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1965 Supreme(Mad) 78
Madras High Court
ANANTANARAYANAN,NATESAN
Vazhakulangarayil Safiya Bi - Appellant
Versus
Arivur Abdul Shukoor Sahib - Respondent
Decided On : 03/04/1965
B. K. Nambiyar, for Appellants; E. A. Viswanathan and G. Rajagopalan, for Respondent.
A contract to sell and purchase, supported by consideration and mutuality, is specifically enforceable, and a subsequent sale of the property to a third party with notice of the prior agreement to reconvey does not affect the right of the original vendor to specific performance.
Headnote:
SPECIFIC PERFORMANCE - SALE WITH AGREEMENT TO RECONVEY - MUTUALITY - ASSIGNMENT - NOTICE - SPECIFIC RELIEF ACT, 1877, SEC. 27(B) - TRANSFER OF PROPERTY ACT, 1882, SEC. 54 - TRUSTS ACT, 1882, SEC. 91.
Fact of the Case:
Plaintiff conveyed the suit property to the first defendant for Rs. 8000 by a registered sale-deed. The parties entered into an agreement in writing on the same date. Under this agreement, the first defendant undertook to reconvey the same property to the plaintiff on payment of the sum of Rs. 8000 within a period of five years from 7-10-1954, it being equally agreed that the plaintiff should exercise the right of repurchase, if he desired to do so, after 7-10-1958 and on or before 7-10-1959. The first defendant, along with the second defendant, sold the suit property to the third defendant for Rs. 8000 on 25-3-1957. On the same date the third and fourth defendants executed an agreement in favour of their vendor, the first defendant, by means of which not only was it made clear that the vendees were fixed with knowledge of the prior agreement to reconvey in favour of the plaintiff, but it further appears, unequivocally, that the vendees undertook to implement this obligation, in specific terms. By a notice dated 2-1-1959, namely, within the time permitted for the exercise of his right to repurchase, the plaintiff intimated his readiness to repurchase, and requested defendants 2 and 4 to reconvey the property on receipt of the consideration, which he offered. A copy of the agreement between defendants 1 and 2 on the one hand and defendants 3 and 4 on the other, was furnished to the plaintiff by the second defendant. But the third defendant, by a reply notice dated 12-2-1959, declined to execute the deed of conveyance.
Finding of the Court:
The court held that the original agreement was a valid contract, supported by consideration and mutuality, and that the undertaking to reconvey was specifically enforceable as such. The court further held that the subsequent sale of the property to the third and fourth defendants, with notice of the prior agreement to reconvey, did not affect the plaintiff's right to specific performance, as the third and fourth defendants were bound by the terms of the agreement under Section 27(b) of the Specific Relief Act, 1877.
Issues: 1. Whether the original agreement to reconvey was a valid contract. 2. Whether the subsequent sale of the property to the third and fourth defendants affected the plaintiff's right to specific performance.
Ratio Decidendi: 1. The court held that the original agreement to reconvey was a valid contract, supported by consideration and mutuality. The court reasoned that the sale deed and the agreement to reconvey together formed an intrinsic transaction, every effective part of which was consideration for the other part. This implied that the agreement to reconvey was not void for absence of consideration. The court further held that the contract was not a mere option, but a mutually enforceable contract to sell and purchase, as the plaintiff was equally bound to purchase and the defendants had a right to enforce the purchase. 2. The court held that the subsequent sale of the property to the third and fourth defendants, with notice of the prior agreement to reconvey, did not affect the plaintiff's right to specific performance. The court reasoned that under Section 27(b) of the Specific Relief Act, 1877, a person who acquires property with notice that another person has entered into an existing contract affecting that property, of which specific performance could be enforced, is bound to hold the property for the benefit of the other person to the extent necessary to give effect to the contract. The court further held that the third and fourth defendants were not transferees for value, who had paid their money in good faith, without notice of the original contract, as they had not merely had knowledge of the contract, but had explicitly undertaken to implement the contract, upon demand, by the persons originally bound.
Final Decision: The court dismissed the appeal and confirmed the decree of the lower court, subject to a modification that the plaintiff was to reimburse the appellants for the value of the improvements made on the property.
ANANTANARAYANAN, J. :- This appeal, which involves a very interesting question of what is claimed to be a conflict in the case law needing elucidation, arises upon the following facts. We might state, at the outset itself, that the facts are not in controversy.
2. On 7-10-1954 one A. Abdul Shukoor Sahib (plaintiff) conveyed the suit property 2/74 Sydenhams Road, Periamet, Madras to the first defendant for Rs. 8000 by a registered sale-deed. The second defendant is the husband of the first defendant, claimed to be acting throughout on her behalf. The parties entered into an agreement in writing (Ex . A 1) on the same date. Under this agreement, the first defendant undertook to reconvey the same property to the plaintiff on payment of the sum of Rs. 8000 within a period of five years from 7-10-1954, it being equally agreed that the plaintiff should exercise the right of repurchase, if he desired to do so, after 7-10-1958 and on or before 7-10-1959. Admittedly, the first defendant entered into possession of the suit property.
3. The first defendant, along with the second defendant, sold the suit property to the third defendant for Rs. 8000 on 25-3-1957. It has to be carefully noted that the date of this sale, 25-2-1957, was even prior to the commencement of the period within which plaintiff could exercise his option to repurchase, namely, 7-10-1968 to 7-10-1959. On the same date the third and fourth defendants executed an agreement in favour of their vendor, the first defendant, by means of which not only was it made clear that the vendees were fixed with knowledge of the prior agreement to reconvey in favour of the plaintiff, but it further appears, unequivocally, that the vendees undertook to implement this obligation, in specific terms. The relevant part of the document, Ex. A2, may be extracted and set forth here, as this undertaking is of some importance:
"The purchaser and third party, added by way of abundant caution, hereby agree to conform to such agreement by and between the seller and the said A. Abdul Shukoor Sahib and execute the conveyance in his favour at the expense of the said A. Abdul Shukoor Sahib (the third party also joining in the sale-deed by way of abundant caution if so desired) on receipt of Rs. 8000 from the said A. Abdul Shukoor Sahib within the period fixed in that behalf if the said A. Abdul Shukoor Sahib requires the seller to comply with the said agreement in time, on the strict understanding that time is the essence of the contract."
4. By a notice dated 2-1-1959, namely, within the time permitted for the exercise of his right to repurchase, the plaintiff intimated his readiness to repurchase, and requested defendants 2 and 4 to reconvey the property on receipt of the consideration, which he offered. A copy of the agreement between defendants 1 and 2 on the one hand and defendants 3 and 4 on the other, was furnished to the plaintiff by the second defendant. But the third defendant, by a reply notice dated 12-2-1959, declined to execute the deed of conveyance. In the subsequent suit by plaintiff, first and second defendants, the original vendees, did not contest the right of the plaintiff to obtain the reconveyance on payment of Rs. 8000, and the contest has only been by the third defendant (primarily) with the fourth defendant as an ancillary party. The learned Sixth Assistant Judge of the City Civil Court, Madras gave a decree in favour of the plaintiff, and hence this appeal by defendants 3 and 4.
5. The above facts clarify the situation, and, at the first blush, it would appear that there is little or no room for doubt. Sec. 91 of the Trusts Act embodies the principle that where a person acquires property with notice that another person has entered into an existing contract affecting that property, of which specific performance could be enforced, the person acquiring the property must hold it for the benefit of the other person to the extent necessary to give effect to the contract. The sam
