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citation codes
Case Number
Judges
  • Mookerjee
  • Beachcroft, JJ.
Acts
  • Section 27, Clause (b) of the Specific Relief Act,
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Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Judges
  • Mookerjee
  • Beachcroft, JJ.
Acts
  • Section 27, Clause (b) of the Specific Relief Act,
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Smart Summary

Structured Summary of the Opinion

Factual and Procedural Background

The dispute arises from an agreement dated 21 September 1904 by which the plaintiff agreed to finance litigation brought by defendant 1 (an ejectment action begun 23 December 1902) in return for the benefit of any favourable decree; defendant 1 agreed that upon receipt of Rs. 2,000 he would convey the property to the plaintiff if his title was upheld. On 12 December 1904 a decree in favour of defendant 1 was made in the ejectment suit. Defendants 2 and 3 appealed and on 11 May 1905 a consent decree (by agreement between the appellants and defendant 1) was entered setting aside the 12 December 1904 decree. The Subordinate Judge found that defendants 2 and 3 had obtained defendant 1's assent to the compromise by payment of Rs. 1,500 and that they were aware of (and possessed a copy of) the plaintiff's agreement with defendant 1.

The plaintiff then commenced the present suit on 30 May 1905 seeking a declaration that the consent decree of 11 May 1905 was fraudulent and collusive and did not affect his rights under the 12 December 1904 decree, and further sought specific performance of the 21 September 1904 agreement. Defendant 1 did not resist the claim; defendants 2 and 3 denied the agreement's factum and validity. The trial Court dismissed the suit; on appeal the plaintiff obtained a decree. The present appeals were brought — one by defendants 2 and 3 and another by defendant 4 — against that decree.

Legal Issues Presented

  1. Whether the agreement of 21 September 1904 (by which the plaintiff financed defendant 1's litigation in return for a conveyance upon payment of Rs. 2,000) is of a nature that a Court of Equity will not specifically enforce it.
  2. Whether, even if the consent decree of 11 May 1905 is declared inoperative as to the plaintiff, defendants 2 and 3 are nevertheless entitled to restoration to the position they occupied as appellants against the decree of 12 December 1904 (i.e., whether the consent decree should be vacated and the prior appeal reinstated).
  3. Whether the deposit of Rs. 2,000 payable by the plaintiff should be credited to defendant 1 alone or to defendants 1, 2 and 3 jointly (and related questions as to entitlement and distribution).
  4. Whether defendant 4, who purchased during the pendency of the present litigation, can claim title notwithstanding the doctrine of lis pendens.

Arguments of the Parties

Appellants (Defendants 2 and 3) — Principal Arguments

  • The agreement is of such a nature that a Court of Equity will not specifically enforce it (i.e., the agreement is not enforceable in equity).
  • Even if the consent decree is declared inoperative, defendants 2 and 3 should be restored to the position they occupied as appellants against the decree of 12 December 1904 — in effect, the consent decree should be vacated and the earlier appeal re-instated.
  • As to the deposit of Rs. 2,000, they contended that if defendant 1's rights have vested in defendants 2 and 3, then defendants 2 and 3 alone are entitled to the money and are liable to execute the conveyance.

