designation of time as the essence of the contract bars a suit for specific performance filed after that date.
- Whether, given the lower Court's findings on the genuineness and binding nature of Exh. 1, the plaintiff is entitled to specific performance despite the plaintiff's failure to have paid the consideration prior to the expiry of the two-year period.
Arguments of the Parties
Appellant's Arguments (Mr. Gupta)
- Given the lower Court's findings that Exh. 1 was duly executed and binding, the plaintiff was entitled to specific performance.
- Because the defendant repudiated the contract on 18 December 1942, it was unnecessary for the plaintiff to make a formal tender of the purchase money that the defendant would certainly have refused; the absence of such tender should not defeat the plaintiff's right to specific performance.
- The provisions of Exh. 1 did not prevent the plaintiff from bringing a suit for specific performance after 10 February 1943.
Respondent's Arguments (Mr. Banerjee)
- Time was the essence of the contract under Exh. 1 and clause 3 required the plaintiff initially to tender the total consideration before the completion of the two-year period; only on such payment would the defendant be obliged to execute the conveyance.
- The defendant's letter of 18 December 1942 could not be construed as a refusal or repudiation sufficient to excuse tender.
- Clause 3 and clause 4 together (including the explicit statement that the agreement becomes inoperative after 10 February 1943) meant that after that date the agreement stood cancelled and was unenforceable.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Nicholson v. Smith (1882) 22 Ch. D. 640 | Cited for the ordinary rule that payment of the consideration is to be simultaneous with and at the time the conveyance is executed by the vendor. | The Court relied on this authority (along with Pratap Chandra v. Kali Charan) to state the ordinary rule between vendors and purchasers, and then examined whether Exh. 1 introduced any special contract departing from that rule. |
| Pratap Chandra v. Kali Charan (1951) 55 C.W.N. 557 at p. 561 | Also cited for the ordinary rule governing simultaneous payment and conveyance between vendor and purchaser. | The Court used this as an additional authority to situate the normal rule and to guide interpretation of clause 3 of Exh. 1 as to when consideration was to be paid. |
| Edridge v. Sethna (L.R. 60 I.A. 368) | Referenced for the proposition that, for a suit for damages, the cause of action accrues from the date of repudiation. | The Court noted that while repudiation would give rise to a cause of action for damages from the date of repudiation (as in Edridge v. Sethna), for specific performance the plaintiff properly waited until after 10 February 1943 and clause 4 did not bar that suit. |
| Botham v. East India Company (1787) 1 T.E. 638 | Cited for the principle that non-performance by a purchaser is excused where the default results from the vendor's default. | The Court applied this principle to hold that the plaintiff's non-performance (lack of tender) was excused because it resulted from the defendant's repudiation/default. |
| Manick Chandra Bhowmick v. Abhoy Charan Gope (24 C.L.J. 90) | Also cited for the principle that a purchaser's non-performance may be excused when caused by the vendor's default. | The Court invoked this case alongside Botham to support the conclusion that a purchaser need not perform an act rendered futile by the vendor's repudiation. |
| Hunter v. Daniel (4 Hare 420) | Enunciated the practice of courts not to require a formal tender where the tender would be a mere form and would have been refused. | The Court relied on this principle (as approved in Chalikani Venkatarayanim) to conclude that a formal tender by the plaintiff would have been a useless formality in the face of the defendant's repudiation. |
| Chalikani Venkatarayanim v. Zamindar of Tuni (1922 L.R. 50 I.A. 41 at 46) | Judicial Committee's approval of Hunter v. Daniel's principle regarding unnecessary formal tenders. | The Court cited the approval to reinforce that it was not required to insist on a formal tender where it would have been futile because of the vendor's repudiation. |
Court's Reasoning and Analysis
The Court undertook a textual and factual analysis based on the terms of Exh. 1, the correspondence between the parties, and the lower Court's findings:
- Examination of the agreement (Exh. 1): The Court quoted and analyzed clauses 3 and 4. Clause 3 fixed completion "within two years, i.e., on or before the 10th day of February, 1943, time being the essence of the contract" and stated that if the purchasers paid Rs. 10,001 on or before that date the vendor would execute a conveyance at the purchasers' cost. Clause 4 declared that the agreement would become inoperative and stand cancelled after 10 February 1943.
