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Shyam Singh v. Daryao Singh (Dead) By Lrs. And Others
Factual and Procedural Background
Defendants 2–4 were bhumidars of agricultural land in Village Nala, District Muzaffarnagar (U.P.). On 4-2-1971 they executed a registered sale deed in favour of Defendant 1 for Rs 4,900 and, on the same day, Defendant 1 executed a separate “Agreement of Repurchase” granting Defendants 2–4 an option to re-purchase the land within ten years on repayment of the sale price. On 2-6-1977 Defendants 2–4 executed a registered deed assigning their right of repurchase to the plaintiff (appellant) for Rs 19,000.
The plaintiff filed a suit for specific performance in 1981. The Trial Court dismissed the suit, holding that Defendants 2–4 had no remaining interest to convey and that the 1977 document did not amount to an assignment of the repurchase right. The First Appellate Court affirmed, adding that the right of repurchase was personal and non-assignable. The High Court, in second appeal, concurred with both courts and dismissed the suit on 30-9-1997. The present Supreme Court judgment reviews that dismissal.
Legal Issues Presented
- Whether the Agreement of Repurchase dated 4-2-1971 contained an express or implied prohibition against assignment of the right of repurchase by Defendants 2–4 to a third party.
- Whether, due to subsequent consolidation proceedings under the U.P. Consolidation of Holdings Act, 1953, the identity of the suit land was lost, rendering the relief of specific performance infructuous.
Arguments of the Parties
Appellant's Arguments
- The 1971 agreement does not expressly prohibit assignment; therefore, under Section 15(b) of the Specific Relief Act, 1963, the right of repurchase is assignable.
- Mere reference to “heirs” without “assignees” does not amount to an implied prohibition.
- Consolidation proceedings merely substitute new plots for old ones; the suit for specific performance remains maintainable (relying on Rajeshwar v. Board of Revenue).
Respondent 1's Arguments
- The absence of the words “assignees” or “transferees” in the agreement, coupled with mention of “heirs”, implies a prohibition on assignment, making the right strictly personal.
- Because of consolidation proceedings, the original holding has merged into a different “chuk”; specific performance of the original land is impossible (relying on Piarey Lal v. Hori Lal).
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| T.M. Balakrishna Mudaliar v. M. Satyanarayana Rao, (1993) 2 SCC 740 | Right of repurchase is assignable unless the contract expressly makes it personal. | Relied upon as binding authority supporting assignability of the repurchase right. |
| Habiba Khatoon v. Ubaidul Huq, (1997) 7 SCC 452 | Restates that benefits of a contract are assignable in absence of an explicit bar. | Cited to reinforce the principle and to summarise earlier jurisprudence. |
| Sakalaguna Nayudu v. Chinna Munuswami Nayakar, AIR 1928 PC 174 | Benefit of a repurchase contract can be assigned if not clearly personal. | Quoted (through Habiba Khatoon) to support the assignability rationale. |
| Vishweshwar Narsabhatta Gaddada v. Durgappa Irappa Bhatkar, AIR 1940 Bom 339 | Both common law and Specific Relief Act allow assignment unless expressly barred. | Included in the chain of authorities validating the plaintiff’s stance. |
| Sinnakaruppa Gounder v. M. Karuppuswami Gounder, AIR 1965 Mad 506 | Burden lies on the party alleging non-assignability to prove an intention to make the right personal. | Referenced to elucidate the evidentiary burden. |
| Piarey Lal v. Hori Lal, (1977) 2 SCC 221 | Where identity of land is lost after consolidation, specific performance may become impossible. | Invoked by Respondent 1 to argue that the suit has become infructuous; issue remitted for trial court determination. |
| Rajeshwar v. Board of Revenue, (1995) 1 SCC 339 | Consolidation results in substitution, not extinction, of property rights. | Invoked by the appellant to oppose the respondent’s contention on consolidation. |
Court's Reasoning and Analysis
Examining the 1971 Agreement in its vernacular form and translation, the Court found no clause expressly forbidding assignment. Under Section 15(b) of the Specific Relief Act, a “representative-in-interest” — which includes assignees — may seek specific performance unless the contract provides otherwise. The mere mention of “heirs” without “assignees” was held insufficient to create an implied prohibition, especially given the ten-year window for re-purchase, which suggested that the parties contemplated possible transfers.
