Ramakrishna Naidu vs Palaniappa Chettiar

Ramakrishnan, J.—This Letters Patent Appeal is directed against the judgment of Ganapatia Pillai, J. in S. A. No. 15 of 1957. That appeal

was tiled against the judgment and decree of the learned Subordinate Judge, Cuddalore, in A. S. No. 127 of 1955 preferred against the decree of

the District Munsif, Tirukoilur in O. S. No. 282 of 1952. The prior facts necessary for a consideration of this Letters Patent Appeal are briefly the

following:

The suit property is 5 acres and 35 cents of dry land in a village near Chidamoaram in South Arcot district. The defendant, Palaniappa Chettiar

is a Nattukottai Chettiar who was at one time doing money-lending business in Chidambaram. His native place is Valayapathi near Pudukottai. The

suit property belonged to one Narayanaswami Nadar, who had borrowed money from the defendant. The defendant obtained a decree, attached

the suit property, brought it to sale in court auction, and purchased it on 14-4-1941. The sale was confirmed on 28-6-1941, and the defendant

obtained possession through court on 17-3-1941. Some years later, the defendant wound up his business at Chidambaram, and went away to live

in his native place Valayapathi. The plaintiff met the defendant at Valayapathi, and entered into an agreement of purchase with him Of the Suit

property for a consideration of Rs. 1500 out of which Rs. 300 was paid immediately in cash as advance, and the balance was agreed to be paid

within one month.

It is common ground that when the plaintiff tendered the balance of consideration, the defendant refused to accept it, and refused to execute the

sale deed. When the plaintiff sent a notice on 11-6-1951, the defendant sent a reply notice refusing to sell the property. He alleged various

grounds, but out of them, the most significant was the claim that at the time of the agreement, the defendant was not aware of the fact that a scheme

of irrigation by the digging of a channel had been in progress for the irrigation of the concerned property which had become thereby very valuable,

and that the plaintiff was aware of the scheme, but had taken advantage of this knowledge in obtaining the agreement, and therefore the bargain

was neither fair nor equitable nor just nor conscionable. It may also be pointed out that shortly after this, Narayanaswami Nadar the original owner

of the property filed a petition in the executing court under Order XXI , Rule 90, C. P. C. for setting aside the court sale alleging that the money

decree had been discharged in some other manner, the defendant appeared in person, and agreed to the setting aside of the decree. It was found

that these proceedings were collusive and therefore not binding on the plaintiff. Nothing turns now upon this aspect of the case, be cause the

disposal of the case has proceeded on the ground that the defendant owned the property, and the question that arose for consideration was

whether in the circumstances of the case, the plaintiff was entitled to obtain specific performance of the agreement to sell.

The learned District Munsif of Tirukoilur who tried the suit found, that there was nothing in the circumstances of the case which gave the plaintiff

an unfair advantage in regard to the bargain, and decreed the suit for specific performance. The learned Subordinate Judge of Cuddalore, in

appeal, came to the conclusion that the plaintiff had suppressed the material fact about the irrigation facilities, above mentioned, of which the

defendant was not aware and that though this might not amount to fraud, still it would not justify the court in granting specific performance, in the

alternative, the lower appellate court held that the plaintiff was entitled to damages which were fixed at Rs. 1500, besides the return of the advance

of Rs. 300. Therefore, in lieu of the trial court''s decree, the first appellate court granted to the plaintiff a decree for Rs. 1800. It was against this

decision, that the plaintiff filed the second appeal before Ganapatia Pillai, J. mere was also a memorandum of cross-objections filed by the

defendant. The plaintiff reiterated his claim that specific performance should be decreed. Ganapatia Pillai, J. upheld the first appellate court''s view,

and held that Section 22(1) of the Specific Relief Act would apply to this case, where the plaintiff had suppressed material information concerning

the property, of which the defendant was not aware, which had the result of making the bargain between the parties unequal. The second appeal

was dismissed and the memorandum of cross-objections which related to the award of damages was also dismissed.

