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1953 SCC OnLine Ker 130 : AIR 1954 TC 10 : 1953 KLT (SN 1) 16

Travancore-Cochin High Court

(BEFORE SANKARAN AND JOSEPH VITHAYATHIL, JJ.)

T.V. Kochuvareed and another … Appellants;

Versus
P. Mariappa Gounder and others … Respondents.
A.S. Nos. 450 and 454 of 1952
Decided on March 31, 1953

Page: 12

The Judgment of the Court was delivered by

SANKARAN, J.:— These two appeals are directed against the decree
in O.S. No. 183 of 1950 on the file of the District Court at Trichur. The
suit is for specific performance of the agreement for sale of the several
items of properties, movable and immovable, described. In the
schedule attached to the plaint. The main item of property consists of a
the factory known by the name of Sivakami Tile Works situated at
Puthukkad in Nanmanikara village near Trichur in the Travancore-
Cochin State. The other items of properties are the lands, bungalows
and other buildings as well as the machinery and other accessories
attached to the factory.
2. These properties belonged to the 1st defendant in the case, who
is a resident of Pallathur in Ramnad District of the Madras State.
Plaintiff who is a dealer in tiles at Pollachi negotiated with the 1st
defendant for the purchase of the Sivakami Tile Works together with all
the properties attached to it and after settling the terms entered into a
registered agreement on 22-5-1950 with the 1st defendant setting
forth the terms of the proposed sale and purchase. Exhibit D is that
agreement. The sale price was fixed at Rs. 90003/- and at the time of
the execution of Ex. D an earnest, money of Rs. 5003/- was paid by the
plaintiff to the 1st defendant. It was stipulated that the sale deed
should be executed before the month of Ani of the current Tamil year
(i.e., before 15-7-1950), that on the date of the registration of Ex. D.
plaintiff should make a ready cash payment of Rs. 50,000/- out of the
sale consideration before the Registering Officer,
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Page: 13

that for the balance of consideration of Rs. 35,000/- plaintiff should

execute a mortgage of the same properties in favour of the 1st
defendant with a provision for payment of that amount with six per
cent interest on or before 31-5-1951 and that all the expenses of the
transaction were to be met by the plaintiff himself. The 1st defendant
was to deliver possession of all the movable and immovable properties
to the plaintiff at the time of the execution of the sale deed. The parties
had also expressly stipulated that time should be of the essence of the
agreement between them and the consequences to follow from the
default by either party were also provided for in Ex. D. If the agreement
fell through on account of the default of the plaintiff, he must forfeit the
advance of Rs. 5003/- paid by him. If the sale as agreed could not be
pushed through on account of (the default of?) 1st defendant he has to
return to the plaintiff the earnest money of Rs. 5003 and is also to pay
a further sum of Rs. 5003 by way of damages.

3. Before the date fixed for the execution of the sale deed, plaintiff
deposited the required amount and had to his credit over Rs. 50,000/-
under the current account in the South Indian Bank Limited at its
branch at Pollachi. He had also purchased the necessary stamp papers
in his name on 8-7-1950. But, according to him, he got information
from one Thenappa Chcttiar of Devakotla who has been examined in
this case as P.W. 2, that the 1st defendant was trying to evade his
obligations under the agreement Ex. D. Accordingly, plaintiff caused the
registered notice Ex. E dated 7-7-1950 to be sent through his lawyer
expressing his readiness and willingness to abide by the terms of Ex. D
and calling upon the 1st defendant to perform his obligation of
executing the deed of conveyance as per the terms of the agreement.
4. To this notice, the 1st defendant sent the reply Ex. F through his
lawyer stating that one Neelacanda Iyer was in possession of the
Sivakami Tile Works under an outstanding lease, that the lessee has
refused to surrender possession of the factory and that therefore it has
become impossible to effect the sale as contemplated in Ex. D. The 1st
defendant had also offered to return the earnest money of Rs. 5003/-.
5. According to the plaintiff, the lease made mention of in Ex. F is
untrue and non-existent and the pica put forward by the 1st defendant
on the basis of the lease is illegal and mala fide. The stand taken by the
plaintiff is that the Tile factory and other items of property attached to
it are actually in the possession and control of the 1st defendant
himself and that he is bound to carry out the undertakings in Ex. D by
executing a deed of conveyance and surrendering possession of the
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properties forthwith, on receipt of the consideration as agreed.

Consistent with this position the suit was instituted against the 1st
defendant as the sole defendant, praying for a decree directing him to
execute a registered deed of sale in favour of the plaintiff and deliver
possession of, the plaint schedule property. Future mesne profits at the
rate or Rs. 30,000/- a year till date of delivery of possession of the
property was also claimed.
6. Only some time subsequent to the institution of the suit
defendants 2 and 3 were impleaded in the case. Their impleading was
ordered under the following circumstances. The plaint was at first
presented in this Court on 23-8-1930 before the judge on vacation duty
during the Onam holidays that year. On the same day, plaintiff filed two
separate applications. C.M.P. Nos. 1478 and 1479. The first of these
petitions was for the appointment of a Commissioner to prepare an
inventory of all the properties of the Sivakami Tiie Works, particularly of
the engine, press, pugmill, fourteen-chambered kilns, dyes, buildings,
furniture, raw materials and other movable and immovable properties
of the said Tile Works. That petition was allowed and an Advocate of
this Court was appointed as Commissioner. The other petition was for
the appointment of a Receiver to take possession of the plaint schedule
properties. On that petition, notice was ordered returnable in ten days.
Subsequently, the records of the case were sent to the District Court
where the further proceedings have been carried on.
7. When the Commissioner went to the factory to prepare the ???
Neelacanda Iyer, the alleged lessee of the factory under the 1st
defendant, presented Ex. XXXIII statement dated 25-8-1950 objecting
to the preparation of the inventory. That statement is in the following
terms:
“I am in possession of the aforesaid Sivakami Tile Works end the
properties attached thereto, as lessee for the last nine years with an
option to renew for another five years from 1127 M.E. Most of the
properties are my improvements. As there is no order against me, I
object to the inventory and I hereby place on record my protest.”
8. In spite of the objection thus raised by Neelacauda Iyer, as lessee
of the file factory, the plaintiff did not care to implead this claimant as a
party to the suit. On the other hand, plaintiff pursued his application for
the appointment of a receiver to take possession of the suit properties
with the 1st defendant alone on record.
9. On 23-12-1950, the lower Court allowed that application and
appointed the Official Receiver of that Court as Receiver in respect of
these properties also. On knowing of this order, Neelacanda Iyer
presented M.P. 11 of 1951 dated 3-1-1951 praying that the receiver
may be directed not to disturb his possession of the factory as the
lessee thereof. By another petition, M.P. 12 of 1951, of the same Court,
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he moved for a stay of the further proceedings in respect of the receiver

matter pending final orders on M.P. 11 of 1951. Plaintiff opposed both
these petitions and filed M.P. 282 of 1951 praying that orders may be
issued to the receiver to take possession of the factory forthwith. In the
meanwhile the 1st defendant had Hied Civil Miscellaneous Appeal,
C.M.A. No. 1 of 1951, in this Court against the order appointing a
receiver to take possession of the suit properties. That C.M.A. ended in
dismissal. It was mainly on the strength of that order that, the plaintiff
pressed for immediate direction to the receiver to take possession of
the properties.
On 12-2-1951 the lower Court passed orders on M.P. Nos. 11 and
12 directing the petitioner Neelacanda Iyer to deposit Rs. 15,000/-
in Court and to execute a lease deed in favour of the receiver and
thus continued to be in possession of the properties.
10. While matters were at this stage, the present 3rd defendant took
a registered assignment deed on 5-3-1951 in respect of all the rights of
Neelacanda Iyer as the lessee in possession of the suit properties. As
assignee of such rights, he filed M.P. 515 dated 7-3-1951 praying that
the question of the lessee's possession may be fully investigated after
raising an issue regarding that matter and that in the meanwhile he
may be permitted to continue to be in possession of the properties
under the Receiver. He had also prayed for being impleaded as an
additional party in the suit. Since he had agreed to abide by the order
passed on

Page: 14

M.P. 11 of 1951 the Court by its order dated 16-3-1951 permitted him
to deposit Rs. 15,000/- in Court and to execute a lease deed in favour
of the Receiver and to continue in possession of the properties. The
question of impleading him as a party was deferred for decision at a
later stage.

