Nathulal v. Phoolchand

Nathulal agreed in writing to sell a ginning factory and its land to Phoolchand, took part of the price and gave possession. He then cancelled the sale and sued for possession. On 16 October 1969 the Supreme Court held that Phoolchand could defend his possession under s. 53A of the Transfer of Property Act, because Nathulal had not done his own part first.

Quick Revision

Citation note: the judgment text prints 1970 AIR 546, 1970 SCR (2) 854 and 1969 SCC (3) 120. The appeal number is Civil Appeal No. 2345 of 1966.

Source note: the judgment has no numbered paragraphs. No paragraph numbers are cited. Every block of the judgment is covered below.

Parties

Nathulal — appellant; owner of a ginning factory built on agricultural land (Khasra No. 259/1). He was the plaintiff in the suit for possession.

Phoolchand — respondent; the buyer under the agreement of 26 February 1951. He was the defendant in the suit.

Chittarmal — not a party; Nathulal's brother, in whose name the land stood in the revenue records.

Procedural History

1. Nathulal sued in May 1954 in the Court of the District Judge, Nimar. He asked for possession of the land and the factory, and for mesne profits (profits for the period of wrongful possession) from the date of delivery.
2. The Trial Court decreed (formally granted) the suit. It held that Phoolchand committed breach of contract (failing to perform a contract) by not paying the balance on or before the due date.
3. Phoolchand appealed. The High Court of Madhya Pradesh (Indore Bench), in First Appeal No. 56 of 1961, reversed the decree by its judgment and decree dated 3 December 1965.
4. The High Court declared that Nathulal was entitled to the balance of the consideration (the price). It also awarded mesne profits at Rs. 1,500 a year from 7 May 1951, until the date on which Rs. 21,000 were deposited.
5. Phoolchand had to deposit Rs. 21,000 within two months of the decree. Subject to that, he could keep possession of the whole property, including the ginning factory and the structures on the land.
6. If Phoolchand defaulted, Nathulal could claim possession of the whole property. Mesne profits would then run at Rs. 3,000 a year from the date Phoolchand went out of possession until possession was delivered.
7. The High Court disposed of Nathulal's cross-objections on mesne profits in the light of those directions.
8. The High Court granted a certificate, and Nathulal appealed to the Supreme Court (Civil Appeal No. 2345 of 1966). The Supreme Court decided on 16 October 1969.

Facts

1. Nathulal owned a ginning factory built on agricultural land bearing Khasra No. 259/1.
2. The land stood entered in the revenue records in the name of Chittarmal, Nathulal's brother.
3. On 26 February 1951, Nathulal agreed to sell the land and the factory to Phoolchand for Rs. 43,011. The headnote prints the price as Rs. 43,077.
4. Nathulal received Rs. 22,011 as part payment and put Phoolchand in possession of the property.
5. Phoolchand agreed to pay the balance on or before 7 May 1951.
6. The terms were written down in counterpart and signed by both parties.
7. Under the agreement, Nathulal undertook to get Chittarmal's name removed from the revenue records and his own name entered.
8. The land stayed recorded in Chittarmal's name until 6 October 1952.
9. Under s. 70(4) of the Madhya Bharat Land Revenue and Tenancy Act 66 of 1950, Phoolchand was not an agriculturist. The land could not be sold to him without the sanction of the State Government.
10. The High Court found that Phoolchand had an arrangement with a Bank to borrow up to Rs. 75,000 when he needed it.
11. Phoolchand pleaded that on 7 May 1951 he sent a telegram offering to pay the balance against execution of the sale deed.
12. On 8 October 1951, Nathulal rescinded the contract on the plea that Phoolchand had not paid the balance on the due date.
13. Nathulal executed no conveyance of the land or the factory in favour of Phoolchand.
14. In May 1954, Nathulal sued for possession and mesne profits. He alleged that Phoolchand was a trespasser because he had broken the express terms of the agreement by not paying the balance on time.

Issues Raised

1. Could Phoolchand defeat Nathulal's claim for possession by the defence of part performance under s. 53A of the Transfer of Property Act?
2. Did s. 70(8) of the Madhya Bharat Land Revenue and Tenancy Act 66 of 1950 bar the plea of part performance for a person put in possession under a contract of sale?
3. Were the first three conditions of s. 53A satisfied, including whether the act done in pursuance of the contract had to be independent of the contract's terms?
4. Was Phoolchand willing to perform his part of the contract (the fourth condition of s. 53A)?
5. Did the repeal of Act 66 of 1950 by the Madhya Pradesh Land Revenue Code, 1959 have retrospective operation?

