Borde R.M., J.
1. Appellants herein are raising challenge to the judgment and decree dated 29.8.1996, passed by the Joint Civil Judge, Junior Division, Jamkhed in Regular Civil Suit No. 187/1990, whereby suit presented by plaintiffs-appellants herein claiming relief of specific performance of contract on the basis of agreement of sale dated 6.11.1989 has been dismissed. The judgment and decree passed by the trial Court has been confirmed in an appeal presented at the instance of plaintiffs-appellants being R.C.A. No. 402/96, by the Extra Joint District Judge, Ahmednagar, vide judgment and order dated 15.9.2000.
While admitting the appeal on 31.8.2001, this Court has framed following substantial questions of law.
(i) Whether Section 43 of the Bombay Tenancy and Agricultural Lands Act prohibits absolutely, even an agreement of sale, without delivery of possession, to the prospective purchaser?
(ii) Whether such an agreement of sale is rendered unlawful and illegal?
(iii) Whether the Courts below have failed to exercise the jurisdiction vested in them in passing decree of specific performance?
This Court is expected to decide the matter in terms of the questions framed above.
2. Plaintiffs have approached the Court with a contention that in view of the registered agreement dated 6.11.1989, the defendant has agreed to alienate an area to the extent of 42 ares (275 feet x 162 feet) out of agricultural land S. No. 454/2 of village Jamkhed in favour of plaintiffs for consideration of Rs. 20,000/-. Plaintiffs advanced an amount of Rs. 10,000/- towards earnest amount and it was agreed between the parties that balance of amount shall be paid at the time of execution of the sale deed. A condition was incorporated in the agreement of sale that balance of amount shall be paid till 6.10.1990 or after grant of permission for conversion of user of land for non-agricultural purpose. It was also settled between the parties that possession shall have to be handed over after execution of the sale deed. According to the plaintiffs, they were ready and willing to perform their part of contract and they asked the defendant to execute the sale deed. However, defendant did not comply with his part of agreement. As such, plaintiffs called upon the defendant to execute the sale deed after accepting balance consideration of Rs. 10,000/-, by issuing notice on 4.10.1990. Plaintiffs gained information that the defendant is trying to enter into an agreement of sale with some other person. As such, plaintiffs were constrained to file suit claiming specific performance of contract.
3. Defendant caused his appearance in response to the suit summons and resisted suit claim by filing written statement at Exhibit-18. According to the defendant, there is no portion of 42 ares land, out of S. No. 454/2. According to the defendant, land has been allotted to his family in accordance with provisions of Section 32-G of the Bombay Tenancy and Agricultural Lands Act, 1948 (for short, the said Act'), and as such, for alienating the property, permission of appropriate authority is required. Defendant contends that agreement of sale is illegal and invalid in view of the provisions of Section 43 of the said Act. Defendant further contends that plaintiffs were indulging in money lending business and the transaction entered into between the parties is in the nature of loan transaction and the document i.e. agreement of sale was got executed by way of security for loan advancement. Defendant further contends that market price of the land is far more than the amount mentioned in the agreement of sale. Defendant, as such, prayed for dismissal of the suit.
4. The trial Court, on the basis of pleadings, framed issues and answered the same after appreciating evidence placed on record by the parties. The trial Court, as regards issue No. 1- 'Whether the plaintiff prove that the defendant had executed agreement of sale in his favour?', answered it in affirmative. As regards issue No. 2 - 'Whether the plaintiff prove that he is ready and willing to perform his part of contract?', the trial Court answered in affirmative. However, the trial Court has held, while answering issue No. 3- Whether the defendant prove that the agreement of sale was executed as a security for the loan?', answered in negative. So far as issue No. 4- Whether the defendant prove that the agreement of sale is illegal?', trial Court answered it in the affirmative. The trial Court, as such, dismissed the claim in respect of specific performance of the contract. The trial Court, however, decreed the claim in respect of refund of consideration amount and directed the defendant to pay Rs. 10,000/- along with interest at the rate of 6% p.a. from the date of agreement of sale i.e. 06.11.1989, on or before 31.10.1996.
5. The judgment and decree passed by the trial Court was subjected to challenge at the instance of original plaintiffs. Defendant did not prefer any appeal and as such he shall be deemed to have accepted adverse finding recorded by the trial Court.
6. The appeal preferred by the plaintiffs was restricted to refusal of claim in respect of specific performance of contract i.e. execution of sale deed in favour of plaintiffs. The first Appellate Court also came to the conclusion that the alleged agreement of sale, which is the basis for claiming specific performance entered into between the parties, is illegal one, in view of non-observance of the procedure prescribed under Section 43 of the said Act. The first Appellate Court has held that the agreement of sale is null and void and as such plaintiffs are not entitled for grant of relief of specific performance of contract. It was held that trial Court has rightly rejected the prayer in that behalf. The other findings in respect of proof of execution of the document, namely agreement of sale as well as in respect of readiness and willingness to perform part of the contract by the plaintiffs are confirmed by the first Appellate Court. The appeal presented by plaintiffs, thus, came to be dismissed.
