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1990 SCC OnLine P&H 928 : ILR (1991) 2 P&H 407 : (1991) 2 RRR 19 : AIR
1992 P&H 18

Punjab and Haryana High Court

(BEFORE G.R. MAJITHIA, J.)

Raj Kumar … Appellant;

Versus
Shanti Saroop Gandhi and Others … Respondents.
Regular Second Appeal No. 2030 of 1978
Decided on November 21, 1990
Transfer of Property Act, 1882 — S. 55 — Agreement to sell — Possession of Land with
tenant and this fact in the knowledge of vendee — Vendor agreeing to deliver vacant
possession on stipulated date — Vendee only entitled to formal or symbolic possession.
Held :
That S. 55 of the Transfer of Property Act is founded upon the principle of natural justice. As soon
as the relationship of buyer and seller is established between the parties, they acquire reciprocal
rights and both are bound to protect interests of each other. The contract referred to in the
expression “in the absence of any contract to the contrary” may either be express or implied. Clause
(f) of sub-section (1) of S. 55 says that the seller is bound to give, on being required, the buyer such
possession of the property as its nature admits. Under this clause, the word “as its nature permits”
refer to physical or actual possession in the case of tangible property and formal or symbolical
possession in the case of intangible property. Possession does not necessarily import actual
possession or personal occupation. So, when the buyer has notice of a tenancy, he is only entitled to
formal or symbolical possession. Moreover, the words “in the absence of any contract to the
contrary” in the section shows that the operation of this clause can be excluded by a contract
between the parties. So, where it is made clear that actual possession of the property was in
possession of the tenant, the rigours of the clause stood excluded.
(Para 7)
Regular Second Appeal from the order of the Court of Shri Romesh Chand Jain, Additional District
Judge, (II) Hissar dated 11th day of September, 1978 affirming that of the Court of Shri V.K.
Kaushal, Sub Judge, 1st Class, Hissar dated the 6th May, 1972, dismissing the suit of the plaintiff
but leaving the parties to bear their own costs.
Claim: Suit for recovery of Rs. 11,450 detailed as:—
Principal Rs. 10,000 and interest Rs. 1,450 and additional Court fee of Rs. 19.50 has been
fixed for further claim of interest.
Claim in Appeal: For setting aside the orders of the both the Courts below.
Hari Mittal, Advocate with Prabhodh Mittal, Advocate, for the appellant.
H.L. Sarin, Sr. Advocate with Hemant Sarin, Advocate and, Ashish Handa Advocate,
for the Respondents.

Page: 408

The Judgment of the Court was delivered by

G.R. MAJITHIA, J.:— The unsuccessful plaintiff has come up in second appeal
against the judgment and decree of the first appellate court affirming on appeal those
of the trial court whereby his suit for recovery of Rs. 11450 was dismissed.
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2. The facts:—
… Predecessor-in-interest of respondent No. 1 executed an agreement to sell dated
February 21, 1968 in favour of the plaintiff and defendant No. 2. He agreed to sell land
measuring 124 acres situated in village Talwandi Rana at the rate of Rs. 820 per acre.
Rs. 10,000 were paid as earnest money to him and it was agreed that the sale deed
would be executed on or before June 30, 1968. The agreement recited that in case the
vendor failed to execute the sale deed within the time prescribed he would be liable to
pay to the vendees Rs. 10,000, the advance money, and Rs. 10,000 more as damages.
Incase, the vendees failed to get the sale deed executed in their favour the vendor
would forfeit the earnest money paid to him. It was further stated in the plaint that
the vendor agreed to deliver vacant possession of the land at the time of execution of
the agreement to sell, but later on he found himself incapable of delivering the vacant
possession since it was in possession of the tenants and, therefore, he failed to
execute the sale deed in favour of the plaintiff and defendant No. 2. On June 26, 1968,
Sawan Mal gave a telegram to the plaintiff to get the sale deed executed. In reply to
the telegram the plaintiff intimated Sawan Mal telegraphically that he had promised to
deliver vacant possession and that he was ready to get the sale deed executed
provided he (Sawan Mal) satisfied him that he would deliver vacant possession of the
land agreed to be sold. Sawan Mal did not reply to this telegram but he was present in
the office of Sub Registrar, Hisar on June 30, 1968 to execute the sale deed. The
vendees did not turn up and therefore, the sale deed could not be executed. The
plaintiff further claimed that the amount in question was a charge on the property in
question by virtue of Section 55(6)(b) of the Transfer of Property Act and that he could
recover this amount by sale of the property regarding which the agreement to sell was
executed in his favour by Sawan Mal deceased.

