International Contractors Ltd vs Prasanta Kumar Sur

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

Court: Supreme Court of India

Case Number: Civil Appeal No. 205 of 1956

Decision Date: 25 January 1961

Coram: J.L. Kapur, J.C. Shah

In this matter, the Supreme Court of India considered an appeal filed by International Contractors Ltd against Prasanta Kumar Sur, the appeal being dated 25 January 1961 and decided by a bench consisting of Justice J.L. Kapur and Justice J.C. Shah. The case is recorded under the citation 1962 AIR 77 and also appears in the 1962 SCR (2) 579 report, with an additional reference in E&D 1989 SC 606 (4). The dispute arose out of a transaction in which the appellant had purchased a specific property from the respondent and, shortly thereafter, entered into an agreement to reconvey the same property back to the respondent for a consideration of Rs 10,001 within a two‑year period, the essential term of which was that the purchase be completed on or before 10 February 1943. The pertinent provision of the reconveyance agreement was set out in Clause 3, which stipulated that if the purchasers paid the sum of Rs 10,001 to the vendor by the stipulated date, the vendor would, at the purchasers’ expense, execute any conveyance necessary to transfer the vendor’s title and interest in the property free of any encumbrances. Prior to the expiry of the agreed period, the respondent wrote to the appellant requesting the fulfilment of the reconveyance and indicating that the purchase money was ready for payment. After a series of communications, the appellant’s solicitors categorically repudiated the reconveyance agreement. The respondent, having not tendered the agreed purchase sum, instituted suit for specific performance. The trial court dismissed the suit on the ground that the respondent had failed to tender the purchase money. On appeal, the Calcutta High Court set aside the trial court’s order and decreed specific performance in favour of the respondent. The Supreme Court upheld this decision, holding that the appellant’s total repudiation of the reconveyance contract relieved the respondent of any obligation to tender the purchase money and authorized the respondent to seek enforcement of the contract. The Court affirmed that when an agreement for sale is totally repudiated, a formal tender of the purchase price becomes unnecessary. In reaching this conclusion, the Court followed the authorities of Hunter v Daniel (1845) 4 Hare 420 and Chalikani v Zamindar of Tuni and Others (1922) LR 50 IA 41, while distinguishing the earlier decision in Ismail Bhai Rahim v Adam Osman [I.L.R. 1938] 2 Cal 337. The judgment was rendered in the civil appellate jurisdiction under Civil Appeal No. 205 of 1956, which arose from the decree dated 26 May 1954 of the Calcutta High Court in appeal from Original Decree No. 127 of 1950. Counsel for the appellant appeared for the respondents, while counsel for the respondents represented the plaintiff and the second respondent.

In this appeal the Court considered the judgment and decree of the Calcutta High Court of Judicature. The appellant had been the defendant in the suit from which the present appeal arose, while respondent No. 1 had been the plaintiff, and the second respondent was entered as a pro‑forma defendant. The factual background was as follows: on 4 February 1941 the respondent sold the disputed property to the appellant for a consideration of Rs 10,000. Subsequently, on 10 February 1941 the parties executed an agreement for reconveyance that was to be performed within a period extending up to 10 February 1943, for a sum of Rs 10,001. The third clause of that agreement stipulated that the purchase had to be completed by the purchasers within two years, that is, on or before 10 February 1943, and that time was the essence of the contract. It further provided that if the purchasers paid Rs 10,001 on or before that date, the vendor, at the cost of the purchasers, would execute such conveyance as might be necessary to transfer the vendor’s right, title and interest in the property free from any encumbrances, if any, created by the vendor. On 26 November 1942 the solicitor for respondent No. 1 wrote to the appellant, stating that the respondent was ready and willing to complete the purchase as early as possible upon payment of Rs 10,001, and enclosed a draft conveyance for the appellant’s approval, subject to the results of a search for any encumbrances that might have been created by the appellant. On 30 November 1942 the solicitors for the appellant replied, requesting that the agreement of sale on which the respondents relied be produced for inspection, because the appellant was unable to locate a copy of that agreement in its records. On 11 December 1942 the respondent’s solicitor sent another letter declaring that the client was very eager to complete the purchase and that the full consideration money was lying idle in his hands awaiting the return of the draft conveyance approved on the appellant’s client’s behalf. The appellant’s solicitors responded on 18 December 1942, denying that any concluded or valid agreement for sale existed between their client and the respondent or any other person with respect to the premises in question. Thereafter, on 10 June 1943 respondent No. 1 instituted a suit for specific performance and, alternatively, for redemption on the ground that the transaction was in reality a mortgage. The trial court dismissed the suit on 16 May 1950, holding that the transaction on which the suit was based was not a mortgage but an outright sale coupled with an agreement for repurchase, and that because the vendor had failed to pay the money punctually according to the contractual terms, the right to repurchase was lost and could not be specifically enforced; consequently, the court had no power to grant any relief against forfeiture of that breach.

