Title not extracted — [1986] 2 S.C.R. 447

The Judgment of the Court was delivered by

SEN, J. This appeal on certificate is directed against the judgment and decree of the Gujarat High Court dated February 1, 1971 reversing those of the Civil Judge, Senior Division, Surendranagar dated January 31, 1961, and decreeing the plaintiffs' suit for specific performance. -1' Put very shortly, the essential facts are these. By an agreement in writing (Exh.26) dated October 19, 1949, the appellant who was the defendant entered into an agreement to purchase two plots of land admeasuring 491 and 1599 square yards situate in Village Dudheraj recorded as Girasdari agricultural land of which he was the tenant @ Rs. 2. 50 pef- square yard from the Girasdar, Rana Mohabat Singh and paid Rs. F 1,001 by way of earnest money in lieu thereof. The agreeme'!F stipulated that the vendor Rana Mohabat Singh was to apply fpr permission from the Collector to convert this agricultural land into village site i.e. for non-agricultural use. The sale-deed was to be executed by Rana Mohabat Singh after he had obtained the requisite permission from the Collector. G Within about a month therefrom i.e. on November 14, 1949, the appellant by a contract (Exh.25) covenanted to sell the same property to the respondents Jani Narottamdas Lallubhai an~ Thakur Dhirajlal Dhaneshvar who were the plaintiffs@ Rs. 3.75 per square yard. The agreement provided that the vendor i.e. the appellant was to get the land converted into village site H at his own expense.

R.R. DAHYABHAI v. J.N. LALLUBHAI [ SEN, J,] 451

A In 1950-51, Rana Mohabat Singh applied to the Collector for grant of permission to convert the land into village site but his application was rejected and thereafter he refunded the earnest amount to the appellant. The Saurashtra Land Reforms Act, 1951 came into force w.e.f. September 1, 1951. Under the provisions of the Act, there was an extinguishment B of the right and title of Rana Mohabat Singh as the ",\. ex-Girasdar of the land and the appellant was recognised to be an occupant thereof under the provisions of the Bombay Land Revenue Code, 1898. On August 13, 1957, the appellant made an application to the revenue authorities for the grant of an occupancy certificate. The Mamlatdar by his order dated February 6, 1958 directed the issue of an occupancy c >;certificate in favour of the appellant on condition of his ~paying occupancy price in accordance with the provisions of the Saurashtra Land Reforms Act. On that very day i.e. on February 6, 1958, the occupancy certificate was issued to the appellant on such payment being made but it was to come into effect from August 1, 1958. On June 23, 1958, the appellant D applied for converting 1000 square yards out of the two plots which prior to 1958 were agricultural land into village site, and on August 26, 1958 the revenue authorities granted such ~permission. Thereafter, on September 10, 1959 the revenue authorities granted permission for converting the remaining area of land into village site. Thus, by September 10, 1959 E the appellant obtained permission for converting both the plots for non-agricultural use. On October 5, 1959 the -+respondents called upon the appellant to execute a conveyance of the property in accordance with the agreement of sale ,between the parties and on his failing to comply, commenced \he present suit on September 6, 1960. F

The material terms of the agreement between the parties are to be found in the suit Banakhat (Exh.25) and they are to the effect

"You can construct a house or building or a factory G or put up a park, garden etc. on this land after getting it converted into village site land. The sale-deed in respect of this land is to be executed after the land has been converted into such use • • • • • • • The title of the land is free from any doubt• No one has, any right, title or interest H

p. 452 Copy page pinpoint

A ~ therein. If any amount is to be paid either to the Government or to the Darbar in respect of the land, then you are not liable for the same, but this agreement has been entered into w:l.th you on the footing that the land is to be considered as village site land. We have to give you a certified B copy of the permission whereby the land is converted into village site land and all expenses4 in connection with the grant of such conversion are to be borne by us."

It is common ground that the word - "we" refers to the vendor c i.e. the appellant and "you" refers to the respondents i.e~ the purchasers. -+- The appellant contested the suit on various grounds. He pleaded inter alia that (1) the agreement between the parties as per Bsnakhat (Exh.26) was a contingent contract and not an absolute contract and that the appellant's vendor Rana Mohabat Singh having failed to obtain permission of the Collector in terms of the agreement (Exh. 25) entered into by him with the appellant for converting the land into village site, and execute a sale-deed in his favour, the agreement between tht parties was incapable of performance and (2) the suit was barred by limitation. The Courts below have. differed in their conclusion. The learned Civil Judge who tried the suit upheld these pleas and non-suited the respondents. He held that the suit was barred by limitation and further that the contrac~ between the parties being a contingent contract, the agreement in view of the events that had happened made it unenf orceabl';{ F On appeal, the High Court reversed the decree and held that the agreement between the parties had not been cancelled by mutual consent and that finding has not been challenged before us, On the question as to whether the agreement was a contingent contract or a contract creating absolute liabilities as between the parties without contemplating any contingency, the High Court reproduced the material portion of the agreement (Exh.25) set out above and held that t~ agreement clearly contemplated that the sale-deed was to be executed after the requisite permission was obtained from the Collector for use of the land as a village site and that the land was not to be sold as agricultural land but as village

