Sagarmal S/o Gulabchand Jain v. Gujarati Beedi Company
2011-03-07
ABHAY M.NAIK, SHANTANU KEMKAR
body2011
DigiLaw.ai
ORDER Abhay M. Naik, J. 1. This appeal by the Plaintiff has been preferred against the judgment and decree dated 22.07.2003 passed by the Court of 15th Additional District Judge, Indore in Civil Suit No. 25-A/2002 declining thereby to grant relief of specific performance and instead granting refund of consideration. 2. Facts relevant for the purpose of this appeal are that the Plaintiff/Appellant instituted a suit for specific performance with allegations that the suit house bearing No. 1/6 situated at Tilak Path, Indore was owned by Defendant No. 1, which was a partnership firm. Defendants/Respondents No. 2 and 3 were its partners. Defendants No. 2 and 3 entered into an oral agreement of sale in favour of the Plaintiff on 27.02.1989 on behalf of the said partnership firm for a consideration of Rs. 5,01,000/-. Rs. 21,000/-were received as a part of consideration vide Cheque No. 251952 dated 01.03.1989 of Bank of Baroda. Signature in token of receipt of cheque was put on the counterfoil of the cheque. Balance consideration was liable to be paid up to 01.06.1989. A formal agreement was to be executed by them up to 01.03.1989 in favour of the Plaintiff. The Defendants avoided to execute the registered sale-deed in Plaintiff's favour. Therefore, the Plaintiff vide telegraphic notice dated 27.02.1989 asked the Defendants to execute the registered sale-deed within 24 hours. He also expressed readiness and willingness to get the registered sale-deed executed at his expenses, after making payment of the balance consideration. Defendants vide reply dated 03.03.1989 disputed the agreement alleged by the Plaintiff and, instead, informed that an agreement in favour of another person was executed. During the pendency of the suit, Defendants No. 1 to 3 executed registered sale-deed dated 26.09.1995 in respect of the suit property in favour of Narendra Kumar S/o Chauthmal Ravka, who was impleaded in the suit as Defendant No. 4, with an allegation that he is bound by the agreement dated 27.02.1989. Plaintiff prayed that the Defendants may be directed to execute the registered sale-deed in Plaintiff's favour, after receipt of balance consideration to the tune of Rs. 4,80,000/-and possession of the suit property may also be delivered to him. In the alternative, the Plaintiff prayed for refund of advance consideration of Rs. 21,000/-with damages to the tune of Rs. 1,00,000/-. 3. Defendants No. 1 to 3 submitted joint written statement, refuting thereby the claim of the Plaintiff.
4,80,000/-and possession of the suit property may also be delivered to him. In the alternative, the Plaintiff prayed for refund of advance consideration of Rs. 21,000/-with damages to the tune of Rs. 1,00,000/-. 3. Defendants No. 1 to 3 submitted joint written statement, refuting thereby the claim of the Plaintiff. They, inter alia, disputed the alleged oral agreement dated 27.02.1989 for a consideration of Rs. 5,01,000/-. It has been stated that Defendants No. 2 and 3 were authorized vide general meeting dated 06.01.1989 merely to negotiate with the prospective purchasers for the purpose of sale. They were required to apprise of the same in the general meeting and that the consent from other partners was to be obtained. In this view of the matter alleged agreement dated 27.02.1989 and the receipt of Rs. 21,000/-as advance money were denied, being not binding. Defendants No. 2 and 3 were, thus, not authorized to enter into agreement of sale in favour of the Plaintiff, since consent from other partners was not obtained. It was denied that the cheque was submitted by Defendant No. 2 for an amount of Rs. 21,000/-. It has been expressly and specifically mentioned in the written statement that an agreement to sell the suit property in favour of Defendant No. 4 was entered into on 27.02.1989 for a consideration of Rs. 5,15,000/-in the meeting of Defendant No. 1. Proposal of the Plaintiff was for a lesser sum and was, therefore, not accepted. On 28.02.1989, it was reduced into writing and a sum of Rs. 51,000/-was received as advance consideration. A supplementary agreement was also executed on 05.04.1989 between Defendants No. 1 to 3, on one hand, and Defendant No. 4, on another hand, and receipt of possession was also executed by Defendant No. 4, after receiving the possession of the suit property. A sum, in all, Rs. 3,51,000/-was received by Defendants No. 1 to 3 from Defendant No. 4 up to 05.04.1989 and pursuant thereto possession of the suit property was delivered to Defendant No. 4, in part performance of the agreement. Date for execution of the registered sale-deed was extended on 28.04.1989 up to 30.06.1989 with a condition that Defendant No. 4 would pay interest at the rate of Rs. 1.50% PM on the balance consideration of Rs. 1,64,000/-for the intervening period. This was so mentioned in the supplementary sale agreement.
