Case: TILAK RAJ BAKSHI Vs. AVINASH CHAND SHARMA(DEAD) THROUGH LRS

2. The suit scheduled property located in Chandigarh was owned by one Kirpa Ram Bakshi. He had executed a registered will on 04.09.1974 in favour of the plaintiff, the first defendant and another son who was the 3 rd defendant in the suit. Thereafter, the disputed house was transferred in favour of the aforesaid three persons by the Estate Officer. The plaintiff filed the present suit from which the appeal arises alleging that on 31.03.1982 there was an agreement entered into between the three brothers namely himself, the first defendant and the younger brother. Clause (5) of the agreement provides as follows:The individual portions of New Delhi and Chandigarh and agricultural land cannot be sold without concurrence of all three in writing and if it is sold on agreement of three, first preference to be given to both other brothers. Any special renovation after expiry of joint upkeep is done by any one of us and full accounts are maintained, then in the event of total sale of any unit, the extra amount spent on special renovation (subject to reasonable depreciation/appreciation) by individual will be payable to the individual over and above 1/3 rd share of the sale proceeds3. It was alleged that the said clause was violated by his brother, the first defendant and without getting his written concurrence for the same the first defendant sold the suit scheduled property to the second defendant. It was alleged that this will result in fragmenting the site which is prohibited and it was also alleged that the sale was void. The suit came to be filed for declaring the sale deed in favour of the second defendant void and for specific performance directing first defendant to execute sale deed in respect of one-third share to the plaintiff4. The second defendant contested the matter. It was inter alia contended that the family settlement was forged and fabricated. The plaintiff did not have any preferential right. The second defendant was a bonafide purchaser. The plaintiff never intended to purchase the property. The share of the first defendant was transferred to the second defendant by the Estate Officer of Chandigarh on his application5. The trial Court found that the family arrangement was indeed executed. It is a genuine document and not forged or fabricated. The suit filed on 03.02.1998 challenging the sale deed dated 12.11.1997 was filed within time. The second defendant was found not to be a bonafide purchaser. He was aware of giving preference by the first defendant to the appellant. It was further found that the plaintiff was never offered to purchase the share of the first defendant. The trial court found that the plaintiff was entitled to specific relief and declared the sale null and void. The plaintiff was entitled to specific performance as per the terms and conditions of the agreement dated 31.03.1982 to purchase the share of the first defendant6. The second defendant appealed against the judgment. The first Appellate Court found that the family arrangement was genuine. It referred to the correspondence between the plaintiff and the wife of the first defendant. He proceeded to find that the only controversy was whether the first defendant has offered to the plaintiff to purchase his one-third share or whether the plaintiff never came forward for the same. The first Appellate Court found that no document was produced to show that the first defendant himself offered. The court further goes on to find letters by the wife of the first defendant which reveals that offer was given to the plaintiff to purchase. As per clause (5) of the family arrangement, the concurrence of the plaintiff was not taken in writing before selling to the second defendant. As far as the offer is concerned the Appellate Court referred to the correspondence. Defendant no.1 was not ready to accept earnest money. The house was located at Chandigarh. The sale could be effected only at Chandigarh. Plaintiff visiting Bhilai, where first defendant lived, would not have been served any purpose. Reference is made to the telephone bills of the plaintiff to prove communication between him and the first defendant regarding sale. The sale in favour of the second defendant was effected through power of attorney. No offer was made for selling to the plaintiff by the first defendant through a power of attorney. It is found that though P19 shows that a deal was struck but because the wife of the first defendant was pressing hard for the plaintiff to come to Bhilai, it did not work. The plaintiff was found ready and willing. The first defendant has violated the family settlement. The second defendant was aware from the wife of the first defendant that she wanted to sell to the plaintiff. The second defendant was a tenant who was aware of the family arrangement. There was no notice issued to the other sharers. The appeal of the second defendant was dismissed. That apart the Appellate Court also allowed the cross appeal filed by the plaintiff and directed the second defendant to hand over possession