Case Note & Summary
The appeal arose from a suit for specific performance of a contract for sale of a house property situated in Tughlak Road, New Delhi, owned by the appellant and built on a leasehold plot granted by the Government in 1935 to her predecessor-in-title. The plaintiffs-respondents entered into an agreement dated September 4, 1956, to purchase the property for Rs 1,10,000. The agreement provided that the vendor would obtain the Chief Commissioner's permission to the transaction of sale within two months, and if the permission was not forthcoming within that time, the purchasers could extend the date or treat the agreement as cancelled. Permission was not granted within the stipulated period, so the purchasers extended the time by another month. The appellant had applied for permission but withdrew her application by letter dated April 12, 1957. Despite repeated requests, she failed to perform her part of the contract. The plaintiffs averred that they had always been ready and willing to perform and that the defendant had backed out. They filed a suit for specific performance of the contract or alternatively for damages amounting to Rs 51,100. The trial court, though finding that the plaintiffs had been throughout ready and willing, indeed anxious, to perform and that the defendant had backed out, refused specific performance on the ground that the agreement was inchoate because previous sanction of the Chief Commissioner had not been obtained. It awarded Rs 11,550 as damages with proportionate costs. On appeal, the Punjab High Court (Circuit Bench) at Delhi reversed the trial court, holding that there was a completed contract between the parties subject to the sanction of the Chief Commissioner, and that the condition requiring vendor to obtain sanction did not render the contract incomplete. The High Court relied on the Privy Council decision in Motilal v. Nanhelal and decreed specific performance, also recording that if the Chief Commissioner ultimately refused sanction, the plaintiffs may not be able to enforce the decree, but that was no bar to passing a decree. It assessed alternative damages at Rs 5,775. The defendant appealed to the Supreme Court, arguing that the contract was contingent and unenforceable because the contingency had not been fulfilled. She also sought to raise a new plea that specific performance should not be enforced. The Supreme Court rejected the contention, holding that under the document the vendor had to make the necessary application for permission; she had made such an application but withdrew it without sufficient reason. Since the plaintiffs had always been ready and willing, and time was not of the essence, the court had to enforce the terms of the contract and enjoin the defendant to make the necessary application. The Court directed that within one month from the date of judgment the defendant shall make the necessary application to the Chief Commissioner or other competent authority, and within one month of receipt of the sanction she shall convey the property to the plaintiffs. In the event of sanction being refused, the plaintiffs shall be entitled to damages as decreed by the High Court. The Supreme Court also declined to allow the new plea, stating that points not specifically raised in the High Court nor pleaded in the pleadings should not be allowed for the first time. The appeal was dismissed with costs.
Headnote
A) Contract Law - Specific Performance - Contract Subject to Statutory Sanction - Indian Contract Act, 1872, general principles - The agreement for sale of a leasehold house property required the vendor to obtain the Chief Commissioner's permission; the condition did not render the contract incomplete or inchoate but was an implied term binding the vendor. The vendor withdrew her application without sufficient reason, while the purchasers were always ready and willing to perform. The court held that the vendor must be enjoined to apply for permission, and the suit for specific performance was correctly decreed; if sanction was refused, the purchasers would be entitled to alternative damages (Paras 3-5). B) Civil Procedure - Appellate Practice - New Plea Not Taken in High Court - General principles of appellate practice - The appellant sought to raise the plea that specific performance should not be enforced, which was not pleaded or raised in the High Court. The Supreme Court refused to allow this new plea, stating that points not specifically raised in the High Court nor pleaded in pleadings should not be allowed for the first time. Held that the appeal failed and was dismissed with costs (Paras 6-7).
Issue of Consideration
Whether contract for sale of house property subject to Chief Commissioner's permission was contingent, incomplete, and unenforceable due to non-fulfillment of condition; whether court could decree specific performance when sanction was not obtained; whether new plea not raised in High Court could be raised for the first time in Supreme Court.
Final Decision
Appeal dismissed with costs. The Supreme Court affirmed the High Court's decree for specific performance and added a direction that the defendant-appellant, within one month from the date of judgment, shall make the necessary application to the Chief Commissioner or other competent authority, and within one month of receipt of sanction shall convey the property to the plaintiffs. In the event of sanction being refused, the plaintiffs shall be entitled to damages as decreed by the High Court (Rs 5,775).
Law Points
- Specific performance of a contract subject to statutory sanction is enforceable where the vendor has implied obligation to apply for permission
- withdrawal of application by vendor after purchasers extended time constitutes breach
- agreement is completed contract not inchoate due to lack of sanction
- points not raised in High Court or pleadings cannot be raised for the first time in Supreme Court
- time not of the essence of the contract
