Case Note & Summary
The appellant, Agricultural Produce Marketing Committee (APMC), Bellary, was the defendant No.1 in a suit for specific performance filed by the respondents (plaintiffs). The plaintiffs claimed that they and their predecessor-in-interest had taken a lease of a piece of land measuring 200 ft x 200 ft in Sy.No.759A, Bellary Town, from one Sri.Manjuswamy Matada Shivamurthy Swamy under a lease deed dated 07.09.1969 (Ex.P1). The lease deed contained an option to purchase the leased property for a consideration of Rs.10,000 within a period of 10 years. The plaintiffs alleged that they had exercised the option and were ready and willing to perform their part of the contract, but the lessor failed to execute the sale deed. Subsequently, the property was acquired by the APMC, which was impleaded as defendant No.1. The trial court decreed the suit for specific performance, directing the defendants to execute the sale deed. The APMC appealed. The High Court framed the issue of whether the lease deed with an option to purchase constituted a contract for sale and whether the appellant, as successor-in-interest, was bound by it. The court analyzed the terms of the lease deed and held that the option to purchase was a separate contract for sale, and the plaintiffs had exercised the option within the stipulated period. The court further held that the appellant had notice of the lease and the option, as the lease deed was registered and the appellant had taken possession subject to the lease. Therefore, the appellant was bound by the contract and liable to specifically perform it. The court dismissed the appeal, affirming the trial court's decree.
Headnote
A) Specific Relief Act - Contract for Sale - Option to Purchase - A lease deed containing an option to purchase the leased property constitutes a contract for sale, and the lessee can seek specific performance of such contract. The court held that the option to purchase is a separate and independent contract for sale, and the lessee's exercise of the option creates a binding obligation on the lessor to sell. (Paras 10-12) B) Specific Relief Act - Successor-in-Interest - Notice - A successor-in-interest who takes the property with notice of a prior agreement for sale is bound by the contract and can be directed to specifically perform it. The court held that the appellant, being a statutory body that acquired the property with notice of the lease and option to purchase, was bound by the contract and liable to execute the sale deed. (Paras 13-15) C) Code of Civil Procedure, 1908 - Section 96 - Appeal against Decree for Specific Performance - The appellate court will not interfere with the trial court's discretion to grant specific performance unless it is shown to be arbitrary or perverse. The court upheld the trial court's decree for specific performance, finding no error in the exercise of discretion. (Para 16)
Issue of Consideration
Whether a lease deed containing an option to purchase the leased property constitutes a contract for sale that can be specifically enforced against the successor-in-interest of the lessor who had notice of the agreement?
Final Decision
The High Court dismissed the appeal, affirming the trial court's judgment and decree dated 30.03.2013 in O.S.No.102/2008, which directed specific performance of the contract for sale.
Law Points
- Specific performance of contract for sale
- Lease deed with option to purchase
- Successor-in-interest bound by contract
- Notice of prior agreement
- Section 96 CPC
- Section 20 Specific Relief Act