Date for execution of the registered sale-deed was extended on 28.04.1989 up to 30.06.1989 with a condition that Defendant No. 4 would pay interest at the rate of Rs. 1.50% PM on the balance consideration of Rs. 1,64,000/-for the intervening period. This was so mentioned in the supplementary sale agreement. Thereafter, the Plaintiff instituted a suit for injunction against the Defendants, which prevented Defendants No. 1 to 3 from receiving Rs. 1,64,000/-. Instead, Defendant No. 4 became liable to pay interest with effect from 30.06.1989. It has been denied that the Plaintiff has been ready and FA No. 479/2003 willing to get the registered sale-deed executed, after payment of balance consideration. It has been further stated that the Plaintiff himself deposited a sum of Rs. 21,000/-in the bank account of Defendant No. 1, which he may withdraw from the bank. Defendants offered their cooperation for such withdrawal. Pursuant to the agreement in favour of Defendant No. 4, registered sale-deed in respect of the suit property was executed in his favour on 26.09.1995. Defendant/Respondent No. 4 submitted his separate written statement, virtually supporting Defendants No. 1 to 3. Additionally, it is stated that the suit is barred by limitation. He stated further that he entered into the agreement to purchase the suit property from Defendants No. 1 to 3. His being the highest offer, was accepted and pursuant thereto, registered sale-deed dated 26.09.1995 has also been executed in his favour. He has also been already put into possession of the suit property, pursuant to the agreement of sale. Hence, the suit is liable to dismissal. 4. Learned trial Judge, after recording the evidence, vide impugned judgment and decree dated 22.07.2003 has declined to grant relief of specific performance; instead, decree has been awarded merely for refund of Rs. 21,000/-with interest at the rate of Rs. 1.5% per month. Aggrieved by the aforesaid, the present appeal has been preferred by the Plaintiff/Appellant. Defendant No. 4 has also submitted cross-objections under Order 41 Rule 22 of the Code of Civil Procedure Code. 5.
21,000/-with interest at the rate of Rs. 1.5% per month. Aggrieved by the aforesaid, the present appeal has been preferred by the Plaintiff/Appellant. Defendant No. 4 has also submitted cross-objections under Order 41 Rule 22 of the Code of Civil Procedure Code. 5. Shri G.M. Chaphekar, learned senior advocate assisted by Shri Y.K. Joshi, learned advocate for the Appellant and Shri A.K. Sethi, learned senior advocate assisted by Shri Milind Phadke, learned advocate for the Respondents made their respective submissions on the merits of appeal as well as cross-objections and on provisions of law governing the situation, which have been considered in the light of the material on record. 6. It has been contended on behalf of the Appellant that the decree for specific performance on oral contract is not prohibited in law, rather, the same is permissible as laid down by the High Court of Krishnan Kesavan and Ors. v. Kochukunju Karunakaran: AIR 1988 Ker107. It has been observed in paragraph No. 3: 3. Before entering the substantial questions of law, the learned Counsel for the Appellants made an attempt to challenge the concurrent decrees on the merits by a contention that the evidence on which the courts below acted was meagre, insufficient and untrustworthy and that the courts below did not take note of the fact that courts are not expected to grant prayers for specific performance based on oral agreements and dependent on oral evidence alone. I do not think that there is any merit in that argument. What the Supreme Court has stated in Ouseph Varghese v. Joseph Aley (1969) 2 SCWR 347 is only that rarely a decree for specific performance is granted on the basis of an agreement supported solely by oral evidence. That is only as rule of caution and prudence for the guidance of courts in appreciating the contentions and evidence for the purpose of granting or refusing reliefs. That is not a rule of law. An oral agreement is not something prohibited by law. No rule of law says that relief cannot be granted when the agreement and evidence supporting it are only oral and no documents are there to support. Oral agreements can be enforced by courts provided the evidence is sufficient to satisfy the conscience of the court. Both the courts below evaluated the pleadings and evidence carefully and found the issue in favour of the Plaintiff.
