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Kerala High Court · body

1994 DIGILAW 458 (KER)

Purushothaman v. Thulasi

1994-11-28

P.K.BALASUBRAMANYAN

body1994
Judgment :- The appellant is the plaintiff. He sued for specific performance of an agreement to sell land. The agreement was on 8-10-1985. The price was Rs. 19,000/-. An advance of Rs. 5,000/- was paid. The defendant was to execute the sale deed on or before 7-1-1986 after receiving the balance consideration. The plaintiff was ready and willing to perform his part of the contract and to pay the balance consideration of Rs. 14,000/-. The defendant did not perform the contract. So, the plaintiff filed the suit on 8-1-1986. The plaintiff deposited the balance consideration in court on 17-1-1986. He claimed Rs. 2,000/- as damages for the delay in performance. During the trial he claimed that he was entitled to mesne profits from the property from the date of deposit of the balance consideration in addition to specific performance. 2. The defendant admitted the agreement. 'He admired the receipt of Rs. 5,000/-. He denied it was advance. He pleaded that it was earnest money. He was all along ready and willing to execute the sale deed within the stipulated time but the plaintiff was not ready and willing. The plaintiff had no funds. So the plaintiff could not tender the balance. The plaintiff was not entitled to specific performance. The plaintiff was not entitled to realise any amount from the defendant by way of damages. The plaintiff was not entitled to claim any mesne profits. The defendant continues to be the owner of the property. The suit was to be dismissed. 3. By judgment and decree dt.8-12-1986 the trial court decreed the suit. It directed the defendant to execute the sale deed. It negatived the plaintiffs claim for damages and mesne profits. The defendant appealed. He filed A.S.40 of 1987. In that appeal the plaintiff got the plaint amended by adding a prayer claiming recovery of the advance in case specific performance was disallowed. He claimed mesne profits at Rs. 1500/- per annum from the dale of deposit of Rs. 14,000/-. At the hearing of the appeal the defendant sought an opportunity to file an additional written statement. Granting this opportunity the lower appellate court set aside the judgment and decree of the trial court and remanded the suit to the trial court by its judgment dt.13-6-1990. 1500/- per annum from the dale of deposit of Rs. 14,000/-. At the hearing of the appeal the defendant sought an opportunity to file an additional written statement. Granting this opportunity the lower appellate court set aside the judgment and decree of the trial court and remanded the suit to the trial court by its judgment dt.13-6-1990. After remand, the trial court found that the plaintiff was always ready and willing to perform his part of the contract, It held that the defendant was bound to specifically perform the agreement. That court held that since the plaintiff was not able to get possession of the property inspite of the deposit of the balance sale consideration because of the default of the defendant in performing the contract, he was entitled to mesne at the rate of Rs. 1500/- per annum. The claim for damages of Rs. 2,000/- was disallowed. The suit was thus decreed. The defendant appealed. The appellate court held that it was the defendant who was not ready and willing to perform his part of the contract. It held that the plaintiff had done all that he could pursuant to the contract. It therefore confirmed the decree for specific performance in plaintiffs favour. Regarding mesne profits, mat court held that since the contract for sale docs not itself create any interest in the property, the plaintiff was not entitled to mesne profits. The court referred to the definition of mesne profits. The decree for profits granted by the trial court was vacated. The plaintiff has appealed. The defendant has not appealed. The decree for specific performance has become final. The defendant died. His legal representatives arc the respondents in the Second Appeal. 4. The Second Appeal was admitted on the question whether the decree for payment of Rs. 1,500/- per year to the plaintiff from 17-1-1986, the date of deposit of the balance sale consideration by turn could be sustained with reference to S.21 of the Specific Relief Act. The respondents entered appearance. The records were called. The Second Appeal was heard. 5. The trial court had awarded mesne profits from the date of deposit of the balance sale consideration. It had not awarded the amount as compensation in addition to the grant of the decree for specific performance. The respondents entered appearance. The records were called. The Second Appeal was heard. 5. The trial court had awarded mesne profits from the date of deposit of the balance sale consideration. It had not awarded the amount as compensation in addition to the grant of the decree for specific performance. The lower appellate court had reversed the decree on the finding that no mesne profits could be awarded before conferment of title on the plaintiff pursuant to the decree. It had not considered whether the decree could be sustained as award of compensation in addition to the decree for specific performance passed in the case. Obviously, such a claim was not raised before that court. 