The Court considered the argument that silence on assignment implies prohibition but rejected it, reasoning that parties are presumed to know statutory rights of assignment. It regarded the transaction as analogous to a mortgage created to meet financial needs; denying assignment would unjustly deprive the original owners of value.
Relying on Balakrishna Mudaliar and Habiba Khatoon, the Court reiterated that an option to repurchase is prima facie assignable unless clearly made personal. The concurrent findings of the lower courts were therefore characterised as misconstruction of the document.
On the new issue regarding consolidation proceedings, the Court noted that mixed questions of fact and law arise. Without a factual record, it refrained from deciding the effect of consolidation and instead directed the trial court to frame and try those issues after permitting amended pleadings.
Holding and Implications
Appeal Partly Allowed. The Supreme Court set aside the concurrent findings of the three lower courts and held that the plaintiff, as assignee of Defendants 2–4, is entitled to seek specific performance against Defendant 1. The matter is remanded to the trial court to determine the impact of consolidation proceedings under the U.P. Consolidation of Holdings Act, 1953. No order as to costs.
Implications: The judgment reinforces the principle that options to repurchase are transferable unless expressly made personal, aligning with earlier Supreme Court and Privy Council authority. The final relief, however, awaits resolution of factual issues relating to consolidation.
D.M Dharmadhikari, J.— The High Court of Allahabad in second appeal before it by the impugned judgment dated 30-9-1997, concurring with the two courts below, has dismissed the suit of the plaintiff-appellant seeking specific performance of Agreement of Repurchase of property in dispute on the ground that under the terms of the agreement dated 4-2-1971, the right of repurchase was personal in favour of the original contracting parties (Defendants 2 to 4) and the said right was not assignable or transferable in favour of the plaintiff.
2. The only legal question involved is whether the terms of the Agreement of Repurchase dated 4-2-1971 contain any implied prohibition on the original contracting parties (particularly Defendants 2 to 4) from transferring or assigning their rights in favour of a third party.
3. The relevant facts for deciding the above legal question are as under:
Defendants 2 to 4 were bhumidars of the lands in dispute situate at Village Nala, District Muzaffarnagar in the State of Uttar Pradesh. On 4-2-1971, the owners executed a registered sale deed in favour of Defendant 1 (contesting Respondent 1 herein) for a consideration of Rs 4900. On the same day Defendant 1 who had purchased the property executed an agreement for reconveyance of the said property in favour of Defendants 2 to 4. The relevant terms of the Agreement of Repurchase dated 4-2-1971, on interpretation of which the parties are at variance, in its relevant parts (rendered into English), read as under:
“Ext. 4 dated 4-2-1971
Original on stamp paper of Rs 2.25
Whereas we, Daryao Singh, son of Hardeva, the first party and Surajmal, Peetam and Babu, sons of Rati Ram, the second party, Jat, residents of Village Nala, Pargana Kandhala, Tehsil Budhana, District Muzaffarnagar. Party 2 has executed a sale deed today in favour of Party 1 for a sum of Rs 4900 in respect of 2 bighas 7 biswas of the land of Khasra No. 95, bearing a rent of Rs 6.25 annually situate in Khata No. 331 of Village Nala, Pargana Kandhala, Tehsil Budhana, District Muzaffarnagar, about which it was agreed between the parties that if the second party paid the entire consideration of the sale deed of Rs 4900 to the first party or to the heirs of the first party within ten years from today then in that situation the first party will reconvey the aforesaid land by sale deed in favour of the second party without any objection. If for any reason the first party does not execute a sale deed in favour of the second party, after five years but within ten years from the date of sale deed dated 4-2-1971, then the second party will have a right to deposit the entire consideration of Rs 4900 in the civil court and get the sale deed executed by the court, the first party will have no objection. The present agreement will be binding upon the parties and the heirs of the parties. Therefore, these few comments by way of agreement of reconveyance of sale within ten years are being written so that this document may be used when necessary. After the limitation of ten years the second party will have no right at all to get released the aforesaid from Party 1.”