11. M.P. Nos. 11 and 12 and 282 of 1951 were heard together and
were disposed of by a final order passed on 28-6-1951. The effect of
that order was merely to confirm the directions which had already been
made by the prior orders passed on C.M.P. Nos. 11, 12 and 318 of
1951. By this time, the 2nd defendant had obtained an assignment of
all the rights which the 1st defendant had in respect of the plaint
properties, the deed of assignment being Ex. XLII dated 8-3-1951. On
the strength of that assignment, he filed M.P. 901 dated 20-6-1951
praying that he may be impleaded as an additional defendant, in the
case and permitted to carry forward the contentions of his assignor, the
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1st defendant. Since the plaintiff did not object to the adoption of such
a course, the Court passed an order on 3-7-1951 allowing M.P. 901 and
impleading the 1st defendant's assignee as the 2nd defendant in the
case. In continuation of M.P. 515 of 1951 the lessee's assignee filed
another petition M.P. 1626 on 20-9-1951 reiterating his prayer that he
may also be impleaded as an additional defendant in the suit. Since
this petition was not opposed by the plaintiff, the Court on 20-9-1951
itself passed an order allowing the petition. Accordingly the petitioner
was impleaded as the 3rd defendant in the case.
12. After the 2nd defendant was impleaded in the case, he merely
accepted the contentions of the 1st defendant and this was all that he
could do as a transferee ‘pendente lite’ of the 1st defendant's rights
over the suit properties. The position of the 3rd defendant is different.
His assignor Neelaeanda Iyer has been no party to the present suit. All
the rights available to them are based on the lease deed Ex. I which
came into existence on 1-1-1117, i.e., several years prior to the
commencement of this litigation. So far as the lease arrangement is
concerned, all the defendants have practically the same contentions.
13. According to them, Neelaeanda Iyer has been in possession and
enjoyment of these properties as lessee thereof ever since the date of
Ex. I and has been regularly paying the pattom to the 1st defendant as
stipulated in the lease deed and that the 3rd defendant having acquired
the rights of Neelaeanda Iyer, is now occupying the position of the
lessee of these properties with the same rights and liabilities which
Neelaeanda Iyer himself had. It is also stated that the option given to
Neelacanda Iyer under Ex. I for continuing the lease for a further period
of five years from 1127 onwards, was duly exercised by him by
notifying that fact to the 1st defendant before the expiry of the original
period fixed in Ex. I and that therefore neither the 1st defendant nor
the plaintiff can claim surrender of possession of these properties
before the end of the extended period of the lease.
14. The 3rd defendant and his assignor have both declared their
intention in unmistakable terms to exercise their full rights under the
lease deed Ex. 1 and to retain possession of the suit properties for the
full period available under it. The 3rd defendant has further stated that
even at the stage of the termination of the full period of the lease, he
can be evicted from the properties only after the value of all the
improvements effected by him and his predecessor-in-interest in the
leasehold premises is assessed and paid to him and that the question
of thus determining the lease is beyond the scope of the present suit.
He has further contended that the lessee's rights cannot in any way be
affected by Ex. D, the deed of agreement for sale, entered into between
the plaintiff and the 1st defendant alone behind the back of the lessee
and that therefore the plaintiff is not entitled to get any relief in this
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suit as against the lessee of the plaint properties.

15. The 1st defendant has admitted the execution of Ex. D the deed
of agreement in favour of the plaintiff, but has contended that the
parties entered into such an agreement with the full understanding of
the existence of the lease arrangement under Ex. I in favour of
Neelaeanda Iyer as also his possession on the strength of it. It is stated
that at the time of execution of Ex. D, the parties to it hoped that it
may be possible to persuade the lessee to surrender possession of the
properties within the time fixed in Ex. D for the implementation of that
agreement and that it was expressly agreed between the plaintiff and
the 1st defendant that the agreement for sale need be performed only
if the lessee's consent is thus obtained in the matter of surrendering
possession of the properties. It is stated that the obtaining of such
consent was agreed to be a condition precedent to the agreement for
sale becoming operative.
16. According to the 1st defendant, he tried his best to persuade
Neelacanda Iyer to surrender possession of the properties. But the
latter was not prepared to yield. On the other hand, the lessee is stated
to have flatly refused to comply with the request to surrender
possession of the properties and to have stated his determination to
retain possession of the properties for the full period available under Ex.
I. This position was clearly known early in June 1950, and the same
was promptly let known by the 1st defendant to the plaintiff through
Thenappa Chettiar who was their common friend and who had taken an
active part in bringing about the agreement under Ex. D, Since the
agreement has thus become impossible of performance, plaintiff was
also requested to take back the earnest money of Rs. 5003. It is,
therefore, contended that the plaintiff is not entitled to ask for’ specific
performance of the agreement for sale.
17. The 1st defendant has further contended that the agreement Ex.
D has been vitiated by mutual mistakes on the part of the contracting
parties as to the nature and extent of the lessee's right to the value of
improvements effected by him on the suit properties and that the
agreement is indefinite and vague in so far as it has not specified the
necessary particulars regarding the properties forming the subject-
matter of this agreement. It is also contended that there has been no
proper or legal tender of the sale price by the plaintiff. It is also stated
that the plaintiff is not entitled to claim any mesne profits in respect of
the suit properties, and that the claim on that account at the rate of Rs.
30,000/- per year is baseless and untenable and that the plaintiff has
not sustained any damages on account of the agreement becoming
impossible of performance for no fault of the contracting parties.
18. In answer to the contentions raised by the defendants, the
plaintiff filed a replication wherein he denied the existence of the
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alleged lease in favour of Neelaeanda Iyer. It was further contended

that even if there was any lease it was only a sham arrangement for an
ulterior purpose and that no rights passed under it. Plaintiff has
maintained the position that the said Neelaeanda Iyer was at all times
the Manager under the 1st

Page: 15

defendant and has not effected any improvements in the properties and
that himself or his assignee has no right to resist the plaintiff's claim
for possession of the properties together with mesne profits at the rate
claimed.

19. After a consideration of all the evidence adduced by the parties,

the lower Court came to the conclusion that the lease deed Ex. I was
never treated as a valid document, that it was never intended to take
effect, that it also never took effect, and that it might have been
brought into existence with the only object rightly imputed to it by the
plaintiff in the box, i.e., to hoodwink the income-tax and super-tax
officers. On the strength of these findings, the lower Court held that the
agreement for sale as embodied in Ex. D was not subject to any
condition and that there is no impediment in the way for the specific
performance of that agreement. The other contentions raised by the
defendants were also negatived. Accordingly, plaintiff's suit for specific
performance of the agreement for sale was decreed as against the 1st
defendant with the direction that the decree will bind defendants 2 and
3 as well 15 days' time was allowed to the plaintiff to bring back to
Court the sum of Rs. 50,000/- which he had deposited in Court at the
early stage of the suit but bad subsequently withdrawn, with the
permission of the Court.
20. The 1st defendant was allowed 30 days' time to obtain from
Court the stamp papers produced by the plaintiff and to execute the
sale deed and produce it in Court. Ready cash consideration of Rs.
50,000/- was directed to be withdrawn by the 1st defendant or his
assignee, the 2nd defendant. Plaintiff was given 15 days' time to
execute a mortgage in respect of the properties covered by the sale
deed for securing the balance of Rs. 35000/- to make up the full
amount of the sale consideration as contemplated by Ex. D. Mesne
profits at the rate of Rs. 15,000/- per year had also been decreed in
favour of the plaintiff. He had been authorised to recover possession of
the properties from the receiver. The 3rd defendant had been directed
to deliver possession of these properties to the Receiver with all arrears
of mesne profits. All the defendants have been made liable for the costs
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of the plaintiff.
21. It is against this decree that defendants 2 and 3 have come up
in appeal. In A.S. 450 of 1952 filed by the 3rd defendant, he has taken
exception to the lower Court's finding on the question of the validity
and binding nature of the lease deed, Ex. I, and also to the decree for
possession passed in favour of the plaintiff in disregard of the 3rd
defendant's subsisting rights under the lease arrangement. In A.S. No.
454 of 1952 filed by the 2nd defendant, lie has objected to all the
findings recorded by the lower Court against defendants 1 and 2 and
also to the decree passed, plaintiff-respondent has filed an objection
memorandum objecting to the lower Court's finding that the lease set
up by the defendants is true and also contending that the amounts
deposited by the plaintiff in Court should also be taken into account in
calculating the costs due to the plaintiff in connection with the receiver-
appointment, as also the issue of a commission to prepare an inventory
of the suit properties.
22. The two appeals and the objection memorandum taken together
have brought up the whole case before this Court. The decision on the
following Questions will determine the fate of the two appeals and also
the objection memorandum:
“(i). Was the lease arrangement under Ex. I dated 1-1-1117 a real
and genuine transaction? Did it come into effect? and was it
subsisting even at the time of Ex. D the agreement for sale
entered into between the Plaintiff and the 1st defendant? Is the
lease arrangement subsisting even now? Can the plaintiff or the
1st defendant ignore the lease and secure possession of the suit
properties from the 3rd defendant as per the proceedings in the
present case?
(ii). Was the agreement embodied in Ex. D for the sale of the suit
properties to the plaintiff made conditional upon the lessee under
Ex. I agreeing to surrender possession of the properties within the
period fixed in Ex. D? Did the agreement fall through and become
impossible of performance on account of the lessee's refusal to
make such a surrender of possession of the properties?
(iii). Is the plaintiff entitled to get a decree for specific performance
of the agreement for the sale in its entirety or at least in part?
(iv). Is the plaintiff's claim for mesne profits sustainable and if so, at
what rate? If not is the plaintiff entitled to get any amount by way
of damages and if so what amount and from whom?”
23. Before proceeding to consider the evidence relating to the
several points formulated above, mention may be made about a
strange procedure adopted in the recording of the evidence in this case.
It is seen that the three witnesses on the plaintiff's side and the first
seven witnesses on the defence side were examined and most of the
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documents on either side were produced before defendants 2 and 3 had

