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Smart Summary

Structured Summary of the Provided Legal Opinion

Factual and Procedural Background

The plaintiffs sued for specific performance of a contract of sale dated 14 May 1874. The plaintiffs' ancestor, Ali Isap, was the original owner. A decree was obtained by one Ranchhod against Ali Isap in 1871; the suit land was sold in execution and purchased by Jibhai at auction on 8 October 1872. On 14 May 1874 Jibhai sold the land to the grandfather of defendants 1 to 3 and 5 to 10. On the same day the vendee Akuji (defendants' grandfather) executed a registered agreement in favour of Abhram, binding himself to sell the land to Abhram for Rs. 461 at any time when the money was offered and not to sell the land to any other person. The plaintiffs contend that Jibhai was a benamidar (nominal purchaser) for their ancestor Isap (the father of the person to whom the agreement was executed) and, more than 50 years later, sought specific performance of the agreement. Both Courts below awarded the plaintiffs' claim. Defendant 1 filed this second appeal. Four objections were taken in the appeal: (1) the agreement infringes the law of perpetuity; (2) the agreement prohibiting alienation to anybody else is void; (3) plaintiffs seek to enforce the agreement against the successor-in-title of the original purchaser contrary to section 66 of the Civil Procedure Code (CPC); and (4) that the original agreement was with a minor (this ground was given up).

Legal Issues Presented

  1. Whether the 1874 agreement (which gave a right of pre-emption to Abhram or his heirs exercisable at their option) is void as infringing the rule against perpetuities.
  2. Whether the agreement's prohibition on alienation (not to sell the land to any other person) is void as an absolute restraint on transfer, within the principle of Section 10 of the Transfer of Property Act (or the equivalent pre‑Act principle).
  3. Whether Section 66 of the CPC bars the suit because plaintiffs base their case on an allegation that Jibhai was a benamidar and the suit is against persons claiming under a purchaser certified by the Court.
  4. Whether any incapacity (original agreement with a minor) affects enforceability (this point was abandoned by the appellant).

Arguments of the Parties

Appellant's Arguments

  • The agreement is incapable of specific performance because it infringes the law of perpetuities (i.e., it creates a right of pre-emption which might arise beyond the permissible period).
  • The agreement that prohibits alienation to anyone other than the specified person (and at a fixed price) is void as an absolute restraint on alienation, contrary to the principle underlying Section 10 of the Transfer of Property Act (relying on Asghari Begam v. Maula Baksh).
  • The suit is barred by Section 66 of the CPC because the plaintiffs' case alleges that Jibhai was a benamidar for the plaintiffs' ancestor and the suit is effectively attacking a certified purchase; Balaram v. Naktu was cited.
  • One ground (that the original agreement was with a minor) was given up by the appellant.

Respondents' Arguments

  • The respondents (as described in the opinion) attempted to distinguish the leading Divisional Bench ruling relied upon by the appellant but their counsel admitted difficulty distinguishing that authority on any plain basis. The respondents relied on a contrary view said to have been taken by the Madras High Court in Charamudi v. Raghavulu.
  • The respondents also referred to Fakirji v. Bhagvatlal (a Registration Act case) in support of their position; the respondents' counsel argued that certain precedent(s) did not apply or were distinguishable.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Harkisandas v. Bai Dhanu Referred to earlier authority holding that before the Transfer of Property Act English law applied and agreements could create equitable interests subject to perpetuities. Referenced as supporting the view in Dinkarrao's case that pre‑Transfer contracts could create equitable interests and be subject to the rule against perpetuities.
Dinkarrao Ganpatrao v. Narayan Vishwanath Held that prior to the Transfer of Property Act a contract for sale of immovable property created an equitable interest (purchaser owner in equity) and that English decisions on perpetuities would apply. The court held the present case was clearly governed by this decision and applied its principle to conclude the agreement created a right susceptible to the rule against perpetuities.
London and South-Western Railway Co. v. Gomm English authority applying the rule against perpetuities to contracts creating future or contingent interests (applied to pre‑Transfer era contracts). Relied upon (through Dinkarrao and other authorities) to support that the present agreement offended against the rule against perpetuities.
Woodall v. Clifton Another authority cited alongside London & S.W. Railway as applying the rule against perpetuities. Used by the court (via Dinkarrao and related reasoning) to support voidness of the agreement for perpetuity reasons.
Charamudi v. Raghavulu Madras High Court decision said to take a different view on similar issues. The respondents relied on it, but the court expressly declined to follow that contrary view and held itself bound by the Divisional Bench ruling (Dinkarrao and related authorities).
Maharaj Bahadur Singh v. Balchand (Privy Council) Held that an agreement to grant in future a site for a temple did not create a present estate or an enforceable covenant running with the land and offended the rule against perpetuities. Adopted as leading to the same conclusion: the agreement in the present case was unenforceable because it offended the rule against perpetuities and did not create a present interest or covenant that ran with the land.
Fakirji v. Bhagvatlal Case under the Registration Act (referred to by respondents). The court considered it inapplicable to the perpetuity principle, noting it did not affect the principles laid down in Maharaj Bahadur Singh v. Balchand.
Asghari Begam v. Maula Baksh (A.I.R. 1929 All. 381) Held that where a deed initially absolutely transferred property but a subsequent clause restrained the transferee from parting with interest except to the transferor, that absolute restriction is void. The court applied the principle analogously: although the prohibition in the present case arose in a separate agreement made the same day, the court regarded the sale and the restriction as part of one transaction and held the restriction void on the same underlying principle.
Balaram v. Naktu Ruling concerning suits directly based on benami transactions (cited by appellant). The court held Balaram v. Naktu inapplicable because that case was directly based on a benami transaction; here the suit was based on a separate contract and not directly on the benami purchase, so Section 66 CPC did not bar the suit.

