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Hiralal Lachmiram Pardeshi v. Janardan Govind Nerlekar

Bombay High Court
Feb 24, 1937
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Summary of Opinion — Broomfield, J.

Factual and Procedural Background

This is an appeal from a decree dismissing the plaintiff's suit for specific performance of an agreement by defendant 1 to sell four plots of land at Kurduwadi (described in the plaint as plots (a), (b), (c) and (d)).

Relevant facts from the record:

  • On 21 October 1929 defendant 1 agreed to sell plot (d) to defendant 2 for Rs. 2,000; Rs. 200 was paid as earnest money and the bargain paper provided that the sale deed was to be executed after Divali (about a fortnight).
  • On 18 April 1930 defendant 1 agreed to sell all four plots to the plaintiff for Rs. 7,000. The bargain paper recited that the properties were mortgaged to Dr. Patki; defendant 1 was to pay off the amount of the mortgagee's decree and execute a sale deed in the plaintiff's favour within 15 days. The bargain paper referred to the earlier agreement between defendant 1 and defendant 2 in respect of plot (d), and stated that that prior receipt had become null and void (or that the vendor would not allow it to affect the plaintiff).
  • In May 1930 the plaintiff called on defendant 1 to complete the agreement and published a notice in a newspaper. On 6 June 1930 defendant 2 filed a suit for specific performance of defendant 1's agreement to sell plot (d) to him. On 25 June 1930 the plaintiff filed the suit (the present suit) seeking specific performance in his favour and ancillary reliefs in relation to the mortgage debt and, if necessary, damages for any part not specifically enforceable.
  • Notices of the plaintiff's suit were served on the defendants in July 1930. In defendant 2's suit a consent decree was passed on 1 September 1930 which provided that the plaintiff was to receive Rs. 1,600 and execute a sale deed in defendant 2's favour within 15 days (as recorded in the opinion).
  • The trial Judge dismissed the plaintiff's suit for specific performance, holding that Section 15 of the Specific Relief Act applied and that the plaintiff was unwilling to accept conveyance of the properties other than on terms that would compensate defendant 1 for his inability to convey plot (d).

Legal Issues Presented

  1. Whether the plaintiff was bound by the prior agreement of October 1929 between defendant 1 and defendant 2 relating to plot (d), given that the plaintiff had notice of that agreement (it being mentioned in the plaintiff's own bargain paper).
  2. Whether Sections 14 to 17 of the Specific Relief Act applied to permit (a) specific performance of the whole contract despite defendant 1's inability to convey plot (d), (b) specific performance of part of the contract under Section 14 or 15, or (c) specific performance of a separable part (plots (a), (b) and (c)) under Section 16.
  3. If specific performance could not be granted for the whole or a separable part, whether the plaintiff was entitled to damages for breach (having regard to the pleadings and evidence, and Section 19 of the Act).

Arguments of the Parties

Appellant's Arguments (as recorded)

  • The learned counsel for the appellant (plaintiff) argued that the plaintiff was not bound by the prior agreement between defendant 1 and defendant 2 because that agreement had ceased to be binding due to long delay and failure to implement it. The counsel did not press this contention very strenuously, according to the opinion.
  • Mr. Thakor (appearing for the appellant) further contended that Sections 14 and 15 of the Specific Relief Act had no application. He argued that nothing prevented the Court from decreeing specific performance of the whole contract as against defendant 1: defendant 1 could be ordered to convey the whole property to the plaintiff and the plaintiff could be ordered to reconvey plot (d) to defendant 2 (and defendant 2 could in his turn obtain specific performance against the plaintiff under Section 27 of the Act). In his submission Ss. 14 and 15 should be confined to cases where inability to complete is due to a legal defect (such as want of title), whereas here defendant 1 had not parted with legal interest and there were merely equities in favour of defendant 2.
  • The plaintiff also vaguely alleged collusion between the defendants, but the opinion records there was no proof of collusion.

Defendant(s)' Arguments / Versions (as recorded)

  • Defendant 1 maintained that the plaintiff was to make his own arrangements about plot (d) and either settle with defendant 2 or give up plot (d). This version of defendant 1 was contradicted by the written contract and disbelieved by the trial Judge.
  • Defendant 2 pursued a separate suit and obtained a consent decree (recorded in the opinion) directing execution of a sale deed in his favour within 15 days, which formed the factual basis for treating the prior agreement as binding.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
52 IA 90 (observations of Lord Sumner / Privy Council) That Sections 14–17 of the Specific Relief Act "constitute a complete code" governing partial specific performance; and the precautionary approach required by Section 16 — the Court must have material tending to establish that a part of the contract can and ought to be specifically performed and stands on a separate and independent footing; the Court cannot act on mere surmise nor make a new bargain for the parties. The Court relied on these observations to apply Sections 14–17 as a complete code, to require concrete material before applying Section 16, and to refuse to apply Section 16 where doing so would effectively require the Court to make a new bargain or act on speculative inferences.

