Gorakhram Sadhuram vs Laxmibai Wife Of Inderlal Nandlal
Rewritten Version Notice: This is a rewritten version of the original judgment.
Court: supreme-court
Case Number: Appeal (civil) 38 of 1948
Decision Date: 14 March, 1950
Coram: S. Fazal Ali, M.P. Sastri, M.C. Mahajan, B.K. Mukherjea, S.R. Das
In the civil appeal numbered 38 of 1948, the petitioner Gorakhram Sadhuram challenged a decree of the High Court of Judicature at Bombay dated 26 January 1948, which had set aside a decree originally passed by Justice Chagla on 7 July 1947. The matter was heard before a five-judge Bench of the Supreme Court of India consisting of Justice S. Fazal Ali, Justice M. P. Sastri, Justice M. C. Mahajan, Justice B. K. Mukherjea and Justice S. R. Das. The judgment was delivered by Justice Mahajan.
The suit that gave rise to the appeal had been instituted by Laxmibai, the wife of Inderlal Nandlal of Malad, on 26 May 1943. She sought specific performance of an agreement dated 29 April 1929, which she alleged had been concluded between herself and the firm Messrs Gorakhram Sadhuram, a business of bankers and commission agents carried on at Kalbadevi Road, Bombay. According to the terms of that agreement, the defendants were bound to transfer the bungalow situated in Malad to the plaintiff’s name whenever the plaintiff demanded such transfer, subject to payment of all costs of the transfer. In addition, the defendants were required to debit the sum of Rs 40,000—the agreed value of the bungalow—into the current account of the firm Messrs Thackersidas Nandlal, a firm owned by the plaintiff’s husband and father-in-law, which was substantially indebted to Messrs Gorakhram Sadhuram.
The primary defence raised by the defendants was that the plaintiff, Laxmibai, was not a party to the 1929 agreement and therefore could not maintain an action for specific performance. It was also pleaded, though later abandoned, that the suit was barred by Section 66 of the Code of Civil Procedure. Despite the abandonment of the statutory defence, the issue was nevertheless argued at the hearing.
Justice Chagla, sitting in the Bombay High Court, dismissed the suit on the ground that the plaintiff, not being a party to the agreement, lacked locus standi to claim specific performance. He further held that the suit was barred by Section 66 of the CPC. On appeal, Justices Bhagwati and Tendolkar reversed that decision, finding that the plaintiff was indeed a party to the agreement and was ready and willing to perform her obligations under it. They also concluded that the suit was not barred by Section 66 of the CPC.
Justice Chagla had additionally expressed the view that the plaintiff was not ready and willing to perform her part of the contract because her husband was unable to pay the Rs 40,000 stipulated as the price for the conveyance of the house. However, this particular argument concerning the plaintiff’s readiness to perform was not pressed before the Court of Appeal by the respondent’s counsel, and it was not raised before the Supreme Court in the present proceedings.
The agreement required the appellant firm to transfer and convey the disputed bungalow to the plaintiff’s name, and the plaintiff was expressly bound to meet all costs, charges and expenses associated with that transfer. The consideration for the conveyance was fixed at Rs. 40,000, which the parties agreed would be debited to the account of the firm. The agreement made clear that no cash payment was to be demanded from the firm or any of its partners; the only financial obligation was the accounting entry of the agreed sum.
Mr. Setalvad appealed the decision of the High Court on three separate grounds. First, he argued that the High Court had erred in holding that the plaintiff was a party to the contract and therefore entitled to specific performance; he contended that the record did not support such a finding and that it was contrary to the evidence. Second, he maintained that the suit was barred by Section 66 of the Code of Civil Procedure. Third, he submitted that specific performance is a discretionary remedy and, because the circumstances of the parties had changed since the agreement was executed in 1929, the Court should decline to enforce the contract more than fourteen years after it was made.
To assess the validity of these submissions, the Court set out the relevant factual background. The plaintiff’s husband and her father-in-law had executed a series of mortgages in favour of the appellant firm, the earliest of which was dated 20 September 1922. These mortgages covered the property that is now in dispute – a bungalow located in Malad, a suburb of Bombay. In 1925 the appellant instituted a suit based on that mortgage; a preliminary decree was granted in its favour on 15 April 1925 and became a final decree on 8 April 1926. Execution proceedings under the final decree were still pending when, on 28 August 1929, the parties entered into the disputed agreement. The terms of that agreement were set out in two letters dated 29 August 1929 and 30 August 1929, the contents of which are reproduced below:
“To Shahji Gorakhramji Sadhuramji. Please convey our salutations (Jaigopal) to Nandlal and Inderlal Nandlal. Further, our two ginning factories and one pressing factory together with the accompanying compound at Panderkowda, which were mortgaged to you for Rs. 3,15,000, are hereby sold to you for Rs. 3,15,000. We shall execute any documents that you may require at the time you obtain the transfer to your name. Furthermore, the house at Kalbadevi in Bombay, the residence at Gaiwadi and the bungalow at Malad, which have been mortgaged for Rs. 5,40,000, are sold by us for a total of Rs. 4,40,000, being Rs. 1,15,000 for the house at Kalbadevi and Rs. 40,000 for the bungalow at Malad. You have obtained a decree against us and an order for auction sale by the Commissioner; whether the properties are finally auctioned or sold, we consent to either outcome. Whenever you request us to execute any documents in respect of these matters, we will do so without objection. Moreover, you must have the bungalow at Malad transferred to the name of the mother of Chiru.”
