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Narayan Nagorao v. Amrit Haribhau
Summary of Opinion
Factual and Procedural Background
This is an appeal by the defendant against a decree for specific performance of a contract for the sale of a house. On 4-4-1949 the defendant executed a document styled as an Isar Chitti reciting receipt of Rs. 125 as earnest money and undertaking to sell his house to the plaintiff for Rs. 300. The agreement provided that if the defendant did not execute a sale deed by 25-5-1949 he would repay the earnest money and pay damages of Rs. 100. The plaintiff alleged that the defendant refused to execute the sale deed, and that he served a pre-suit notice declaring his willingness to perform. The defendant replied that he had not received the whole earnest money, that the parties had not intended the document to operate as a contract of sale, that he was illiterate and had been duped, and that the real agreement was for a loan secured by mortgage; he also contended that the plaintiff could be compensated by payment of money as damages. The trial Court decreed specific performance, the lower appellate Court upheld that decree, and the defendant appealed.
Legal Issues Presented
- Whether the plaintiff had sufficiently alleged and (if traversed) proved continuous readiness and willingness to perform his part of the contract so as to sustain a suit for specific performance.
- Whether oral evidence was admissible to show that the written document (Exhibit P-1 dated 4-4-1949) was not a contract of sale but a contract for the execution of a mortgage deed, under the First Proviso to Section 92 of the Evidence Act.
- Whether the presence in the contract of a clause specifying a sum to be paid on breach (a stipulated sum or penalty) precluded the court from exercising its discretion to grant specific performance, particularly in light of Section 20 and Section 12 of the Specific Relief Act.
Arguments of the Parties
Appellant's (Defendant's) Arguments
- The defendant denied that the document was a contract of sale and asserted that he was illiterate and had been duped.
- He contended he had received only Rs. 47 as earnest money (not the full Rs. 125) and that the real agreement was that the plaintiff would lend him Rs. 200 secured by a mortgage over the house.
- The defendant argued that oral evidence was admissible under the First Proviso to Section 92 of the Evidence Act to prove that the document was intended to operate as a mortgage rather than a sale.
- The defendant contended that because the contract named a sum to be paid in case of breach, the Court should not exercise its discretion to order specific performance.
Respondent's (Plaintiff's) Arguments
- The plaintiff relied on the written document (Isar Chitti) executed by the defendant reciting receipt of Rs. 125 and undertaking sale for Rs. 300.
- The plaintiff alleged that the defendant refused to execute a sale deed and that he served a notice before suit expressly stating his readiness and willingness to perform his part of the contract.
- The plaintiff maintained that the document evidenced a contract of sale and sought specific performance as the sole substantive relief.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Ardeshir H. Mama v. Flora Sassoon, ILR 52 Bom. 597; AIR 1928 PC 208 | That in a suit for specific performance the plaintiff must allege and, if traversed, prove continuous readiness and willingness from the date of the contract to the time of hearing; failure to make good the averment leads to dismissal. | The Court accepted the principle but held that the plaintiff had adequately shown readiness and willingness by reference to the pre-suit notice and the relief sought; the Court declined to strike the suit out on a technicality. |
| Shamjibhai v. Jagoo Hemchand Shah, ILR 1949 Nag. 531; AIR 1952 Nag. 220 | Followed the Ardeshir principle that the plaintiff must allege and, if disputed, prove performance and continuous readiness and willingness. | The Court relied on this Nagpur Division Bench decision (to which the present judge was a party) as supporting the view that the plaintiff's reference to a pre-suit notice expressing readiness sufficed in the circumstances. |
| Cort v. The Ambergate, etc. Railway Company, (1851) 17 QB 127 | Interpretation that an averment of readiness and willingness means non-completion was not the plaintiff's fault and that they were disposed and able to complete if not renounced by defendant. | The Court quoted Lord Campbell's observation to support a commonsense construction that the plaintiff's averment in the notice met the requirement of readiness and willingness. |
| Arjunsa Raghusa Patwi v. Mohanlal Harakchand Jain, ILR 1938 Nag. 308; AIR 1937 Nag. 345 | Recognition and approval of the Cort v. Ambergate observation regarding the meaning of averment of readiness and willingness. | The Court noted that the Cort observations were quoted with approval in this case and used that chain of authority to support the conclusion on readiness and willingness. |
| Shamlal v. Yesaram, ILR 1954 Nag. 866; AIR 1954 Nag. 334 | Also quoted with approval the Cort v. Ambergate observations on the meaning of an averment of readiness and willingness. | The Court cited this authority as further support for treating the plaintiff's notice and pleadings as sufficient to establish readiness and willingness for purposes of specific performance. |
Court's Reasoning and Analysis
The Court examined the appeal on three main points and applied statutory provisions and precedents as follows.