In this Utters Patent Appeal, Sri K.S. Desman Who appeared for the appellant-plaintiff took as through the relevant documents and the

authorities, and pressed on us that, in the circumstances of the case, specific performance of the agreement should have been decreed. The

principal reason which made the transaction unfair and unequal, was that an irrigation channel was being constructed which would render the land,

which hitherto was lying fallow, considerably more valuable. The defendant had gone away to his village near Pudukottai and had no Knowledge

of this development in regard to the property which was situated near Chidambaram. The plaintiff, however, was aware of this fact. After he

became aware of this fact, he went to the defendant''s village at Valayapatti and it was there that the agreement of sale was entered into. It is found

by the courts below that the properly at the time of the suit had become very valuable and certainly its value would have exceeded Rs. 3000,

whereas the plaintiff wanted to have his bargain settled at Rs. 1500, that is half of its real value, relying on the agreement. No doubt, if the bargain

was fair proper and not oppressive, it is immaterial that by force of subsequent circumstances, for example, by a rise in the price of the landed

property, the contract had become more beneficial to the purchaser, when it would not be a case where specific performance could be refused;

but in this case, reliance is being placed not on the mere appreciation of the price, but upon the provision for irrigation facilities to the land, of which

the plaintiff knew, but the defendant did not. We entirely agree with the view of Ganapatia Pillai, J. that this is a case where the plaintiff obtained an

unfair advantage, even though there might not be fraud or misrepresentation on the plaintiffs part, and that Section 22(1) of the Specific Relief Act

1877 will apply to the facts of the case. Section 22 reads as follows:

The jurisdiction to decree specific performance is discretionary, and the court is not bound to grant such relief merely because it is lawful to do

so; but the discretion of the court is not arbitrary but sound and reasonable, guided by judicial principles and capable of correction by a court of

appeal.

The following are cases in which the court may properly exercise a discretion not to decree specific performance :

(i) where the circumstances under which the contract is made are such as to give the plaintiff an unfair advantage over the defendant, though there

may be no fraud or misrepresentation on the plaintiff''s part.

This principle has been well recognised by English authorities through a long chain of decisions. In Falcke v. Gray, (1859) 4 Drew 651 : 29 LJ Ch

28, plaintiff had agreed to purchase from one Mrs. Gray two jars evidently objects de art, whose value was well known to the plaintiff, who had

been for 25 years a dealer in curiosities, and who was well acquainted with the prices which articles of this kind would fetch. Mr. Gray consulted

one Brend, a house agent who did not know the value of the article but who thought they would be worth 20 � a piece. The bargain to sell was

struck at �. 40. When the plaintiff, on defendant''s refusal to complete the sale, sued for specific performance of the agreement to sell, the claim

was negatived by the court, following a long line of prior authorities in English courts which have laid down:

Where the contract, although not actually fraudulent, was one in which the parties were not on an equal footing, the plaintiff knowing, and the

seller being ignorant, of the value of the thing sold, and the price appeared to be inadequate, the court would refuse relief.

The principle has been firmly established in the law of specific performance. Fry in his book ""A treatise on the Specific Performance of Contracts"",

6th Edn. at page 185 says:

There are many instances in which, though there is nothing that actually amounts to fraud, there is nevertheless a want of that equality and fairness

in the contract which, as we have seen, are essential in order that the court may exercise its extraordinary jurisdiction in specific performance.

Halsbury in his ""Laws of England"" (pages 366 and 367 of Hailsham Edn., Vol. 31) under the heading ""Oppressiveness of Contract"" has dealt with

this subject:

The discretion of the court to grant specific performance is not exercised if the contract is not ''equal and fair''. In such a case, even though no

fraud such as to justify rescission is alleged, the court does not interfere to enforce the contract. Unfairness may consist in such suppression of fact

as does not, in the opinion of the court, amount to fraud or misrepresentation, such as the conduct of a lessee in obtaining the renewal of a lease

while suppressing the fact that the person on whose life the old lease depended was in extremis.

The Calcutta High Court in Gobinda Chandra v. Nanda Kumar, AIR 1915 Cal 298, applied the above principle as well as Section 22 of the

Specific Relief Act and held:

There may be cases which cannot be brought within the four corners of any of the provisions of the Central Act as to the invalidity or voidability of

agreements, but are nevertheless cases in which a court of equity may properly refuse to exercise its jurisdiction under the Specific Relief Act.

Section 22 of the latter enactment as well as both principle and authority point to the same conclusion.

We are, therefore, in full agreement with Ganapatia Pillai, J. that the bargain in this case was oppressive and unconscionable, and that it is not an

appropriate one for being enforced by way of specific performance. Though before Ganapatia Pillai, J. the defendant filed a memorandum of

cross-objections objecting to the award of Rs. 1500 as damages to the plaintiff, at the time of the hearing, it was not pressed, and this question is

also not before us in the Letters Patent Appeal. The Letters Patent Appeal is dismissed with costs.