When the agreement is not that of assingment of rights by Vendees of earlier agreement of sale , he can not file a suit for specific performance of the agreement of sale = Upon considering the facts and circumstances of the present case, it is evident that there is no privity of contract between the Appellants and Respondent Nos. 1. Respondent Nos. 1 were not party to the 1986 agreement. Vice versa, the Appellants were not party to the 1987 agreements, though whether or not they had knowledge of the same is disputed. Hence Respondent Nos. 1cannot seek specific performance of the 1986 agreement, or for that matter, the 1987 agreements, against the Appellants, except by suing as ‘representatives-in-interest’ of the original vendees under Section 15(b) of the Specific Relief Act.

When the agreement is not that of assingment of rights by Vendees of earlier agreement of sale , he can not file a suit for specific performance of the agreement of sale

=

Upon considering the facts and circumstances of the present case, it is evident that there is no privity of contract between the Appellants and Respondent Nos. 1. Respondent Nos. 1 were not party to the 1986 agreement. Vice versa, the Appellants were not party to the 1987 agreements, though whether or not they had knowledge of the same is disputed.

Hence Respondent Nos. 1cannot seek specific performance of the 1986 agreement, or for that matter, the 1987 agreements, against the Appellants, except by suing as ‘representatives-in-interest’ of the original vendees under Section 15(b) of the Specific Relief Act.

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 10683-86 OF 2014

Kapilaben & Ors. …Appellants

Versus

Ashok Kumar Jayantilal Sheth Through POA

Gopalbhai Madhusudan Patel & Ors. …Respondents

J U D G M E N T

MOHAN M. SHANTANAGOUDAR, J.

  1. These appeals arises out of judgement of the High Court of

Gujarat at Ahmedabad dated 31.7.2014, allowing the appeals of

the respective Respondent Nos. 1 in the four Civil Appeal Nos.

10683-86 of 2014 before us (hereinafter ‘Respondent Nos. 1’),

against judgement and order of the Additional District Judge,

1

Vadodara dated 2.4.2013 and order dated 30.12.2011 of the

Additional Senior Civil Judge, Vadodara; and decreeing the suits

SCS Nos. 657-660/1988 filed by Respondent Nos. 1 for specific

performance against the Appellants herein.

I. Background Facts

  1. This case concerns four suits for specific performance filed

by the Respondent Nos. 1/Plaintiffs against the

Appellants/Defendants Nos. 1-5. One Naranbhai Ramdas Patel

(Defendant No. 1, now deceased) was the original owner of

property bearing Survey No. 354/1, admeasuring 1 acre and 31

gunthas in Village Manjalpur of Vadodara district (hereinafter ‘suit

property’). He, along with Defendants Nos. 2-5 (relatives of

Defendant No. 1) executed agreement to sell dated 11.3.1986

(‘1986 agreement’) in respect of the suit property in favour of

Respondent Nos. 3-11/Defendants Nos. 6-9 (hereinafter

‘original vendees’), for which the original vendees paid earnest

money of Rs. 1,54,251. The suit property was included in Town

Planning Scheme No. 19 of the Vadodara Municipal Corporation

and possession of the suit property was to be given to the original

2

vendees once the aforesaid Scheme was finalized. A registered

sale deed in respect of the suit property was to be executed upon

receipt of the remaining consideration from the original vendees,

the deadline for which was within three months of finalization of

the Town Planning Scheme.

The case of Respondent Nos. 1 is that the original vendees

thereafter executed four agreements to sell dated 14.9.1987

(‘1987 agreements’) in respect of four different portions of the

suit property, assigning the former’s rights under the 1986

agreement in the latter’s favour, and that earnest money of Rs.

5000/- was paid under each agreement. Notably, the Appellants

were not parties to the 1987 agreements.

Under the 1987 agreements, it was purportedly open to

Respondent Nos. 1 to make preparations for construction of a

housing scheme over the suit property and issue advertisement

for the same. Hence they claim that consequently, possession of

the suit property was given to them, that a Bhoomi Pujan was

conducted for laying foundation stone on the land and the

members of the housing scheme were also registered. Further,

3

that they also obtained the layout plan and construction

permission for the housing scheme from Vadodara Municipal

Corporation at their own cost, and the deceased original owner

Mr. Naranbhai Patel had put his signature on the layout plan.

Subsequently, dispute arose between the parties, and the

original vendees filed suit SCS No. 194/1988 on 4.4.1988 before

the Learned Civil Judge (Senior Division) at Vadodara (hereinafter

‘trial court’), seeking specific performance of the 1986 agreement

against the Appellants. They claimed that they had served notice

to the Appellants on 11.3.1988 seeking execution of sale deed in

their favour, but the latter had given evasive reply to the same;

that they were deliberately avoiding execution of sale deed so as

to take advantage of increase in real estate prices. Per contra, the

Appellants claimed that they had on 25.3.1988, by way of reply to

the original vendees’ legal notice, cancelled the 1986 agreement

as the original vendees had not paid the remaining consideration

as required.