been impleaded as parties to the suit. Such evidence was recorded in
the miscellaneous proceedings relating to the appointment of a receiver
to take possession of the properties and to the objections which the 3rd
defendant's predecessor-in-interest had raised in respect of that
matter. However, it is seen that after the 3rd defendant has also been
brought on the party array both sides agreed that the entire evidence
which had been recorded up to that date in connection with the
miscellaneous proceedings may also be treated and made use of as
evidence relating to the several issues involved in the suit itself. Thus
the trial proceeded and was brought to a close with the examination of
D.Ws. 8 and 9 also.
24. The 1st of the four points formulated above relates to the lease
arrangement entered into between the plaintiff and the first defendant.
The whole dispute in the case appears to have centred round this
question and the lower Court is seen to have rested its decision of the
suit on the finding that the lease arrangement evidenced by Ex. I was
never brought into effect. The lease deed Ex. I is seen to have been
executed in stamp papers to the value of Rs. 30/- purchased in the
name of the lessee Neelakanta Iyer on 31-12-1116. The lease deed was
executed on 1-1-1117 and it is described as an agreement by way of
lease executed’ between Solayappa Chettiar, the owner of the
properties as the lessor on the one part, and Neelakanta Iyer as the
lessee on the other part.
25. In the opening portion of the document, it is stated that the
tenancy is to commence on the first day of Chingam 1117 and the
annual rent payable by the lessee is at the rate of Rs. 2,500/- for the
first three years and at Rs. 3,000/- for the next 7 years with an option
to the lessee to continue the lease for the next five years from 1127 at
the rent of Rs. 3000/- per year on his expressing his desire to do so
before the expiry of the year 1126.

Page: 16

26. Some of the other important terms agreed to between the

parties and recorded in Ex. 1 are (1) that the lessee or his assignee
shall pay the annual rent to the lessor before the expiry of each
Malayalam year, (2) that the lessee shall pay interest at the rate of 6
per cent per year in the case of default of the payment of the annual
rent, (3) that the lessee shall abide by all the rules and notifications
under the Cochin Factory Act and other enactments that may be
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applicable to the factory, (4) that the lessee shall continue in

possession till 1126 for a period of 10 years without any interruption
from the lessor and with the option left with the lessee to continue the
lease for the next five years on the same terms and conditions on his
expressing his desire to do so in writing before the expiry of the year
1126, (5) that the lessee shall effect all necessary repairs to the Tile
Factory buildings which suffered severe damage on account of the
cyclone in the year 1116 and are in a dilapidated condition and shall
also make any addition, alteration or improvements to the buildings
and the machinery which he may think necessary in the interest of the
industry. (6) that the lessee shall be paid full compensation for all the
additions and improvements made by him at the time of the
determination of the lease & (7) that at the termination of the lease the
lessee shall deliver up the premises, buildings & machinery in a fairly
good condition—reasonable ware and tare during the period of the lease
being taken into consideration—on his being paid full compensation for
all the repairs, additions, alterations and improvements made by him.
27. The schedule of the properties covered by the lease is given at
the foot of the document and the properties are described under 12
different items.
28. Both lessor and lessee have signed the document and as D.W. 9
and D.W. 1 they have sworn to the execution of this document, and
also to the fact that it was intended as a real transaction and that the
lease actually came into operation with effect from 1-1-1117 itself.
There is nothing in the apparent tenor of the document to doubt the
reality and bona fides of the transaction.
29. (His Lordship then discussed the documentary evidence filed by
defence consisting of accounts, Income-tax and Sales Tax records and
licences obtained for running the factory and further after summarising
the oral evidence of witnesses stated:) The lower Court has not given
proper reasons for discarding the evidence of these witnesses.
Normally, the appellate Court would have due weight to the opinion of
the trial Court regarding the credibility or otherwise of the witnesses
examined before it. But this wholesome rule can have any application
only to cases where the trial Court is seen to have applied its mind to a
judicial consideration and a proper appreciation of the evidence given
by the witnesses examined before it. It is regrettable to note that there
has been no such proper approach by the lower Court to the evidence
given by D. Ws. 1 to 9.
30. It cannot also be said that the learned Judge had the advantage
of observing the demeanour of these witnesses and of forming his own
opinion as to their credibility or otherwise. Of all these witnesses, D.W.
8 alone appears to have been examined in the presence of the learned
Judge. D.W. 9 was examined on commission. The other witnesses,
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D.Ws. 1 to 7, had all been examined by his predecessors-in-office.

Under these circumstances, the lower Court was bound to go through
the evidence of these witnesses in detail and to assess such evidence at
its intrinsic worth before coming to the conclusion whether the same is
acceptable or not. To dub parties and witnesses as liars is a very
serious matter. No doubt the Court is at liberty to express its opinion
regarding the credibility or otherwise of the witnesses and parties
whose evidence it has to consider. Such opinion, whether, it be
complimentary or condemnatory, should be justified by the facts and
circumstances on record. The tendency to treat the matter in a light
mood and to indulge in sweeping remarks should be avoided, so that
there may be no cause for complaint that the witnesses and parties
have been improperly and unfairly treated by the Courts. The treatment
meted out to D.Ws. 1 to 9 by the lower Court is undoubtedly open to
such a serious charge. (Then his Lordship after examining the oral
evidence stated:)
31. In the appreciation of the evidence on record in this case, both
oral and documentary, the learned Additional District Judge has clearly
gone wrong in having placed undue importance on certain mistaken
entries in the factory accounts produced in this case and also on certain
minor discrepancies in the evidence of D.Ws. 1 and 9 and in having
been obsessed with the idea that Ext. I was brought into existence
merely as the result of a secret understanding between Solayappa
Chettiar and Neelaeanda Iyer to evade payment of income-tax due in
respect of the income earned by Solayappa Chettiar from the Sivakami
Tile Works. The result has been that the learned Judge fell into the
grave error of not properly appreciating and not giving due weight to
the oral and the large mass of documentary evidence in the case which
is overwhelmingly in favour of the inference that the lease arrangement
under Ext. I was a real transaction and that ever since the date: of Ext.
I Neelaeanda Iyer was in possession and enjoyment of the factory as its
lessee and that Solayappa Chettiar was only getting the pattom as
stipulated in the document. The documentary evidence discussed in the
earlier part of this judgment is such as to lead to this inference only.
The fact of the lease is clearly sworn to by D.Ws. 1 and 9 and also by
the independent witnesses D.Ws. 2 to 7, all of whom are respectable
persons. Nothing has been brought out in their examination to discredit
their evidence.
32. Hence, we believe the evidence of these witnesses as true and
hold that the lower Court was wrong in summarily, rejecting their
evidence. The several circumstances discussed above also point to the
irresistible conclusion that from 1-1-1117 onwards, the lessee has been
in possession and enjoyment of the factory in his own right as per the
terms of the document. Accordingly, we hold that the lease
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arrangement under Ext. I was a real and genuine transaction and that
it came into force with effect from 1-1-1117 onwards.
33. An argument advanced on behalf of the plaintiff in the case that
the lease deed Ext. I not having been registered as required by the law
of registration in force, is not admissible in evidence and that the lessee
or his assignee is not therefore entitled to claim any rights on the basis
of such a document, may be disposed of at this stage. No doubt the
lease deed Ext. I relating to immovable properties comes under the
category of documents whose registration is made compulsory under
Section 17 of the Registration Act and it is laid down in S. 49 of the
same Act that no document required to be registered by S. 17 of the
Act or by the provisions of the Transfer of Property Act shall affect the
immovable properties comprised therein or be received as evidence of
transactions affecting such properties unless such

Page: 17

documents are registered. But the exception to this rule is specified in

the proviso to Section 49 of the Registration Act and also in Section 53-
A of the Transfer of Property Act.

34. The proviso to Section 49 of the Registration Act, state that an

unregistered document affecting immovable properties required by the
Registration Act or the Transfer of Property Act to be registered, may be
received as evidence of a contract in a suit for specific performance or
as evidence of part performance of such a contract for purposes of
Section 53-A of the Transfer of Property Act. Section 53 A of the
Transfer of Property Act states that “where any person contracts 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 certainly, and the
transferee has, in ??? 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
and has done some act in furtherance of the contract, and the
transferee has performed or is willing to perform his part of the
contract, 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 therefor by the law for the time being in force, the transferor
or any person claiming under him shall be debarred from enforcing
against the transferee and persons claiming under him any right in
respect of the property of which the transferee has taken or continued
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in possession, ‘other than a right expressly provided by the terms of

