Avula Charamudi v. Marriboyina Raghavulu

Ayling and Tyabji, JJ.:— It has been argued before us that the agreement (Exhibit G) on which the plaintiff sues for a re-conveyance of the land to him is void as being opposed to the rule against perpetuities inasmuch as no period is fixed during which the plaintiff may claim to have the land reconveyed the argument is that under Exhibit G the land would be tied up for an indefinite period, as the plaintiff would be entitled to assert his right at any time however remote. The short answer to this argument is that the land is not tied up by Exhibit G; and that there is a mere personal contract between the contracting parties; which does not create any interest in land, though it may have some reference to the land. This answer is met by the contention that if the agreement to reconvey contained in Exhibit G is a valid contract, then specific performance of it could be had under the Specific Relief Act, section 27(b) from any subsequent purchaser of the land who had notice of it; that therefore the agreement to reconvey must be taken to be a covenant running with the land and as such amounting to an interest in land; and that if so the attempt to create such an interest for an indefinite period of time must fail under the Transfer of Property Act, section 14 which must be applied as the rule of Hindu law is not less stringent than that contained in the section: Ramasami Pattar v. Chinnan Asari.

Our attention was drawn to London and South Western Railway Company v. Gomm, which has been referred to or followed in India in Kolathu Ayyar v. Ranga Vadhyar, Haris Paik v. Jahuruddi Gazi(4), Nobin Chandra Soot v. Nabab Ali Sarkar(5) and Kalimaddin Bhuya v. Reazuddin Ahmed(6).

The decisions of English Courts cannot be followed without caution, inasmuch as the rules of law and equity relating to covenants running with the land as laid down in Tulk v. Moxhay with the limitations placed upon those rules by such decisions as Haywood v. The Brunswick Permanent Benefit Building Society and London and South Western Railway Company v. Gomm may have a very different effect from the law which has to be enforced in British India by reasons of section 27(b) of the Specific Relief Act and section 40 of the Transfer of Property Act. It may be that covenants which would not run with the land in England would in British India be enforceable as against persons having notice of them. We refer however to English decisions not so much for taking from them the law as if it were directly and in terms applicable to India but for the elucidation of some of those general principles with which the statutory law of India duals.

The first point to be borne in mind in connection with the questions that arise in this appeal is expressed with very great clearness by Farwell, L.J, in South Eastern Railway v. Associated Portland Cement Manufacturers (1900), Limited. He says: “It is settled beyond argument that an agreement merely personal not creating any interest in land is not within the rule against perpetuities. It is sufficient to refer to Witham v. Vane in the House of Lords reported in Challis on Real Property, appendix V. There, there was a ‘covenant by a purchaser of lands in fee simple contained in the conveyance made to him by the vendor, that the purchaser, his heirs, appointees, and assigns will from time to time and at all times pay, or cause to be paid, to the vendor, his heirs, executors, administrators, or assigns the sum of six pence for every chaldron of coals wrought and gotten out of the lands conveyed, and which shall be shipped for sale.’ That was entered into by the Earl of Darlington (afterwards Duke of Cleveland) in 1824. He died in 1842; the benefit of the covenant was assigned to certain other persons, end they sued the executors of the Duke in the year 1883, and this question of perpetuity was swept aside as having no relevancy whatever to a mere personal covenant, although such covenant was connected in some way at any rate with the land. But the fact that there is some connection with or reference to land does not make a personal contract by A less a personal, contract binding on him, with all the remedies arising there out unless the Court can by construction turn it from personal contract into a limitation of land, and a limitation of land only. As regards the original covenantor it may be both; he may have attempted both to limit the estate, which may be had for perpetuity, and he may have entered into a personal covenant which, is binding on him because the rule against perpetuities' has no application to such a covenant.”

“The real answer,” continues Farwell, L.J, “to the argument, founded on the inconvenience of tying up land is that the action upon the covenant sounds in damages only unless the defendant has still got the land to which the covenant relates. If he has still that land, then in an action on the covenant the plaintiff may claim specific performance, and it is for the Court, to see whether in such circumstances it is inequitable to grant specific performance, or whether the covenantor ought to pay damages in lieu of it. There is no defence to such an action in, the present case. So far as I see I should have no hesitation whatever in decreeing specific performance. There certainly is no honesty in the Company's case; there is a clear covenant, by them to do a certain thing when called on by a particular person. They are so called on by that person. They have had the benefit of the covenant in the reduction of the amount of money which they have had to pay, and now they refuse to perform their own personal covenant on the ground of perpetuity.”

The distinction between an agreement merely personal and an agreement creating an interest in land was not lost sight of in London and South Western Railway Company v. Gomm, on which the appellant greatly relied.