Respondent Nos. 1 were not party to SCS No. 194/1988; and

no averment was made in the said suit regarding the 1987

4

agreements. Instead, on 21.11.88, Respondent Nos. 1 filed four

separate suits SCS Nos. 657-660/1988 against the Appellants and

the original vendees seeking specific performance of the 1987

agreements. Respondent Nos. 1 alleged that the Appellants and

the original vendees were conniving with each other to deny their

rights under the 1987 agreements, so as to sell the land to a third

party in view of the increasing price of real estate in Vadodara.

The Appellants in their written statements to SCS Nos. 657-

660/1988 denied having any dealings with Respondent Nos. 1 and

also stated that the original vendees had never informed them

about the 1987 agreements. They averred that since the original

vendees had never become the legal owners of the suit property,

they did not have any right or authority to enter into any kind of

transaction qua the land with Respondent Nos. 1; and that the

plaints were concocted to usurp the land.

Both sets of suits, SCS No. 194/1988 and SCS Nos. 657-

660/1988, remained pending for a number of years. During that

period, notably, the Appellants and the original vendees acting

together executed a Power-of-Attorney dated 11.11.2001 in

5

favour of one Dhananjay Vallabhbhai Patel. It was stated in the

Power-of-Attorney that the Appellants and the original vendees

are relinquishing their rights in the suit property to Mr. Dhananjay

Patel for the purpose of executing sale deed in favour of one

Kantilal Ambalal Patel, who is the uncle of the said Dhananjay

Patel.

A. Proceedings in SCS No. 194/1988 (Original vendees’ suit)

  1. The original vendees filed withdrawal pursis on 26.7.2002

seeking to unconditionally withdraw SCS No. 194/1988 on the

ground that the 1986 agreement was fraudulently registered; that

they were not aware of the identity of the true owners of the suit

property at the time of the 1986 agreement as it was executed

through a broker, that the original owners of the suit property had

not signed the agreement, nor had they received any

consideration; and the 1986 agreement was fraudulently

registered, hence no dispute could be raised regarding the suit

property. On the same day, Respondent Nos. 1 sought

impleadment as co-plaintiffs in SCS No. 194/1988.

6

The trial court by way of common order dated 22.9.2002

rejected the original vendees’ withdrawal application and allowed

the impleadment applications of Respondent Nos. 1. The High

Court in revision reversed the trial court’s order, though without

going into the merits of the claim made by Respondent Nos. 1.

The Court held that the original vendees had an absolute right to

withdraw their suit unconditionally irrespective of their

motivations for the same. Further, that it was open to Respondent

Nos. 1 to raise all available contentions in their separate suits,

including admissions, if any, made by the original vendees in their

suit SCS No. 194/1988. It was noted that Respondent Nos. 1

cannot be permitted to substitute the original vendees as

plaintiffs, as otherwise substantial amendment would be required

to the original vendees’ plaint. The special leave petitions filed by

Respondent Nos. 1 against the High Court judgement were

dismissed by this Court by order dated 16.11.2004 in SLP (Civil)

Nos. 22664-65/2004.

Respondent Nos. 1 subsequently made application in SCS

No. 658 of 2008, for revival of SCS No. 194/1988, contending that

7

the original vendees had been misled into withdrawing the latter

suit; however the application was dismissed by the trial court and

the High Court by orders dated 24.1.2008 and 25.3.2008

respectively. Hence the withdrawal of the original vendees’ suit

has attained finality.

B. Proceedings in SCS Nos. 657-660/1988 (Present suit)

  1. It is relevant to note that though the original plaints in SCS

Nos. 657-660/1988 were seeking specific performance only of the

1987 agreements, Respondent Nos. 1 amended their plaints in

2005 to seek a declaration that the 1986 agreement is still in

force and that the Appellants were bound to execute the 1986

agreement on the basis of the assignment made in their favour.

The trial court by common order dated 30.12.2011 dismissed

all four suits. It rejected Respondent Nos.1/Plaintiffs’ contention

that the original vendees had withdrawn their suit SCS No.

194/1988 in collusion with the Appellants herein. This was based

on the reasoning that the High Court and this Court had, in the

8

earlier proceedings, sanctioned the unconditional withdrawal of

SCS No. 194/1988 and not made any finding of judicial

impropriety or fraud.

The trial court further found that in light of revocation of the

1986 agreement by the Appellants and withdrawal of SCS No.

194/1988 by the original vendees, it was not open to the Plaintiffs

to re-agitate for specific performance of the said agreement. That

in any case, even if the 1986 agreement was assumed to be in

force, the original vendees could not have assigned their

outstanding obligation to pay the remaining consideration without

the written consent of the original owner i.e., Defendant No. 1

Naranbhai. Since the 1987 agreements and the 1986 agreement

were not ad idem, and new conditions were laid down in the 1987

agreements, such consent was indispensable.