In a letter dated 29-August-1929, the parties set out several financial obligations. The letter stipulated that any expenses incurred in relation to the arrangement would be borne by the plaintiff. The plaintiff was asked to debit Rs 40,000 to the appellant. The appellant also declared that a single diamond ring, which had been pledged with the plaintiff, was to be delivered to the mother of Chiru Kanhaiyalal. For that purpose the plaintiff was requested to debit an additional Rs 1,500. The letter further observed that any monies still due to the appellant under the mortgage and current accounts would be paid by the plaintiff whenever the appellant could receive them. Finally, the letter asserted that the plaintiff’s heir would have no right to object to these arrangements and would be bound to accept all of them.
A second letter, addressed to Shahji Nandlalji Thakerseydasji and Inderlalji Nandlalji, acknowledged receipt of the plaintiff’s correspondence dated the 10th of Bhadarva Vad, which corresponds to 30-August-1929. The appellant wrote that the plaintiff’s statements were accepted. The appellant confirmed that the plaintiff had asked for the transfer of bungalow 1 at Malad to the name of Shah Kanhaiyalalji’s mother and that a diamond ring should be given to her. The appellant agreed to comply with those requests and added that whenever the plaintiff asked for the bungalow to be transferred, the appellant would do so at the plaintiff’s cost. The appellant further promised to give one diamond ring to the mother on either 30 August or 31 August 1929.
In accordance with the agreement, the diamond ring was handed over by the appellants to the plaintiff within one or two months after the date of the letter. Subsequently, on 30 April 1930 the appellants purchased the Malad house at an auction sale. The sale was officially confirmed on 4 July 1930 and a sale certificate in the name of the appellants was obtained. Although the stamp duty for the sale certificate was paid by the plaintiff’s husband or father-in-law, the payment was made out of the plaintiff’s own money. It is now agreed that the plaintiff was placed in possession of the house shortly thereafter. She furnished the premises, carried out repairs, and paid the property taxes. While the appellants initially paid the taxes, those amounts were later recovered in cash from the plaintiff either directly or through her husband. The plaintiff incurred a substantial amount of money in improving the house and continued to remain in possession of it up to the present time. When the plaintiff later demanded that the appellant firm execute a conveyance in her favour, the appellants refused, which forced the plaintiff to commence the present suit.
After the confirmation of the sale of the Malad property and other properties, the appellants obtained a personal decree against the mortgagors on 18 August 1930 for the sum of Rs 5,89,000, together with future interest. In 1931 the plaintiff’s father-in-law died, and a few months after the suit was filed the plaintiff’s husband was adjudicated insolvent.
The primary issue for determination is whether, considering the contents of the two letters described above and the oral evidence presented, the plaintiff can be held to have been a party to the contract concerning the delivery of the diamond ring and the transfer of the Malad house.
The correspondence dated 29-8-1929 expressly provided that the bungalow would be transferred into the plaintiff’s name, that the plaintiff would bear all expenses of the conveyance, and that a diamond ring would be handed over to her. The appellants subsequently sent a letter of acceptance which affirmed this proposal. That acceptance letter further added that, should the mortgagors request the transfer of the bungalow into the plaintiff’s name, the transfer would be effected at the cost of the mortgagors, and the ring would nevertheless be given to the plaintiff.
Although these letters were not formal legal instruments, no issue was raised that the parties were not in agreement (ad idem) regarding the terms. It is equally uncontested that the parties intended, as set out in the first letter, that the plaintiff would pay the conveyance costs and that the deed would be executed in her favour. The appellants expressly consented to this arrangement. In their acceptance letter, the appellants addressed the mortgagors, their families, and the plaintiff as a single collective, indicating that the transfer of the house to the plaintiff was meant to benefit not only her but also her children and, in effect, the entire family. Regarding the diamond ring, the plaintiff was identified as the sole promisee since the ring was intended specifically for her.
