CASE NO.: Appeal (civil) 3346 of 1981 PETITIONER: RAMESHWAR SWARUP (DEAD) BY LRS. RESPONDENT: SMT. SAROJ TYAGI AND ORS. DATE OF JUDGMENT: 12/10/1998 BENCH: K. VENKATASWAMI & A.P. MISRA JUDGMENT:
JUDGMENT
1998 Supp(2) SCR 312
The Judgment of the Court was delivered by
VENKATASWAMI, J. In spite of service of notice, the respondents remained
unrepresented. Hence, we requested Mr. R. Sundarvardan, learned senior
Advocate, to assist the Court as Amicus Curiae. The issue that arises for
our consideration out of the judgment dated 22.7.81 of the Allahabad High
Court in S.A. No. 1103/73, is ; Can a party (purchaser) to a sale agreement
of a property in Cantonment Area rescind the contract on the ground that
the permission given by the Military Estate Officer (for short ‘MEO’) was
conditional, when under the contract the purchaser had undertaken to get,
the permission.
Brief facts are as under :-
The property in question is a bungalow on Plot Nos. 258 and 258A situated
at old Grant on the Mall Road in the cantonment Area, Meerut. The
appellants (hereinafter called the ‘Vendors’) are the owners of the suit
property. The first respondent (hereinafter called the ‘Vendee’) entered
into an Agreement with the appellants (Vendors) on 3.11.65 for the
purchases of the suit property for consideration of Rs. 70,000. In terms of
the Agreement, a sum of Rs. 11,000 was paid as earnest money to the Vendors
on 11.10.65. The Vendee filed a suit for recovery of the said amount of Rs.
11,000 contending, inter alia, that the understanding was that the Vendors
would get unconditional permission from the MEO, Meerut, for the transfer;
that the Vendors have cunningly incorporated in the said Agreement that the
permission from the MEO for the agreed sale shall be obtained by the
Vendees; that there were minors among the Vendors and by concealing that
factor the Agreement was entered into and that there were already
proceedings pending for the resumption of the Suit property. On the basis
of the above allegations, the suit for recovery of the earnest money was
filed.
The Vendors resisted the suit denying each and every one of the ,
allegations in the plaint. According to the Vendors, the express term of
the Agreement was that it was for the vendee to obtain the permission for
transfer of the property from the MEO; that there were no minors among the
Vendors on the date of the Agreement as alleged; that there were no
proceedings pending for resumption as pleaded in the plaint and that the
Vendee was fully aware of the condition that she had to get the permission
from the MEO for the sale of the property.
The Trial Court, on the basis of the pleadings and evidence, found that the
Vendee was entitled to get back the money as the conditional permission
given by the MEO would amount to no permission at all and the Vendee was
not obliged to purchase the property.
The Vendors, aggrieved by the judgment and decree of the Trial Courts
preferred an appeal to the Additional District Judge, Meerut, in Civil
Appeal No. 517/70, The First Appellate Court, on reappreciation of the
pleadings and evidence, found that the permission granted by the MEO for
the transfer of the suit property was not conditional and that the Vendee
was not entitled to wringle out of the Sale Agreement; that there were no
resumption proceedings pending at the tune of or prior to the Sale
Agreement ; that the Vendee knew that it is for her to get the permission
from the MEO and that the amount paid by the Vendee being the earnest money
and she, having committed a default, cannot ask for refund of the said
money. On the basis of these findings, the First Appellate Court allowed
the appeal and dismissed the suit filed by the Vendee.
Aggrieved by the judgment and decree of the First Appellate Court, the
Vendee preferred a Second Appeal No. 1103 of 1973 before the Allahabad High
Court.
A learned Single Judge of the Allahabad High Court was of the view that the
Second Appeal could be decided on a single point, namely, whether the
conditional permission given by the MEO would amount to no permission at
all and, therefore, me Vendee was not obliged to go ahead with the Sale
Agreement and consequently she can claim for refund of the earnest money
paid for the purchase of the property. The High Court construed that the
permission given by the MEO being conditional one, would amount to no
permission and, therefore, the Vendee was entitled to rescind the contract
and claim for refund of the earnest money. In that view of the matter, the
High Court reversed the judgment of the First Appellate Court and restored
that of the Trial Court, which decreed the suit filed by the Vendee, The
present appeal by special leave is filed against the said judgment of the
Allahabad High Court.