Oral agreements can be enforced by courts provided the evidence is sufficient to satisfy the conscience of the court. Both the courts below evaluated the pleadings and evidence carefully and found the issue in favour of the Plaintiff. No substantial question of law is involved justifying interference. Such an argument is not available also 7. It has further been contended that the oral agreement alleged by the Plaintiff has been found proved by the trial Court, while giving findings on Issues No. 1 to 3. This being so, learned trial Judge has committed an illegality in declining the relief of specific performance, ignoring the limitations prescribed in Sections 20 and 21 of the Specific Relief Act, 1963. Accordingly, it is submitted that the learned trial Judge has acted illegally in refusing to exercise the discretion in favour of the Plaintiff and granting the refund of consideration with interest. Aforesaid has been countered by Shri A.K. Sethi, learned senior advocate appearing for Respondent No. 4 and Shri Milind Phadke, learned advocate appearing for Respondents No. 1 and 2 on the ground that the discretion has been rightly exercised within the ambit of Sections 20 and 21 of the Specific Relief Act and no interference is warranted. This apart, it has been submitted by Shri A.K. Sethi, learned senior advocate that Defendant No. 4 is not responsible to pay the cost of the suit, as directed by the learned trial Judge. 8. It may be seen that the Plaintiff has approached the Court of law by instituting a suit for specific performance on 11.04.1989 with specific averments that the suit property belonged to the registered partnership firm in the name and style of Shri Gujarati Beedi Company. Defendants No. 2 and 3 being its partners, entered into an oral agreement to sell the suit property to the Plaintiff for a consideration of Rs. 5,01,000/-on 27.02.1989. A sum of Rs. 21,000/-vide Cheque No. 251952 dated 01.03.1989 of Bank of Baroda was received towards part of consideration, as revealed in the counterfoil of the cheque, duly signed by Defendant No. 2. It was further agreed that balance consideration would be received up to 01.06.1989 and the registered sale-deed would be executed. It was also agreed that a formal agreement would be executed by Defendants No. 1 to 3 in favour of Plaintiff up to 01.03.1989. 9.
It was further agreed that balance consideration would be received up to 01.06.1989 and the registered sale-deed would be executed. It was also agreed that a formal agreement would be executed by Defendants No. 1 to 3 in favour of Plaintiff up to 01.03.1989. 9. Aforesaid averments were denied by Defendants No. 1 to 3 and Issues No. 1 to 3 were raised in the light of such averments. All these issues have been decided by the learned trial Judge on the basis of the evidence on record in favour of the Plaintiff. These issues relate to the alleged transaction between Plaintiff and Defendants No. 1 to 3. Findings on such issues have not been challenged before this Court by Defendants No. 1 to 3, though the same have been challenged by Defendant No. 4 vide cross-objections under Order 41 Rule 22 CPC, but we do not find it to be within the domain of Respondent No. 4 to make a challenge to them, since they are not concerned with him. In the absence of challenge to such findings by Defendants No. 1 to 3, we hereby hold that they have attained finality. However, the effect of such findings in the light of the pleadings on record is being examined in the succeeding paragraphs. 10. Defendants No. 1 to 3 as well as Defendant No. 4 in their separate written statements have clearly pleaded that the partnership firm of Shri Gujarati Beedi Company was constituted by number of partners. Defendants No. 2 and 3 were two partners amongst others. They were not the only partners of the said firm and were not authorized to enter into an agreement to sell the suit property, which was owned by the said registered partnership firm. According to the specific plea raised in the written statement, the partnership firm vide its resolution dated 06.01.1989 authorized Defendants No. 2 and 3 merely to negotiate for the sale of the suit property with the prospective purchasers. They were directed to apprise the partnership firm in the general meeting of all the offers with particulars of the prospective purchasers. After approval/consent from all the partners, the sale could have been effected. On 27.02.1989, proposals with respective offers were submitted by four prospective purchasers. On 27.02.1989, proposal of Defendant No. 4 for a consideration of Rs. 5,15,000/-, being the highest, was accepted.
