2019 Supreme(SC) 1294

SUPREME COURT OF INDIA
MOHAN M. SHANTANAGOUDAR, ANIRUDDHA BOSE, JJ.
Kapilaben & Ors. - Appellants
Versus
Ashok Kumar Jayantilal Sheth Through POA Gopalbhai Madhusudan Patel & Ors. - Respondents
Civil Appeal Nos. 10683-86 of 2014
Decided on : 25-11-2019

IMPORTANT POINTS
In absence of privity of contract between the parties, specific performance cannot be sought for.
‘Representatives-in-interest’ includes the assignee of a contractual interest. In case of a contract of personal nature, the assignment would necessarily require the consent of the other party.
Contract for sale of property does not by itself create any interest in or charge on the property.
A party relinquishing its rights to frustrate performance of its contract, it would be liable to compensate the other party.

Headnote:

(a) Specific Relief Act, 1963 - Section 15(b) - Respondent Nos. 1 not party to 1986 agreements - Appellants not party to the 1987 agreements - No privity of contract between the Appellants and Respondent Nos. 1 - Respondent Nos. 1 cannot seek specific performance of the 1986 or 1987 agreements against the Appellants, except by suing as ‘representatives-in-interest’ of the original vendees. (Para 7)

(b) Contract - ‘Representatives-in-interest’ - Includes the assignee of a contractual interest - The assignment would necessarily require the consent of the other party to the contract if it is of a ‘personal nature’. (Para 7, 8)

(c) Specific Relief Act, 1963 - Section 15(b) - Assignee can specifically enforce any interest in a contract - Except where the ‘personal quality’ of the party is a material ingredient in the contract; or where the contract prohibits the beneficiary from transferring their contractual interest to third parties - Where conferment of a right or benefit is contingent upon, or coupled with, discharge of a burden or liability, such right or benefit cannot be transferred without the consent of the person to whom the co-extensive burden or liability is owed. (Para 9, 10)

(d) Indian Contract Act, 1872 - Section 40 - The promisor ‘may employ a competent person’, or assign the contract to a third party to perform the promise only if the parties did not intend that the promisor himself must perform it - Therefore in a contract of personal nature, the promisor must necessarily show that the promisee was agreeable to performance of the contract by a third person/assignee - If the promisee’s consent is not obtained, the assignee cannot seek specific performance of the contract. (Para 10)

(e) Transfer of Property Act, 1882 - Contract for sale of property - Does not by itself create any interest in or charge on the property. (Para 12)

(f) Indian Contract Act, 1872 - Section 40 - Assignment - Instantly, 1987 agreements purporting to assign rights and obligation of original vendees in favour of respondent 1 - 1987 agreement simply substitutes liabilities - Thereby respondent 1 assuming obligations of original vendees - Included obligation to pay betterment tax as also to reimburse cost of acquiring planning permissions and to get the suit property levelled for the purpose of construction - Assignment in nature of development agreement. (Para 12)

(g) Specific Relief Act, 1963 - Section 15(b) - Original vendees not fulfilling their obligations under 1986 agreement prior to purported ‘assignment’ under the 1987 agreements - Not ‘performing their part of the contract’ - Assignment of such a contract cannot be enforced without proving that it was with the knowledge and consent of the original owners/Appellants. (Para 12, 13)

(h) Contract - Assignment - Payment of balance consideration amount as per 1987 agreements (at double the rate of 1986 agreement) payable to original vendees, not appellant-landlord - Possession of property to be handed over by original vendee, not appellant - Respondent 1 not liable to discharge liabilities of original vendee towards appellant - 1987 agreements not assignment of 1986 agreement - Independent agreements for sale contingent on the execution of the 1986 agreement - Respondent 1 cannot seek specific performance of 1986 agreement. (Para 13, 14)

(i) Specific Relief Act, 1963 - Section 15(b) - No privity of contract between appellant and respondent 1 - No valid assignment of rights flowing from the 1986 agreement to Respondent Nos. 1 - Respondent 1 cannot seek specific performance against appellant. (Para 14)

