1972 (3) TMI 90 - SC - Indian Laws

Court allows appeal, sets aside judgment, rescinds decree for specific performance, directs share production, awards costs.

The appeal was allowed, and the judgment under appeal was set aside. The Court ordered the rescission of the decree for specific performance passed in ... Rescision of decree for specific performance - court's retained control over decree for specific performance - default in performance where time for performance is not specified - competence of application for rescission under Specific Relief Act - effect of attachments on obligee's default - mode of execution of decree for specific performanceCompetence of application for rescission under Specific Relief Act - rescision of decree for specific performance - Whether the appellant's application to rescind the agreement and the decree for specific performance was maintainable. - HELD THAT: - The Court held that an application to rescind a decree for specific performance of a contract for sale of movables is competent because the Court which passes such a decree retains control over the matter and may grant ancillary relief, including rescission, when the party moved against has positively refused to complete the contract. Section 28 of the Specific Relief Act, 1963, which deals with rescission of decrees for immovable property, does not oust the Court's power to entertain rescission of a decree in relation to movables; the Specific Relief Act is not exhaustive of all peculiarities of relief and does not preclude exercising equitable powers preserved by established doctrine. Consequently the application was held maintainable and entertainable by the Court.Application to rescind the agreement and decree was competent and entertainable by the Court which retains control over a decree for specific performance.Default in performance where time for performance is not specified - rescision of decree for specific performance - Whether there can be default justifying rescission where the decree did not specify a time for payment of the purchase money. - HELD THAT: - The Court applied the principle that, absent an express time, performance must be within a reasonable time (Contract Act principle). A decree for specific performance does not extinguish the contract or implied terms; parties remain free to make time essential by demand after a reasonable period. If the party moved against by conduct evinces an intention not to perform, the Court may adjudge rescission even though the decree did not fix a time. Here the appellant gave notices and opportunities to perform; after the stay lapsed, the conduct of the purchaser indicated unwillingness to perform, amounting to default within a reasonable time and justifying rescission.Default can be found and rescission ordered even where the decree fixed no time, if performance within a reasonable time is demanded and the party's conduct shows refusal or inability to perform.Effect of attachments on obligee's default - Whether attachments of the purchaser's rights or of the shares by third parties prevented finding him in default and thereby precluded rescission. - HELD THAT: - The Court held that inability of the purchaser to obtain satisfaction of the decree because of attachments caused by his own indebtedness does not absolve him from default. The inquiry is whether the purchaser disabled himself from performing; attachments resulting from his financial position were his responsibility and did not prevent the appellant from seeking rescission. Similarly, attachments by third parties of the shares did not make delivery impossible in law where court orders and receivership mechanisms existed for delivery upon payment.Attachments and creditors' actions did not preclude a finding of default or an order for rescission; they were not a valid defence to the rescission claim.Mode of execution of decree for specific performance - Whether the appellant could have executed the decree as a money decree and recovered the purchase money instead of seeking rescission. - HELD THAT: - The Court examined execution law and held that a decree for specific performance is not a money decree and its execution must follow the specific procedures in Order XXI, Rule 32 (detention, attachment, sale after attachment) rather than Order XXI, Rule 30 for money decrees. Sub-rule (5) permits acts to be done by decree-holder but does not permit realization of purchase money as if it were a money-decree. Therefore, inability to treat the decree as a money decree did not preclude the appellant from applying for rescission when the purchaser refused to pay.The decree could not be executed as a money decree to realise purchase money; failure to pay justified rescission as an alternative remedy.Court's retained control over decree for specific performance - rescision of decree for specific performance - Whether, on the established facts and conduct of the purchaser, the High Court's order rescinding the decree should be set aside and rescission ordered by this Court. - HELD THAT: - After reviewing facts, interlocutory orders, correspondence and steps taken to procure delivery through the receiver, the Supreme Court found that the purchaser deliberately avoided payment and relied on advantages conferred by injunctions and control to evade performance. The High Court's contrary conclusion on maintainability and accrued rights was reversed. The Supreme Court directed rescission of the decree for specific performance, ordered production and delivery of the share scripts to the Registrar and arranged custody/delivery consistent with receivership orders, and allowed the appeal with costs.The appeal is allowed; the decree for specific performance is rescinded and ancillary directions for delivery of shares and costs are given.Final Conclusion: The Supreme Court held the appellant's rescission application competent, found that the purchaser was in default despite no time being fixed in the decree, rejected attachments and execution-argument defences, ordered rescission of the decree for specific performance, and directed production and delivery of the shares to give effect to the rescission; appeal allowed with costs. Issues Involved1. Rescission of Agreement and Decree for Specific Performance2. Appellant's Right to Apply for Rescission under Specific Relief Act, 18773. Maintainability of Application under Specific Relief Act, 19634. Appellant's Right to Rescind Contract and Decree5. Execution of Decree6. Attachments and Their Impact on Performance of DecreeDetailed Analysis1. Rescission of Agreement and Decree for Specific PerformanceThe primary issue was whether the appellant could rescind the agreement dated October 30, 1956, and the decree dated February 25, 1964, for specific performance of the agreement. The appellant argued that Mundhra was not keen on paying the purchase money and getting the transfer of the 51% shares because the injunction granted by the Court made him virtually the owner of 100% shares in Turner Morrison without paying for the 51% shares.2. Appellant's Right to Apply for Rescission under Specific Relief Act, 1877The appellant contended that the application was maintainable under Section 35 of the Specific Relief Act, 1877, despite the repeal of that Act by the Specific Relief Act, 1963. The Court found that the appellant had no accrued right on the date of the repeal to file an application under Section 35 of the Specific Relief Act, 1877, which was saved under Section 6 of the General Clauses Act, 1891. The mere right to take advantage of the provisions of an Act is not an accrued right.3. Maintainability of Application under Specific Relief Act, 1963The Court agreed with the Division Bench that since Section 28 of the Specific Relief Act, 1963, only provided for rescission of a decree for specific performance of a contract for the sale or lease of immovable property, the application was incompetent under the section.4. Appellant's Right to Rescind Contract and DecreeThe Court held that it retained control over the decree even after it was passed and could entertain an application for rescission if the party moved against had positively refused to complete the contract. The Court found that Mundhra committed a breach of the contract, making it practically impossible for him to perform his part of the obligation under the decree. The Court adjudged that the contract and the decree must be rescinded.5. Execution of DecreeThe Court discussed the execution of a decree for specific performance, stating that it can only be in the manner prescribed by Order 21, Rule 32 of the Code of Civil Procedure. The appellant could not have executed the decree against Mundhra as a money decree and realized the purchase money from him. Therefore, if Mundhra refused to pay the purchase money, the appellant was justified in applying for rescission of the decree.6. Attachments and Their Impact on Performance of DecreeThe Court found no substance in the contention that the attachments of the decree by the creditors of Mundhra prevented him from tendering the purchase money to the appellant. The inability to pay off the creditors was the proximate cause of the attachments, and the responsibility for the same was that of Mundhra. The attachments did not prevent the appellant from delivering the shares to Mundhra, as the attachment order directed that the 51% shares should be produced before the Calcutta High Court for delivery to Mundhra against payment of the consideration mentioned in the decree.ConclusionThe appeal was allowed, and the judgment under appeal was set aside. The Court ordered the rescission of the decree for specific performance passed in Suit No. 600 of 1961. The receiver was directed to produce the 2,295 shares before the Court and give custody of the same to the Registrar, who would then hand them over to the appellant. The appellant was awarded costs.