That neither of the Appellants had given any such consent,

either verbally or by conduct; nor was there any evidence that the

original vendees had paid the remaining consideration to the

Appellants, such that the former’s rights under the 1986

agreement had fortified and consequently passed on to the

9

Plaintiffs under the 1987 agreements. Therefore the 1987

agreements were void, illegal and unenforceable. Further, that

the 1987 agreements were also vague and unenforceable

inasmuch as the suit property was not specifically defined therein.

The trial court additionally held that the Plaintiffs had not

taken any steps, such as depositing the remaining consideration

owed by the original vendees, or paying betterment tax as per

the terms of the 1987 agreements, to show that they themselves

were ready and willing to perform the contracts. Hence this was

not a fit case to grant either specific performance or damages,

though Respondent Nos. 1 were held entitled to return of the

earnest money paid by them with interest.

The Learned Additional District Judge, Vadodara by

judgement dated 2.04.2013 affirmed the trial court’s findings. It

was re-emphasized that a party to a contract cannot assign their

obligations thereunder without the other party’s consent. There

was nothing on record to show that the Appellants had given such

consent. In any case, since the original vendees had never shown

their readiness and willingness to pay the balance consideration

10

due by them, no right of specific performance had accrued in

their favour. Further, that the original vendees had anyway

waived their rights by withdrawing their suit in SCS No. 194/1988.

Hence the question of assignment of such a right to Respondent

Nos. 1, such that they could claim specific performance of the

1986 agreement as representatives-in-interest of the original

vendees under Section 15(b) of the Specific Relief Act, 1963

(‘Specific Relief Act’) did not arise.

However, the High Court in the impugned judgement found

that there was a definite linkage between the 1986 agreement

and the 1987 agreements such that there was a valid assignment

of rights in favour of Respondent Nos.1, which made them

‘representatives-in-interest’ of the original vendees for the

purpose of Section 15(b) of the Specific Relief Act. The High Court

reasoned that since all the material rights under the 1986

agreement were assigned under the 1987 agreements,

supplementary conditions specified in the latter did not change

the nature of the basic contract.

11

Further, that reading Sections 40 and 54 of the Transfer of

Property Act, 1882 (‘Transfer of Property Act’) and Section 15(b)

of the Specific Relief Act together, the ‘interest’ assignable under

Section 15(b) need not be an interest in the property or a charge

created in the property. A contractual interest in the form of an

obligation annexed to ownership of the property may also be

assignable. It was discernible from the facts and evidence on

record that the Appellants had given implied consent for such

assignment. Mr. Naranbhai Patel’s signature on planning

permissions and his presence at the Bhoomi Pujan ceremony

were taken as proof that the original owners had consented to the

involvement of Respondent Nos. 1 in developing a housing

scheme on the suit property. Therefore, it was found that the

1986 agreement remained alive, and the rights derived therefrom

in favour of the original vendees were validly assigned under the

1987 agreements.

Additionally, since the High Court and this Court had clarified

while sanctioning withdrawal of SCS No. 194/1988 that such

withdrawal would not preclude Respondent Nos. 1 from pursuing

12

their independent remedies, the withdrawal of the original

vendees’ suit could not prejudice the rights of Respondent Nos. 1

to specific performance. That actual tendering of money was not

necessary to evince readiness and willingness to perform the

contract as required under Section 16(c) of the Specific Relief Act,

and the specific averments made in the pleadings by Respondent

Nos. 1 would suffice.

It may be relevant to note at this juncture that the High

Court by interim order dated 27.6.2013 had directed Respondent

Nos. 1 to deposit an amount equal to five times the amount of

original consideration under the 1987 agreements, and

Respondent Nos. 1 have submitted that they are ready and willing

to forfeit the entire amount deposited in respect of the relief of

specific performance, so as to balance equities between the

parties.

We further note from the order sheets maintained by this

Court that the parties have been directed to maintain status quo

during the pendency of the appeal and no steps have been taken

for the execution of the impugned judgement.

13

II. Issues and Submissions made by the Parties

  1. Therefore, upon a perusal of the entire record, the following

issues arise for our consideration:

Firstly, whether there was a valid assignment of rights by the

original vendees in favour of Respondent Nos. 1 under the 1987

agreements?

Secondly, whether the right of Respondent Nos. 1 to seek

specific performance survives subsequent to the cancellation of

the 1986 agreement by the Appellants and withdrawal of suit in

SCS No. 194/1988 by the original vendees?

Thirdly, whether relief may be granted to Respondent Nos. 1,

and if so, of what nature?

  1. Learned senior counsel for the Appellants, Mr. Ranjit Kumar

argued that there was no privity of contract between the

Appellants and Respondents Nos. 1 in the respective appeals.

