Teju Kaya and Co. Vs. Gangji Nensey and Co. - Court Judgment

John Beaumont, Kt., J.

1. This is an appeal from a decision of Mr. Justice Mirza, The suit is a suit by the purchasers ofimmoveable property claiming to recover the purchase money which they paid under the contract, on the ground that the vendors did not complete the contract within due time. The contract is dated November 1, 1924 (Exhibit B), The vendors are a firm called Gangji Nensey & Co., which was apparently a partnership in which there were two partners one of them the defendant Premji Bhojpal and the other Paaau Nensey. Under the contract, which is Exhibit B, the vendors agreed to sell to the purchasers certain leasehold property being a godown of the Port Trust, the purchase money being Rs. 30,000, and the contract shows that the whole of the purchase money was paid on the date of the contract and the purchasers were to be given possession. Then the contract says:-

As regards the pucca documents we are to gab the same registered etc, in your favour within six months from this date.

2. The purchasers were in fact given possession either at the date of the contract or soon after. The property which was the subject-matter of the contract was a lease of this godown from the Port Trust for a term of twenty-live years from December 25, 1915, and the lease contained a covenant against assigning the demised premises without the consent in writing of the trustees of the Port Trust, Under the contract it is, in my opinion, clear that the vendors were liable to obtain the consent of the landlords to the assignment, there being nothing in the contract to alter the general law on that subject. But it appearsthat by arrangement between the parties the purchasers did in fact attempt to get the consent of the lessors to the proposed assignment, There is nothing in the evidence to suggest that they released the vendors from their obligation under the contract to get that consent; they only arranged as a matter of convenience to themselves to endeavour to get the consent. In pursuance of that arrangement the purchasers entered into correspondence with the trustees of the Port Trust on March 9, 1925, and evenactually by a letter of April 7,1925, the trustees of the Port Trust took the point that, as one of thevendors. viz., Passu Nensey, had died on January 20, 1925, it would be necessary for representation to his estate to be taken out, and for his personal representative to join in the assignment. That contention of the Port Trust may have been justified having regard to the provisions of Section 45 of the Transfer of Property Act. At any rate, whether rightly or wrongly, the trustees of the Port Trust did raise the objection that the representative of Passu Nensey must join in the assignment, After that requisition had been made, the purchasers referred the matter to thevendors. and told them that they must arrange for representation to be taken out to Passu Nerisey's estate. That was done admittedly about the middle of April, and it seems to me impossible to Bay that the vendors had been guilty of any improper delay up to that time, because the purchasers had themselves chosen to take the matter out of the hands of the vendors. After receiving this request to arrange to take out re-presentation to Passu Nensey's estate, the vendors did not question their obligation to comply with it, and according to the evidence of the defendant Premji Bhojpal he communicated with the widow of Passu Nensey, who was residing in Cutch. He tried to get her to take out letters of administration to her deceased husband's estate, but she refused, though she eventually agreed that Premji Bhojpal as a creditor should himself apply for letters of administration, On June 21 the vendors by a letter informed the purchasers that the draft of a petition for letters of administration had been prepared and would be declared in a day or two. It is, I think, not possible to say that down to that date there had been any unreasonable delay on the vendor's part. They had taken about two months in which to communicate with the widow and ascertain that she refused herself to act and to get her permission for one of the creditors to act, and seeing that she was residing in Cutch, I do not think twomonths delay can be said to have been unreasonable. On July 21 the purchasers wrote to the vendors saying that:-

unless within one month from the date thereof, time being hereby made of the essence of the contract, your client do every thing needful to obtain letters of administration and the sanction of the Port Trust to the sale and otherwise carry out the agreement and complete the sale our clients will without any further intimation cancel the contract and will file a suit to recover from your clients the sum of Rs. 30,000.

3. And on August 26 the purchasers gave notice cancelling the contract. On December 7 the vendors gave to the purchasers notice that they were ready and willing to complete the contract and offered to get the sanction of the Port Trust to the assignment, letters of administration to Passu Nensey'a estate having by then been obtained by the defendant Premji Bhojpal.