R.R. DAflYABHAI v. J.N. IALLUBHAI [ SEN, J.) 453

A site. In coming to that conclusion the High Court took into ·~consideration the agreement between the appellant and Rana Mohabat Singh (Exh.26) which contained the recital :

"I will execute the registered sale-deed in your favour immediately after permission to convert B these plots into village site land has been obtained."

"'between In the light of that recital, it held that the agreement the parties (Exh.25) contemplated that the sale-deed was to be executed after permission was obtained from the revenue authorities for use of the land as a village site and c it was not being sold as agricultural land. x . -ly Following the decision of Chagla, CJ. in F.. )lanc:bbodas v. liatlml Biracband & Co., [1951) Bom. LR 491 the High Court held that the words "after the permission is obtained" in Exh. 26 and the words "after the land is converted" in Exh. 25 both D indicate the point of time at which the sale-deed within the contemplation of the parties had to be executed in accordance with the terms of the document. In the circumstances, the High court held that the contract could not be interpreted as a t-'contingnent contract. Upon that view, it held that there was no contingency whatsoever and even though Rana Mohabat Singh E had failed to obtain the requisite permission to convert the land into village site, as and when such permission was "f' obtained by the appellant, the rights of the respondents for _.. the performance of the agreement came into existence. It also r held that the respondents were entitled to rely on the doctrine of 'feeding the estoppel' embodied in s.13 of the F ~Specific Relief Act, 1963. It held that at the time when the agreement was entered into between the parties in 1949, the appellant had only a right to get the land in suit conveyed to him by Rana Mohabat Singh in pursuance of the agreement (Exh.26). However, by virtue of the provisions of the Saurashtra Land Reforms Act, his title as an occupant became G complete and he had obtained the permission to convert the land into village site and the respondents were therefore ~ entitled to get specific performance of the agreement in respect of the rights which he had at the date of the suit. It further held that the permission to convert the disputed land into village site having been obtained on August 26, 1958, H

A 454 SUPREME COURT REPORTS [19861 2 s.c.R.

insofar as a part of the land was concerned and on September 10, 1959, as regards the balance thereof it could not be said Ji,. that the respondents suit was barred by limitation. Upon these B findings, the High court reversed the decree of the learned Civil Judge and decreed the respondents suit for specific performance.

Two questions are raised upon this appeal. First of these is whether the agreement embodied in the suit Banak.hat .I, c (Exh.25) dated November 14, 1949 was a contingent contract and as the contingency failed, there was no contract which could be made the basis for a decree for specific performance, and the second is that the suit as framed was barred by limitation under Art.113 of the Limitation Act, 1963, As to the first contention, it is urged that the High Court proceeded on the )(._ erroneous belief that the grant of permission by the Collector'f- was a certain event and therefore its finding that the contract was an absolute and unconditional one, is vitiated. It is said that the appellant's vendor Rana Mohabat Singh having failed to obtain percission from the Collector in 1950-51 in terms of the agreement (Exh.26) entered into by him with the appellant for converting the land into village site and execute a deed of conveyance in his favour, the appellant had an imperfect title and therefore the right to specific i performance of the suit Banakhat (Exh.25) did not arise inasmuch as the conversion of the Girasdari lands at the instance of Rana Mohabat Singh was a condition on which the lllltual rights and obligations of the parties would arise. The submission proceeds on the basis that the two transactions were interdependent and Rana Mohabat Singh' s application for 'r permission for conversion of the agricultural land to non-agricultural purposes having been rejected, the appellant f. was relieved of his obligation to convey the suit lands under ' G the Banakhat (Exh.25). In support of the contention, reliance is placed on the decision of the Privy Council in Dal snkh M. Pancholi v. The Guarantee Life & l!aployment Insurance Company Ltd. &Ors., A.I.R. 1947 P.C. 182,

We do not see any basis for the submission that the H contract between the parties as embodied in the suit Banakhat ~ (Exh.25) was a contingent contract, the performance of which was dependent upon fulfilment of the condition under the