7. Shri Shah, learned Senior Counsel appearing for appellants, has invited my attention to the provisions of Section 43 of the Bombay Tenancy and Agricultural Lands Act, 1948, which reads as under:
43. (1) No land purchased by a tenant under Sections 32, 32-F {32-I , 32-O, (33-C or 43-ID} or sold to any person under Section 32-P or 64 shall be transferred by sale, gift, exchange, mortgage, lease or assignment without the previous sanction of the Collector. (Such sanction shall be given by the Collector in such circumstances, and subject to such conditions, as may be prescribed by the State Government:
Provided that, no such sanction shall be necessary where the land is to be mortgaged in favour of Government or a society registered or deemed to be registered under the Bombay Co-operative Societies Act, 1925, for raising a loan for effecting any improvement of such land.
2. Any transfer of land in contravention of Sub-section (1) shall be invalid.
8. According to Shri Shah, learned Senior Counsel appearing for appellants, what is prohibited by Section 43 is transfer by sale, gift, exchange, mortgage, lease or assignment, without previous sanction of the Collector. According to learned Senior Counsel, entering into an agreement for purchasing the property has not been prohibited in view of Section 43 and there is no impediment in granting specific performance subject to appropriate sanction by the Collector as contemplated under Section 43 of the said Act.
9. Shri Shah, learned Senior Counsel for appellants, also placed reliance on the judgment in the case of (Balu Baburao Zarole and Ors. v. Shaikh Akbar Shaikh Bhikan and Ors.) reported in : AIR2001Bom364 . The learned Single Judge of this Court, after considering relevant provisions, has laid down that a decree for specific performance can be granted subject to sanction by the Collector in such matters. It has been observed by the learned Single Judge that provisions of Section 43 of the Act would be attracted at the stage of execution of the conveyance and the property can be said to have been transferred only upon execution of sale deed and entering into an agreement of sale does not create any interest in the property and as such the prohibition contained in Section 43 of the Act is not an impediment in granting conditional decree. In paragraphs 3 and 4 of the said judgment, it has been observed thus:
3. Section 43 of the Act provides, in so far as is material that no land purchased by a tenant inter alia under Section 32 'shall be transferred by sale, gift, exchange, mortgage, lease or assignment without the previous sanction of the Collector'. The requirement of taking the previous sanction of the Collector would apply to a transfer by sale or by any of the other modes specified therein. In so far as the requirement of taking the sanction of the Collector under the provisions of Section 43 of the Bombay Tenancy and Agricultural Lands Act, 1948 is concerned, the trial Court and the Appellate Court correctly held that the decree for specific performance would be subject to the condition of the sanction being obtained to the sale from the Collector under Section 43. In the event of the Collector not granting sanction, the plaintiff would be entitled to a refund of the purchase price together with interest only as, in the absence of sanction under Section 43 the sale cannot be concluded. In taking this view, no error has been committed by the trial Court and by the Appellate Court. In (Nathulal v. Phoolchand) reported in : [1970]2SCR854 , a Bench of the Supreme Court, consisting of Mr. Justice J.C. Shah (as the learned Chief Justice then was) and Mr. Justice K.S. Hegde held that where by a statute property is not transferable without the permission of an authority, an agreement to transfer the property must be deemed to the subject to the implied condition that the transferor will obtain the sanction of the authority concerned. While laying down the aforesaid proposition in paragraph 5 of its Judgment, the Supreme Court referred to the judgment of the Privy Council in A.I.R. 1930 P.C. 187, and the judgment of the Supreme Court in [Mrs. Chandnee Widya Vati Madden v. Dr. C.L. Katial) 1963 DGLS 64 : : [1964]2SCR495 .
