REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOs. 9821-9822 OF 2010
(Arising out of S.L.P. (C) Nos. 14985-14986 of 2010)
M/s J.P. Builders & Anr. .... Appellant(s)
Versus
A. Ramadas Rao & Anr. .... Respondent(s)
WITH
CIVIL APPEAL NOs. 9824-9825 OF 2010
(Arising out of S.L.P.(C) Nos. 15008-15009 of 2010)
AND
CIVIL APPEAL NO. 9826 OF 2010
(Arising out of S.L.P.(C) No. 17435 of 2010)
JUDGMENT
P. Sathasivam, J.
1) Leave granted in all the Special Leave Petitions.
2) These appeals seek to challenge the common
judgment and order dated 23.02.2010 passed by the
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Division Bench of the High Court of Judicature at Madras
in A.S. Nos. 708 of 2008 and 946 of 2009 and W.P. No.
23405 of 2009 whereby the High Court partly allowed A.S.
No. 708 of 2008 confirming the decree for specific
performance granted by the Principal District Court,
Chengalpet in O.S. No. 336 of 2008 and dismissed A.S.
No. 946 of 2009 preferred by the appellants herein. By
the same order, the High Court disposed of W.P. No.
23405 of 2009 with certain directions. By a subsequent
order dated 29.04.2010, the High Court dismissed the
Review Application No. 37 of 2010 in A.S. No. 708 of 2008
and Review Application No. 47 of 2010 in W.P. No. 23405
of 2009 preferred by the appellants herein.
Brief facts:-
3) (a) The subject matter of the suit is a total extent of 30
acres 86 cents of land in Senthamangalam Village,
Sriperumbadur Taluk, Kancheepuram District comprised
in 38 items. M/s J.P. Builders-Appellant No. 1 and Shri
J.P. Paramanandam-Appellant No. 2 herein are the
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owners of the suit property which they acquired under
various sale deeds. The sister concern of M/s J.P.
Builders viz., M/s Anand Agency has availed certain
financial assistance from the Indian Bank, (hereinafter
referred to as `the Bank') and for the said assistance
Appellant Nos. 1 and 2 herein offered their various
properties including the suit property as security for the
principal as well as interest amount payable by M/s
Anand Agency of which Appellant No. 2 is the sole
proprietor.
(b) On 15.08.2005, the appellants entered into a
Memorandum of Understanding (MoU) (Ex. A-2) with
Respondent No. 1 herein for sale of the suit property at a
sale consideration of Rs. 14 lakhs per acre and a sum of
Rs. 1 lakh was paid as advance by way of cheque on the
same day. Balance sale consideration was to be paid
within three months from the date of obtaining
confirmation letter from the Bank.
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(c) On 10.10.2005, M/s J.P. Builders, by a letter
addressed to the AGM, Indian Bank, Asset Recovery
Management Branch II, offered a sum of Rs. 100 lakhs as
full and final settlement of the dues of its sister concern,
M/s Anand Agency, which was declined by the Bank by
letter dated 15.10.2005 advising them to revise the offer
with substantial improvement. By letter dated 23.01.2006,
the Bank stated that Appellant No. 2 herein had not made
any improvement in his One Time Settlement (in short
`OTS') proposal of Rs. 100 lakhs and hence the Bank is
proceeding to enforce its rights under the Securitization
and Reconstruction of Financial Assets and Enforcement
of Security Interests Act, 2002 (hereinafter referred to as
`the Act'). By letter dated 01.02.2006, Appellant No. 2
offered a sum of Rs. 148 lakhs as one time settlement of
the loans availed by M/s Anand Agency.
(d) On 03.02.2006, Respondent No. 1 entered into a Sale
Agreement with the appellants for purchase of the suit
property. The sale price of Rs. 14 lakhs per acre was
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enhanced to Rs. 18 lakhs per acre and the total sale
consideration was fixed at Rs. 5,55,48,000/-. On the
same day, Respondent No. 1 had paid a sum of Rs. 24
lakhs by way of cheque as further advance to Appellant
No.2 in addition to Rs. 1 lakh already paid. On
18.04.2006, a further payment of Rs. 50 lakhs was made
by Respondent No. 1.
(e) On 26.04.2006, the Bank rejected the OTS offer of
Rs. 148 lakhs stating that since the amount offered is very
low, the Bank has decided to pursue the recovery
application filed before the Debts Recovery Tribunal,
(hereinafter referred to as `DRT') Chennai for the recovery
of the dues of the Bank. Again, by letter dated
15.05.2006, the Bank stated that out of court settlement
can be done if an offer of Rs. 629.60 lakhs by working out
interest at PLR i.e. 11% compound on the principal
outstanding as on 31.03.1993 be made. However, since
the settlement amount was more than the sale
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consideration for the suit property, the Appellant No. 2
could not agree to pay the same.
(f) On 26.07.2006, Respondent No. 1 issued a legal notice
to the appellants calling upon them to liquidate the loans
out of the amounts received from him and retrieve the
original documents from the Bank in order to execute the
sale deed. By letter dated 27.07.2006, the Appellant No. 1
replied to the notice stating that the first respondent had
not paid the balance sale consideration in spite of
repeated requests and raised doubt that the first
respondent is no longer interested to buy the suit
property, therefore, a legal notice was sent calling upon
Respondent No. 1 to pay a sum of Rs. 1 crore as liquidated
damages.
(g) On 07.08.2006, Respondent No. 1 filed O.S. No. 336
of 2006 before the Principal District Judge, Chengalpet
against the appellants and the Bank. By judgment and
decree dated 30.04.2008, the Principal District Judge,
Chengalpet decreed the suit partly, granting the relief of
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specific performance directing appellant Nos. 1 & 2 herein
to specifically perform their part of the obligations arising
out of the agreement for sale (Ex. A-3) dated 03.02.2006
by executing the sale deed in favour of Respondent No. 1
on receipt of the balance sale consideration of Rs.
4,80,48,000/- subject to the mortgage of the Bank.
Further the relief in respect of permanent injunction
restraining the appellants from alienating or encumbering
or dealing with the subject property was granted. The
prayer for mandatory injunction for directing the
appellants to discharge the loan in respect of DRT
proceedings pending on the file of DRT-I, Chennai, thereby
retrieve the documents and deliver the same to
Respondent No. 1 at the time of execution and registration
of sale deed was refused. Challenging the rejection of the
prayer of mandatory injunction and failure to award costs,
Respondent No. 1 filed A.S. No. 708 of 2009 before the
High Court of Madras along with interim applications
being M.P. Nos. 1 and 2 of 2008. On 01.02.2009,
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Respondent No. 1 filed another interim application in M.P.
No. 1 of 2009 in A.S. No. 708 of 2008. By order dated
18.04.2009, the Division Bench of the High Court passed
an order of injunction in M.P. No. 1 of 2008 and M.P. No.
1 of 2009 restraining the appellants herein from
alienating, encumbering or dealing with the suit property
pending appeal.
(h) On 06.10.2006, the Bank filed OA No. 491 of 1999
withdrawing its OTS offer of Rs. 629.60 lakhs and called
upon the appellants to pay the total amount due along
with future interest, costs and charges. By order dated
15.05.2009, the Presiding Officer, DRT-I, Chennai,
disposed of O.A. No. 491 holding that the Bank is entitled
to recover a sum of Rs. 11,08,51,875/- from M/s Anand
Agency. Pursuant to the order, the Recovery Officer
issued the recovery certificate being D.R.C. No. 102 of
2009 and also issued the 1st sale notification dated
23.10.2009 bringing to sale the suit property. The upset
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price was fixed at Rs. 27 crores and the date of sale was
fixed as 25.11.2009.
