In the Supreme Court of India Equivalent Citation: AIR 1970 SC 546; 1970 (18) BLJR 790; 1970 MhLJ 674; 1970 MPLJ 612; (1969) 3 SCC 120; (1970) 2 SCR 854. Appellants Nathulal Respondent Phoolchand Counsels for the appellant I.N. Shroff and B.L. Joshi, Advs. Counsel for the respondent R. Gopalakrishnan, Adv. Decided on 16 October 1969 Bench J.C. Shah and K.S. Hegde, JJ.
Background:
When two parties enter into a contract, certain obligations are imposed on each of the parties under the contract. Sections 51 to 54 of the Indian Contract Act (1872), deals with performance of reciprocal promises. When a contract comprises exchange of promises which form the consideration or part of the consideration for each other, they are called reciprocal promises.[1] When such promises are to be simultaneously performed, each party is bound to perform the same only when the other shows readiness and willingness to perform their promise.[2] In case of reciprocal promises to be performed in an order, the order which is required by the nature of the transaction is followed unless the parties have expressly agreed to a specific order.[3] In this case, there was allegation of breach of contract and the order in which the promises under the concerned contract were to be performed was in question.
Facts:
The appellant, Nathulal, owned a Ginning factory which stood on an agricultural land bearing Khasra No. 259/1 which stood in his brother Chittarmal’s name in revenue records. On February 26, 1951 he agreed to sell the land and the factory to Phoolchand, the respondent, for a sum of Rs. 43,011/-. Upon payment of Rs. 22, 011/-, the respondent was put in possession of the property and agreed to pay the remaining amount on or before May 7, 1951. The terms of the contract were reduced into writing and duly signed by both the parties. On October 8, 1951 the appellant rescinded the contract on the grounds that the respondent failed to pay the remaining amount. The respondent contended that the appellant had failed to delete his brother’s name from the revenue records and had unlawfully altered the contract after execution by adding a clause which made it unlawful for the respondent to possess the property after May 7, 1951 without paying the balance amount. The District Court of Nimar decreed in favour of the appellant and held the respondent liable for breach of contract. The High Court of Madhya Pradesh reversed the decree. The respondent was allowed to retain possession of the property on the condition that he paid the appellant mesne profit for the period of time between May 7, 1951 and the date he deposited the balance amount. It was further held that if the respondent failed to pay the same, he would be liable to pay mesne profit at double the rate for the time period during which the appellant was deprived of the possession of the property. The appellant preferred an appeal to the Supreme Court with the leave of the High Court.
Issues:
- Whether the respondent is eligible to claim the defence of part performance to an action in ejectment by the appellant?
- Whether the respondent was at all times prepared to fulfil the terms of the contract?
Argument Advanced
Contentions of the appellant:
- By virtue of Section 70(8) of theMadhya Bharat Land Revenue and Tenancy Act(1960), the plea of part performance is not available to a person put in possession of the property under a contract of sale.
- The act done in pursuance of the contract must be independent of the terms of the contract.
Contentions of the respondent
- The appellant failed to perform his promise under the terms of the contract which disentitles him to sue the respondent for the breach of its reciprocal promise.
Judgment:
Section 70 (8) of the Madhya Bharat Land Revenue and Tenancy Act (1960) says that: “No sale under this section shall be deemed to be valid until the sale deed effecting such a sale has been registered in accordance with the law of registration in force for the time being.” The appellant had contended that by virtue of this section, the respondent would not be eligible to claim the plea of part-performance of the contract. However, the Hon’ble Court held this particular provision to be inapplicable in the instant case as there was no sale since the title of the property remained with the appellant; and the respondent was relying on a contract of sale and equity. The provision was considered to be applicable only in cases where a sale deed was executed and not in cases of part-performance as provided in section 53A of the Transfer of Property Act.
The conditions necessary for making out the defence of part performance to an action in ejectment by the owner are:
1. that the transferor has contracted to transfer for consideration any Immovable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty;
2. that the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession continues in possession in part performance of the contract;
3. that the transferee has done some act in furtherance of the contract; and
4. that the transferee has performed or is willing to perform his part of the contract. If these conditions are fulfilled then notwithstanding that the contract, though required to be registered, has not been registered, or, where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefore by the law for the time being in force, the transferor or any person claiming under him is debarred from enforcing against the” transferee any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract.
In the instant case, it was indisputably proven that there was a written agreement between the parties to transfer the property with clearly defined terms. Upon payment of Rs. 22, 011/-, the respondent was given possession of the property. Thus, the first three requisite conditions for the defence of part-performance have been satisfied. The respondent had sent a telegram to the appellant on May 7, 1951, offering to pay the balance amount upon the execution of a sale deed. The respondent had arranged with a bank to borrow upto Rs. 75,000/-, when needed by him, and had sufficient resources at his disposal to enable him to pay the amount due. This was held by the court to show the respondent’s willingness and preparedness to perform his obligation under the contract.
According to section 70 (4) of the Madhya Bharat Land Revenue and Tenancy Act, 1960, the appellant was required to obtain the sanction of the State Government before the sale of the property to the respondent as the land in question was an agricultural land and the respondent was not an agriculturist. The revenue records of the land were in the appellant’s brother’s name. It was implied under the contract that the appellant was required to obtain the necessary permission from the State government which the appellant never obtained; and also get his brother’s name deleted from the revenue records which was only done on October 6, 1952. In considering whether a person is willing to perform his part of the contract the sequence in which the obligations under a contract are to be performed must be taken into account. If under the terms of the contract, the obligations of the parties have to be performed in a certain sequence, one of the parties to the contract cannot require compliance with the obligations by the other party without in the first instance performing his own part of the contract which in the sequence of obligations is performable by him earlier. Hence, it was held that the respondent could not be called upon to perform his obligations under the contract unless the appellant had fulfilled his obligations which came first in sequence. The appeal was dismissed with costs.
Case Comment:
In this case, the court while determining the alleged breach of a contract of sale between the parties applied section 54 of the Indian Contract Act (1872) which provides that a party who is required to perform a promise and has failed to do so, cannot claim the performance of the reciprocal promise. Since the contract did not expressly define the order in which the promises were to be performed, the court determined the same taking into consideration the nature of a sale transaction. The court held that the appellant had defaulted in the performance of his promises and could not sue the respondent who had at all times been ready and willing to perform the reciprocal promise.
Edited by Parul Soni
Approved & Published – Sakshi Raje
Reference
[1] The Indian Contract Act, 1872, No. 9, S. 2(f).
[2] The Indian Contract Act, 1872, No. 9, S. 51.
[3] The Indian Contract Act, 1872, No. 9, S. 52.
