2019 (11) TMI 1397 - SC - Indian Laws

Court Invalidates Assignment of Rights, Denies Specific Performance, Awards Compensation.

The court found the assignment of rights under the 1987 agreements invalid without the consent of the Appellants. As the original vendees did not fulfill ... Assignment of rights - Section 16(c) of the Specific Relief Act - whether there was a valid assignment of rights by the original vendees in favour of Respondent Nos. 1 under the 1987 agreements? - HELD THAT:- The mere fact that the original owner Mr. Naranbhai Patel signed the development permissions for the suit property and may have been present at the Bhoomi Pujan does not indicate that he consented to assignment of the 1986 agreement. The 1986 agreement stipulated that the original owners would give their signatures for obtaining necessary permissions for the proposed development on the suit property. Hence, as the trial court has rightly noted, Mr. Naranbhai Patel was only carrying out his contractual obligation as he had promised to the original vendees. This does not indicate that he was under the impression that the said permissions were now to be obtained for the benefit of Respondent Nos. 1 - It is pertinent to note that Respondent Nos. 1 conceded before the trial court that the Appellants had given their signatures on the layout plan for the housing scheme on the suit property to the original vendees, not to Respondent Nos. 1. Even the advertisement regarding the ‘Unnati Park’ housing scheme nowhere indicates that the Appellants/original owners were developing the project on the suit property in partnership with Respondent Nos. 1 - there was no valid assignment of rights flowing from the 1986 agreement to Respondent Nos. 1, and they cannot seek specific performance against the Appellants. Whether the right of Respondent Nos. 1 to seek specific performance survives subsequent to the cancellation of the 1986 agreement by the Appellants and withdrawal of suit in SCS No. 194/1988 by the original vendees? - HELD THAT:- The trial court has found that though the suit property de jure vested with the concerned government authority under the Town Planning Scheme, the de facto possession of the property remains with the Appellants and the original vendees have not taken possession thereof. Furthermore, both the trial court and the learned District Judge have on facts found that the original vendees have not shown any readiness or willingness to pay the remaining consideration to the Appellants. Hence since the original vendees have abandoned their rights under the 1986 agreement, enforcement of the 1987 agreements has become virtually impossible and Respondent Nos. 1 cannot seek specific performance of the latter. Consequently the 1987 agreements are void and unenforceable as provided under Sections 32 and 35 of the Contract Act - since the original vendees have revoked the Power-of-Attorney, status-quo has been restored, and the Plaintiffs’ cause of action no longer exists. The Learned District Judge and the High Court in the impugned judgement have affirmed the trial court’s reasoning on this aspect, and we see no reason to overturn their concurrent findings on this matter. Whether relief may be granted to Respondent Nos. 1, and if so, of what nature? - HELD THAT:- Though we have found that on facts and law, Respondent Nos. 1 are not entitled to specific performance of the 1986 and 1987 agreements, prima facie it does appear that the Appellants and the original vendees have colluded to frustrate performance of the 1987 agreements. The trial court had directed the original vendees to reimburse earnest money of ₹ 5000 paid by Respondent Nos. 1 towards each of the 1987 agreements with an interest of 9% p.a. from 14.9.1987 till the date of realization. We are in agreement with the aforesaid direction. Appeal allowed in part. Issues Involved:1. Validity of assignment of rights by the original vendees in favor of Respondent Nos. 1 under the 1987 agreements.2. Whether the right of Respondent Nos. 1 to seek specific performance survives subsequent to the cancellation of the 1986 agreement and withdrawal of suit by the original vendees.3. Nature of relief to be granted to Respondent Nos. 1.Issue-Wise Detailed Analysis:I. Validity of Assignment of Rights under 1987 Agreements:A. General Principles Governing Assignability of Contracts:The court emphasized that there was no privity of contract between the Appellants and Respondent Nos. 1, as the latter were not party to the 1986 agreement, and the former were not party to the 1987 agreements. According to Section 15(b) of the Specific Relief Act, specific performance of a contract may be obtained by the representative in interest or the principal of any party thereto, provided the contract does not involve personal qualities or explicitly bar assignment. The court cited precedents such as Khardah Company Ltd v. Raymon & Co (India) Private Ltd., and Indu Kakkar v. Haryana State Industrial Development Corporation Ltd., to highlight that obligations under a contract cannot be assigned without the consent of the other party, and rights under a contract are assignable unless the contract is personal in nature or explicitly non-assignable.B. Application to the Present Case:The 1986 agreement allowed the sale deed to be executed in favor of the original vendees or a name proposed by them, subject to certain conditions. The court interpreted this to mean a nominee at the time of execution, not a subsequent assignee. The 1987 agreements purported to assign the original vendees' rights and obligations to Respondent Nos. 1, but the court found this to be more of a substitution of liabilities rather than a simple assignment. The court concluded that the assignment was invalid without the Appellants' consent, which was not evidenced by any actions or conduct.II. Whether the Right to Seek Specific Performance Survives:The court noted that the 1987 agreements were contingent contracts, enforceable only if the original vendees had fulfilled their obligations under the 1986 agreement. Since the original vendees did not pay the remaining consideration and the 1986 agreement was canceled, their rights ceased to exist. The original vendees’ withdrawal of their suit further indicated their abandonment of rights under the 1986 agreement. Consequently, the 1987 agreements became void and unenforceable under Sections 32 and 35 of the Contract Act.III. Nature of Relief to be Granted:The court acknowledged that the Appellants and the original vendees seemed to have colluded to frustrate the performance of the 1987 agreements. Although Respondent Nos. 1 were not entitled to specific performance, the court upheld the trial court's direction for the original vendees to reimburse the earnest money paid by Respondent Nos. 1 with interest. Additionally, the court awarded compensation to Respondent Nos. 1 for the loss of opportunity and inconvenience, directing the original vendees to pay Rs. 1,80,000/- with interest from the date of the suits. The High Court was also directed to release and remit the consideration amount deposited by Respondent Nos. 1.Conclusion:The appeals were partly allowed, setting aside the impugned judgment and providing compensation to Respondent Nos. 1 while denying specific performance.