KAPILABEN & ORS. versus ASHOK KUMAR JAYANTILAL SHETH THROUGH POA GOPALBHAI MADHUSUDAN PATEL & ORS.
[2019] 17 S.C.R. 247, Supreme Court of India, 2019
Outcome: Appeal(s) allowed (Granted)
Segment: Body
A
B
C
D
E
F
G
H
247
KAPILABEN & ORS.
v.
ASHOK KUMAR JAYANTILAL SHETH THROUGH
POA GOPALBHAI MADHUSUDAN PATEL & ORS.
(Civil Appeal Nos. 10683-86 of 2014)
NOVEMBER 25, 2019
[MOHAN M. SHANTANAGOUDAR AND
ANIRUDDHA BOSE, JJ.]
Specific Performance:
Specific performance of contract – Agreement to sell
disputed property in the year 1986 between original vendor and
original vendees – Sale was to be executed upon receipt of
remaining consideration from the original vendees within stipulated
time – The original vendees thereafter in the year 1987 executed
four agreements to sell the four different portions of the property
in dispute to the vendees in the present case (i.e. respondent Nos.1)
– The vendees under 1987 agreement were required to start a
housing project on the land in question – Suit for specific
performance of 1986 agreement was filed by the original vendee
against the original vendor – The vendees under 1987 agreements
also filed suit for specific performance of the 1987 agreements –
Original vendees withdrew their suit for specific performance of
1986 agreement and the vendees in respect of 1987 agreements
sought impleadment as co-plaintiffs in that suit – Trial court rejected
the withdrawal application and allowed the impleadment
application – High Court reversing the order of trial court allowed
the withdrawal application and rejected impleadment applications
– The order of High Court was affirmed by Supreme Court –
Vendees of 1987 agreement amended their suit for
specific
performance of 1987 agreement seeking execution of 1986
agreement on the basis of assignment made in their favour – Trial
court dismissed the suits – Appellate Court affirmed the finding of
trial court – High Court allowed the case of vendees of 1987
agreement – Appeal to Supreme Court by the original vendors –
Held: There was no privity of contract between the appellants
(original vendors) and respondent No.1 (vendees in 1987
   [2019] 17 S.C.R. 247
247
A
B
C
D
E
F
G
H
248
SUPREME COURT REPORTS
[2019] 17 S.C.R.
agreement) as neither appellants were party to 1987 agreements,
nor respondent Nos.1 were party to the 1986 agreement – Hence
respondent Nos.1 cannot seek specific performance of 1986 or
1987 agreements against the appellants except by suing as
representative-in-interest or the original vendees u/s. 15(b) of the
Specific Relief Act – The term ‘representative-in-interest’ includes
the assignee of a contractual interest – Whether or not an assignee
can seek specific performance would depend upon the construction
of the contract – In the facts of the present case, 1987 agreements
were not a case of assignment, but were independent agreements
for sale which were contingent upon the execution of 1986
agreement – Therefore, the only way respondent Nos.1 could seek
specific performance of the 1986 agreement was by proving the
appellants’ knowledge of and consent to transfer of the original
vendees’ rights and liabilities to respondent Nos.1 – In the present
case, appellants have neither by words nor by conduct, consented
to the assignment of the 1986 agreement in favour of respondent
Nos.1 – 1987 agreements were contingent contracts – Once 1986
agreement was cancelled, the original vendees’ rights thereunder
ceased to exist – Due to subsequent withdrawal of the suit for
specific performance of 1986 agreement abandoning their rights,
enforcement of 1987 agreements has become impossible – Thus,
1987 agreements are void and
unenforceable as provided u/ss. 32
and 35 of the Contract Act – However, it prima facie seems that
the original vendees relinquished their rights in the 1986
agreements to frustrate the performance of 1987 agreements,
original vendees are directed to reimburse earnest money and 9%
interest per annum and pay compensation of Rs.1,80,000/- with
interest @ 9% per annum – Specific Performance Act, 1963 –
s.15(b) – Contract Act, 1872 – ss.32, 35 and 40 – Transfer of
Property Act, 1882 – s.40.
Contract:
Assignability of Contract – Held: Promisor cannot assign
contract to the third party without consent of the promisee.
Words and Phrases:
‘Representative-in-interest’ – Meaning of in the context of
contract.
A
B
C
D
E
F
G
H
249
Partly allowing the appeals, the Court
HELD: 1.1 Upon considering the facts and circumstances
of the present case, it is evident that there is no privity of
contract between the appellants and respondent Nos. 1.
Respondent Nos. 1 were not the party to the 1986 agreement.
Vice versa, the appellants were not party to the 1987 agreements,
though whether or not they had knowledge of the same is
disputed. Hence, respondent Nos. 1 cannot seek specific
performance of the 1986 agreement, or for that matter, the 1987
agreements, against the appellants, except by suing as
‘representatives-in-interest’ of the original vendees under
Section 15(b) of the Specific Relief Act. [Para 7] [236-B-D]
The Indian Contract and Specific Relief Acts by
Pollock and Mulla by (R. Yashod Vardhan, and Chitra
Narayan eds., 15th edn., Vol. I) 730 – referred to.
1.2 The term ‘representative-in-interest’ includes the
assignee of a contractual interest. Though the provisions of the
Contract Act do not particularly deal with the assignability of
contracts, this Court has opined time and again that a party to a
contract cannot assign their obligations/liabilities without the
consent of the other party. Even in a case of assignment of
rights simplicitor, such assignment would necessarily require the
consent of the other party to the contract if it is of a ‘personal
nature’. [Paras 7, 8] [263-F-H; 265-A-B]
1.3 The rule stated in Section 15(b) of the Specific Relief
Act is that any interest in
a contract can be specifically enforced
by the assignee thereof, except where the ‘personal quality’ of
the party is a material ingredient in the contract; or where the
contract, expressly or by necessary implication, prohibits the
beneficiary from transferring their contractual interest to third
parties. Hence Section 15(b) does not contradict the general law
on assignability of contracts as laid down by this Court, but
rather clarifies that the same conditions will have to be satisfied
if an assignee seeks to secure specific performance of the
assigned contract. [Para 9] [265-D-G]
1.4 In the modern context where parties frequently enter
into complex commercial transactions, it is perhaps not so
KAPILABEN v. ASHOK KR. JAYANTILAL SHETH THR. POA GOPALBHAI
MADHUSUDAN PATEL
A
B
C
D
E
F
G
H
250
SUPREME COURT REPORTS
[2019] 17 S.C.R.
convenient to pigeonhole contracts as being either ‘general’ or
of ‘personal nature’ or as involving the assignment of purely
‘rights’ or ‘obligations’. It is possible that a contract may involve
a bundle of mutual rights and obligations which are intertwined
with each other. Where the conferment of a right or benefit is
contingent upon, or coupled with, the 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 10] [266-A-D]
1.5 It would be inequitable for a promisor to contract out
his responsibility to a stranger if it is apparent that the promisee
would not have accepted performance of the contract had it been
offered by a third party. This is especially important in business
relationships where the pre-existing goodwill between parties
is often a significant factor influencing their decision to contract
with each other. This principle is already enshrined in Section
40 of the Contract Act. The promisor ‘may employ a competent
person’, or assign the contract to a third party as the case may
be, to perform the promise only if the parties did not intend that
the promisor himself must perform it. Hence in a case where
the contract is of personal nature, the promisor must necessarily
show that the promisee was agreeable to performance of the
contract by a third person/assignee, so as to claim
exemption
from the condition specified in Section 40 of the Contract Act.