- Ordinary rule as to simultaneity of payment and conveyance: The Court restated the general rule (citing Nicholson v. Smith and Pratap Chandra v. Kali Charan) that consideration is ordinarily paid simultaneously with execution of the conveyance, but acknowledged parties can contract otherwise. The Court then asked whether clause 3 created a special arrangement requiring payment before conveyance.
- Interpretation of clause 3: The Court concluded that clause 3, taken as a whole, did not create a special arrangement departing from the ordinary rule; rather it described the normal practice expecting payment at the time of conveyance.
- Factual findings on readiness and repudiation: The Court relied on evidence showing that on 28 November 1942 (before expiry) the plaintiff, through his solicitor, intimated readiness to complete the purchase and sent a draft conveyance. The defendant's solicitor, on 18 December 1942, denied the execution and validity of the agreement and returned the draft conveyance. On these facts the Court found the plaintiff had within the period intimated readiness and the defendant had refused to accept or act pursuant to the agreement.
- Effect of repudiation on tender requirement: The Court addressed whether the plaintiff's failure to tender the purchase money barred specific performance. It applied established principles (Botham; Manick Chandra Bhowmick) that non-performance by a purchaser is excused where it results from vendor default, and the principle (Hunter v. Daniel; Chalikani) that courts will not require a formal tender when it would have been a mere form and would have been refused. The Court held that a tender would have been a useless formality in view of clear repudiation.
- Whether clause 4 barred the suit: The Court rejected the defendant's contention that clause 4 and the agreement's inoperative language meant a suit filed after 10 February 1943 was barred. The Court reasoned that clause 4 required necessary steps to be taken before 10 February 1943 and that, where the defendant had repudiated, a suit for specific performance brought after that date (thereby giving the defendant opportunity to change its mind until the last day) was not barred by clause 4. The Court distinguished a suit for damages (where cause of action accrues from repudiation) from a suit for specific performance, and held clause 4 did not prevent the specific performance suit.
- Conclusion from combined analysis: Given the genuineness and binding nature of Exh. 1, the plaintiff's timely intimation of readiness, and the defendant's repudiation, the plaintiff's failure to make a formal tender did not defeat his claim for specific performance.
Holding and Implications
Holding:
APPEAL ALLOWED. The judgment and decree of the lower Court were set aside.
Direct orders and immediate consequences for the parties (as directed by the Court):
- The plaintiff is directed to deposit in the Court below Rs. 10,000 within two months from the date of the judgment.
- The defendant-company is directed to execute the conveyance within one month from the date of the deposit and to execute and register the conveyance at the cost of the plaintiff.
- If the defendant-company refuses or neglects to execute and/or register the conveyance within the time granted, the Subordinate Court was authorized to execute the conveyance on behalf of the defendant-company.
- If the plaintiff fails to deposit Rs. 10,001 within the date fixed, the appeal will stand dismissed with costs (the opinion contains this specific condition as stated in the decree).
- If the deposit by the plaintiff is made within the due date, the plaintiff will be entitled to the costs of the trial Court and of this Court.
Note: The decree as recorded in the opinion directs deposit of Rs. 10,000 within two months but also states the conditional dismissal if the plaintiff fails to deposit Rs. 10,001 within the fixed date; both formulations are reproduced here exactly as they appear in the provided opinion.
Broader implications: The Court did not purport to lay down any novel general principle beyond applying established authorities: (a) the normal simultaneity rule for payment and conveyance remains subject to the parties' own agreement; (b) a purchaser's non-performance may be excused where it results from the vendor's repudiation; and (c) courts will not require a formal tender that would have been a mere formality and necessarily refused. The decision applied these principles to the facts and resulted in specific performance being ordered with the practical directions set out above. No new precedent beyond the application of the cited authorities was declared in the opinion.