the contract’.”
35. The conditions required by this section are fully satisfied so far
as the lease deed Ext. I is concerned. The transferee under it who was
already in possession of the properly has from the date of Ext. I
onwards continued to be in possession of such property in furtherance
of the terms of Ext. I and has done everything in accordance with the I
terms of the contract embodied in it and such I performance on his part
has been fully acquiesced I in by the transferor. The fact that the lessee
was in possession of the properly on the strength 1 of Ext. I was also
known to the plaintiff even I prior to the date on which he entered into
the agreement for Ext. D with the 1st defendant. This fact is evident
even from the letter Ext. B written by the plaintiff expressing his desire
to get the property either on lease or on sale and also suggesting that
he would himself take the necessary steps to secure possession from
the lessee whose term had not expired by that time. Under these
circumstances, there is no force in the plaintiff's contention that Ext. I
is inadmissible in evidence or that the lessee and his assignee are not
entitled to claim their rights on the strength of that document and thus
to resist the plaintiff's move to eject them from the property and
recover possession of the same.
36. Even if there had been any doubt on the rights of a lessee placed
in the position similar to that of the lessee under Ext. I, the matter has
been set at rest by the decision of the Supreme Court in — Maneklal v.
H.J. Ginwalla & Sons’, 1950 SCC 83 : AIR 1950 SC 1 (A). In that case
it was ruled that where in an action to eject a lessee on the ground that
he had no registered deed of lease executed in his favour the defendant
lessee takes the plea of part performance and proves that there was a
written and signed contract of lease in his favour and that he had taken
possession in accordance with the terms of the agreement and was
paying rent to the plaintiffs in accordance with that agreement, the
defendant is entitled to retain possession in spite of an absence of the
registered deed.
37. There is yet another argument advanced on behalf of the plaintiff
against the validity of Ex. I. When this document was executed by the
1st defendant in favour of Neelaeanda Iyer, there was already in
existence Ex. L the general power of attorney which the 1st defendant
had executed in favour of Neelaeanda ever on 10-6-1112. The
argument is that so long as Ex. L has not been cancelled by executing
and registering a cancellation deed, the lease deed Ex. I has only to be
ignored as ineffectual and inoperative and Neelaeanda Iyer must be
deemed to, be continuing as the power of attorney holder of the 1st
defendant on the strength of Ex. L. We are unable to appreciate this
argument also. The fact that Ex. L is a registered document, while Ex. I
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has not been registered, cannot by itself attract the application of

Section 50 of the Ragistration Act.
38. Clause (1) of S. 50 states that every document of the kinds
mentioned in cls. (a) to (d) of S. 17(1) and cls. (a) and (b) of S. IS
shall, if duly registered, take effect as regards the property comprised
therein against every unregistered document relating; to the spane
property and not being a decree or order, whether such unregistered
document be of the same nature as the registered document or not. A
general power of attorney like Ex. L does not come under any of the
categories of documents specified in this section.
39. The effect of Ex. L was only to constitute Neelacanda Iyer as the
duly authorised agent of Solayappa Chettiar to do all acts as specified
therein on his behalf in respect of his properties within the former State
of Cochin. It cannot be said that Ex. L had the effect of creating a right,
title or interest, whether vested or contingent, in favour of the power of
attorney holder in respect of Solayappa Chettiar's immovable properties
in the Cochin Stale. The document only provided for the management
of such properties and Neelacanda Iyer was merely authorised to do
such acts of management for and on behalf of Solayappa Chettiar
himself. It was open to the principal to revoke, restrict or modify the
powers of management thus conferred on his agent. Such a revocation
was effectively made so far as Neelaeanda Iyer's authority to manage
the Sivakami Tile Works was concerned, when Solayappa Chettiar
executed the lease deed Ext. I. It may also be mentioned in this
connection that beyond mentioning the fact that Neelaeanda Iyer has
been in management of the factory no special power was conferred on
him by Ext. L to continue such management for any length of time.
40. Apart from this aspect, the fact is there that with the execution
of the lease deed Ext. I his management as the agent of Solayappa
Chettiar was brought to a close. The agent himself having acquiesced in
the termination of such management by accepting the new position as
lessee under Ext. I, it cannot be said that thereafter the power of
attorney Ext. L had any further operative force, so far as the file factory
was concerned. There was no necessity to mention in Ex. I that with
the execution of the document the power of attorney Ext. L ceased t-o
be operative so far as the management of the factory was concerned.
Even in Ext. D the agreement for sale, in favour of the plaintiff, there is
no reference at all to Ext. L. In the present suit the plaintiff has also not
taken up the position that the formal cancellation

Page: 18

of Ext. L is necessary before possession of the properties can be

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secured from Neelaeanda Iyer. Thus the contention urged by the

plaintiff on the basis of Ext. L has only to be negatived as being clearly
untenable.

41. It has already been found that the lease deed Ext. I has come
into effect. The original term granted in favour of the lessee under that
document was to expire only on the last day of the year 1125 M.E. The
agreement Ext. D was entered into between the plaintiff and the 1st
defendant several months before that date. Ext. D was on 22-5-1950
corresponding to 8-10-1125. The parties have definitely stipulated in
Ext. D that the sale deed should be registered and possession given to
the vendee before the end of Ani of the corresponding tamil year i.e.,
before the end of Mithunam 1125. It is obvious that the lease
arrangement was in force and was subsisting on the date of Ext. D and
also on the date fixed for the execution of the sale deed and for
surrender of possession of the property.
42. The same was the position even on the date of the institution of
the suit. Under the terms of Ext. I, the lessee had the option to elect to
continue the lease arrangement for a further period of five years from 1
-1-1127 onwards by giving written intimation of such election to the
lessor before the expiry of the original period. The 1st defendant as
D.W. 9 has clearly admitted that Neelaeanda. Iyer duly exercised this
option and had intimated that fact to him by sending a registered letter
to that effect. Copy of that letter signed by Neelaeanda Iyer and
retained by him was shown to D.W. 9 who admitted it to be the copy of
the letter received by him from Neelaeanda Iyer. It has been marked as
Ext. XL in the case. The letter is dated 5-3-1951. Ext. XLI is the postal
receipt obtained on sending the letter registered. The receipt shows
that it was sent on 5th March 1951.
43. The admissibility of Ext. XL is questioned or behalf of the
plaintiff on the ground that the original has not been produced. No
doubt there is some force in this objection. At the same time there is
the admission by D.W. 9 the lessor that he had received a written
intimation from the lessee to the effect that he had exercised his option
to continue the lease for a further period of five years and that such an
intimation was given before the expiry of the original period fixed in the
lease deed. The 3rd defendant who is the assignee of the lessee can
certainly take advantage of this admission and claim the benefit of the
option which the original lessee had exercised before the expiry of the
original period even prior to transferring his rights under Ext. XLIII. It
may also be mentioned that the question whether the 3rd defendant
has acquired a valid right to continue the lease arrangement for a
further period of five years, will properly arise for determination in a
suit for determination of the lease.
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44. As already pointed out on more than one occasion, the present
suit is not one for determination of the lease. On the other hand, the
definite stand taken up by the plaintiff right up to the last stage is that
the lease deed did not come into effect and that the lessee or his
assignee has no right to be in possession of the property or claim any
value for the improvements alleged to have been effected by them and
that he is entitled to obtain a decree for specific performance of the
agreement for sale together with actual possession of the property as
against the 1st defendant. Even apart from the exercise of the option
by the lessee there were several months more for the original period of
the lease to expire when the present suit was instituted. Thus it is clear
that in any view of the matter the plaintiff has no right to claim
possession of the properties and thus to have the lessee evicted
therefrom.
45. In view of the findings that the lease has come into effect and is
subsisting even now, it is not open to the plaintiff or even to the 1st
defendant to ignore the lease arrangement and to secure possession of
the properties from the 3rd defendant as per the proceedings in the
present suit. Even accepting the plaintiff's contention that the lease
under Ext. I is only a colourable transaction fraudulently brought about
as a result of the collusion of the 1st defendant and Neelaeanda Iyer
with the object of defeating the income-tax law, it is clear that the
plaintiff is not entitled to avoid the lease and to secure possession of
the properties from the lessee. Accepting the position taken by the
plaintiff to be correct, the fraud I has already been perpetrated and the
1st defendant had derived the benefit therefrom. In such a situation, it
will not be open to the 1st defendant himself to set up any plea against
the lessee that the lease arrangement is only a shaml transaction and
thus to seek an avoidance of it. The plaintiff who claims a right to the
properties under the 1st defendant will also be subject to the same
disability and cannot escape from it.
46. Thus, in any view of the case, the possession of the properties
can be claimed by the plaintiff only after duly terminating the lease by
mutual consent or in the absence of such consent, by taking
appropriate proceedings for the determination, of the lease. It follows
therefore that viewed from any stand-point the third defendant's claim
to retain possession of the properties has to be upheld and the
plaintiff's claim to get delivery of possession of the suit properties as
per the proceedings in this suit has to fail. Point 1 formulated by us is
decided accordingly.
47. Points 2 and 3 may now be considered. According to defendants
2 and 3, the agreement Ext. D was subject to the condition that it need
be performed only if the 1st defendant could persuade the lessee under
Ext. I to surrender possession of the properties within the period
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specified in Ext. D so as to enable the 1st defendant to put the plaintiff

in possession of the properties at the time of the execution and
registration of the sale deed. The agreement is said to have become
impossible of performance on account of the lessee's refusal to
surrender possession of the properties within the time stipulated or in
the near future.
48. The condition attached to the agreement for sale is not
embodied in Ext. D, but only formed the subject-matter of a collateral
oral agreement between the plaintiff and the 1st defendant. The direct
evidence in support of this oral agreement consists of the testimony of
D.Ws. 8 and 9. That evidence has to be examined in the light of the
other outstanding circumstances which have an important bearing on
the real nature of the agreement entered into between the plaintiff and
the 1st defendant. Hence, the background furnished by those
circumstances and also by Exts. B and C which are relied on by the
plaintiff as the earliest letters of correspondence that led up to Ext. D
may first be stated.
49. (His Lordship considered the question in the manner indicated
and came to the conclusion that D.Ws. 8 and 9 gave a true and correct
version and that the parties entered into such an oral agreement. Then
he stated:)
50. The learned Advocate General appearing for the plaintiff-
respondent contends that the oral evidence given by D.Ws. 8 and 9 to
the effect