If the promisee’s consent is not obtained, the assignee cannot
seek specific performance of the contract. [Para 10] [266-D-H;
267-A-B]
1.6 Hence, whether or not an assignee can seek specific
performance would depend upon the construction of the contract
in each case. The Court would have to determine the nature of
interest sought to be transferred, whether such interest was
meant to be enforceable only between the parties to the contract
and whether the contract expressly or by necessary implication
bars assignment of such interest. [Para 11] [267-A-C]
1.7 In the present case, the 1986 agreement provided that
the Appellants shall execute sale deed in favour of the original
vendees or ‘name proposed by the vendee’ subject to the
assurance that the latter would pay the remaining consideration
A
B
C
D
E
F
G
H
251
and betterment tax within the stipulated time, and that the former
would obtain the necessary permissions for construction on the
suit property. The term ‘name proposed by the vendee’ in the
1986 agreement refers to a nominee to be proposed at the time
of execution of the sale deed and not a subsequent assignee.
At the same time, it is true the 1986 agreement does not contain
any express bar against assignability. [Para 11] [267-C-E]
1.8 It cannot be said that in every case where there is no
express bar against assignability stipulated in the contract,
assignment of the interest therein should be upheld without
looking at the context in which the parties contracted with each
other. It has to be seen whether the terms of the contract, and
the circumstances in which the contract was entered into, lead
to an inference that the parties did not intend to make their
interest therein assignable. [Para 11] [267-F-H]
1.9 Section 40 of the Transfer of Property Act states that
a contract for sale of immovable property is a contract that “a
sale shall take place on terms settled between the parties”. It is a
settled position that such a contract does not by itself create any
interest in or charge on the property. The buyer only obtains a
right to get the sale deed executed, upon fulfilment of the
applicable terms and conditions as consented to by all the
parties. Hence the 1986 agreement, being an agreement to sell
the suit property, is a clear case of a contract
combining mutual
rights and obligations. The original vendees were to obtain the
right to get the sale deed executed in respect of the suit property
upon fulfilment of the conditions specified in the 1986 agreement.
[Para 12] [268-E-H]
1.10 Upon comparison of the 1986 agreement and the 1987
agreements, it is found that the 1987 agreements amount to
nothing but a substitution of liabilities wherein Respondent Nos.
1 have assumed the same obligations which the original vendees
were supposed to have performed under the 1986 agreements.
This includes not only the obligation to pay betterment tax but
also the obligation to reimburse the cost of acquiring planning
permissions and to get the suit property levelled for the purpose
of construction. Additionally, the 1987 agreements also provide
that the plaintiffs can prepare the scheme for construction of
KAPILABEN v. ASHOK KR. JAYANTILAL SHETH THR. POA GOPALBHAI
MADHUSUDAN PATEL
A
B
C
D
E
F
G
H
252
SUPREME COURT REPORTS
[2019] 17 S.C.R.
housing society on the suit property, get the members of the
society registered and execute agreements with them, and
publish advertisement boards regarding the scheme. Hence this
is not a case of assignment of agreement for sale simplicitor, but
assignment of what is akin to a development agreement for a
housing scheme on the suit property. A contract of this nature
is ordinarily based upon certain personal understanding between
the parties regarding the course of business to be undertaken
on the suit property. [Para 12] [269-A-D]
1.11 It is not disputed that the original vendees had not
fulfilled their obligations under the 1986 agreement prior to the
purported ‘assignment’ under the 1987 agreements. Hence they
had not ‘performed their part of the contract’ as required under
Section 15(b) of the Specific Relief Act. Applying the law, the
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] [269-D-F]
1.12 Under the 1987 agreements, payment of the
remaining consideration amount is to be made to the original
vendees, not the appellants, and possession of the suit property
is to be handed over by the original vendees. Even the
consideration to be paid was twice the rate as specified in the
1986 agreement. The 1987 agreements nowhere provide for
discharge of the original vendees’ pending obligations towards
the appellants
by respondent Nos. 1. Hence, the 1987
agreements were not a case of assignment but appear to be
independent agreements for sale which were contingent on the
execution of the 1986 agreement. Therefore, the only way
respondent Nos. 1 can seek specific performance of the 1986
agreement against the appellants is by proving the appellants’
knowledge of and consent to transfer of the original vendees’
rights and liabilities to respondent Nos. 1. [Para 13] [269-E-H]
1.13 It is true that Section 15(b) does not stipulate in what
form the promisee’s ‘acceptance’ of performance by a
representative-in-interest of the promisor should be
communicated. It may be either through express written consent,
or implied from the actions of the promisee; though as a matter
of caution, the former mode of acceptance would inevitably have
A
B
C
D
E
F
G
H
253
higher evidentiary value. However in the present case, as the
trial court and the District Judge have rightly appreciated on
facts, the appellants have not either by words or by conduct,
consented to the assignment of the 1986 agreement in favour
of respondent Nos. 1. [Para 14] [270-A-C]
1.14 Respondent Nos. 1 had conceded before the trial court
that the appellants had given their signatures on the layout plan
for the housing scheme on the suit property to the original
vendees, not to respondent Nos. 1. Even the advertisement
regarding the housing scheme nowhere indicates that the
appellants/original owners were developing the project on the
suit property in partnership with respondent Nos. 1. Thus, there
was no valid assignment of rights flowing from the 1986
agreement to respondent Nos. 1, and they cannot seek specific
performance against the appellants. [Para 14] [270-E-G]
1.15 The 1987 agreements are clearly contingent contracts
inasmuch as they could only be enforced had the original
vendees obtained the right to get the sale deed executed, and
taken possession of the suit property as per the terms of the
1986 agreement. Once the 1986 agreement was cancelled by the
appellants, the original vendees’ rights thereunder ceased to
exist. [Para 16] [271-D-F]
Khardah Company Ltd v. Raymon & Co (India) Private
Ltd., AIR 1962 SC 1810 : [1963] SCR 183 – followed.
Indu Kakkar v. Haryana State Industrial Development
Corporation Ltd. and Another (1999) 2 SCC 37 :
[1998] 3 Suppl. SCR 277 – relied on.
Shyam Singh v. Daryao Singh (Dead) By LRs.  and
Others (2003) 12 SCC 160 : [2003] 5 Suppl. SCR
784 ; Ram Baran Prasad v. Ram Mohit Hazra and
Others AIR 1967 SC 744 : [1967] SCR 293 –
distinguished.
