# [1974] 1 S.C.R. 312

- **Citation:** [1974] 1 S.C.R. 312
- **Court:** Supreme Court of India
- **Decided:** 1974
- **Case number:** Civil Appeai'No. 2517 of 1969
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1974-1-s-c-r-312-5974
- **Pages:** 10

## Headnote

~.:;;-
,._
!llZ
N. L. DEVENDER SINGH & ORS.
A
.v.
SYED KHAJA
AugUJt 3, 1971
LK. K. MATHEW AND M. H. BEG, JJ.]
Sptc;fiC Rditf Act 1877, 1, 12-Presumptloll ul'!dtr-WMn rebutttd-B~~r 111 a
,, Zl-When optratu.
Tho plaintiff (rtSpondent herein) eXecuted an ai"!ement on. 9-_10-1962 With
defendant no. l whereby the latter aifeed to ·~11 . to ~e former hjs hOUSo m
Hyderabad for a sum of IU. 60,000. Tho plamtiJI pa1d a aum «?f RJ. 2.000 u
caroeat money.
However, dependant no. 1 sold tbe property In qu.,f.ioo. OQ
J9·HH962 to defendants 2 to 7 for a sum of RJ. 70,000. ~
plaintiff CODa>-
quently filed a suit for specific performance of tho aar~ment. The
~uit wu
milled by defendant no. 1 on tho jV!>Und tha~ the pla.Jn~ had obWoed tho c
agreement dated 9-10·1962 as a result of marep~entalton and fnud. Tho
trial court held that misrepresentatlon and fraud had not been proved but the
plaintilr had obtained an "unfair advantaao". On thi3 view the trial Court diamissed the 1uit for 1pecific performance. It ordered the repayment to tho pllill·
tiff of the earnest money paid by him.
lfll~ alia tho trial eourt also ordered tko
payment of RJ. 20,000 to tho plaintiff as liquidated dall?ges or penalty ~ 5tipll·
laced in the agreement o! 9·10-1962. In appe:U the High Court decroed the
plaintiff'• auit disagreeing with tho view of the trial Court that the plaintiff bad
D
obtainod llD Unfair advantal!C•
Tho Hi(lh Court Jl'aDled the defendantJ a corti·
ficate of fitnea, to appeal to this Court. It was contended oo behalf of the delcodan~ppellants that the pllrliea theiilie!Ves havina stipulated for RJ. 2D,OOO o
liquidated dlliL!Iges in the event of a br~ ~ the lint defendant. the !Jreswnption contained in the cxplana,ion to s. 12 of
o Specific Relic! Att IS 7 ltood
rebutted. It was also contended that ooce the aforesaid pre~umption wu rtbutltd
tho bar conbuned in i«tion 21 of the Act ll'ould ipSQ facto becomo operative.
DU.mwina the nppeoJ,
E
HElD : (I) A rcfercoce to a. 22 of tbo Act of U77 (correspon~ to s. 20
of tho Specific Relief Act 196S) would sbow that tho jurisdiction of the Court m
decree specific relief is di&cretionarv and mUJt be ex~rcised on sound and rcuoaab!o JCOI!Och M~n~ided by judicilll priacip!CJ and capable of correction by tho Colut
..
of appeal". This jurisdiction cannot be curtailed or taken away by merely fiiln:
a. aurn even as liquidated damages. This is ~o perfectly clear by tho pcovi·
SIOill o! •· 20 of the old Act (corresponding to s. 23 of the Act of 1963) to
that the Court hu to detcrmioo, on tho facts and circu!ll!ltancn of each ~
be'oro It, whether apccific performance of a
contract to convey a
property
F
ougllt to be granted. p 19G-HJ
The fact .that the P!U'lies thecnsel ves •peclfied a sum of money to be paid. in
!he event of 111 breach IS, no doubt, a piece of oYidence to be comidercd In: detid·
IllS whether the presumption baa been repelled or not. But, it is nothinl m0C11
than a PICCC of evidence, It ia not coacluslv0 or decuive. (320A-BJ
'iJ) Tho content!on th11t coco tho pre:~umption tontaltled in uplan.aqoo m
a. 1~ of the old Act It removed, the bar c:ont.aincd '· 21 of the old Att .11110St tha
G
II'POCiftc: e.n!~ment ~~ a contract for which compensation In mooey Is an ~
qaato rcl~ef, aut~matically opcratca, overloob that tho eonditioo for tho lm;lol4•
}1011 of lbc bar U actual rroof that c;ompeoutlon ln money b adequate 00 thO
acta and. dl'C?trul.llnCta o 11 particular c:uo before tho Court. Tbe cJJect ol ~
P(esumrliDn " that the party comina to the c:ourt for the apedde pcr!ormac<:e
o a c~nlraet for tale of Immovable p~y ~d not pro\~ .ao~r until the
other •Ide bas removed the Pre\U~!I01l. A~r tho evidence Is ed to rcJllO\'C
1~o.[raurnptlon, the plalntlfi may u 1.o 14 • IIO'ltlon to pre\"C, ~other evidOII~
o Cibe, tb.al paymrnt of money does oot cotnpcn.ato bim a oquattly.