Concurring: Renupada Mukherjee, J. agreed with the judgment.
Mookerjee, J.:— This is a plaintiff's appeal which arises out of a suit brought by him for specific performance of a contract for the sale of the property in suit. The relevant facts are almost all admitted ones.
2. Premises No. 83, Bagmari Road, in the eastern suburbs of Calcutta, originally belonged to the plaintiff and his co-sharers. The northern portion of the said premises came to be possessed by the plaintiff alone. On or about the 4th of February, 1941, the plaintiff executed in favour of the defendant-company, a conveyance in respect of the separated northern portion of the said premises for a consideration of Rs. 10,000. The plaintiff's case is that, he was in urgent need of Rs. 10,000. He had proposed to the defendant-Company for an advance of Rs. 10,000 on the security of the said property. The defendant refused to accept the property on mortgage, but was agreeable to pay Rs. 10,000 on the plaintiff executing a conveyance in respect of the said property. The defendant also agreed to execute an agreement for re-sale simultaneously with the execution of the conveyance for a consideration of Rs. 10,001 on condition that the said consideration was paid and the transfer obtained within two years of the execution of the agreement. The plaintiff executed the conveyance on the 4th February, 1941. On the 10th February, 1941, such an agreement also was signed. On the 26th November, 1942 i.e, within twenty-two months of the date of the agreement the plaintiff offered to the defendant-company to-complete the purchase and sent a draft conveyance for approval. Certain letters were exchanged between the parties thereafter and ultimately on the 18th December, 1942, the defendant refused to complete the transaction on the allegation that there had been no concluded or valid agreement of sale as alleged. Four months after the expiry of the period of two years from the date of the agreement the present suit was filed on the 10th June, 1943. The plaintiff claimed that he was entitled to specific performance of the contract for sale on payment of Rs. 10,001 at the cost of the plaintiff. There was an alternative prayer for a decree for redemption on the footing that the transaction was in reality a mortgage and for consequential reliefs.
3. The defence as originally filed was on the footing that the alleged contract was not a genuine one. Even if it were found to be genuine the plain-tiff was not entitled to any relief as he had not tendered the amount of consideration. The plaintiff was also alleged not to be in a position to make the payment at the relevant time and he could never had been ready and willing to perform the contract. The alternative claim for redemption was also resisted.
4. The learned Subordinate Judge on the evidence came to the conclusion that the story as set up by the plaintiff that the original proposal by the plaintiff to the defendant was for a loan on; a mortgage of the premises a question, which had been denied by the defendant, was true. Though the transaction was in fact intended to be a mortgage by conditional sale, in view of section 58(c) of the Transfer of Property Act as amended by Act XX of 1929, the transaction could not be treated as a mortgage by conditional sale. The conditions of re-sale had not been embodied in the conveyance, Exht. C. Had the case not been governed by the proviso to section 58(c) of the Transfer of Property Act the transaction would have been held to be a mortgage by conditional sale. The then market-value of the property was found to be much higher than Rs. 10,000 which had been stated to be the consideration for the conveyance.
5. The agreement Exht. 1, was found to be a genuine and valid document. The Court further came to the conclusion that the contract would be enforced specifically unless there was some other legal bar. The learned Subordinate Judge thereafter found that the plaintiff not having tendered the full amount as mentioned in the agreement he was not entitled to pray for specific performance of the contract. The repudiation of the contract by the defendant did not entitle the plaintiff to claim specific performance without having performed completely his part of the contract. On an interpretation of the agreement Exht. 1 it was further held that on the 10th of February, 1943, the said agreement had become inoperative and stood cancelled. The plaint having been filed after that date the suit was not entertainable. Time being the essence of the contract and the agreement having become inoperative after the 10th of February, 1943, the plaintiff was not entitled to any relief.