2.1 Respondent Nos. 1 have admitted in their plaints that
the Town Planning Scheme was finalized prior to the 1986
agreement. Hence the deadline stipulated under the 1986
agreement for payment of remaining consideration by the original
vendees, i.e., within three months of finalization of the Scheme,
KAPILABEN v. ASHOK KR. JAYANTILAL SHETH THR. POA GOPALBHAI
MADHUSUDAN PATEL
A
B
C
D
E
F
G
H
254
SUPREME COURT REPORTS
[2019] 17 S.C.R.
has long since lapsed. Since the original vendees never paid the
remaining consideration within the time specified in the 1986
agreement, their rights thereunder never fructified. [Para 17]
[272-A-C]
2.2 Even assuming that the original vendees acquired some
interest in the suit property, the subsequent withdrawal of the
suit SCS No. 194/1988 shows that the original vendees do not
intend to enforce the 1986 agreement. The trial court has found
that though the suit property de jure vested with the concerned
Government Authority under the Town Planning Scheme, the de
facto possession of the property remains with the Appellants and
the original vendees have not taken possession thereof.
Furthermore, both the trial court and the District Judge have
on facts found that the original vendees have not shown any
readiness or willingness to pay the remaining consideration to
the appellants. Hence since the original vendees have abandoned
their rights under the 1986 agreement, enforcement of the 1987
agreements has become virtually impossible and respondent
Nos. 1 cannot seek specific performance of the latter.
Consequently the 1987 agreements are void and unenforceable
as provided under Sections 32 and 35 of the Contract Act. [Para
17] [272-B-F]
2.3 Given that the withdrawal of the suit for specific
performance of 1986 agreement has attained finality before this
Court, and the trial court and the High Court have concurrently
found in the separate application made by the plaintiffs in the
present suit, by orders dated 24.1.2008 and 25.3.2008
respectively, that the original vendees cannot be compelled to
continue their suit against their desire, interference with the
same is not warranted. [Para 18] [273-B-C]
3.1 Though on facts and law, respondent Nos.1 are not
entitled to specific performance of the 1986 and 1987
agreements, prima facie it does appear that the appellants and
the original vendees have colluded to frustrate performance of
the 1987 agreements. The trial court has rightly directed the
original vendees to reimburse earnest money of Rs. 5000 paid
by respondent Nos. 1 towards each of the 1987 agreements with
an interest of 9% p.a. from 14.9.1987 till the date of realization.
[Para 19] [273-C-E]
A
B
C
D
E
F
G
H
255
3.2 Since the original vendees seem to have relinquished
their rights in the 1986 agreement so as to frustrate performance
of the 1987 agreements, it would be just, in these circumstances,
to award compensation to the Plaintiffs for the loss of opportunity
and inconvenience suffered by them. Though no remedy is
available as against the Appellants on account of absence of
privity of contract, it is apposite to direct the original vendees,
that is, respondent Nos. 3-11 in the four appeals, to pay
Rs. 1,80,000/-, with interest at the rate of 9% per annum from
the date of the suits, as damages to the Plaintiffs/respondent Nos.
1 in these appeals. High Court is also directed to expeditiously
release and remit back the consideration amount deposited by
respondent Nos. 1 in lieu of specific performance. [Para 19] [273-
G-H; 274-A-B]
Habiba Khatoon v. Ubaidul Huq and Others (1997) 7
SCC 452 : [1997] 3 Suppl. SCR 251 – referred to.
Case Law Reference
[1997] 3 Suppl. SCR 251
referred to
Para 6
[1963] SCR 183
followed
Para 7
[1998] 3 Suppl. SCR 277
relied on
Para 7
[2003] 5 Suppl. SCR 784
distinguished
Para 11
[1967] SCR 293
distinguished
Para 11
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 10683-
10686 of 2014.
From the Judgment and Order dated 31.07.2014 of the High
Court of Gujarat at Ahmedabad in S.A. Nos. 100, 101, 102 & 103 of
2013.
Ranjit Kumar, Sr. Adv., Gaurav Agrawal, Santosh Krishnan,
Anurag Gharote,  Advs. for the Appellants.
C.U. Singh, Sr. Adv.,
Amar Dave, Mahesh Agarwal, Rishi
Agrawala, Ankur Saigal, Arshit Anand, Divyang Gobind Chandiramani,
E.C. Agrawala, Advs.  for the Respondents.
KAPILABEN v. ASHOK KR. JAYANTILAL SHETH THR. POA GOPALBHAI
MADHUSUDAN PATEL
A
B
C
D
E
F
G
H
256
SUPREME COURT REPORTS
[2019] 17 S.C.R.
The Judgment of the Court was delivered by
MOHAN M. SHANTANAGOUDAR, J.
1. These appeals arises out of judgement of the High Court of
Gujarat at Ahmedabad dated 31.7.2014, allowing the appeals of the
respective Respondent Nos. 1 in the four Civil Appeal Nos. 10683-86
of 2014 before us (hereinafter ‘Respondent Nos. 1’), against judgement
and order of the Additional District Judge, Vadodara dated 2.4.2013 and
order dated 30.12.2011 of the Additional Senior Civil Judge, Vadodara;
and decreeing the suits SCS Nos. 657-660/1988 filed by Respondent
Nos. 1 for specific performance against the Appellants herein.
I. Background Facts
2. 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 bearing Survey No. 354/
1, admeasuring 1 acre and 31 gunthas in Village Manjalpur of Vadodara
district (hereinafter ‘suit 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 (hereinafter ‘original
vendees’), 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 case of Respondent Nos. 1 is that 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.
Under the 1987 agreements, it was purportedly open to
Respondent Nos. 1 to make preparations for construction of a housing
scheme over the suit property and issue advertisement for the same.
A
B
C
D
E
F
G
H
257
Hence they claim that consequently, possession of the suit property was
given to them, that a Bhoomi Pujan was conducted for laying
foundation stone on the land and the members of the housing scheme
were also registered. Further, that they also obtained the layout plan
and construction permission for the housing scheme from Vadodara
Municipal Corporation at their own cost, and the deceased original
owner Mr. Naranbhai Patel had put his signature on the layout plan.
Subsequently, dispute arose between the parties, and the original
vendees filed suit SCS No. 194/1988 on 4.4.1988 before the Learned
Civil Judge (Senior Division) at Vadodara (hereinafter ‘trial court’),
seeking specific performance of the 1986 agreement against the
Appellants. They claimed that they had served notice to the Appellants
on 11.3.1988 seeking execution of sale deed in their favour, but the latter
had given evasive reply to the same; that they were deliberately avoiding
execution of sale deed so as to take advantage of increase in real estate
prices. Per contra, the Appellants claimed that they had on 25.3.1988,
by way of reply to the original vendees’ legal notice, cancelled the 1986
agreement as the original vendees had not paid the remaining
consideration as required.
Respondent Nos. 1 were not party to SCS No. 194/1988; and
no averment was made in the said suit regarding the 1987 agreements.
Instead, on 21.11.88, Respondent Nos. 1 filed four separate suits SCS
Nos. 657-660/1988
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.