"
tnoo-EI
.· lo the present c~, altbouab. evidcQCO -.n. le<J by
art!~. yet there wu oo
CJideDC41 to s.how tlle Clttellt Of ion of pt"'6pecLJvc

## Text

~.:;;-
,._
!llZ
N. L. DEVENDER SINGH & ORS.
A
.v.
SYED KHAJA
AugUJt 3, 1971
LK. K. MATHEW AND M. H. BEG, JJ.]
Sptc;fiC Rditf Act 1877, 1, 12-Presumptloll ul'!dtr-WMn rebutttd-B~~r 111 a
,, Zl-When optratu.
Tho plaintiff (rtSpondent herein) eXecuted an ai"!ement on. 9-_10-1962 With
defendant no. l whereby the latter aifeed to ·~11 . to ~e former hjs hOUSo m
Hyderabad for a sum of IU. 60,000. Tho plamtiJI pa1d a aum «?f RJ. 2.000 u
caroeat money.
However, dependant no. 1 sold tbe property In qu.,f.ioo. OQ
J9·HH962 to defendants 2 to 7 for a sum of RJ. 70,000. ~
plaintiff CODa>-
quently filed a suit for specific performance of tho aar~ment. The
~uit wu
milled by defendant no. 1 on tho jV!>Und tha~ the pla.Jn~ had obWoed tho c
agreement dated 9-10·1962 as a result of marep~entalton and fnud. Tho
trial court held that misrepresentatlon and fraud had not been proved but the
plaintilr had obtained an "unfair advantaao". On thi3 view the trial Court diamissed the 1uit for 1pecific performance. It ordered the repayment to tho pllill·
tiff of the earnest money paid by him.
lfll~ alia tho trial eourt also ordered tko
payment of RJ. 20,000 to tho plaintiff as liquidated dall?ges or penalty ~ 5tipll·
laced in the agreement o! 9·10-1962. In appe:U the High Court decroed the
plaintiff'• auit disagreeing with tho view of the trial Court that the plaintiff bad
D
obtainod llD Unfair advantal!C•
Tho Hi(lh Court Jl'aDled the defendantJ a corti·
ficate of fitnea, to appeal to this Court. It was contended oo behalf of the delcodan~ppellants that the pllrliea theiilie!Ves havina stipulated for RJ. 2D,OOO o
liquidated dlliL!Iges in the event of a br~ ~ the lint defendant. the !Jreswnption contained in the cxplana,ion to s. 12 of
o Specific Relic! Att IS 7 ltood
rebutted. It was also contended that ooce the aforesaid pre~umption wu rtbutltd
tho bar conbuned in i«tion 21 of the Act ll'ould ipSQ facto becomo operative.
DU.mwina the nppeoJ,
E
HElD : (I) A rcfercoce to a. 22 of tbo Act of U77 (correspon~ to s. 20
of tho Specific Relief Act 196S) would sbow that tho jurisdiction of the Court m
decree specific relief is di&cretionarv and mUJt be ex~rcised on sound and rcuoaab!o JCOI!Och M~n~ided by judicilll priacip!CJ and capable of correction by tho Colut
..
