2006 (5) TMI 189 - SC - Indian Laws

Supreme Court affirms lower courts, upholds enforceability of sale agreement under Companies Act

Panchanan Dhara & Ors. Versus Monmatha Nath Maity (DEAD) Thru Lrs. & Anr.

The Supreme Court affirmed the lower courts' decisions, dismissing the appeal. It held that the agreement for sale was enforceable under the Companies ... Whether a suit for specific performance of contract will be barred by limitation or not? - Held that:- Appeal dismissed. Execution of the agreement was not denied by us, even in the absence of resolution the contract could not have been to be invalid or illegal. So far as the question of putting up of the seal of the company is concerned, it is a relic of the days when mediaeval barons, who could not read or write, used their rings to make a characteristic impress. Even in absence of a seal, the company may still be held to be liable having regard to the nature of transaction and the authority of those who had executed it. If the act of the directors is not ultra vires or no public policy is involved, the parties acting thereupon cannot be left at large. Issues Involved:1. Enforceability of the agreement for sale under sections 46 and 48 of the Companies Act.2. Readiness and willingness of the respondent to perform the contract.3. Bar of limitation on the suit for specific performance.4. Uncertainty of terms under section 29 of the Contract Act.Issue-wise Detailed Analysis:1. Enforceability of the Agreement for Sale under Sections 46 and 48 of the Companies Act:The appellant contended that the agreement for sale was unenforceable as the provisions of sections 46 and 48 of the Companies Act had not been complied with. The trial court held that since all the directors of the company were parties to the agreement, the provisions were not attracted. The first appellate court and the High Court upheld this view, noting that the directors had sufficient authority to execute the agreement. The Supreme Court affirmed this, stating that section 46 merely lays down the mode of signing contracts on behalf of the company, and an oral agreement for sale is permissible in law. The company never denied the terms of the agreement nor raised any plea that the agreement was not binding or illegal.2. Readiness and Willingness of the Respondent to Perform the Contract:The appellant argued that the respondent was not ready and willing to perform his part of the contract. The trial court found that this plea had been waived, and both the first appellate court and the High Court upheld this finding. The Supreme Court noted that the conduct of the parties indicated that the agreement was kept alive, and the company had assured the respondent that the contract would be honored. The court found no merit in the appellant's contention.3. Bar of Limitation on the Suit for Specific Performance:The appellant argued that the suit was barred by limitation, relying on the second part of article 54 of the Limitation Act. The trial court held that the agreement was subsisting and not barred under article 54. The first appellate court found that the time for performance was extended by the conduct of the parties, and the High Court agreed. The Supreme Court noted that the period of limitation begins to run from the date fixed for performance or from the date the plaintiff had notice of refusal. The court found that the time for performance had been extended, and the suit was filed within the limitation period after the company refused to execute the deed on 21-8-1985.4. Uncertainty of Terms under Section 29 of the Contract Act:The appellant contended that the terms of the agreement were uncertain and void under section 29 of the Contract Act. The Supreme Court held that this plea was not raised before the lower courts and could not be raised for the first time before the Supreme Court. The court found that the terms of the agreement were not uncertain or vague, and therefore, section 29 was not attracted.Conclusion:The Supreme Court dismissed the appeal, affirming the judgments of the lower courts. The court found that the agreement for sale was enforceable, the respondent was ready and willing to perform the contract, the suit was not barred by limitation, and the terms of the agreement were not uncertain. The appeal was dismissed with no costs.