(i) Challenging the decree for specific performance
granted by the Principal Judge, Chengalpet, the
appellants filed A.S. No. 946 of 2009 before the High
Court which was admitted by the Division Bench on
20.10.2009. On 16.11.2009, Respondent No. 1 filed a writ
petition being W.P. No. 23405 of 2009 before the High
Court praying for a writ of mandamus for bringing the suit
property in O.S. No. 336 of 2006 on the file of the
Principal District Judge, Chengalpat in his favour and also
filed Miscellaneous Petition in the aforesaid writ petition
being M.P. No. 1 of 2009 praying to stay the auction sale
of the property covered by the decree dated 30.04.2008
made in O.S. No. 336 of 2006. On the same day, the
interim applications bearing M.P. Nos. 2 & 3 of 2009 in
A.S. 708 of 2008 were also listed and the same were
dismissed by the Division Bench.
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(j) Questioning the auction sale proposed to be
conducted by the DRT, on 19.11.2009, Respondent No. 1
filed I.A. Nos. 1 to 3 in D.R.C. No. 102 of 2009 in O.A. No.
491 of 1991 before the Recovery Officer, DRT-I, Chennai
praying for release of the scheduled property and stay of
auction sale. On 23.11.2009, the Recovery Officer, DRT-I,
Chennai dismissed the said applications. On 24.11.2009,
Respondent No. 1 filed SLP (C) No. 31358 of 2009 before
this Court challenging the order dated 16.11.2009 passed
by the Division Bench of the High Court in M.P. No. 1 of
2009 in W.P. No. 23405 of 2009. Respondent No. 1 also
filed another SLP (C) Nos. 19154-55 of 2009 challenging
the order dated 18.04.2009 passed by the Division Bench
of the High Court in M.P. No. 1 of 2008 and M.P. No. 1 of
2009 in A.S. No. 708 of 2008 and order dated 16.11.2009
in M.P. Nos. 2 & 3 of 2009 in A.S. No. 708 of 2008. On
the very same day, i.e. on 24.11.2009, this Court passed
an order to continue auction but not to declare the result.
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On 11.12.2009, this Court dismissed the SLPs filed by
Respondent No. 1.
(k) On 23.02.2010, the Division Bench, by impugned
judgment, partly allowed A.S. No. 708 of 2008 filed by
Respondent No. 1 herein directing him to deposit the
balance sale consideration of Rs.4,80,48,000/- with 18%
interest from the date of filing of the suit and also directed
the appellants herein to execute the sale deed conveying
the subject property to Respondent No. 1 and the Bank
was directed to proceed against the various other
properties of the appellants being the subject matter of
O.A. No. 491 of 1999 for recovering the balance amount.
The appellants preferred Review Petition No. 37 of 2010
before the High Court which was dismissed on
29.04.2010. Being aggrieved by the impugned judgment
dated 23.02.2010 and order dated 29.04.2010, the
appellants have preferred these appeals by way of special
leave petitions before this Court.
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4) Heard Mr. L. Nageswara Rao and Mrs. Nalini
Chidambaram, learned senior counsel for the appellants
and Mr. R.F. Nariman, learned senior counsel for
respondent No.1 and Mr. Himanshu Munshi, learned
counsel for respondent No.2-Bank.
5) Mr. L.N. Rao and Mrs. Nalini Chidambaram appearing for
the appellants after taking us through the pleadings, judgment
of the trial Court as well as the impugned judgment of the High
Court raised the following contentions:
i) The plaintiff has not established "readiness and
willingness" in terms of Section 16(c) of the Specific
Relief Act, 1963, hence the Courts below ought not to
have granted discretionary relief of decree for specific
performance.
ii) Inasmuch as the agreement being a contingent
contract, which is impossible to fulfil and cannot be
implemented, in such circumstance, whether the
Courts below are justified in granting the relief in
favour of the plaintiffs.
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iii) Whether the right of marshaling by subsequent
purchaser as provided in Section 56 of the Transfer of
Property Act, 1882 (hereinafter referred to as `the T.P.
Act') is available to a decree holder in a suit for specific
performance and whether the High Court is justified in
granting such a relief in the absence of any pleading
and issue before the trial Court.
iv) Whether the High Court is justified in hearing a writ
petition filed under Art. 226 of the Constitution of
India along with the regular first appeal filed under
Section 96 C.P.C.
v) Whether the High Court is justified in issuing certain
directions to the Bank which are contrary to the orders
passed by the competent forum, namely, Debts
Recovery Tribunal.
vi) Whether the High Court is justified in granting cost in
favour of the plaintiff when the same was rightly
disallowed by the trial Court.
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6) On the other hand, Mr. R.F. Nariman, learned senior
counsel for the first respondent, by drawing our attention to
all the relevant materials relied on by the trial Court and the
appellate Court supported the ultimate decision of the High
Court. He submitted that -
i) The plaintiff has established his readiness and
willingness all along and the same was rightly
accepted by the trial Court and confirmed by the
High Court.
ii) The contract in question is not a contingent
contract in terms of Sections 31 and 32 of the
Indian Contract Act, 1872.
iii) In view of the fact that the plaintiff has prayed for
larger relief and the trial Court has confined to
lesser relief of decree for specific performance, the
plea of marshaling being a question of law and
taking note of equity and justice, the High Court
rightly applied the said principle and there is no
error warranting interference on this ground.
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iv) The subject matter of the appeals and the relief
prayed for in the writ petition were interconnected,
hence the High Court is justified in disposing of the
writ petition along with the appeals.
v) Inasmuch as the plaintiff has succeeded partial
relief at the hands of the trial Court after paying
substantial court fee, the High Court is justified in
awarding cost which was omitted by the trial court.
vi) In any event, in view of the materials placed and the
ultimate decision by both the Courts below,
interference by this Court exercising jurisdiction
under Art. 136 is not warranted. Even after grant of
leave, this Court has ample power to dismiss the
appeal without going into all the issues.
7) We have considered the rival contentions and perused all
the relevant materials in the form of oral and documentary
evidence.
Readiness and Willingness
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8) Section 16(c) of the Specific Relief Act, 1963 provides for
personal bars to relief. This provision states that specific
performance of a contract cannot be enforced in favour of a
person,
a) who would not be entitled to recover compensation for its breach;
or
b) who has become incapable of performing, or violates any essential
term of, the contract that on his part remains to be performed, or
acts in fraud of the contract, or wilfully acts at variance with, or in
subversion of, the relation intended to be established by the
contract; or
c) who fails to aver and prove that he has performed or has always
been ready and willing to perform the essential terms of the
contract which are to be performed by him, other than terms the
performance of which has been prevented or waived by the
defendant.
Explanation.- For the purposes of clause (c),-
(i) where a contract involves the payment of money, it is not
essential for the plaintiff to actually tender to the defendant or to
deposit in court any money except when so directed by the court;
(ii) the plaintiff must aver performance of, or readiness and
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willingness to perform, the contract according to its true
construction."
Among the three sub-sections, we are more concerned about
sub-section(c). "Readiness and willingness" is enshrined in
clause (c) which was not present in the old Act of 1877.
However, it was later inserted with the recommendations of
the 9th Law Commission's report. This clause provides that
the person seeking specific performance must prove that he
has performed or has been ready and willing to perform the
essential terms of the contract which are to be performed by
him.
9) The words "ready" and "willing" imply that the person
was prepared to carry out the terms of the contact. The
distinction between "readiness" and "willingness" is that the
former refers to financial capacity and the latter to the conduct
of the plaintiff wanting performance. Generally, readiness is
backed by willingness.