Court's Reasoning and Analysis

The court's analysis proceeded primarily on the question of perpetuity. It held that the present agreement (1874) gave a right of pre-emption to Abhram (or his heirs) exercisable at their option at an uncertain future time. The court considered earlier authorities, notably Dinkarrao Ganpatrao v. Narayan Vishwanath, which held that contracts for sale made before the Transfer of Property Act created equitable interests in land and therefore attracted the English rule against perpetuities; that decision applied English cases such as London and South-Western Railway Co. v. Gomm and Woodall v. Clifton. The court found no distinction between Dinkarrao's facts and the present case: both involved agreements creating future contingent rights (pre-emption) which might not arise within the permissible perpetuity period and in practice were being pressed after a very long interval (51 years here).

The court also relied on the Privy Council decision in Maharaj Bahadur Singh v. Balchand, which held that an agreement creating only a future interest (to be taken effect by entry at an uncertain future date) offended the rule against perpetuities and did not create a present estate or covenant running with the land. Applying these authorities, the court concluded that the 1874 agreement was void as against the rule against perpetuities and therefore could not be specifically enforced. The court rejected the respondents' reliance on a contrary Madras High Court view (Charamudi v. Raghavulu) and treated Fakirji v. Bhagvatlal (a Registration Act case) as not affecting the perpetuity principle.

Having disposed of the appeal on the ground of perpetuity, the court briefly considered the appellant's other contentions in case of further appeal:

  • On the contention under Section 10 of the Transfer of Property Act (absolute restraint on alienation), the court noted that Jibhai's transfer to the defendants' ancestor was an unconditional sale while the prohibition on sale to others appeared in a separate agreement with Abhram executed the same day. The court regarded both instruments as part of the same transaction and, following the principle in Asghari Begam v. Maula Baksh, treated the restriction as void (the court observed Section 10 itself was not in force at the time but applied the underlying principle existing before the Act).
  • On Section 66 CPC (bar on suits against persons claiming under a court-certified purchase on the ground that the purchase was made on behalf of someone else), the court held Section 66 must be strictly construed and applies only where the cause of action is the benami purchase itself. Since the present suit was based on a separate contract (not the transfer by Jibhai), Section 66 did not apply. The court observed that if the case had been a suit to recover possession based directly on benami purchase the result might differ, but that was not the factual basis of the present suit.

Holding and Implications

Holding: The court concluded that the 1874 agreement is void as offending the rule against perpetuities and therefore cannot be enforced. Accordingly, the decree of the lower appellate court is reversed and the suit is dismissed with costs throughout. The decree is reversed.

Implications:

  • The immediate consequence is that the plaintiffs' action for specific performance fails and the decree in their favour is set aside; the suit is dismissed with costs.
  • Because the court disposed of the appeal on the ground of perpetuities, the finding that the prohibition on alienation would also be void (if relevant) and the conclusion on Section 66 CPC are treated as subsidiary observations; the principal ruling rests on established authorities (Dinkarrao, London & S.W. Railway, Maharaj Bahadur Singh) rather than the creation of a novel precedent by this judgment.

Signature in opinion: B.V/R.K

Show full summary ...

    Allibhai Mahomed Akuji v. Dada Alli Isap

    1. The facts of this appeal are peculiar, and were I not of the opinion that they are covered by authority I should have referred it to a Bench.