to the plaintiff. PROCEEDINGS BEFORE THE HIGH COURT7. The High Court after referring to the correspondence between the parties found that the first defendant has indeed offered to sell his share to the plaintiff. Plaintiff could have sent a draft. The precarious condition of the first defendant, having regard to his health, was known to the plaintiff8. The High Court found that there was no valid and binding contract between the parties. No price has been fixed nor there is any penalty clause, i.e., in case of failure, either one of the parties can enforce the agreement (obviously clause (5) which we have already quoted). In view of the omissions of the appellant to act on the offer, he has lost the preemptory right to purchase the share and it led to the sale in favour of the second defendant. The High Court proceeds to hold that clause (5) relied upon by the plaintiff is not only vague but indefinite and void. The plaintiff cannot be permitted to exercise belatedly after he has lost to encash offer reflected in the letters which we will refer to hereinafter9. It is also found that the second defendant being the tenant could only be evicted under the law relating to tenants10. The High Court noted that the fragmentation may not be possible but solution was found in Sections 2, 3 and 4 of the Partition Act and by ascertaining market value they could buy each others share. Section 22 of the Hindu Succession Act was found to have been declared unconstitutional by this Court. Appellant had not accepted the offer. Reference was made to Section 20 of the Specific Relief Act and it was found that in the circumstances, appellant was not entitled to the discretionary relief.

Court's reasoning:
FINDINGS WHETHER THERE WAS A FAMILY SETTLEMENT?17. As far as the first question is concerned, whether there was a family settlement, at paragraph 6 of the plaint, the family settlement was pleaded. The answer to the same, by the second defendant, is that the alleged family settlement dated 31.03.1982 is a forged and fabricated document. We can safely conclude that no material has been placed by the second defendant to establish that the alleged family settlement is a forged document. There is no case that it is not a family settlement. The settlement is arrived at between the plaintiff, his brother-the first defendant and another brother-third defendant. Therefore, we can proceed on the basis that there is a family settlementWHETHER THE FAMILY SETTLEMENT WAS VAGUE?18. With regard to the finding by the High Court that whether the family settlement is vague, unenforceable and void, the complaint of the plaintiff is that there is no pleading that family settlement is vague and unenforceable21. Therefore, the mere fact that a plea is not taken, that the clause in question is vague, and hence, unenforceable and void will not stand in the way of the Appellate Court looking into the contract and, if on its terms, it finds it to be vague and unenforceable, it can be so held22. The question is to whether clause (5) in question is vague and unenforceable. We noticed that it provides that the property in question cannot be sold without concurrence of the three brothers in writing. If it is sold on the agreement of three brothers, the first preference is to be given to both other brothers. When it is stated that the property cannot be sold without concurrence of the three brothers in writing, there cannot be any doubt about its meaning. It means what it says which is that should a brother want to sell the property, the other two brothers must agree in writing. This clause cannot be described as vague. This is different from the aspect as to whether it is a clog on ownership or whether it is otherwise unenforceable but it cannot be described as being vague. The second contention is that when a decision is taken by the brothers permitting sale by a third brother, then, first preference is to be given to both the other brothers. What is intended is that after the written concurrence is obtained for selling in order that property is not sold to a third party/stranger, the other two brothers are given an opportunity to buy that property. This portion of the clause cannot also be described as vague as such. No doubt, it could be argued that the price at which the offer is to be made is not expressly mentioned. We have found that the clause is part of a family settlement between brothers. Courts ordinarily lean in favour of family settlement. Clause (5) itself does not contain an agreement to sell. It only contemplates a preferential offer being treated as a condition precedent to a brother affecting a sale outside of a family to a stranger. The price can only be understood as market price which would be the fair price. Therefore, we are of the view that the finding by the High Court that contract is vague cannot be sustainedWHETHER OFFER WAS MADE BY DEFENDANT NO.1 TO PLAINTIFF30. Correspondence indeed establish, therefore, that the health of the first defendant was poor and it was deteriorating and he was in urgent need for money. It is quite clear