After approval/consent from all the partners, the sale could have been effected. On 27.02.1989, proposals with respective offers were submitted by four prospective purchasers. On 27.02.1989, proposal of Defendant No. 4 for a consideration of Rs. 5,15,000/-, being the highest, was accepted. Plaintiff's proposal for a sum of Rs. 5,01,000/-, being lower, was rejected and the consent was given for agreement of sale in favour of Defendant No. 4 for a consideration of Rs. 5,15,000/-. Accordingly, agreement was executed on 28.02.1989 in favour of Defendant No. 4 and a part of consideration to the tune of Rs. 51,000/- was received on the same day. According to the agreement, balance consideration was liable to be paid between 20th April and 28th April, 1989. 11. It may be seen that despite the aforesaid specific objection, learned trial Judge did not raise an issue about the authority of Defendants No. 2 and 3 to enter into an agreement of sale in respect of the property belonging to partnership firm. It is not disputed by the Plaintiff/Appellant that there were other partners also of the firm. In our considered opinion, a relief of specific performance in the attending facts and circumstances of the case cannot be granted, without examining the authority of Defendants No. 2 and 3 to enter into the agreement of sale in respect of property belonging to the partnership firm. Admittedly, Plaintiff has neither pleaded nor proved any specific written authority in favour of Defendants No. 2 and 3 to deal with the property belonging to the partnership firm. Section 19 of the Indian Partnership Act, 1932 reads as under: 19. Implied authority of partner as agent of the firm. (1) Subject to the provisions of Section 22, the act of a partner, which is done to carry on, in the usual way, business of the kind carried on by the firm, binds the firm. The authority of a partner to bind the firm, conferred by this section, is called his "implied authority". (2) In the absence of any usage or custom of trade to the contrary, the implied authority of a partner does not empower him to (a) ..... (b) ..... (c) ..... (d) ..... (e) ..... (f) ..... (g) transfer immovable property belonging to the firm, or (h) .....
(2) In the absence of any usage or custom of trade to the contrary, the implied authority of a partner does not empower him to (a) ..... (b) ..... (c) ..... (d) ..... (e) ..... (f) ..... (g) transfer immovable property belonging to the firm, or (h) ..... Such a power to transfer the firm's property must be expressly given to the transferring partner, so far as the immovable property of the partnership firm is concerned. We may successfully refer to the Apex Court decision in the case of Bina Murlidhar Hemdev and Ors. v. Kanhaiyalal Lokram Hemdev and Ors.: AIR 1999 SC 2171 , wherein it is observed: - Under Section 19(1) of the Partnership Act, the acts of a partner which are done to carry on, in the usual way, business of the kind carried on by the firm, binds the firm. Under Section 19(2), in the absence of any usage or custom of trade to the contrary, the above implied authority- (here express authority under Clause 10 of the same nature)- does not prima facie empower the partner to "transfer immovable property belonging to the firm" as stated in Clause (g) of Section 19(1) of the Partnership Act. Such a power to transfer property of the firm must be expressly given to the transferring partner so far as immovable property is concerned there is no such authority shown. Plaintiff has neither pleaded nor proved any usage and custom of trade to the contrary, which could have enabled it to seek decree for specific performance, in the absence of specific written authority. 12. It is true that agreement of sale as alleged by the Plaintiff did not have the effect of transferring immovable property of the partnership firm. An agreement by itself does not create any right in the prospective transferee in the immovable property. It may confer a right on such prospective transferee to seek specific performance of the agreement. Transfer of immovable property of the firm by a partner cannot be objected to by a third party, if the same stood ratified subsequently by other partners. In the present case, there is no evidence on record; firstly, to prove that Defendants No. 2 and 3 were authorized on behalf of the partnership firm to finalize the agreement of sale so as to bind the firm.