(Underlining by court to add emphasis)
4. Under the above terms of the Agreement of Repurchase, Defendants 2 to 4 sold their rights to obtain reconveyance of sale in favour of the plaintiff (present appellant) by executing a document dated 2-6-1977, on payment of a sum of Rs 19,000. The said document is also registered and its execution is not in dispute.
5. The Court of Munsif Magistrate, Kairana, District Muzaffarnagar dismissed the suit by holding that Defendants 2 to 4 having already transferred their rights in the property in favour of Defendant 1, had no right left in the property to transfer the same in favour of the plaintiff. In the opinion of the trial court the document dated 2-6-1977 executed in favour of the plaintiff does not amount to transfer of right of repurchase in favour of the plaintiff but it was a transfer of interest in the property involved which was invalid as Defendants 2 to 4 had already transferred their interest and title in the land to Defendant 1.
6. At this stage, it may be mentioned that we have looked into the terms of the document dated 2-6-1977 and we find a clear stipulation therein to indicate that whatever right of repurchase that existed in favour of Defendants 2 to 4 has been transferred by them in favour of Defendant 1 (sic plaintiff). The reasoning of the trial court, therefore, that right of repurchase has not been assigned or transferred in the document dated 2-6-1977, is prima facie erroneous and has not been supported by any of the parties before us in this appeal.
7. The first appellate court upheld dismissal of the suit by the trial court not only on the ground that no right of repurchase had been transferred in favour of the plaintiff but also on additional ground that the right of repurchase, if any, available to Defendants 2 to 4 was a right personal to them and was not assignable or transferable. The High Court by the impugned judgment passed in second appeal re-examined the terms of the document in question dated 4-2-1971 (Ext. 4) to arrive at a conclusion that the right of repurchase was available personally to the contracting parties Defendants 2 to 4 and to their heirs. It held that as under the terms of the said document there is no clear stipulation permitting Respondents 2 to 4 to transfer the right of purchase to anybody else, as the said right was not assignable. The relevant finding of the High Court reads thus:
“It is true that there is no negative clause that the said right of repurchase cannot be transferred to a stranger but the deed dated 4-2-1971 (Ext. 4) is specific that it is binding upon the parties and their heirs. The said clause does not permit Respondents 2 to 4 to transfer the right of repurchase to anybody else including the appellant.”
8. We have heard the learned counsel appearing on either side and looked carefully and minutely into the terms of the disputed document comparing it with the vernacular copy. We have extracted above the relevant recitals of the said document. As has been noted by the High Court and the courts below, it contains no express prohibition on transfer or assignment of right by the original contracting parties to a third party. The only question is whether such prohibition against assignment or transfer can be read into the document by implication.
9. In our considered opinion, reading the document as a whole and particularly keeping in view the fact that a long period of ten years was fixed for obtaining reconveyance, no implied prohibition of transfer or assignment can be inferred in the document, particularly in view of the clear provisions of Section 15(b) of the Specific Relief Act, 1963 which reads as under:
“15. Who may obtain specific performance.—Except as otherwise provided by this Chapter, the specific performance of a contract may be obtained by—
(a) any party thereto;
(b) the representative-in-interest or the principal, of any party thereto:
Provided that where the learning, skill, solvency or any personal quality of such party is a material ingredient in the contract, or where the contract provides that his interest shall not be assigned, his representative-in-interest or his principal shall not be entitled to specific performance of the contract, unless such party has already performed his part of the contract, or the performance thereof by his representative-in-interest, or his principal, has been accepted by the other party;”
(emphasis added)
10. As is to be seen from the provisions of Section 15(b) of the Specific Relief Act, 1963, specific performance of the contract may be obtained by “any party thereto” or “their representative-in-interest”. This expression clearly includes the transferees and assignees from the contracting party in whose favour the right exists. Such right of seeking specific performance would, however, be not available in terms of the proviso below clause (b) where “the contract provides that the interest shall not be assigned”.
