Whether the aggrieved party can claim specific performance in case of anticipatory breach of contract?

Supreme Court Of India

SABYASACHI MUKHARJI, M. H. KANIA AND S. RANGANATHAN, JJ.

Jawahar Lal Wadhwa and another Appellants

Vs.

Haripada Chakroberty Respondent.

Civil Appeal No. 2678 of 1985

14th October, 1988.

 Citation: AIR1989SC 606, 1989(1)ARBLR403(SC ), JT1988(4)SC 138, 1988(2)SC ALE1033, (1989)1SC C 76, [1988]Supp3SC R513,MANU/SC/0208/1988,1988 ALLMR ONLINE 577 (S.C.)
1989(1)UJ111

KANIA, J. :-The hearing before us now relates to certain objections filed to the Award made by Shri A. C. Gupta a former Judge of this Court who was appointed the sole arbitrator to adjudicate upon the dispute between the parties pursuant to the Order of this Court dated 18th November, 1987*in the circumstances asset out hereinafter. In order to appreciate the objections, it is necessary to refer to certain facts.

2. The Settlement Commissioner, Government of India allotted Plot No. 631 at Chitranjan Park, New Delhi measuring, 160 sq. yds. to the respondent under the Settlement Scheme for the refugees from Pakistan for a total price of Rs. 4,800/-. This allotment was made by the Settlement Commissioner on behalf of the Rehabilitation Department of the Government of India. The respondent applied for a loan from the Ministry of Defence for construction of the house on the said plot and a loan of Rs. 15,000/- was sanctioned in his favour. Under the House Construction Rules of the Government, the plans and estimates had to be submitted along with the application and the sanctioned amount was to be paid in four instalments at different stages of construction. The respondent started the construction of a building on the said land. By the end, of 1973, the respondent had constructed a house on the said plot up to the roof level. By that time he had obtained and used up a sum of Rs. 12,000/- out of the loan sanctioned to him and only a balance of Rs. 3,000/- remained to be paid to him under the said loan. According to the respondent, this amount was not sufficient for the final completion of the house and he, therefore, sought the help of Appellant No. 1 who advanced a sum of Rs. 5,000/- to him. In September 1973 the respondent entered into an agreement dated September 6, 1973 to sell the house and the said plot to the Appellant No. 1. The aforesaid amount of Rs. 5,000/- given by way of loan was shown in that agreement as an advance paid towards the sale price. The respondent also executed a General Power of Attorney in favour of Appellant No. 1 inter alia enabling him to carry on construction work on the said and on behalf of the respondent. According to the respondent, the house was not complete but the Appellants who are husband and wife were occupying the same. Under circumstances, we need not discuss here, on January 29, 1974 another agreement was entered into between appellant No. 1 and