Arguments Contended

The judgment records the arguments of counsel for Nathulal. It also records Phoolchand's pleaded defence and the findings of the lower courts. It does not record separate argument by counsel for Phoolchand.

For the appellant (Nathulal):

• Section 70(8) of the Madhya Bharat Land Revenue and Tenancy Act bars the plea of part performance for a person put in possession under a contract of sale.
• The act done in pursuance of the contract must be independent of the terms of the contract.
• Phoolchand was not willing to perform his part of the contract.
• Nathulal was bound to perform his two conditions only after Rs. 21,000 was paid.
• The repeal of Act 66 of 1950 by the Madhya Pradesh Land Revenue Code, 1959 has retrospective operation.
• Counsel appearing: I. N. Shroff and B. L. Joshi.

For the respondent (Phoolchand):

• Phoolchand's pleaded defence was that Nathulal had not got Chittarmal's name deleted from the revenue records, as the agreement required.
• He pleaded that he was ready and willing to pay the balance of Rs. 21,000.
• He pleaded that he had sent a telegram on 7 May 1951 offering to pay the balance against execution of the sale deed.
• He pleaded that Nathulal had unlawfully altered the agreement after execution. The alleged addition was a clause declaring Phoolchand's possession unlawful if he did not pay by 7 May 1951.
• The judgment records no separate argument by counsel for Phoolchand (R. Gopalakrishnan appeared for him).

Court's Reasoning

The judgment has no numbered paragraphs. The steps below follow the order of the judgment. Shah J. delivered the judgment of the Court (Shah and Hegde JJ.). There is no separate opinion.

Judgment of the Court (Shah J., for Shah and Hegde JJ.)