6. Mesne profits by its very definition postulates that the possession of the person concerned is wrongful .The possession of the defendant in this case would become wrongful only on the title to the property being conveyed to the plaintiff. It is clear from S.54 of the Transfer of Property Act that an agreement for sale does riot create any interest in or charge on the property agreed to be sold. Title passes only on execution of the registered instrument transferring the title. It is therefore clear that unless and until the deed oi' sale is executed in favour of the plaintiff pursuant to the decree for specific performance, the title to the property would not pass to the plaintiff. That no liability for mesne profits would arise merely on the grant of a decree for specific performance is clear from the decisions reported in Govinda v. Provabali, AIR 1956 Cal.147 and Knmaraswami v. Rudraradhya (AIR 1966 My. 215) and similar other decisions. The ratio appears to be that until a conveyance is actually executed pursuant to an agreement for sale, the promisee under the agreement is not entitled to any proprietory interest in the property at all. Even on the passing of a decree for specific performance, no title passes until a conveyance is actually executed by the defendant in obedience to the decree or by the court in execution of the decree. Until the title actually passes to the plaintiff, the defendant continues to be the owner of the property and he cannot be said to be in unlawful possession thereof and therefore liable for mesne profits. (See observations of Narayana fi, J. in Knmaraswami's case). Until the title actually passes to the plaintiff, the defendant continues to be the owner of the property and he cannot be said to be in unlawful possession thereof and therefore liable for mesne profits. (See observations of Narayana fi, J. in Knmaraswami's case). Tested in that light it would not be possible to grant the plaintiff a decree for mesne profits prior to a sale deed being executed in his favour in execution of the decree for specific performance. 7. Though Indian law does not recognise the concept and creation of duality of ownership, legal and equitable on the execution of an agreement to convey immovable property as understood in English law, it is recognised that such an agreement for sale does not create an obligation annexed to the ownership of immovable property not amounting to an interest in the properly which obligation may be enforced even against a transferee with notice of the contract or a gratuitous transferee of the property. According to the Supreme Court in the decision reported in Bui Dosabai v. Mathurdas (AIR 1980 SC 1334) the equitable ownership in property recognised by equity in England is translated into Indian Law as an obligation annexed to the ownership of the property not amounting to an interest in the property, but an obligation which may be enforced against the transferee with notice or a gratuitous transferee. It cannot therefore be said that the defendant in the case on hand had not incurred an obligation enforceable by law. The performance of that obligation is withheld by the defendant unjustifiably. This is the finding of the courts below in this case when they granted a decree for specific performance in favour of the plaintiff. In other words, it was found that the defendant had failed to fulfil his obligation. In such a situation, cannot the court grant any relief to the plaintiff in respect of the profits of the property for the period during which he might normally have enjoyed the profits if the defendant had honoured his obligation and had performed his part of the contract? It appears to me that this situation is contemplated and covered by S.21 of the Specific Relief Act which provides for payment of compensation for breach of contract in addition to or in substitution of specific performance of the contract. Sub-sec. It appears to me that this situation is contemplated and covered by S.21 of the Specific Relief Act which provides for payment of compensation for breach of contract in addition to or in substitution of specific performance of the contract. Sub-sec. 3 of S.21 specifically says that if in any suit the court decides that specific performance ought to be granted but that is not sufficient to satisfy the justice of the case and that some compensation for breach of the contract should also be awarded to the plaintiff, the court shall award him such compensation. No doubt the determination of the compensation in such a case shall be guided by the principles specified in S.73 of the Indian Contract Act. Commenting on the scope of S.21 of the Act, Dr. Banerjee in his Tagore Law Lectures has indicated that compensation for delay can be awarded. To quote, "Proper compensation for delay is granted in cases of specific performance of contracts. Ordinarily, the buyer is entitled to the rents and profits of the property from the time the contract should have been completed, and the vendor is allowed interest on