of appeal". This jurisdiction cannot be curtailed or taken away by merely fiiln:
a. aurn even as liquidated damages. This is ~o perfectly clear by tho pcovi·
SIOill o! •· 20 of the old Act (corresponding to s. 23 of the Act of 1963) to
that the Court hu to detcrmioo, on tho facts and circu!ll!ltancn of each ~
be'oro It, whether apccific performance of a
contract to convey a
property
F
ougllt to be granted. p 19G-HJ
The fact .that the P!U'lies thecnsel ves •peclfied a sum of money to be paid. in
!he event of 111 breach IS, no doubt, a piece of oYidence to be comidercd In: detid·
IllS whether the presumption baa been repelled or not. But, it is nothinl m0C11
than a PICCC of evidence, It ia not coacluslv0 or decuive. (320A-BJ
'iJ) Tho content!on th11t coco tho pre:~umption tontaltled in uplan.aqoo m
a. 1~ of the old Act It removed, the bar c:ont.aincd '· 21 of the old Att .11110St tha
G
II'POCiftc: e.n!~ment ~~ a contract for which compensation In mooey Is an ~
qaato rcl~ef, aut~matically opcratca, overloob that tho eonditioo for tho lm;lol4•
}1011 of lbc bar U actual rroof that c;ompeoutlon ln money b adequate 00 thO
acta and. dl'C?trul.llnCta o 11 particular c:uo before tho Court. Tbe cJJect ol ~
P(esumrliDn " that the party comina to the c:ourt for the apedde pcr!ormac<:e
o a c~nlraet for tale of Immovable p~y ~d not pro\~ .ao~r until the
other •Ide bas removed the Pre\U~!I01l. A~r tho evidence Is ed to rcJllO\'C
1~o.[raurnptlon, the plalntlfi may u 1.o 14 • IIO'ltlon to pre\"C, ~other evidOII~
o Cibe, tb.al paymrnt of money does oot cotnpcn.ato bim a oquattly.
"
tnoo-EI
.· lo the present c~, altbouab. evidcQCO -.n. le<J by
art!~. yet there wu oo
CJideDC41 to s.how tlle Clttellt Of ion of pt"'6pecLJvc gai~ to lbe p!alAtlff·tciPOI•
ent or to tho .appellan~. [320E-F)
~
.
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313
A
• (iii) Sin~e the presumption under s •. 12 ·<>f fhe old Act had not been rebutteds
the High C<:n.lrt rightly decreec:t the suit for specific performance of the contract.
It could not be said that tb.e High Court had lightly interfered with the exercise
of it3 discretion by the trial court to grant or not to grant specifi performance on
n
c
0
. 1he facts and circumstances of tbe case. f321C-DJ .
·
CIVIL APPELLATE JURISDICTION: Civil Appeai'No. 2517 of 1969.
.
.
.
.
From the Judgment and Order dated 31st March, 1969 of the
Andhra Pradesh HigJ:t Court at Hyderabad, in City Civil Court Appeal
No. 71 of 1964.
P. Keshva Pillai, for appeallants Nos. 1 & 3 •
• M. C. Chagla, Aziz Ahmad and P. C. Bharatri, for
appe~nts
Nos. 2t 4-7. ·
·
1
C. K. Daplztary, v. S. Sahni, S. M. Aqil and U. P. Singh, for the
respondent.
·· ·
The Judgment of the Court was delivered by
BEG, J.. This appeal has come before us on a
Certificate of
fitness granted by the High Court of Andhra Pradesh, under Articles
132 and 133 of the Constitution of India.
The . Plaintiff-Respondent - had
sued
Defendant-Appellant
Devender Singh (hereinafter referred to as the "First Defendant'~)
for specific performance of a contract to sell a house facing the Secun·
derabad Junction Railway Station in Hyderabad for a sum of Rs.
60,000/- concluded on 9-10 ·1962 at New Delhi where the first ~fchE
dant resides.
It appears that there was a previous agreement on
27-9-1962 (hereinafter referred to as the "first agreement") between
the Plaintiff, who resides at Hyderabad, and ·the first
Defendant,
through an agent, Laxmanaswamy. D.W. 2, with the help of Sambamurthy, D.\V. 3, a nephew of Laxmanaswamy and an Incometax
practitioner residing at Secunderabad, for the sale of this very property for Rs. 55,000/- the terms of which were embodied in a dOC't}-
F / ment Ex. B. 15. ·The First Defendant denies the binding character
of the first agreement of 27-9-1962 under which a cheque for Rs.
10.000/- was dra\\'ll up by the Plaintiff in favour of the first DefCfldant and handed over to his·agent by the Plaintiff. The exact reasan
for a cancellation of this cheque for Rs. 10,000/- in favour of the
J st Defendant is not clear, but, according to Sambamurthy; D.W. 3,
the reason was that, actuaiiy, .Rs. 20,{}00/- . was being demanded
G
on behalf of the first Defendant as eamest money to which the p]aintiff had consented so that a new cheque was, for some unknown
reason. to be issued and not another cheque for Rs. ·10,000{. The
evidence of. Sambamurthy also show that the Plaintiff bad become
aware of . want of written authority on the pm of either l.axmanaswamy or Sambamurthy to conclude the· contract on .behalf of the 1st
Defendant so tmt he must have felt uncertain about the effect of the
first agreement. .Evidently, attempts . to show the Plaintiff that I1Is
JJ
position was shaky, under. the .first agreement and higgling were going
on despite ·.the agi'ccm~nt of .27-9-:~962~.E\-idence in. the ~case and
.findings rec.Ot:.c.led t1J ercon ~Y · the Tria1, c .CQur~ as y;cU as the High
Court show that, although the first Dedcndant,"who was keen to dis-
314
SUPREME COlmT llEl"OaTS
[ 1974) 1 s.c.tt.
post of his property at Secunderabad, may have -had other . offers, ' A
yet, upto 27-9-1962, when the first agreement was concluded, he
had no better offer tban the plaintiff's.
