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Harendra Chandra Das v. Nanda Lal Roy

Calcutta High Court
Jun 2, 1932
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Structured Summary of the Opinion

Factual and Procedural Background

The plaintiff sued for specific performance of a contract for sale alleged to have been entered into by defendants 1 to 5 on 3rd Chaitra 1330 B.S., or alternatively for refund of earnest money and recovery of damages. Defendants 2 to 5 held maliki (ownership) rights in the subject property as members of a joint Hindu family with specific shares; defendant 1 held a meadi ijara (lease) right in the share of defendant 3. Defendant 6 was the karta (manager) of the joint family and, with defendant 7 (an officer of the estate), acted as agents in respect of the alleged contract. Defendants 8 to 13 were purchasers from defendants 1 to 5 by kabalas dated 4th Ashar 1331.

The trial Court (Subordinate Judge, Second Court, Sylhet) decreed the suit in favour of the plaintiff, awarding Rs. 350 against defendants 1 to 7 and costs, but disallowing certain claims (including Rs. 3,000 for compensation). On appeal, the District Judge of Sylhet modified the decree: he decreed the suit as against defendants 2, 4 and 5 to 13; allowed specific performance as against defendants 2, 4 and 5 and 8 to 13 in respect of the agreement dated 3rd Chaitra 1330; declared the kabalas dated 4th Ashar 1331 invalid in respect of the shares of defendants 2, 4 and 5; directed execution of a fresh kabala in favour of the plaintiff for those shares; and dismissed the suit as against defendants 1 and 3.

Both the plaintiff and defendants 2 and 4 to 13 appealed to the Court which delivered the opinion summarised here.

Legal Issues Presented

  1. Whether there was any contract for sale to the plaintiff (existence of the alleged agreement dated 3rd Chaitra 1330).
  2. Whether the contract, if found, was legally enforceable and capable of specific performance.
  3. Whether defendants 6 and 7 (the agents) had authority to enter into the contract.
  4. Whether defendants 1 to 5 approved of or ratified the contract (and which of them, if any, ratified it).
  5. Whether defendants 8 to 13 had notice of the alleged contract and were bona fide purchasers for value without notice.
  6. Whether specific performance could be granted as to part shares of joint property where some co-sharers ratified and others did not.

Arguments of the Parties

Plaintiff's Arguments

  • The plaintiff sought specific performance of the contract dated 3rd Chaitra 1330, alternatively claiming refund of earnest money and damages.
  • Implicit in the plaintiff's position (as reflected in the judgment) was that a concluded agreement had been entered into with defendants 1 to 5 by agents (defendants 6 and 7) and that the agreement could be enforced against those who had ratified it or who had notice.
  • The plaintiff pointed out an inaccuracy in the appellate Court's quoting of a witness's deposition (writing versus reading the sale document), but this was advanced only as a challenge to a specific passage of the lower Court's judgment rather than as a substantive alteration of the factual findings relied on for ratification by certain defendants.

Defendants' Arguments (as presented in the opinion)

  • Defendants 1 to 5 denied the contract alleged by the plaintiff, and asserted that defendants 8 to 13 were bona fide purchasers for value without knowledge or notice of any earlier agreement.
  • Defendants 6 and 7 contended (or it was disputed) that they acted beyond the scope of authority in entering into the agreement on behalf of defendants 2 to 5.
  • Defendants 2 and 4 to 13 (as appellants) relied on decisions of the Judicial Committee of the Privy Council (notably Rai Promotha Nath Mittra v. Gostha Behari Sen and Graham v. Krishna Chunder Dey) to argue that where not all co-owners have consented or where the contract was not of a divisible nature, specific performance could not be granted; they urged that there was no concluded contract enforceable against them because defendants 1 and 3 had not ratified the contract and there was no mutuality allowing enforcement against only some co-owners.
  • Defendants 8 to 13, as purchasers, argued they were transferees for value without notice (bona fide purchasers) and thus could not be subjected to specific performance of a prior contract they allegedly did not know about.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Baburam Bag v. Madhab Chandra Pollay (1913) 40 Cal 555 Establishes that when a person claims to be a transferee for value without notice of an earlier contract, the burden is on him to prove he is such a transferee (i.e., bona fide purchaser without notice). The Court applied this principle to hold that defendants 8 to 13, who made no inquiry despite circumstances that should have put them on guard, could not claim to be transferees without notice and therefore could be subjected to specific performance.
Rai Promotha Nath Mittra v. Gostha Behari Sen, AIR 1932 PC 43 In that case the Judicial Committee treated contracts that were made on the footing that all owners would consent as requiring relinquishment by the plaintiff (under the Specific Relief Act) before specific performance could be granted; it concerns the limits on enforcing a contract where not all co-owners have consented. The Court distinguished the present case from Rai Promotha Nath Mittra: it held that the present contract related to separate shares of co-sharers and was not made on the footing that all owners must consent, so the rule in Rai Promotha Nath Mittra did not prevent specific performance here.
Graham v. Krishna Chunder Dey, AIR 1925 PC 45 The Judicial Committee held that Sections 14 to 17 of the Specific Relief Act constitute a complete code regarding specific performance of part of a contract and provided guidance on when part-performance and enforcement of part of a contract is permissible (including the operation of Section 16 regarding separable items). The Court relied on the Graham principle to conclude that where separate shares of co-sharers stand on independent footing, specific performance of those shares can be granted; the present shares were separable, so Graham supported enforcement as to the ratifying co-sharers' shares.