In the present case, there is no evidence on record; firstly, to prove that Defendants No. 2 and 3 were authorized on behalf of the partnership firm to finalize the agreement of sale so as to bind the firm. Secondly, the alleged agreement is neither averred nor proved to have been ratified by the remaining partners. 13. After having gone through the statement of the Plaintiff himself, we find that the Plaintiff has expressly pleaded ignorance about the other partners of the firm in paragraph of his statement. On the other hand, Defendant No. 2 has appeared in witness box, who has stated about 15-16 partners of the partnership firm. Eleven of them have been named in paragraph 2 of his statement. He has produced resolution dated 06.01.1989 of the partnership firm, which has been marked as Ex.D/1. Defendant No. 2 is one of the signatories of the said document. Defendants No. 2 and 3 were authorized vide Ex.D/1 to negotiate with the prospective purchasers. They were further required to place the proposals in the general meeting of the partnership firm for obtaining approval from the remaining partners. It is clearly mentioned that after such approval alone, the deal would be binding on all the partners. Plaintiff in paragraph 18 of his statement has not denied this resolution. Instead, he expressed his ignorance about it. Defendant No. 2 appearing as DW-1 is signatory of Ex.D/1 and D/2 and has identified his signature as 'D' to 'D' on these documents. Likewise, he has identified signatures of few of other partners, namely, Maganbhai Patel 'A' to 'A', Hirabhai 'B' to 'B', Shankarbhai 'C' to 'C', Laxmidas 'E' to 'E', Jayaben 'F' to 'F', Manaharbhai 'G' to 'G', Chhotabhai 'H' to 'H' and Rajendra Kumar 'I' to 'I'. Ex.D/2 is the resolution dated 27.02.1989 wherein it is specifically mentioned that Defendant No. 4 has given an offer to purchase the suit property at Rs. 5,15,000/-. The Plaintiff's offer was obviously less than that of Defendant No. 4. This being so, the offer given by Defendant No. 4 to purchase the suit property for a consideration of Rs. 5,15,000/-was accepted by all the partners, as revealed in Ex.D/2. It has been contended on behalf of the Appellant that Ex.D/1 and D/2 are not duly proved.
5,15,000/-. The Plaintiff's offer was obviously less than that of Defendant No. 4. This being so, the offer given by Defendant No. 4 to purchase the suit property for a consideration of Rs. 5,15,000/-was accepted by all the partners, as revealed in Ex.D/2. It has been contended on behalf of the Appellant that Ex.D/1 and D/2 are not duly proved. A document may be proved by any of the following modes, as laid down by Division Bench of this Court in the case of Ramibai v. Life Insurance Corporation of India 1981 JLJ 388 . It has been held that: - (i) By calling a person who signed or wrote a document; (ii) By calling a person in whose presence the documents are signed or written; (iii) By calling handwriting expert; (iv) By calling a person acquainted with the handwriting of the person by whom the document is supposed to be signed or written; (v) By comparing in Court, the disputed signature or hand-writing with some admitted signatures or writing; (vi) By proof of an admission by the person who is alleged to have signed or written the document that he signed or wrote it; (vii) By the statement of a deceased professional scribe, made in the ordinary course of business, that the signature on the document is that of a particular person; A signature is also proved to have been made, if it is shown to have been made at the request of a person by some other person, e.g. by the scribe who signed on behalf of the executant; (viii) By other circumstantial evidence. In the instant case, Defendant No. 2 has appeared in the witness box as signatory of Ex.D/1 as well as Ex.D/2. He has produced and exhibited these two documents. He has also identified his own signatures as well as of certain other partners. This being so, Ex.D/1 and D/2 cannot be objected to as not proved, in view of Ramibai's decision (supra). This apart, it may be seen that copy of Ex.D/1 and D/2 as well as copies of register Ex.D/11 to D/15 were submitted with written statement as mentioned in Special Plea No. 2 of the written statement. There are various entries about Defendant No. 4 having deposited the consideration in installments. Considering this fact, they cannot be disbelieved in the absence of contrary evidence. 14.