10) In N.P. Thirugnanam vs. Dr. R. Jagan Mohan Rao &
Ors., (1995) 5 SCC 115 at para 5, this Court held:
".....Section 16(c) of the Act envisages that plaintiff must
plead and prove that he had performed or has always been
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ready and willing to perform the essential terms of the
contract which are to be performed by him, other than those
terms the performance of which has been prevented or
waived by the defendant. The continuous readiness and
willingness on the part of the plaintiff is a condition
precedent to grant the relief of specific performance. This
circumstance is material and relevant and is required to be
considered by the court while granting or refusing to grant
the relief. If the plaintiff fails to either aver or prove the
same, he must fail. To adjudge whether the plaintiff is ready
and willing to perform his part of the contract, the court
must take into consideration the conduct of the plaintiff
prior and subsequent to the filing of the suit alongwith other
attending circumstances. The amount of consideration
which he has to pay to the defendant must of necessity be
proved to be available. Right from the date of the execution
till date of the decree he must prove that he is ready and has
always been willing to perform his part of the contract. As
stated, the factum of his readiness and willingness to
perform his part of the contract is to be adjudged with
reference to the conduct of the party and the attending
circumstances. The court may infer from the facts and
circumstances whether the plaintiff was always ready and
willing to perform his part of the contract."
11) In P.D'Souza vs. Shondrilo Naidu, (2004) 6 SCC 649
paras 19 and 21, this Court observed:
"It is indisputable that in a suit for specific performance of
contract the plaintiff must establish his readiness and
willingness to perform his part of contract. The question as
to whether the onus was discharged by the plaintiff or not
will depend upon the facts and circumstance of each case.
No strait-jacket formula can be laid down in this behalf....
The readiness and willingness on the part of the plaintiff to
perform his part of contract would also depend upon the
question as to whether the defendant did everything which
was required of him to be done in terms of the agreement for
sale."
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12) Section 16(c) of the Specific Relief Act, 1963 mandates
"readiness and willingness" on the part of the plaintiff and it is
a condition precedent for obtaining relief of grant of specific
performance. It is also clear that in a suit for specific
performance, the plaintiff must allege and prove a continuous
"readiness and willingness" to perform the contract on his part
from the date of the contract. The onus is on the plaintiff. It
has been rightly considered by this Court in R.C. Chandiok &
Anr. vs. Chuni Lal Sabharwal & Ors., (1970) 3 SCC 140 that
"readiness and willingness" cannot be treated as a straight
jacket formula. This has to be determined from the entirety of
the facts and circumstances relevant to the intention and
conduct of the party concerned. It is settled law that even in
the absence of specific plea by the opposite party, it is the
mandate of the statute that plaintiff has to comply with Section
16(c) of the Specific Relief Act and when there is non-
compliance with this statutory mandate, the Court is not
bound to grant specific performance and is left with no other
alternative but to dismiss the suit. It is also clear that
readiness to perform must be established throughout the
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relevant points of time. "Readiness and willingness" to perform
the part of the contract has to be determined/ascertained from
the conduct of the parties.
13) In the light of the above principles, let us consider whether
the plaintiff has established his case for decree for specific
performance.
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14) Mr. L.N. Rao and Mrs. Nalini Chidambaram vehemently
contended that the plaintiff has miserably failed to prove that
he has fulfilled his obligation both under Ex. A-2 (MoU) and
Ex. A-3 - Agreement for Sale and in those circumstances,
defendants 1 & 2 are not bound to convey the suit property in
favour of the plaintiff. It is not in dispute that on 15.08.2005,
the defendants entered into a MoU with respondent No.1 for
sale of the suit property at a sale consideration of Rs. 14 lakhs
per acre and a sum of Rs. 1 lakh was paid as advance.
Balance sale consideration was to be paid within three months
from the date of obtaining confirmation letter from the second
respondent-Bank. It is seen from the materials that on
10.10.2005, M/s J.P. Builders, by a letter addressed to the
AGM, Indian Bank Assets Recovery Management Branch II,
offered a sum of Rs. 100 lakhs as full and final settlement of
the dues of its sister concern which was declined by the Bank
advising to revise the offer with substantial improvement. By a
letter dated 23.01.2006, the Bank stated that defendant No.2
herein had not made any improvement in his one time
settlement proposal of Rs. 100 lakhs and hence the Bank is
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proceeding to enforce its rights under the Act. It is further
seen that on 01.02.2006, the appellant No.2 offered a sum of
Rs. 148 lakhs as one time settlement. Within two days of the
said offer i.e. 03.02.2006 the plaintiff entered into a Sale
Agreement with the defendants for purchase of the suit
property. The sale price of Rs. 14 lakhs per acre was enhanced
to Rs. 18 lakhs per acre and the respondent No.1 had paid a
sum of Rs. 24 lakhs as further advance to defendant No.2. It
is further seen that on 18.04.2006, a further payment of Rs. 50
lakhs was made by the plaintiff. It is also seen that on
15.05.2006, the Bank rejected the one time settlement offer of
Rs. 148 lakhs stating that out of court settlement can be done
if an offer of Rs. 629.60 lakhs by working out interest at PLR
i.e. 11% compound on the principal outstanding as on
31.3.1993 be made. For this, defendant No.2 could not agree
to pay the same.
15) A perusal of the recitals in the Agreement for Sale (Ex.A-
3) are to the effect that to discharge the bank loan and for the
business purpose of the vendors, the appellants have decided
to sell the properties and offered the same for sale and the
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Respondent No. 1 has agreed to purchase the said property.
In Ex. A-3, it is stated that defendant Nos. 1 & 2/vendors have
undertaken to discharge the loans and hand over the original
title deeds of the said property to the plaintiff within three
months from the date of the agreement for scrutiny of title. It
is relevant to mention here that Ex. A-3, was executed on
03.02.2006. The recital also shows that the plaintiff has to
pay further advance, if any, required by the vendors to release
the documents from the Bank. It is the definite case of the
plaintiff that defendant Nos. 1 & 2 had agreed to liquidate the
property and hand over the original title deeds for which the
plaintiff had paid further advance of Rs. 24 lakhs and on
18.04.2006, he had paid Rs.50 lakhs.
16) We have already adverted to the initial OTS proposal
dated 01.02.2006 expressing second defendant's willingness to
pay for Rs. 148 lakhs since the bank has expressed its
inability to consider, by letter dated 15.05.2006, the bank has
conveyed that OTS will be accepted if the offer is given for Rs.
629.60 lakhs by working out compound interest at 11%. In
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the plaint, there is a specific averment that the plaintiff even
on 18.4.2006 has paid a further advance of Rs. 50 lakhs.
17) In his oral evidence before the Court, the plaintiff - PW-1
had reiterated and in fact asserted that he was always ready
with the money and duly pursuing the OTS along with
Defendant Nos. 1 & 2. Insofar as readiness and willingness on
the part of the plaintiff is concerned, apart from the specific
plea in the plaint about the payment and advance of
substantial amount, he also placed the relevant materials in
the form of letters to show that he was corresponding with the
Bank for early settlement of the dues. In other words, the
assertion in the form of specific plea in the plaint and
correspondence in the form of letter, his assertion in the
witness box at the time of trial, the Courts below are right in
arriving at a conclusion that the plaintiff has proved and
complied with the mandates provided under Section 16 (c) of
the Specific Relief Act.