4. Section 43 of the Act would be attracted at the stage of the execution of the conveyance since upon the execution of the sale deed, the property is transferred by sale. An agreement to sell does not create any interest in property. In this regard, a reference may be made to a judgment of learned Single Judge of this Court, D.K. Deshmukh, J., delivered on 1st October, 1997, in Appeal from Order No. 713 of 1997. The earlier judgment delivered by M.F. Saldanha, J. reported in (Parshuram Kathod Giakar Anr. v. Pandu Mahadu Hard) : 1994(1)BomCR715 , which was subsequently referred to in the Judgment of V.H. Bhairavia, J. reported in (Lotan Ramchandra Shimpi v. Shankar Ganpat Kayasth) : (1994)96BOMLR1 , will have to be construed with reference to the observations of the learned Judge in para 9 of the judgment where the learned Judge clarified that the observations which were made in the order were for the limited purpose of the petition before the Court, which arose against an interim order. Since the Suit was pending before the trial Court, the learned Judge held that it would be open to the parties in the said case to urge all contentions before the trial Court 'without being prejudiced even in the least by any of the observations made' in that Judgment. In view of the subsequent Judgment of a learned Single Judge, D.K. Deshmukh, J., it would be clear that the provisions of Section 43 of the Act would be attracted at the stage of the execution of the conveyance. Before the conveyance is executed in pursuance of a decree for specific performance, the previous sanction of the Collector under Section 43 would have to be sought and the execution of the conveyance can only take place after and subject to the grant of sanction by the Collector. If the Collector grants sanction, the terms and conditions laid down therein have to be observed. If sanction is refused, no conveyance can be executed. Section 43 would unquestionably be attracted to the execution of the conveyance in respect of the land and it is, therefore, that both the courts in the present case came to the conclusion that the decree will have to be subject to the condition that permission of the Collector would have to be sought under the provisions of Section 43. The judgments of both the Courts below do not suffer from any infirmity. There is, therefore, no merit in the second appeal.
10. A similar question arose in the matter of (Sitaram Ganu Mhaskar and Anr. v. Keshav Ramchandra Shelor and Anr.) reported in 2001 (4) All.M.R. 116. In the reported judgment, relief was claimed on the strength of an agreement of sale entered into between the parties. An objection was raised in respect of raising claim on the strength of agreement of sale, which is subject to bar as provided under Section 43 of the said Act. It was canvassed that the agreement of sale entered into, without obtaining prior sanction of the Collector, shall not be relied upon and the suit filed for specific performance of agreement of sale is not at all maintainable on the strength of such agreement which itself is invalid. The learned Single Judge, while dealing with the objection, has referred to the judgment in the matter of Shri Parshuram Kathod Giakar Anr. v. Pandu Mahadu Hard and Anr. reported in : 1994(1)BomCR715 , wherein a view has been taken that there is total prohibition or legal bar on alienation of the lands in question and if one were to read the wording of the section, more carefully, it would include any attempt of doing so or for that matter the execution of any document in pursuance thereof.
It is, in these circumstances, that the Court has held that it would not be possible to draw a distinction between the agreement to sell and the conclusion of the sale. While distinguishing the analogy adopted in the reported judgment Parshuram v. Pandu, the learned Single Judge, in para 4, has observed thus:
4. In my opinion, the observations of the learned Single Judge are contrary to the clear words used in Section 43. What cannot be done without previous sanction of the Collector, is transfer of the land by sale, gift, exchange, mortgage, lease or assignment. An agreement of sale is not a transfer. It is settled view that an agreement of sale does not transfer any interest in the land. Therefore, in my opinion, the observations of the learned Single Judge of this Court being contrary to the provisions of Section 43 of the Act, are per incuriam and therefore, have no binding force.
11. As has been held by the Learned Single Judge, the judgment in the matter of Parshuram Kathod Giakar being per incuriam, has no binding force and as such the view adopted by the learned Single Judge in the matter of Balu Baburao Zarole : AIR2001Bom364 , as well as in the matter of Sitaram Ganu Mhaskar, 2001 (4) All.M.R. 116, needs to be taken as a correct pronouncement on the point in issue.
12. What is prohibited in view of Section 43 of the said Act is transfer by sale, gift, exchange, mortgage, lease or assignment, without previous sanction of the Collector. In the instant matter, parties have entered into an agreement of sale. It cannot, therefore, be held that there is any creation of interest in favour of vendee and the proprietary title does not validly pass from the vendor to the vendee. It would be appropriate to refer to Section 54 of the Transfer of Property Act, which defines 'Sale':
54. 'Sale' defined - 'Sale' is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised.
Sale how made.- Such transfer, in the case of tangible immovable property of the value of one hundred rupees and upwards, or in the case of a reversion or other intangible thing, can be made only by a registered instrument.
In the case of tangible immovable property, of a value less than one hundred rupees, such transfer may be made either by a registered instrument or by delivery of the property.
Delivery of tangible immovable property takes place when the seller places the buyer, or such person as he directs, in possession of the property.
Contract of sale.- A contract for the sale of immovable property is a contract that a sale of such property shall take place on terms settled between the parties.
It does not, of itself, create any interest in or charge on such property.