Page: 19

that the contract embodied in Ex. D was made subject to the condition
of the 1st defendant being able to persuade the lessee to surrender the
properties is inadmissible under section 92 of the Evidence Act. That
section states that where the terms of a contract, grant or disposition of
property have been reduced to writing and have been proved by the
production of such document, no evidence of any oral agreement or
statement shall be admitted as between the parties to such instrument
or their representatives-in-interest, for the purpose of contradicting,
varying, adding to or subtracting from such terms. The rule thus
enunciated in section 92 is subject to the several exceptions as
enumerated in the provisions to the section. The third proviso states
that the existence of a separate oral agreement constituting a condition
precedent to the attaching of any obligation under such contract, grant
or disposition of property, may be pro red. The oral agreement sworn to
by D.Ws. 8 and 9 clearly comes within this proviso.
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51. As per the contract embodied in Ex. D, defendant 1 had agreed

to convey to the plaintiff the suit properties within the time specified
and also to deliver possession of the properties at the time of the
execution of the deed of conveyance. The plea of defendant 1 is that
there was a separate oral agreement between himself and the plaintiff
that the contract for sale was subject, to the condition of the lessee
agreeing to surrender possession of the properties within the time
specified for the sale and that this oral agreement constituted a
condition precedent to the attaching of the obligation arising out of the
contract embodied in Ex. D. This I oral agreement has not the effect of
contradicting or varying any of the terms of the agreement for sale. On
the other hand those terms are maintained intact and the separate oral
agreement is sought to be proved merely for the purpose of making out
the real nature of the contract for sale viz., that it was only a contingent
contract.
52. Section 31 of the Indian Contract Act defines a contingent
contract as a contract to do or not to do something on some event
collateral to such contract does or does not happen. Section 32 of the
same Act lays down that contingent contracts to do or not to do
anything if an uncertain future event happens cannot be enforced by
law unless and until that event has happened and that if the event
becomes impossible such contracts become void.
53. That there was only such a contingent contract between the
plaintiff and defendant 1 in respect of the sale of the suit properties,
could be proved by the terms embodied in Ex. D or by the terms as
supplemented by the evidence relating to the contemporaneous oral
agreement between them at the time of the execution of Ex. D. Such a
contemporaneous oral agreement sworn to by D.Ws. 8 and 9 does not
in any way alter the legal effect of Ex. D, but only proves the condition
attached to the enforcement of the obligation arising thereunder. Such
a condition cannot be said to be one in defeasance of the main contract
itself. A condition precedent to the attaching of the obligation under a
particular contract could very well be inserted in the document
evidencing the contract. There may be cases where the parties for
reasons of their own may deliberately refrain from reducing that part of
their contract into writing and make it the subject-matter of a
contemporaneous oral agreement, Proviso 3 to Section 92 of the
Evidence Act definitely permits evidence being given in proof of such
contemporaneous oral agreement.
54. What would amount to oral agreements constituting a condition
precedent as contemplated by Proviso 3 to Section 92 of the Evidence
Act, has been explained in numerous cases. It; —‘Rowland v.
Administrator-General’, AIR 1938 P.C. 198 (B) a collateral oral
agreement not to enforce a promissory-note until a certain specified
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condition was fulfilled, was held to be an oral agreement constituting a

condition precedent attaching to the obligation arising out of the note
and as such coming within Proviso 3 to Section 92 of the Evidence Act.
55. In — ‘Shivlal v. Bai Sankli’, AIR 1931 Bom 297 (C) a Hindu
widow's claim for arrears of maintenance due to her on the strength of
a written agreement between herself and her brothers-in-law, providing
for payment of annuity to her at a specified rate, was resisted by the
brothers-in-law by setting up an oral agreement that the payment of
the amount was conditional upon their being satisfied of the widow's
continued good conduct. It was found that the written contract had
already come into effect and that payments were already made to the
widow during the first four years from the date of the agreement and
accordingly it was held that the oral agreement set up by the
defendants could not be allowed to be proved because it did not
constitute a condition precedent to the attaching of the obligation
under the written agreement.
56. In — ‘Chaganlal v. Jagjivandas’, AIR 1940 Bom 54 (D), the oral
agreement pleaded was to the effect that the promissory-note sued on
could not be enforced, but that the amount thereof was to be adjusted
in the making up of the partnership accounts of the firm of which the
plaintiff was stated to be a partner. It was pointed out that the oral
agreement set up had the effect of a total denial of the legal liability
arising out of the promissory-note and that such an agreement would
not come under proviso 3 to S. 92.
57. In — ‘Sahadeo Shrawan v. Namaeo Atmaram’, AIR 1949 Nag 15
(E), the suit for specific performance of an agreement for sale of
movable properties was resisted by setting up an oral agreement that
the contract for sale was subject to the condition of the plaintiff
executing another deed of conveyance in favour of the defendant.
Evidence in proof of such an oral agreement was held to be admissible
under the aforesaid proviso to S. 92 and it was further held that the
oral agreement was not one to defeat the contemplated sale deed or to
vary the terms thereof: but that it related only to the condition on the
happening of which alone the contract for sale was to come into force.
58. The same distinguishing feature of a contemporaneous oral
agreement constituting the condition precedent to the attaching of the
obligation under the written contract, has been pointed out and
explained in the comparatively recent decision in — ‘Dungarmull v.
Sambhu Charan’, AIR 1951 Cal 55 (F).
59. Applying the tests laid down in these cases to the facts of the
present case, it is clear that the oral agreement sworn to by D.Ws. 8
and 9 is not one in defeasance or the contract embodied in Ex. D but is
only one constituting a condition precedent on the happening of which
alone the contract under Ex. D could be enforced. The objection that
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such an oral agreement cannot be I allowed to be proved is

unsustainable. Such evidence was rightly admitted and it has
conclusively established the fact that the agreement embodied in Ex. D
was subject to the condition of defendant 1 being able to persuade his
lessee to surrender possession of the suit properties within the time

Page: 20

fixed for the execution of the contemplated sale deed. It is also

conclusively established by the evidence on record that defendant 1
tried his best to persuade his lessee to surrender possession of the
properties, but that the lessee was not prepared to yield.

60. On the other hand, the lessee insisted on his rights to hold on
for the full period originally fixed in the lease deed Ex. I and also for the
further period of five years as provided in the document, by exercising
the option given to him in respect of that matter. Thus defendant 1 as
lessor could not under law and in fact secure possession of the
properties from the lessee so as to be in a position to execute the sale
deed in favour of the plaintiff and to put him in possession of the
properties within the time stipulated in Ex. D. The condition precedent
attached to I the contract under Ex. D having thus failed the contract
itself has ceased to be operative and the same cannot therefore be
made the basis of a decree for specific performance.
61. Reference may in this connection be made to the decision of the
Privy Council in — ‘Dalsukh v. Guarantee Life and Employment
Insurance Co.’, AIR 1947 PC 182 (G). In that case also the agreement
for sale was made subject to the condition of the Court which placed an
attachment over the properties covered by the agreement giving its
approval to the proposed transaction. But it transpired that such
approval was refused by the Court. It was ruled by the Privy Council
that the contract for sale was only a contingent contract and as the
contingency failed there was no contract which could be made the basis
of a decree for specific performance and that the plaintiff's suit for such
a relief had only to be dismissed.
62. The sustainability of the contract under Ex. D as the basis for the
suit for specific performance has also to be tested in the light of the
provision contained in Section 56 of the Indian Contract Act. In para. 2
of that section it is stated that
“a contract to do an act which, after the contract is made,
becomes impossible, or, by reason of some event which, the
promisor could not prevent, unlawful, becomes void when the act
becomes impossible or unlawful.”
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63. The doctrine of frustration known to the English law has thus
been statutorily recognised under the Indian Law.
64. In — ‘Cricklewood Property and Investment Trust Ltd. v.
Leighton's Investment Trust Ltd.’, 1945 AC 221 at p. 228 (H), this
doctrine has been explained as follows:
“Frustration may be defined as the premature determination of an
agreement between parties, lawfully entered into and in course of
operation at the time of its premature determination, owing to the
occurrence of an intervening event or change of circumstances so
fundamental as to be regarded by the law both as striking at the root
of the agreement, and as entirely beyond what was contemplated by
the parties when they entered into the agreement.”
65. For the application of this doctrine it is essential to ascertain the
facts assumed by the parties as forming the fundamental basis of their
contract and then to see how far the subsequent developments have
resulted in the determination of the very basis of the contract, thereby
rendering its performance impossible.
66. So far as the contract under Ex. D is concerned, it has already
been found that the contracting parties were fully aware of the
subsistence of the lease Ex. I in favour of Neelaeanda Iyer and that he
was actually in possession of the properties under that arrangement. It
was with full knowledge of these facts that the agreement for sale was
entered into with particular emphasis laid on the clause requiring the
vendor to put the purchaser in possession of the properties immediately
on the registration of the document. The execution of the document, as
also the dealings of the parties were both to be made within the time
fixed in Ex. D and it was expressly stated that time was to be the
essence of the contract. Getting of possession of the properties was
obviously considered by the purchaser as the all-important factor in this
transaction. In fact the whole contract proceeded on that basis.
67. In — ‘Ganga Saran v. Firm Ram Charan’, AIR 1932 SC 9 at p. 11
(I), it has been pointed out that it is open to the Court to infer from the
nature of the contract and the surrounding circumstances that a
condition which is not expressed was a foundation on which the parties
contracted. In the present case the parties entered into the contract in
the hope and belief that defendant 1 would be successful in persuading
the lessee to surrender the properties. Soon alter the execution of the
agreement defendant 1 tried his best to persuade the lessee to make
such a surrender of possession; but he failed in such attempt, and in
view of the rights created in favour of the lessee as per the provisions
in Ex. I defendant 1 was certainly helpless in compelling the lessee to
surrender possession of the properties.
68. Thus there was no default on the part of defendant 1, and yet
the result of the situation as it developed was that the implementation
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of the agreement according to the governing intention of the parties as