    2. The facts are simple. The plaintiffs sued for specific performance of a contract of sale dated 14th May 1874. The plaintiffs' ancestor Ali Isap was the original owner of the land. One Ranchhod obtained a decree against him in 1871, and then in sale in execution the suit land was sold by auction and purchased by one Jibhai on 8th October 1872. On 14th May 1874, the said Jibhai sold the suit land to the grandfather of defendants 1 to 3 and 5 to 10 and on the same day the vendee Akuji, defendants' grandfather executed a registered agreement in favour of Abhram by which he bound himself to sell the land to Abhram for Rs. 461 at any time when the money was offered, and not to sell the land to any other person whatever. The plaintiffs' case is that Jibhai was a mere benamidar for their ancestor Isap, the father of the person to whom the agreement was executed. And now after more than 50 years' they sue for specific performance of the agreement. Both the Courts below have awarded the plaintiffs' claim. Defendant 1 makes this second appeal, and four objections have been taken in appeal: viz., (1) that the agreement is incapable of specific performance as it infringes the law of perpetuity; (2) the agreement which prohibits alienation to anybody else is void; (3) Jibhai was a benamidar of the original creditor, and plaintiffs sue to enforce the agreement against the successor-in-title of the original purchaser, which is against section 66 of the cpc and (4) the original agreement was with a minor. (This has been given up).

    3. The most important ground is the first one. The agreement in question is before the Transfer of Property Act came into force. Under Section 54 of the Transfer of Property Act, a contract for sale does not of itself create any interest or charge on such property but it is contended that before the Transfer of Property Act came into force it was held that English law applied to agreements and they created an equitable interest in land, and therefore were subject to the law of perpetuities, and reference is made to Harkisandas v. Bai Dhanu (1). That case refers to the case of Dinkarrao Ganpatrao v. Narayan Vishwanath (2) in which it was held, in dealing with a contract of 1878, that prior to the Transfer of Property Act a contract for the sale of immovable property created an equitable interest in the property and made the purchaser the owner in equity, and consequently the English decision like London and South-Western Railway Co. v. Gomm (3) would apply, and it was not, therefore really necessary in that case to decide the question whether the law would be the same in cases governed by the Transfer of Property Act. On reference to Dinkarrao's case , I am of opinion that the present case is clearly governed by it. In that case by a sale deed of 1878 the vendor conveyed to the purchaser a plot of land forming part of a larger piece of land, and the vendor covenanted that:

    “In case you or your heirs have to sell the said plot, the same is to be sold back to me for the abovementioned value. It is not to be sold to any other person. In case you are informed in writing that I or my heirs or vahivatdars or donees from me are not going to purchase it, then only you can sell it to another person if you like.”

    4. It was held that the covenants in question were void as offending against the principle underlying the rule against perpetuities, relying on London and South-Western Railway Co. v. Gomm , and the other cases quoted there. It is described in the judgment as a contract creating a right of pre-emption which cannot be specifically enforced until the proper occasion arises in the future, and it was held by Macleod, C.J, that such contracts, though not creating an interest in land either equitable or executory under Section 54 of the Transfer of Property Act, do create rights which are capable of being enforced with regard to the land in certain circumstances against third parties, and the rule of perpetuities made applicable to this country by Section 14 of the Transfer of Property Act, applies to this class of contracts, and it was held by Kanga, J., that prior to the Transfer of Property Act the law assumed in Illus. (a), Section 13 of the Specific Relief Act, that a contract for the sale of immovable property created an equitable interest in the property and made the purchaser the owner in equity, was the law in India, and he goes on to say (p. 215):

    “Now we have before us an agreement made in 1878 to convey an immovable property upon the happening of an event which might occur at a more remote period than the lives in being and 18 years afterwards. It is an agreement creating under the law prior to the Transfer of Property Act an equitable interest in immovable property which would be void as infringing the rule against perpetuities:” London and South-Western Railway Co. v. Gomm and Woodall v. Clifton (4).”

    5. I am unable to see any distinction between that case and the present case. In the present case we have an agreement which gives to one of the parties to it the right of pre-emption which might not arise until long after the period contemplated by the law of perpetuities, and is as a matter of fact now attempted to be enforeed after an interval of 51 years. The learned advocate for the respondents admitted that he was not able to distinguish that case on any plain basis, but contended that a different view has been taken by the Madras High Court in Charamudi v. Raghavulu (5). I am however, bound to follow the ruling of the Divisional Bench of this Court and it is not for me to say whether the view taken by the Madras High Court is correct or that taken by this High Court. There is moreover a case of the Privy Council in Maharaj Bahadur Singh v. Balchand (6) which leads to the same conclusion. There an agreement had been made between a Maharaj and a Jain Society that if the Society should require a site for the erection of a temple thereon, he and his heirs would grant a site free of cost. The proprietor afterwards alienated the whole hill. Subsequently the Society sued the alienees for possession of a site defined by boundaries, alleging notice to the proprietor requiring that site and that they had taken possession bub had been dispossessed. It was held that the action failed because the agreement conferred on the Society no present estate or interest in the site, and was unenforceable as a covenant since if did not run with the land and infringed the rule against perpetuities. It has been argued by the learned advocate for the respondents that was a suit against an alienee from the person who originally entered into the contract but that is not the sole ground of the decision. Their Lordships say (at p. 380 of 46 I.A) that the covenant does not, and cannot, run with the land, and therefore was not capable of enforcement. But their Lordships also hold (p. 380 of 46 I.A):

    “Further if the case be regarded in another light—namely, an agreement to grant in the future whatever land might be selected as a site for a temple—as the only interest created would be one to take effect by entry at a later date, and as this date is uncertain, the provision is obviously bad as offending the rule against perpetuities, for the interest would not then vest in praesenti, but would vest at the expiration of an indefinite time which might extend beyond the expiration of the proper period.”