The Appellants in their written statements to SCS Nos. 657-660/
1988 denied having any dealings with Respondent Nos. 1 and also stated
that the original vendees had never informed them about the 1987
agreements. They averred that since the original vendees had never
become the legal owners of the suit property, they did not have any
right or authority to enter into any kind of transaction qua the land with
Respondent Nos. 1; and that the plaints were concocted to usurp the
land.
Both sets of suits, SCS No. 194/1988 and SCS Nos. 657-660/
1988, remained pending for a number of years. During that period,
KAPILABEN v. ASHOK KR. JAYANTILAL SHETH THR. POA GOPALBHAI
MADHUSUDAN PATEL [MOHAN M. SHANTANAGOUDAR, J.]
A
B
C
D
E
F
G
H
258
SUPREME COURT REPORTS
[2019] 17 S.C.R.
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.
A. Proceedings in SCS No. 194/1988 (Original vendees’ suit)
3. The original vendees filed withdrawal pursis on 26.7.2002
seeking to unconditionally withdraw SCS No. 194/1988 on the ground
that the 1986 agreement was fraudulently registered; that they were
not aware of the identity of the true owners of the suit property at the
time of the 1986 agreement as it was executed through a broker, that
the original owners of the suit property had not signed the agreement,
nor had they received any consideration; and the 1986 agreement was
fraudulently registered, hence no dispute could be raised regarding the
suit property. On the same day, Respondent Nos. 1 sought impleadment
as co-plaintiffs in SCS No. 194/1988.
The trial court by way of common order dated 22.9.2002 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, though without going into the
merits of the claim
made by Respondent Nos. 1. The Court held that
the original vendees had an absolute right to withdraw their suit
unconditionally irrespective of their motivations for the same. Further,
that it was open to Respondent Nos. 1 to raise all available contentions
in their separate suits, including admissions, if any, made by the original
vendees in their suit SCS No. 194/1988. It was noted that Respondent
Nos. 1 cannot be permitted to substitute the original vendees as plaintiffs,
as otherwise substantial amendment would be required to the original
vendees’ plaint. The special leave petitions filed by Respondent Nos. 1
against the High Court judgement were dismissed by this Court by
order dated 16.11.2004 in SLP (Civil) Nos. 22664-65/2004.
Respondent Nos. 1 subsequently made application in SCS No.
658 of 2008, for revival of SCS No. 194/1988, contending that the
original vendees had been misled into withdrawing the latter suit;
however the application was dismissed by the trial court and the High
Court by orders dated 24.1.2008 and 25.3.2008 respectively. Hence the
withdrawal of the original vendees’ suit has attained finality.
A
B
C
D
E
F
G
H
259
B. Proceedings in SCS Nos. 657-660/1988 (Present suit)
4. It is relevant to note that though the original plaints in SCS
Nos. 657-660/1988 were seeking specific performance only of the 1987
agreements, Respondent Nos. 1 amended their plaints in 2005 to seek
a declaration that the 1986 agreement is still in force and that the
Appellants were bound to execute the 1986 agreement on the basis of
the assignment made in their favour.
The trial court by common order dated 30.12.2011 dismissed all
four suits. It rejected Respondent Nos.1/Plaintiffs’ contention that the
original vendees had withdrawn their suit SCS No. 194/1988 in collusion
with the Appellants herein. This was based on the reasoning that the
High Court and this Court had, in the earlier proceedings, sanctioned
the unconditional withdrawal of SCS No. 194/1988 and not made any
finding of judicial impropriety or fraud.
The trial court further found that in light of revocation of the 1986
agreement by the Appellants and withdrawal of SCS No. 194/1988 by
the original vendees, it was not open to the Plaintiffs to re-agitate for
specific performance of the said agreement. That in any case, even if
the 1986 agreement was assumed to be in force, the original vendees
could not have assigned their outstanding obligation to pay the remaining
consideration without the written consent of the original owner i.e.,
Defendant No. 1 Naranbhai. Since the 1987 agreements and the 1986
agreement were not ad idem, and
new conditions were laid down in
the 1987 agreements, such consent was indispensable.
That neither of the Appellants had given any such consent, either
verbally or by conduct; nor was there any evidence that the original
vendees had paid the remaining consideration to the Appellants, such
that the former’s rights under the 1986 agreement had fortified and
consequently passed on to the Plaintiffs under the 1987 agreements.
Therefore the 1987 agreements were void, illegal and unenforceable.
Further, that the 1987 agreements were also vague and unenforceable
inasmuch as the suit property was not specifically defined therein.
The trial court additionally held that the Plaintiffs had not taken
any steps, such as depositing the remaining consideration owed by the
original vendees, or paying betterment tax as per the terms of the 1987
agreements, to show that they themselves were ready and willing to
perform the contracts. Hence this was not a fit case to grant either
KAPILABEN v. ASHOK KR. JAYANTILAL SHETH THR. POA GOPALBHAI
MADHUSUDAN PATEL [MOHAN M. SHANTANAGOUDAR, J.]
A
B
C
D
E
F
G
H
260
SUPREME COURT REPORTS
[2019] 17 S.C.R.
specific performance or damages, though Respondent Nos. 1 were held
entitled to return of the earnest money paid by them with interest.
The Learned Additional District Judge, Vadodara by judgement
dated 2.04.2013 affirmed the trial court’s findings. It was re-emphasized
that a party to a contract cannot assign their obligations thereunder
without the other party’s consent. There was nothing on record to show
that the Appellants had given such consent. In any case, since the
original vendees had never shown their readiness and willingness to pay
the balance consideration due by them, no right of specific performance
had accrued in their favour. Further, that the original vendees had
anyway waived their rights by withdrawing their suit in SCS No. 194/
1988. Hence the question of assignment of such a right to Respondent
Nos. 1, such that they could claim specific performance of the 1986
agreement as representatives-in-interest of the original vendees under
Section 15(b) of the Specific Relief Act, 1963 (‘Specific Relief Act’)
did not arise.
However, the High Court in the impugned judgement 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.
Further, that reading Sections 40 and 54 of the Transfer of
Property Act, 1882 (‘Transfer of Property Act’) and Section 15(b) of
the Specific Relief Act together, the ‘interest’ assignable under Section
15(b) need not be an interest in the property or a charge created in the
property. A contractual interest in the form of an obligation annexed to
ownership of the property may also be assignable. It was discernible
from the facts and evidence on record that the Appellants had given
implied consent for such assignment. Mr. Naranbhai Patel’s signature
on planning permissions and his presence at the Bhoomi Pujan
ceremony were taken as proof that the original owners had consented
to the involvement of Respondent   Nos. 1 in developing a housing
scheme on the suit property.  Therefore, it was found that the 1986
agreement remained alive, and the rights derived therefrom in favour
A
B
C
D
E
F
G
H
261
of the original vendees were validly assigned under the 1987
agreements.