There are various entries about Defendant No. 4 having deposited the consideration in installments. Considering this fact, they cannot be disbelieved in the absence of contrary evidence. 14. Contention of Shri G.M. Chaphekar, learned senior advocate appearing on behalf of the Appellant is that the relief of specific performance cannot be denied dehors Sections 20 and 21 of the Specific Relief Act, 1963. According to him, discretion vested in the trial Court has not been property exercised and the decree for specific performance ought to have been granted. Shri A.K. Sethi, learned senior advocate countered the aforesaid by submitting that in the attending facts and circumstances, the discretion has been rightly exercised in declining to grant the relief of specific performance. 15. For the sake of convenience, we reproduce Sections 20 and 21 of the Specific Relief Act, 1963: 20. Discretion as to decreeing specific performance.-(1) The jurisdiction to decree specific performance is discretionary, and the Court is not bound to grant such relief merely because it is lawful to do so; but the discretion of the court is not arbitrary but sound and reasonable, guided by judicial principles and capable of correction by a court of appeal. (2) The following are cases in which the court may properly exercise discretion not to decree specific performance: (a) where the terms of the contract or the conduct of the parties at the time of entering into the contract or the other circumstances under which the contract was entered into are such that the contract, though not voidable, gives the Plaintiff an unfair advantage over the Defendant; or (b) where the performance of the contract would involve some hardship on the Defendant which he did not foresee, whereas its non-performance would involve no such hardship on the Plaintiff; or (c) where the Defendant entered into the contract under circumstances which though not rendering the contract voidable,makes it inequitable to enforcespecific performance. Explanation 1.-Mere inadequacy of consideration, or the mere fact that the contract is onerous to the Defendant or improvident in its nature, shall not be deemed to constitute an unfair advantage within the meaning of Clause (a) or hardship within the meaning of Clause (b).
Explanation 1.-Mere inadequacy of consideration, or the mere fact that the contract is onerous to the Defendant or improvident in its nature, shall not be deemed to constitute an unfair advantage within the meaning of Clause (a) or hardship within the meaning of Clause (b). Explanation 2.-The question whether the performance of a contract would involve hardship on the Defendant within the meaning of Clause (b) shall, except in cases where the hardship has resulted from any act of the Plaintiff subsequent to the contract, be determined with reference to the circumstances existing at the time of the contract. (3) The court may properly exercise discretion to decree specific performance in any case where the Plaintiff has done substantial acts or suffered losses in consequence of a contract capable of specific performance. (4) The Court shall not refuse to any party specific performance of a contract merely on the ground that the contract is not enforceable at the instance of the party. 21. Power to award compensation in certain cases.-(1) In a suit for specific performance of a contract, the Plaintiff may also claim compensation for its breach, either in addition to, or in substitution of, such performance. (2) If, in any such suit, the court decides that specific performance ought not to be granted, but that there is a contract between the parties which has been broken by the Defendant, and that the Plaintiff is entitled to compensation for that breach, it shall award him such compensation accordingly. (3) If, in any such suit, the court decides that specific performance ought to be granted, but that it is not sufficient to satisfy the justice of the case, and that some compensation for breach of the contract should also be made to the Plaintiff, it shall award him such compensation accordingly. (4) In determining the amount of any compensation awarded under this section, the court shall be guided by the principles specified in Section 73 of the Indian Contract Act, 1872 (9 of 1872). (5) No compensation shall be awarded under this section unless the Plaintiff has claimed such compensation in his plaint: Provided that where the Plaintiff has not claimed any such compensation in the plaint, the court shall, at any stage of the proceeding, allow him to amend the plaint on such terms as may be just, for including a claim for such compensation.
Explanation.-The circumstance that the contract has become incapable of specific performance does not preclude the court from exercising the jurisdiction conferred by this section. 16. Reliance has been placed by Shri Chaphekar, learned senior advocate on the Apex Court decision in the case of S.V.R. Mudaliar (dead) by L Rs. and Ors. v. Mrs. Rajabu F. Buhari (dead) by LRs. and Ors.: AIR 1995 SC 1607 to buttress his aforesaid contention. This case is quite distinguishable on facts inasmuch as it was found that there was an agreement between the vendor and vendee that vendee would re-convey the property sold to him if the vendor within three years repays the purchase money alongwith certain money as consortium. Such an agreement was found by the Apex Court as an enforceable contract. In the case in hand, the suit property admittedly belonged to the partnership firm. Plaintiff alleged that they entered into an oral agreement to purchase firm's property with Defendants No. 2 and 3 alone (who were partners of the firm) whereas there were remaining 14-15 partners, who had not given authority to Defendants No. 2 and 3 to enter in to any such kind of agreement and are not proved to have ratified the alleged agreement of sale in respect of the property belonging to the partnership firm. 17. Sub-section (1) of Section 20 itself lays down that power to grant relief of specific performance is discretionary and the Court is not bound to grant such relief merely because it is lawful to do so. Obviously, discretion of the Court must be sound and reasonable, as mentioned in Sub-section (1) itself. It is true that learned trial Judge has found the alleged oral agreement in favour of the Plaintiff to be proved by the evidence recorded by him. Existence of agreement of sale may be independent of its enforceability. Every agreement need not be necessarily enforceable in the eye of law. This being so, apart from its proof, a Plaintiff is obliged to establish that agreement set up by him is enforceable against the Defendant within the ambit of provisions of the Specific Relief Act, 1963. Since the suit property was owned by the partnership firm, agreement to sell the same could have been validly entered into by all the partners or by any of the partners having authority from the remaining partners.
