Raja Kamala Ranjan Roy vs Baijnath Bajoria

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeal No. 4 of 1950

Decision Date: 1 December 1950

Coram: Hiralal J. Kania, Das J.

In the matter of Raja Kamala Ranjan Roy versus Baij nath Bajoria, the judgment was delivered on 1 December 1950 by the Supreme Court of India. The opinion was authored by Justice Hiralal J. Kania, who also sat on the bench together with Justices Das and Sudhi Ranjan. The case is reported in the citation 1951 AIR 1 and 1950 SCR 840. The substantive legal issue concerned a contract for specific performance relating to an offer to purchase a lease-hold right. The lease deed contained a stipulation that the lessee must obtain the landlord’s written consent before assigning the premises, with the provision that such consent “shall not be unreasonably withheld in the case of a respectable or responsible person.” The questions presented to the Court included whether the lessee could be discharged from the liability to obtain consent when the landlord unreasonably refused, whether the suit for specific performance by the purchaser was maintainable, and how the covenant in the lease deed should be interpreted, particularly the effect of the clause limiting the landlord’s discretion.

The factual background recorded that the defendant had taken possession of certain premises under a lease deed that incorporated a covenant prohibiting assignment without the landlord’s written consent, subject to the condition that consent not be unreasonably withheld from a respectable or responsible person. After a series of offers and counter-offers, the plaintiff made a definitive offer to purchase the defendant’s leasehold interest on terms that required the plaintiff to obtain the landlord’s consent before completing the sale. The defendant accepted this offer without any conditions. Subsequently, the defendant refused to execute the assignment, alleging that the landlord had withheld the required consent. The plaintiff therefore instituted suit seeking specific performance of the agreement. The Court held that (i) the agreement was not contingent upon obtaining the landlord’s consent; the duty to secure consent was simply a term that the defendant was obligated to fulfil. (ii) The phrase “such consent, however, not to be unreasonably withheld in the case of a respectable or responsible person” did not create an independent covenant by the landlord promising not to withhold consent unreasonably; rather, it qualified the lessee’s covenant by relieving the lessee of the burden if the landlord’s refusal was unreasonable. (iii) Because the plaintiff was a respectable and responsible person and the landlord’s refusal was found unreasonable, the defendant was entitled to assign the lease without the landlord’s consent. (iv) The Court affirmed its authority to decide the issue even though the landlord was not a party to the suit, noting that the decision would not be binding on the landlord. (v) Consequently, the defendant could not invoke the lack of the landlord’s consent as a defence to escape his obligations under the agreement, and the plaintiff was entitled to a decree for specific performance.

In this case the Court observed that the defendant could not invoke the lack of the lessor’s consent as a defense to avoid performing his contractual obligations when the plaintiff insisted that the agreement be carried out, even though the lessor had not granted his consent. Consequently, the plaintiff was entitled to a decree for specific performance of the lease agreement. The matter before the Supreme Court was recorded as Civil Appeal No 4 of 1950, an appeal from the judgment and decree of the High Court of Judicature at Calcutta delivered on 30 May 1948 by Chief Justice Sir Trevor Harries and Justice Mukherjea. That High Court order confirmed, with certain modifications, the earlier decree of a single Judge of the same court, Justice Ormond, dated 24 January 1947, which arose out of suit No 1031 of 1945. The appellant was represented by counsel N C Catterjee, assisted by Samarendra Nath Mukherje, while the respondent was represented by counsel P L Banerjee, assisted by Upendra Chandra Mullick. The judgment of the Supreme Court was delivered by Justice Das on 1 December 1950. The appeal was brought by the defendant in a suit for specific performance, challenging the High Court’s order that dismissed his earlier appeal and upheld, with modifications, the decree for specific performance originally granted by Justice Ormond. The factual background, which was not seriously contested, involved the ownership of premises No 374 Upper Chitpur Road, Calcutta, by Maharaja Sris Chandra Nandy of Cossimbazar. By an indenture of lease dated 27 April 1931, the Maharaja, acting as manager of the Cossimbazar Raj Wards Estate under the Court of Wards, leased the said premises to Madan Gopal Daga for a term of fifty-one years commencing 1 May 1931, at a monthly rent of Rs 1,083-5-3, and subject to the terms contained in the lease. Clause 2, sub-clause 6 of that lease required the lessee to covenant not to assign the premises or any part thereof without first obtaining the lessor’s written consent, stipulating however that such consent could not be unreasonably withheld in the case of a respectable or responsible person. The lease also contained the usual provision allowing the lessor to re-enter the premises for non-payment of rent for three months or for any breach of the lessee’s covenants, without prejudice to the lessor’s right to sue for damages. On 25 March 1943, Madan Gopal Daga, having secured the lessor’s written consent, assigned the unexpired residue of the lease to the defendant, who was subsequently accepted by the lessor as the new lessee. Between 27 January 1945 and 2 February 1945, correspondence exchanged between the plaintiff, the defendant, and their respective solicitors resulted in an alleged agreement by the defendant to assign the lease to the plaintiff for