Additionally, since the High Court and this Court had clarified
while sanctioning withdrawal of SCS No. 194/1988 that such withdrawal
would not preclude Respondent Nos. 1 from pursuing their independent
remedies, the withdrawal of the original vendees’ suit could not prejudice
the rights of Respondent Nos. 1 to specific performance. That actual
tendering of money was not necessary to evince readiness and
willingness to perform the contract as required under Section 16(c) of
the Specific Relief Act, and the specific averments made in the pleadings
by Respondent Nos. 1 would suffice.
It may be relevant to note at this juncture that the High Court
by interim order dated 27.6.2013 had directed Respondent Nos. 1 to
deposit an amount equal to five times the amount of original
consideration under the 1987 agreements, and Respondent Nos. 1 have
submitted that they are ready and willing to forfeit the entire amount
deposited in respect of the relief of specific performance, so as to
balance equities between the parties.
We further note from the order sheets maintained by this Court
that 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 judgement.
II. Issues and Submissions made by the Parties
5. Therefore, upon a perusal of the entire record, the following
issues arise for our consideration:
Firstly, whether there was a valid assignment of rights by the
original vendees in favour of Respondent Nos. 1 under the 1987
agreements?
Secondly, whether the right of Respondent Nos. 1 to seek specific
performance survives subsequent to the cancellation of the 1986
agreement by the Appellants and withdrawal of suit in SCS No. 194/
1988 by the original vendees?
Thirdly, whether relief may be granted to Respondent Nos. 1,
and if so, of what nature?
6. Learned senior counsel for the Appellants, Mr. Ranjit Kumar
argued that there was no privity of contract between the Appellants
KAPILABEN v. ASHOK KR. JAYANTILAL SHETH THR. POA GOPALBHAI
MADHUSUDAN PATEL [MOHAN M. SHANTANAGOUDAR, J.]
A
B
C
D
E
F
G
H
262
SUPREME COURT REPORTS
[2019] 17 S.C.R.
and Respondents Nos. 1 in the respective appeals. That the 1987
agreements were contingent contracts under Section 31 of the Indian
Contract Act, 1872 (‘Contract Act’), as the rights therein could only
be enforced upon the completion of the 1986 agreement, and the interest
created under the 1987 agreements was also a ‘contingent interest’
under Section 21 of the Transfer of Property Act. Since the 1986
agreement was cancelled, Respondent Nos. 1 could not seek specific
performance of the 1987 agreements.
Further, that the purported ‘assignment’ under the 1987
agreements practically amounted to a novation of the 1986 agreement,
and the Appellants had not accorded any consent for such an
assignment. Even if such an assignment had taken place, there was no
evidence to show that Respondent Nos. 1 were ready and willing to
perform their contractual obligations. Respondent  Nos. 1 had never
communicated their willingness to complete their contractual obligations
under the 1986 agreement to the Appellants.
Per contra, learned senior counsel for Respondent No. 1, Mr.
C.U. Singh argued that the Appellants i.e. the landowners were
colluding with the original vendees to avoid sale of the suit property, as
evidenced by the fact that the original vendees had not contested the
suit at any point of time. He brought to this Court’s notice that there
could not have been a termination of the 1986 agreement in 1988 given
that in the
Power-of-Attorney dated 11.11.2001 (supra) executed by
Defendant Nos. 1-9 (the Appellants and the original vendees) in favour
of Mr. Dhananjay Patel, it is stated that the original vendees have
acquired rights in the suit property under the 1986 agreement. It is not
open to the Appellants to accept the existence of the 1986 agreement
in the Power-of-Attorney and reject it for the purpose of these suits.
He further relied upon this Court’s decisions in Shyam Singh v.
Daryao Singh (Dead) By LRs. and Others, (2003) 12 SCC 160, Ram
Baran Prasad v. Ram Mohit Hazra and Others, AIR 1967 SC 744
and Habiba Khatoon v. Ubaidul Huq and others, (1997) 7 SCC 452
to argue that no implied prohibition can be read into the 1986 agreement
against assignability of the interest therein. The requirement of consent
of the other party for assignment under Section 15(b) of the Specific
Relief Act is only applicable in cases where the obligation is of a
personal nature or where there is an express bar in the contract
prohibiting such assignment of interest. Further, that in any case, the
A
B
C
D
E
F
G
H
263
original owner Naranbhai Patel’s conduct in arranging for development
permissions and consenting to publication of advertisement regarding
development of housing scheme in the suit property shows that there
was implied consent for assignment of rights under the 1986 agreement
in favour of Respondent Nos. 1.
III. Validity of Assignment of Rights under 1987
Agreements.
A. General principles governing assignability of contracts
7. Upon considering the facts and circumstances of the present
case, it is evident that there is no privity of contract between the
Appellants and Respondent Nos. 1. Respondent Nos. 1 were not party
to the 1986 agreement. Vice versa, the Appellants were not party to
the 1987 agreements, though whether or not they had knowledge of
the same is disputed. Hence Respondent Nos. 1 cannot seek specific
performance of the 1986 agreement, or for that matter, the 1987
agreements, against the Appellants, except by suing as ‘representatives-
in-interest’ of the original vendees under Section 15(b) of the Specific
Relief Act. Section 15(b) provides that:
“15. Who may obtain specific performance.—Except as
otherwise provided by this Chapter, the specific performance of
a contract may be obtained by—
…(b) the representative in interest or the principal, of any party
thereto: Provided that where the learning, skill, solvency or any
personal quality of such party is a material ingredient in the
contract, or where the contract provides that his
interest shall
not be assigned, his representative in interest or his principal shall
not be entitled to specific performance of the contract, unless
such party has already performed his part of the contract, or the
performance thereof by his representative in interest, or his
principal, has been accepted by the other party…”
It is well-settled that the term ‘representative-in-interest’ includes
the assignee of a contractual interest. Though the provisions of the
Contract Act do not particularly deal with the assignability of contracts,
this Court has opined time and again that a party to a contract cannot
assign their obligations/liabilities without the consent of the other party.
A Constitution Bench of this Court in Khardah Company Ltd v.
Raymon & Co (India) Private Ltd., AIR 1962 SC 1810 has laid out
this principle as follows:
KAPILABEN v. ASHOK KR. JAYANTILAL SHETH THR. POA GOPALBHAI
MADHUSUDAN PATEL [MOHAN M. SHANTANAGOUDAR, J.]
A
B
C
D
E
F
G
H
264
SUPREME COURT REPORTS
[2019] 17 S.C.R.
“…An assignment of a contract might result by transfer either
of the rights or of the obligations thereunder. But there is a well-
recognised distinction between these two classes of assignments.
As a rule obligations under a contract cannot be assigned except
with the consent of the promisee, and when such consent is given,
it is really a novation resulting in substitution of liabilities. On the
other hand, rights under a contract are assignable unless the
contract is personal in its nature or the rights are incapable of
assignment either under the law or under an agreement between
the parties.”