Since the suit property was owned by the partnership firm, agreement to sell the same could have been validly entered into by all the partners or by any of the partners having authority from the remaining partners. Even subsequent ratification by remaining partners could have made the agreement enforceable in a Court of law. None of the situations is found proved, in the present case. This being so, the oral agreement of sale set up by the Plaintiff cannot be said to be binding on the partnership firm and the learned trial Judge is not found to have been exercised his jurisdiction contrary to law. 18. Defendant No. 2 is a signatory of Ex.D/1 and D/2, who has been examined as DW-1. Thus, the documents marked as Ex.D/1 and D/2 cannot be said to be legally not proved. These two documents are fatal to the Plaintiff's case for specific performance, because they, firstly, revealed that Defendants No. 2 and 3 were not authorized to enter into an agreement to sell the partnership's property, without consent of the other partners; secondly, it is revealed in Ex.D/2 that the offer given by the Plaintiff was not the highest and that of the Defendant No. 4, being the highest, was accepted by the consent of all the partners. 19. It has been contended on behalf of the Appellant that the plea that Defendants No. 2 and 3 were merely authorized to negotiate with the prospective purchasers and were not authorized to enter into an agreement of sale in respect of partnership firm's property, is afterthought, because it is not so mentioned in the reply (Ex.D/5) in response to the telegraphic notice. Copy of the reply is at page 137 of the paper book, which is marked as Ex.D/5. It is clearly mentioned in it that no agreement of sale in favour of the Plaintiff with the partners of the firm is established. Moreover, it is an admitted fact that the suit property belonged to the partnership firm. This being so, the Plaintiff cannot escape from the rigour of Section 19 of the Partnership Act, which does not empower any partner to make firm liable for transferring its immovable property merely at the instance of one or two partners, without having obtained the consent from other partners or ratification on behalf of the remaining partners. 20.
This being so, the Plaintiff cannot escape from the rigour of Section 19 of the Partnership Act, which does not empower any partner to make firm liable for transferring its immovable property merely at the instance of one or two partners, without having obtained the consent from other partners or ratification on behalf of the remaining partners. 20. As a general rule, specific performance of the contract can only be obtained, if it can be found to be capable of mutual enforcement, i.e., at the time it was entered into, it could have been enforced by either party to it against the other. We are quite averse to Section 22 of the Indian Partnership Act, which reads, as under: 22 Mode of doing act to bind firm.-In order to bind a firm, an act or instrument, done or executed by a partner or other person on behalf of the firm, shall be done or executed in the firm-name, or in any other manner expressing or implying an intention to bind the firm. A conjoint reading of Sections 19 and 22 of the Indian Partnership Act goes to show that an act of a partner binds a firm, which is done to carry on, in the usual way, the business of the kind carried on by the firm. Thus, the said two sections are not in conflict with each other. Instead, Section 22 may be construed as a procedural provision. An act of a partner performed in the usual way of business of the firm would bind the partnership firm. Thus, Section 22 being a procedural provision shows as to how a partner can bind his partnership firm and its partners, once his act falls within the four corners of Section 19(1) of the Act. Procedure provided in Section 22 may be taken help of, if the basic conditions prescribed under Section 19 are established, as per requirement of Section 19(1). In such a situation, an act of a partner would bind the partnership firm. If that basic requirement is not satisfied, even though a partner complies with the procedure provided in Section 22, by executing documents in the manner provided thereunder, it will not yield any fruitful result inasmuch as such an act will not bind partnership firm.