11. Clearly, in this case under the terms of the document dated 4-2-1971, Ext. 4, there is no express prohibition against assignment or transfer of the right of repurchase by the original party in favour of the third party. Learned counsel appearing for the contesting respondent (Defendant 1) very strenuously urged that in the recitals of the document at the appropriate place there is mention of the parties and their heirs but there is no mention of the transferees or assignees of the contracting parties. This omission is a clear indication of implied prohibition against transfer or assignment of any right by the original contracting party.
12. We find it difficult to accept this proposition. True it is that there is no clear stipulation permitting assignment or transfer of right of the purchaser by original party in favour of the third party but both contracting parties would be presumed to have been alive to the legal provisions contained in Section 15(b) of the Specific Relief Act. The two documents — one of sale and the other of repurchase — were executed on the same day. As the sale and Agreement of Repurchase are contained in two separate documents, although contemporaneously executed, the transaction cannot be treated to be a “mortgage” as defined in Section 58(c) read with the proviso thereunder of the Transfer of Property Act but it seems to be a transaction akin to a “mortgage” — if not “mortgage proper”. From the tenor and contents of the two documents contemporaneously executed, it seems that Defendants 2 to 4 to raise money, sold the property but with a right of repurchase on return of the money. A long period of ten years for obtaining reconveyance was agreed between the original contracting parties to indicate the nature of transaction to be one to satisfy the monetary need of the transferor. Initial period of five years was stipulated for obtaining reconveyance mutually, failing which after expiry of the period of five years, reconveyance could be obtained through court within an outer limit of ten years from the original date of the execution of the document. It seems unjust to construe the terms of the document to mean that though the original transferors of the property are unable to raise requisite money within the initial period of five years and thereafter continue to be incapable financially to approach court for seeking reconveyance, they would have no right to assign or transfer their right on value to others. This would result in deprivation of the property or competitive value altogether to the original owners.
13. In our considered opinion, in the absence of any words or expressions in the documents indicating prohibition on assignment or transfer of right of repurchase and in the face of clear provisions of Section 15(b) of the Specific Relief Act, 1963, an implied prohibition cannot be read into the terms of the documents. Merely because in the documents, there is mention of “heirs” of the contracting parties but not their “assignees” or “transferees”, the legal right of assignment available to the benefit of original contracting party under Section 15(b) of the Act cannot be denied to it.
14. We are fortified in our view by two direct decisions of this Court rendered in somewhat similar circumstances with documents contemporaneously executed for sale and repurchase with comparable stipulations. See T.M Balakrishna Mudaliar v. M. Satyanarayana Rao (1993) 2 SCC 740 and Habiba Khatoon v. Ubaidul Huq (1997) 7 SCC 452.
15. In the case of Habiba Khatoon (1997) 7 SCC 452 taking stock of earlier decisions of this Court, the Privy Council and the High Court of Bombay, the law on the present-contested issue was explained to uphold the right of repurchase of the original contracting party thus:
“We may in this connection also usefully refer to a decision of this Court in the case of T.M Balakrishna Mudaliar v. M. Satyanarayana Rao (1993) 2 SCC 740. Considering the provisions of Section 15(b) of the Specific Relief Act, 1963 a Bench of two learned Judges of this Court speaking through Kasliwal, J., endorsed (in para 10 of the SCC) the statement of law flowing from the decision of Sakalaguna Nayudu AIR 1928 PC 174 as well as the decision of Beaumont, C.J, speaking for the Bombay High Court in the case of Vishweshwar Narsabhatta Gaddada v. Durgappa Irappa Bhatkar AIR 1940 Bom 339, ILR 1940 Bom 674. The statement of law which got imprimatur of this Court in para 9 of the Report runs as follows:
‘The Privy Council in Sakalaguna Nayudu v. Chinna Munuswami Nayakar AIR 1928 PC 174 has held that the benefit of a contract of repurchase which did not show that it was intended only for the benefit of the parties contracting, could be assigned and such contract is enforceable. Beaumont, C.J in Vishweshwar Narsabhatta Gaddada v. Durgappa Irappa Bhatkar AIR 1940 Bom 339, ILR 1940 Bom 674 held that both under the common law as well as under Section 23(b) of the Specific Relief Act, 1877, an option given to repurchase the property sold would prima facie be assignable, though it might also be so worded as to show that it was to be personal to the grantee and not assignable. On the particular facts of that case, it was held that the contract was assignable. In Sinnakaruppa Gounder v. M. Karuppuswami Gounder AIR 1965 Mad 506, ILR (1965) 2 Mad 20 it was held: (AIR p. 508, para 5)