(j) Indian Contract Act, 1872 - Section 31, 32 and 35 - Contingent contract - 1987 agreements contingent upon 1986 agreement - 1986 agreement cancelled by appellant-landlord - Original vendee’s rights ceased to exist - 1987 agreements held void and unenforceable. (Para 16, 17)

(k) Code of Civil Procedure, 1908 - Order XXXIX, Rule 2A - Application filed after undue delay without satisfactorily explaining the same - Not maintainable. (Para 18)

(l) Indian Contract Act, 1872 - Section 53 - Original vendees relinquishing their rights under 1986 agreement - To frustrate performance of 1987 agreements - Liable to compensate respondent 1. (Para 19)

Facts of the case:

This case concerns four suits for specific performance filed by the Respondent Nos. 1/Plaintiffs against the Appellants/Defendants Nos. 1-5. One Naranbhai Ramdas Patel (Defendant No. 1, now deceased) was the original owner of property. He, along with Defendants Nos. 2-5 (relatives of Defendant No. 1) executed agreement to sell dated 11.3.1986 (‘1986 agreement’) in respect of the suit property in favour of Respondent Nos. 3-11/Defendants Nos. 6-9, for which the original vendees paid earnest money of Rs. 1,54,251. The suit property was included in Town Planning Scheme No. 19 of the Vadodara Municipal Corporation and possession of the suit property was to be given to the original vendees once the aforesaid Scheme was finalized. A registered sale deed in respect of the suit property was to be executed upon receipt of the remaining consideration from the original vendees, the deadline for which was within three months of finalization of the Town Planning Scheme.

The original vendees thereafter executed four agreements to sell dated 14.9.1987 (‘1987 agreements’) in respect of four different portions of the suit property, assigning the former’s rights under the 1986 agreement in the latter’s favour, and that earnest money of Rs. 5000/-was paid under each agreement. Notably, the Appellants were not parties to the 1987 agreements.

Subsequently, dispute arose between the parties, and the original vendees filed suit seeking specific performance of the 1986 agreement against the Appellants.

On 21.11.88, Respondent Nos. 1 filed four separate suits against the Appellants and the original vendees seeking specific performance of the 1987 agreements. Respondent Nos. 1 alleged that the Appellants and the original vendees were conniving with each other to deny their rights under the 1987 agreements, so as to sell the land to a third party in view of the increasing price of real estate in Vadodara.

Both sets of suits remained pending for a number of years. During that period, notably, the Appellants and the original vendees acting together executed a Power-of-Attorney dated 11.11.2001 in favour of one Dhananjay Vallabhbhai Patel. It was stated in the Power-of-Attorney that the Appellants and the original vendees are relinquishing their rights in the suit property to Mr. Dhananjay Patel for the purpose of executing sale deed in favour of one Kantilal Ambalal Patel, who is the uncle of the said Dhananjay Patel.

The trial court rejected the original vendees’ withdrawal application and allowed the impleadment applications of Respondent Nos. 1. The High Court in revision reversed the trial court’s order. The special leave petitions filed by Respondent Nos. 1 against the High Court judgment were dismissed.

The trial court dismissed all four suits. However, the High Court in the impugned judgment found that there was a definite linkage between the 1986 agreement and the 1987 agreements such that there was a valid assignment of rights in favour of Respondent Nos.1, which made them ‘representatives-in-interest’ of the original vendees for the purpose of Section 15(b) of the Specific Relief Act. The High Court reasoned that since all the material rights under the 1986 agreement were assigned under the 1987 agreements, supplementary conditions specified in the latter did not change the nature of the basic contract.

The parties have been directed to maintain status quo during the pendency of the appeal and no steps have been taken for the execution of the impugned judgment.

Finding of the Court:

1987 agreements are not assignments of 1986 agreement.

Result: Appeals partly allowed.