6. Mr. Gupta appearing on behalf of the appellant contends that on the findings reached by the lower Court about the due execution and the binding nature of the agreement Exht. 1. the plaintiff is entitled to claim specific performance of the contract. The defendant having repudiated the contract on the 18th December, 1942, it was not necessary for the plaintiff to make a formal tender which was surely to be refused by the defendant. The fact that the amount was not tendered would not affect the right of the plaintiff to claim specific performance. Further, the provisions contained in the agreement Exht. 1 did not affect the: rights of the plaintiff to bring a suit for specific performance after the 10th February, 1943.
7. Mr. Banerjee on the other hand contends that time being the essence of the contract as under the agreement, the provisions required the plaintiff to tender in the first instance the total amount of the consideration before the completion of the period of two years from the date of the agreement and only on such payment would the defendant execute the conveyance in his favour. The letter dated 18th December, 1942, written on behalf of the defendant to the plaintiff could not be interpreted as a refusal or repudiation Clause 3 of the agreement clearly provided that after the 10th February, 1943, the agreement had become wholly inoperative and unenforceable.
8. Before we consider the questions of law raised on behalf of the parties before us it is necessary that the provisions contained in the agreement should be carefully examined.
9. Exht. 1, being the memorandum of agreement was in the usual form whereby the vendor agreed to sell and the purchaser agreed to purchase the property in suit for Rs. 10,001.
10. The relevant portions of clauses 3 and 4 may be quoted.
“Clause 3— The purchase shall be completed by the purchasers within two years, i.e, to say, on or before the 10th day of February, 1943, time being the essence of the contract. If the purchasers shall on or before the 10th day of February, 1943, pay to the Vendor, a sum of Rs. 10,001, the vendor shall at the cost of the purchasers execute such conveyance as may be necessary for conveying and transferring its right, title and interest in the said property free from encumbrances if any created by it, and shall also make over such documents of title relating to the same as it may have in its possession provided always that the conveyance shall be executed by the Vendor in favour of the said Prasanta Kumar Sur, if he be living at that time and failing him, in favour of the said Dilip Kumar Sur, if the latter be then living and failing the said Dilip Kumar Sur, in favour of the said Srimati Kalyani Bala Sur.”
“Clause 4— This agreement shall become inoperative and stand cancelled after the 10th day of February, 1943”.
11. It is evident that the parties intended that the purchase would be completed within two years that is on or before 10th February, 1943. Who is to take the initiative in this matter and at what stage the consideration is to be paid by the purchaser?
12. That the purchaser is willing and ready to complete the transaction is in the first instance to be intimated by him.
13. The ordinary rule governing vendors and purchasers is that the payment of the consideration is to be simultaneous with and at the time when the conveyance is executed by the vendor. [See Nicholson v. Smith (1) (1882) 22 Chancery Division 640], also see Pratap Chandra v. Kali Charan (2) [(1951) 55 C.W.N 557 at p. 561]. In any particular case, however, the parties may agree to deviate from the ordinary rule. Unless, therefore, there be any special contract the parties are to follow the normal rule governing vendors and purchasers.
14. Does clause (3) in the agreement of the present case introduce any special contract as between the parties requiring the payment of the consideration not at the time of the execution of the conveyance, but before the same?
15. In our view, clause (3) taken as a whole does not introduce any special arrangement but describes merely the normal practice.
16. From the evidence adduced in this ease, it is disclosed that on the 28th November, 1942, sometime before the expiry of the period of two years, the plaintiff had through his solicitor intimated the defendant-company, his de sire to complete the purchase in terms of the agreement the draft conveyance also was sent by the solicitor to the defendant for approval. The attitude taken up on the defendant's side was feigning ignorance of the agreement itself. Execution of the agreement was denied and the document was described to be a spurious one. The letter sent by the defendant's solicitor on the 18th December, 1942, conveyed the information as aforesaid and the draft conveyance was returned along with the same.
