TaxTMI 
TaxTMI 
1993 (11) TMI 256
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....cannot survive beyond its life time which is the source of the protection. 8. The defendants were merely prospective purchasers and the title has not vested in them. Once the remedy for acquiring title through specific performance is lost to the vendee, equitable relief of protection to possession comes to end. Such protection is conterminous and does not survive beyond the span of the agreement. It is no doubt held that Section 53-A is a shield for the vendee and not a sword. Limitation has also nothing to do with, defence. However, the right asserted must subsist as per the limitation prescribed by law. Legally nonexistent right cannot oust the claim of vendor to recover possession, which was delivered in part performance of the contract. To allow the vendee to hold the possession even if the contract is not enforceable would lead to very anomalous, legal and factual situation. It would be paying dividends to vendee whose gesture suffers from laches and who lost the right to claim the transfer of title. It would be defeating the doctrine of equity which has been codified in Section 53-A of the Act. 2. Having regard to the conflict, the learned Single Judge formulated ....
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....778 SC and Khadi Gram Udyog Trust v. Shri Ram Chandraji Virajman Mandir [1978] 2 SCR 249. The last word on the subject is of Supreme Court in Punjab National Bank and Ors. v. Surendra Prasad Sinha 1992 CriLJ 2916, which reads as thus: The rules of limitation are not meant to destroy the rights of the parties. Section 3 of the Limitation Act 36 of 1963 for short "the Act", only bars the remedy, but does not destroy the right which the remedy relates to. The right to the debt continues to exist notwithstanding the remedy is barred by the limitation. Only exception in which the remedy also becomes barred by limitation if the right is destroyed, for example under Section 27 of the Act a suit for possession of any property becoming barred by limitation, the right to property itself is destroyed. ... It is settled law that the creditor would be entitled to adjust, from the payment of a sum by a debtor, towards the time barred debt. It is also equally settled law that the creditor when he is in possession of an adequate security, the debt due could be adjusted from the security in his possession and custody. 5. Money claim, even if the remedy to recover is barred, doe....
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.... to defence. 8. The dictum as laid down leads to a situation: (a) limitation does not bring infirmity to the right of a transferee without title to hold possession, but it cripples the right of vendor with title to recover possession; (b) possession is one of the incidence of transfer of interest of a transferor. As a consequence, transferee holds possession irrespective of transfer of interest as a whole of the transferor as envisaged by Section 8 of the Act; (c) as statutory limitation cannot be carved out in Section 53-A of the Act, protection available to transferee thereon runs indefinitely; (d) shield becomes more effective than sword and equity then prevails over law. The consequences thus follow lead to a seriously anomalous situation. This is not and cannot be a design of equity recognised by Section 53-A of the Act, which has been incorporated by Amending Act No. XX of 1929. 9. Earlier to 1929, an ignorant transferee of immovable property, who is placed in possession pursuant to the contract, could be evicted by the transferor by treating him as a trespasser. He had no statutory protection. He had to suffer for mischief a....
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....l not get a good title unless the transfer is effected according to law, that is, executed and registered. In this view, registration would still be necessary in order that the transferee may acquire a perfect and marketable title. But, although on account of non-registration, no title has passed, yet by reason of part-performance equities have arisen which Courts of law ought to recognise and enforce. (emphasis supplied) 11. Intendment as revealed, to incorporate Section 53-A is thus: (a) Equity needs to be enforced in favour of a person without marketable title; (b) Registration is still inevitable. To make enforcement of registration more vigorous and registration is not allowed to be evaded; (c) To minimize probabilities of perjuries and frauds; (d) Safeguard against a fraud to be made available only when the agreement is fully performed. Let us examine as to whether the intendment as made explicit would be achieved if the equitable protection is made available, even if the specific performance of a contract of sale, fails. 12. Having defined the intendment, the Committee proceeded to deal with the contrary view as then prevailing....
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....the contract, taken possession of the property, or, being already in possession, continues in possession in part performance of the contract, and has done some act in furtherance of the contract: Provided that nothing in this section shall affect the rights of the transferee for consideration who has no notice of the contract or of the part performance thereof. This section applies to contracts to lease executed after the first day of April 1930. This incorporation deals only with contract of a lease, which otherwise needs a compulsory registration. It prevents frustration of specific performance for want of registration. Equity as incorporated by this section is active which is in contradistinction to Section 53-A of the Act. The lessee in possession can protect his possession in terms of Section 53-A of the Act and can also seek specific performance on the strength of these provisions, even if the contract, though required, is not registered. However, this has no application to the contract of sale of immovable property. 14. The contract of lease merely transfers some interest of transferor. However title remains with the transferor, whereas contract of sa....