“In our view, generally speaking, the benefits of a contract of repurchase must be assignable, unless the terms of the contract are such as to show that the right of repurchase is personal to the vendor. In the latter case it will be for the person who pleads that the contract is not enforceable, to show that the intention of the parties thereto was that it was to be enforced only by the persons named therein and not by the assignee.” ’ ”
16. From the statement of law as has been approved and followed by this Court in two decisions in Habiba Khatoon (1997) 7 SCC 452 and T.M Balakrishna Mudaliar (1993) 2 SCC 740, unless the contents of the document in question and evidence in relation thereto are so clear to infer a prohibition against assignment or transfer, the right of repurchase has to be held to be assignable or transferable and cannot be treated as personal to the contracting parties.
17. On a very unsubstantial ground that the document in question makes a mention only of “parties” and their “heirs” and not “assignees” or “transferees”, it cannot be held that the right of repurchase was not assignable. In our considered opinion, therefore, the courts below were in error in construing the document in question in a manner to infer an implied prohibition against assignment and transfer.
18. In this appeal, the respondent filed an application (not numbered) dated 25-8-2001 seeking permission to raise additional grounds and file additional documents. In the additional grounds, it is urged on behalf of the contesting respondent that suit land recorded as Holding No. 306 with area 0.8693 hectares, as a result of consolidation proceedings under the provisions of the U.P Consolidation of Holdings Act, 1953 (hereinafter referred to as “the Act of 1953”) has been converted into a new holding called “chuk” comprising several other plots with area 0.7724 hectares. Learned counsel appearing for the respondent in support of the additional grounds argues that the property agreed to be sold as a result of consolidation proceedings having lost its identity, the suit for specific performance of contract for Original Holding No. 306, has been rendered infructuous. Heavy reliance is placed on the decision of this Court in the case of Piarey Lal v. Hori Lal (1977) 2 SCC 221, (1977) 2 SCR 915.
19. On the other side, learned counsel appearing for the appellant seriously disputed the fact that as a result of consolidation proceedings, identity of the suit land had been lost and specific performance of agreement of sale cannot be granted. It is contended that as a result of consolidation proceedings, “there is merely substitution of one property for the other” and the suit for specific performance cannot be said to have been rendered incompetent or infructuous. Reliance is placed on the decision of this Court reported in Rajeshwar v. Board of Revenue (1995) 1 SCC 339, 1995 All LJ 144.
20. The additional grounds urged in this appeal as a result of subsequent legal developments of consolidation of holdings under the Act of 1953 raise issues both of fact and law. We consider it just and proper to remand the case to the trial court for deciding these additional issues arising on facts and law.
21. As a result of discussion aforesaid, this appeal partly succeeds and is allowed. The concurrent findings of the courts below that the right of repurchase under the agreement was personal to the original contracting party and their heirs, are hereby set aside. It is held that the plaintiff as “assignee” or “transferee” from the original contracting party is entitled to seek specific performance of the contract from contesting Respondent 1.
22. The case is remanded to the trial court for deciding the limited issues arising between the parties on facts and law on the applicability and effect of the provisions of the Act of 1953.
23. The trial court shall grant opportunity to the parties to amend their pleadings. It shall then frame issues on those amended pleadings and after granting them opportunity to lead evidence decide the suit in accordance with law. The suit was filed in the year 1981. The trial court shall make every endeavour to complete the trial on the additional issues and decide the suit as expeditiously as possible. To facilitate early disposal of the suit, the parties are directed to appear before the trial court on 15-12-2003. In the circumstances, we make no order as to costs in this appeal.
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