Court's Reasoning and Analysis

The Court proceeded through the following analytical steps, strictly following the findings and reasoning set out in the opinion below:

  1. Existence of Contract and Agency: The District Judge (appellate Court below) found, on the evidence, that defendants 6 and 7 entered into a contract with the plaintiff on 3rd Chaitra 1330 on behalf of defendants 2 to 5. The agents (defendants 6 and 7) were found to have acted beyond their authority.
  2. Ratification: Although the agents had exceeded authority, defendants 2, 4 and 5 subsequently ratified the contract; defendants 1 and 3 did not ratify. The Court of appeal's factual finding as to ratification was accepted as conclusive by the Court delivering the opinion, and an asserted inaccuracy in quoting a witness's deposition was held not to affect the lower Court's ratification findings.
  3. Purchasers and Notice: The appellate Court found evidence that defendants 8 to 13 had information of negotiations and had been asked by the plaintiff's agent not to purchase. The District Judge refused to disbelieve the plaintiff's evidence on this point and held that even knowledge of ongoing negotiations should have put those purchasers on enquiry; having failed to inquire, they could not establish the character of transferees without notice. The Court applied the settled rule (cited to Baburam Bag) that the burden lies on a purchaser to prove bona fide purchaser status where notice is in issue, and affirmed the finding that specific performance could be enforced against defendants 8 to 13.
  4. Divisibility of the Contract / Specific Performance as to Shares: The Court examined whether the agreement was indivisible (thus preventing part performance) or divisible with respect to the separate co-sharers' shares. It concluded, on the facts, that the contract related to the distinct and separate shares of co-sharers (defendants 2 to 5), and the negotiations and intention indicated divisibility. Because defendants 2, 4 and 5 ratified their parts and defendant 3 refused, the contract was in effect separated as to those shares and therefore specific performance could be granted as to the shares of the ratifying co-sharers.
  5. Application of Privy Council Authorities and Specific Relief Act: The Court addressed the reliance placed by defendants on Privy Council authorities (Rai Promotha Nath Mittra and Graham). It distinguished Rai Promotha Nath Mittra because that case concerned contracts made on the footing that all owners would consent (which would involve Section 15 relinquishment issues). Here, the contract concerned separate shares negotiated and standing independently, so the rule in Rai Promotha Nath Mittra did not apply. The Court invoked the Graham decision to the effect that Sections 14–17 of the Specific Relief Act form a complete code for part performance and specific enforcement of part of a contract; since the shares were separable, Section 16/Section 15 considerations relied upon by defendants did not prevent enforcement as to the ratified shares.
  6. Conclusion on Appeals: Having affirmed that (a) a contract was made by agents and (b) defendants 2, 4 and 5 ratified it while 1 and 3 did not, and (c) defendants 8 to 13 were not bona fide purchasers without notice, the Court concluded that the District Judge's decree granting specific performance against defendants 2, 4, 5 and 8 to 13 (and directing invalidation of certain kabalas and execution of a fresh kabala as to the shares of defendants 2, 4 and 5) was correct and should be affirmed.

Holding and Implications

DISMISSED: Both appeals were dismissed with costs, and the decree of the learned District Judge in the Court of appeal below was affirmed.