(emphasis supplied)
In Khardah Company, the Appellant jute manufacturers were
entitled to receive price for the jute from the buyer/dealer of jute only
upon delivery of certain shipping documents. Question arose as to
whether such an obligation coupled with a benefit was assignable. This
Court held, based on the above-mentioned principle, that the terms of
the contract strongly implied that the rights thereunder are non-
transferable.
Similarly, in Indu Kakkar v. Haryana State Industrial
Development Corporation Ltd. and Another, (1999) 2 SCC 37, the
Respondent Corporation allotted certain land subject to the condition
that the allottee shall complete construction of a building unit on the
plot within a period of two years. Upon the allottee’s failure to comply
with the said condition, the Respondent resumed the land. The
allottee
filed a civil suit challenging the resumption order, during the pendency
of which he assigned his rights in the plot to the Appellant. The issue
was whether such an assignee could challenge the resumption order.
A two-judge Bench of this Court held, in reliance upon Khardah
Company (supra), that:
“19.…Answer of the said question depends upon the terms of
allotment. Assignment by act of parties may cause assignment
of rights or of liabilities under a contract. As a rule a party to a
contract cannot transfer his liabilities under the contract without
consent of the other party. This rule applies both at the Common
Law and in Equity (vide para 337 of Halsbury’s Laws of
England, Fourth Edition, Part 9). Where a contract involves
A
B
C
D
E
F
G
H
265
mutual rights and obligations an assignee of a right cannot
enforce that right without fulfilling the co-relative obligations.”
(emphasis supplied)
8. Even in a case of assignment of rights simplicitor, such
assignment would necessarily require the consent of the other party to
the contract if it is of a ‘personal nature’. This is elucidated by learned
authors Pollock and Mulla in their commentary on The Indian
Contract and Specific Relief Acts (R. Yashod Vardhan, and Chitra
Narayan eds., 15th edn., Vol. I) at page 730:
“A contract which is such that the promisor must perform it in
person, viz. involving personal considerations or personal skill or
qualifications (such as his credit), are by their nature not
assignable. The benefit of contract is assignable in ‘cases where
it can make no difference to the person on whom the obligation
lies to which of two persons he is to discharge it.’ The contractual
rights for the payment of money or to building work, for e.g., do
not involve personal considerations.” (emphasis supplied)
9. It is true that Section 15(b) of the Specific Relief Act does
not specifically state that ‘obligations’ may not be assigned except with
the consent of the other party. However a reading of Section 15(b)
shows that it is nothing but a statutory formulation of the ratio laid down
in the above-mentioned precedents. The rule stated in Section 15(b) is
that any interest in a contract can be specifically enforced by the
assignee thereof,
except where the ‘personal quality’ of the party is a
material ingredient in the contract; or where the contract, expressly or
by necessary implication, prohibits the beneficiary from transferring their
contractual interest to third parties. Hence Section 15(b) does not
contradict the general law on assignability of contracts as laid down
by this Court, but rather clarifies that the same conditions will have to
be satisfied if an assignee seeks to secure specific performance of the
assigned contract.
Therefore, for example, a contract for a singing performance or
a painting may not be assignable as it involves a personal skill and even
if it is assigned, the assignee cannot seek specific performance in
respect of such a contract. Whereas it may be said that general
contracts for payment of money or building work do not involve any
personal considerations, as it makes no difference as to who discharges
KAPILABEN v. ASHOK KR. JAYANTILAL SHETH THR. POA GOPALBHAI
MADHUSUDAN PATEL [MOHAN M. SHANTANAGOUDAR, J.]
A
B
C
D
E
F
G
H
266
SUPREME COURT REPORTS
[2019] 17 S.C.R.
the obligation to pay or perform a certain act under the contract. Hence
the assignees of parties to such contracts may seek specific
performance.
10. It is important to note that in the modern context where
parties frequently enter into complex commercial transactions, it is
perhaps not so convenient to pigeonhole contracts as being either
‘general’ or of ‘personal nature’ or as involving the assignment of purely
‘rights’ or ‘obligations’. It is possible that a contract may involve a bundle
of mutual rights and obligations which are intertwined with each other.
However, as this Court has held in Indu Kakkar (supra), the same
rule as laid down in Khardah Company (supra) and as stated in
Section 15(b) of the Specific Relief Act, may be applied to such
contracts as well. Where the conferment of a right or benefit is
contingent upon, or coupled with, the 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.
It further has to be seen whether conferment of benefits under
a contract is based upon the specific assurance that the co-extensive
obligations will be performed only by the parties to the contract and no
other persons. It would be inequitable for a promisor to contract out
his responsibility to a stranger if it is apparent that the promisee would
not have accepted performance of the contract had it been
offered by
a third party. This is especially important in business relationships where
the pre-existing goodwill between parties is often a significant factor
influencing their decision to contract with each other. This principle is
already enshrined in Section 40 of the Contract Act:
“40. Person by whom promise is to be performed.—If it
appears from the nature of the case that it was the intention of
the parties to any contract that any promise contained in it should
be performed by the promisor himself, such promise must be
performed by the promisor. In other cases, the promisor or his
representative may employ a competent person to perform it.”
It is clear from the above that the promisor ‘may employ a
competent person’, or assign the contract to a third party as the case
may be, to perform the promise only if the parties did not intend that
the promisor himself must perform it. Hence in a case where the
contract is of personal nature, the promisor must necessarily show that
the promisee was agreeable to performance of the contract by a third
A
B
C
D
E
F
G
H
267
person/assignee, so as to claim exemption from the condition specified
in Section 40 of the Contract Act. If the promisee’s consent is not
obtained, the assignee cannot seek specific performance of the contract.
B. Application of the above principles to the present case
11. Hence, in light of the above discussion, whether or not an
assignee can seek specific performance would depend upon the
construction of the contract in each case. The Court would have to
determine the nature of interest sought to be transferred, whether such
interest was meant to be enforceable only between the parties to the
contract and whether the contract expressly or by necessary implication
bars assignment of such interest.
In the present case, the 1986 agreement provided that the
Appellants shall execute sale deed in favour of the original vendees or
‘name proposed by the vendee’ subject to the assurance that the latter
would pay the remaining consideration and betterment tax within the
stipulated time, and that the former would obtain the necessary
permissions for construction on the suit property.
We are of the opinion that the term ‘name proposed by the
vendee’ in the 1986 agreement refers to a nominee to be proposed at
the time of execution of the sale deed and not a subsequent assignee.
At the same time, it is true the 1986 agreement does not contain any
express bar against assignability. The question which arises then is
whether the purported assignment in favour of
Respondent Nos. 1 under
the 1987 agreements is legally valid.
The decisions in Shyam Singh (supra) and Ram Baran Prasad
(supra) relied upon by Respondent Nos. 1 will not help their case as
this Court found on the particular facts of those cases that the terms
of the contracts in those cases did not implicitly bar assignment. These
decisions cannot be taken to lay down a blanket rule that in every case
where there is no express bar against assignability stipulated in the
contract, assignment of the interest therein should be upheld without
looking at the context in which the parties contracted with each other.