That the 1987 agreements were contingent contracts under

Section 31 of the Indian Contract Act, 1872 (‘Contract Act’), as the

rights therein could only be enforced upon the completion of the

1986 agreement, and the interest created under the 1987

14

agreements was also a ‘contingent interest’ under Section 21 of

the Transfer of Property Act. Since the 1986 agreement was

cancelled, Respondent Nos. 1 could not seek specific performance

of the 1987 agreements.

Further, that the purported ‘assignment’ under the 1987

agreements practically amounted to a novation of the 1986

agreement, and the Appellants had not accorded any consent for

such an assignment. Even if such an assignment had taken place,

there was no evidence to show that Respondent Nos. 1 were

ready and willing to perform their contractual obligations.

Respondent Nos. 1 had never communicated their willingness to

complete their contractual obligations under the 1986 agreement

to the Appellants.

Per contra, learned senior counsel for Respondent No. 1, Mr.

C.U. Singh argued that the Appellants i.e. the landowners were

colluding with the original vendees to avoid sale of the suit

property, as evidenced by the fact that the original vendees had

not contested the suit at any point of time. He brought to this

Court’s notice that there could not have been a termination of the

15

1986 agreement in 1988 given that in the Power-of-Attorney

dated 11.11.2001 (supra) executed by Defendant Nos. 1-9 (the

Appellants and the original vendees) in favour of Mr. Dhananjay

Patel, it is stated that the original vendees have acquired rights in

the suit property under the 1986 agreement. It is not open to the

Appellants to accept the existence of the 1986 agreement in the

Power-of-Attorney and reject it for the purpose of these suits.

He further relied upon this Court’s decisions in Shyam

Singh v. Daryao Singh (Dead) By LRs. and Others, (2003) 12

SCC 160, Ram Baran Prasad v. Ram Mohit Hazra and

Others, AIR 1967 SC 744 and Habiba Khatoon v. Ubaidul Huq

and others, (1997) 7 SCC 452 to argue that no implied

prohibition can be read into the 1986 agreement against

assignability of the interest therein. The requirement of consent

of the other party for assignment under Section 15(b) of the

Specific Relief Act is only applicable in cases where the obligation

is of a personal nature or where there is an express bar in the

contract prohibiting such assignment of interest. Further, that in

any case, the original owner Naranbhai Patel’s conduct in

16

arranging for development permissions and consenting to

publication of advertisement regarding development of housing

scheme in the suit property shows that there was implied consent

for assignment of rights under the 1986 agreement in favour of

Respondent Nos. 1.

III. Validity of Assignment of Rights under 1987

Agreements.

A. General principles governing assignability of contracts

  1. Upon considering the facts and circumstances of the present

case, it is evident that there is no privity of contract between the

Appellants and Respondent Nos. 1. Respondent Nos. 1 were not

party to the 1986 agreement. Vice versa, the Appellants were not

party to the 1987 agreements, though whether or not they had

knowledge of the same is disputed. Hence Respondent Nos. 1

cannot seek specific performance of the 1986 agreement, or for

that matter, the 1987 agreements, against the Appellants, except

by suing as ‘representatives-in-interest’ of the original vendees

under Section 15(b) of the Specific Relief Act. Section 15(b)

provides that:

17

“15. Who may obtain specific performance.—

Except as otherwise provided by this Chapter, the

specific performance of a contract may be obtained by

…(b) the representative in interest or the principal, of

any party thereto: Provided that where the learning,

skill, solvency or any personal quality of such party is a

material ingredient in the contract, or where the

contract provides that his interest shall not be

assigned, his representative in interest or his principal

shall not be entitled to specific performance of the

contract, unless such party has already performed his

part of the contract, or the performance thereof by his

representative in interest, or his principal, has been

accepted by the other party…”

It is well-settled that the term ‘representative-in-interest’

includes the assignee of a contractual interest. Though the

provisions of the Contract Act do not particularly deal with the

assignability of contracts, this Court has opined time and again

that a party to a contract cannot assign their obligations/liabilities

without the consent of the other party. A Constitution Bench of

this Court in Khardah Company Ltd v. Raymon & Co (India)

Private Ltd., AIR 1962 SC 1810 has laid out this principle as

follows:

“…An assignment of a contract might result by transfer

either of the rights or of the obligations thereunder. But

18

there is a well-recognised distinction between these

two classes of assignments. As a rule obligations under

a contract cannot be assigned except with the consent

of the promisee, and when such consent is given, it is

really a novation resulting in substitution of liabilities.

On the other hand, rights under a contract are

assignable unless the contract is personal in its nature

or the rights are incapable of assignment either under

the law or under an agreement between the parties.”

(emphasis supplied)

In Khardah Company, the Appellant jute manufacturers

were entitled to receive price for the jute from the buyer/dealer of

jute only upon delivery of certain shipping documents. Question

arose as to whether such an obligation coupled with a benefit was

assignable. This Court held, based on the above-mentioned

principle, that the terms of the contract strongly implied that the

rights thereunder are non-transferable.