The oral evidence presented at trial consisted of the testimonies of three witnesses: the plaintiff herself, her husband Inderlal Nandlal, and her son Kanhaiyalal. All three gave identical accounts that the arrangement, later reflected in the two letters, originated at a meeting held in the mortgagors’ Kalbadevi residence and that the meeting was attended by every member of the family. The creditors were represented at that meeting by their agent, Murlidhar, who has since died and therefore was unavailable to testify.
According to Kanhaiyalal’s deposition, he was seated near his father, his grandfather and Murlidhar, while his mother was sitting in a neighbouring room. He recounted that the plaintiff had instructed him, as the accounts were being settled, that she should receive the house and certain jewellery. Acting on his mother’s directions, he conveyed this request to Murlidhar. It was not denied that the plaintiff, being a purdahnashini woman, would not personally engage in negotiations and could only express herself through her son or husband. Consequently, the determination of whether she was a party to the agreement does not hinge on her personal participation in the discussions, but rather on her decisive interest in the matter—she demanded the house for herself, and the creditor’s representative entered into specific stipulations with her, even though the actual negotiations on her behalf were conducted by her son or husband.
The cumulative effect of the evidence is that the plaintiff made a demand to the creditor for the transfer of the house and the delivery of the jewellery, and that a response to that demand was subsequently formulated.
The Court recorded that it had been decided to convey both the ring and the house situated in Malad to the plaintiff, and that the plaintiff had expressly assented to this arrangement. In her testimony the plaintiff declared that she and Murlidhar had mutually agreed that the Malad house would be transferred in her name and that the ring would also be given to her. She further stated that she had undertaken to bear the expenses associated with the transfer. The plaintiff recounted that Murlidhar was seated opposite her during the discussion and, although he declined to convey the house and the ring to her husband or father-in-law on the ground that they were speculators, he indicated that he would be prepared to transfer both items directly to her should she desire them.
The plaintiff’s statement, when read in its entirety, demonstrated that she was an active participant in the negotiations conducted with the creditor on behalf of the family. She was not merely a silent onlooker. The creditor’s representative, on the other hand, was seeking to settle his claim not only with the two mortgagors but with the entire family, because the mortgaged property was a joint-family asset that was to be sold pursuant to an execution of the mortgage decree.
To forestall any objections to the sale of the joint-family property—whether such objections might be raised by the debtors themselves, by their son, or by the plaintiff—the decree-holders deemed it prudent to fashion an arrangement that included all members of the family. Such an arrangement would preclude the family members, who held interests in the joint property, from interfering with the execution proceedings or from contesting the sale. Entering into a settlement solely with the mortgagors would have left the other family members free to raise a variety of objections, which would have been detrimental to the decree-holders. Consequently, the arrangement was devised expressly to avoid those potential challenges.
The mortgagors expressed a willingness to relinquish the mortgaged property, but the other family members would have joined the arrangement only if they derived some benefit from it. By participating, they could preserve a portion of the joint-family estate for themselves and their descendants, and also secure comfortable living arrangements for the mortgagors. If the settlement had been confined to the two debtors, there would have been no justification for the creditor’s representative to travel to the debtors’ residence and convene a meeting that included every family member.
The plaintiff’s presence at that conference therefore indicated that the meeting was intended to bind her to the terms of the settlement by granting her both the ring and the house. This was meant to prevent her later from invoking the ring as her stridhana property or from asserting a claim to the house for residential purposes. The inclusion of the son at the meeting was also purposeful, as he might contend that the mortgages had been incurred for speculative purposes and therefore were not binding upon him.
The Court observed that the arrangement was not intended for genuine family purpose but appeared speculative in nature. Considering the surrounding circumstances, the Court stated that it was not prepared to disbelieve the plaintiff when she asserted that she and Murlidhar had mutually agreed to the terms set out in the letter concerning the house and the diamond ring.
Although Justice Chagla had accepted the plaintiff’s evidence regarding the factual statements she made, he had refrained from concluding that the agreement itself had been concluded directly between the plaintiff and Murlidhar. Justice Chagla expressed the view that the arrangement negotiated between the plaintiff’s husband, her father-in-law, and Murlidhar had merely been communicated to the plaintiff, rather than being a direct pact between her and Murlidhar.
The present Court examined the plaintiff’s testimony with particular care and found that her narrative was presented in a straightforward manner. Consequently, the Court found no reason to disbelieve her declaration that both she and Murlidhar had consented to the arrangement. The Court further noted that the clause in the debtors’ letter obligating the plaintiff to bear the costs of conveyance could not have been inserted without her explicit consent.
Regarding the diamond ring, the Court observed that the plaintiff alone was eager to obtain it, and that without satisfying her demand, an amicable settlement could not have been reached. The plaintiff’s husband, Inderlal Nandlal, also testified that Murlidhar had informed his wife that the ring and the house would be transferred to her whenever she desired, and that it had been agreed that she would pay the expenses of transferring the Malad property into her name.