    6. In the present case the interest created is one which would take effect by the tender of the fixed price at a later date which is uncertain, the period being left entirely to the option of Abhram or his heirs. The learned advocate for the respondents also referred to Fakirji v. Bhagvatlal (7). That however was a case under the Registration Act, and does not in my opipion, affect Sue principles which are laid down in the last lines of the Privy Council judgment: in Maharaj Bahadur Singh v. Balchand which I have just referred to. As a result, I must hold that the agreement is void as being against the principle of perpetuities, and that it cannot therefore be enforced. This is sufficient for the decision of the appeal. I will however refer briefly to the other two contentions which have been raised by the appellant, in case there is a Letters Patent appeal against this decision. It has been contended that the agreement is also bad inasmuch as it prohibits alienation except to the plaintiffs and at a fixed price, and it therefore offends against the principle of Section 10 of the Transfer of Property Act, which provides that:

    “where property is transferred subject to a condition or limitation absolutely restraining the transferee or any person claiming binder him from parting with or disposing of his interest in the property, the condition or limitation is void except in the case of a lease where the condition is for the benefit of the lessor or those claiming under him,” etc.

    7. It has been contended that the case is governed by Asghari Begam v. Maula Baksh, A.I.R 1929 All. 381, where it was held that where a deed of transfer at first absolutely transferred property to another, but by a subsequent cause makes the clause subject to a condition restraining the transferee from parting with or disposing of that interest to any person other than the transferor, the condition amounts to an absolute restriction on the right of transfer and so is void. In the present case the transfer was by Jibhai the auction purchaser to the defendants' ancestor, and that transfer was without any condition, and it is contended that in the Allahabad case the clause prohibiting the transfer was in the deed itself, and therefore invalidated the deed. In the present case the prohibition of transfer is in a separate agreement made with a third person, i.e, Abhram. It is farther contended on behalf of the appellant that the transfer by Jibhai and the agreement with Abhram which took place on the same day formed part of the same transaction, and are based on the fact of Jibhai being only a bsnamidar for Abhram who was the real owner of the land. The question of whether this amounts to a restraint of alienation within Section 10 of the Transfer of Property Act, which by the way was not in force at the time when this transaction was entered into, would depend on whether the agreement with Abhram is regarded as forming part of the same transaction as the sale by Jibhai. In my opinion they should be so regarded, and therefore under the ruling in the Allahabad case referred to above the restriction on alienation would be void under the principles of Section 10 of the Transfer of Property Act, although the Act itself was not in force at that time. It has been frequently held that the principles which underlie the Act were principles in existence before. The third objection is that the suit is barred, by section 66 of the cpc, which lays down that:

    “No suit shall be maintained against any person claiming title under a purchase certified by the Court in such manner as may be prescribed on the ground that the purchase was made on behalf of the plaintiff or on behalf of some one through whom the plaintiff claims”

    8. And it is contended that the present suit is based on the allegation in the plaint that Jibhai was merely a benamidar for the original owner Ali Isap whose descendant the plaintiff is. It is contended that section has no application. The section has to be construed strictly. The present suit has nothing to do with the transfer by Jibhai to the defendants' ancestor, and the ruling in Balaram v. Naktu (8), which was quoted by the learned advocate for the appellant has no application inasmuch as the suit in that case was directly based on a benami transaction. I am of opinion that as section 66 of the cpc, has to be strictly construed, it will apply only to a suit in which the cause of action is given by the benami purchase and not to a suit like the present which is based on a contract which is separate from the transfer. The Court sale which was in the name of Jibhai had taken place some time before. If Ali Isap had brought a suit to recover possession of the property against the present defendants' ancestor on the ground that he was the person on whose behalf the purchase was made, S. 66 would apply, but not I think to a suit which is based on a different cause of action, i.e, a contract entered into between the defendants' ancestor and the ancestor of the plaintiff even though the basis of that contract might be the benami nature of the original purchase at the Court-sale. That however is a minor point in view of the opinion to which I have come on the question of perpetuity.

    9. As a result the decree of the lower appellate Court will be reversed and the suit dismissed with costs throughout.

    B.V/R.K

    10. Decree reversed.

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    Comments

    Allibhai Mahomed Akuji v. Dada Alli Isap
    (Jul 11, 1931)