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....tion of willingness to perform the contract by the transferee would invite perjuries, fictitious assertions and vexatious litigation. It would place the transferee in a dominant position to enjoy the property without title and would exploit and deprive the transferor with title. Extent of such equity would flow completely in disproportion and also in distortion. 16. The Committee then records: Inasmuch as the statutory recognition of part- performance is a matter of considerable importance, we think it desirable to explain in further detail the reasons for the various recommendations we are making- In providing that the transferor shall be debarred from enforcing against a transferee any rights except such as arise out of the agreement, we desire to make it clear that the rights arising out of the contract as between the transferor and the transferee should be enforceable as if the transfer has been completed according to law. This provision will prevent a transferor from ejecting a transferee who has in part-performance of the contract taken possession, and at the same time enable the transferor to sue the transferee upon his covenant, say, to pay rent. The ef....
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.... pertinent to note that the Act of 1993, however, eliminated Section 27-A. As such, the view that equitable protection to possession is available till the specific performance lay, has a sway and must prevail. 18. Placing transferee in possession by way of part-performance is a parole agreement under the contract. Equity cannot usurp the authority to maintain such transitory situation to have the edge over the express provisions of law. A contract of sale of immovable property essentially culminates, unless frustrated, rescinded or otherwise becomes unenforceable in registration of a Deed of Sale. "Transferee is willing to perform his part of the contract" as envisaged by Section 53-A, necessarily includes taking by him all steps as permissible by law to carry the contract to its ultimate end. This could be with or without intervention of the Court. Such steps take within their sweep legal action to enforce the contract specifically. Transferee placed in possession by way of part performance, who claims equity to protect his possession, has a responsibility of higher degree in the performance of contract. A transferor by performing his part under the contract has placed the t....
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....ror once the suit for specific performance fails. The intention of the Legislature is clear. The transferee cannot maintain his possession once having failed to avail specific performance during the period admissible by law. Whatever might be the extent of right of a transferee, his possession cannot receive protection in a legal action at the behest of the transferor, to recover possession. Equity cannot have any design to lead a situation of uncertainty. To grant protection beyond the specific performance of contract would evade transfer of property and registration. It would also Invite chaos, which is now vagrant. It would further completely defeat the basic intendments, which led to incorporate Section 53-A of the Act. In the case of Adinath, the law is, therefore, correctly laid down. H.W. Dhabe, J. (On behalf of M. K. Mukherjee, C. J. and H. W. Dhabe, J.) 1. Having noticed during the hearing of the instant Second Appeal No. 231 of 1992, the conflict of views in the Division Bench Judgments of this Court in Nanasaheb v. Appa AIR 1957 Bom 138 (for short Nanasaheb's case) and Adinath v. Policeman Housing Society 1991 M.L.J. 256 (for short, Adinath's case)....
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....he suit field was lost and it was not, therefore, open to him to defend his possession by claiming a right in that regard under Section 53A of the Act. The learned Lower Appellate Court accepted the above plea raised by the respondents/ plaintiffs in appeal in view of the Judgment of this Court in Adinath's case cited supra. It, therefore, decreed the suit of the respondents/plaintiffs for 'possession of the suit-field. It also allowed the claim for mesne profits partly but directed that in the said claim, adjustment should be given to the appellant/defendant in regard to the earnest money and the loan amount he had paid under the contract (Ex. 38). 5. Feeling aggrieved by the Judgment and decree of the learned Lower Appellate Court, the appellant/defendant has preferred the instant Second Appeal in this Court. In order to support his plea under Section 53A of the Act so as to protect his possession of the suit field, the appellant relied upon the Judgment of the Division Bench of this Court in Nanasaheb's case cited supra before the learned Single Judge of this Court, before whom on Notice before admission, the Second Appeal was listed for hearing. Since the learned....