Court's Reasoning and Analysis

The Court proceeded in a step-by-step legal analysis strictly within the framework of Sections 14–17 of the Specific Relief Act:

  1. Binding nature of the prior agreement: The Court first held that the October 1929 agreement between defendant 1 and defendant 2 was binding on the plaintiff. The bargain paper executed by defendant 1 and the plaintiff mentioned the prior agreement; the plaintiff had notice and made no inquiries; there was a consent decree in favour of defendant 2; and the plaintiff's allegation of collusion was unsupported. On those facts the trial Judge was right to treat the prior agreement as binding on the plaintiff.
  2. Application of Sections 14–17: The Court treated Sections 14–17 as a complete code for partial specific performance and considered whether any of those sections permitted a decree in the plaintiff's favour:
    • Section 14 was inapplicable because the part (plot (d)) which could not be performed did not constitute only a small proportion of the whole in value.
    • Section 15 would permit specific performance of so much as could be performed only if the plaintiff were prepared to relinquish claims to further performance or compensation; specifically, the plaintiff would have to accept conveyance of the properties excluding plot (d) and pay the purchase price reduced accordingly. The plaintiff had expressed unwillingness to accept that course, so Section 15 did not help him.
  3. Submission under Section 16 and the Privy Council guidance: Because Sections 14 and 15 were inapplicable, the plaintiff's case depended on Section 16 (specific performance of a separable part). The Court emphasized the Privy Council's caution in 52 IA 90: before exercising Section 16 the Court must have material tending to show that a part can and ought to be specifically performed and stands on a separate and independent footing, and the Court must not, by judicial fiat, make a new bargain for the parties.
  4. Application of Section 16 to the facts: The Court examined whether plots (a), (b) and (c) could be treated as a separable part:
    • There was no clear basis in the bargain paper or evidence to fix a separate price for plots (a), (b) and (c) (the suggestion that their price could be treated as Rs. 7,000 minus Rs. 2,000 for plot (d) was rejected as speculative).
    • All four plots had been mortgaged and defendant 1 had undertaken to pay off the mortgage debt on all four and to execute a single sale deed for the four plots; that scheme supported treating the contract as an entire contract rather than separable bargains.
    • The mortgage debt and the reliefs claimed in the plaint (which involved payments to, and dealings with, the mortgagee) meant that effectuating a separable decree in respect of plots (a)–(c) would likely require the Court to make new arrangements or bargains between the parties — precisely what Section 16 and the Privy Council's guidance disallow in the absence of concrete material showing separability.
    • Defendant 1's later contention that the plaintiff should make his own arrangements about plot (d) was contradicted by the written contract and disbelieved by the trial Judge; the plaintiff's pleaded case and evidence treated the four plots as one transaction to be dealt with together.
  5. Damages and alternative relief: The Court noted that the plaintiff did not claim damages for total breach. Although Section 19 might permit an award of damages, that point was not pressed before the Court and there was no evidence of material damage suffered by the plaintiff. Therefore damages were not awarded.
  6. Conclusion of analysis: Given that (i) the prior agreement bound the plaintiff, (ii) Sections 14 and 15 did not afford relief, and (iii) Section 16 could not be applied on the material before the Court without effectively making a new bargain or acting on speculation, the Court concluded the trial Judge was correct in dismissing the suit.

Holding and Implications

APPEAL DISMISSED.

Implications and direct effects (as stated in the opinion):

  • The trial Judge's dismissal of the plaintiff's suit for specific performance is affirmed.
  • The plaintiff is bound by the prior agreement between defendant 1 and defendant 2 (as found by the trial Judge and affirmed on appeal).
  • No decree for specific performance in favour of the plaintiff was granted in respect of either the whole contract or a separable part (plots (a), (b) and (c)).
  • The Court awarded costs in favour of the respondents: there will be two sets of costs (as recorded in the opinion).
  • The opinion records that while damages might have been available under Section 19, that remedy was not pressed and there was no evidence of material damage; consequently no damages were awarded and no new precedent expanding the scope of Sections 14–17 was established beyond the application of the existing authorities cited.

Disposition as recorded: "9. Appeal dismissed." (Signed R.M./R.K. in the reported opinion.)

Show all summary ...