Direct Consequences (as set out in the opinion)

  • The decree granting specific performance as against defendants 2, 4 and 5 and against defendants 8 to 13 (in respect of the shares of defendants 2, 4 and 5) was upheld.
  • The kabalas dated 4th Ashar 1331 in favour of defendants 8 to 13 were declared invalid so far as the shares of defendants 2, 4 and 5 were concerned, and the District Judge's direction for execution of a fresh kabala in respect of those shares in favour of the plaintiff was affirmed.
  • The plaintiff's suit was dismissed as against defendants 1 and 3 (no ratification by them); the agents (defendants 6 and 7) had acted beyond authority but the contract was ratified by some co-sharers.

Implications on Legal Principles

The opinion applies established principles (burden on a purchaser claiming to be without notice; divisibility of contracts with respect to separate shares) and distinguishes the Privy Council precedents relied upon by appellants on the specific facts before the Court. The judgment does not purport to lay down a new legal principle beyond the application and distinction of existing authorities; its effect is to confirm the correct application of those authorities to the facts, resulting in specific performance as to the ratified shares and enforcement against purchasers who had notice or were on inquiry.

K.N/R.K
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1. The plaintiff in the suit out of which these two appeals have arisen, prayed for a decree for specific performance of a contract for sale said to have been entered into by defendants 1 to 5 on 3rd Chaitra 1330 B.S or in the alternative for refund of earnest money and recovery of damages. Defendants 2 to 5 had maliki right in the property which was the subject matter of the contract for sale, to the extent of certain definite shares owned by each of them as a member of a joint Hindu family; defendant 1 had a meadi ijara right in the property to the extent of the share of defendant 3. Defendant 6 was the karta of the joint family of which defendants 1 to 5 were members, defendant 1 being the mother of defendants 2 to 5. Defendant 7 was an officer of the joint family-estate. Defendants 6 and 7 acted as agents in the matter of the contract for sale, of which specific performance was prayed for by the plaintiff Defendants 8 to 13 are purchasers from defendants 1 to 5, by kabalas dated 4th Ashar 1331, of the property in regard to which the plaintiff asked for specific performance. The plaintiff's claim in suit was resisted by all the defendants mentioned above. The contract for sale as alleged by the plaintiffs, was denied; it was asserted that defendants 8 to 13 were bona fide purchasers for value, without knowledge or notice of any previous agreement for sale with the plaintiff as alleged by the plaintiff in the suit. The controversy between the parties to the litigation are indicated by the principal issues raised for determination in the suit, which were to the following effect: Was there any contract for sale to the plaintiff? Was the contract legally enforceable and capable of specific performance? Had defendants 6 and 7 any authority to enter into any eon-tract? Did defendants 1 to 5 approve of or ratify the contract? Had defendants 8 to 13 notice of the contract? Are defendants 8 to 13 bona fide purchasers for value? The learned Subordinate Judge, Second Court, Sylhet, in whose Court the suit was instituted, passed a decree in the suit in these words:

“The suit be decreed with costs, decree against defendants 1 to 7 being for Rs. 350 and against all the defendants for costs, prayers ka to chha of the plaint and claim for Rs. 3,000 as compensation being disallowed and interest running at 6 per cent per annum on decretal amount till realization.”

2. The prayers ka to chha, it may be mentioned, related to specific performance. On appeal by the plaintiff, the learned District Judge of Sylhet modified the decree of the trial Court, and passed a decree directing that the suit be decreed as against defendants 2, 4, and 5 to 13, and that the plaintiff be allowed specific performance as against defendants 2, 4, 5 and 8 to 13, of the agreement dated 3rd Chaitra 1330. The kabalas dated 4th Ashar 1331, in favour of defendants 8 to 13 were declared invalid, in respect of the shares of defendants 2, 4 and 5. The decree further directed the execution of a fresh kabala in respect of the shares of defendants 2, 4 and 5, in favour of the plaintiff. The plaintiff's suit was dismissed as against defendants 1 and 3. Defendants 2 and 4 to 13, as well as the plaintiff, have appealed to this Court. The defendants' appeal being appeal from Appellate Decree No. 851 of 1929 while the appeal by the plaintiff is appeal from Appellate Decree No. 898 of 1929. In view of the questions raised in these appeals the findings arrived at by the learned District Judge on appeal in his elaborate and careful judgment may be briefly referred to. The learned Judge held upon the evidence before him, that defendants 6 and 7, on behalf of defendants 2 to 5, entered into a contract with the plaintiff for the sale of the property, and that the agreement was concluded on 3rd Chaitra 1330, Defendants 6 and 7, the agents, were, according to the learned Judge's finding, acting beyond the scope of their authority, but the agreement was ratified by defendants 2, 4 and 5, but not by defendants 1 and 3. On the question of the position of defendants 8 to 13 the District Judge has held that on the facts and in the circumstances mentioned by him the contract could be specifically enforced against them.