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....nce of view between the two Division Benches of this Court in the above two cases, we proceed to consider the rival submissions of the parties upon the question of law referred to us. The learned Counsel for the appellant has urged before us that although, prior to 1929, i.e. prior to the introduction of Section 53A in the Act, there was some difference of view amongst the High Courts on the question whether the defendant/transferee was entitled to protect his possession on the basis of the equitable doctrine of part performance of contract, which was made applicable in England, particularly after his suit for specific performance of contract was barred by time, after enactment of Section 53A, the said controversy stands resolved in favour of the defendant/transferee. Apart from Nanasheb's case, he has relied upon the Judgment of the Assam High Court in the case of Bholai Phukan v. Lakhi Kanta Ahom and Ors. AIR 1949 Ass 8, in support of his submission that Section 53A of the Act does not import limitation. He has also relied upon the Judgments in the following cases for the proposition that for a plea in defence there is no bar of limitation. See Nakul Chandra Polley v. Kalipad....
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....e has taken or continued in possession, other than a right expressly provided by the terms of the contract : provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof. 10. Obviously Section 53A of the Act partially incorporates the English Doctrine of part performance of contract. It is enacted to protect the possession of a transferee by debarring the transferor from enforcing against him and the persons claiming under him any right in respect of such property other than a right expressly provided by the terms of the contract, provided the transferee fulfils the essential requirements of the said section which are as follows :- 1. There is a contract of transfer of immovable property. 2. The contract is for consideration. 3. It is in writing, signed by or on behalf of the transferor. 4. Its terms can be ascertained from writing. 5. The transferee has taken the possession or is already In possession of the property in part performance of the contract, and 6. He has done some act in furtherance of the contract. ....
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....of Sri Kishan Lal v. MSL Kashmiro AIR 1916 PC 172, in which it is held that the limitation would not apply to a defence. Following the above Judgment of the Privy Council, the Judgment of Jardine, J. in Hargovinddas v. Bajibhai (1889) 14 Bom. 222 and the Full Bench of the Madras High Court in Lakshmi Dass v. Roop Laul (1906) 30 Mad. 169 this Court held in Gopal Bhaurao v. Jagannath AIR 1935 Bom. 326, that where a title of a person in possession is challenged, he may set forth any defence in favour of his right to the property and. the Statute will not come so as to prevent him from setting forth any relief i.e. (defence). It is pertinent to see that the Full Bench of the Madras High Court has categorically held in the case cited supra that because a party's remedy as plaintiff to have an instrument avoided is time barred, it would not mean that his right to say, by way of equitable defence, if sued, that the instrument ought not to be enforced, is equally time barred. See also Orr. v. Sundra (1894)17 Mad. 255. 12A. It is thus clear that all that the Limitation Act does is to take away the remedy of a plaintiff to enforce his rights by an action; it is however, open to a defe....
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....st consider the question as to the legislative intent behind enactment of Section 53A which would also show as to what the mischief was which was intended to be prevented by its enactment. It would therefore, be useful to refer to the legislative history of Section 53A of the Act. 15. As already pointed out, Section 53A is introduced in the Act by the Transfer of Property (Amendment) Act, 1929 (for short, the Amending Act, 1929). However, prior to the introduction of Section 53A in the Act, by the above Amending Act, 1929 i.e. prior to 1929, the Courts in India also made applicable the doctrine of part performance of contract as in England, but there was difference of view in its application in India for which reason it appears that by amendment, the said right was codified by partial importation of the English Doctrine of part performance in Section 53A introduced in the Act. The protection granted under Section 53A of the Act is thus a statutory protection and does not merely depend upon equitable considerations. 15A. It will be at this stage useful to refer to the English Law upon the doctrine of part performance of contract. In England, Section 4, since re-enacted in Sect....
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....equities have sprung up which cannot be disregarded. It thus takes the parole contracts out of the statute of frauds. 16A. Turning to the position in India prior to 1929 about application of the doctrine of part performance there was divergence of view on the said question amongst the High Courts whether the said doctrine is applicable in India or not. This is clear from the two Judgments of this Court referred to in Nona Saheb's case cited supra viz. (1) Venkatesh Damodar v. Mallappa Bhimappa AIR 1922 Bom. 9 and (2) Nemtulla v. Safiabu AIR 1935 Bom. 208, from which it appears that in this Court itself there was difference of view upon the question of application to the equitable doctrine of part performance of contract prior to the Amending Act. 1929. 17. It may be seen that Lord Shaw, J. in the Judgment of the Privy Council in the case of Mahomad Musa v. Aghore Kumar Ganguli, 42 Cal. 801, after quoting the Judgment of the House of Lords in Maddtson v. Alderson cited supra with approval observed as follows: For equity will support a transaction clothed imperfectly in those legal forms to which finality attaches after the bargain has been acted upon. There was no....