expressed in Ex. D had become absolutely impossible and that fact was
duly communicated by defendant 1 to the plaintiff. The doctrine of
frustration as enunciated in Section 56 of the Contract Act is attracted
to such a situation and the result is that the contract under Ex. D has
become void on account of the supervening impossibility of
performance. It follows, therefore, that specific performance of the
agreement as contained in Ex. D cannot be decreed. To pass such a
decree, would obviously be to direct defendant 1 to perform an
impossibility.
69. An exception as it were to the doctrine of frustration as
enunciated in Section 56 of the Indian Contract Act is provided for in
Section 13 of the Specific Relief Act. Section 13 runs as follows:
“Notwithstanding anything contained in Section 56 of the Indian
Contract Act, a contract is not wholly impossible of performance
because a portion of its subject-matter, existing at its date, has
ceased to exist at the time of the performance.”
70. It is obvious that this section as it is framed is I intended to
govern cases where, in spite of the loss or destruction of a portion of
the subject-matter of the contract, substantial performance of the
contract is still possible. The facts of the present case are such that the
situation as it exists cannot be brought under Section 13 of the Specific
Relief Act.
71. This is not a case where any portion of the subject-matter of the
contract, ceased to exist. On the other hand the whole of the subject-
matter continues to exist as it was on the date of the contract. All the
same the dominant intention of the parties that the purchaser shall be
put in actual possession of the properties, at the time of the execution
of the sale deed cannot be put into effect on account of the third party-
lessee's insistence to strictly adhere to his legal rights under the lease
deed Ex. I and to retain possession

Page: 21

for the full term available under it. Thus it is clearly a case where
contract as conceived by the parties has become wholly impassible of
performance and not one where there is the possibility of substantial
performance. The contract is, therefore, hit by the provision contained
in para. 2 of Section 56 of the Contract Act.

72. It has now to be considered whether the claim for the alternative
relict urged on behalf of the plaintiff-respondent can be entertained and
allowed. Such a claim was urged only during the course of the hearing
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of these appeals and by means of a statement filed in this Court on 19-

1-1953. That statement is signed by the plaintiff as also by his
advocate. In that statement the plaintiff has prayed that without:
prejudice to his contentions regarding the truth, legality and
enforcibility of the alleged leasehold rights of Neelacanda Iyer under Ex.
I defendant 1 may be directed to execute a sale deed in respect of all
the plaint properties as an alternative to the plaint prayer. Such a part,
performance of the contract under Ex. D is asked far under the latter
pan of Section IS of the Specific Relief Act and as required by the
proviso to that section the plaintiff has relinquished all claims to further
performance of the contract and all rights to compensation.
73. In the statement filed by him on 19-1-1953 he has stated as
follows:
“I agree, in the event of a decision on the lease in favour of
defendant 3, to take all such interests as defendant 1 had at the
time of suit and give up my claim to further performance and all
right to compensation either for deficiency or for the loss or damage
sustained by me through the default of defendant 1, and be satisfied
with the specific performance with such other reliefs incidental to the
same as the Court may grant.”
74. The rule as enunciated in Section 17 of the Specific Relief Act is
that the Court shall not direct the specific performance of a part of
contract except in cases coming under one or other of the three last
preceding sections viz., Ss. 14 to 16. The question of the specific
performance of a contract in I whole or in part can arise only when it is
found I that the contract itself subsists as a valid and legally enforcible
contract. It has already been found that the contract which is the basis
of the present suit was only a contingent contract and that it fell
through on account of the failure of the contingency. There is therefore
no contract to be specifically enforced in whole or in part.
75. Ever, if the contract under Ex. D is taken to be not a contingent
contract, the plaintiff's claim for specific performance of part of that
contract had to fail for a variety of reasons. The claim for specific
performance in part can be sustained only if the same can be brought
under Sections 14, 15 or 13 of the Specific Relief Act. To attract S. 14
the two essential conditions to be satisfied are that the part which
should be left unperformed must bear only a small proportion to the
whole in value and that the non-performance of the contract in respect
of that part must be capable of being compensated by money, so far as
the contract under Ex. D is concerned, the part which is impossible of
specific performance is that part which relates to the immediate
delivery of the properties. From the nature of the stipulations in Ex. D
and also from the surrounding circumstances which led up to the
agreement, it is unmistakably clear that the plaintiff entered into the
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bargain with the idea of getting immediate possession of the file

factory. In fact the idea of getting such immediate possession was the
very foundation of the contract. In no sense can it be said that the right
to get such immediate possession bears only a small proportion to the
value of the entire subject-matter.
76. The total consideration stipulated under Ex. D is a sum of Rs.
90,003. In the plaint the claim for mesne profits in respect of the
properties covered by the agreement is at the rate of Rs. 30,000/- per
year. In the decree passed by the lower Court mesne profit is allowed
at the rate of Rs. 15,000/- per year, These figures give an idea of the
value of the possessory right in respect of these properties. According
to the plaintiff's estimate, three years' possession of the factory is
sufficient to recoup the entire sale consideration payable under Ex. D.
At the rate fixed by the lower Court such recoupment will be possible
only within a period of six years. In view of the period fixed in the lease
deed Ex. I and also of the option exercised by the lessee to hold on for
a further period of five years, the chance of recovery of possession from
the lessee has been put off by a period of six years from the date of Ex.
D. The plaintiff had certainly not bargained for such a contingency when
he entered into the agreement for sale. Securing immediate possession
of the factory having been the dominant idea with which the contract
was entered into and the value of such possessory right being very
substantial when compared with the total amount of the agreed
consideration, the case cannot be brought under Section 14 of the
Specific Relief Act so as to justify the passing of a decree for specific
performance in part of the agreement for sale by directing the
execution of a conveyance in respect of the mere title to the properties.
77. Section 16 of the Specific Relief Act also does not apply because
the part of the contract to be specifically enforced does not stand on a
separate and independent footing from the remaining part of the
contract as per the terms embodied in Ex. D. It is clear from these
terms that the parties contemplated only a single and indivisible
transaction by way of sale with immediate delivery of possession and
for effecting such a conveyance the time stipulated was expressly
stated to be of the essence of the contract. The consequences to follow
from the non-implementation of the agreement for sale in the manner
agreed to and within the period fixed, have also been provided for in
Ex. D. The several terms contained in Ex. D read as a whole clearly rule
out the possibility of splitting up the contract into separate and
independent part and of piecemeal performance of such parts. The
deliberate insertion of the provision in Ex. D that time is of the essence
of this particular contract, is the surest indication that, transfer of title
and possession had to be simultaneous and within the specified time,
and that the parties did not want this contract to be governed by the
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normal rules applicable to contracts for sale of immovable properties.

The idea of transfer of title alone independent of actual physical
possession, is absolutely foreign to the contract under Ex. D.
78. It remains only to be seen whether the relief under the latter
part of Section 15 of the Specific Relief Act can and ought to be granted
to the plaintiff in this case. This section contemplates cases where the
performance of the whole of the contract has turned out to be
impossible and where the portion that cannot be performed forms a
considerable portion of the whole or does not admit of compensation in
money. In such cases the party who is unable to perform the contract

Page: 22

as a whole is not entitled to compel specific performance of so much of

the contract that is capable of being put into effect. The latter part of
the section, however, gives an option to the other party to elect to be
satisfied with getting specific performance of that portion of the
contract which is possible of being performed. But this election is made
subject to certain conditions. He has to expressly relinquish all claims
for further performance of the contract and all right to compensation
either for the deficiency or for the loss or damage sustained by him
through the default of the defendant.