18) Mrs. Nalini Chidambaram before the High Court as well
as before us by basing reliance on clause 4 of the MoU (Ex. A-
2) contended that the balance sale consideration has to be
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paid within one week of the receipt of Confirmation Letter from
the Bank and absolutely there is no material to show that the
plaintiff was ready with the money within the prescribed
period of one week. It is also pointed out that in addition to
the same, plaintiff has to pay the amount to clear the bank
loan and without paying the amount within the prescribed
period, the plaintiff has committed breach of his obligations,
hence, the plaintiff is not permitted to blame the defendant
which would arise only after the performance of the plaintiff's
obligation. In order to prove her stand, learned senior counsel
for the appellants heavily placed reliance on Clauses 4, 6 and
7 of Ex. A-2. In the light of the said claim, we perused various
clauses in Ex. A-2 as well the subsequent agreement for sale
dated 03.02.2006, Ex. A-3. As rightly pointed out by the
Division Bench, defendant Nos. 1 & 2 had entered into an
agreement to sell the suit property to discharge loans and
handover the original title deeds has been reiterated both in
Ex. A-2 and Ex. A-3. However, it is to be noted that after
execution of Ex. A-3, i.e. agreement for sale dated 03.02.2006,
defendant Nos. 1 & 2 have undertaken to discharge the loans
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and handover the original title deeds to the plaintiff. No
doubt, as per Ex. A-3, plaintiff has to pay further advance, if
required by the vendors to release the documents from the
Bank. The plaintiff has demonstrated by placing oral and
documentary evidence that on the date of execution of Ex. A-3,
he has paid further advance of Rs. 24 lakhs and Rs. 50 lakhs
on 18.04.2006. It was pointed out that the plaintiff has settled
Rs. 75 lakhs out of the sale consideration and for the balance
sale price he has deposited a sum of Rs. 2,45,00,000/- in
Indian Overseas Bank, Sowcarpet Branch, Chennai. The
deposit receipt of the said amount is produced as Ex. A-13. In
order to prove that he had sufficient means of finance, the
plaintiff has produced documents under Ex. A-12 and Ex. A-
13. In his evidence as PW-1, the plaintiff has asserted that he
was having ready cash and also produced Ex. A-11, Fixed
Deposit Receipt (FDR dated 19.04.2006 in his name) in Indian
Overseas Bank for Rs. 2,45,00,000 with date of maturity as
18.07.2006. Ex. A-12 is the certificate issued by the Indian
Bank, Alwarpet Branch, Chennai stating that the plaintiff is
maintaining Savings Bank Account No.726244658 in their
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bank and the balance as on 20.04.2007 is Rs. 1,50,00,444/-
Ex. A-13 is the Certificate issued by Indian Overseas Bank
stating that credit balance of plaintiff's savings bank account
No. 6874 is Rs. 304,12,574.08 as on 21.04.2007. If we analyse
Ex. A-11 to Ex.A-13 coupled with assertion made in the oral
evidence of PW-1, it would amply show that plaintiff was
having sufficient cash and financial capacity to complete the
transaction. Further the plaintiff is required to pay the
balance amount of consideration only on the event of a
demand made for payment of further amount by the
defendants on the basis of the confirmation letter to be
obtained from the bank as per the agreement for sale under
Ex. A-3. Absolutely, there is no evidence as to any demand
made by defendant Nos. 1 & 2 from the plaintiff for further
payment of sale price. Inasmuch as under Ex. A-4, he had
intimated that he is prepared to get the sale executed while
perusing the aforesaid bank deposit receipts, it is clearly
revealed that the plaintiff was endowed with the means to pay
the sale consideration and had ever been prepared to do the
same. On the other hand, it is not the case of Defendant Nos.
2
1 & 2 that they have asked for further advance and that the
plaintiff did not respond for their request. As rightly pointed
out by the trial Court and commended by the High Court, it is
not clear that why Defendant Nos. 1 & 2 fail to led oral
evidence in support of their claim. It is also not clear why they
have avoided the witness box, though it is stated that the
plaintiff had admitted the stand of Defendant Nos. 1 & 2
which is factually incorrect and unacceptable. The only
objection pointed out was that for effective OTS, even though,
the plaintiff has deposited Rs.10,01,000/- in the "No lien
account" of second defendant, the plaintiff has surreptitiously
withdrawn the said amount which had upset the settlement
talks between defendant Nos. 1 & 2 and the 3rd defendant-
Bank on the other side. It is true that as per clause 4 of Ex.
A-2 MoU, the plaintiff has agreed to pay further advance to
defendant Nos. 1 & 2 to enable them to pay and clear the bank
loan obtained by their sister concern namely, M/s Anand
Agency, wherein defendant No.1 - J.P. Builders have stood as
guarantors to the said loan. It is equally true that in the letter
(Ex. B-1), addressed to the Assistant General Manager of the
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Bank, the plaintiff has stated that he has deposited
Rs.10,01,000/- in a "No-lien account" towards M/s. Anand
Agency and that he has proposed to purchase the property
from them which was mortgaged to the Bank and after
acceptance of the compromise settlement, the amount can be
appropriated towards the compromise arrived. In the same
letter, the plaintiff has also informed that if the compromise
settlement is not materialized, the said deposit may be
released to him. However, as pointed out earlier, one time
settlement offer of Rs. 148 lakhs was not acceptable by the
Bank and because of the same, the plaintiff withdrew the said
deposit and the bank by a letter (Ex. B-2), informed the second
defendant about the same. As rightly pointed out by the High
Court, mere withdrawal of Rs. 10,01,000/- deposited in "No-
lien account" by the plaintiff has no significance since
subsequent to the same both parties have entered into Ex. A-
3, Agreement for sale on 03.02.2006 and on which date the
plaintiff has also paid a further advance of Rs. 25 lakhs.
These facts have been clearly explained by PW-1 in his
evidence and he also asserted that the same fact was orally
2
informed to Defendant Nos. 1 & 2. We have already pointed
out that there is no reason to disbelieve the assertion of PW-1.
As rightly pointed out by Mr. R.F. Nariman, learned senior
counsel for the first respondent-plaintiff that after receipt of
Ex. B-2 Defendant Nos. 1 & 2 have not raised any protest but
on the other hand they proceeded to further advance of Rs. 50
lakhs from the plaintiff on 18.04.2006 and made endorsement
in Ex. A-3 agreement for sale. In those circumstances, as
rightly pointed out and correctly appreciated by the High
Court, withdrawal of Rs. 10,01,000 from "No-lien account" of
M/s Anand Agency by the plaintiff would not lead to the
conclusion that the plaintiff had committed breach and was
not ready to perform his part of the contract.
19) With the materials placed, specific assertion in the plaint,
oral and documentary evidence as to execution of agreement,
part-payment of sale consideration, having sufficient cash and
financial capacity to execute the sale deed, bank statements as
to the moneys in fixed deposits and saving accounts, we are of
the view that the plaintiff has proved his "readiness" and
"willingness" to perform his part of obligation under the
3
contract. The concurrent findings of the trial court as well the
High Court as to readiness and willingness to perform
plaintiff's part of the obligations under the contract, in the
absence of any acceptable contra evidence is to be confirmed.
We agree with the conclusion arrived at by the trial Court as
well as by the High Court on the readiness and willingness on
the part of the plaintiff and reject the argument of the learned
senior counsel for the appellants.
Contingent Contracts
20) By pointing out various clauses in the MoU (Ex. A-2), Ms.
Nalini Chidambaram, learned senior counsel for the appellants
heavily contended that inasmuch as the contract was
depending upon uncertain events of the Indian Bank, agreeing
for OTS, the contract entered is contingent depending on the
move of the Indian Bank. According to her, inasmuch as
various clauses insists certain impossible conditions at the
hands of the Indian Bank, the contract entered into between
the plaintiff and defendants become impossible and void.
Though such an argument was advanced before us, there was
no such specific plea in their written statement and the Trial
3
Court has not framed separate issue and considered the same.
Irrespective of the above position, in view of the assertion
made by learned senior counsel, we intend to discuss and give
our answer.
21) Chapter III of the Indian Contract Act, 1872 deals with
Contingent Contracts. Contingent contract has been defined
in Section 31 and method of enforcement is stated in Section
32 which reads as under:
"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.
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.
If the event becomes impossible, such contracts become
void."
It is clear that if the condition prescribed or even described in
the contract is impossible, undoubtedly, such contracts
become void and not enforceable in terms of Section 32. The
events enumerated in the contract, according to Ms. Nalini
Chidambaram are (a) a letter specifying the balance due to the
bank (b) an undertaking later from the Bank that it will receive
the said balance amount (c) they will handover the original
3
documents directly to the plaintiff. While elaborating the said
points, learned senior counsel highlighted that for executing
the sale deed, getting confirmation or clearance letter from the
Indian Bank on payment of the dues to the Bank and getting
original documents have been emphasized in various clauses
in the MoU (Ex. A-2). Among various clauses, she highlighted
Clauses 4, 6, 7 in the MoU (Ex. A-2). No doubt, those
conditions have been enumerated in the above referred
clauses. She also brought to our notice that the Indian Bank
not only declined the OTS offer of Rs 148 lakhs but got a
decree for Rs. 8,51,825.29 from the DRT. The very same
contentions were raised before the High Court. Mr. R. F.