Broomfield, J.:— This is an appeal from a decree dismissing the plaintiff's suit for specific performance of an agreement by defendant 1 to sell four plots of land at Kurduwadi with buildings thereon described in the plaint as (a), (b), (c) and (d). The material facts are these: On 21st October 1929 defendant 1, who is the owner of these four plots had agreed to sell plot (d) to defendant 2 for Rs. 2000. Rs. 200 were paid as earnest money and the bargain paper provided that the sale deed was to be executed after Divali that is to say in about a fortnight. On 18th April 1930 defendant 1 agreed to sell all the four plots to the plaintiff for Rs. 7000. The bargain paper recited that the properties had been mortgaged to one Dr. Patki; that the vendor, defendant 1, was to pay off the amount of the decree obtained by the mortgagee and execute a sale deed in the plaintiff's favour within 15 days. There was a reference to the prior agreement between defendant 1 and defendant 2:

About six months ago, I have taken Rs. 200 as earnest money from one Shankar Gangaram Salunke and had agreed to sell to him the last plot out of the aforesaid property, measuring 90 feet in length and 48 feet in width, and have passed to him a receipt in writing. But according to the terms in the said receipt, he has not paid to me the remaining amount and has not got the sale deed executed. As he has not fulfilled the terms, his receipt has become null and void. I will not allow the same to affect you.

2. In May 1930, the plaintiff sent a notice to defendant 1 calling upon him to complete the agreement. He also published a notice in a newspaper. On 6th June 1930 defendant 2 filed a suit for specific performance of defendant 1's agreement to sell plot (d) to him and on 25th June 1930 the plaintiff filed the suit, from which this appeal arises, praying that defendant 1 should be ordered to execute a sale deed in favour of the plaintiff, that in case defendant 1 fails to pay off the amount to Dr. Patki the amount of the mortgage decree should be kept aside and the balance, if any, ordered to be paid to defendant 1, that in case defendant 1 fails to execute the sale deed a sale deed may be ordered to be executed by the Court, and that if the Court finds that specific performance can not be granted in respect of some part, damages to that extent may be awarded to the plaintiff. Notices of this suit were served on the defendants in July 1930. In the suit filed by defendant 2 a consent decree was passed on 1st September 1930 which provided that the plaintiff was to receive Rs. 1600 and execute a sale deed in defendant 2's favour within 15 days. The plaintiff's suit for specific performance has been dismissed because the trial Judge held that Section 15 of the Specific Relief Act, applied and the plaintiff was unwilling to purchase plots (a), (b) and (e) without compensation for defendant 1's inability to convey plot (d) to him. It has been argued by the learned counsel for the appellant, though not I think very strenuously, that the plaintiff is not bound by the agreement between defendant 1 and defendant 2. He says that this agreement ceased to be binding owing to the long delay and failure to implement it. But the plaintiff had notice of this agreement. It was mentioned in his own bargain paper. He was put upon inquiry therefor, and he admits that he made no inquiries. There is nothing at all to show that time was of the essence of the contract. A decree for specific performance has actually been obtained, and though the plaintiff vaguely alleged collusion between the defendants, there is no proof of anything of that sort. Clearly therefore the trial Judge was right in holding that the agreement of October 1929 is binding on the plaintiff.

3. That being so, the question whether the plaintiff is entitled to the relief claimed by him depends on the application of Sections 14 to 17 of the Specific Relief Act, which, as Lord Sumner says in 52 IA 90,1 “constitute a complete code, within the terms of which relief of the character in question must be brought if it is to be granted at all.” These sections are as follows:

14. Where a party to a contract is unable to perform the whole of his part of it, but the part which must he left unperformed hears only a small proportion to the whole in value, and admits of compensation in money, the Court may, at the suit of either party, direct the specific performance of so much of the contract as can be performed, and award compensation in money for the deficiency.

15. Where a party to a contract is unable to perform the whole of his part of it, and the part which must be left unperformed forms a considerable portion of the whole, or does not admit of compensation in money, he is not entitled to obtain a decree for specific performance. But the Court may, at the suit of the other party, direct the party in default to perform specifically so much of his part of the contract as he can perform, provided that the plaintiff relinquishes all claim to further performance, and all right to compensation either for the deficiency, or for the loss or damage sustained by him through the default of the defendant.

16. When a part of a contract which, taken by itself, can and ought to be specifically performed, stands on a separate and Independent footing from another part of the same contract which cannot or ought not to be specifically performed, the Court may direct specific performance of the former part.

17. The Court shall not direct the specific performance of a part of a contract except in cases coming under one or other of the three last preceding sections.