the respondent which has been discribed as an agreement for construction. Under that agreement, Rs. 80,000/- was to be paid by the respondent as the price of the construction to be put up by Appellant No. 1 on the said plot and he was to charge Rs. 20,000/- as the profits and labour charges. He was to deposit Rs. 15,000/- with the respondent as a security. After the completion of the house, the respondent was to return the amount of 1,l5,000/- within three years in a lump sum and on such payment, Appellant No. 1 was to hand over the possession of the building and the plot to the respondent. Till the amount was paid, Appellant No. 1 was entitled to possess and occupy and enjoy the same and to receive rents thereof. According to the respondent, this transaction was sham and bogus. Disputes arose between the parties and the respondent filed a suit in August 1977 claiming for the return of the possession of the said plot and the house. A notice of motion under S. 34 of the Arbitration Act, 1940 for stay taken out by the Appellants was dismissed. An appeal was preferred against the said decision. In the appeal which came up for hearing before the Additional District Judge, Delhi, with the consent of the parties, Shri Bakshi Man Singh was appointed as the sole arbitrator to adjudicate upon the disputes in the suit. The said Shri Bakshi Man Singh died in July 1979 without making any award. On an application by the respondent, the learned Additional District Judge filled up the vacancy by appointing Shri Hari Shanker, Advocate, as the sole arbitrator. Shri Hari Shanker made and published his award which went against the Appellants. According to the Appellants, the said award was made ex parte. The Appellants challenged the award by filing objections under Ss. 30 and 33 of the Arbitration Act before the learned Additional District Judge and applied for setting aside the said award. This application was dismissed by the learned Additional District Judge. The Appellants, filed an appeal against this decision on October 14, 1982 before the Delhi High Court but the said appeal was dismissed by the learned single Judge of that High Court on April 30, 1985. This decision of the learned single Judge was challenged before this Court by way of Special Leave Petition under Art. 136 of the Constitution. Leave was granted and the present Appeal came to be numbered as aforesaid. This Appeal came up for hearing before a Division Bench of this Court on November 18, 1987. After hearing learned Counsel for the parties, in order to ensure fair play in the action, this Court set aside the award of the Arbitrator and also the judgment of the Delhi High Court and appointed Shri A. C. Gupta, a former Judge of this Court, as the sole arbitrator to adjudicate upon the disputes between the parties. The arbitrator was directed to make his award with short reasons within four months front the receipt of the copy of the order. Certain other conditions like payment of compensation and additional expenses were imposed on the Appellants. Pursuant to the said order of this Court the said Shri A. C. Gupta entered upon the reference and made and published his award on March 18, 1988. Under the said award, it was held that the respondent was entitled to a sum of Rs. 58,498.60 p. and interest on this amount at the rate of 18 per cent per annum from the date of the reference to the date of the award which worked out to a sum of Rs. 3,510/-. Taking into account the amount paid by the respondent initially towards the arbitrator’s remuneration and other costs and after setting off the dues of appellants against the respondent, it was held that the respondent / claimant was entitled to recover possession of the disputed building from the appellants and that a sum of Rs. 57,753/- was payable by the appellants to the respondent. It is this award which is challenged before us now.

3. The, sole submission made by Mr. Bhandare, learned Counsel for the appellants is that the award is bad in law and liable to be set aside as there is an error of law disclosed on the face of the award. In this connection, Mr. Bhandare drew our attention to Cl. 2(b) of the agreement to sell dated September 6, 1973 referred to earlier. The earlier part of the agreement set out that the pruchaser (Appellant No. 1) had paid to the seller (Respondent) a sum of Rs. 5,000/-, the receipt of which was acknowledged by the respondent and the balance amount payable was to be

paid in the manner set out in the said Cl. 21(b) which runs its follows :

“The purchaser shall pay to the seller Rs. 105/- each month against the sanctioned loan of Rs. 15,000/- by the fifth day of every English Calendar month till such time the full amount of loan is recovered from the seller by the Government of India. The first instalment shall commence with effect from 5th October, 1973. The purchaser, if he desires, can also deposit the actual remaining amount towards this loan at any time in lump sum to the Government of India on behalf of the seller.”

4. It is a common ground that the sum of Rs. 105/- per month referred to Cl. 2(b) of the said agreement was paid by the respondent only up to January 1976 and that this payment covered up to 23 instalments and more than 100 instalments were remaining unpaid. Mr. Bhandare pointed out that it was contended by the appellants before the arbitrator that, although the agreement for sale between the parties was not registered and might not convey any interest to Appellant No. 1 in the property, the appellants had been put in possession of the said land and construction pursuant to the said agreement since September 1973, as appears from the agreement of sale, and, in view of this, appellants were entitled to retain possession under the protection afforded by S. 53-A of the Transfer of Property Act, 1882. He drew our attention to the following statements contained in the award of the learned Arbitrator:

“The respondent who has been in possession of the property since September 1973 as would appear from the first agreement for sale, claimed that his possession was protected under S. 53-A of the Transfer of Property Act …….

Section 53-A affords protection to a transferee on certain conditions, one of which is that ‘the transferee has performed or is willing to perform his part of contract.’ Under the agreement for sale, the respondent was required to pay the claimant a monthly sum of Rs. 105/- to enable the latter to pay the instalments in discharge of the house building loan. From the receipts filed it appears that the respondent paid only up to January 1976 which covered 23 instalments only and more than 100 instalments remained to be paid. There is no valid reason why he should have failed to carry out his obligation under the contract. Thus it cannot be said that the respondent had performed or was willing to perform his part of the contract. Therefore, the respondent was not entitled to retain possession of the disputed property beyond January 1976.”