It has to be seen whether the terms of the contract, and the
circumstances in which the contract was entered into, lead to an
inference that the parties did not intend to make their interest therein
assignable.This is the principle of law as authoritatively stated by the
Constitution Bench in Khardah Company (supra):
KAPILABEN v. ASHOK KR. JAYANTILAL SHETH THR. POA GOPALBHAI
MADHUSUDAN PATEL [MOHAN M. SHANTANAGOUDAR, J.]
A
B
C
D
E
F
G
H
268
SUPREME COURT REPORTS
[2019] 17 S.C.R.
“…We agree that when a contract has been reduced to writing
we must look only to that writing for ascertaining the terms of
the agreement between the parties but it does not follow from
this that it is only what is set out expressly and in so many words
in the document that can constitute a term of the contract
between the parties. If on a reading of the document as a whole,
it can fairly be deduced from the words actually used therein
that the parties had agreed on a particular term, there is nothing
in law which prevents them from setting up that term. The terms
of a contract can be expressed or implied from what has been
expressed. It is in the ultimate analysis a question of construction
of the contract. And again it is well established that in construing
a contract it would be legitimate to take into account surrounding
circumstances. Therefore on the question whether there was an
agreement between the parties that the contract was to be non-
transferable, the absence of a specific clause forbidding transfer
is not conclusive. What has to be seen is whether it could be
held on a reasonable interpretation of the contract, aided by such
considerations as can legitimately be taken into account that the
agreement of the parties was that it was not to be transferred.
When once a conclusion is reached that such was the
understanding of the parties, there is nothing in law which prevents
effect from being given to it.”
(emphasis supplied)
12. Section 40 of the Transfer of Property Act states that a
contract for sale of immovable property is a contract that “a sale shall
take place on terms settled between the parties”. It is a settled position
that such a contract does not by itself create any interest in or charge
on the property. The buyer only obtains a right to get the sale deed
executed, upon fulfilment of the applicable terms and conditions as
consented to by all the parties. Hence the 1986 agreement, being an
agreement to sell the suit property, is a clear case of a contract
combining mutual rights and obligations. The original vendees were to
obtain the right to get the sale deed executed in respect of the suit
property upon fulfilment of the conditions specified in the 1986
agreement.
The 1987 agreements purport to assign the aforesaid rights and
obligations of the original vendees in favour of Respondent Nos. 1/
A
B
C
D
E
F
G
H
269
Plaintiffs. Upon comparison of the 1986 agreement and the 1987
agreements, we find that the 1987 agreements amount to nothing but a
substitution of liabilities wherein Respondent Nos. 1 have assumed the
same obligations which the original vendees were supposed to have
performed under the 1986 agreements. This includes not only the
obligation to pay betterment tax but also the obligation to reimburse the
cost of acquiring planning permissions and to get the suit property
levelled for the purpose of construction.
Additionally, the 1987 agreements also provide that the plaintiffs
can prepare the scheme for construction of housing society on the suit
property, get the members of the society registered and execute
agreements with them, and publish advertisement boards regarding the
scheme. Hence this is not a case of assignment of agreement for sale
simplicitor, but assignment of what is akin to a development agreement
for a housing scheme on the suit property. A contract of this nature is
ordinarily based upon certain personal understanding between the parties
regarding the course of business to be undertaken on the suit property.
It is not disputed that the original vendees had not fulfilled their
obligations under the 1986 agreement prior to the purported ‘assignment’
under the 1987 agreements.  Hence they had not ‘performed their part
of the contract’ as required under Section 15(b) of the Specific Relief
Act. Applying the law as stated above, the
assignment of such a contract
cannot be enforced without proving that it was with the knowledge and
consent of the original owners/Appellants.
13. It is further relevant to note that under the 1987 agreements,
payment of the remaining consideration amount is to be made to the
original vendees, not the Appellants, and possession of the suit property
is to be handed over by the original vendees. Even the consideration to
be paid was twice the rate as specified in the 1986 agreement. The
1987 agreements nowhere provide for discharge of the original vendees’
pending obligations towards the Appellants by Respondent Nos. 1.
Hence we are inclined to accept the Appellants’ argument that the 1987
agreements were not a case of assignment but appear to be independent
agreements for sale which were contingent on the execution of the 1986
agreement. Therefore, the only way Respondent Nos. 1 can seek
specific performance of the 1986 agreement against the Appellants is
by proving the Appellants’ knowledge of and consent to transfer of the
original vendees’ rights and liabilities to Respondent Nos. 1.
KAPILABEN v. ASHOK KR. JAYANTILAL SHETH THR. POA GOPALBHAI
MADHUSUDAN PATEL [MOHAN M. SHANTANAGOUDAR, J.]
A
B
C
D
E
F
G
H
270
SUPREME COURT REPORTS
[2019] 17 S.C.R.
14. It is true that Section 15(b) does not stipulate in what form
the promisee’s ‘acceptance’ of performance by a representative-in-
interest of the promisor should be communicated. It may be either
through express written consent, or implied from the actions of the
promisee; though as a matter of caution, the former mode of acceptance
would inevitably have higher evidentiary value. However in the present
case, as the trial court and the Learned District Judge have rightly
appreciated on facts, we do not find that the Appellants have either by
words or by conduct, consented to the assignment of the 1986 agreement
in favour of Respondent Nos. 1.
The mere fact that the original owner Mr. Naranbhai Patel signed
the development permissions for the suit property and may have been
present at the Bhoomi Pujan does not indicate that he consented to
assignment of the 1986 agreement. The 1986 agreement stipulated that
the original owners would give their signatures for obtaining necessary
permissions for the proposed development on the suit property. Hence,
as the trial court has rightly noted, Mr. Naranbhai Patel was only
carrying out his contractual obligation as he had promised to the original
vendees. This does not indicate that he was under the impression that
the said permissions were now to be obtained for the benefit of
Respondent Nos. 1.
It is pertinent to note that Respondent Nos. 1 conceded before
the trial court
that the Appellants had given their signatures on the layout
plan for the housing scheme on the suit property to the original vendees,
not to Respondent Nos. 1. Even the advertisement regarding the ‘Unnati
Park’ housing scheme nowhere indicates that the Appellants/original
owners were developing the project on the suit property in partnership
with Respondent Nos. 1.
Thus we conclude that there was no valid assignment of rights
flowing from the 1986 agreement to Respondent Nos. 1, and they
cannot seek specific performance against the Appellants.
IV. Whether the Plaintiffs are entitled to Specific
Performance?
15. Having found that Respondent Nos. 1 cannot seek specific
performance of the 1986 agreement, it may be considered whether they
can seek any remedy qua the 1987 agreements as against the Appellants
and the original vendees. Since there is no privity of contract between
A
B
C
D
E
F
G
H
271
the Appellants and Respondent Nos. 1 there no longer remains any
question of granting specific performance as against the former.
16. Further, as noted above, the terms of the 1987 agreements
indicate that they are contingent contracts, as defined under Section
31 of the Contract Act:
“31. “Contingent contract” defined.—A “contingent contract”
is a contract to do or not to do something, if some event, collateral
to such contract, does or does not happen.”