Mr. P.S. Mishra, learned senior counsel appearing for the appellants
(Vendors), elaborately argued the matter challenging the conclusion of the
High Court by referring to the provisions of the contract Act, Transfer of
property Act and the Specific Relief Act. He also cited judgments of the If
ivy Council and of this Court in support of his contentions. He contended
that the earnest money, being part of the sale consideration, cannot be
recovered when the sale transaction fell through at the instance of the
Vendee and that ‘the conditional permission given by the MEO was not
unusual having regard to the situation of the property in the Cantonment
Area. He also submitted mat the parties to the Agreement knew that the
property was liable for resumption in accordance with the provisions Of the
Cantonment Act and the rules framed thereunder,
Mr. R. Sundarvaradan, learned senior counsel appearing as Amicus Curiae,
also argued the matter elaborately contending that the conditional
permission given by the MEO was no permission at all and, therefore, the
Vendee was under no obligation to proceed further under the Agreement.
According to the learned counsel, the contract fell through on account of a
collateral reason for which the Vendee was not responsible. As the Vendee
was not responsible for the failure of the contract, she was justified in
claiming refund of the earnest money paid by her. He also cited several
decisions in support of his submissions.
After considering the rival submissions and perusing the High Court
judgment, we are of the view that we need not consider all the points
raised by the counsel on both sides when the only question decided by the
High Court was with reference to the scope of the permission granted by the
MEO and the consequences thereof. If we come to the conclusion that the
permission given by the MEO in this case was no permission at all, then the
Vendee must succeed. If we hold it otherwise, the Vendors should succeed.
It is common ground that under the Agreement the Vendee undertook to get
the permission from the MEO and the Vendee knew about it. Clause 5 of the
Agreement provides that in case the MEO did not accord the permission, the
Vendee will be absolved of her liability to purchase the property and will
be entitled to get her money back. The condition on which reliance was
placed by both the parties and subject to which the permission by the MEO
was given, reads as follows:-
“That the purchaser gives a Certificate to the effect that he has no
intention to represent against the resumption proceedings when decided by
the competent authority.’
The High Court held that the above condition was not in accordance with any
law and wholly unjustified, and according to the learned Judge, the MEO had
no right to impose such a condition so as to take away the right of filling
objection by the Vendee whenever resumption was done. Though the resumption
itself was to be made under the provisions of the Cantonment Act and the
Rules framed thereunder, by virtue of the condition imposed, according to
the learned Judge, the purchaser could not resist the resumption even in a
case where the resumption was not in accordance with law. Construing the
condition in (he manner stated above, the High Court concluded that such a
permission would be no permission in the eye of law and, therefore, the
Vendee was entitled to rescind the contract and claim refund of the earnest
money. Whether the High Court was right in construing the condition in the
mariner stated above is the only question to be decided in this appeal.
The parties knew that the property was situated in the Cantonment Area. The
finding of the First Appellate Court was that the husband of the Vendee was
a graduate and the Vendee herself was literate and they knew about the
terms of the Agreement fully well. Even the Trial Court, which decreed the
suit, found that the Vendee must be presumed to have been aware of the
legal position with regard to resumption in respect of the property in the
Cantonment Area. Knowing the legal position of the properties situated in
the Cantonment Area, the Vendee had entered into an Agreement. It is also
hot in dispute that ‘( is the vendee who had undertaken to obtain the
permission for the purchase of the property from the MEO and the only
obligation on the part of the Vendors was to make available all necessary
papers and assist the Vendee in getting the permission. It is again an
undisputed fact that there was no express or implied condition that the
Vendors must get an unconditional permission from the MEO, Bearing these
factors in mind if we look into the condition imposed by the MEO, we are
unable to sustain the conclusion of the High Court on the effect of
condition referred to above. The High Court erred in holding that the
purchaser was prohibited from challenging any future resumption, even if
the resumption proceedings were contrary to the provisions of the
Cantonment Act and the Rules regarding resumption. The High Court should
not have construed the condition imposed by the MEG by giving a narrow and
literal meaning to the condition. Instead the condition should have been
read down on the facts of the case. If the authorities proceed for
resumption contrary to the express provisions of the Act and the Rule, it
is always open to the aggrieved party to challenge the same and the
condition imposed, as noticed above, cannot be construed to mean that even
though such resumptions were contrary to the provisions, cannot be
challenged. The mere fact that at a future point of time the property in
the Cantonment Area would be liable for resumption in accordance with law,
will not clothe the Vendee to repudiate the Sale Agreement. Except the plea
regarding the nature of the condition imposed by the MEO, the High Court
had not found the other pleas against the Vendor. If we construe the
condition as not unusual having regard to go the situation of the property
in the Cantonment Area, the necessary corollary would be that the Vendee,
on the facts of this case, could not have repudiated the Sale Agreement,
The only ground which weighed with the High Court to reverse the judgment
of the First Appellate Court, as noticed earlier, was regarding the nature
of condition. For the reasons stated above, we hold that the said
conclusion arrived at by the High Court on the nature of the condition
cannot be sustained. The appeal has to be and is accordingly allowed with
no order as to costs. The suit filed by the first respondent will stand
dismissed.
We place on record our appreciation to the learned senior counsel, Mr. R.
Sundaravaradan, for the assistance rendered to this Court.