3. One of the points raised in the appeal by defendants 2 and 4 to 13 is with reference to the decision arrived at by the Court of appeal below, that defendants 8 to 13 were persons against whom the plaintiff's contract could be specifically performed; and mention has to be made of the reason given by it in this behalf. The learned Judge has made mention of evidence showing that these defendants had information of what was taking place in regard to the contract for sale, to the plaintiff, and of evidence showing that the plaintiff's agent having asked them not to buy the property in question. The learned Judge has refused to disbelieve plaintiff's evidence on the point; and has held that even if they were only aware of the fact that negotiations for the sale of the property was in progress, between defendants 1 to 5 and the plaintiff's agent, that should have put them on their guard, and they should have made necessary inquiries as to whether any agreement to sell the property had been definitely concluded. This defendants 8 to 13 did not do. There can be no doubt that the learned District Judge has rightly directed himself in coming to the decision on the question whether defendants 8 to 13 were or were not bona fide purchasers for value, and whether or not they had knowledge or notice of the previous contract with the plaintiff. It is well settled now that when a person claims to be a transferee for value without notice of the original contract, the burden lies upon him to prove that he fulfils that character. If defendants 8 to 13 chose to make no inquiry, they could not claim to be transferees without notice: “they could not predicate of themselves” that they were persons who claim without notice of the contract of 3rd Chaitra 1330, with the plaintiff: see in this connexion, Baburam Bag v. Madhab Chandra Pollay . 1913 40 Cal 555. The decision of the learned Judge, in the Court of appeal below, that the contract could be specifically enforced against defendants 8 to 13, is upon the findings arrived at by him correct and must be affirmed.

4. On the question of ratification of the contract for sale to the plaintiff by defendants 2, 4 and 5, and not by defendants 1 and 3, which was raised in the appeal by the plaintiff, there is a clear finding of fact arrived at by the learned District Judge. It was pressed before us that there has been an inaccuracy in quoting from the deposition of one of the witnesses for the plaintiff, examined on is this part of the case, inasmuch as the witness stated that he “wrote” the document evidencing the sale to the plaintiff, at the bidding of defendants 1 to 5, and not that he “read out” the same, as mentioned in the judgment of the Court of appeal below. It has also been urged that upon the findings arrived at by the lower appellate Court, there was ratification in law by defendants 1 and 3, on the evidence that was common to the defendants 1 to 5. We are unable to say that the inaccuracy in quoting a passage from the deposition of a witness, to which reference has been made above, in any way affects the findings and the conclusion arrived at by the learned Judge in the Court below, on the question of ratification. Prom the facts and circumstances to which reference has been made in the judgment of the Court below, the conclusion followed that the defendants 1 and 3 had not ratified the contract. It is impossible upon the findings arrived at by the lower Court, to hold in favour of the plaintiff, that defendants 1 and 3 had ratified the contract; and upon those findings there appears to be no justification for the contention that there was ratification in law, seeing that upon the facts proved in the case, and upon the inference drawn from such facts, there was no ratification of the contract, either express or implied, so far as defendants 1 and 3 were concerned.

5. The question whether the contract of 3rd Chaitra 1330, was legally enforceable, and the question whether the contract was capable of specific performance, were raised before the Courts below, and have been urged in the appeal by defendants 2 and 4 to 13. The plaintiff who had previously acquired some share in the property in suit, was desirous of securing other shares in the same. With a view to this, there were negotiations with defendants 2 to 5 for purchase of the shares of the property owned by them; defendant 6 who had sold his own share in the property to the plaintiff, negotiated as agent of defendants 2 to 5. Upon the finding arrived at by the Court below, the agents (defendants 6 and 7) had gone beyond the scope of their authority, but defendants 2, 4 and 5 had subsequently ratified the contract entered into by the agents on their behalf; defendants 1 and 3 however did not ratify the contract.