- Readiness and willingness: The Court acknowledged the Privy Council decision in Ardeshir and the Nagpur Division Bench decision in Shamjibhai that a plaintiff in a suit for specific performance must allege and, if traversed, prove continuous readiness and willingness to perform. The Court found that the plaintiff had expressly referred to a pre-suit notice in which he stated his readiness and willingness, and had made the failure of the defendant to execute the sale deed a complaint in the suit. The relief clause sought only specific performance (no alternative relief). Given these facts and the quoted authority (including Lord Campbell's observation in Cort v. Ambergate), the Court concluded that it would be overly technical to hold that the plaintiff had failed to express readiness and willingness; consequently, the plaintiff was not disentitled to specific performance on that ground.
- Admissibility of oral evidence to vary written document (Section 92 proviso): The defendant contended that oral evidence was admissible under the First Proviso to Section 92 of the Evidence Act to show that the document was intended as a mortgage. The Court examined the categories listed in the proviso (fraud, intimidation, illegality, want of due execution, incapacity, failure of consideration, or mistake) and held that the plea raised by the defendant did not fall within those specified categories. Therefore the Courts below were right in excluding oral evidence aimed at proving that the document was intended to operate otherwise than as expressed in the writing.
- Effect of a stipulated sum for breach (Sections 20 and 12 of the Specific Relief Act): The Court considered whether a clause naming a sum to be paid on breach prevented the exercise of the equitable discretion to order specific performance. It referred to Section 20 and its illustration, and to Section 12 (Explanation) which presumes that a breach of a contract to transfer immovable property cannot be adequately compensated by money unless the contrary is proved. The Court explained the analytical distinction between (a) a contract which stipulates a sum as security or a penalty to secure performance of the main obligation (to be specifically enforced), and (b) an alternative contract giving the promisor an election to either perform or pay the sum (where Section 20 would not apply). On the language of the document in the present case, the Court held that the clause was in terrorem and intended to secure performance of the conveyance, placing the contract in the former category. Accordingly Section 20 applied and this did not preclude specific performance; the lower Courts were therefore correct in decreeing specific performance.
Holding and Implications
Holding: Appeal dismissed; the decree of the lower appellate Court affirming the trial Court's decree for specific performance is upheld.
Implications:
- The defendant remains bound by the decree for specific performance of the sale contract and the appeal is dismissed with costs in favour of the plaintiff.
- The Court's decision rests on application of established principles (Sections 12 and 20 of the Specific Relief Act; proviso to Section 92 of the Evidence Act) and prior authorities; the opinion does not purport to lay down a novel principle beyond these applications.
End of summary.
Counsels:
For Appellant/Petitioner/Plaintiff: R.S. Baxi, Adv.
For Respondents/Defendant: J.N. Chandurkar, Adv.
Cases Referred:
Ardeshir H. Mama v. Flora Sassoon, ILR 52 Bom. 597, AIR 1928 PC 208; Shamjibhai v. Jagoo Hemchand Shah, AIR 1952 Nag 220, ILR 1949 Nag. 581; Cort v. The Ambergate, etc. Railway Company, (1851) 17 QB 127, 20 LJQB 460; Arjunsa Raghusa Patwi v. Mohanlal Harakchand Jain, ILR 1938 Nag. 308, AIR 1937 Nag. 345, ILR 1938 Nag 308; Shamlal v. Yesaram, ILR 1954 Nag. 866, AIR 1954 Nag. 334
1. This is a defendants appeal from a decree for specific performance of a con-tract of sale of a house passed against him.