Similarly, in Indu Kakkar v. Haryana State Industrial

Development Corporation Ltd. and Another, (1999) 2 SCC

37, the Respondent Corporation allotted certain land subject to

the condition that the allottee shall complete construction of a

building unit on the plot within a period of two years. Upon the

allottee’s failure to comply with the said condition, the

Respondent resumed the land. The allottee filed a civil suit

19

challenging the resumption order, during the pendency of which

he assigned his rights in the plot to the Appellant. The issue was

whether such an assignee could challenge the resumption order.

A two-judge Bench of this Court held, in reliance upon Khardah

Company (supra), that:

“19.…Answer of the said question depends upon the

terms of allotment. Assignment by act of parties may

cause assignment of rights or of liabilities under a

contract. As a rule a party to a contract cannot transfer

his liabilities under the contract without consent of the

other party. This rule applies both at the Common Law

and in Equity (vide para 337 of Halsbury’s Laws of

England, Fourth Edition, Part 9). Where a contract

involves mutual rights and obligations an assignee of a

right cannot enforce that right without fulfilling the corelative obligations.”

(emphasis supplied)

  1. Even in a case of assignment of rights simplicitor, such

assignment would necessarily require the consent of the other

party to the contract if it is of a ‘personal nature’. This is

elucidated by learned authors Pollock and Mulla in their

commentary on The Indian Contract and Specific Relief Acts (R.

Yashod Vardhan, and Chitra Narayan eds., 15th edn., Vol. I) at

page 730:

20

“A contract which is such that the promisor must

perform it in person, viz. involving personal

considerations or personal skill or qualifications (such

as his credit), are by their nature not assignable. The

benefit of contract is assignable in ‘cases where it can

make no difference to the person on whom the

obligation lies to which of two persons he is to

discharge it.’ The contractual rights for the payment of

money or to building work, for e.g., do not involve

personal considerations.” (emphasis supplied)

  1. It is true that Section 15(b) of the Specific Relief Act does not

specifically state that ‘obligations’ may not be assigned except

with the consent of the other party. However a reading of Section

15(b) shows that it is nothing but a statutory formulation of the

ratio laid down in the above-mentioned precedents. The rule

stated in Section 15(b) is that any interest in a contract can be

specifically enforced by the assignee thereof, except where the

‘personal quality’ of the party is a material ingredient in the

contract; or where the contract, expressly or by necessary

implication, prohibits the beneficiary from transferring their

contractual interest to third parties. Hence Section 15(b) does not

contradict the general law on assignability of contracts as laid

down by this Court, but rather clarifies that the same conditions

21

will have to be satisfied if an assignee seeks to secure specific

performance of the assigned contract.

Therefore, for example, a contract for a singing performance

or a painting may not be assignable as it involves a personal skill

and even if it is assigned, the assignee cannot seek specific

performance in respect of such a contract. Whereas it may be

said that general contracts for payment of money or building work

do not involve any personal considerations, as it makes no

difference as to who discharges the obligation to pay or perform a

certain act under the contract. Hence the assignees of parties to

such contracts may seek specific performance.

  1. It is important to note that in the modern context where

parties frequently enter into complex commercial transactions, it

is perhaps not so convenient to pigeonhole contracts as being

either ‘general’ or of ‘personal nature’ or as involving the

assignment of purely ‘rights’ or ‘obligations’. It is possible that a

contract may involve a bundle of mutual rights and obligations

which are intertwined with each other. However, as this Court has

held in Indu Kakkar (supra), the same rule as laid down in

22

Khardah Company (supra) and as stated in Section 15(b) of the

Specific Relief Act, may be applied to such contracts as well.

Where the conferment of a right or benefit is contingent upon, or

coupled with, the discharge of a burden or liability, such right or

benefit cannot be transferred without the consent of the person to

whom the co-extensive burden or liability is owed.

It further has to be seen whether conferment of benefits

under a contract is based upon the specific assurance that the coextensive obligations will be performed only by the parties to the

contract and no other persons. It would be inequitable for a

promisor to contract out his responsibility to a stranger if it is

apparent that the promisee would not have accepted

performance of the contract had it been offered by a third party.

This is especially important in business relationships where the

pre-existing goodwill between parties is often a significant factor

influencing their decision to contract with each other. This

principle is already enshrined in Section 40 of the Contract Act:

“40. Person by whom promise is to be performed.

—If it appears from the nature of the case that it was

the intention of the parties to any contract that any

promise contained in it should be performed by the

23

promisor himself, such promise must be performed by

the promisor. In other cases, the promisor or his

representative may employ a competent person to

perform it.”