1. Noted: Nathulal owned the Ginning Factory on Khasra No. 259/1. The land was entered in the name of his brother Chittarmal.
2. Noted: On 26 February 1951, Nathulal agreed to sell the land and the factory to Phoolchand for Rs. 43,011 (the body text is garbled and the headnote prints Rs. 43,077). He took Rs. 22,011 and gave possession.
3. Noted: Phoolchand agreed to pay the balance on or before 7 May 1951. The terms were reduced to writing in counterpart and duly signed.
4. Noted: Nathulal rescinded the contract on 8 October 1951. In May 1954 he sued in the District Judge's Court, Nimar, for possession and mesne profits, calling Phoolchand a trespasser.
5. Noted: Phoolchand's defence had four parts. Nathulal had not got Chittarmal's name deleted. Phoolchand was ready and willing to pay Rs. 21,000. He had telegrammed an offer on 7 May 1951. The agreement had been unlawfully altered after execution.
6. Noted: The Trial Court decreed the suit. It held that Phoolchand broke the contract by not paying the balance by the due date. The High Court reversed the decree, with the directions recorded above. Nathulal appealed with a certificate.
7. Noted: The Trial Court thought Phoolchand could not raise Rs. 21,000 by 7 May 1951 and so broke the contract.
8. Noted: The High Court held that Nathulal was not guilty of breach, because Phoolchand had arranged to borrow up to Rs. 75,000 from a Bank when he needed it. So he had enough resources to pay.
9. Noted: Both courts held that Phoolchand failed to pay by 7 May 1951. Both held that he had not made the tender (a formal offer to pay) he pleaded.
10. Noted: Under the agreement, Nathulal had undertaken to get Chittarmal's name removed and his own entered. The land stayed in Chittarmal's name until 6 October 1952, and before that date Nathulal rescinded.
11. Noted: Under s. 70(4) of the Madhya Bharat Land Revenue and Tenancy Act 66 of 1950, Phoolchand was not an agriculturist. The land could not be sold to him without State Government sanction.
12. Held: Where no clause deals with the matter, a condition must be implied that Nathulal will secure the sanction under s. 70(4) after paying the proper fee.
13. Why: It is well settled that where a statute makes property non-transferable without the authority's permission, an agreement to transfer it is subject to an implied condition. The transferor must obtain the sanction. The Court cited Motilal and Others v. Narhelal and Another and Mrs. Chandhee Widya Vati Madden v. Dr. C. L. Katial and Others.
14. Held: Phoolchand could be called upon to pay the balance only after Nathulal performed his part of the contract.
15. Noted: Phoolchand had an outstanding arrangement with his banker to draw the money needed for payment to Nathulal.
16. Held: To prove himself ready and willing, a purchaser need not produce the money or prove a settled scheme for financing the transaction. The Court cited Bank of India Ltd. and Others v. Jamsetji A. H. Chinoy and Messrs. Chinoy and Company.
17. Held: The High Court decided largely on the view that Nathulal committed breach. But "the question whether Nathulal had committed the breach is not of much significance".
18. Why: Nathulal was the owner and had executed no conveyance. He sued for possession on his title. Phoolchand could defeat the claim if he established the defence of part performance under s. 53A of the Transfer of Property Act.
19. Noted: Counsel for Nathulal argued that, under s. 70(8) of the Madhya Bharat Act, the plea of part performance is not available to a person put in possession under a contract of sale.
20. Noted: Section 70(8) says that no sale under that section is deemed valid until the sale deed has been registered under the law of registration in force.
21. Held: The argument that s. 70(8) bars part performance has no force.
22. Why: Section 70(8) only requires that, besides the conditions of s. 70, registration of the sale deed is a condition before a sale is deemed valid. There was no sale in this case. Phoolchand relied on a contract of sale and an equity to defend his possession. Nothing in s. 70(8) bars a claim based on part performance under s. 53A.
23. Noted: The conditions for the defence of part performance to an ejectment action (a suit to recover possession) by the owner are four.
    • The transferor has contracted to transfer immovable property for consideration, by writing signed by him or on his behalf. The terms must be ascertainable with reasonable certainty.
    • The transferee has taken possession in part performance of the contract. Or, being already in possession, he continues in possession in part performance.
    • The transferee has done some act in furtherance of the contract.
    • The transferee has performed or is willing to perform his part of the contract.
24. Noted: If these conditions are fulfilled, a further rule applies. It applies even where the contract needed registration but was not registered. It also applies where the transfer was not completed in the prescribed manner. The transferor, or anyone claiming under him, cannot enforce against the transferee any right over the property he holds. The only exception is a right expressly provided by the contract.
25. Held: There was a contract to transfer immovable property for consideration, by writing signed by Nathulal. Its terms could be ascertained with reasonable certainty.
26. Held: In part performance, Phoolchand took possession and paid Rs. 22,011.
27. Held: The argument that the act done in pursuance of the contract must be independent of the contract's terms cannot be accepted.
28. Held: The first three conditions for the defence of part performance exist.
29. Noted: Mr. Shroff argued that Phoolchand was not willing to perform his part of the contract. That went to the fourth condition.
30. Noted: Nathulal had expressly undertaken to have the revenue records rectified by deleting Chittarmal's name.
31. Held: It was also an implied condition that Nathulal would secure the Collector's sanction to the transfer under s. 70(4) of Act 66 of 1950.
32. Held: The first condition was not fulfilled till 6 October 1952. The second was never fulfilled.
33. Held: The Court was unable to agree that the repeal of Act 66 of 1950 by the Madhya Pradesh Land Revenue Code, 1959 has retrospective operation.
34. Held: In deciding whether a person is willing to perform his part, the sequence in which the contract's obligations are to be performed must be taken into account.
35. Held: The argument that Nathulal had to perform the two conditions only after Rs. 21,000 was paid is plainly contrary to the terms of the agreement.
36. Noted: By s. 4 of the Transfer of Property Act, the chapters and sections of that Act which relate to contracts are to be taken as part of the Indian Contract Act, 1872.
37. Held: A contract may require obligations to be performed in a certain sequence. Then one party cannot require the other to comply without first performing his own part. That part comes earlier in the sequence.
38. Held: Phoolchand had at all relevant times made the necessary arrangements to pay. But so long as Nathulal did not carry out his part, Phoolchand could not be called upon to pay the balance.
39. Held: Phoolchand was at all relevant times willing to carry out his part of the contract.
40. Held: The appeal fails and is dismissed with costs.