It was submitted by Mr. Bhandare that these statements clearly disclose an error apparent on the face of the award. It is pointed out by him that, prior to February 1976, the respondent by his Advocate’s notice dated 16-1-1976 had repudiated the said agreement for sale by contending in his notice that it had been procured by fraud, undue influence and coercion practised by Appellant No. 1 and it was submitted that the said repudiation was wrongful and in view thereof Appellant No. 1 was absolved from his obligation to make any further payment of Rs. 105/- per month or to continue to be ready and willing to perform the agreement. It was submitted by him that the aforestated statements contained in the award ran counter to the settled position in law and disclosed a clear error of law on the face of the award. He drew our attention to the decision of this Court in International Contractors Ltd. v. Prasanta Kumar Sur, (1961) 3 SCR579 : (AIR 1962 SC 77). In that case the appellant had purchased the property in dispute from the respondent but soon thereafter there was an agreement for reconveyance of the property to the respondent within a period of two years for almost the same value for which it was sold. Before the expiry of the stipulated period, the respondent entered into correspondence with the appellant, asking for the completion of the agreed reconveyance and intimating that the purchase money was ready to be paid, but after some further correspondence, the appellant’s solicitors, on his behalf, repudiated the agreement for reconveyance. The respondent then did not tender the price agreed to be paid and filed a suit for specific performance. The suit was dismissed by the trial Court on the ground that the respondent had not paid the money. The High Court

reversed the decision and decreed the suit. On an appeal to this Court, it was held that as the appellant had totally repudiated the contract for reconveyance and had failed to perform his part of the contract, it was open to the respondent to sue for its enforcement and the High Court was right in holding that respondent was entitled to a decree for specific performance. In our view, Mr. Bhandare may be right in contending that this decision does show that it has been held by this Court that in certain circumstances once a party to a contract has repudiated a contract, it is not necessary for the other party to tender the amount payable under the contract in the manner provided in the contract in order to successfully claim the specific performance of the contract. The decision, however, nowhere lays down that where one party to a contract repudiates the contract, the other party to the contract who claims specific performance of the contract is absolved from his obligation to show that he was ready and willing to perform the contract. Mr. Bhandare’s argument really is to the effect that the respondent wrongly repudiated the contract by his said letter dated 16th January, 1976, before all the mutual obligations under the contract had been carried out, that is to say, he committed an anticipatory breach of the contract and in view of this, Appellant No. 1 was absolved from carrying out his remaining obligations under the contract and could claim specific performance of the same even though he failed to carry out his remaining obligations under the contract and, might have failed to show his readiness and willingness to perform the contract. In our view, this argument cannot be accepted. It is settled in law that where a party to a contract commits an anticipatory breach of the contract, the other party to the contract may treat the breach as putting an end to the contract and sue for damages, but in that event he cannot ask for specific performance. The other option open to the other party, namely, the aggrieved party, is that he may choose to keep the contract alive till the time for performance and claim specific performance but, in that event, he cannot claim specific performance of the contract unless he shows his readiness and willingness to perform the contract. The decision of this Court in International Contractors Ltd. v. Prasanta Kumar Sur (supra), properly analysed only lays down that in certain circumstances it is not necessary for the party complaining of an anticipatory breach of contract by the other party to offer to perform his remaining obligations under the contract in order to show his readiness and willingness to perform the contract and claim specific performance of the said contract. Mr. Bhandare also referred to the decision of the Andhra Pradesh High Court in Makineni Nagayya v. Makineni Bapamma, AIR 1958 Andh Pra 504. We do not consider it necessary to refer to this decision as it does not carry the case of the appellants any further. The ratio of the said decision in no way runs counter to the said position in law set out above.

5. In the case before us, what the arbitrator has done is to set out in his award the relevant portion of S. 53-A of the Transfer of Property Act in terms of the said section. There can be no dispute that these provisions have been correctly set out. There is thus no error in the proposition of law set out by the learned Arbitrator in the award. It may be that there is an error, although that is by no means certain, in the application of these principles in coming to the conclusion that, notwithstanding the repudiation of the said contract by the respondent, Appellant No. 1 was not absolved from his obligation to pay the remaining instalments of Rs. 105/- per month as provided under the contract.