There a Railway Company had sold land in 1865 with an agreement by their vendee on behalf of himself “his heirs, assigns, owner, and owners for the time being of the land, and all other persons who should or might be interested therein”: the agreement so entered into contained an option to the Railway Company to repurchase at any time. Sir George Jessel, M.R, says, at pages 580 and 581: “Whether the rule (as to remoteness) applies or not depends upon this as it appears to me, does or does not the covenant give an interest, in the land? If it is a bare or mere personal contract it is of coarse not obnoxious to the rule, but in that case it is impossible to see how the present appellant can be bound. Se did not enter into the contract, but is only a purchaser from Powell who did. If it is a mere personal contract it cannot be enforced against the assignee. Therefore the company must admit that it somehow binds the land. But if it binds the land it creates an equitable interest in the land. The right to call for a conveyance of the land is an equitable interest or equitable estate. In the ordinary case of a contract for purchase there is no doubt about this, and an option for repurchase is not different in its nature.”

Sir Geobge Jessel's remarks read in the light of what Farwell L.J, said in South Eastern Railway v. Associated Portland Cement Manufacturers (1900), Limited had reference only to that aspect of the agreement which purported to create an interest in the land; that aspect alone had any relevance to the question that the Master of the Rolls was considering. But as Farwell, L.J, pointed out parties may by the same agreement purport to do two things: (1) to create an interest in land in perpetuity; (2) to enter into a personal covenant unrestricted in point of time; the rule against perpetuities cannot be obnoxious to the latter, though it invalidates the former.

Lord Justice Lindley in London and South Western Railway Company v. Gomm said: “This is an action for specific performance of a contract entered into not by the defendant but by somebody else. The first thing, therefore, the plaintiffs must show is, upon what legal principle the defendant is bound by a contract into which he did not enter. It is not contended that he is bound by it on the ground that the covenant entered into by Powell runs with the land and binds him at law, but it is said that though it does not bind him at law it binds him in equity.

“Then upon what principle is it that he is bound in equity? It is said that he is bound in equity because he bought the land knowing of the covenant into which his predecessor in title had entered. That proposition, stated generally, assumes that every purchaser of land with notice of covenants into which his vendor has entered with reference to the land is bound in equity by all those covenants.”

The learned Lord Justice then considers which classes of covenants run with the land, in other words which classes of agreements are enforced in England not only against the person who entered into them but against a purchaser of the land with notice of the agreement entered into by his predecessor in title. That portion of his judgment is not directly applicable as we have the law laid down in the Specific Relief Act, section 27(b) and the Transfer of Property Act, section 40. He concludes by saying that the agreement then before the Court could be enforced (if at all) as against the defendants only as a covenant running with the land; that the agreement for repurchase went beyond the doctrine of covenants running with the land laid down in Tulk v. Moxhay and could not therefore be said to be a covenant running with the land, and could not consequently be enforced against a person who did not enter into it. He then agrees with the observations of the other members of the Court that the covenant purports to create an interest in land but that interest is void for remoteness.

Thus it is clear that the Court was not deciding in London and South Western Railway Company v. Gomm upon the personal aspect of the agreement at all. What was then decided was (1) that the agreement could not prevail as between the parties before the Court in any aspect other than that by which it purported to create an interest in land and that in so far as it purported to create an interest in land, it was void for remoteness and (2) that the defendant could not be bound by an agreement to which he was not a party on the ground that it was a covenant running with the land, for the agreement was not of that class which could run with the land, not being within the principle laid down in Tulk v. Moxhay. In other words the decision may shortly be thus stated: the agreement either created an interest in the land, or it did not; if it created an interest in land, then it was void for remoteness; if it was merely a personal covenant it did not bind the defendant, who was not a party to it, and was not bound by it under Tulk v. Moxhay.

It seems clear on a consideration of the cases to which we have referred, that very different sets of rules apply according as the juristic act in question creates, (1) an interest in land or (2) a mere personal contractual liability.

With reference to the former (1) the policy of the law is expressed in the rule against perpetuities and a transaction (whether it is a contract or a declaration of trust, or a bequest) in so far as it purports to create an interest in land is void to the extent that it contravenes the rule against perpetuities; what is void is the interest which is sought to be created so as to come into operation at a remote time, not the contract. If however the sole object of a contract is to create such an interest, it is of course wholly void.