2. It is not disputed that on 4-4-1949, the defendant executed in favour of the plaintiff a document styled as an Isar Chitti whereunder after reciting that he had received Rs. 125/- as earnest money he undertook to sell a house belonging to him to the plaintiff for Rs. 300/-. the agreement also provided that in case the defendant did not execute a sale deed by 25-5-1949, he will be liable to pay back the earnest money to the Plaintiff and also to pay damages to the extent of Rs. 100/-. According to the plaintiff, the defendant refused to execute a sale deed and that he therefore served a notice on the defendant before the suit to execute a sale deed. But his reply to the notice was that he had not received the whole of the earnest money, that it was not the intention of the parties that the document should operate as a contract of sale and that is why he refused to execute a sale deed. Further according to the plaintiff he had alleged in the notice that he was willing to perform his part of the contract. The defendant denied the contract and said that he is an illiterate person, that he was duped by the plaintiff that he received Rs. 47/- only by way of earnest money and the real agreement between the parties was that the plaintiff was to lend him Rs. 200/- by accepting a mortgage over the ho se in suit. Further according to him the plaintiff would be properly compensated by payment of the money as damages.
3. The trial Court decreed the suit and the lower appellate Court upheld that decree.
4. The first point which was urged before me was that there was no express averment in the plaint to the effect that the plaintiff was ready and willing to perform his part of the contract, that as laid down by their Lordships of the Privy-Council in Ardeshir H. Mama v. Flora Bassoon, ILR 52 Bom. 597: (AIR 1028 PC 208) (A), it was necessary for the plaintiff not only to allege specifically that he was willing to perform his part of the contract but to establish it and that his failure to do so would bring about the dismissal of the suit for specific performance. This decision was followed, by a Division Bench of the Nagpur High Court in Shamjibhai v. Jagoo Hemchand Shah (ILR 1949 Nag. 531): (AIR 1952 Nag 220) (B, to which I was a party and it was observed as follows at pages 601, G02 (of ILR Nag): (at p. 228 of AIR):
"One of the essential factors in a case of this kind is that the plaintiff must first allege and then, if the matter is traversed, prove (a) that he has performed all the conditions which under the contract he was bound to perform and (b) that he has been ready and willing at"all times from the time of the contract down to the date of suit to perform his part of the contract. This principle is set out succinctly in Section 24 (b) of the Specific Relief Act, but It has been expanded by Judicial decision. Their Lordships of the Privy Council hold that though the matter of specific relief is governed in India by the terms of the Specific Relief Act, nevertheless as the Act is founded on the English Law it is permissible, on matters with which the Act does not deal specifically, to refer to the English law. That was decided in ILR 52 Bom. 597: (AIR 1928 PC 208 (A) So far as the present points are concerned, their Lordships hold at P. 619, (of ILR Bom.) : (at. p. 216 AIR):
"In a suit for specific performance on the other hand, he treated and was required by the Court to treat the contract as still subsisting. He had in that suit to allege, and if the fact was traversed, he was required to prove a continuous readiness and willingness, from the date of the contract to the time of the hearing, to perform the contract on his part. Failure to make good that averment, brought with it the inevitable dismissal of his suit."
What is laid down in this decision is that the plaintiff must treat the contract as subsisting. This he can do by making a specific allegation of that kind in the plaint. In the instant case we find that the plaintiff has clearly referred to the notice given by him to the defendant in which he has expressly stated his readiness and willingness to perform his part of the contract and he has also made a grievance of the fact that in spite of this notice the defendant failed to execute a sale deed in his favour. In the relief clause the only substantial relief which is asked for is the relief of specific performance. He has not even claimed any alternative relief. In the circumstances, therefore, it would amount to being extremely technical if I were to hold that the plaintiff has not expressed his readiness and willingness to perform his part of the contract. In this connection I may quote the following observations of Lord Campbell in Court v. The Ambergate, etc.
