Sinnakaruppa Gounder vs M. Karuppuswami Gounder and Another

S. Ramachandra Iyer, C.J.

(1) The short point for determination in this appeal is whether an option to re-purchase reserved to the vendor under his conveyance can be validly

assigned. Govindammal, the original owner of the property which forms the subject-matter of this litigation, executed a sale of it on 4-4-1953 in

favour of the appellant for a sum of Rupees 12000. Three days later and as a part of the same transaction, the latter executed in favour of the

vendor an agreement to reconvey the property for the same consideration if it were paid within a period of five years therefrom. It is not disputed

that the agreement should be construed as conferring on the vendor an option to repurchase the property and it is not an independent agreement

for sale.

(2) On 5-4-1958, Govindammal assigned her rights under the above agreement to the respondent for a consideration of Rs. 23000 a part of which

viz., Rs. 12000 being reserved with him for payment to the appellant to obtain the property back. The respondent then called upon the appellant to

receive the money and execute a reconveyance of the property. The appellant did not respond to the respondent''s request for retransfer. A suit

claiming specific performance followed. The main defence to the action was, that is the only point urged in this appeal that the benefit of option to

repurchase vested in Govindammal was not assignable. The learned Subordinate Judge overruled this contention, and, finding that the respondent

was ready and willing to perform his part of the contract at all material times, granted a decree for specific performance.

(3) It has been argued on behalf of the appellant that a clause for reconveyance of the property contained in sale deed or in an agreement forming

part of the same transaction will not amount to a convenient which will run with the land and can therefore be enforced only by the actual parties to

the conveyance. Support for this contention was sought from a decision of the Allahabad High Court reported in Gobardhan Vs. Raghubir Singh .

It was held in that case that a right of repurchase created in favour of specified individuals would not be one that ran with the land, but was in the

nature of a mere privilege conferred upon the individuals specified under the document. The decision in that case turned mainly on the terms of the

document of sale which was construed as conferring the right personally on the vendor. Under the English Law where a contract to purchase a

land creates an equitable interest therein in favour of the purchaser, a covenant giving an option to repurchase has been held to create in favour of

the vendor an interest in the property. See L and S. W. Rly. Co., v. Gomm, (1882) 20 Ch 562 . But that rule may not apply in this country. It may

be that a clause in a sale deed entitling the vendor to repurchase the property does not run with the land; but, being a contract, it must be capable

of being specifically enforced provided that there are no circumstances disentitling that relief and such specific performance can be enforced against

subsequent purchasers of the property with notice. If the clause of repurchase is confirmed in the document of conveyance itself or if it is even

contained in a separate registered document, any subsequent purchaser of the property can be deemed to have had notice of that agreement and

would be bound to a decree for specific performance.

Section 23 of the Specific Relief Act which enumerates the category of persons entitled to claim specific performance of contract does not support

the extreme contention now advanced that specific performance could never be granted in favour of an assignee form one of the parties to the

contract. That section says that besides the immediate parties to the contract, the representative-in-interest or the principal (if any such party was

acting as his agent) can obtain specific performance, provided (1) that the contract itself does not prohibit the assignment and (2) that personal

considerations do not form the foundation or the material element in the contract. The question, whether specific performance can be enforced by a

representative-in-interest of one of the parties to the contract has first to be determined on a fair construction of the contract itself. It is, however,

suggested that the rule contained in S. 23, will not apply to agreements to reconvey, which are essentially unilateral in character, inasmuch as it is

not open to the other party viz., the vendee, to compel specific performance. There is, however, a fallacy in the contention. A right of repurchase

reserved to a vendor under a conveyance of property is an option or a power given to him. It has no doubt or a power given to according to its

terms vide Samarpuri Chettiar v. Sudarsana Achariar, ILR 42 Mad 302: AIR 1919 Mad 432. Where, for example, the option is to the exercised

within a stipulated period and it is not so exercised, the option or power is lost by very terms creating it; but were the option is exercised in

accordance with its terms, a contract will spring into existence. To put it differently, an option to repurchase reserved to a vendor, under a

conveyance can be regarded as an irrevocable offer by the vendee to reconvey the property on the terms and conditions specified therein. The

consideration for such an offer is the benefit received by the vendee under the original conveyance. This offer will lapse after the time stipulated

expires or on the failure to perform any of the conditions contained in the document or contract. Thus an option to purchase may not by itself

constitute a contract. But, when the option is exercised in due conformity with the terms of the contract with the result that a binding contract for

reconveyance of the property results. A contract having thus come into existence on the exercise of the option by the vendor to repurchase the

property, the provisions of S. 23 of the Specific Relief Act will apply. In Kanakasabapathi Chetti v. Govindarajulu Naidu, 77 MLW 322: AIR

1961 Mad 219 a Bench of this court held that an agreement to reconvey, where it forms part of the original sale, should be regarded as supported

by consideration, and that there was also the element of mutuality present init.