79. The section is worded in general terms and there is nothing in it

to indicate as to the stage at which the plaintiff has to make his choice.
Even though the proper course for the plaintiff would be to make up his
mind and to ask for the restricted relief afforded by the latter part, of S.
15, even at the time of the institution of the suit the section does not
preclude him from asking for such a relief at any subsequent stage of
the suit, provided that his conduct all through has been free from
blame and that no charge of mala fides could be justly attributed to
him. The relief contemplated by this section is essentially an equitable
relief which the Court, on a proper exercise of its judicial discretion,
may or may not grant. The party who claims such equitable relief must
satisfy the Court that he has all along been acting in a fair and
reasonable manner and that he has not been attempting to get an
undue advantage to himself at the sacrifice of the legitimate interests
of the opposite party.
80. So far as the present case is concerned, it cannot be said that
the plaintiff has come to Court with a straight and honest case. The
agreement for sale was entered into by him with full knowledge of the
subsisting lease arrangement under Ex. I in favour of Neelaeanda Iyer
and also with the consciousness that unless the lessee agreed there
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was no chance of securing possession of the properties from him before

the expiry of the full term available under the lease deed Ex. I and
before settling the lessee's claim for the value of improvements
effected by him on the properties. The plaintiff ignored the lease
altogether when he instituted the present suit and made an attempt to
dispossess the lessee even without making him a party to the suit.
Even after the lease was proved in the case and the lessee's assignee
got himself impleaded as an additional defendant in the case, the
plaintiff was not prepared to concede the truth and the reality of the
situation, tut persisted in denying and repudiating the lease. Even up
to the final stage of the arguments in these appeals, the plaintiff has
been insisting on his claim to get recovery of possession of the
properties in utter disregard of the lessee's right.
81. In the statement, filed by him on 19-1-1953 claiming the relief
under S. 15, the same attitude has been maintained by the plaintiff.
That statement itself opens by saying that it is without prejudice to his
contentions “regarding the truth, legality and enforcibility of the
leasehold right of K.S. Neelaeanda Iyer under Ex. I”. The claim for the
relief claimed under S. 15 is also put forward as a conditional claim i.e.,
a claim to be granted in the event of the ultimate decision on the
question of the lease being in favour of defendant 3. It has been
definitely found that, the position taken up by the plaintiff in respect of
the lessee in question is absolutely false and untenable and that the
plaintiff is guilty of the utmost bad faith in his insistence to maintain
such a position and in trying to defeat the lessee's interests in the
properties. The Court will be disinclined to grant the equitable relief
urged on behalf of such a plaintiff particularly when the same is urged
at the very last stage of the litigation and as the result of a
consciousness that the falsity of the claim as urged in the plaint stands
exposed.
82. In — ‘Subbrayaau v. Tatayya’, 1937 Mad WN 1158 (J), the
plaintiff's claim for specific performance of an agreement for sale was
disallowed on the ground that he had set up a false case in support of
his claim. It was further held that a Court of equity cannot be expected
to exercise its discretion in favour of such a plaintiff in the matter of
granting the equitable relief by way of specific performance. The
plaintiff in the present suit being in a worse position, his belated prayer
for a decree for specific performance of a portion of the contract under
Ex. D has to be disallowed.
83. A plaintiff seeking relief under the latter part of Section 15 of the
Specific Relief Act has to strictly comply with the conditions specified in
the proviso to that section. In the statement filed by the plaintiff on 19-
1-1953 urging the alternative relief by way of a decree for partial
performance of the contract, he has made several reservations and the
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relief claimed is expressly made subject to those reservations. Even

though he has agreed to give up his claim for further performance and
all right to compensation either for the deficiency or for the loss or
damage sustained by him through the default of defendant 1, what he
has mentioned at the close of the statement is that he will be satisfied
with a decree for specific performance of so much of the contract as
defendant 1 could perform, together with “such other relief incidental to
the same as the Court may grant”. Such reservations and qualifications
are inconsistent with the unconditional undertaking required by the
proviso to S. 15 from a plaintiff seeking the special relief the granting
of which is permitted by the latter part of that section. In this view of
the matter also, the plaintiff's claim for partial performance of the
contract must fail.
84. On behalf of the appellants it is urged that the plaintiff is not
entitled to invoke the aid of Section 15 of the Specific Relief Act in view
of the special provisions contained in Ex. D the agreement for sale. The
argument is that Sections 14 and 15 of the Specific Relief Act are only
intended to cover cases where the inability to perform the whole
contract, was not contemplated by the contracting parties and that
these sections have no application where the obstacle to the full
performance of the contract was known to the parties and yet no
provision was made to meet the eventuality. Reliance is placed on the
ruling in — ‘Shardaprasad v. Sikander’, AIR 1915 Nag 15 (K), in
support of this position.
85. In that case also the occupancy rights over the property agreed
to lie sold could not be transferred to the plaintiff as contemplated by
the parties to the contract because such transfer could he made only
with the requisite sanction under Section 45 of the C.P. Tenancy Act
and because the defendant's application for such sanction had been
refused by the authorities concerned. The question for consideration
was whether the plaintiff's offer to accept the sale without the
occupancy rights over the property on payment of the whole
consideration could be accepted and a decree for specific performance
of so much of the contract could be granted in his favour. On the facts
the Court found that the parties were fully aware of the possibility of
the contract becoming impossible of performance on account of the
failure to obtain

Page: 23

the requisite sanction for the transfer of the occupancy rights over the
property agreed to be sold, but did not care to provide for such a
contingency.
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86. In considering the question as to how far Sections 14 and 15 of

the Specific Relief Act could be made applicable to such a situation, it
was ruled in that case that these sections apply only to cases where the
inability to perform the whole contract, was not contemplated by the
contracting parties, and not to cases where the contracting parties
know of and contemplated the possibility of the whole contract being
incapable of performance, for reasons beyond the control of either
parry. It appears to us that this is too broad a proposition and with all
respect to the learned Judge who decided that case, we have to point
out that there is nothing in Ss. 14 and 15 to warrant any such
limitations and restrictions being placed on their scope and
applicability. The sections being worded in general terms, they must,
apply to all cases coming within their scope unless the parties have
expressly contracted out of the provisions of these sections. The
provisions contained in these sections are intended merely to confer
certain rights and benefits on parties to contracts for sale of immovable
properties; but these provisions do not involve any questions of public
policy. It is therefore, perfectly open to the contracting parties to waive
the benefits conferred by these sections and to restrict and regulate
their rights by inserting suitable provisions in the contract.
87. Construing the several provisions contained in Ex. D as a whole,
it is clear that the parties to this contract did not want to avail
themselves of the general rights conferred by Sections 14 to 16 of the
Specific Relief Act but wanted to restrict their rights and liabilities
within the limits expressly provided for in Ex. D. It is clear that they
conceived of a contingency of the sale with immediate delivery of
possession becoming impossible within the time stipulated in Ex. B and
accordingly to meet the situation that may come about on account of
defendant 1's inability to effect the sale in the manner agreed to it was
provided that in addition to the returning of the earnest money he must
pay a sum of Rs. 5003/- by way of liquidated damages to the plaintiff.
No doubt, an ordinary provision for damages in an agreement for sale
cannot by itself be construed to mean that the parties have abandoned
their right to insist on specific performance of the contracting have
elected to be satisfied with a claim for recovery of damages. It has to
be seen whether there are other decisive provisions in the contract to
indicate that the parties had really bargained for a settlement of their
disputes with the payment of the agreed amount by way of damages.
88. Such decisive provisions contained in Ex. D are the provision by
which time was expressly stipulated to be of the essence of the contract
and the provision defining the agreed amount or Rs. 3003 as the
liquidated damages payable by the defendant. Even it a period has
been fixed for the execution of the sale deed the plaintiff could under
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normal circumstances have asked for specific performance of the

agreement within a reasonable time after the expiry of that period,
because in the absence of an express provision in the contract, time will
not be taken to be of the essence of the contract for the sale of
immovable properties. In this case a, comparatively short period was
fixed for the execution of the sale deed and the parties deliberately
inserted a provision in Ex. D that time should he of the essence of this
particular contract. This shows that if sale with immediate possession,
was possible it had to be effected within the time fixed and not at any
time thereafter.
89. This provision taken along with the provision for payment of a
sum of Rs. 5003/- as liquidated damages in cases of defendant 1's
failure to effect the sale within the time fixed, clearly shows that the
parties have deliberately contracted out of the provisions of Sections 14
to 16 of the Specific Relief Act and that by waiving the general rights
available under these sections they have restricted their rights to the
special provisions inserted in Ex. D. Where the terms of the contract are
thus clear and specific as defining and regulating the rights of the
parties to it, they have her stand by such express provisions and are
not entitled to ignore those provisions and to seek to enforce the rights
normally available under the general law of contracts. Consistent with
this view it has to be held that Ex. D does not permit of a relief by way
of specific performance of the contract in part under Section 15 of the
Specific Relief Act.
90. There is yet another reason why specific performance of the
contract under Ex. D cannot be decreed. Some of the items covered by
the agreement for sale consist of movable properties. These also were
surrendered to the lessee under Ex. I when that lease arrangement was
entered into on 1-1-1117. It is not now known as to whether these
items do not really exist and if so in what condition. At any rate,
defendant 1 is not now in a position to deliver these items to the
plaintiff. Without such delivery, there could be no completed sals in
respect of these movable properties. The plaintiff has not stated that he
is prepared to accept the sale in respect of defendant 1's title to the
remaining items of immovable properties only. So long as it is not
possible for defendant 1 to hand over these movables to the plaintiff
and to effect a sale of them, the provision in Ex. D that the plaintiff
should execute a mortgage in favour of defendant 1 in respect of all the
properties to be included in the sale deed, to secure the deferred
consideration of Rs. 35,000/-, cannot also be implemented.
91. As a result of the foregoing discussion we have arrived at the
following conclusions on the questions involved in points 2 and 3
formulated by us. The contract under Ex. D was only a contingent
contract to come into effect only in the event, of the lessee under Ex. I
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agreeing to surrender possession of the properties within the period