Page: 409

3. Defendants No. 1 and 3 to 10 contested the suit. The execution of the agreement
to sell was not denied. It was, however, denied that defendant No. 2 transferred his
rights under the agreement to sell in favour of the plaintiff. It was denied that the
vendor agreed to deliver vacant possession of the land in dispute. It was further
pleaded that the plaintiff and defendant No. 2 visited the land in dispute at the time of
agreement arid also verified from the entries in the revenue record that the same was
in possession of tenants. Vendor Sawan Mal used to reside in Delhi in those days and
the land in dispute was situated in village Talwandi Rana and it was known to the
vendees that the tenants were in possession of the same. The vendor was not legally
bound to deliver vacant possession of the land or get the deed of attornment executed
from the tenants in favour of the plaintiff and defendant No. 2. The plaintiff's claim for
recovery of earnest money with interest was refuted. It was disputed if the amount
can be a charge on the property in question. Defendants No. 4 to 10 claimed
themselves to be bonafide purchasers for consideration without any notice of the
alleged agreement in favour of the plaintiff and defendant No. 2. Personal liability of
defendant No. 2 for payment of the amount was also disputed.
4. The trial judge framed the following issues:—
1. Is the plaintiff not entitled to rescind the contract because the defendants did
not deliver the possession to the plaintiff, nor obtained attornment from tenants
on the suit property in favour of the plaintiff before the deed could be registered
by the due date? OPD.
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2. If issue No. 1 is decided against the defendant, is the plaintiff not entitled to
claim refund of earnest money? OPD.
3. If issue No. 1 is decided in favour of defendant, whether the plaintiff is still
entitled to claim refund of his earnest money? OPD.
4. If issue No. 1 and 2 are decided against the defendants, is the plaintiff entitled
to interest on earnest money? If so, at what rate? OPP.
5. If issue No. 2 and 4 are decided in favour of plaintiff, whether the amount due to
the plaintiff cannot be charged on the property in question? OPD.

Page: 410

6. Whether the plaintiff has acquired the right and interest of defendant No. 2 to
recover earnest money and interest of his share from the defendants, and as
such can claim the entire amount of earnest money and interest? OPP.
7. Whether the defendants have sold the suit property to another person, if so,
when and with what effect? OPD.
8. If issue No. 7 is proved in favour of the defendant, whether the subsequent
transferee is a necessary or proper party? OPD.
9. If issue No. 8 is decided in favour of the defendant and the plaintiff is held
entitled to return of earnest money and interest, whether his claim cannot be a
charge on the suit property in the hands of the subsequent transferee also? OPD.
10. Whether the defendants No. 3 to 10 are bonafide purchasers for value without
notice of the agreement in question between the plaintiff and defendant No. 2 on
one side and defendant No. 1 on the other side, if so, with what effect on their
rights and on the rights of the plaintiff? OPD.
11. Whether the agreement to sell entered into between the plaintiff and defendant
No. 2 and Sawan Mal proposed vendor is inadmissible in evidence on account of
being insufficiently stamped and registered, if so, what is its effect? OPD.
12. Whether defendant No. 1 being the LR of the original proposed vendor is also
personally liable for the amount claimed? OPP.
13 Relief.