Nariman, by drawing our attention to Ex. A-3 contended that
Agreement for Sale dated 03.02.2006 is a fresh agreement
hence clause 4, 6 and 7 of the MoU (Ex. A-2) would not govern
the parties. We have once again perused various clauses in
Ex. A-2 as well as subsequent agreement for sale Ex. A-3. It is
relevant to note that in the plaint, in paragraph 7, this aspect
has been specifically pleaded wherein it was highlighted that
the plaintiff sought for performance of contract strictly in
3
accordance with the original Memorandum of Understanding
(MoU) dated 15.08.2005 as emerged with the agreement for
sale dated 03.02.2006 entered into between the plaintiff and
the defendant Nos. 1 and 2 in Chennai for sale and purchase
of the suit property. In fact, this was specifically mentioned by
the plaintiff in his rejoinder notice dated 31.07.2006
addressed to defendant Nos. 1 and 2 and even after receipt of
the same, they have not chosen to send any reply disputing
the same. In those circumstances, we agree with the
conclusion arrived at by the High Court, namely, after the
parties entered into Ex. A-3 agreement for sale, Clauses 4, 6
and 7 of the MoU (Ex A-2) would not govern the parties. On
the other hand, as per Clause 3, 4 and 6 in Ex. A-3, the
vendor and defendant Nos. 1 and 2 have undertaken to
discharge their loans and hand over title deeds. The relevant
clauses, namely, 3, 4 and 6 of Ex. A-3 are as follows.
"......3. The balance of sale consideration shall be paid by the
PURCHASER TO THE VENDORS on or before the
Registration of the Deed of Sale.
4. The Vendor undertake to discharge the Loans and hand
over the ORIGINAL TITLE DEEDS relating to Schedule
mentioned properties to the PURCHASER, within three
months from this date for scrutiny of title. HOWEVER, the
3
purchaser has to pay further advance if any required by the
VENDORS, to release the documents from Bank.
6. The sale shall be completed within six months from the
date of production of ORIGINAL DOCUMENTS by the
VENDORS to the Purchaser....."
22) If we accept the above stand and conduct of the parties
and fresh terms as mentioned above in Ex. A-3, the conditions
incorporated in Ex. A-2 need not be complied with and it
cannot be contended that the contract was a contingent
contract and unless and until a letter of confirmation issued
by the Indian Bank, the same is not enforceable. As rightly
pointed out by Mr R. F Nariman, the vendors have agreed to
sell the property but agreed to execute the sale deed after
discharge of the mortgage in favour of the defendants. In
other words, it was only the execution of the sale deed which
was postponed to a future date. The clauses referred above in
Ex A-3 do not insist the sale deed is to be executed only after
the acceptance of OTS proposal by the Bank. It is true that
the first OTS offered by defendant Nos. 1 and 2 was not
acceptable by the Bank. When the Bank offered OTS for Rs.
629.60 lakhs, it was not acceptable by the defendant Nos 1
and 2. Clause 4 of Ex. A-3, makes it clear that to discharge
3
the loans of the Bank, the vendors are free to make a request
to the purchaser, namely, the plaintiff, to make further
advance and after getting the amount from the plaintiff,
defendant Nos. 1 and 2 have to secure documents from the
Bank. The trial Court as well as the High Court held that
there is no material to show that the defendant Nos. 1 and 2
made any attempt to comply with Clause 4 in Ex. A-3 by
requiring the plaintiff to make further advance. In the earlier
paragraphs, we have also highlighted the conduct of the
plaintiff in keeping the required money, no doubt, in their SB
account for the purpose of meeting the demand of the
defendant Nos. 1 and 2. Even otherwise, the agreement to
discharge the loans of the Bank and handover the original title
deeds to the plaintiff cannot be construed as impossible event
and it would affect the terms of contract to become void, more
particularly, when the plaintiff deposited substantial amount
facilitating the defendant Nos. 1 and 2 to meet their
requirement for fulfilling the contract. As rightly observed by
the High Court, in the light of various clauses in the
agreement agreed to by both the parties, the same cannot be
3
termed as a contingent contract.
23) As stated earlier, merely because the contract insist
settlement of a loan of the bank and handover the title deeds
to the plaintiff from the bank are not impossible events in the
light of the performance made by the plaintiff, the contract in
question did not come to an end on this ground and such
contract is not a contingent contract and undoubtedly, the
Court has jurisdiction to grant relief in terms of the contract.
Obtaining No Objection Certificate (NOC) from the authority
concerned, clearance of NOC from Income Tax Department or
any other State/Central authority, securing title deeds after
clearing certain loans are incidental and implied covenant on
the part of the vendors to do the needful to give effect to the
agreement.
24) It is also relevant to point out that though defendant Nos.
1 and 2, at the first instance offered OTS for Rs. 148 lakhs,
the Bank, after taking note of various aspects claimed Rs.
629.60 lakhs as their proposal. As rightly pointed out by Mr.
R.F. Nariman, it was not an impossible performance
considering the amount borrowed by the sister agency of the
3
Ist defendant and various properties possessed by defendant
Nos. 1 and 2 in prime localities of Chennai and in and around
the sub-urban areas of Chennai.
25) We are satisfied that the contract in question is capable
of performance and the contention of the learned senior
counsel for the appellants that it is a contingent contract and
is incapable of performance cannot be accepted. We have
already pointed out that this was not an issue before the trial
Court and such plea was not raised in the written statement.
We have also pointed out that defendant Nos. 1 and 2 did not
bother to explain all salient features by entering the witness
box in support of their claim. We have already highlighted
that the plaintiff has established that he has partially
performed his part of obligations by paying the advance
amount of Rs. 25 lakhs and another Rs. 50 lakhs in addition
to the initial deposit of Rs. 1 Lakh. We also hold that plaintiff
has proved his readiness and willingness and financial ability
to complete the sale transaction. Accordingly, we reject the
second contention also.
3
Marshalling
26) It is the claim of the plaintiff before the High Court that
having secured a decree for specific performance as per
Section 56 of the T.P. Act, 1882, by applying the principles of
Marshalling, directions may be issued to the Bank to exhaust
its remedy from other items of property which are located in
the prime places in Chennai before bringing the properties
covered in the agreement of sale.
27) In order to understand the claim of the plaintiff and the
stand taken by the defendant Nos. 1 and 2, it is useful to refer
Section 56 of the T. P. Act.
"56. Marshalling by subsequent purchaser.--If the owner
of two or more properties mortgages them to one person and
then sells one or more of the properties to another person,
the buyer is, in the absence of a contract to the contrary,
entitled to have the mortgaged-debt satisfied out of the
property or properties not sold to him, so far as the same will
extend, but not so as to prejudice the rights of the mortgagee
or persons claiming under him or of any other person who
has for consideration acquired an interest in any of the
properties."
Similar to this is Section 81 of the T.P. Act which speaks about
marshalling securities. The High Court after noting that the
plaintiff had paid substantial amount as advance and secured
3
decree for specific performance, came to the conclusion that
the right of marshalling is available to the plaintiff. Section 56
deals with the right of subsequent purchaser to claim
marshalling. It should be contrasted with Section 81 which
refers to marshalling by a subsequent mortgage. The concept
as in Section 56 applies to sales in a manner similar to Section
81 which applies to mortgages alone.
28) The concept of marshalling by subsequent purchaser can
be explained by the following illustration. Suppose A owns
properties X and Y. Both these properties are mortgaged to C.