Other Parties / Positions Noted

  • Defendant 1 did not resist the plaintiff's claim in the suit and therefore made no contest to enforcement of the agreement.
  • Defendant 4's position (the grounds of his appeal) is not detailed in the opinion, but the Court observed that he purchased during the pendency of the litigation and is subject to lis pendens.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Bhagwant Dayal Singh v. Debi Dayal Sahu (1904 35 Cal 420) That the propriety of an agreement of this nature can be questioned only by the parties thereto. Used to support the conclusion that the agreement could not be attacked except by parties to it and that the consent decree could not prejudice the plaintiff as a stranger unless shown fraudulent or collusive.
Lala Achal Ram v. Raja Kazim Hussain Khan (1905 27 All 271) That the propriety of an agreement of this nature can be questioned only by the parties thereto. Applied together with other authorities to reject the contention that the agreement is unenforceable in equity as between the plaintiff and defendant 1.
Gossain Ramdhan Puri v. Gossain Dalmir Puri (1909 2 IC 385) Review of earlier decisions establishing that principle (that such agreements are open to challenge only by parties). Cited as further authority confirming enforceability against the obligor and those with notice.
In re South American and Mexican Co. A decree by consent is operative between the parties so long as it is not set aside in a proper judicial proceeding, in the same manner as if it were a decree upon contest. Supported the distinction that a consent decree is operative inter partes but cannot be applied to the prejudice of a stranger.
The Bellcairn Same principle as In re South American and Mexican Co. regarding the inter-partes effect of consent decrees. Reinforced the Court's view that consent decrees cannot defeat rights of strangers absent proper proceedings.
Huddersfield Banking Co. v. Henry Lister and son (1895 2 Ch 273) That a consent decree has no greater validity than the agreement between the parties in so far as strangers are concerned. Used to show the plaintiff (a stranger to the consent) can show the decree fraudulent and collusive and protect his rights.
Great North-West Central Ry. v. Charlebois (1899 AC 114) That a consent decree has no greater validity than the agreement between the parties in so far as strangers are concerned. Applied for the same purpose as Huddersfield Banking Co. — to limit the effect of consent decrees on strangers.
Smith v. Phillips (1 Keen 691) Illustrative authority that a person who takes an estate affected by a prior contract with notice cannot protect himself by relying on his elder title. Included among cases showing that defendants 2 and 3, who had notice and paid consideration, could not gain superior rights via the consent decree.
Foot v. Heron (3 Y & C 586) Same illustrative principle regarding notice and inability to avoid prior contract obligations. Cited as corroborative authority for the principle applied to the present facts.
Union Bank v. Kent (1888 39 Ch D 238) Same illustrative principle regarding purchasers with notice. Used as part of the group of authorities supporting the Court's conclusion on notice and enforceability.
Mumford v. Stohwasser (43 LJ Ch 694) Same illustrative principle regarding purchasers with notice. Referenced in support of the proposition that a purchaser with notice cannot defeat specific performance.
Hunt v. Luck (1901 1 Ch 45) As to the application of the rule in Mumford v. Stohwasser (referenced). Cited as related authority confirming the principle regarding notice.
Khajooroonissa v. Roushan Jehan (1876-77 2 Cal 181) Established that if a consent decree is vacated, the parties are restored to the position they occupied when the consent decree was made. Distinguished by the Court: principle acknowledged but held inapplicable because the plaintiff (a stranger to the consent decree) could not invoke vacation of that decree to restore the earlier appeal.
Raj Kumar Roy v. Harakrishna Chakrabutty (1911 10 IC 355) Reviewed cases on the effect of vacating a consent decree and restoration of parties to earlier positions. Used to show the general principle but distinguished on facts (plaintiff here cannot seek vacatur as a stranger).
Madan Mohan Singh v. Gaja Prasad Singh (1911 11 IC 228) Authority for the proposition that a prayer for possession may be coupled with a prayer for specific performance of a contract. Applied to direct that upon execution of the conveyance the plaintiff should be placed in possession.
Mati Lal Pal v. Preo Nath Mitra (1909 3 ??? 696) Authority on the doctrine of lis pendens barring subsequent purchasers during pendency of litigation. Relied upon to dismiss defendant 4's appeal because he purchased during pendency and was barred by lis pendens.

Court's Reasoning and Analysis

The Court proceeded in a stepwise legal analysis, grounded in precedent and statutory principle as stated in the opinion:

  1. On the contention that the agreement should not be specifically enforced, the Court held there was "no substance" in that argument. It relied on authorities establishing that the propriety of such an agreement can be questioned only by the parties to it; since defendant 1 (the obligor) did not contend the agreement was unconscionable, the agreement stood enforceable as between the plaintiff and defendant 1.
  2. The Court then addressed the effect of the consent decree. Citing authorities that a consent decree is operative between the consenting parties until set aside in proper proceedings, the Court distinguished the inter partes effect from the rights of strangers: a consent decree has no greater validity vis-à-vis strangers than the underlying agreement between the consenting parties. Therefore the plaintiff (a stranger to the consent) could show that the consent decree was fraudulent and collusive and that it did not affect his rights.
  3. Turning to whether defendants 2 and 3 could nonetheless keep the property by virtue of the consent decree, the Court noted the Subordinate Judge found that defendants 2 and 3 had notice of the plaintiff's agreement and had paid consideration to defendant 1 for the settlement. The Court applied Section 27(b) of the Specific Relief Act (as cited in the opinion) and relevant authorities, concluding that defendants 2 and 3 stood in the position of persons taking with notice and therefore could not acquire better rights through the device of a consent decree than they would under a private conveyance. Precedents were cited showing that a person who accepts an estate subject to a prior contract with notice cannot defeat that contract by relying on an elder title.
  4. On the question of the Rs. 2,000 deposit, the Court accepted partially the appellants' contention that if defendant 1's rights had vested in defendants 2 and 3 they would be entitled to the money and liable to execute the conveyance. However, the Court observed it did not know what equities might subsist between defendant 1 on the one hand and defendants 2 and 3 on the other. The Court therefore directed an equitable procedural mechanism: the conveyance should be executed by all three defendants, the sum of Rs. 2,000 should be treated as deposited to the credit of all three, and defendant 1 would be given an opportunity to establish any valid claim to a portion of the sum before the Court of first instance within one month of service of notice.
  5. Regarding the request to vacate the consent decree and reinstate the appeal (i.e., to restore defendants 2 and 3 to their prior position as appellants), the Court held that the principle that vacatur restores parties to their previous position cannot aid the plaintiff here because the plaintiff is a stranger to the consent decree and therefore cannot ask for its vacatur; the only declaration available to him is that the consent decree does not prejudice his rights. Consequently, the Court refused to vacate the consent decree at the plaintiff's instance.
  6. On defendant 4's appeal, the Court concluded he had no title because he purchased during the pendency of the litigation and was barred by the doctrine of lis pendens; accordingly his appeal was dismissed.
  7. The Court also directed that, as the plaint contained a prayer for possession coupled with specific performance, the plaintiff should be placed in possession as soon as the conveyance is executed, relying on prior authority to permit such relief.

Holding and Implications

Core Ruling: APPEAL BY DEFENDANTS 2 & 3 ALLOWED IN PART; APPEAL BY DEFENDANT 4 DISMISSED.

Specific holdings and immediate legal consequences (direct effects on the parties):

  • The decree in favour of the plaintiff for specific performance of the agreement of 21 September 1904 is to be upheld; the Subordinate Judge's order for specific performance is affirmed (subject to the modifications described).
  • The conveyance shall be executed by defendants 1, 2 and 3; if they refuse, the Court will execute it on their behalf.
  • The sum of Rs. 2,000 paid by the plaintiff and deposited to the credit of defendant 1 is to be treated as having been deposited to the credit of all three defendants (1, 2 and 3). Defendants 2 and 3 are prima facie entitled to the sum, but defendant 1 will be given one month after service of notice to establish any valid claim to a portion; if he does not establish a claim or does not appear, defendants 2 and 3 may withdraw the full amount. Any attachment treating the deposit as defendant 1's property will cease.
  • Defendant 4's appeal is dismissed on the ground he purchased during the pendency of the litigation and is barred by lis pendens.
  • Upon execution of the conveyance, the plaintiff is to be placed in possession of the property covered by the conveyance.
  • The order for costs made by the Court below in respect of the first and second Courts will stand; the parties will bear their own costs in the present Court.

Broader legal implications:

The opinion applies and reaffirms established principles (as cited) about the limited effect of consent decrees on strangers, the enforceability of agreements made with litigants who subsequently obtain title, the operation of lis pendens, and the Court's equitable powers to require conveyance and award possession upon specific performance. The opinion does not purport to lay down a new legal doctrine; rather it applies existing authorities to the facts at hand. No statement in the opinion indicates that a novel precedent was intended to be created.

End of summary — based exclusively on the provided opinion.

Show full summary ...

    Fateh Chand v. Narsingh Das

    1. These two appeals have been preferred one by defendants 2 and 3, another by defendant 4 against the decree in a suit for specific performance of a contract for sale of land. The events antecedent to the suit, as found by the Subordinate Judge, may be briefly narrated. On 23rd December 1902, defendant 1 brought an action in ejectment against defendants 2 and 3 in respect of the property now in dispute. On 12th December 1904, a decree was made in that suit, whereby the title of defendant 1 to the disputed property was established and he became entitled to recover possession by ejectment of defendants 2 and 3. During the pendency of that suit, the present plaintiff had entered into an agreement with defendant 1 on 21st September 1904, to the effect that he would finance the litigation and that if in the end a decree was made in favour of defendant, the benefit thereof would accrue to the plaintiff. It was further agreed between the parties that defendant 1, upon receipt of Rs. 2,000, would execute a conveyance in favour of the plaintiff in respect of the property to which his title might be ultimately established. There was also a detailed provision as to the liability for costs to which further reference is not needed for our present purpose.