In this matter, the parties entered into an agreement that the defendant would assign the unexpired residue of his lease to the plaintiff, with the assignment to become effective on 1 February 1945 for a price of Rs 1,80,000, and the terms of that agreement were set out in a series of letters exchanged between the parties and their solicitors, which the Court would refer to later in greater detail. On 21 February 1945 the defendant wrote to the lessor informing him that he had agreed to assign his interest in the lease to the plaintiff and requesting that the lessor give his written consent to such an assignment. The lessor replied on 5 March 1945 that he could not consider giving consent because, in his view, the lease had already been determined, and that consequently the entire initiative lay with the defendant. That reply made clear that the lease had been terminated for non-payment of rent and that the lessor expected the defendant to revive the lease by paying the arrears before any question of consent to an assignment could be entertained. On 8 March 1945 the defendant, through his solicitor, informed the plaintiff’s solicitor that he had approached the lessor but had been unable to obtain the required consent, and that, because a valid transfer could not be effected without such consent and because the agreement for sale was expressly subject to obtaining that consent, the defendant felt compelled to cancel the agreement. The plaintiff, by a letter dated 10 March 1945, contested that contention, asserting that the agreement was not conditional upon the lessor’s consent and that the defendant therefore had no right to terminate it. The plaintiff further pointed out that the lease expressly provided that the lessor could not unreasonably withhold his consent when the proposed assignee was a respectable and responsible person, a description that applied to the plaintiff; consequently, the plaintiff argued that the lessor was bound to grant consent. The subsequent correspondence between the parties continued in a similar vein, with each side maintaining its respective position, but the Court found it unnecessary to recount those additional letters. On 17 March 1945 the lessor instituted suit No 425 of 1945 in the High Court against the defendant seeking recovery of the demised premises on the ground that the lease had been determined. While that suit was pending, the plaintiff filed a suit for specific performance of the agreement to assign the lease on 4 July 1945, the suit from which the present appeal arose. On 13 July 1945 the lessor’s ejectment suit was resolved when the defendant consented to a decree for arrears of Rs 59,213-11-0, which the defendant paid, thereby waiving the forfeiture for non-payment and reviving the lease. Shortly after that settlement, on 6 August 1945 the defendant applied once again to the lessor for consent to assign the lease, and on the same day the lessor responded by refusing to give his consent, offering no explanation for the refusal.

In this matter, the lessor declined to give his consent to the assignment of the lease and offered no reason for the refusal. The plaintiff then instituted a suit for specific performance, which was initially heard before Justice Ormond in November 1946. The case was heard in part and subsequently adjourned. Further proceedings took place in January 1947, and on 23 January 1947 Justice Ormond issued a decree ordering the defendant to specifically perform the agreement to assign the lease. The decree stipulated that if the defendant could not obtain the written consent of the lessor within fourteen days from the date of the decree, the assignment should proceed notwithstanding the lack of such consent. The defendant appealed this decree.