that the first defendant had made offer to the appellant for selling his share for Rupees Five Lakhs. It is also quite clear that the plaintiff himself acknowledged in the letter dated 01.04.1996 that the offer of Rupees five lakhs was reasonable. Appellant, quite clearly, has articulated his pressing priority to be to conduct the marriage of his daughter. This means that he was hard pressed for money. Otherwise there was no need for him after finding the offer to be reasonable to request the first defendant and his wife to try to reduce the value. Letter dated 15.04.1996 written by the first defendants wife shows that she did not wish to then receive earnest money and she finally demanded that final payment be made as prices in Chandigarh were increasing quite rapidly and rate settled by the plaintiff was quite old. She emphasized that the offer was given because she was in dire need of money. Now the need is of the plaintiff. This correspondence also tends to show that the rate of five lakhs was, in fact, even acceptable to the plaintiff as the letter referred to the rate settled by the plaintiff being quite old. But nothing was happening on the ground. This leads the first defendant wife to state that she would only handle the situation in any manner but it will not be possible later on. The sale took place after more than a year. One thing is clear that an offer was made on behalf of the first defendant to the plaintiff32. Apparently, in keeping with the family settlement, a preference was indeed shown. The price was reasonable and acceptable even to the plaintiff though he wanted a reduction. Having regard to the health of the first defendant and the dire stage at which first defendant and his wife were placed, we cannot for a moment but hold that they had made an attempt to comply with the condition in the family settlement providing for preferenceWHETHER THE HIGH COURT WAS RIGHT IN HOLDING THAT THE COURTS WOULD NOT EXERCISE DISCRETION UNDER SECTION 20 OF THE SPECIFIC RELIEF ACT, 1963 AS THE CONTRACT WAS NOT SPECIFICALLY ENFORCEABLE?34. In this regard, the question would arise in the first place as to which is the contract which is sought to be enforced. It is pleaded in the plaint that first defendant was interested in disposing of his share and the plaintiff was ready and willing to purchase the share of first defendant. It is specifically averred that the third defendant (the other brother) did not show any interest in purchasing share of the fist defendant. Finally, the relief sought is by way of decree for specific performance directing the defendant to sell by the sale of one-third share in the house to the plaintiff and handover vacant possession of the demised portion to the plaintiff. This is apart from the relief against the sale in favour of the second defendantThus, it can be seen that the family settlement has been understood as the agreement and the plaintiff is entitled to specific performance of the agreement37. A perusal of these judgments would reveal the following aspects:1. The Appellate Court finds that the plaint schedule property was owned by the father. It is found that the three sons get equal shares2. The Trial Court finds that no offer was made by the first defendant to the plaintiff. It decrees specific performance by directing so on the basis that first defendant will have to make an offer to the plaintiff and the third defendant after finding that the first defendant was not bound to make an offer to sell at Rs.4.80 lakhs. The Appellate Court, on the other hand, has gone to decree specific performance by even directing possession of the property to be given to the plaintiff by the second defendant. On the basis of the terms and conditions of the agreement dated 31.03.1982, there are clearly two palpable flaws in the findings and directions. Admittedly, the second defendant was already occupying the property as a tenant. He can be evicted only in accordance with law even if everything is held in favour of the plaintiff. In other words, even if it is found that the assignment by the first defendant in favour of the second defendant is null and void, he has the right to continue in possession unless he is evicted under the relevant law for the eviction of tenants. Therefore, the direction to deliver possession is clearly unsustainable. The second flaw which vitiated the judgment of the first Appellate Court is that it has proceeded to hold that plaintiff is entitled to specific performance as per the terms and conditions of the agreement dated 31.03.1982. The Appellate Court was in error in decreeing specific performance on the basis that the family settlement without anything more, embodied a contract for sale of immovable property. The terms of the agreement, viz., the price at which the property is to be sold and purchased, are not spelt out in the family settlement, as correctly noticed by the Trial Court. The Appellate Court has not proceeded to hold that the plaintiff is entitled to purchase the property at Rs.4.80 lakhs at which price the first defendant has sold to the second