Later, A sells property X to B. Now, B will be entitled to insist
that his vendor A, shall satisfy his mortgage debt out of
property Y (unsold) in the first instance as far as possible. If
after property Y is exhausted there still remains balance of
debt, only then property X will be drawn upon. As stated
earlier, Section 56 deals with the concept of marshalling in a
transaction involved in subsequent sale, on the other hand,
Section 81 is applicable only to mortgages. The doctrine of
marshalling rests upon the principle that a creditor who has
the means of satisfying his debt out of several funds shall not,
4
by the exercise of his right, prejudice another creditor whose
security comprises only one of the funds.
29) As rightly pointed out, in view of the sale agreement
which results into decree for specific performance, the plaintiff
is entitled to insist upon defendant Nos. 1 to 3 to have the
mortgage debt satisfied out of the properties not sold to the
plaintiff and in any case if the sale proceeds are not sufficient
then to proceed against the said suit properties. Learned
senior counsel for the appellants strongly objected the
application of the principle of marshalling by subsequent
purchaser by the High Court when the plea of marshalling was
not taken by the plaintiff in the trial Court. In other words,
according to them, without taking such plea before the trial
court, the same cannot be taken for the first time before the
Appellate Court. It is not in dispute that the plea of
marshalling and applicability of Section 56 of the T.P. Act was
not raised before the trial Court. However, if we consider the
entire plaint, which is available in the appeal paper-book, the
plaintiff has claimed a larger relief. In para 12 of the plaint,
the plaintiff has prayed for the following reliefs.
4
(i) "directing the Defendant Nos. 1 and 2 to specifically
perform the Agreement for Sale Deed dated 03.02.2006 in
respect of the suit schedule mentioned property which is
more fully described in the schedule hereunder, by
executing a Deed of Sale or Deeds of Sale and register a
valid conveyance in favour of the Plaintiff or his nominee
or nominees on a date to be fixed by this Court and/or in
default, direct the officer of this Court to convey the suit
schedule mentioned property on behalf of the Ist and 2nd
Defendants herein in favour of the plaintiff or his nominee
or nominees on a date to be fixed by this Court on receipt
of the balance sale consideration of Rs. 4,80,48,000/-
payable by the Plaintiff to them.
(ii) For a mandatory injunction directing the 1st and 2nd
Defendants to discharge the loan payable to the 3rd
Defendant Bank in respect of DRT proceedings pending
on the file of DRT, Chennai as per the terms of the
contract dated 03.02.2006 thereby retrieve the
documents and deliver the same to the plaintiff at time of
execution and registration of Sale Deed or Sale Deeds in
favour of the plaintiff or his nominee or nominees either
in one lot or in pieces as the case may be.
(iii) Not pressed, deleted.
(iv) For a permanent injunction restraining the Defendants 1
and 2, their men, servants, agents, or any one claiming
through them or authorized by them in any manner
alienating, encumbering or dealing with the suit schedule
mentioned property either by way of sale, mortgage, lease,
joint-development, or otherwise, or putting up any
construction thereon except in accordance with law.
(v) To grant such further or other reliefs; and
(vi) To award the costs of this suit."
30) As observed by the High Court, the plaintiff was under an
impression that the trial Court would grant the entire relief as
claimed and he did not anticipate that he could get a part of
4
relief sought for by him. In this circumstance, learned senior
counsel appearing for the plaintiff was right in highlighting
that there was no occasion for the plaintiff to raise the plea of
marshalling at the time of filing of the suit. Even otherwise, as
rightly observed by the High Court, the plea of marshalling
being pure question of law based upon the decree obtained for
specific performance, cannot simply be thrown out merely
because the same was not specifically pleaded.
31) Mrs. Nalini Chidambaram strongly contended that in the
absence of any plea the claim of marshalling cannot be applied
to the plaintiff. In support of her stand she relied on
Anathula Sudhakar vs P. Buchi Reddy (Dead) By Lrs. And
Ors. (2008) 4 SCC 594 wherein this Court held "no amount of
evidence or arguments can be looked into or considered in the
absence of pleadings and issues, is a proposition that is too
well settled." Absolutely, there is no dispute about the said
proposition. In the said decision, the High Court in a Second
Appeal arising from a suit for bare injunction while reversing
the decision of the first Appellate Court, examined various
aspects relating to title and recorded findings and proceeded to
4
discuss and grant relief in the absence of pleadings and issues
regarding title. Similar view has been expressed in Bachhaj
Nahar vs. Nilima Mandal and Anr (2008) 17 SCC 491. It is
relevant to extract the principles enunciated in para 23 of the
judgment which are as follows.
"23. It is fundamental that in a civil suit, relief to be granted
can be only with reference to the prayers made in the
pleadings. That apart, in civil suits, grant of relief is
circumscribed by various factors like court fee, limitation,
parties to the suits, as also grounds barring relief, like res
judicata, estoppel, acquiescence, non-joinder of causes of
action or parties, etc., which require pleading and proof.
Therefore, it would be hazardous to hold that in a civil suit
whatever be the relief that is prayed, the court can on
examination of facts grant any relief as it thinks fit. In a suit
for recovery of rupees one lakh, the court cannot grant a
decree for rupees ten lakhs. In a suit for recovery possession
of property `A', court cannot grant possession of property `B'.
In a suit praying for permanent injunction, court cannot
grant a relief of declaration or possession. The jurisdiction to
grant relief in a civil suit necessarily depends on the
pleadings, prayer, court fee paid, evidence let in, etc."
In those circumstances, while reiterating the principles laid
down above, we hold that the same are not applicable to the
case on hand.
32) We have already demonstrated the relief prayed in the
plaint by paying substantial court fee of Rs. 41,66,326.50. In
such circumstance, when a party is able to secure substantial
relief, namely, decree for specific performance with clearance
4
of mortgage amount, it is the duty of the Court to mould the
relief so as to render substantial justice between the parties.
In this regard, we accept the course adopted by the High Court
in granting relief to the plaintiff.
33) We are also satisfied that merely because for recovery of
the loan secured by banks, a special Act, namely, Recovery of
Debts due to Banks and Financial Institutions Act, 1993 has
been enacted which is not a bar for the civil Court to apply to
other relief such as Section 56 of the T.P. Act. We are also
satisfied that by issuing such direction on the application of
Section 56 of the T.P. Act, the Division Bench has not modified
or eroded the order passed by the DRT. On the other hand, it
is an admitted fact that the Bank has accepted the impugned
verdict of the High Court and did not challenge the same
before this Court by filing an appeal. We are also satisfied
that by granting such a relief, the Bank is not prejudiced in
any way by bringing other properties for sale first to satisfy the
mortgage debt payable by defendant Nos. 1 and 2. In fact, the
High Court was conscious and also observed that if sale
proceeds of other items of properties are not sufficient to
4
satisfy the debt payable to the Bank by defendant Nos. 1 and
2, in that event, Bank can proceed against the suit properties.
34) We are also conscious of the fact that the said doctrine
cannot be permitted to become a device for destructing the
sanctity of contract. The court will also not apply the doctrine
of impossibility to assist a party which does not want to fulfill
its obligations under the contract.
About Writ Petition:
35) It is relevant to note that during the pendency of the
appeals before the High Court, the very same plaintiff filed
Writ Petition No. 23405 of 2009, impleading defendant Nos. 1
and 2, M/s Anand Agency which is a sister concern of
defendant No. 1 and 3rd defendant-Bank apart from Union of
India, praying for issuance of a writ of Mandamus forbearing
the respondents from bringing the scheduled property forming
the subject matter of the decree in his favour in O.S. No 336 of
2006 on the file of the Principal District Judge, Chengalpet by
way of auction. He also prayed for certain other directions.
Objections were raised by the appellants about the hearing of
4
the writ petition along with the appeals. We have already
adverted to the facts leading to the filing of two regular First
Appeals before the High Court. It is not in dispute that the
parties in those appeals as well as in the writ petition are one
and the same except Union of India against whom the writ
petitioner has not sought any relief. It is also not in dispute
that the subject matter of the lis and properties are one and
the same in both the appeals and the writ petition. There is
no bar for the Division Bench which has jurisdiction to hear
appeal, to hear writ petition when the same is connected with
the main issue. In fact, no serious objection was raised before
the High Court for hearing the writ petition along with the
appeal. On the other hand, on the earlier occasion, when the
parties have filed special leave petitions against certain interim
orders, this Court requested the High Court to dispose of all
the matters together. It is relevant to point out that no
clarification or direction was sought in respect of the said
order passed by this Court.