R.R. IlAHYABHAI v. J,N, IALLUBHAI [ SEN, J,] 455

A "*arlier agreement (Exh.26) by which the appellant's vendor Rana Mohabat Singh had undertaken upon himself the obligation of procuring the necessary sanction from the Collector. As to the appellant having an imperfect title the question is purely hypothetical. May be, initially the two transactions were not independent of each other but were inter-dependent, for the B performance of one depended upon the fulfilment of the other ~greement. If there was no abolition of proprietory rights, it ~ould well be said that the suit Banakhat (Exh.25), being subject to the fulfilment by Rana Mohabat Singh of the terms of the earlier agreement (Exh.26), the appellant had an imperfect title and therefore the contract between the parties was contingent on Rana Mohabat Singh obtaining the approval of C ~he Collector and as he could not secure such approval and ~xecute a conveyance in favour of the appellant, no effective agreement came into being which could be ordered to be speci- fically enforced. But the contention that unless the appellant's vendor Rana Mohabat Singh conveyed title by execu- tion of a proper conveyance, the contract as between the D parties became impossible of performance and further that for want of such conveyance the appellant had an imperfect title, does not take into account the subsequent events.

It is common ground that shortly thereafter, the Saurashtra Land Reforms Act, 1951 came into force w.e.f. E

- September 1, 1951. Under the provisions of the Act, there was an extinguishment of the right and title of Rana Mohabat Singh as a Girasdar of the suit land and the appellant· was 1fecognised to be an occupant thereof under the provisions of the Bombay Land Revenue Code. It would, therefore, appear that »e contention that the appellant had an imperfect title is F >l'~thout any basis whatever. With the extinction of the title of Rana Mohabat Singh and the conferral of the rights of an occupant an the appellant, the property became transferable by him. As such occupant, it is undisputed that the appellant made an application to the reven~ authorities permitting the conversion of the disputed ·1and into village site. lbereafter, G there was no legal impediment in the way of the appellant in ~ecuting a sale-deed. Under the terms of the suit Banakhat (Exh.25), the appellant had undertaken the obligation of getting the land converted into village site. As indicated, the word 'we' in the document (Exh. 25) refers to the vendor i.e. the appellant .and 'you' refers to the respondents. lbe H

456 SUPREME COURT REPORTS [1986] 2 s.c.P.. A terms of the document are clear and explicit and admit of no~ ambiguity. The appellant had by the contract bound himself to fornish a certified copy of the permission whereby the land was converted into village site apart from bearing all expenses in connection with the grant of such permission. B In our opinion, the decision in Dalsukh M. Pancholi 's case is clearly distinguishable on facts. It is clear from the terms of the offer and acceptance in that case, that the'- parties had contemplated that, to make the contract effective the 'approval of the attaching Court' must be obtained. The learned Subordinate Judge held that the term 'subject to the c approval of the Court' was not an essential condition, but in the High Court it was conceded that it was an essential term~ The facts of the case show that there was good reason for insisting on this condition for at the time of execution of~ the agreement it was well-known to the parties that the property was under attachment by various courts. In those circumstances, the Privy Council observed :

"In their Lordships' opinion there can be no doubt that the condition was an essential one. It was essential not for one party alone, but for both"'* parties. From the point of view of the purchaser it is unnecessary to observe that he would get a clear title to the property only if the creditors, through the Court, consented to take Rs. 6,50,000 ,_ in full satisfaction of their decrees against the vendor's family. The purchaser was not willing to 't" risk even the payment of the earnest money without the knowledge of the attaching Court for it was t~ be paid only to the nominee of the Court named a)i' the time of giving the approval to the transaction. The condition was not exclusively for the benefit of the purchaser; it was equally important from the standpoint of the vendors also. Ram Jas would accept the offer only with the proviso "subject to the approval of the Court". The family was heavily indebted. It was important for Ram Jas that he)> should get effective discharge of all the liabilities of the family by the payment of Rs.6,50,000; thus, it was necessary from his standpoint also, that the sale should be subject to

R.R. DAHYABHAI V• J,N, IALLUBHAI [ SEN, J,] 457

the approval of .the attaching Court." A

It was accordingly held that the contract was a contingent one and as the contingency failed, there was no contract which could be made the basis for a decree for specific performance.

Although Rana Mohabat Singh having failed to fulfil the B terms of his contract with the appellant and execute a ~ sale-deed in his favour might have rendered the contract between them incapable of performance, but with the extinction of the title of Rana Mohabat Singh and the conferral of the rights of an occupant on the appellant, the property became transferable subject, of course, to the express covenant on y: the part of the appellant to do all things necessary to give c effect to the agreement. Here, the suit Banakhat (Exh. 25) -.r embodies an express covenant to that effect. There is always in such contracts an implied covenant on the part of the vendor to do all things necessary to give effect to the agree- ment, including the obtaining of the permission for the trans- fer of the property. The principles on which a term of this nature may be implied in contracts are well -settled. It is enough to refer to Halsbury's Law of England, Vol. 8, 3rd ;-- Edn;, P• 121 where the principles are summarised as follows :

"In construing a contract, a term or condition not expressly stated may, under certain circumstances be implied by the Court, if it is clear from the nature of the transaction or from something actual found in the document that the contracting parties must have intended such a term or condition to be part of the agreement between them. Such an implication must in all cases be founded on the presumed intention of the parties and upon reason, and will only be made when it is necessary in order to give the transaction that efficacy that both the parties must have intended it to have, and to prevent such a failure of consideration as could not have been within the contemplation of the parties."