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....ecial Committee under Clause 15, it is clear that the said Committee has exhaustively considered the doctrine of part performance as it existed in England, its good points, its pit-falls, particularly such as the enforcement of a parole Agreement in regard to which there was equally a possibility of a transferee practising a fraud upon the transferor by leading perjured evidence to prove the essential requirement of the doctrine of part performance. It has also examined the law applicable in India and the divergence of view in the High Courts. The question before the Special Committee thus was whether the equitable doctrine should be abrogated in India in favour of the rigid application of the law of Registration and other procedural requirements for transferring title to the transferee or whether the equitable doctrine of part performance, suitably framed should be made applicable in India also. 21. The Special Committee observed at pages 54 and 55 of the report that it was of the view that the time had not arrived when the said equitable doctrine should be abrogated in favour of a rigid application of the law of registration. According to it, the ignorant transferees in India,....
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....g which the equitable relief could be given to the parties to a transaction when there was no registered instrument, (see pages 55-56 of the Gazette). One view was that such relief could be given only within the period during which the suit for specific performance would lie the other view being that such relief could be given even after the expiry of the period to limitation for such a suit had expired. The Special Committee was of the view that since even after the period of limitation had expired when part performance had taken place the parties stood in the same relation to each other as they did within the period of limitation the equities which arose within that period remained the same. In fact according to it the longer the possession in part performance was, the higher would be the equities. It was therefore of the view that in order that the relief should be effective it ought to be available at all times during which the transferee was in possession in part performance of the contract i.e. even after the expiry of the period of limitation for the suit for specific performance of contract by the transferee to get the document of title registered in his favour of course su....
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....t or the Transfer of Property Act to be registered can be received as evidence of a Contract in a Suit for specific performance under Chapter 11 of the Specific Relief Act, 1877 or as evidence of part performance or a contract for the purposes of Section 53A of the Act or as evidence of any collateral transaction not required to be effected by registered Instrument. 27. The above legislative history of the Amending Act, 1929 introducing Section 53A in the Act thus shows the selling in which the said section was introduced in the Act. The Statement of Objects and Reasons for the Amending Act, 1929 shows that the report of the Special Committee hereinbefore referred to has sufficiently explained the objects and reasons for its enactment. It is well settled that in construing a statute, the Court is entitled to take into account such external or historical facts as may be necessary to understand the subject matter of the statute or to have regard to the surrounding circumstances, which existed at the time of the passing of the Statute. See Lord Halsbury's Judgment in Harron v. Rathmines Rathgar Improvement Commissioner (1892) A. C. 498 at page 502. See also Harrietta Nair Advar....
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....ress Newspapers Pvt. Ltd. v. Union of India (1961) ILLJ 339 SC, Madanlal Fakirchand Dudhediya v. S. Changdeo Sugar Mills Ltd. AIR 1962 SC 1543, Union of India v. Harbhajan Singh Dhillon [1972] 83 ITR 582 (SC), C.I.T., Gujarat v. Vadilal Lallubhai [1972] 86 ITR 2 (SC), R.S. Nayak v. A. R. Antalay 1984 CriLJ 613, Mithilesh Kumari v. Prem Bihari Khare [1989] 177 ITR 97 (SC) . 30. It is clear from the above legislative history of the Amending Act, 1929 that after examining rival views upon the equitable doctrine of part performance of contract, as applicable in England, rival views about its application in India, Its good points and pit-falls and the fact that fraud could be practised and that perjured evidence could be led by both the transferor and the transferee, the Special Committee has tried to balance the equities in favour of the transferor and transferee in partial importation of the said doctrine in proposing introduction of Section 53A in the Act as hereinbefore shown. The said Section 53A of the Act grants statutory protection to the defendant/transferee to protect his possession of the suit property if he satisfies the requirements of the said section. 31. As regards....