36) Mr. R.F. Nariman, learned senior counsel has pointed out
that the writ petitioner has highlighted the applicability of the
4
principle of marshalling. He pointed out that in grounds (j)
and (k), the factual aspects about applicability of marshalling
have been highlighted. Since the appellants have seriously
objected that in the absence of any material, the High Court
ought not to have considered the same, we reproduce the said
grounds hereunder:
(j) "When there are other properties belonging to the Judgment
Debtors are available for auction sale for realization of the
D.R.C. issued the suit properties are brought to auction
sale, leaving out the other valuable properties of the
Respondent Nos. 1 & 2 at Chennai and the property covered
by the decree situate at Senthamangalam village are
brought to sale and the said action of the respondents
would defeat and frustrate the decree for specific
performance granted in favour of the petitioner herein.
(k) When there are more than one property belonging to the
borrowers are available leaving out all the properties
including the 3 valuable properties at Chennai are left from
auction sale and the property situate at Senthamangalam
village (forming the decree property) would demonstrate that
the respondent bank with tacit understanding with the
borrowers is attempting to destroy the rights of the Decree
Holder who is holding a decree for specific performance
which has not been stayed by the High Court, Madras and
the respondent bank is not willing to receive the monies
offered by the petitioner on behalf of the Respondents 4, 5
and 6 ever since the inception of the suit in August 2006 till
date which would demonstrate the motive of the bank in
indulging in dilatory tactics, the Respondents 2 and 3 in
collusion and connivance of the respondents 4, 5 and 6 are
bringing the property covered by the decree solely with a
view to frustrate the decree secured by the petitioner
herein."
4
Though the plea of `marshalling' has not been specifically
mentioned but all the required details have been referred to. It
is not clear whether any objection/counter has been filed by
the respondent Nos. 4 to 6 therein (respondent Nos. 1 & 2
herein) about those factual details. Irrespective of the same,
we have already concurred with the High Court in applying the
said principle considering the larger relief prayed for in the
suit and the plaintiff was having a decree for specific
performance subject to clearance of mortgage loan with the
Bank.
37) In Sain Ditta Mal vs. Bulagi Mal & Sons and others,
AIR (34) 1947 Lahore 230, the High Court after adverting to
Section 56 of the Transfer of Property Act has held that this
equitable doctrine exists for the benefit of the buyer alone.
Following the said decision of the Lahore High Court, Karam
Singh Sobti vs. Smt Shukla Bedi, AIR 1962 Punjab High
Court at Delhi 477 reiterated the same principle.
4
38) The principle laid down in Brahm Parkash vs. Manbir
Singh & Ors., [1964] 2 SCR 324 at 335 is also relevant to
quote:.
"The other submission of learned counsel was that the
learned Judges failed to give effect to the last portion of
Section 56 under which marshalling is not to be permitted
so as to prejudice the rights inter alia of the mortgagees or
other persons claiming under him i.e. under the original
mortgagor. Learned counsel pointed out that the appellant
having proved his mortgage and the fact that it was
subsisting, the learned Judges of the High Court ought to
have held that any direction as to marshalling must
necessarily prejudice him. We are unable to agree that this
follows as any matter of law. The question of prejudice is
purely one of fact which has to be pleaded and the necessary
facts and circumstances established. It is obvious that the
question of prejudice would be intimately connected with the
value of the property against which the mortgagee is directed
to proceed in the first instance. If even after paying off such
a mortgage there is enough left for payment over to the
subsequent encumbrancer referred to in the last portion of
Section 56 it would be manifest that there would be no
question of prejudice. If therefore the appellant desired to
invoke the benefit of the last portion of Section 56 he should
have made some plea as to the value of the property and
shown how it would prejudice his rights as a subsequent
encumbrancer. He however made no such plea and no
evidence was led as to the value of the property. Even at the
stage of the appeal in the High Court the contention that to
allow marshalling in favour of the subsequent purchaser --
Mukhamal would result in prejudice to him was admittedly
never put forward before the learned Judges. As the point is
one not of pure law but springs from the factual inadequacy
of the property mortgaged to him to discharge his debt it is
too late for the appellant to raise such a plea in this Court."
It is clear that the application of the principle of marshalling
may cause prejudice to the other party, but their Lordships
have held that the said prejudice is a pure question of fact and
depends upon various factors.
5
39) In the light of the details and materials highlighted in the
earlier paragraphs and as discussed by the High Court, we are
satisfied that the High Court is right in applying the principle
of marshalling in favour of the plaintiff that too by
safeguarding the interest of the 3rd defendant-Bank. In fact,
the Bank did not challenge the impugned judgment of the
High Court. Accordingly, we reject the contrary arguments
made in respect of applying the principle of marshalling at the
appellate stage.
Cost
40) Though no serious argument was advanced about the
award of cost, in the grounds raised in the appeal, the
appellants have agitated the award of cost by the High Court
in favour of the plaintiff. Section 35 of the CPC speaks about
Cost. Inasmuch as the plaintiff after valuing the suit paid a
substantial court fee of Rs. 41,66,326.50 and ultimately he
secured a decree for specific performance though he could not
secure a relief in its entirety, the plaintiff is entitled for his
cost. It is not in dispute that the court has granted the major
5
relief, namely, decree for specific performance subject to
clearance of the mortgage debt. In those circumstances, the
High Court having noticed the payment of substantial court
fee ordered cost payable by the contesting defendant Nos. 1
and 2 to the plaintiff. We agree with the said direction.
Direction to the Recovery Officer/Tribunal
41) Learned senior counsel for the appellants contended that
the jurisdiction of Recovery officer/Tribunal is exclusive and
no other Court can go into their order for which they relied on
Allahabad Bank vs. Canara Bank & Anr., (2000) 4 SCC
406, State Bank of India vs. Allied Chemical Laboratories
& Anr., (2006) 9 SCC 252, India Household and
Healthcare Ltd. vs. LG Houshold and Healthcare Ltd.,
(2007) 5 SCC 510. We are conscious of the principles
enunciated in these decisions. However, in our case, the High
Court taking note of the fact that it had considered various
connected issues in respect of the same properties in which
both the Civil Court and the DRT passed several orders and
the fact that defendant Nos. 1 and 2 are having sufficient
other properties in prime locations at Chennai and other
5
places nearby Chennai and also of the fact that the Bank was
also party to both these proceedings and accepted the
impugned order of the High Court and not filed any appeal
before this Court, we feel that the direction/clarification
issued by the High Court does not run counter to the orders of
DRT/Recovery Officers, on the other hand, it safeguards the
interest of all parties. Only because of the delay on the part of
the defendant Nos. 1 and 2 in not settling the dues of the
Bank at the appropriate time, in the recent times, property
value has risen to some extent. On this ground, we cannot
interfere with the direction of the High Court about the sale of
the said properties.
Interference under Article 136 of the Constitution of India
42) Though we have exhaustively dealt with the merits of the
appeals, Mr. R.F. Nariman, learned senior counsel for
Respondent No. 1 highlighted that even after grant of leave,
there is no obligation on the part of this Court to go into all
aspects and decide after giving reasons. According to him, in
view of the concurrent findings by the Trial Court and the
High Court about the decree for specific performance and
5
other relief by the High Court based on the question of law
and equity, this Court has ample power to dismiss all the
appeals even without assigning any reason.
