Shree Ambarnath Mills Corporation vs D. B. Godbole and Anr

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1957 Supreme(Bom) 4

IN THE HIGH COURT OF BOMBAY
Shah J.C. and Palnitkar Shirpatrao. , JJ.
Appellants: Shree Ambarnath Mills Corporation
Vs.
Respondent: D.B. Godbole and Anr.
A.F.O.D. No. 631 of 1956
Decided On: 14.01.1957
Counsels:
For Appellant/Petitioner/Plaintiff: K.T. Desai, K.S. Cooper, Advs., Amarchand and Mangaldas, Attorneys
For Respondents/Defendant: G.N. Joshi, Poras Mehta, N.B. Vakil, Advs. and Little and Co., Attorneys

Headnote:
SPECIFIC PERFORMANCE - SALE OF PROPERTY - AGREEMENT OF SALE - INDEFINITE TERMS - ENFORCEABILITY - NEGATIVE COVENANT - INJUNCTION - DISPLACED PERSONS (COMPENSATION AND REHABILITATION) ACT, 1954 - ACQUISITION OF EVACUEE PROPERTY - VESTING IN CENTRAL GOVERNMENT FREE FROM ENCUMBRANCES - EXTINGUISHMENT OF RIGHTS - CONSTITUTIONALITY - ARTICLE 31(2) - CLAUSE (5) (B) (III) - APPLICABILITY - CIVIL COURT'S JURISDICTION - SECTION 36 - BAR TO INJUNCTION.
Fact of the Case:

The plaintiffs, displaced persons, entered into an agreement with the Custodian of Evacuee Property for the purchase of certain evacuee properties. The agreement consisted of three distinct parts: (i) a lease of the properties for five years, (ii) a sale of certain moveable properties, and (iii) a sale of the properties themselves. The agreement was not registered, and the plaintiffs filed a suit for an injunction restraining the defendants, the Custodian and the Union of India, from selling or disposing of the properties. The trial court dismissed the suit, holding that the agreement was not enforceable, that the plaintiffs' right to purchase the properties had been extinguished by the Displaced Persons (Compensation and Rehabilitation) Act, 1954, and that the Civil Court had no jurisdiction to grant an injunction under Section 36 of the Act.
Finding of the Court:

The High Court upheld the trial court's decision. It held that the agreement of sale was unenforceable because the price, the period after which the agreement was to become enforceable, the properties in respect of which it was to operate in favor of the plaintiffs, and the persons to whom the properties were to be sold were all indefinite. The Court also held that the plaintiffs could not rely on an implied negative covenant in the agreement to obtain an injunction, as the agreement did not contain a distinct negative covenant not to sell the properties to any person other than the plaintiffs. Further, the Court held that the Displaced Persons (Compensation and Rehabilitation) Act, 1954, vested the evacuee properties in the Central Government free from all encumbrances, including the plaintiffs' right to purchase the properties. The Court also held that the Act was not unconstitutional, as it was saved by Clause (5) (b) (iii) of Article 31 of the Constitution, which provides that nothing in Clause (2) (relating to taking possession of or acquiring property for a public purpose) shall affect the provisions of any law which the State may hereafter make with respect to property declared by law to be evacuee property. Finally, the Court held that the Civil Court had no jurisdiction to grant an injunction under Section 36 of the Act, which prevents the Civil Court from entertaining a suit for injunction in respect of any action taken or to be taken in pursuance of any power conferred by or under the Act.
Issues: 1. Whether the agreement of sale was enforceable. 2. Whether the plaintiffs could rely on an implied negative covenant in the agreement to obtain an injunction. 3. Whether the Displaced Persons (Compensation and Rehabilitation) Act, 1954, vested the evacuee properties in the Central Government free from all encumbrances, including the plaintiffs' right to purchase the properties. 4. Whether the Act was unconstitutional. 5. Whether the Civil Court had jurisdiction to grant an injunction under Section 36 of the Act.
Ratio Decidendi: 1. An agreement of sale is unenforceable if the price, the period after which the agreement is to become enforceable, the properties in respect of which it is to operate in favor of the plaintiffs, and the persons to whom the properties are to be sold are all indefinite. 2. A negative covenant in an agreement must be distinct and not implied from the affirmative agreement. 3. The Displaced Persons (Compensation and Rehabilitation) Act, 1954, vests the evacuee properties in the Central Government free from all encumbrances, including the plaintiffs' right to purchase the properties. 4. The Act is not unconstitutional, as it is saved by Clause (5) (b) (iii) of Article 31 of the Constitution. 5. The Civil Court has no jurisdiction to grant an injunction under Section 36 of the Act, which prevents the Civil Court from entertaining a suit for injunction in respect of any action taken or to be taken in pursuance of any power conferred by or under the Act.
Final Decision: The appeal was dismissed with costs.