6. Thus the contract sought to be specifically enforced was not treated by the parties concerned as one entire contract indivisible in its nature: it was not also a contract entered into by a cosharer of joint property undertaking to obtain the consent of the other cosharers in respect of joint property. It may be noticed that the nature of a contract, whether it was divisible or not, must be determined upon the facts and circumstances of each particular case; and the question was essentially a question of fact. The contract entered into by the agents in the case before us, was one, in regard to the distinct and different shares of cosharers defendants, 2 to 5, in the joint property, and in respect of which shares only, taken separately, there could be a conveyance of title, so far as any of the cosharers was concerned. There was the contingency of any of the cosharers not agreeing to convey his own share; and subsequent events showed that such contingency did happen. The position then was this: the agents were negotiating on behalf of each of the cosharers, defendants 2 to 5, for the sale of the joint property; some of the parties concerned, defendants 2, 4 and 5, ratified the action of the agents; defendant 3 as well as defendant 1 did not ratify the same.

7. Defendant 1, it must be remembered, was not a cosharer, but was only an ijaradar of the share of defendant 3 in the joint property. The contract therefore in the case before us, was one that was, on the face of it, and in view of the conduct of the parties and the intention to be gathered from such conduct, divisible in its nature; and was, in point of fact separated and divided by defendants 2, 4 and 5 ratifying the contract, and by the refusal of defendant 3 to do so, in respect of his own share in the joint property. It was therefore an agreement between the plaintiff and defendants 2, 4 and 5 for sale, and does not come within the general rule that where a person is jointly interested in an estate with another person, and purports to deal with the entirety, specific performance will not be granted against him as to his share. Very great reliance has been placed by the learned advocate for, defendants 2 and 4 to 13, appellants, on the pronouncements of their Lordships; of the Judicial Committee of the Privy Council, in the case of Rai Promotha Nath Mittra v. Gostha Behari Sen . AIR 1932 PC 43, as also upon the rule laid down by their Lordships in Graham v. Krishna Chunder Dey . AIR 1925 PC 45, in support of the case of these defendants, that there was no concluded contract in the case before us, which could be specifically enforced by the plaintiff, in view of the non-ratification of the contract by defendants 1 and 3; and that the plaintiff not having relinquished his claim to further performance and all right to compensation, was not entitled to a decree for specific performance. It was urged that there was no mutuality in the contract of which specific performance was sought, as defendants 2, 4 and 5 could not insist upon the enforcement of the contract.

8. The questions thus raised do not in our judgment, arise for consideration in the case before us, in view of the nature of the contract entered into. It cannot be said in this case, as it was made out in Rai Promatha Nath Mittra's case that the contract was on the footing that all the owners of the property would consent to the sale. The agents acting on behalf of defendants 2 to 5 in this case were negotiating for the sale to the plaintiff, of the share of the joint property, owned by each of these defendants separately; and defendant 3 refused to ratify the act of the agents, so far as his own share was concerned. In Graham's case, their Lordships of the Judicial Committee definitely held that in India Sections 14 to 17 of the Specific Relief Act, 1877, constituted a complete Code, so far as specific performance of part of a contract was concerned, and their Lordships laid down the law in a case where there was the question of a part performance of a contract, the vendor having failed to make title to one of the two items of property agreed to be sold. The contract was not one in regard to which it could be said that one of the items of property stood on a separate and independent footing, so as to be within the terms of Section 16 of the Specific Relief Act. In the case before us, the separate shares of defendants 2 to 5 in the joint property stood altogether on an independent footing, and the plaintiff and the agents on behalf of these defendants were negotiating for the sale of these separate shares of these defendants in the joint property. The case placed before the Court by the plaintiff, regard being had to the averments made in his plaint, was one to which Section 15 of the Specific Relief Act, could not have any application; and the rule laid down by the Judicial Committee, in Rai Promotha Nath Mittra's case that unless there was relinquishment by the plaintiff of claims, as provided by that section, there could be no decree made for specific performance, in favour of the plaintiff, could not therefore apply. The contract in the case before us, was, after ratification, a concluded contract in regard to the shares of defendants 2, 4 and 5, and as such, specific performance could be granted of the same. The decision of the learned District Judge, in the Court of appeal below, in favour of the plaintiff, is, in our judgment, correct, and it is in consonance with the principles underlying the decisions of the Judicial Committee of the Privy Council in the cases referred to above, upon which reliance has been placed on behalf of defendants 2 and 4 to 13 in the suit. In the result both the appeals are dismissed with costs. The decision and decree passed by the learned District Judge in the Court of appeal below are affirmed.

K.N/R.K

9. Appeals dismissed.