Authorities

• Motilal and Others v. Narhelal and Another (also printed as Motilal & Ors. v. Nanhelal and Anr.), L.R. 57 I.A. 333: relied on for the rule that, where a statute bars transfer without the authority's permission, an agreement to transfer carries an implied condition that the transferor will obtain it.
• Mrs. Chandhee Widya Vati Madden v. Dr. C. L. Katial and Others, [1964] 2 S.C.R. 495: relied on for the same implied-condition rule.
• Bank of India Ltd. and Others v. Jamsetji A. H. Chinoy and Messrs. Chinoy and Company (also printed as Bank of India Ltd. & Ors. v. Jamsetji A. H. Chinov and M/s. Chinoy and Co.), L.R. 77 I.A. 76, 91: relied on for the rule that a purchaser need not produce the money or vouch a concluded financing scheme to prove he is ready and willing.
• Transfer of Property Act, s. 53A: the defence of part performance. Its four conditions are listed above. If met, the transferor cannot enforce any right over the property except one expressly provided in the contract.
• Transfer of Property Act, s. 4: its chapters and sections on contracts are to be read as part of the Indian Contract Act, 1872.
• Madhya Bharat Land Revenue and Tenancy Act 66 of 1950, s. 70(4): land could not be sold to a non-agriculturist without State Government sanction. The sanction is implied as the seller's duty here.
• Madhya Bharat Land Revenue and Tenancy Act 66 of 1950, s. 70(8): no sale under s. 70 is valid until the sale deed is registered. It does not bar a part performance defence where there is no sale.
• Madhya Pradesh Land Revenue Code, 1959: it repealed Act 66 of 1950. The Court held that the repeal was not retrospective.
• Also cited in footnotes: none beyond the three reports listed above.

Judgement

1. The Supreme Court held that Phoolchand could rely on the defence of part performance under s. 53A of the Transfer of Property Act.
2. The Court held that s. 70(8) of the Madhya Bharat Land Revenue and Tenancy Act 66 of 1950 was no bar to that defence.
3. The Court held that Phoolchand was at all relevant times willing to carry out his part of the contract.
4. The appeal was dismissed with costs.

Legal Principle / Ratio

A transferee in possession under a signed written contract to transfer immovable property can resist the owner's suit for possession by part performance under s. 53A. He must show that he is willing to perform his part. Where the contract fixes a sequence of obligations, one party cannot demand performance from the other until he has performed his own earlier obligation.

Key holding: "cannot require compliance with the obligations by the other party without in the first instance performing his own part of the contract".

The headnote of the report adds that a clause such as s. 70(8) does not bar the plea when no sale is relied upon.

Critical Analysis

Analysis based on the judgment text.

• The Court calls the question of Nathulal's breach "not of much significance". It does not say whether he was in fact in breach.
• The Court does not decide Phoolchand's plea that the agreement was altered after execution. It also does not decide the effect of the telegram of 7 May 1951.
• The Court gives no reason why the act in furtherance need not be independent of the contract's terms. It only says the argument "cannot be accepted".
• The Court does not state the reasons for rejecting retrospective operation of the 1959 Code. It states only its inability to agree.

Significance

• The case lists the four conditions for a part performance defence to an owner's suit for possession.
• It shows that readiness and willingness depends on the order in which the contract requires obligations to be performed.
• It shows that a buyer need not produce the money to be ready and willing.
• It shows that a statutory sanction needed for transfer is an implied duty of the seller.

Exam-Important Points

• Rule: the four conditions of s. 53A are a signed writing, possession in part performance, an act in furtherance, and willingness to perform. Trap: the act in furtherance need not be independent of the contract's terms.
• Rule: the party whose obligation falls earlier in the sequence must perform it before demanding performance. Trap: the seller here had to clear the records and obtain sanction before the balance fell due.
• Rule: a purchaser proves readiness and willingness without producing the money or a concluded financing scheme.
• Rule: where a statute needs sanction for a transfer, the transferor must obtain it, by an implied condition.
• Trap: s. 70(8) of the Madhya Bharat Act concerns the validity of a sale. It does not bar the defence where only a contract of sale is relied on.
• Facts to remember: agreement of 26 February 1951; Rs. 43,011 price (headnote prints Rs. 43,077); Rs. 22,011 paid; balance Rs. 21,000 due 7 May 1951; rescission on 8 October 1951; decided 16 October 1969.
• Result: appeal dismissed with costs.

Prepared from the full text of the judgment. The judgment text has no numbered paragraphs, so no paragraph numbers are cited.