fixed for the execution of the sale deed. This contingency tailed and the
contract became impossible of performance on account of the lessee's
refusal to make surrender of the properties within that period in spite of
all possible attempts made by defendant, 1 to induce the lessee to
make such surrender and thus the contract fell through. The plaintiff is
not entitled to get a decree for specific performance of this contract in
its entirety or even in part.
92. Before proceeding to consider the fourth point, two other
contentions raised in the case by the contesting defendants may also
be mentioned. These are that the contract under Ex. D is vitiated by a
mutual mistake as contemplated by Section 20 of the Indian Contract
Act and that the plaintiff was not ready and wilting to perform his
obligations under the contract. The failure of the contracting parties to
take note of the right of the lessee under Ex. I to get compensation for
all his improvements in the properties and to make provision for the
same in Ex. D is according to the defendants the mistake which vitiates
the contract. It has come out from the evidence in the case

Page: 24

that both parties were conscious of the rights of the lessee and it was
the result of a deliberate design on their part that nothing was
mentioned in Ex. D about the lease arrangement of the rights of the
lessee. Therefore it cannot be said that the agreement was entered into
under any mistake. It cannot also be said that even if there has been
any mistake as contended by the defendants, it was in respect of any
fact essential to the agreement under Ex. D.

93. It could only be said that the parties had formed an erroneous
opinion as to the real value of the subject-matter of the agreement as a
result of not providing for the settlement of accounts with the lessee.
Any such erroneous opinion will not be deemed to be a mistake
vitiating the agreement and this position is made clear by the
Explanation to Section 20 of the Contract Act. The other contention is
also equally untenable. The plaintiff had raised the necessary funds to
be paid by way of consideration at the time of the execution of the sale
deed and he had purchased the necessary stamp papers within the
stipulated time. These papers have been produced in the case. He had
also intimated that fact to defendant 1 by issuing the lawyer's notice
Ex. E. The Pass Book Ex. H in the plaintiff's name shows that he had to
his credit in the South Indian Bank Ltd., Pollachi, the amount required
for advancing the ready cash consideration under the sale deed
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contemplated by Ex. D. In view of these facts and circumstances, it is

clear that there is no force at all in these contentions raised by the
defendants. The lower Court was, therefore, right in repelling these two
contentions.
94. Coming to the fourth point, the first question for consideration is
whether the plaintiffs claim for mesne profits is sustainable. In view of
our finding that the agreement for sale itself has fallen through, there is
no necessity to consider this question at all. Even otherwise the plaintiff
could sustain such a claim against the defendants only by making out
that they are persons in wrongful possession of the suit properties, so
long as the lease arrangement under Ex. I is subsisting, it cannot be
said that the lessee or his assignee is in wrongful possession of the
properties covered by the lease deed Ex. I. The ownership of these
properties continued to vest in defendant 1 even at the time of the suit.
The plaintiff has at best only an agreement for sale in his favour. Such
an agreement has not the effect of transferring any legal or equitable
estate in favour of the plaintiff.
95. This position is made clear by the last clause to Section 54 of the
Transfer of Property Act where it is stated that a contract for sale of
immovable properties does not, of itself, create any interest in or
charge on such properties. In this respect the Indian Law is different
from the English Law which recognises an equitable estate in favour of
a party who has entered into a contract for the sale of immovable
property. Under the Indian Law such a person gets only a right to
compel the other party to execute a sale deed in respect of the property
and unless and until such a sale deed is actually brought into existence
by act of parties or under a decree of Court, the party who has
contracted for the purchase cannot be said to have acquired an
ownership over the property. The plaintiff in this case not having
acquired any such ownership his claim for recovery of mesne profits in
respect of the suit properties from the defendants in the case is clearly
unsustainable. In this view of the matter the question as to what would
be the correct rate of mesne profits due in respect of this suit
properties does not arise for consideration.
96. The next aspect to be considered is whether the plaintiff is
entitled to get any amount by way of damages in this case. Here again
the question of damages can arise only when there is a subsisting
contract. We have definitely found that the agreement under Ex. D was
only a contingent contract and that on account of the failure of the
contingency resulting in the contract becoming impossible of
performance, the whole contract fell through. Thus it cannot be said
that there has been breach of contract on the part of defendant 1 with
the consequent liability for payment of damages. The provision in Ex. D
for payment of Rs. 5003/- as ‘Nikar nashtam’ or liquidated damages,
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could be invoked by the plaintiff only if the contract itself subsisted and
defendant 1 defaulted to perform it. That provision expressly refers to
defendant 1's default in the matter of completing the sale, as the basis
of his liability to pay Rs. 5003/- as “Nikar Nashtam” or liquidated
damages. This amount cannot be awarded as damages in favour of the
plaintiff in view of the finding that there has been no-default on the
part of defendant 1 in the matter of completing the sale. The plaintiff
can get only a refund of the earnest money paid by him. Defendant 1
has expressed his readiness and willingness to pay back this amount of
Rs. 5003/-. Under such circumstances we think that the plaintiff can be
given a decree for the said amount in this suit itself, and that it is not
necessary to drive him to a separate suit for the recovery of the same.
97. Thus our findings on Point No. 4 are that the plaintiff's claim for
mesne profits is unsustainable and that he can get a, decree only for
recovery of the earnest money of Rs. 5003/- paid under Ex. D, from
defendant 1.
98. Lastly there is the question of costs. Defendant 3 has completely
succeeded in his defence of this suit. It was the plaintiff's attempt to
totally ignore the lease arrangement under Ex. I and to, get recovery of
possession of the properties without a due termination of the lease that
necessitated defendant 3 entering appearance in this suit for the
purpose of establishing the possessory right of the lessee and thus to
resist the plaintiff's attempt to get recovery of possession of the
properties. Defendant 3 is therefore entitled to get his full costs from
the plaintiff. So far as defendants 1 and 2 are concerned, they stand in
the same position, defendant 2 having only obtained an assignment of
defendant 1's rights over the suit properties during the pendency of
this suit. As against these defendants also the plaintiff has failed in his
claim for a decree for specific performance of the agreement for sale as
embodied in Ex. D and he gets only a decree for recovery of the earnest
money of Rs. 5003/- from defendant 1. The plaintiff will therefore get
his costs of the suit only to the extent of this amount, but has to pay
the costs of defendants 1 and 2 to the extent of the balance of the
plaint claim.
99. Two points raised by the plaintiff-respondent in his
memorandum of objections may also be disposed of in this connection.
The first point relates to the sum of Rs. 2000/- deposited by him in
Court to meet the expenses of the working of the file factory by the
receiver appointed in this case. It is contended on behalf of the plaintiff
that this amount should also be included in the costs to be awarded to
him in this case. The next point relates to the sum of Rs. 100/-
deposited by him to meet the expenses of the commissioner

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deputed to prepare an inventory in respect of the file factory and its

accessories. He claims this amount also as costs due to him. Both these
amounts will be included among the different, items of costs incurred
by the plaintiff; but these items of expenses were unnecessarily
incurred by him at his own risk and therefore he has to suffer such
costs.

100. In the result A.S. No. 450 of 1952 is allowed and so far as
defendant 3 is concerned his claim to retain possession of the suit
properties on the strength of the lease deed Ex. I followed by the deed
of assignment Ex. XLIII, is upheld and the plaintiff's suit directed
against such possession is dismissed. Defendant 3 will get his costs
throughout from the plaintiff. A.S. No. 454 of 1952 is also allowed and
the lower Court's decree directing specific performance of the contract
for sale as embodied in Ex. D is set aside and the plaintiff's suit is
dismissed so far as it relates to the claim for specific performance. But
the plaintiff is given a decree for recovery of a sum of Rs. 5003/-
rupees five thousand and three only representing the earnest money
paid under Ex. D, from defendant 1. The plaintiff will get his costs in
this Court as well as in the lower Court in respect of this amount. In
other respects the plaintiff will suffer his costs throughout. The amount
decreed will carry future interest at the rate of 6 per cent per annum.
Excepting to the extent of the amount of Rs. 5003/- decreed in favour
of the plaintiff defendants 1 and 2 will get their costs from the plaintiff
in proportion to the value of the balance of the plaint claim. These
defendants together will get only one set of costs in the lower Court. So
far as the costs in this Court are concerned, defendant 2 appellant
alone is entitled to get. The costs of A.S. 454 of 1952 to the extent
specified above. The memorandum of objections is dismissed except to
the extent indicated in the previous paragraph of this judgment.
A/M.K.S.
101. Order accordingly.
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