defendant. If the decree is treated as confirming the decree of the Trial Court, then, the price at which it is to be purchased would only have been ascertained on the basis of an offer which is made in pursuance of the Trial Courts judgment, and therefore, no decree for specific performance, as passed by the First Appellate Court, could certainly have been passed43. Right to preemption is ordinarily born out of custom or in terms of a statutory provision. We are not, in this case, concerned with the statutory right of preemption or custom. We would necessarily have to fall back on first principles relating to preemption, which we feel, have been explained in Bishan Singh (supra) which we have set out. We will proceed on the basis that a family settlement/contract can give rise to a right of preemption44. We would notice that there is no case expressly set up in the plaint that what appellant is seeking to enforce is a right of preemption. If the suit involved a right of preemption, and proceeding on the basis that the appellant was pursuing his secondary right to follow the property sold, then, the relief would have been to substitute himself in place of the buyer/second defendant. As held by this Court, the right of preemption is not right of re-purchase. Even proceeding on the basis of it being a case of preemption, as held by the High Court and by us, first preference was given to the plaintiff. As far as decision in K. Naina Mohamed (supra)is concerned, clause (11) of the will in the said case tabooed alienation in favour of strangers. In this case, the clause, we are concerned with, certainly does not place an absolute restriction on alienation in favour of a stranger. All that it contemplates is an offer being made to the brothers, once the first step of concurrence in writing by the brothers for the sale is obtained. We do not, therefore, think that the appellant would be justified in invoking the principle underlying the right of preemption in this caseIMPACT OF ABSENCE OF WRITTEN CONCURRENCE BY BROTHERS FOR SALE52. Thus, what is sought is specific performance. The appellant proceeded in the suit on the basis that there is a contract. A contract presupposes an offer which is accepted which means that there was an offer from the defendant. The correspondence, which we have referred to, fortifies us in holding that there was an effective offer and it did not materialize on account of any default on the part of the plaintiff53. Now, if the clause is broken down, it involves the following steps. A brother announces his desire to sell his share. He seeks written concurrence of the other brothers. A written concurrence is given. Then, the next step is reached. The selling brother offers to sell it to the other brothers. If they take the offer and the price is agreeable to the parties, sale follows. If the brothers do not wish to buy, the sale to the strangers is permitted. In the above process, in the facts of this case, it is clear that the appellant and the first defendant, without insisting on the written concurrence, went to the stage of offer to brothers. The appellant has led the first defendant to assume, even without a written concurrence, that the sale is permitted. The first defendant has acted clearly on the basis that the requirement of the first stage was not being insisted upon. Otherwise, he could have certainly obtained the concurrence. Having thus acted in the matter, and the second stage having been reached, when for reasons where the fault cannot be attributed to the first defendant, the offer, which the appellant himself describes as reasonable, was not seized upon by the appellant, the third stage emerged. This meant that it became open to the first defendant to sell to a stranger and which is what he did by it selling it to the second defendant. Even proceeding to enforce the clause, we find that the appellant is clearly estopped from setting up the plea of absence of written consent of the brothers. It would be inequitable, particularly when we are considering the matter in an appeal sourced under Article 136 of the Constitution of IndiaEFFECT OF PROHIBITION AGAINST FRAGMENTATION OF PROPERTY IN QUESTION UNDER THE CAPITAL OF PUNJAB (DEVELOPMENT AND REGULATION) ACT, 195263. While it may not be true that the issue of fragmentation was not raised in the courts, we would think that the appellant is not able to persuade us to hold that the assignment in favour of the second defendant is vulnerable on the basis that it involves fragmentation. We have noticed the deposition of the plaintiff about partition of the house into three portions. We have noted the fact that one-third share has been duly transferred and mutated in the name of the first respondent/second defendant by the Chandigarh Administration64. The second defendant has produced the communication dated 19.12.1997 which indicates the transfer of rights of site in Sector 19A held by Vishnu Dutt Mehta (first defendant) is noted in favour of the second defendant subject to certain conditions. This is obviously before the 2007 Rules came into force