(4) If the provisions of S. 23 were held to apply, s indeed they should be a contract having come into being then an assignee of the vendor will be

entitled to claim specific performance unless the contract itself prohibits the assignment or it has been stipulated therein that the benefit of

repurchase could be claimed only by the vendor or by any particular person specified therein. In Venkateswara v. Raman Nambudhri, AIR 1917

Mad 358 Coutts Trotter, J., as he then was, observed that he execution of a contract for reconveyance could not be regarded as creating a mere

right to sue and that all contracts capable of specific performance would be assignable excepting those of the class prohibited by S. 23 of the

Specific Relief Act. This view was accepted by another Bench of this court in C. Doraiswamy Mudali Vs. Thangavelu Mudaliar and Others, .

(5) Mr. S. Mohan, who appeared for the appellant, then contended that an option to obtain a reconveyance of the property once sold must be

always regarded as motivated by personal considerations and that it should therefore be held that it could not be transferred in favour of any other

person. Reliance was placed in support of this argument on the decision of the Privy Council in Situl Prasad v. Lakshmi Prasad, ILR 10 Cal 30

and also on the Mudali v. Raghavachari, ILR 29 Mad 307. But those were cases where, on the terms of the contract, it was clear that the vendor

alone should pay the money and obtain the conveyance. We are therefore unable to regard these decisions as establishing the proposition

contended for by Mr. Mohan, viz., that the benefit, of an option to repurchase given to a vendor of real property can never be assigned.

Learned counsel then invited our attention to two decisions of the Bombay High Court viz., Vithoba Madhav Shanbhog Vs. Madhav Damodar

Shanbhog, . Bu they were also cases in which the terms of the sale deed disclosed an attention that the party that assigns outside the family would

not enforce the contract specifically. It is however unnecessary to refer in detail to these decisions, as they have been considered fully in a later

judgment of a Bench of the Bombay High Court in Vishweshwar Narsabhatta Gaddada Vs. Durgappa Irappa Bhatkar, . Beaumont C. J. found

great difficulty in following the reasoning in the earlier cases. Both these decisions held that agricultural classes of India have such sentimental regard

for their land that courts would have to take judicial notice of the sentiment and construe contracts made by them containing a clause of repurchase

as being purely personal to the vendor. This was not accepted by Beaumont C. J. with whom Sen J. Concurred. They laid down that, both under

the common law as well as under S. 23(b) of the Specific Relief Act, an option given to repurchase the property sold would prima facie be

assignable, though it might also be so worded as to show that it was to be personal to the grantee and not assignable. On the particular facts of that

case, it was held that the contract was assignable.

This view is indeed in accord with the decision of the Privy Council reported in Sakalaguna v. Munnuswami, AIR 1928 PC 174 where their

Lordships, affirming the decision of this court in Chinna Munuswami Nayudu Vs. Sagalaguna Nayudu and Another, held that he benefit of the

parties contracting, could be assigned, observing that a document executed by the parties on the date of sale of immovable property providing that

the purchaser should reconvey the property to the vendor after a period of 30 years on the vendor paying the purchase price, constituted a

contract enforceable by the assignee of the vendor against he sons of the purchaser and that it was not merely an offer incapable of assignment until

accepted by the tender of the price. In our view, generally speaking, the benefits of a contract of repurchase must be assignable, unless the terms

of the contract are such as to show that the right of repurchase is personal to he vendor. In the latter case it will be for the person who pleads that

the contract is to enforceable, to show that the intention of the parties thereto was that it was to be enforced only by the persons named therein and

not by the assignee.

(6) Turning now to he facts of the present case, there is nothing in the terms of the agreement dated 7-4-1953 which either prohibits the assignment

of the benefits thereof or shows that it was intended only to benefit Govindammal and her assignee. The agreement merely says that ""the under-

mentioned properties"" have been agreed to be resold for Rs. 12000 to Govindammal. That cannot by itself mean that the benefit of the agreement

was not assignable by Govindammal. We therefore agree with the learned Subordinate Judge that the benefit of the contract of repurchase can be

assigned by Govindammal, and that, on such assignment taking place, the respondent acquired a valid title to claim specific performance. The

appeal fails and is dismissed with costs (Advocate''s fee Rs. 500).

(7) Appeal dismissed.