Evidence is conflicting on
the question whether the first Defendant bad authorised Sambamurthy
by telephone to conclude the contract on his behalf for the sale of
property of Rs. 55,000/~, but this was unimportant in view of the
subsequent agreement of 9-10-1962. The Plaintiff. who was evident.:
Iy very . anxious to obtain the property, bad fio\vn to Delhi with his ·
B
lawyer and had managed, by offering Rs. 60,000/~ as the price of·
the property, out of which Rs. 20,000f'-' '\vas paid as earnest money
(Rs. 10,000/- in cash and Rs. lO,COOJ-• by a cheque dated 9-10-1962)
and the balance at the time of registration, to induce the first Defendant himself to conclude and execute the fresh agreement of
9·10-1962.
The deed of agreement of 9~10-1962 Ex. AI was not executed in
a hurry by the first Defendant. He ha4 nmple time to consider any
othct offers there might be till then for sale of his property and to
take legal advice. if he had wanted to have it, before executing the
deed of 9-10-1962. -The Trial Court as well as the High Court had
found that the first Defendant was fully aware of all the facts and
had entered into the. agreement of 9th October, 1962, with open eyes
because it was the most advantageous transaction open to tl1e first
Defendant at that time and not as a result of any pressure or misrepresentation or fraud practised upon the first Defendant, a middle
aged hard headed and astute businessman who deposed _that he was
a Director of Blackwood Hodge (Pvt.) Ltd., and wns connected with
a number of other business concerns. He had himself stated ·in his
evidence in Court that he entered into the agreement of 9-HH962
because he considered that "a bird in hand was worth two in the
bush'' and had thus given. out the real renson .for the agreement of
9-10-1962.
The
first
Defendant had, however. ignorjng the contract of
9-10-1962, actually sold the property under a deed dated 19-10-1962
E."<. B. 22 for a sum of Rs. 70,00f>/- received from Gulam Hussain
Jowkar (2nd Def~ndant), Rajab (3rd Defendant), Safar Jowkar (4th
D..!fcndant) Hussain Jowkar (5th Defendant), Wali Hussain Nasab
(6th Dcfen'dant), all p:.rtners in the. firm carrying on the business
of running: Alpha Hotel (7th Defendant), situated in front of the
Railway
Station ·at Secunderabad.
Apparently, the offer of Rs.
70,000/- had come too late and proved too tempting- for the first
Ddendant to resist it.
The first Defendant bad, in answer to the suit of the Plajntiff-
~espondent. pleased that the contract of 9-10-1962 was the result of
miNcprcsentation and fraud.
All he could urg~ in support of such·
a plea was that the first Defendant had been so completely overawed
bv the Plaintiff and his lawyer mis-representing to him that the first r
agreement was still binding and that the Plaintiff could sue upon it.
that he .executed the agreement of 9~10-1962. -Both the Trial Court
and the _High Court. had found the plea of fraud ~nd mis-representation taken by the first Defendant to be baseless. . Nc'9erthclcss. the
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N. L. SINGH v. SYEo I<HA.JA (Btg, 1.)
315
Trial Court had relied upon the facts leading up to the agreement· of
9-10-1962 and the allegation that the first Defendant was overawed
as sufficient to justify the finding that the plaintiff had obtained an
"unfair advantage" over the 1st Defendant while concluding the agreement of
9-10-1962.
Therefore, the Trial Court thought that the
plaintiff was not entitled to specific performance of the agreement of
9-10-1962, but awarded a decree for the return of Rs. 20,000/~ to
the plaintiff, which he had paid to the first Defendant as earnest
money, and for damages of Rs. 20,000/-. which had been stipulated
for by way of liquidated damages or penalty in the agreement of
9-10-1962, and for additional damages to the extent of Rs. 2,300f-.