Judgment -

1. This is an appeal against the decree passed by Judge Tulzapurkar on 8th October, 1956, in Civil Suit No. 293 of 1956 on the file of the Bombay City Civil Court. Shree Ambarnath Mills Corporation are a partnership consisting of three partners; (1) Rai Bahadur Kunwar Raj Nath, (2) Shaligram Khanna and (3) Pesumal Atalrai Sha-hani. All the three partners of the firm are displaced persons who migrated to India as a result of the Partition in 1947. We will hereafter collectively refer to the three partners of Shree Ambarnath Mills Corporation as "the plaintiffs". The plaintiffs carry on business in Bombay. Prior to 1947 Messrs. Ahmed Abdul Karim Bros. Ltd.. was carrying on business as manufacturers of textiles and bobbins. The properties of that Company consisted of three factories with bungalows and chawls at Ambarnath in the district of Thana, a Bobbin factory at Tardeo in Bombay and the goodwill and other benefits of the business. These properties were notified as evacuee property under a notification, dated 12th September, 1951, issued by the Assistant Custodian of Evacuee Property, and in consequence thereof the properties become vested in the Custodian of Evacuee Property. By an indenture, dated 30th August, 1952, the Custodian entered into a composite agreement with the plaintiffs relating to three distinct matters. There was first a demise under which the nulls at Thana and the factory at Tardeo were leased to the plaintiffs for five years at an annual rental of Rs. 6,00,000/- payable by four quarterly instalments of Rs. 1,50,00/ each, payable in advance on or before the 30th of each quarter. The plaintiffs also agreed to make a security deposit of Rs. 1,50,000/- for due performance of the covenant regarding payment of rent. Secondly there was a covenant under which the plaintiffs agreed to deposit Rs. 7,00,000/- as security for payment of the price of all stocks of raw materials, unsold finished goods, consumers stores, spare parts, cars and trucks and other moveables which the plaintiffs agreed to purchase from the Custodian. The plain-tiffs also agreed to take delivery of the stocks of raw materials, etc., which had been hypothecated the certain banks after discharging the in cumbrance. Thirdly there was a covenant of the Custodian to sell the mills and the factory to the plaintiffs subject to certain conditions.

2. Pursuant to this agreement the plaintiffs deposited with the Custodian a sum of Rs. 1,50,000/-on 31st August, 1952, as security for the due filment and observance of the conditions as to-regulate payment of instalments of rent, but it appears that the plaintiffs did not pay the security deposit of Rs. 7,00,000/- for price of goods agreed to be purchased by them. It appears that the plaintiffs remained in possession of the properties, which were notified as evacuee properties, till February 1954. On 12th February, 1954, the Custodian served a notice upon the plaintiffs, purporting to do so in exercise of the powers vested in him by Section 13 of the Administration of Evacuee Property Act, 1950, calling upon the plaintiffs not to remove stocks of raw materials, finished goods and other properties from any of the three Ambarnath Mills or the Bobbin Factory at Tardeo or the godowns or offices at Bombay and also prohibiting the plaintiffs from raising any monies on the security of the stock of finished goods, goods in process, raw materials, etc., and further directing the plaintiffs to submit a daily report to the Custodian of all the transactions entered into by them including payments made and received, and further directing the plaintiffs to furnish in writing such information as may be required from time to time relating to the quality, quantity, nature, approximate value and the place of storage at raw materials, finished goods and goods in process. The notice was given because the plaintiffs had committed default in payment of rent and in giving the guarantee for Rs. 7,00,000/- and Clause5 of t

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