6. In Coimbatore District Podu Thozillar Samgam v. Balasubramania Foundary, (1987) 3 SCC 723: (AIR 1987 SC 2045) it has been held by this Court that it is an error of law and not a mistake of fact committed by the Arbitrator which is justiciable in the application before the Court. If there is no legal proposition either in the award or in any document annexed to the award which is erroneous and constitutes the basis of the award and the alleged mistakes or alleged errors, are only mistakes of fact the award is not amenable to corrections by the Court. In its judgment, the Court referred to the, decision of this Court in Union of India v. A. L Rallia Ram,

(1964) 3 SCR 164 : AIR 1963 SC 1685 and, after referring to certain factors pertaining to awards in arbitration proceedings and the machinery devised by the Arbitration Act 1940, pointed out that the award was the decision of a domestic tribunal chosen by the parties and the. Civil Courts which were entrusted with the power to facilitate arbitration and to effectuate the awards, could not exercise appellate powers over the decisions. This Court reiterated that it was now firmly established that an award was bad on the ground of error of law on the face of it only when in the award itself or in a document actually incorporated in it, there was found some legal proposition which was the basis of the award and which was erroneous. This view was enunciated by the Judicial Committee in Champsey Bhara and Co. v. Jivraj Balloo Spg. and Wvg. Co. Ltd., 50 Ind App 324 : 1923 AC 480 : (AIR 1923 PC 66). This view was again reiterated and emphasised by this Court in Kanpur Nagar Mahapalika v. M/s. Narain Das Haribansh, (1970) 2 SCR 28 : (1969) 2 SCC 620 where Ray, J., as the learned Chief Justice then was, observed at page 30 of the report relying on Champsey Bhara case, (AIR 1923 PC 66) :

“An error of law on the face of the award meant that one could find in the award, or in a document actually incorporated thereto, as, for instance, a note appended by the arbitrator stating the reasons for his judgment, some legal proposition which was the basis of the award and which one can say is erroneous.”

7. In State of Orissa v. M/s. Lall Brothers, (1988) 3 JT 552 : (AIR 1988 SC 2018) it was held by a Bench of this Court that it is not open to the Court to speculate, where no reasons are given by the arbitrator, as to what impelled him to arrive at his conclusions. Reference was made in this connection (see Para 8) to the observations of the Judicial Committee in Champsey Bhara and Co. v. Jivraj Balloo Spg. and Wvg. Co. Ltd. and of this Court in Jivarajbhai Ujamshi Sheth v. Chintamanrao Balaji (1964) 5 SCR 480: (AIR 1965 SC 214).

8. It was next contended by Mr. Bhandare that the award disclosed an error in law as certain important documents relied on by the appellants were not referred to or discussed in the award at all. In support of this contention Mr. Bhandare referred to the decision in K. P. Poulose v. State of Kerala. (1975) 2 SCC 236: (AIR 1975 SC 1259). In that case the arbitrator failed to take into account material documents, which were necessary to arrive at for a just and fair decision to resolve the controversy between the parties and it was held that this amounted to legal misconduct on the part of the arbitrator and his award liable to beset aside. This decision is not of much assistance in the case before us as it is not the contention of Mr. Bhandare that the award is bad on the ground of any misconduct of the arbitrator but on the ground that it discloses an error of law on the face of the record. Moreover, our attention has not been drawn to any particular document which was essential to resolve the controversy between the parties nor has it been demonstrated that any such document was not taken into account by the arbitrator. In view of this, there is no basis to support the contention of Mr. Bhandare which must be rejected. It cannot be even said in this case that the arbitrator was guilty of any legal misconduct or otherwise.

9. The objections to the Award of Shri A. C. Gupta, therefore, fail and are dismissed. There will be a judgment in terms of the award. Let the decree be drawn up accordingly. In the facts and circumstances of the case, there will be no order as to costs to the hearing before us.

Order Accordingly

Leave a Reply

Your email address will not be published.

error: Content is protected !!