4. The first question which we have to determine is whether time was of the essence of this contract If it was not, then we have to consider whether the vendors had been guilty of unreasonable delay by July 21. If they had, then we have to consider further whether the purchasers' notice given on that day was a reasonable notice. With regard to the first point as to whether time was of the essence of the contract, it is not expressed to be so in the contract, bat Mr. Engineer on behalf of the appellant has contended that we should treat time as of the essence having regard to the nature of the property agreed to be sold. No doubt the nature of the property is one of the matters which has to be taken into consideration in determining whether time should be treated as of the essence of the contract. In the case of a sale of certain properties, as for instance a reversion or a business, it is established that, in the absence of anything to the contrary in the contract, time is deemed to be of the essence of the contract. But, in my opinion, that rule does not apply to the sale of leaseholds, although undoubtedly the fact that the property is leasehold with a comparatively short term to run is a matter to take into consideration in determining whether time was originally intended to be of the essence of the contract, and if it was not, in determining the amount of delay which it may be right to allow in carrying out the contract. Here it is very important to observe that at the date of the contract the whole of the purchase money was paid and possession was given, and it appears to me therefore that it really made very little difference to the purchasers whether the matter was completed by a formal assignment within six months as provided by the contract, or within any reasonable time thereafter. The matter would only become one of urgency if the purchasers desired to dispose of the property and to show a good title, and there is no evidence that the purchasers desired to dispose of the property, I think, therefore, that time in this case was not of the essence of the contract. Upon the second question I have already said that in my judgment the vendors were not guilty of any unreasonable delay in carrying out the contract, at any rate by June 21, They had informed the purchasers on that date that the application for letters of administration to the estate of Paasu Nensey was going through, and the delay after that was such as was inevitable in obtaining a grant of letters of administration. In my view by July 21 there had been no unreasonable delay on the part of thevendors. and the purchasers were not justified in serving a notice making time of the essence of the contract, and if that is so, it is not necessary to consider whether the notice served was reasonable. But I may say that, having regard to the fact that time was necessarily required to take out letters of administration, and to the further fact that there is no evidence that it made any substantial difference to the purchasers whether their title was completed promptly or not, I think that a month's notice was unreasonably short.

5. So far, therefore, I agree with the learned Judge in thinking that time was not originally of the essence, and that the purchasers had not effectively made it of the essence at the date when they filed this suit, which was January 22, 1926. But at that point it seems to me considerable difficulty arises. The defendants on April 26, 1926, put in a counter-claim asking for specific performance, and the learned Judge gave them a decree on thatcounter claim. In my opinion, that portion of the decree was wrong, and the vendors were not entitled to an order for specific performance. In order to entitle themselves to an order for specific performance, it was, I think, necessary for the vendors to aver and prove that at the date when they raised their claim for specific performance they were in a position, that is to say, were ready and willing, to carry out their part of the contract. In the written statement which is repeated in the counter-claim the defendants say in paragraph 2 :-

These defendants submit that the transaction was to all intents and purposes a complete sale and the defendants had only to sign a formal purchase document when tendered and admit execution thereof before the Sub-Registrar soon thereafter. These defendants say that the plaintiffs had undertaken to do the needful in the matter and to obtain the necessary consent of the lessors and to get the draft lease approved by them.

6. It is true that in paragraph 12 the defendants say that they are and always have been ready and willing to perform their part of the contract, but it seems to me that, reading their written statement as a whole, they have stated that they regard the obtaining of the consent of the lessors as part of the plaintiff's1 part of the contract, and not their own part. Therein I think they were wrong. It follows that we have not got any allegation by the vendors that they were ready and willing to do that which we hold that they were bound to do under the contract, that is, to obtain the consent of the lessors. Not only do the defendants not aver that they had obtained the consent, or were in a position to obtain the consent, of thelessors. but in point of fact no evidence whatever was given that such consent has been obtained, and indeed I gather that in fact the consent has not been obtained. It seems to me, therefore, that the defendants are not entitled to an order for specific performance.

7. Mr. Coltman has contended that he is so entitled on two grounds. In the first place, he says that if the defendants failed to obtain the consent of the lessors to the assignment, their failure was due to the fault of the plaintiffs, because he says the plaintiffs have retained the original lease and the draft assignment which they got back from the Port Trust authorities, No such allegation is made in the written statement which, as I have said, claims that it was the plaintiffs' duty to get the consent, and does not suggest that they prevented the defendants from getting such cop- sent. But in any case the allegation is not, in my opinion, proved. So far as the original lease is concerned, I understand that the plaintiffs have in fact retained it, but they have never beenasked to return it, probably because the defendants were afraid of such request being interpreted as acquiescence on their part in the plaintiffs' claim to repudiate the contract. It is obvious that the plaintiffs, on repudiating the contract, could not have objected to return the lease had they been asked to do so.9. With regard to the draft assignment, it is true that in their letter of November 5, 1925, the defendants' solicitors say:-

We are now instructed to request you to forward the said draft to the Port Trust authorities after making the necessary amendment therein and obtain their necessary approval and sanction ;

10. and that request does not appear to have been complied with. But I cannot see that there was any particular virtue in the draft assignment which had already been sent to the Port Trust authorities and returned. In any event it would require substantial amendment by adding the representatives of Passu Nensey, and I have no doubt whatever that if the vendors had sent to the Port Trust authorities the original lease, after obtaining it back from the purchasers together with a proper draft assignment, the authorities would have said whether or not they were prepared to consent to the assignment.

11. Then the second point taken by Mr. Coltman is that in view of the repudiation of the contract by the plaintiffs, the time to obtain the license had not arrived and he relies on the case of Ellis v. Rogers (1885) 29 Ch. D. 1661 . That was originally a suit for specific performance of an agreement by the defendant to purchase a certain interest in land from the plaintiff; but it appears that before the suit came on for hearing the plaintiff had had to resume possession of the land and build upon it, and therefore he confined his claim at the hearing to a claim for damages. Mr. Justice Kay held that inasmuch as the plaintiff had not at the date when he commenced his action obtained the license of the landlord to the sale, which license was required, he was never ready and willing to perform his part of the contract, and that his action must fail. The Court of Appeal decided the case on another ground. All the three learned Lord Justices, however, expressed disagreement with the decision of Mr. Justice Kay as to the necessity for obtaining a license from the landlord. But, as far as i can see, their disagreement was based on the ground that the action had become one for damages. Lord Justice Bowen says (p. 669):-

This is an action for repudiating the contract, and ill no no answer be say that the Plaintiff had not done something he was bound to do, unless he refused to do it, so as to repudiate the contract;

12. And Lord Justice Cotton in his judgment says (p. 671):-

The vendor up to the time when the purchaser refused to go on, had been ready and willing to do all that was required to be done by him up to that time, and the proceedings had nut reached the stage when it was necessary for him to be furnished with a license to assign.