During the appeal, after two days of hearing, the appellate court sought to clarify the issues by granting the plaintiff an opportunity to examine the Maharaja as a witness so that all relevant facts could be fully elicited and considered for a proper decision. The appeal was consequently adjourned, and the lessor was examined on commission, with his testimony entered into the record. After further hearing, the appellate court dismissed the defendant’s appeal and upheld the decree for specific performance, holding that execution of the deed of assignment in favour of the plaintiff did not require prior consent of the lessor. Subsequently, the decree was amended to insert a provision permitting the plaintiff to set off from the purchase price the rent that had become payable from 1 February 1945 until the date of conveyance, after deducting all outgoings, and to charge interest on the purchase price at a rate of four per cent per annum from that date to the date of conveyance.

The defendant now stands before this Court in appeal against the judgment and decree of the appellate court. Counsel for the appellant advanced the primary contention that the agreement was conditional upon the lessor’s consent; since the defendant could not secure such consent, no enforceable agreement existed that could be specifically performed. The resolution of this issue required a precise interpretation of the correspondence alleged to have formed the agreement. On 9 January 1945, the plaintiff had offered to purchase the defendant’s leasehold interest on the terms set out in a letter dated that same day. Clauses 3 and 4 of that letter read as follows: “(3) The lease will be transferred in my favour as from 1 February 1945, and I shall be entitled to recover rents from the tenants as from that date and shall pay the rent to the superior landlord and municipal taxes from that date. (4) You shall have to obtain the necessary consent for the transfer of the lease in favour of myself or my nominees from the said Maharaja of Cossimbazar before the execution of the transfer of lease in my favour.”

The Court noted that the plaintiff’s original letter required the transfer of the lease in favour of the plaintiff or his nominees, and that this transfer had to be obtained from the Maharaja of Cossimbazar before the execution of the lease transfer in the plaintiff’s favour. The defendant replied to the plaintiff’s letter on 28 January 1945. In his reply the defendant expressed his willingness to transfer the lease to the plaintiff, subject to the terms set out in his own correspondence. The defendant’s letter contained two important clauses. Clause 3 read: “If your final acceptance as stated above is received within 30th January current and if I am able to obtain the consent of Maharaja Cossimbazar for transfer of the leasehold interest within the first week of February, 1945, I agree to your para 3.” Clause 4 read: “Your para 4 is agreed to but the name or names of the persons to be mentioned in the sale deed for whom permission is to be taken from Maharaja Cossimbazar should be clearly stated with their respective addresses.” The Court held that these two letters did not consummate an agreement because the defendant’s response was not an unconditional acceptance of the plaintiff’s offer; rather, it amounted in law to a counter-offer. By virtue of clause 3 the defendant proposed to transfer the lease to the plaintiff effective 1 February 1945, thereby allowing the plaintiff to receive rents from that date and to become liable for rent payable to the lessor from the same date, on the condition that the plaintiff’s acceptance be received by 30 January 1945 and that the defendant be able to secure the lessor’s consent within the first week of February 1945. The Court explained that this clause did not make the entire offer dependent on obtaining the lessor’s consent; instead, it inserted the consent requirement as one of the terms of the offer, namely that the lease would be transferred as of 1 February 1945 provided the consent was obtained within the specified week. Similarly, clause 4, subject to the assignee’s name being clearly stated, indicated that the defendant would obtain the lessor’s consent for the assignment of the lease. The Court observed that clause 4 was not drafted to make the defendant’s offer contingent on his obtaining the lessor’s consent; rather, it constituted a term of the offer that would become binding on the defendant if the offer were accepted. The Court further observed that the plaintiff did not appear to accept the defendant’s counter-offer. Instead, on 29 January 1945 the plaintiff, through his solicitors, made a fresh offer to purchase the defendant’s leasehold interest for Rs 1,80,000 on the following terms: (a) the earnest money would be Rs 5,000 instead of Rs 30,000; (b) the plaintiff would obtain the conveyance in his own favour and the landlord’s consent would be obtained by the defendant before completion of the sale; (c) the plaintiff would complete the conveyance within one month after the receipt by the plaintiff of all the original title deeds from the defendant.