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....registered document of title in his favour. 33. Moreover, on perusal of the Judgments of the various High Courts on this question, it is clear that the preponderance of the view after enactment of Section 53A of the Act is that the statutory protection afforded to a defendant/transferee under the said section is not lost by expiry of limitation for a suit for specific performance of contract for getting the document of title registered in his favour. There is no reason to deviate from the said view on the principle of stare decisis also when the above view has prevailed in the High Court for a long time after introduction of Section 53A in the Act. The Doctrine of stare decisis was exhaustively considered by the Supreme Court in its Judgment in the case of Wamanrao v. Union of India (1981) 2 SCC 367, although for reasons given in the said Judgment it was not invoked in deciding the constitutional validity of article 31A of the Constitution. The said Doctrine is firmly established in English and American Jurisprudence and is invoked in India also. See Bengal Immunity Co. Ltd. v. State of Bihar [1955] 2 SCR 603; Mamleshwar Prasad v. Kanahaiyalal [1975] 3 SCR 834; Rajnarayan Pande ....
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....vance paid by him was liable to be forfeited. The trial Court granted a degree of cancellation of the agreement of sale and, directed the transferee/defendant to hand over the possession of the suit property to the transferee/plaintiff. It however, directed the transferor/plaintiff to refund the Earnest Money paid by the transferee/defendant to him with interest. Both the parties feeling aggrieved by the decree of the trial Court, filed appeals in the High Court. The High Court, however, deciding the appeal preferred by the transferee/ defendant not only reversed the decree of the trial Court against him but on the contrary in exercise of discretion under Order 7. Rule 7, Civil Procedure Code to do what is just and equitable granted a decree of specific performance of contract in his favour by directing the transferor/plaintiff to execute the registered Sale Deed in his favour on his depositing in the trial Court the balance of consideration. The High Court did not decide the cross-appeal filed by the transferor/plaintiff in respect of forfeiture of earnest money paid by the transferee/defendant. 36. The transferor/plaintiff challenged the above Judgment and decree of the High C....
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.... terms of the contract. In considering the said question, it found that the main plea raised by the transferor/plaintiff in his suit in that regard was that the possession of the transferee/defendant was not referable to the contract in question of which the part performance was claimed by him as required by Section 513A of the Act. but was referable to the fact that, he had sought for temporary accommodation for 8 days pursuant to which, he obtained possession of the suit property and illegally continued in possession thereafter. However, according to the Supreme Court, the High Court without considering the said question, although decided by the trial Court against the transferee/defendant, held that there was no dispute that on payment of Rs. 15000/- on 16.11.1974, pursuant to the Agreement of sale, the transferee/defendant was put in possession of the house and was entrusted with the documents pertaining to the same. It is because the High Court did not consider the above plea of the transferor/plaintiff that the Supreme Court remitted the matter to the High Court for reconsideration and also for the reason that the cross-appeal filed by the transferor/ plaintiff was not ....
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....protection of such a transferee to continue in possession on the ground that he cannot get a perfect marketable title by lapse of time. 41. The above discussion is in fact sufficient to hold that the statutory protection granted under Section 53A of the Act to a transferee in possession of the immovable property under an unregistered contract q| instrument of transfer by debarring the transferor from enforcing any right in respect of the immovable property against the transferee except a right expressly provided for under the contract, is not lost to the transferee by expiry of limitation for the suit for specific performance of contract to get the document of title registered in his favour in regard to the suit property. However, since the reasoning in paras 7 and 8 of the Judgment in Adinath's case or the proposition propounded therein is that when the period of limitation expires, the agreement of sale in question meets with its legal death and as a result the protection under Section 53A of the Act which flows from such agreement cannot survive beyond its life time which is the source of protection to the transferee, it is necessary to consider the validity of such a pro....
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....tions under the contract is treated as a mode of discharge of the rights and obligations under the contract. The above modes of discharge of contract are also contained in various provisions of chapter IV of the Indian Contract Act relating to performance of contracts and Chapter IV of the Specific Relief Act, 1963 relating to rescission of contract. 44. It is thus clear from the above authoritative books on law of contract that by lapse of time for a suit for enforcement thereof, the rights and obligations under a contract do not come to an end. The well known rule is limitation bars a remedy and not a right to which the only exception carved out by statute is in regard to the title to an immovable property which is extinguished on expiry of limitation for instituting a suit for possession. Section 27 of the Limitation Act, 1963 which corresponds to Section 28 of the Limitation Act, 1908 contains the above exception to the well recognised rule that lapse of time bars only the remedy, but does not extinguish the right. Section 27 of the 1963 Act provides that when the period of limitation under the said Act for any person to institute a suit for possession of any property expire....