It is clear from the above that the promisor ‘may employ a

competent person’, or assign the contract to a third party as the

case may be, to perform the promise only if the parties did not

intend that the promisor himself must perform it. Hence in a case

where the contract is of personal nature, the promisor must

necessarily show that the promisee was agreeable to

performance of the contract by a third person/assignee, so as to

claim exemption from the condition specified in Section 40 of the

Contract Act. If the promisee’s consent is not obtained, the

assignee cannot seek specific performance of the contract.

B. Application of the above principles to the present case

  1. Hence, in light of the above discussion, whether or not an

assignee can seek specific performance would depend upon the

construction of the contract in each case. The Court would have

to determine the nature of interest sought to be transferred,

whether such interest was meant to be enforceable only between

24

the parties to the contract and whether the contract expressly or

by necessary implication bars assignment of such interest.

In the present case, the 1986 agreement provided that the

Appellants shall execute sale deed in favour of the original

vendees or ‘name proposed by the vendee’ subject to the

assurance that the latter would pay the remaining consideration

and betterment tax within the stipulated time, and that the

former would obtain the necessary permissions for construction

on the suit property.

We are of the opinion that the term ‘name proposed by the

vendee’ in the 1986 agreement refers to a nominee to be

proposed at the time of execution of the sale deed and not a

subsequent assignee. At the same time, it is true the 1986

agreement does not contain any express bar against

assignability. The question which arises then is whether the

purported assignment in favour of Respondent Nos. 1 under the

1987 agreements is legally valid.

The decisions in Shyam Singh (supra) and Ram Baran

Prasad (supra) relied upon by Respondent Nos. 1 will not help

25

their case as this Court found on the particular facts of those

cases that the terms of the contracts in those cases did not

implicitly bar assignment. These decisions cannot be taken to lay

down a blanket rule that in every case where there is no express

bar against assignability stipulated in the contract, assignment of

the interest therein should be upheld without looking at the

context in which the parties contracted with each other. It has to

be seen whether the terms of the contract, and the circumstances

in which the contract was entered into, lead to an inference that

the parties did not intend to make their interest therein

assignable. This is the principle of law as authoritatively stated

by the Constitution Bench in Khardah Company (supra):

“…We agree that when a contract has been reduced to

writing we must look only to that writing for

ascertaining the terms of the agreement between the

parties but it does not follow from this that it is only

what is set out expressly and in so many words in the

document that can constitute a term of the contract

between the parties. If on a reading of the document as

a whole, it can fairly be deduced from the words

actually used therein that the parties had agreed on a

particular term, there is nothing in law which prevents

them from setting up that term. The terms of a contract

can be expressed or implied from what has been

expressed. It is in the ultimate analysis a question of

construction of the contract. And again it is well

26

established that in construing a contract it would be

legitimate to take into account surrounding

circumstances. Therefore on the question whether

there was an agreement between the parties that the

contract was to be non-transferable, the absence of a

specific clause forbidding transfer is not conclusive.

What has to be seen is whether it could be held on a

reasonable interpretation of the contract, aided by such

considerations as can legitimately be taken into

account that the agreement of the parties was that it

was not to be transferred. When once a conclusion is

reached that such was the understanding of the parties,

there is nothing in law which prevents effect from being

given to it.”

(emphasis supplied)

  1. Section 40 of the Transfer of Property Act states that a

contract for sale of immovable property is a contract that “a sale

shall take place on terms settled between the parties”. It is a

settled position that such a contract does not by itself create any

interest in or charge on the property. The buyer only obtains a

right to get the sale deed executed, upon fulfilment of the

applicable terms and conditions as consented to by all the parties.

Hence the 1986 agreement, being an agreement to sell the suit

property, is a clear case of a contract combining mutual rights

and obligations. The original vendees were to obtain the right to

27

get the sale deed executed in respect of the suit property upon

fulfilment of the conditions specified in the 1986 agreement.

The 1987 agreements purport to assign the aforesaid rights

and obligations of the original vendees in favour of Respondent

Nos. 1/ Plaintiffs. Upon comparison of the 1986 agreement and

the 1987 agreements, we find that the 1987 agreements amount

to nothing but a substitution of liabilities wherein Respondent

Nos. 1 have assumed the same obligations which the original

vendees were supposed to have performed under the 1986

agreements. This includes not only the obligation to pay

betterment tax but also the obligation to reimburse the cost of

acquiring planning permissions and to get the suit property

levelled for the purpose of construction.

Additionally, the 1987 agreements also provide that the

plaintiffs can prepare the scheme for construction of housing

society on the suit property, get the members of the society

registered and execute agreements with them, and publish

advertisement boards regarding the scheme. Hence this is not a

case of assignment of agreement for sale simplicitor, but

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assignment of what is akin to a development agreement for a

housing scheme on the suit property. A contract of this nature is

ordinarily based upon certain personal understanding between

the parties regarding the course of business to be undertaken on

the suit property.