the purchase money for the same period, provided, the delay was due to a fault on the part of the purchaser; the feet, that the purchase money was lying dead, makes no difference; but not, if the fault lay with the vendor. Where a vendor delays executing a conveyance beyond the agreed lime, he may be held liable to pay damages. Where the vendor becomes liable for delay, the normal rule of damages would seem to be the rental value of live premises less any advantage which the buyer may have had by retaining (lie whole or any part of the purchase money, together with any enforceable consequential damages. If, however, the delay is due to the purchaser's fault, he is liable for interest, though (he vendor has received no rents and profits and can, therefore, credit him with none. Where, in a case, the plaintiff sues for specific performance, and the defendant performs the contract during the pendency of the suit, but the court finds that the plaintiff has suffered some injury by the belated performance, it may award such compensation to the plaintiff for late performance as it may find the plaintiff justly entitled to. Where, in a case, the plaintiff sues for specific performance, and the defendant performs the contract during the pendency of the suit, but the court finds that the plaintiff has suffered some injury by the belated performance, it may award such compensation to the plaintiff for late performance as it may find the plaintiff justly entitled to. Damages for belated performance may also be awarded in case where a decree former specific performance will not afford adequate relief. Where, since the date of the contract up to its specific performance the estate in question has deteriorated, the court may, in a proper case, award damages to the promisee for the loss sustained by the contract not having been literally performed." If compensation for delay in performance on the part of the vendor could be computed on the basis of the rents and profits the vendor may receive from the property, cannot the same be made over to a plaintiff who had obtained a decree for specific performance and had also deposited the entire sale consideration immediately on the filing of the suit? Is it obligatory that any such claim for compensation could be treated only as claim for mesne profits which would arise only on the execution of the sale deed either by the party in obedience to the decree or by the court on his behalf in execution of the decree? 8. Relying on the following passage from Pollock and Mulla on Contract, Eleventh Edition, page 829. "In a contract for sale of land special circumstances are necessary to impute to (he vendor the knowledge that the purchaser wants to use it in a particular manner so as to justify the recovery of profits lost as a result of the default of the defendant". It is contended that unless there is a specific notice to the defendant as stated above, there could be no liability in the defendant to pay any profits to the plaintiff by way of loss or compensation. It has to be noted mat this passage occurs in commentaries to S.73 of the Contract Act. It is true that sub-sec. 4 of S.21 of the Specific Relief Act states that while acting under that section the court shall be guided by the principles specified in S.73 of the Indian Contract Act. It has to be noted mat this passage occurs in commentaries to S.73 of the Contract Act. It is true that sub-sec. 4 of S.21 of the Specific Relief Act states that while acting under that section the court shall be guided by the principles specified in S.73 of the Indian Contract Act. Speaking on the difference in the nature of the claim under S.21 of the Specific Relief Act and the claim under S.73 of the Contract Act for compensation for breach, their Lordships of the Supreme Court have slated in Jagdish Singh v. Nalthu Singh (AIR 1992 SC 1604) "So far as the proviso to sub-sec. 5 is concerned, two positions must be kept clearly distinguished. If the amendment relates to the relief of compensation in lieu of or in addition to specific performance where the plaintiff lias not abandoned his relief of specific performance, the Court will allow the amendment at any stage of the proceedings. That is a claim for compensation falling under S.21 of the Specific Relief Act, 1963 and the amendment is one under the proviso to sub-sec. 5. But different and less liberal standards apply if what is sought by the amendment is the conversion of a suit for specific performance into one for damages for breach of contract in which case S.73 of the Contract Act is invoked. This amendment is under the discipline of R.17, O.6C.P.C. The fact that sub-sec. 4, in turn, invokes S.73 of the Contract Act for the principles of quantification and assessment of compensation does not obliterate this distinction." Here the compensation claimed is solely under S.21 of the Specific Relief Act and it has arisen out of the refusal of the defendant to convey the properly as agreed upon. Bearing in mind this distinction, all that the authorities relied on in Mulla in the passage referred to earlier say is that ".... if the defendants are shown to have known that the plaintiff intended to develop the