Chitty on Contract, Vol.I, 23rd Edn., paragraphs 694-95 points out that a term would be implied if it is necessary in the business sense, to give efficacy to the contract. R

458 SUPREME COURT REPORTS [1986) 2 s.c.R.

In- this context reference may be made to the decision of ~ the Privy Council in Kotilal v. NanbeW Gbasiraa, L.R. [1930) 57 Indian Appeals 333, There, the facts were these. In that case, the plaintiff Mst. Jankibai entered into an agreement to purchase from Raibahadur Seth Jiwandas of Jabalpur four annas proprietary share of Mauja Raisalpur together with the sir and khudkast lands appurtenant thereto, with cultivating rights in the sir lands. The property was subject to the provisions of the Central Provinces Tenancy Act, 1920. She filed a suit for -4 specific performance of the said contract. The Privy Council held that the contract was for a transfer of the sir lands without reservation of the right of occupancy, and that the sanction of the Revenue Officer to the transfer was necessary under s. 50(1) of the Act, which was in these terms : '(

" S. 50( 1) : If a proprietor desires to transfer f- the proprietary rights in any portion of his sir land without reservation of the right of occupancy specified in s. 49, he may apply to a revenue- officer and, if such revenue-officer is satisfied that the transferor is not wholly or mainly an agriculturist, or that the property is self- acquir<>d or has been acquired within the twenty -t years last preceding, he shall sanction the transfer."

It was contended before the Privy Council that a decree for specific performance of the agreement of sale could not be y made, because such performance would necessitate ·an application by or on behalf of the vendor to the Revenue f Officer for sanction to transfer the cultivating rights in the -. sir land, and that the Court had no jurisdiction to require the vendor to make such an application. In repelling the contention, the Privy Council observed that in view of their construction of the agreement, namely, that the vendor agreed to transfer the cultivating rights in the sir land :

"(T)here was, in their Lordships' opinion, an ~ implied covenant on the part of the vendor to do all things necessary to effect such transfer, which would include an application to the Revenue Officer to sanction the transfer."

R.R. DAHYABHAI v. J,N. LALLUBHAI [ SEN, J.] 459 ' A -+It was further observed that it was not necessary for their Lordships to decide whether in that case the application for sanction to transfer 1111st succeed, but that it was material to mention that no facts were brought to their Lordships' notice which would go to show that there was any reason why such sanction should not be granted. After making the said observa- B tions, the Privy Council held that in those circumstances the Court had jurisdiction to enforce the contract under the ,..Specific Relief Act, 1877 and Order 21, r. 35 of the Code of Civil Procedure, 1908 by a decree ordering the vendor to apply ·for sanction and to execute a conveyance on receipt of such sanction. The decision of the Privy Council in Motilal v. Nanehalal Ghasiraa, supra, therefore is an authority for the C proposition that if the vendor agrees. to sell the property ):which can be transferred only with the sanction of some -~vernment authority, the Court has jurisdiction to order the vendor to apply to the authority within a specified period, and if the sanction is forthcoming to convey to the purchaser within a certain time. See also : Mrs. a.a~ Widya Vati D Madden v. Dr. C.L. Katial, (1964] 2 s.c.R. 495 and Ramesh Oiandra Owidiak & Anr. v. Qnmi Lal Sabharwal (dead) by his Lrs. & Ors., [1971] 2 S.C.R. 573 where this Court following the Privy Council decision in MotiW v. Nanehlal Qiasir11111's r-case supra, reiterated the same principle. E The next and the last contention that the suit brought by • the appellant was barred by limitation is wholly devoid of substance. Under Art. 113 of the Limitation Act, 1963, the "flimitation prescribed for a suit for specific performance is a period of three years which runs from the date when the cause of action accrues. In the facts and circumstances of the case, F ~e respondents were required to have a conveyance executed immediately upon the conferral of occupancy rights on the abolition and the permission granted by the revenue authorities to him to convert the suit land into village site. As already stated, the permission to convert the disputed land into village site having been obtained on August 26, 1958 G insofar as a part of the land admeasuring 1,000 square yards and on September 10, 1959 as regards the remaining portion, it 1could not be said that the respondents' suit filed on September 6, 1960 was barred by limitation.

460 SUPREME COURT REPORTS [1986) 2 S.C.R.

A The result therefore is that the appeal nllst fail and is dislldssed. The judgment and decree of the High Court decreeing ~ th.? plaintiff's suit for specific performance are upheld. The respondents shall be entitled to their costs throughout.

B S.R. Appeal dismissed.