4. Mr. Thakor has contended that Ss. 14 and 15 have no application. According to him, there is nothing to prevent the Court from decreeing specific performance of the whole contract as against defendant 1. The position of defendant 2 will be unaffected because under S. 27 of the Act he can in his turn obtain specific performance against the plaintiff. Defendant 1 may be ordered to convey the whole property to the plaintiff and the plaintiff to reconvey plot (d) to defendant 2. Ss. 14 and 15, Mr. Thakor says, should be confined to the case where the inability to complete the contract is due to a legal defect such as want of title, whereas, here defendant 1 has not parted with any legal interest in plot (d). There are merely equities arising in favour of defendant 2. Whether this is so as a matter of act the record does not show. As I have mentioned, the decree of 1st September 1930, directed a sale deed to be executed within fifteen days. But, apart from that, this argument, although undoubtedly ingenious, is, in our opinion, unconvincing. The question before the Court in such a case must always be whether the contract can be executed in substance. Assuming that defendant 1 could still convey plot (d) to the plaintiff subject to equities, and under conditions, it would not be the same contract. Defendant 1 by reason of his prior agreement with defendant 2 is just as much unable to carry out the whole of his part of the original agreement within the meaning of S. 14 and S. 15 as if he had no legal title to plot (d). The wide and simple language of these sections cannot in our opinion be limited in the manner suggested.

5. It cannot be said that plot (d) bears only a small proportion to the whole, therefore S. 14 does not apply. Under S. 15 the plaintiff can only get specific performance if he is prepared to pay the agreed purchase price for the properties minus plot (d). He has expressed his unwilling, ness to do this. The suit must fail therefore unless it can be brought under S. 16, which the learned trial Judge has not considered. In view of the observations of their Lord, ships of the Judicial Committee in 52 IA 90 this section must be applied with great caution. Ad page 93 of the report we find these observations:

Their Lordships think (1) that before a Court can exercise the power given by S. 16 it must have before it some material tending to establish these propositions, (the propositions are those stated in the section, viz that there was a part of the contract, which, taken by itself could and ought to be specifically performed and which stood on a, separate and independent footing from the other part of the contract), and cannot apply the section on a mere surmise that, it opportunity were given for further inquiry, such material might be forthcoming and possibly might be found to be sufficient; and (2) that the words of the section, wide as they are, do not authorize the Court to take action otherwise than judicially, and in particular do not permit it to make for the parties or to enforce upon them a contract, which in substance they have not already made for themselves.

6. It is suggested that the part of the contract which could and ought to be specifically performed is the contract to sell plots (a), (b) and (c). But at what price was it agreed to sell them? The Court is asked to assume that as there was an agreement by defendant 1 to sell plot (d) to defendant 2 for Rs. 2000, therefore an agreement to sell plots (a), (b) and (o) to the plaintiff for Rs. 5000 (the difference between Rs. 7000 and Rs. 2000) may be inferred. But is that so? The considerations pointed out by the Privy Council in the case just referred to at p. 91 of the report may apply here also.

7. It may well be that because the four plots were sold together, the total price was less than it would have been if the four plots had been sold separately or plot (d) separately from the others. And then what about the mortgage debt? I have set out the reliefs claimed in the plaint in respect of that. How could the Court possibly deal with the matter without in effect making a new bargain between the parties? It is very far from clear therefore that there was any part of the contract which taken by itself could and ought to be specifically performed.

8. Then as to the agreement about plot (d) standing on a separate and independent footing. There is nothing in the bargain paper to suggest it. No doubt plot (d) was referred to separately, but only for the purpose of showing that the previous agreement was invalid or had lapsed and there, fore plot (d) could be treated as on the same footing as the rest of the properties. All the four plots had been mortgaged. Defendant 1 was to pay off the mortgage debt on all four and execute one sale deed for the four. The plaintiff has made precisely the same case in the plaint and in his evidence. It is not his case that there was a separate bargain about plot (d). It is true that defendant 1 has stated that the plaintiff was to make his own arrangements about plot (d) and either settle with defendant 2 or give it up. But defendant 1's version of the whole affair is contradicted by the written contract and has been quite rightly disbelieved by the trial Judge. There was only one contract for the four plots. The ordinary presumption is that it was an entire contract, intended to be dealt with as a whole and not piece, meal, unless and until the contrary is shown. In our opinion, the contrary has not been shown in this case and S. 16 cannot be said to apply. The plaintiff did not claim damages for the total breach of the contract. Having regard to S. 19 of the Act, damages for breach might nevertheless have been awarded, but the point has not been pressed before us, presumably because there is no evidence whatever of material damage having been suffered by the plaintiff. We hold that the trial Judge was right and dismiss the appeal with costs. There will be two sets of costs.

R.M/R.K

9. Appeal dismissed.