With reference to the latter (2) however, as Farwell, L.J, pointed out, the rule against perpetuities has no application. A contract which is binding only personally would in strictness and according to its literal import be enforceable only so long as both the contracting parties are alive: for if one of them is dead, then there is either no person to enforce it, or no person against whom it can be enforced. It would have been meaningless for the law to apply the rule against perpetuities to such a transaction: for the transaction can (in its strictness) prevail for only a fragment of the period mentioned in the rule against perpetuities. Far from limiting the period during which such a transaction is to operate, the law has enlarged the scope of its operation from its strict limits (viz., during the life-time of both contracting parties) so as to bind the representative of the promisors (Indian Contract Act, section 37).

It is also clear that a contract does not create an interest in land merely because it has reference to land. This is well recognized in England. In India there cannot be a more emphatic enunciation of this principle than that contained in the Transfer of Property Act, section 54, last paragraph, which is explained and contrasted with section 55(6)(b) in Kurri Veerareddi v. Kurri Bapireddi. The law in England seems to be different from that contained in section 54 — London and South Western Railway Company v. Gomm. Moreover the scheme of the Indian law differs widely from that of English law. The Indian Legislature has given great extension to the personal liability of parties, having notice of a contract made by one under whom they claim, though such liability 18 tempered by the discretion of the Court that is asked to enforce specific performance. On the other hand the Indian Legislature: has been stringent in allowing interests to be created in land either for remote periods, or without registered documents. In any case having an interest in land or any other property implies having existing rights in them; and that is very different from having personal rights against some one who may (at the discretion of the Court) be required by law to do some specific act or in lieu of it to give compensation.

It is argued that because under section 27(b) of the Specific Relief Act the contract may be enforced against transferees with notice, therefore it creates an interest in the land. But in the first place if as between the parties themselves a contract for sale does not create an interest in land, it is inconceivable that an interest should be created when the liabilities under the contract are transferred to a third party. Secondly section 27(a) read with section 22 of the same Act only gives a discretionary power to the Court to enforce a contract specifically; it is difficult to see how an interest in land can be considered to be created when it is in the discretion of the Court whether to recognise it or not. If an interest already exists there can be no power in the Court to take away the existing rights of the parties.

Moreover assuming that under section 27(b) some interest might be created to the land itself which can avail to a limited-extent as against transferees it does not follow that the personal liability of the contracting parties is lessened because certain right in rem are attempted to be created and the attempt is unsuccessful by offending the rule against perpetuities. The argument as put by the appellant is self-destructive. For if any interest in land may be created by operation of section 27(b) then that may be a ground for upholding that interest as against transferees, and it may be that the transaction by virtue of which the interest arises, viz., the contract, may thus have an extended operations the section cannot, on the assumption that it creates an interest in land, affect the operation of the contract in its personal aspect. If the object of the section is assumed to be to give an enhanced efficacy to a contract, by the creation of interests in the property itself, in addition to mere personal rights and liabilities, the section cannot be utilized for taking away the binding force of the contract as between the parties themselves.

There are observations in Kolathu Aiyar v. Ranga Vadhyar to the effect that one who has obtained a promise for the conveyance of land has by virtue of the Specific Relief Act, section 27(b) and the Trusts Act, section 91 “a substantial interest in it”: such an interest is apparently meant as is implied in section 14 of the Transfer of Property Act. These observations were perhaps not necessary for the decision, as in the earlier portion of the judgment it is intimated that the intention of the parties as appearing from the contract was that the heirs of the covenantor should not be bound by it and the suit was against the heirs—Stocker v. Dean—Indian Contract Act, section 37, paragraph 2. In any case we are unable to reconcile these observations with section 54 of the Transfer of Property Act and Kurri Veerareddi v. Kurri Bapireddi.

The two cases decided in Calcutta, Nobin Chandra Soot v. Nabab Ali Sarkar and Kalimaddin Bhuya v. Reazuddin Ahmed, are not easily reconcileable on principle. The, attempt in the latter to distinguish the former on the ground that the application of the rule against perpetuities may depend upon whether the person sued is the original covenantor or one on whom the interest had devolved, cannot be accepted in the face of the authorities. Thus in Witham v. Vane, decided by the House of Lords, the covenant was enforced as between the executors of one party to the contract and the assignees of the other, the ground of decision being that the covenant sought to be enforced was a personal contract and there was no reason why specific performance could be refused. On the other hand if the right that is sought to be enforced depends upon the existence of an interest in the land, and that interest itself is void in law, it does not matter whether the persons that are before the Court are those the have themselves been parties to the transaction attempting to create the interest, or that they are strangers or transferees.

Our decision must therefore be that the rule against perpetuities is applicable only in reference to an attempt to create an interest in land, that no interest in land is created by an agreement to sell the land, still less by reason of there being a possible claim to have an agreement for sale specifically enforced as against a transferee with notice of the agreement. The lower Courts were therefore right in holding that the agreement for resale now in question was enforceable and the appeal is dismissed with costs.

N.R