43) In Balvantrai Chimanlal Trivedi, Manager Raipur
Manfg. Co. Ltd., Ahmedabad vs. M.N. Nagrashna and
Others, AIR 1960 SC 407, while considering the scope of
Article 136 of the Constitution of India, a three-Judge Bench
of this Court has concluded:
"5. The question then arises whether we should interfere in
our jurisdiction under Article 136 of the Constitution, when
we are satisfied that there was no failure of justice. In
similar circumstances this court refused to interfere and did
not go into the question of jurisdiction on the ground that
this Court could refuse interference unless it was satisfied
that the justice of the case required it: see A.M. Allison vs.
B.L. Sen, (1957) SCR 359: ((S) AIR 1957 SC 227). On a
parity of reasoning we are of opinion that as we are not
satisfied that the justice of the case requires interference in
the circumstances, we should refuse to interfere with the
order of the High Court dismissing the writ petition of the
appellant. We accordingly dismiss the appeal, but having
regard to the peculiar circumstances of the case which we
have referred to above we order that each party will bear its
own costs of this appeal."
44) In Balvantrai Chimanlal Trivedi vs. M.N. Nagrashna
and Others, AIR 1960 SC 1292, the Constitution Bench of
this Court, while considering the jurisdiction of this Court
under Article 136, has held:
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"....It is necessary to remember that wide as are our powers
under Article 136, their exercise is discretionary; and if it is
conceded, as it was in the course of the arguments, that this
Court could have dismissed the appellant's application for
special leave summarily on the ground that the order under
appeal had done substantial justice, it is difficult to
appreciate the argument that because leave has been
granted this Court must always and in every case deal with
the merits even though it is satisfied that ends of justice do
not justify its interference in a given case. In the
circumstances we are of opinion that this Court was not
bound to decide the question of jurisdiction on the facts and
circumstances of this case when it had come to the
conclusion in dealing with an appeal under Article 136 of the
Constitution that there was no failure of justice. The review
application therefore fails and is hereby dismissed with
costs."
45) In Taherakhatoon (D) By Lrs. vs. Salambin
Mohammad, (1999) 2 SCC 635, the following point arose for
consideration.
"(2) Whether the discretionary power available to this Court
at the time of grant of special leave continues with the Court
even after grant of special leave and when the appeal is being
heard on merits and whether, this Court could declare the
law and yet not interfere or could mould the relief? Or
whether, once the law is declared, this Court is bound to
grant possession and the mandatory injunction?
Their Lordships have held:
15. It is now well settled that though special leave is granted,
the discretionary power which vested in the Court at the
stage of the special leave petition continues to remain with
the Court even at the stage when the appeal comes up for
hearing and when both sides are heard on merits in the
appeal. This principle is applicable to all kinds of appeals
admitted by special leave under Article 136, irrespective of
the nature of the subject - matter. It was so laid down by a
Constitution Bench of five learned Judges of this Court in
Pritam Singh v. State. In that case, it was argued for the
appellant that once special leave was granted and the matter
was registered as an appeal, the case should be disposed of
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on merits on all points and that the discretionary power
available at the stage of grant of special leave was not
available when the appeal was being heard on merits.
20. In view of the above decisions, even though we are now
dealing with the appeal after grant of special leave, we are
not bound to go into merits and even if we do so and declare
the law or point out the error -- still we may not interfere if
the justice of the case on facts does not require interference
or if we feel that the relief could be moulded in a different
fashion. We have already referred to the various
circumstances of the case which show that the plaintiff, on
her own admission, had knowledge of the trespass in
December 1967 and did not raise any objection to the
construction of the two rooms though she was the adjacent
neighbour. She gave notice only after 7 years in 1974 and
she filed suit in 1975. These two rooms have been there for
the last 30 years. In those circumstances, we declare the law
by holding that the High Court while dealing with a second
appeal under Section 100 CPC erred in not framing a
substantial question of law and that it also erred in
interfering with a pure question of fact relating to the
genuineness of the agreement. We declare that this was not
permissible in law. Even while so declaring, we hold that in
the peculiar circumstances referred to above, this is not a fit
case for interference and that in exercise of our discretion
under Article 136, -- a discretion which continues with us
even after the grant of special leave, -- the decree passed by
the High Court dismissing the suit for possession need not
be interfered with and the two rooms need not be
demolished. The plaintiff could be adequately compensated
by way of damages......"
46) In Chandra Singh and Ors. vs. State of Rajasthan
and Anr. (2003) 6 SCC 545, a three-Judge Bench, after
following the principle in Taherakhaton (supra), held:
"42. In any event, even assuming that there is some force in
the contention of the appellants, this Court will be justified
in following Taherakhatoon v. Salambin Mohd. wherein this
Court declared that even if the appellants' contention is right
5
in law having regard to the overall circumstances of the case,
this Court would be justified in declining to grant relief
under Article 136 while declaring the law in favour of the
appellants.
43. Issuance of a writ of certiorari is a discretionary remedy.
(See Champalal Binani v. CIT) The High Court and
consequently this Court while exercising their extraordinary
jurisdiction under Article 226 or 32 of the Constitution of
India may not strike down an illegal order although it would
be lawful to do so. In a given case, the High Court or this
Court may refuse to extend the benefit of a discretionary
relief to the applicant. Furthermore, this Court exercised its
discretionary jurisdiction under Article 136 of the
Constitution of India which need not be exercised in a case
where the impugned judgment is found to be erroneous if by
reason thereof substantial justice is being done. [See S.D.S.
Shipping (P) Ltd. v. Jay Container Services Co. (P) Ltd.] Such a
relief can be denied, inter alia, when it would be opposed to
public policy or in a case where quashing of an illegal order
would revive another illegal one. This Court also in exercise
of its jurisdiction under Article 142 of the Constitution of
India is entitled to pass such order which will do complete
justice to the parties.
45. This Court said that this principle applies to all kinds of
appeals admitted by special leave under Article 136,
irrespective of the nature of the subject-matter. So even after
the appeal is admitted and special leave is granted, the
appellants must show that exceptional and special
circumstances exist, and that, if there is no interference,
substantial and grave injustice will result and that the case
has features of sufficient gravity to warrant a review of the
decision appealed against on merits. So this Court may
declare the law or point out the lower court's error, still it
may not interfere if special circumstances are not shown to
exist and the justice of the case on facts does not require
interference or if it feels the relief could be moulded in a
different fashion.
46. The observations made in paras 15-20 of Taherakhatoon
can be usefully applied to the facts and circumstances of the
case on hand."
It is clear from the above decisions, even after issuance of
notice in the special leave petition and after grant of leave,
5
irrespective of the nature of the subject matter, the appellants
must show that exceptional and special circumstances exists
and if there is no interference by this Court substantial and
grave injustice will result and that the case has features of
sufficient gravity to warrant a decision from this Court on
merits.
Conclusion
47) In the light of the above discussion, more particularly,
the factual findings rendered by the trial Court and the
Appellate Court-High Court in respect of grant of decree for
specific performance and application of principle of
marshalling under Section 56 of the Transfer of Property Act,
we are in entire agreement with the conclusion arrived by the
High Court. We have also gone through the elaborate order of
the High Court in review petitions filed by the appellants. As a
matter of fact, after highlighting the jurisdiction under review,
the Division Bench of the High Court had taken pains to
discuss once again and rendered a finding on all aspects with
which we fully agree. Inasmuch as we are confirming the
impugned judgment of the High Court in toto, there is no need
5
to refer the affidavit of undertaking filed by the first
respondent herein and the objection raised by the appellants
as to the contents of the same. Since we confirm the
conclusion and ultimate decision of the High Court, we grant
further time of three months from today for deposit of the
balance amount as directed by the High Court in paragraph
85. In case defendant Nos. 1 and 2 fail to comply with the
said directions in executing the sale deed, the trial Court is
directed to execute the sale deed incorporating all the
directions and observations made in the judgment of the High
Court. Consequently, all the appeals are dismissed as devoid
of any merit with no order as to costs.
..........................................J.
(P. SATHASIVAM)
..........................................J.
(ANIL R. DAVE)
NEW DELHI;
NOVEMBER 22, 2010.
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