    2. As already stated, the suit was successful in the primary Court and defendants 2 and 3 preferred an appeal against; the decree of 12th December 1904. On 11th May 1905, a decree was made by consent as between the appellants, and the respondent, as a result whereof, the decree of the Court of first instance was set aside. It has been found that defendants 2 and 3 obtained the assent of defendant 1 to this compromise by the payment of Rs. 1,500. It has also been found that defendants 2 and 3, at the time they accepted the settlement, were aware of the agreement of 21st September 1904 between the present plaintiff and defendant 1; in fact, the Subordinate Judge has held that these defendants had in their possession a copy of the agreement in question.

    3. On 30th May 1905, the plaintiff commenced the present action for a declaration that the consent decree of 11th May 1905 was fraudulent and collusive, and did not affect his rights to the decree of 12th December 1904; he further prayed for specific performance of the agreement of 21st September 1904. Defendant 1 did not resist the claim; but defendants 2 and 3 denied the factum and validity of the agreement sought to be specifically enforced. The Court of first instance dismissed the suit; upon appeal, a decree has been made in favour of the plaintiff. On behalf of defendants 2 and 3, that decree has been assailed substantially on two grounds: namely, first that the agreement is of such a nature that a Court of Equity will not specifically enforce it: and secondly, that no decree for specific performance ought to be made in this suit, because even if the decree be declared inoperative, defendants 2 and 3 are entitled to be restored to the position they occupied as appellants against the decree of 12th December 1904.

    4. In so far as the first contention is concerned, it is clear that there is no substance in it. It was laid down by the Judicial Committee, in the cases of Bhagwant Dayal Singh v. Debi Dayal Sahu . 1904 35 Cal 420 and Lala Achal Ram v. Raja Kazim Hussain Khan . 1905 27 All 271 and in earlier decisions reviewed in the case of Gossain Ramdhan Puri v. Gossain Dalmir Puri . 1909 2 IC 385., that the propriety of an agreement of this nature can be questioned only by the parties thereto. Defendant 1 has not contended that the terms upon which the plaintiff undertook to finance him in the earlier litigation were unconscionable and ought not to be enforced in a Court of Equity. The position therefore is that as between defendant 1 on the one hand and defendants 2 and 3 on the other, the consent decree is valid and binding. As was pointed out in the cases of In re South American and Mexican Co.4 and the Bellcairn5, a decree by consent is operative between the parties so long as it is not set aside in a proper judicial proceeding, in the same manner as if it were a decree upon contest. This principle however cannot be applied to the perjudice of a stranger to the decree. The plaintiff is entitled to show that the decree is fraudulent and collusive and does not affect his legal rights. In other words, as was pointed out in the cases of Huddersfield Banking Co. v. Henry Lister and son . 1895 2 Ch 273 and Great North-West Central Ry. v. Charlebois . 1899 AC 114, a consent decree has no greater validity than the agreement between the parties, in so far as strangers to that agreement are concerned.

    5. The question therefore arises, whether the plaintiff could have been affected by any agreement between defendant 1 and defendants 2 and 3 to his prejudice. It has not been disputed and it cannot be disputed that if defendant 1 had conveyed or surrendered to defendants 2 and 3 his rights under the decree of 12th December 1904, and if the latter had accepted the conveyance or the surrender with notice of the agreement between the plaintiff and defendant 1, the position of the plaintiff would have remained unaffected. He would have been entitled under Section 27, Clause (b) of the Specific Relief Act, to claim specific performance of the agreement, not merely against defendant 1, but also defendants 2 and 3. In our opinion, the position of defendants 2 and 3 is the same as if they had accepted a private assignment from defendant 1 with notice of the obligation under which he stood in relation to the plaintiff. They cannot, through the intervention of the Court and under the device of a consent decree, acquire higher rights than they would have done under a private conveyance. That this position is obviously sound, will be clear if we bear in mind that defendants 2 and 3 paid consideration to defendant 1 for this settlement. The defendants 2 and 3 cannot occupy a better position than a person who, having a prior title, gets in the subsequent estate which is affected by the contract; such a person, if he has notice, cannot protect himself from the performance of the contract, by his elder title: Smith v. Phillips . 1 Keen 691 Foot v. Heron . 3 Y and C 586 Union Bank v. Kent . 1888 39 Ch D 238 Mumford v. Stohwasser . 43 LJ Ch 694; as to this last case see Hunt v. Luck . 1901 1 Ch 45. The view of the subordinate Judge that a decree for specific performance ought to be made in favour of the plaintiff, must, consequently, be upheld.

