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CAN SUBSEQUENT VENDEES BECOME REPRESENTATIVES-IN-INTEREST FOR ORIGINAL VENDEES FOR SPECIFIC PERFORMA

Kapilaben & ors V. Ashok Kumar Jayantilal Sheth- CIVIL APPEAL NOS. 10683-86 OF 2014 – November 25, 2019

This is a suit of specific performance filed by the First Respondent against appellants. The appellant was the original owner of the suit property who transferred it to the respondent/original vendee in 1986. The suit property, which was in Town Planning Scheme, has to be given to original vendee on the finalization of scheme and the sale deed has to be registered on the receipt of the remaining consideration. The original vendees executed 4 sale deeds of the property to the First Respondent in 1987. This agreement authorized the First Respondent to make preparations for construction and advertisement. The possession was given to them and they conducted Bhoomi Pujan. Later, dispute arose between the parties. The original vendee filed suit, before Ld.CJ, seeking specific performance of the 1986 agreement. He accused appellant that he is taking advantage of increased real estate prices. Appellants claimed that the original vendees had not paid the remaining consideration. First Respondent alleged that the Appellants and the original vendees are joining to deny their rights under 1987 agreements. The appellants contended that the original vendees had never become the legal owners of the suit property and so they did not have any right or authority to enter into any transaction with First Respondent.

When these set of suits are pending, the appellants and the original vendees executed a power-of-attorney in favour of Mr.Dhananjay Patel for executing sale deed in favour of Kantilal Patel. For facilitating this deed, the original vendee filed withdrawal of the 1986 agreement on the ground that it was fraudulently registered. The Trial Court rejected this contention and allowed the pleadings of First Respondent. The HC reversed this Trial Court order. The SLP filed by First Respondent was rejected by the HC. First Respondent later made application contending that the original vendees have been misled into withdrawing the suit, however this application was also rejected by the Trial Court and HC.

The original plaint was amended to seek declaration that 1986 agreement binds.  The Trial Court rejected this contention also by declaring that the original vendees had withdrawn their suit in collusion with the appellants. The court held that neither the appellants had given consent, nor the original vendees paid the remaining consideration. Thus the 1987 agreement was void. The Ld.ADJ affirmed the Trial Court’s order. It held that since the original vendees had waived their right, the First Respondent cannot claim specific performance of 1986 agreement as representatives-in-interest of the original vendees under S.15(b) of Specific Relief Act, 1963.

However, the HC in this case held that there was a linkage between 1986 and 1987 agreement and there is a valid assignment of rights to First Respondent. The withdrawal of the original vendee’s suits could not prejudice the rights of First Respondent.

This case has the following issues before the SC:

Whether there is assignment of rights by original vendee in favour of First Respondent under 1987 agreement?

Whether right of specific performance survives over cancellation of 1986 agreement?

Whether relief can be granted to First Respondent?

Ld. Counsel for appellants argued that there was no privity of contract between appellants and First Respondent. The 1987 agreement was contingent contract U/wS.31 of the Indian Contract Act and interest created under 1987 agreement was ‘contingent interest’ U/S.21 of TOPA act. Since 1986 agreement was cancelled, First Respondent could not seek specific performance of 1987 agreement. First Respondent had never communicated their willingness to complete their contractual obligation under 1986 agreement.

Ld. Counsel for First Respondent argued that appellants were colluding with original vendees to avoid sale of the suit property. Also the 1986 agreement could not be terminated by the power-of-attorney executed. In Shyam Singh V. Daryao Singh , Ram Baran Prasad V. Ram Mohit Hazar and Habiba Khatoon V. Ubaidul Huq it is held that no implied prohibition against assignability of the interest.

The court after considering the facts and circumstances of this case held that there is no privity of contract between appellants and First Respondent. Thus, First Respondent cannot seek specific performance of 1986 or 1987 agreement except as ‘representative-in-interest’ of original vendees U/S.15 of Specific relief Act. A Constitutional Bench of this Court in Khardah Co.LTD V. Raymon&Co Pvt.Ltd held that the terms of the contract strongly implied that the rights are non-transferable. In Indu Kakkar V. Haryana State Industrial Development Corp Ltd S.15(b) of Specific Relief Act does not contradict the general law on assignability.

Whether or not an assignee can seek specific performance, depend upon the construction of the contract. The court should determine the nature of interest sought to be transferred. In this case, the 1986 agreement provided that the appellants shall execute sale deed in favour of the original vendees subject to a condition that the latter would pay the remaining consideration and tax on time. The 1987 agreements assigned the rights and obligation of the original vendees in favour of First Respondent. Comparing 1986 and 1987 agreements say that there is a mere substitution of liabilities. The only way by which the First Respondent can seek specific performance of 1986 agreement is by proving the Appellants’ knowledge and consent to transfer the original vendees’ rights and liabilities.

“The mere fact that the original owner signed the development permissions for suit property and may have been present at the Bhoomi Pujan does not indicate that he consented to assignment of the 1986 agreement.”

Thus, no right flowing from 1986 agreement to First Respondent and no specific performance can be purported in that behalf. Since there is no privity of contract between appellants and First Respondent there can be no specific performance granted. As the 1987 agreement is only a contingent contract, the cancellation of 1986 agreement will cease the original vendees’ rights.

The original vendees have not paid the remaining consideration within the time specified in the 1986 agreement and thus they lost their rights. The original vendees have abandoned their rights under 1986 agreement and this made the enforcement of 1987 agreement virtually impossible. As the original vendee revoked the Power-of-attorney status, the plaintiffs’ cause of action is ceased.

REMEDY TO THE PLAINTIFF:

As the original vendee have relinquished his rights in the 1986 agreement, so as to frustrate performance of the 1987 agreement, the only remedy available to the plaintiff is compensation. It is for the loss of opportunity and inconvenience suffered by them. Also, the court in this case directed the HC to expeditiously release and remit back the consideration amount deposited by the First Respondent.

Priyadharshini R

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