Page: 411

5. Under issue No. 1 it was held that Sawan Mal was not bound to deliver vacant
possession of the land agreed to be sold to the plaintiff and that the plaintiff could not
rescind the contract. He could get the sale deed executed and obtain symbolical
possession of the land and ask the tenants to attorn in his favour; issue No. 2 was
decided against the plaintiff in view of the finding under issue No. 1; issue No. 3 was
decided against the plaintiff since it was found under issue No. 1 that he was not
entitled to the refund of earnest money; issues No. 4 and 5 were decided against the
plaintiff; issue No. 6 was answered in favour of the plaintiff and against the defendant
and it was held that that the agreement to sell was executed on a non-judicial stamp
paper and was admissible in evidence; issues No. 7 and 8 were decided against the
plaintiff and, vide order dated November 19, 1970 it was directed that the subsequent
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vendees be impleaded as party defendant to the suit; no finding was given on issue
No. 9 in view of findings on issues No. 3 and 8: issue No. 10 was answered in favour of
the defendant and it was held that defendants No. 4 to 10 were bonafide purchasers
for value without notice of the agreement to sell in favour of the plaintiff and
defendant No. 2; issue No. 11 was answered in favour of the plaintiff as it was held
that the agreement to sell was admissible in evidence on payment of penalty and
stamp duty which was duly paid and the document was admitted into evidence; issue
No. 12 was answered to the effect that the successor-in-interest of the vendor was not
personally liable to pay the disputed amount but was liable only to the extent to which
the property of the deceased had devolved upon him. In view of findings on issues No.
1 to 4, it was held that the plaintiff was not entitled to the relief sought for and the
suit was dismissed by the trial Court.
6. The appellate Court on appraisal of the evidence came to the conclusion that the
land agreed to be sold was in occupation of the tenants at the time of execution of the
agreement to sell to the knowledge of the plaintiff and defendant No. 2 and they were
quite conscious of the fact that the vacant possession was not to be delivered to them.
It was further found from the contents of the agreement, attending circumstances and
the evidence that there was agreement to the contrary, i.e., a contract not to deliver
vacant possession. This is essentially a finding of fact based upon evidence and is not
open to exception in second appeal.
7. The learned counsel for the plaintiff urged that in a case of agreement to sell of
immovable property the vendor is bound to deliver vacant possession of the land
agreed to be sold to the

Page: 412

vendee. Since the vendor was not in a position to deliver the vacant possession, the
vendees could rescind the contract and in support of his submission he relied upon
Jogemaya Dasee v. Akhoy Coomar Das(1) , Lallubhai Rupchand v. Mohanlal Sakarchand
(2) , Munnalal Bhagirath v. Zamklal Gumchandji(3) , and Sohan Lal v. Bal Kishan Ghanu

Mal,(4) . There is no dispute with regard to the proposition of law laid down in these
authorities but of its applicability to the facts of the instant case. Section 55 of the
Transfer of Property Act is founded upon the principle of natural justice. As soon as the
relationship of buyer and seller is established between the parties, they acquire
reciprocal rights and both are bound to protect interests of each other. The contract
referred to in the expression “in the absence of any contract to the contrary”, may
either be express or implied. Clause (f) of sub-section (1) of Section 55 says that the
seller is bound to give, on being required, the buyer such possession of the property
as its nature admits. Under this clause, the word “as its nature permits” refer to
physical or actual possession in the case of tangible property and formal or symbolical
possession in the case of intangible property. Possession does not necessarily import
actual possession or personal occupation. So, when the buyer has notice of a tenancy,
he is only entitled to formal or symbolical possession. The first appellate Court has
found that the buyer had notice of the tenancy on the land agreed to be sold and it
was not possible for the seller to deliver physical possession to the buyer. Moreover,
the words “in the absence of any contract to the contrary” in the section shows that
the operation of this clause can be excluded by a contract between the parties. So,
where it is made clear that actual possession of the property was in possession of the
tenant, the rigours of the clause stood excluded. The first appellate Court has found on
evidence that in the instant case there was an agreement to the contrary and vacant
possession could not be delivered to the vendees. No exception can be taken to this
finding.
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8. For the reasons aforementioned, I find that the appeal is devoid of any merit and
the same is dismissed. Parties are, however, left to bear their own costs.
P.C.G.
———
(1) 1917 (XL) I.L.R. Calcutta 140.

(2) A.I.R. 1935 Bombay 16.

(3) A.I.R. 1952 Madhya Bharat 145.
(4) A.I.R. 1960 Punjab 275.

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