In such a situation, an act of a partner would bind the partnership firm. If that basic requirement is not satisfied, even though a partner complies with the procedure provided in Section 22, by executing documents in the manner provided thereunder, it will not yield any fruitful result inasmuch as such an act will not bind partnership firm. We may profitably quote the following passage from the decision of High Court of Gujarat in the case of Porbandar Commercial Co-operative Bank Limited v. Bhanji Lavji and Ors. AIR 1985 Guj 106 : - Section 22 of the Indian Partnership Act also cannot be of much assistance to Mr. Desai for the Petitioner-Bank for the simple reason that it is merely a procedural provision which shows how a partner can bind his firm and the rest of the partners of the firm, once his act is within the four corners of Section 19(1). It is obvious that the procedure of Section 22 can be pressed in service provided the basic condition for foisting the liability on the firm and the remaining partners is established as per the requirement of Section 19(1). If that basic requirement is not satisfied, even though the partner complied with the procedure of Section 22 of the Act by executing instruments in the manner provided by Section 22, it would remain an abortive exercise. 21. In the case in hands, it is revealed that the Plaintiff has sought relief of specific performance in respect of the suit property belonging to the partnership firm. Kind of the business which the partnership firm (i.e. Defendant No. 1) used to perform is neither pleaded nor proved. Obviously, sale of immovable property belonging to the partnership firm could not have been the business of the said firm. This being so, it cannot be said that Defendants No. 2 and 3, while dealing with the Plaintiff for sale of firm's property, were acting in usual way of the business of the said firm. Accordingly, we hold that the Plaintiff could not have achieved the relief of specific performance in the absence of an express authority with Defendants No. 2 and 3 from all the remaining partners to sell the firm's property. 22. It has been further submitted that Defendant No. 4 is a pendente lite transferee and is bound by the outcome of the suit.
22. It has been further submitted that Defendant No. 4 is a pendente lite transferee and is bound by the outcome of the suit. On perusal, it is revealed that the suit for specific performance was instituted on 11.04.1989 whereas an order to maintain status quo with regard to possession was issued on 21.04.1989. Prior to the order of status quo, Defendant No. 4 made payment of consideration in installments on various dates. A supplementary agreement was also executed between the partnership firm and Defendant No. 4 on 05.04.1989, as revealed in Ex.D/4. Possession was also delivered on 05.04.1989 pursuant to the agreement, as revealed in Ex.D/4. It was disclosed on 21.04.1989 that possession was already handed over to Defendant No. 4. Registered sale-deed in favour of Defendant No. 4 was executed on 26.09.1995. Thereafter, Defendant No. 4 was impleaded on 16.12.1997, being purchaser of the suit property. It is no doubt true that Defendant No. 4 is lis pendent transferee. However, a transfer of the suit property during the pendency of lis is not void, but is subject to the outcome of the suit. Plaintiff has failed to establish that the alleged oral agreement of sale in his favour was entered into by the partnership firm through all the partners or by Defendants No. 2 and 3 with due authority on behalf of all the partners. This being so, the agreement setup by the Plaintiff is not found enforceable against partnership firm. Accordingly, we observe that the suit has no ill-effect on the purchase of the suit property by Defendant No. 4. 23. In the result, we hold that the oral agreement of sale setup by the Plaintiff is not binding on the partnership firm in respect of the suit property, which was owned by it and the same was, therefore, not enforceable in respect of firm's property. This being so, learned trial Judge is found justified in declining the relief of specific performance in Plaintiff's favour. Since receipt of Rs. 21,000/-towards consideration is found proved against Defendants No. 1 to 3, the same has been rightly directed to be refunded with interest. We further find that learned trial Judge has wrongly imposed cost of litigation also on Defendant No. 4, because he is not found to have committed any wrong against the Plaintiff.
Since receipt of Rs. 21,000/-towards consideration is found proved against Defendants No. 1 to 3, the same has been rightly directed to be refunded with interest. We further find that learned trial Judge has wrongly imposed cost of litigation also on Defendant No. 4, because he is not found to have committed any wrong against the Plaintiff. Accordingly, it is held that Defendant No. 4 is not liable to pay cost of litigation. 24. Resultantly, the appeal is hereby dismissed. Cross-objections to the extent of imposition of litigation expenses on Defendant No. 4 are hereby allowed. Decree be modified accordingly. No order as to costs.