During cross-examination, counsel highlighted several statements obtained from the husband. The husband asserted that the plaintiff did not comprehend the accounts and was not present when the accounts were settled; that Murlidhar was unwilling to provide anything to him or his father; that Murlidhar was prepared to transfer the house to the plaintiff’s wife; that he and his father would refrain from objecting to an auction sale provided Murlidhar transferred the Malad house to his wife’s name; and that the terms of the agreement were negotiated between Murlidhar on one side and the husband and his father on the other, with the wife present in the room.
The opposing side argued that, based on the husband’s statements, the true agreement had been between Murlidhar and the plaintiff’s husband and father-in-law, and therefore the plaintiff’s claim of a direct agreement with Murlidhar concerning the house and the ring should be rejected. The Court found no persuasive force in that contention. On the basis of the record, the Court could not doubt that the demand for the diamond ring and for the release of the mortgaged house originated from the plaintiff herself. Whether that demand had been communicated to the creditor’s representative directly by the plaintiff or through her son or husband was deemed immaterial, as such a mode of communication was consistent with the customary practices of the parties involved in the transaction.
It was evident that the creditor’s representative was unwilling to transfer either the diamond ring or the house to the mortgagors, because the mortgagors would not have retained those assets for any significant period and the very purpose of the transfer would have been frustrated. Consequently, the promise to deliver the house and the ring could only have been addressed to the individual who actually made the demand, and that individual therefore became the promisee with respect to those two items of property.
The creditor’s representative, either through a direct conversation with the plaintiff or by an open declaration made in her presence, assured her that the house and the ring would be given to her. This assurance that she had become the promisee under the contract was substantiated not only by oral testimony but also by the wording of the first letter, which explicitly stipulated that she would bear the costs of the conveyance. Accordingly, the conveyance was to be executed in her name, reflecting her status as promisee.
This interpretation of the agreement was further corroborated by the conduct of the promisors immediately after the contract was formed. Within two months of the agreement, they began performing their obligations by handing the ring directly to the plaintiff, a demand that had been communicated to them through her husband. After successfully purchasing the property at the auction, the promisors invited the promisee—who had undertaken to pay the conveyance expenses through the appropriate channels—to meet the stamp duty required for the sale certificate. They also permitted her to take possession of the property.
The two lower courts found that the defendants had incurred expenses for municipal taxes and other charges relating to the bungalow, and that those amounts were subsequently recovered from the plaintiff. This finding was supported by the oral evidence on record. Moreover, the defendants allowed the promisee, through her husband, to spend substantial sums on repairs and remodeling of the house. In every respect, the defendants fulfilled their part of the promise, except for the final step of executing the conveyance.
When the substantive obligations of the promise had been largely performed and only the legal title remained to be transferred by way of a conveyance, the objection that the plaintiff was not a party to the contract lost its force. The agreement expressly required that the conveyance be executed in the plaintiff’s name, giving her a clear right to demand such execution. Accordingly, the High Court’s decision on this point was affirmed, and the contention advanced by counsel for the appellant was negatived.
The argument that Section 66 of the Civil Procedure Code barred the suit was found to have no substance. The appellants, when they purchased the house at the auction, did so for their own benefit. They had unquestionably entered into an agreement with the plaintiff that
The appellants had purchased the property at the auction sale with the intention of conveying it to the plaintiff, but that intention was irrelevant for the operation of Section 66 of the Civil Procedure Code. The purchase price paid by the appellants was Rs. 20,000. The conveyance that was to be made in favour of the plaintiff was required to be for a consideration of Rs. 40,000. In these circumstances, the allegation that the purchase was a benami transaction could not be sustained, and the High Court correctly rejected that plea on appeal. The appellants had bought the property for their own benefit so that, by holding legal title in their names, they could later fulfill their agreement of sale with the plaintiff. Consequently, the provisions of Section 66 did not operate as a bar to the present suit.
The final contention raised by counsel for the respondents was also without merit. By all practical standards, the plaintiff had been in possession of the house since the date of the agreement. She had paid all taxes, incurred all related expenses, undertaken extensive repairs without objection, and spent substantial sums of money on the property while residing there. What remained, in the Court’s view, was merely the issuance of a formal title document in her favour. Accordingly, the argument that the suit was filed belatedly or that the mortgagors’ position had changed could not be allowed to defeat the plaintiff’s claim. This was particularly evident because the appellate court had already granted her the relief she sought.
An additional argument was presented that the plaintiff might maintain the suit as a beneficiary if she were not a party to the original contract. That submission was unnecessary to consider, because the Court had already found that the plaintiff was indeed a party to the agreement and therefore possessed the standing to maintain the suit.
In conclusion, the appeal was dismissed in its entirety, and the appellants were ordered to bear the costs of the proceedings.