It is not disputed that the original vendees had not fulfilled

their obligations under the 1986 agreement prior to the purported

‘assignment’ under the 1987 agreements. Hence they had not

‘performed their part of the contract’ as required under Section

15(b) of the Specific Relief Act. Applying the law as stated above,

the assignment of such a contract cannot be enforced without

proving that it was with the knowledge and consent of the original

owners/Appellants.

  1. It is further relevant to note that under the 1987

agreements, payment of the remaining consideration amount is

to be made to the original vendees, not the Appellants, and

possession of the suit property is to be handed over by the

original vendees. Even the consideration to be paid was twice the

rate as specified in the 1986 agreement. The 1987 agreements

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nowhere provide for discharge of the original vendees’ pending

obligations towards the Appellants by Respondent Nos. 1. Hence

we are inclined to accept the Appellants’ argument that the 1987

agreements were not a case of assignment but appear to be

independent agreements for sale which were contingent on the

execution of the 1986 agreement. Therefore, the only way

Respondent Nos. 1 can seek specific performance of the 1986

agreement against the Appellants is by proving the Appellants’

knowledge of and consent to transfer of the original vendees’

rights and liabilities to Respondent Nos. 1.

  1. It is true that Section 15(b) does not stipulate in what form

the promisee’s ‘acceptance’ of performance by a representativein-interest of the promisor should be communicated. It may be

either through express written consent, or implied from the

actions of the promisee; though as a matter of caution, the former

mode of acceptance would inevitably have higher evidentiary

value. However in the present case, as the trial court and the

Learned District Judge have rightly appreciated on facts, we do

not find that the Appellants have either by words or by conduct,

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consented to the assignment of the 1986 agreement in favour of

Respondent Nos. 1.

The mere fact that the original owner Mr. Naranbhai Patel

signed the development permissions for the suit property and

may have been present at the Bhoomi Pujan does not indicate

that he consented to assignment of the 1986 agreement. The

1986 agreement stipulated that the original owners would give

their signatures for obtaining necessary permissions for the

proposed development on the suit property. Hence, as the trial

court has rightly noted, Mr. Naranbhai Patel was only carrying out

his contractual obligation as he had promised to the original

vendees. This does not indicate that he was under the impression

that the said permissions were now to be obtained for the benefit

of Respondent Nos. 1.

It is pertinent to note that Respondent Nos. 1 conceded

before the trial court that the Appellants had given their

signatures on the layout plan for the housing scheme on the suit

property to the original vendees, not to Respondent Nos. 1. Even

the advertisement regarding the ‘Unnati Park’ housing scheme

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nowhere indicates that the Appellants/original owners were

developing the project on the suit property in partnership with

Respondent Nos. 1.

Thus we conclude that there was no valid assignment of

rights flowing from the 1986 agreement to Respondent Nos. 1,

and they cannot seek specific performance against the

Appellants.

IV. Whether the Plaintiffs are entitled to Specific

Performance?

  1. Having found that Respondent Nos. 1 cannot seek specific

performance of the 1986 agreement, it may be considered

whether they can seek any remedy qua the 1987 agreements as

against the Appellants and the original vendees. Since there is no

privity of contract between the Appellants and Respondent Nos. 1

there no longer remains any question of granting specific

performance as against the former.

  1. Further, as noted above, the terms of the 1987 agreements

indicate that they are contingent contracts, as defined under

Section 31 of the Contract Act:

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“31. “Contingent contract” defined.—A “contingent

contract” is a contract to do or not to do something, if

some event, collateral to such contract, does or does

not happen.”

Sections 32 and 35 further state that:

“32. Enforcement of contracts contingent on an

event happening.—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.”

“35. When contracts become void, which are

contingent on happening of specified event

within fixed time.—Contingent contracts to do or not

to do anything, if a specified uncertain event happens

within a fixed time, become void if, at the expiration of

the time fixed, such event has not happened, or if,

before the time fixed, such event becomes impossible.”

The 1987 agreements are clearly contingent contracts

inasmuch as they could only be enforced had the original vendees

obtained the right to get the sale deed executed, and taken

possession of the suit property as per the terms of the 1986

agreement. Once the 1986 agreement was cancelled by the

Appellants, the original vendees’ rights thereunder ceased to

exist.

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  1. Respondent Nos. 1 contend that the Power-of-Attorney dated

11.11.2001 (supra) in favour of Mr. Dhananjay Patel shows that

the 1986 agreement was not cancelled and that the original

vendees continued to retain their right to get the sale deed

executed in their favour. It was brought to our notice by the

Appellants that the aforesaid Power-of-Attorney was subsequently

cancelled by the original vendees on 6.6.2003, on the ground that

Mr. Dhananjay Patel had obtained the Power-of-Attorney through

misrepresentation. However, it is important to note that the

original vendees have stated in the aforesaid cancellation notice

that they have ‘joint ownership’ of the suit property. Therefore we

find some merit in the argument that the Appellants and the

original vendees are acting in collusion.