In the revised proposal, the plaintiff’s solicitors stipulated that the earnest money would be Rs 5,000 instead of Rs 30,000, and that the conveyance would be made in the plaintiff’s favour. They required that the landlord’s consent be obtained by the defendant before the completion of the sale, that the conveyance be completed within one month after the receipt by the plaintiff of all original title deeds, and that the transfer of the property to the plaintiff would be deemed effective from 1 February 1945 regardless of the actual date of conveyance. The plaintiff further stated that from that effective date the plaintiff would be entitled to all rents, issues and profits and would assume liability for all obligations arising thereafter, and that the plaintiff would not be liable to pay the defendant’s solicitor’s costs in respect of the sale. By clause (b) the offer was expressed as not being conditional upon the landlord’s consent; nevertheless, the plaintiff insisted that the defendant must obtain such consent, making it a substantive term of the offer so that, upon acceptance, the defendant would be bound to secure the landlord’s consent as an integral part of the agreement.

The defendant, through a letter dated 1 February 1945, indicated acceptance of the plaintiff’s final offer but added a reservation concerning clause (d), stating that the effect of that clause would apply only if the conveyance were completed in accordance with clause (c) of the plaintiff’s letter. On 2 February 1945 the plaintiff, by his solicitors’ correspondence, unconditionally accepted this reservation, and consequently a concluded agreement was formed between the parties. The Court observed that this agreement was not contingent upon the acquisition of the landlord’s consent; rather, the duty to obtain such consent was imposed on the defendant as a term of the agreement itself. The Court below correctly held that the agreement was not conditional, contrary to the appellant’s contention. Subsequent arguments by counsel for the appellant concerned the lessee’s covenant in sub-clause (6) of clause 2 of the lease. Established case law, as referenced in the High Court’s judgment, indicates that the phrase “such consent, however, not to be unreasonably withheld in the case of respectable or responsible person” does not create a separate independent covenant by the landlord guaranteeing consent. Instead, those words qualify the lessee’s obligation not to assign the premises without the landlord’s written consent, effectively relieving the lessee of that burden where the landlord withholds consent unreasonably for a proposed assignment to a respectable or responsible person. In this context, the plaintiff argued that, being a respectable and responsible person, the landlord’s refusal to consent was unreasonable and therefore discharged the defendant from the covenant, allowing a valid assignment without the landlord’s consent.

The plaintiff argued that, being a respectable and responsible person, the lessor had unreasonably refused to give consent to the proposed assignment, and that such refusal had therefore discharged the defendant from his contractual obligation to obtain the lessor’s written consent. As a result, the plaintiff claimed that the defendant could lawfully and validly assign the lease to him without obtaining the lessor’s approval. The appellant objected to this contention on the ground that the plaintiff’s original plaint expressly required that the defendant obtain the lessor’s consent, and therefore the plaintiff should not have been allowed to raise a new issue at the hearing. Both the trial Court and the appellate Court, however, observed that there was no surprise element, because the plaintiff’s argument was based on facts that the defendant himself had admitted and proved during the proceedings. Moreover, the pleadings themselves indicated that the issue had already been foreshadowed. In paragraph 11 of the plaint, the plaintiff described himself as a responsible and respectable individual and asserted that any withdrawal of consent in his favour would be unreasonable, invalid and non-binding. In light of that pleading, the courts concluded that the point raised at trial was not a wholly new submission and that the defendant was not taken by surprise.