land for profit, the special circumstances are established which entitle the plaintiff to have the damages assessed by reference to the profits which both parties contemplated that he would make. There cannot be the slightest doubt here that the defendants knew what the plaintiff's intentions were, and knew exactly how he intended to pursue them." (See Coltrill v. Stenying and Liltlehamptom Building Society, 1966 2 A.E.R.295 at 298). There cannot be the slightest doubt here that the defendants knew what the plaintiff's intentions were, and knew exactly how he intended to pursue them." (See Coltrill v. Stenying and Liltlehamptom Building Society, 1966 2 A.E.R.295 at 298). So, if the defendant knew the purpose for which the plaintiff intended to put the land to use, he will be liable for compensation on the basis of such contemplated use. Moreover, what is the scope of this notice referred to? As Delvin, J. observed in Biggin ami Company Ltd. v. Permanite Ltd. (1950 (2) All E.R.859 at 869) is not such notice something "within the prevision of the defendant as a reasonable man in the light of the knowledge, actual or imputed which he has at the lime of the contract"? Could not the defendant have envisaged that the plaintiff would be in a position to derive income from the property by way of loss of profits the moment the sale deed was executed in his favour and he put in possession? If such a situation could be within the reasonable comprehension of the defendant, can the defendant insist that there should have been a further pre-notice of the intention of the vendee before he could be mulcted with the obligation to pay the rents and profits of the property during the period in which he himself took the same in breach of his obligation to convey the property? The reliance placed on the decision in Fateh Cliand v. Balkishan Dass (AIR 1963 SC 1405) holding that S.74 of the Contract Act has application in contracts relating to sale of immovable properly, does not affect the question involved in the case on hand. 9. Here, the land agreed to be sold is agricultural land Coconut palms exist in the property. Income can be derived from them. By delaying performance, the defendant has deprived the plaintiff of the income. The defendant could have known that if he had conveyed the property, the income therefrom could have been derived by the plaintiff. To borrow the language of Devlin, J. could the defendant not have 'prevision' of this as a reasonable man? The answer could only be in the affirmative. If so, the claim for compensation by the plaintiff under S.21(3) of the Specific Relief Act, cannot be defeated by invoking the doctrine of notice. 10. To borrow the language of Devlin, J. could the defendant not have 'prevision' of this as a reasonable man? The answer could only be in the affirmative. If so, the claim for compensation by the plaintiff under S.21(3) of the Specific Relief Act, cannot be defeated by invoking the doctrine of notice. 10. In such a situation, the plaintiff would be normally entitled to the profits as compensation from the day of the breach by the defendant. But the plaintiff deposited the balance price payable by him to the defendant only on 17-1-1986. If the parties had honoured their bargain, al least on that day, the defendant had become obliged to convey the title to the plaintiff by executing the sale deed. Nearing in mind the scheme of S.54 and 55 of the Transfer of Property Act, the obligation incurred by the defendant and not forgetting the concept of mesne profits as understood, it would be appropriate to hold that the plaintiff has become entitled to compensation from the date of deposit of the purchase price. This would really be the working out of the obligation incurred by the defendant as recognised in Bai Dosabai's case referred to earlier. 11. The trial court awarded the plaintiff compensation at the rate of Rs. 1500/ - per year from 17-1-1986 (It called it, mesne profits). There was no serious challenge to the quantum. The appellate court did not consider the question in its view that the plaintiff was not entitled to claim mesne profits before the deed of sale is executed in his favour. In the light of my discussion, the plaintiff is entitled, in addition to the decree for specific performance, to a decree for profits as compensation from the date of depositor the balance purchase price. Taking note of the entire circumstances of the case and in the light of the evidence, I hold that the plaintiff is entitled to profits by way of compensation at the rate of Rs. 500/- per annum from the date of deposit of the balance consideration by him in the trial court till recovery of possession. In the result, I allow this Second Appeal. I modify the judgment and decree of the lower appellate court and award to the plaintiff also a decree for compensation at Rs. 500/- per annum from 17-1-1986 till date of recovery. In the result, I allow this Second Appeal. I modify the judgment and decree of the lower appellate court and award to the plaintiff also a decree for compensation at Rs. 500/- per annum from 17-1-1986 till date of recovery. I direct the parties to suffer their respective costs throughout.