The trial court held that because the right to repurchase was lost, specific performance could not be enforced and the court lacked authority to grant any relief against forfeiture of the breach. The plaintiff‑respondent appealed to the High Court, which held that the respondents’ failure to actually tender the consideration did not bar a suit for specific performance, for after the appellant had repudiated the contract any tender would have been a useless formality. Consequently the High Court allowed the appeal and decreed specific performance. The appellant now seeks review of that judgment and decree before this Court. The evidence includes correspondence in which the respondent’s solicitor called upon the appellant to reconvey the disputed property and forwarded a draft conveyance. In response the appellant denied that any concluded or valid agreement for sale concerning the property existed. That denial amounted to a complete repudiation of the reconveyance obligation the appellant had undertaken under clause three of the agreement. Because the appellant repudiated the contract and failed to perform his part, the respondent was entitled to sue for enforcement. The appellant, however, argued that the respondent had never tendered the purchase price of Rs 10,001 and was not in a position to do so, and therefore the respondent could not obtain a decree for specific performance. In cases of this kind the issue is not whether the respondent was capable of tendering the money, but whether the appellant unequivocally refused to perform his contractual duty and indicated that any tender would be rejected. The principle laid down in Hunter v. Daniel applies. In that case Wigram, V. C. explained that courts do not require a formal tender when the facts show that the tender would be a mere formality and the other party would refuse to accept the money. Lord Buckmaster, speaking in Chalikani Venkatarayanim v. Zamindar of Tuni, endorsed this view and observed that the critical question is whether the answer sent on behalf of the mortgagee amounted to an unequivocal refusal to accept the money. The same principle applies to the present facts, and the question is whether the reply sent on behalf of the appellant constituted such a clear refusal.

The Court held that the response sent on behalf of the appellant constituted an unequivocal refusal to carry out its part of the contract, and in the Court’s view that refusal was clearly established. The appellant next argued that an offer made by a solicitor could not be regarded as a proper legal offer, and therefore when the solicitor for the respondent called upon the appellant to execute the documents, the appellant was not bound to do so. The Court noted the citations to the earlier authorities (1) (1845) 4 Hare 420; 67 E.R. 712 and (2) (1922) 50 I.A. 41, 47, but expressed its inability to accept that proposition. The Court further observed that the case relied upon by the appellant’s counsel, namely Ismail Bhai Rahim v. Adam Osman (1), did not apply to the facts and circumstances of the present dispute. That earlier decision had held that an offer made by a promiser through a solicitor to pay a debt with interest, at the date of the offer, does not by itself give the promisee a reasonable opportunity to determine whether the promisor is able and willing to perform the promise. The Court stated that unless there are peculiar circumstances distinguishing the present case, the reasoning in that earlier case does not set good law. It was further observed that there is no justification for treating a tender made through a solicitor, who acts as an agent for that purpose, as an improper tender. In the Court’s opinion, the High Court was correct in holding that the respondents were entitled to a decree for specific performance. Accordingly, the appeal was dismissed with costs, and the order of specific performance was affirmed.