Sections 32 and 35 further state that:
“32. Enforcement of contracts contingent on an event
happening.—Contingent contracts to do or not to do anything
if an uncertain future event happens, cannot be enforced by law
unless and until that event has happened.”
“35. When contracts become void, which are contingent
on happening of specified event within fixed time.—
Contingent contracts to do or not to do anything, if a specified
uncertain event happens within a fixed time, become void if, at
the expiration of the time fixed, such event has not happened, or
if, before the time fixed, such event becomes impossible.”
The 1987 agreements are clearly contingent contracts inasmuch
as they could only be enforced had the original vendees obtained the
right to get the sale deed executed, and taken possession of the suit
property as per the terms of the 1986 agreement. Once the 1986
agreement was cancelled by the Appellants, the original vendees’ rights
thereunder ceased to exist.
17. Respondent Nos. 1 contend that
the Power-of-Attorney dated
11.11.2001 (supra) in favour of Mr. Dhananjay Patel shows that the
1986 agreement was not cancelled and that the original vendees
continued to retain their right to get the sale deed executed in their
favour. It was brought to our notice by the Appellants that the aforesaid
Power-of-Attorney was subsequently cancelled by the original vendees
on 6.6.2003, on the ground that Mr. Dhananjay Patel had obtained the
Power-of-Attorney through misrepresentation. However, it is important
to note that the original vendees have stated in the aforesaid cancellation
notice that they have ‘joint ownership’ of the suit property. Therefore
we find some merit in the argument that the Appellants and the original
vendees are acting in collusion.
KAPILABEN v. ASHOK KR. JAYANTILAL SHETH THR. POA GOPALBHAI
MADHUSUDAN PATEL [MOHAN M. SHANTANAGOUDAR, J.]
A
B
C
D
E
F
G
H
272
SUPREME COURT REPORTS
[2019] 17 S.C.R.
Nevertheless, regardless of what may be stated in the Power-
of-Attorney, it has to be seen whether the original vendees have legally
acquired any rights in the suit property. Respondent Nos. 1 have
admitted in their plaints that the Town Planning Scheme was finalized
prior to the 1986 agreement. Hence the deadline stipulated under the
1986 agreement for payment of remaining consideration by the original
vendees, i.e., within three months of finalization of the Scheme, has
long since lapsed. Since the original vendees never paid the remaining
consideration within the time specified in the 1986 agreement, their rights
thereunder never fructified.
Even assuming that the original vendees acquired some interest
in the suit property, the subsequent withdrawal of the suit SCS No. 194/
1988 shows that the original vendees do not intend to enforce the 1986
agreement. The trial court has found that though the suit property de
jure vested with the concerned government authority under the Town
Planning Scheme, the de facto possession of the property remains with
the Appellants and the original vendees have not taken possession
thereof. Furthermore, both the trial court and the learned District Judge
have on facts found that the original vendees have not shown any
readiness or willingness to pay the remaining consideration to the
Appellants. Hence since the original vendees have abandoned their
rights under the 1986 agreement,
enforcement of the 1987 agreements
has become virtually impossible and Respondent Nos. 1 cannot seek
specific performance of the latter. Consequently the 1987 agreements
are void and unenforceable as provided under Sections 32 and 35 of
the Contract Act.
18.It is relevant to note at this juncture that Respondent Nos. 1
have also pleaded that the Power-of-Attorney dated 11.11.2001 (supra)
was executed in breach of the interim injunction order issued by the
trial court directing maintenance of status quo in respect of the suit
property. Hence they seek that action should be taken against the
Appellants and the original vendees under Order XXXIX, Rule 2A of
the Code of Civil Procedure, 1908 for breach of the injunction order.
However, we are in agreement with the trial court’s findings that the
Plaintiffs’ application under Order XXXIX was moved after a delay of
three years and six months, and the said delay has not been satisfactorily
explained. Hence the application is barred by laches. In any case, since
the original vendees have revoked the Power-of-Attorney, status-quo
has been restored, and the Plaintiffs’ cause of action no longer exists.
A
B
C
D
E
F
G
H
273
The Learned District Judge and the High Court in the impugned
judgement have affirmed the trial court’s reasoning on this aspect, and
we see no reason to overturn their concurrent findings on this matter.
It was also re-iterated before us by Respondent Nos. 1 that the
original vendees were misled into withdrawing their suit SCS No. 194/
1988 and that the same should not be binding upon the plaintiffs.
However given that the withdrawal of the suit has attained finality before
this Court, and the Trial Court and the High Court have concurrently
found in the separate application made by the plaintiffs in SCS No. 658/
1988, by orders dated 24.1.2008 and 25.3.2008 supra (respectively), that
the original vendees cannot be compelled to continue their suit against
their desire, we are not inclined to interfere with the same.
V. Alternative Remedy to be given to the plaintiffs
19. Though we have found that on facts and law, Respondent
Nos. 1 are not entitled to specific performance of the 1986 and 1987
agreements, prima facie it does appear that the Appellants and the
original vendees have colluded to frustrate performance of the 1987
agreements. The trial court had directed the original vendees to
reimburse earnest money of Rs. 5000 paid by Respondent Nos. 1
towards each of the 1987 agreements with an interest of 9% p.a. from
14.9.1987 till the date of realization. We are in agreement with the
aforesaid direction.
With regard to the appropriate remedy to be
provided to
Respondent Nos. 1, it may also be pertinent to refer to Section 53 of
the Contract Act, which provides that:
“53. Liability of party preventing event on which the
contract is to take effect.—When a contract contains
reciprocal promises, and one party to the contract prevents the
other from performing his promise, the contract becomes voidable
at the option of the party so prevented: and he is entitled to
compensation from the other party for any loss which he may
sustain in consequence of the non-performance of the contract.”
Therefore, since the original vendees seem to have relinquished
their rights in the 1986 agreement so as to frustrate performance of
the 1987 agreements, it would be just in these circumstances to award
compensation to the Plaintiffs for the loss of opportunity and
inconvenience suffered by them. Though no remedy is available as
KAPILABEN v. ASHOK KR. JAYANTILAL SHETH THR. POA GOPALBHAI
MADHUSUDAN PATEL [MOHAN M. SHANTANAGOUDAR, J.]
A
B
C
D
E
F
G
H
274
SUPREME COURT REPORTS
[2019] 17 S.C.R.
against the Appellants on account of absence of privity of contract, we
consider it apposite to direct the original vendees, that is, Respondent
Nos. 3-11 in the four appeals, to pay Rs. 1,80,000/-, with interest at
the rate of 9% per annum from the date of the suits, as damages to
the Plaintiffs/Respondent Nos. 1 in these appeals, as prayed for in their
pleadings. We also direct the High Court to expeditiously release and
remit back the consideration amount deposited by Respondent Nos. 1
in lieu of specific performance.
20. Hence these appeals are partly allowed, and the impugned
judgement is set aside, in the aforesaid terms.
Kalpana K. Tripathy
Appeals partly allowed.