The appellant’s second objection was that the point concerning the alleged unreasonable withholding of consent should not have been allowed to be raised, and that no evidence on that point should have been admitted in the absence of the lessor as a party to the suit. The court found no merit in that objection. The central issue for determination was whether relief in the form of specific performance could be granted. The court noted that it could not compel the defendant to apply to the lessor for consent, nor could it compel the lessor to grant such consent; if the claim rested solely on the lessor’s consent, the court would ordinarily refrain from ordering specific performance of the assignment agreement. Consequently, the court had to consider whether the factual circumstances demonstrated that the defendant had been relieved of his covenant because the lessor had unreasonably withheld consent. Although any decision on this question would not bind the lessor, the court nevertheless needed to resolve the issue for the purposes of the suit between the parties in order to determine whether to award specific performance to the plaintiff. The appellant’s third objection was that the appellate court should not have permitted the plaintiff to adduce further evidence. It was recalled that the appellate court had directed that the testimony of the Maharaja of Cossimbazar be taken during the hearing of the appeal.

During the hearing of the appeal, the appellate court’s judgment expressly recorded that it was the appellate court which required the evidence in order to clear up the matter and for the purpose of enabling it to reach a proper decision on the issue presented. Consequently, the Court held that the direction to call the evidence fell squarely within the ambit of Order XLI, rule 27 of the Code of Civil Procedure, and therefore no objection could be sustained against the course adopted by the appellate court on that ground. The Court further observed that there was no justification for interfering with the exercise of judicial discretion exercised by the lower tribunals in this respect.

The fourth objection raised by the appellant concerned the High Court’s view that the clause in the agreement obligating the defendant to obtain the lessor’s consent before executing the assignment to the plaintiff was a term intended solely for the benefit of the plaintiff. The Court recalled that the clause had been introduced by the plaintiff in his initial offer, which subsequently matured into a binding agreement. The language of the clause did not indicate that it had been inserted to protect the defendant; rather, it was a term that the plaintiff could rely upon. Accordingly, the failure to obtain the lessor’s consent constituted a breach that the plaintiff could invoke to rescind the contract and claim damages. The Court could not discern, from the correspondence between the parties, any basis on which the defendant could plead the absence of the lessor’s consent as a defence that discharged him from his own performance obligations, especially when the plaintiff had waived any objection and insisted that the agreement be carried out. While the lack of consent might represent a defect in the defendant’s title, the plaintiff was evidently prepared to accept that defect.

Finally, the appellant contended that by ordering specific performance of the agreement the Court had exposed the defendant to the risk of a damages action for breach of covenant. The Court noted that if the assignment of the lease by the defendant to the plaintiff without the lessor’s consent constituted a breach of covenant, the lessor could forfeit the lease and institute possession proceedings. Such a consequence would affect the plaintiff alone, since the defendant had already transferred the lease for valuable consideration. The appellant further argued that the lessor could sue the defendant for damages and that the decree of specific performance placed the defendant in a perilous position. The Court identified two responses to this argument: first, the defendant ought to have framed his obligation to transfer the lease as conditional upon obtaining the lessor’s consent, a condition he failed to incorporate; second, given that the plaintiff was a respectable and financially capable person, the assessment of damages would be uncertain and largely speculative. The Court suggested that this very consideration may have influenced the decision to decree specific performance.

In the present case the defendant had agreed, without imposing any condition, to obtain the lessor’s consent and to assign his interest in the lease. The evidence placed before the Court did not allow any denial or dispute that the plaintiff was a respectable and responsible person, and indeed the learned counsel for the appellant did not challenge that description. The Court agreed with the view expressed by the High Court that, considering the facts and the material on record, the lessor had unreasonably withheld his consent, thereby allowing the defendant to effect the assignment of the lease without obtaining the required permission. The Court further held that, on the facts, both the trial Court and the appellate Court had exercised their discretionary powers correctly, and that there was no sufficient ground for this Court to interfere with the judgment rendered by the High Court. Consequently, the appeal was dismissed. The appellant was ordered to bear the costs of the appeal. The order of dismissal was affirmed, and the agents for the parties were recorded as P.K. Chatterjee for the appellant and S.K. Ghosh for the respondent. The decision reflected the Court’s view that the procedural requirements concerning landlord consent could not be ignored, and that the appellant’s claim for specific performance would have placed him in an unjust position. The cost order was imposed in accordance with the principle that the unsuccessful party should bear the expenses of the proceedings.