17. On these facts it must be held that the plaintiff had within the period intimated his readiness to complete the transaction and the defendant had refused either to accept the contract as valid and binding or to act according to the terms thereof.
18. We shall consider at the proper place the objection raised on behalf of the defendant that the offer made by the plaintiff was neither legal nor sufficient in the eye of law as the consideration money was not paid along with the letter intimating readiness to complete the transaction.
19. As stated already the defendant has not contested before us the finding that the document was not a spurious one, but valid and binding. It, therefore, remains for us to consider the implications thereof.
20. We may at this stage dispose of one other argument advanced by the defendant that the plaintiff's claim had become barred on the date the suit was filed. It is argued that under clause (4) the contract itself became unenforceable on the expiry of two years and the suit having been filed after the expiry of that period it had become barred. This is wholly untenable. Clause (4) requires that necessary steps are to be taken before 10th February, 1943, and if such steps are not taken the rights of the plaintiff to get a conveyance will be lost. The intimation by the Plaintiff to the Defendant that he was ready and willing to abide by the terms might have been kept pending by the defendant till the last day. A suit for specific performance therefore if brought after the period so fixed and after giving an opportunity in the present case to the defendant to change his mind and act according to the terms would not have the effect of making the suit barred.
21. The repudiation of the contract by the defendant as conveyed in the solicitor's letters cannot be taken to be an irrevocable decision by the defendant. It was open to the Company to reconsider the position and agree to act according to the terms. If the suit by the plaintiff had been one for damages it could have been contended that the cause of action was as from the date of the repudiation [Edridge v. Sethna, (3) (L.R 60 I.A 368)]. For filing a suit for specific performance, however, the plaintiff had rightly waited till after the 10th February, 1943. The language used in clause 4 of the agreement, does not stand in the way.
22. We have next to consider whether the failure on the part of the plaintiff to actually tender the amount of the consideration bars a suit for specific performance.
23. There is no question, that there had been an express repudiation of the contract by the defendant as conveyed in the solicitor's letter, dated 18th December, 1942. Was it necessary for the plaintiff after such clear repudiation to tender the amount of the consideration? Such a tender would be a useless formality when the defendant repudiates the contract itself.
24. Non-performance of some of the terms of contract on the part of the plaintiff in a suit for specific performance is excused when that has resulted from the default of the vendor-defendant [Botham v. East India, Company, (4) (1787) 1 T.E 638 and Manick Chandra Bhowmick v. Abhoy Charan Gope (5) (24 C.L.J 90).
25. Reference may also be made to the principle enunciated by Wigram, V.C, in Hunter v. Daniel (6) (4 Hare 420, at 433), referred to with approval by the Judicial Committee in Chalikani Venkatarayanim v. Zamindar of Tuni, (12) [(1922) L.R 50 I.A 41 at page 46]:
“The practice of the Courts is not to require a party to make a formal tender where from the facts stated in the Will or from the evidence it appears the tender would have been a mere form and that the party to whom it was made would have refused to accept the money”.
26. The result, therefore, is that the plaintiff's claim for specific performance must be held to be well-founded. This appeal is accordingly allowed and the judgment and the decree passed by the lower Court are set aside. The plaintiff is directed to deposit in the Court below Rs. 10,000 within two months from this date and the defendant-company is directed to execute the conveyance within one month from the date of the deposit as aforesaid and execute and register the same at the cost of the plaintiff and if the defendant-company refuses or neglects to execute and|or register the said conveyance within the time, so granted the Court below will execute the same on behalf of the defendant-company. If the plaintiff fails to deposit Rs. 10,001 within the date fixed as aforesaid this appeal will stand dismissed with costs. If the deposit by the plaintiff is made within the due date the plaintiff will be entitled to the costs of the trial Court and of this Court.
Renupada Mukherjee, J.:— I agree.
S.K.B
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