Nevertheless, regardless of what may be stated in the

Power-of-Attorney, it has to be seen whether the original vendees

have legally acquired any rights in the suit property. Respondent

Nos. 1 have admitted in their plaints that the Town Planning

Scheme was finalized prior to the 1986 agreement. Hence the

deadline stipulated under the 1986 agreement for payment of

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remaining consideration by the original vendees, i.e., within three

months of finalization of the Scheme, has long since lapsed. Since

the original vendees never paid the remaining consideration

within the time specified in the 1986 agreement, their rights

thereunder never fructified.

Even assuming that the original vendees acquired some

interest in the suit property, the subsequent withdrawal of the

suit SCS No. 194/1988 shows that the original vendees do not

intend to enforce the 1986 agreement. The trial court has found

that though the suit property de jure vested with the concerned

government authority under the Town Planning Scheme, the de

facto possession of the property remains with the Appellants and

the original vendees have not taken possession thereof.

Furthermore, both the trial court and the learned District Judge

have on facts found that the original vendees have not shown any

readiness or willingness to pay the remaining consideration to the

Appellants. Hence since the original vendees have abandoned

their rights under the 1986 agreement, enforcement of the 1987

agreements has become virtually impossible and Respondent

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Nos. 1 cannot seek specific performance of the latter.

Consequently the 1987 agreements are void and unenforceable

as provided under Sections 32 and 35 of the Contract Act.

  1. It is relevant to note at this juncture that Respondent Nos. 1

have also pleaded that the Power-of-Attorney dated 11.11.2001

(supra) was executed in breach of the interim injunction order

issued by the trial court directing maintenance of status quo in

respect of the suit property. Hence they seek that action should

be taken against the Appellants and the original vendees under

Order XXXIX, Rule 2A of the Code of Civil Procedure, 1908 for

breach of the injunction order. However, we are in agreement

with the trial court’s findings that the Plaintiffs’ application under

Order XXXIX was moved after a delay of three years and six

months, and the said delay has not been satisfactorily explained.

Hence the application is barred by laches. In any case, since the

original vendees have revoked the Power-of-Attorney, status-quo

has been restored, and the Plaintiffs’ cause of action no longer

exists. The Learned District Judge and the High Court in the

impugned judgement have affirmed the trial court’s reasoning on

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this aspect, and we see no reason to overturn their concurrent

findings on this matter.

It was also re-iterated before us by Respondent Nos. 1 that

the original vendees were misled into withdrawing their suit SCS

No. 194/1988 and that the same should not be binding upon the

plaintiffs. However given that the withdrawal of the suit has

attained finality before this Court, and the Trial Court and the

High Court have concurrently found in the separate application

made by the plaintiffs in SCS No. 658/1988, by orders dated

24.1.2008 and 25.3.2008 supra (respectively), that the original

vendees cannot be compelled to continue their suit against their

desire, we are not inclined to interfere with the same.

V. Alternative Remedy to be given to the plaintiffs

  1. Though we have found that on facts and law, Respondent

Nos. 1 are not entitled to specific performance of the 1986 and

1987 agreements, prima facie it does appear that the Appellants

and the original vendees have colluded to frustrate performance

of the 1987 agreements. The trial court had directed the original

vendees to reimburse earnest money of Rs. 5000 paid by

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Respondent Nos. 1 towards each of the 1987 agreements with an

interest of 9% p.a. from 14.9.1987 till the date of realization. We

are in agreement with the aforesaid direction.

With regard to the appropriate remedy to be provided to

Respondent Nos. 1, it may also be pertinent to refer to Section 53

of the Contract Act, which provides that:

“53. Liability of party preventing event on which

the contract is to take effect.—When a contract

contains reciprocal promises, and one party to the

contract prevents the other from performing his

promise, the contract becomes voidable at the option of

the party so prevented: and he is entitled to

compensation from the other party for any loss which

he may sustain in consequence of the non-performance

of the contract.”

Therefore, since the original vendees seem to have

relinquished their rights in the 1986 agreement so as to frustrate

performance of the 1987 agreements, it would be just in these

circumstances to award compensation to the Plaintiffs for the loss

of opportunity and inconvenience suffered by them. Though no

remedy is available as against the Appellants on account of

absence of privity of contract, we consider it apposite to direct

the original vendees, that is, Respondent Nos. 3-11 in the four

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appeals, to pay Rs. 1,80,000/-, with interest at the rate of 9% per

annum from the date of the suits, as damages to the

Plaintiffs/Respondent Nos. 1 in these appeals, as prayed for in

their pleadings. We also direct the High Court to expeditiously

release and remit back the consideration amount deposited by

Respondent Nos. 1 in lieu of specific performance.

  1. Hence these appeals are partly allowed, and the impugned

judgement is set aside, in the aforesaid terms.

…..……………………………………..J.

(MOHAN M. SHANTANAGOUDAR)

….………………………………………J.

(ANIRUDDHA BOSE)

New Delhi;

November 25, 2019

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