Section 54 of the Transfer of Property Act specifically lays down that a contract of sale itself does not create any interest or charge on such property. It would be useful to refer to reported judgments in the case of (1) (Satyabrata Ghose v. Mugneeram Bangur & Co. and Anr.) reported in : AIR1954SC44 ;. and (2) (Radhakishan Laxminarayan Toshniwal Ors. v. Shridhar Ramchandra Alshi and Ors.) reported in : [1961]1SCR248 . It has been observed by the Apex Court that:
Under Section 54 of the Transfer of Property Act, a contract for sale does not of itself create any interest in or charge on immovable property. Where, therefore, the parties enter into a mere agreement to sell, it creates no interest in favour of the vendee and the proprietary title does not validly pass from the vendors to the vendee and until that is completed, no right to enforce pre-emption arises.
13. It has been laid down by the Apex Court in the case of Mrs. Chandnee Widya Vati Madden v. Dr. C.L. Katial and Ors. reported in : [1964]2SCR495 , that it is permissible for the Court to get enforced the terms of contract and to enjoin upon the vendor to make necessary application for permission. In the event of permission being refused, the vendee shall be entitled to the damages.
14. In the instant matter, in view of the fact that the property, which is sought to be purchased by the plaintiffs was purchased by vendor/defendant under Section 32-G of the said Act, there is restriction, as laid down under Section 43 of the Act, in respect of transfer of such property. Transfer of such property or part thereof is permissible only with previous sanction of the Collector. The property in dispute is subjected to restriction as contained in Section 43 of the Act and in view of the terms of agreement arrived at between the parties, it will always be the responsibility of the vendor to remove the impediment and secure appropriate permission. In this regard, reference may be necessary to the decision of the Apex Court in the case of Phoolchand Nathulal v. Phoolchand reported in : [1970]2SCR854 . Wherein it has been held that:
That it is well settled that where by statute, property is not transferable without the permission of the authority, an agreement to transfer the property must be deemed subject to the implied condition that the transferor will obtain the sanction of the authority concerned. Hence, Nathulal as vendor has necessarily to get the prior sanction of the State Government made under Section 70(4) of the Madhya Bharat Land Revenue and Tenancy Act (Act No. 66 of 1950). This he has to fulfil before he can claim payment from Phoolchand notwithstanding the absence of such a clause in the agreement.
15. In this view of the matter, it would be the responsibility of the vendor to make an application to the Collector seeking permission for alienation and grant of specific performance can always be made subject to such condition of securing permission from the appropriate authority.
16. Learned Counsel Shri Jadhavar, appearing for the respondent-original defendant, has strenuously contended that vendor cannot be put to terms and cannot be compelled to tender an application to the authority.
17. As, in the instant matter, agreement of sale executed between the parties has been held to have been proved, whereas readiness and willingness to perform part of the contract by the plaintiff has also been held to have been proved, the defendant cannot be permitted to turn around and contend that it would be his choice, whether to apply for appropriate permission or not. In the facts and circumstances of the case, it would always be the responsibility of the vendor to make an application for permission and remove the legal impediment for specific performance of the agreement and while passing the decree, the Court has to enforce the terms of the contract and to enjoin upon the vendor to make necessary application for permission, or else, as has been held by the Apex Court in the reported judgment in the case of Mrs. Chandnee Widya Vati Madden : [1964]2SCR495 , the consequences shall follow.
18. Another argument that has been put forth by the respondent is in relation to the condition incorporated in the agreement of sale relating to conversion of user for non agricultural purposes. However, failure to secure such permission can be no ground for refusal to perform part of the contract. In fact, it is for the defendant to co-operate and take initiative for securing appropriate permission.
19. Learned Counsel for appellants has invited my attention to Rule 25-A(1)(e) of the Bombay Tenancy and Agricultural Lands Rules, 1956 (for short, the said Rules'), which enables the Collector to accord sanction for transfer of the land in the circumstances such as when the land is being sold bona fide for any non-agricultural purpose. It would be the responsibility of the vendor to secure such permission by making an application under Rule 25-A of the said Rules. It is made clear at this stage that in the event of failure by the defendant to tender an application, as mandated, necessary legal consequences shall follow and plaintiffs-appellants would be entitled to take steps permissible in accordance with law.
20. For the reasons stated above, the appeal, therefore, succeeds and is allowed with costs. The suit filed by plaintiffs in respect of specific performance of agreement executed on 6.11.1989 is decreed subject to securing permission as contemplated under Section 43 of the Bombay Tenancy and Agricultural Lands Act, 1948. Defendant/respondent is directed to execute necessary instrument of sale within a period of six months on accepting balance consideration of Rs. 10,000/- and hand over possession of the suit property to the plaintiffs, after securing necessary permission as contemplated under Section 43 of the Bombay Tenancy and Agricultural Lands Act. In the event of refusal to accord permission by the Collector, plaintiffs-appellants would be entitled for refund of consideration amount, as has been directed in terms of Clause (b) of the order, passed by the learned Joint Civil Judge, Junior Division, Jamkhed on 29.8.1996.
21. Pending civil applications stand disposed of.