If the action were an action for damages, it may well be that different considerations would apply : see particularly the judgment of Lord Atkinson in the case of Stickney v. Keeble[1915] A.C 1385 But it seems to me that in an action for specific performance the time to allege that the plaintiff has obtained the license necessary to enable him to carry out his part of the bargain is the date at which he commences his action. I think, therefore, that that second ground of Mr. Coltman also fails.

13. The position then which arises is this: at the time when the plaintiffs started their action to recover their purchase money they had not made time of the essence of the contract, but on the other hand at that date, and also at the date when the vendors put in their counter claim, the vendors were not in a position to carry out their part of the contract, and were not, therefore, entitled to an order for specific performance. The question is, what is the result in law arising from that position The law on the subject is dealt with in the judgment of Lord Parker in Stickney v. Keeble to which I have referred, that judgment being expressly approved of by Earl Loreburn and Lord Mersey and in no way disapproved by the other Law Lords. That was a case, like this, of a purchaser suing to recover his deposit on the ground that the vendor had been guilty of unreasonable delay, and that the purchaser had validly determined the contract. Lord Parker dealt with the principles on which Courts of Equity act in departing from strict stipulations as to time. He points out that equity, if it could do so without doing injustice to the parties, did not hold them to their strict stipulation as to time, and he then discusses the principle on which equity acts in such cases. He says (p. 416):-

Prior to these (i.e. the Judicature) Acts the vendor, could have only obtained relief from the consequences of his failure by filing a bill for specific performance and for an injunction restraining the action. On such a bill he could have obtained no relief unless he were himself able and willing to make a title to the purchaser.

14. And then he points out that in that particular case the vendor had after institution of the action put it out of his power to complete the sale by selling the property to third parties, and then he goes on (p. 416):-

It seems to me that on this ground alone the bill must have failed. An injunction, if granted would not have been incident to, and in aid of, the equitable remedy of specific performance, but a means of enabling the vendor to forfeit) the purchaser's deposit, in other words, to exercise a right which, if it existed at all, was a legal right, and this would be contrary to the principles upon which the Court of Chancery has always acted.

15. It seems to me to follow from that judgment that if the vendor is not entitled to the relief of specific performance, no doubt, with such variation as to time as the Court may think right, there is no equitable ground upon which the Court can prevent the purchaser from taking advantage of the vendor's breach of the stipulation in the contract as to time for completion.

16. I have dealt with the question so far under the English law, but provisions as to time in relation to contracts in India are contained in Section 55 of the Indian Contract Act. That section provides in substance that if the intention of the parties was that time should be of the essence of the contract, then if the contract is broken as to time the promisee has an option to avoid the contract; but that if it was not the intention of the parties that time should be of the essence of the contract, the contract does not become voidable by the failure to do the thing required at or before the specified time, but the promisee is entitled to compensation from thepromiser for any loss occasioned to him by such failure. I take it that the first part of the section includes both the case of time originally being made of the essence, and the case of timebecoming of the essence having regard to what subsequently takes place under the contract, and I apprehend that a vendor suing for specific performance must be taken, at any rate in the absence of a claim to special relief in his pleading, to admit that the time for completion has arrived. However, it is not necessary to pursue that subject, because it is settled, in my opinion, by the decision of the Privy Council in Jamshed Khodaram v. Burjorji Dhunjibhai I.L.R. (1915) Bom 289 18 Bom. L.R. 163 that the rules laid down in Section 55 of the Indian Contract Act do not vary from the English rules, and that the section lays down no principle which differs from those which obtain under the law of England as regards contracts to sell land, That decision was given very soon after the decision of the House of Lords in Stickney v. Keeble which is referred to in the judgment of the Privy Council. We are, therefore, in my opinion, bound to apply to this case the same rules as would be applicable under English law. It seems to me that the vendors having failed, to prove that they are entitled to specific performance, have no answer to plaintiffs' claim for the return of the money. That being so, I think that the appeal must be allowed with costs, and judgment must be given in favour of the plaintiffs for the amount claimed, I reach this conclusion with some reluctance, because I think from the correspondence that the conduct of the purchasers has throughout been unreasonable, and that they were from the start endeavouring to take advantage of the difficulty which arose from the Port Trust requiring representation to the estate of Passu Nensey in order to escape from a contract which they no longer wished to perform. But unfortunately for the vendors they failed to put themselves into a position to take advantage of the rights which they at one time possessed.

Blackwell, J.

17. I agree and do not desire to add anything.