    6. It has been contended, however on behalf of the appellant that the direction given by the Subordinate Judge that the sum of Rs. 2,000 payable by the plaintiff for the conveyance should be deposited to the credit; of defendant 1 alone, cannot be supported. His contention in substance is that if the rights of defendant 1 have vested in defendants 2 and 3 the letter alone are entitled to the money and are liable to execute the conveyance. This position, in our opinion, is only partially sound. As between the first and the second and third defendants, the consent decree is, no doubt, valid and operative. At the same time, we do not know what equities there may be between these parties. The proper course to follow is to direct that the conveyance be executed by all the three defendants and the sum of Rs. 2,000 be deposited to their credit. Prima facie, defendants 2 and 3 alone are entitled to this sum; but if defendant 1 establishes to the satisfaction of the Court that he has a valid claim to any portion of this sum, the Court will be free to distribute it as between defendant 1 on the one hand and the defendants 2 and 3 on the other. The first contention of the appellant must, therefore, be allowed only in part.

    7. In so far as the second contention is concerned it is plainly unsustainable. The learned Vakil for the appellants has contended that they are entitled to be restored to the position which they occupied when the consent decree was made; in other words, that the consent decree should be vacated and the parties should be relegated to the position of appellants and respondent in the litigation of 1904. In support of this position, reliance has been placed upon the decision of the Judicial Committee in the case of Khajooroonissa v. Roushan Jehan . 1876-77 2 Cal 181. That case, however, is clearly distinguishable. No doubt, as laid down by the Judicial Committee in the case mentioned, as also by this Court in other cases reviewed in Raj Kumar Roy v. Harakrishna Chakrabutty . 1911 10 IC 355. if a consent decree is vacated, the parties are restored to the position they occupied when the consent decree was made. But that principle can have no possible application to this case. It is not competent to the plaintiff to invite the Court to vacate the consent decree to which he is no party. He is a stranger to that decree, and the only declaration he can seek is that the decrees, does not prejudice his rights. Consequently, we cannot direct that the consent decree be vacated at the instance of the plaintiff, and that the appeal which was terminated by that decree be now heard as if no consent decree had ever been made.

    8. The result is that the appeal by the second and third defendants is allowed in part and the decree of the Subordinate Judge modified. The plaintiff will have a decree for specific performance; the conveyance will be executed by the first, second and third defendants, and, upon their refusal, by the Court, on their behalf. The sum of Rs. 2,000 payable by the plaintiff has been, we understand, already brought into Court and deposited to the credit of the defendant 1. The deposit will now be taken to have been made to the credit of all the three defendants and if this sum has been attached as the property of defendant 1 that attachment will cease. Defendants 2 and 3 are prima facie entitled to this sum, as by virtue of the consent decree, the title of defendant 1 has vested in them. Notice will, however, issue upon defendant 1 and he will be allowed an opportunity to satisfy the Court of first instance, within one month after service of notice upon him, that he has a valid claim to any portion of this sum of Rs. 2,000. If he establishes a claim to any portion, it will be paid to him. If he does not appear, or if the Court is not satisfied that he has a valid claim to any portion of this sum, defendants 2 and 3 will be at liberty to take out the whole of this sum. The order for costs made by the Court below in respect of the first and second Courts will stand. But the parties will bear their own costs in this Court.

    9. We find that there was a prayer for possession in the plaint. As has been already held by this Court Madan Mohan Singh v. Gaja Prasad Singh . 1911 11 IC 228., such prayer for possession may be coupled with a prayer for specific performance of the contract. We, therefore, direct that as soon as the conveyance is executed, the plaintiff be placed in possession of the property covered by the conveyance.

    10. In so far as the appeal by defendant 4 is concerned, it is obvious that he has no title at all. He purchased during the pendency of the present litigation and is barred by the doctrine of lis pendens, as laid down by this Court in the case of Mati Lal Pal v. Preo Nath Mitra . 1909 3 ??? 696.. His appeal will, therefore, stand dismissed.

    V.B/R.K

    11. Appeal dismissed.

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    Comments

    Fateh Chand v. Narsingh Das
    (May 16, 1912)