Railway Company, (1831) 17 QB 127 (C): "in common sense the meaning of such an averment of readiness and willingness must be that the non-completion of the contract was not the fault of the plaintiffs, and that they were disposed and able to complete- it if it had not been renounced by the defendants."
These observations have been quoted with approval in Arjunsa Raghusa Patwi v. Mohanlal Harakchand Jain, ILR 1938 Nag. 308 at p. 316: (AIR 1937 Nag. 345 at p. 349) (D) and Shamlal v. Yesaram, ILR 1954 Nag. 866: (AIR 1954 Nag. 334) (E). I therefore hold that the failure of the plaintiff to express specifically in clear terms his readiness and willingness to perform his part of the contract does not disentitle him to specific performance.
5. The second point taken was that the Courts below were in error in preventing the defendant from proving that the agreement as evidenced by the document Exhibit P-1, dated 4-4-1349, was not a contract of sale but was a contract for the execution of a mortgage deed. The Learned counsel for the defendant says that oral evidence to prove the document was admissible under the First Proviso to Section 92 of Evidence Act which runs as follows:
"Any fact may be proved which would invalidate any document, or which would entitle any person to any decree or order relating thereto; such as fraud, intimidation, illegality, want of due execution, want of capacity in any contracting party (want or failure) of consideration, or mistake in fact or law."
The plea now raised does not fall in any of the categories specified in this proviso. I therefore agree with the Courts below that oral evidence could not be admitted in this case for proving that the document was intended to operate otherwise than as has been expressly set out therein.
6. The third and last point argued was that the parties having mentioned a sum in the contract to be paid by way of damages to the plaintiff in case there was a breach of the contract on the part of the defendant, the Court would not be right in exercising its discretion in awarding specific performance. The short answer to this argument is to be found in Section 20 of the Specific Relief Act and the illustration thereunder which run as follows:
"A contract, otherwise proper to be specifically enforced may be thus enforced, though a sum be named in it as the amount to be paid in cash of its breach, and the party in default is willing to pay the same.
Illustration.
A contracts to grant B an under lease of property held by A under G, and that he will apply to G for a licence necessary to the validity of the under lease, and that, if the license is not procured, A will pay B Rs. 10,000. A refuses to apply for the license and offers to pay B the Rs. 10,000. B is nevertheless entitled to have the contract specifically enforced if G consents to give the license."
7. Section 12 of the Specific Relief Act deals with contracts which may be specifically enforced. The Explanation thereto provides:
"Unless and until the contrary is proved the Court shall presume that the breach of a contract to transfer immoveable property cannot be adequately relieved by compensation in money."
That being so, the general rule of equity that if a thing is agreed to be done the very thing ought to be done must apply even though there is a penalty annexed to secure its performance or a sum is named in the contract to be paid in case of its breach, it is no doubt true that it is open to the parties who are entering into a contract to stipulate that on failure to perform what has been agreed to be done a fixed sum shall be paid by way of compensation. The question which therefore arises in such a case is the interpretation of the contract. Where there is a contract containing a clause for payment of money is the event of non-performance, the Court has to determine whether it is a contract stipulating that one certain act shall be done with a sum annexed to secure the performance of this very act, or it is at contract stipulating that one of two things shall be done at the election of the party who has to perform it, e.g., either performance or payment in money, Where the contract is of the latter type, it is called an alternative contract and the provisions of Section 20 of the Specific Relief Act do not apply to it. They however apply to a contract of the former type. In the instant case, the language used in the document itself would show that the term specified in the contract was added in terrorem and was put in there to secure the performance of the main condition, i.e. requiring the defendant to convey the house to the plaintiff within the time specified in the contract. In the circumstances there-fore I hold that the contract falls within the former category and as such Section 20 of the Specific Relief Act applies thereto. The Courts below were right in decreeing specific performance.
8. In this view I uphold the decree of the lower appellate Court and dismiss the appeal with costs.
9. Appeal dismissed.
HEADNOTE
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