Interest at 6% per annum and the costs of the suit were also awarded to the Plaintiff by the Trial Court
The High Court had rightly found, after a thorough . re-examination of evidence in the case, that it was· impossible,.to hold that the
plaintiff had obtained any unfair advantage over the first Defendant
in concluding the agreement of 9-W-1962. It found the stand of the
1st Defendant to be disingenuous and his plea as to why or how he
found himself compelled to execute the agreement of 9-10-1962 to
be utterly incredible. The High Court had rightly held that the first
Defendant concluded the agreement of 9-10-1962 because he obtained not only an enhancement of Rs. 5,000/- in the sale consideration but Rs. 20,~/- immediately as earnest money and a stipulation of a further sum of Rs. 20,000/- as liquidated damages or as
penalty in the event of the plaintiff resiling from the contract. Actually, the first Defendant-Appellant was, O\\ing to the fact that he could
put forward want of the alleged agent's authority to sell, for whatever
such an excuse may be worth, and the fact that he had still to execute
a sale deed and give possession of the property, placed in a more
favourable and advantageous bargaining position.
And,
bargaining
had evidently not stopped despite the first agreement.
The only point which could be and which was seriously urged
before us by Mr. Chagla, appearing for the Defendants-Appellants, was
that,
the parties themselves having stipulated for
Rs. 20,000/- as liquidated damages in the event of a breach by first
Defendant, the presumption contained in the Explanation to Section
12 of the Specific Relief Act 1877 (hereinafter called 'the old Act')
~as rebutted.
Here, Section 12 of the old Act may be reproduced
m toto:-
"12. Except as othernise provide in this Chapter the
specific performance of any contract of any contract' may
in the discretion of the Court be enforced-
{a) when the a~t agreed to be done is in the performance, wholly or partly, of a trust;
(b) when there exists no standard for ru.certaining the
actual damage caused by the non-performance
of
the act agreed to be done;
(c) when the act agreed to be done is such that pecuniary
compensation for its
non-performance would not
afford adequate relief; or
316
SUPREME COUlT REPORTS
[ 1974) 1 II.CJl,
(d) when it is probable that pecuniary compensation
cannot be got for the non-performance of the act
agreed to be done.
Explanation.-Unless and until the contrary is proved,
the Court shall presume that the breach of a contract to
transfer immovable property cannot be adequately relieved
by compensatio11 in money, and that ~ breach of a con·
tract to transfer moveahle property can be thus relieved".
lbe principles embodied in Section 12 of the old Act have bcm
incorporated in Section 10 of the Specific Relief Act of 1963 (h«einafter referred to as the Act of 1963'') which runs as follows:
"10. Except as -otherwise provided in this Chapter, the
specific performance of any contract may, in the discretion
9f the court, be enforced-
( a) when there exists no standard for ascertaining the
actual damage caused by the non-performance ol
the act agreed to be done; or
(b) when th~ ac~ agreed to be done is such that com·
pensation in money for its non-performance would
not atford adequate relief.
Explanation.-Unless and until the contrary is proved,
the court shall presume-
(i) that the breach of a contract to transfer immovablf"
property cannot be adequately relieved by compensation in money; and
(ii) that the breach of a contract to transfer movable
property can be so relieved except in the following
cases:-
(a) where the property is not an ordinary article
of commerc.e, or is of special value ot interest
to the plaintiff, or consists of goods which are
not eastly obtainable in the market;
(b) where the property is held ·by the defendant
as the agent or trustee of the plaintiff".
The term of the contract of 9-10-62 which, according to Mt. Chagla,
attracts the explanation of Section 12 of the old Act reads as
follows:
"It is agreed that should I fail to comply with the terms
of this agreement, I shall be liabJ-e not only for the refund
of the adv!lnce of Rs. 20,000/· (Rupees twenty thousand
~nly) receiVed by mo but I shall also be liable to pay a
similar amount of Rs. 20,000/· (Rupee.s twenty thousand
only) as damages to the said Syed Khaja".
. There is no m~ntion anywhere in the oontract that a party to it
Will have the option to either fulfil the contract to buy or sell or
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N. L. SINGH v. SYED Klw.A (Beg, J.)
317
to pay the liquidated damages or pcnalt; of Rs. 20,000/· stipulated
for a breach, as an alternative to the performance of the contratt
to buy or to seU.
Section 21 of the old Act, to wbich Section 14 of the Act of
1963 <:0rrcsponds, enaas, inter GIUI, that ''a contract for the DOilpaf<nliDCe of which a compensation of money is adequate reli~'
ctnDOt be specificaJJy enforced. Hence. it is contended that. once
dle presumption contained in Explanation to Section 12 is rebutted,
by ~
that the parties themselves contemplated a certain amount
a liquidated damagts for a breach of contract, the bar under Section
21 of the old Act must be given effect to because it must be
deemed to be proved that the non-performance complained of cu
bo adequately compensated by money.
The assumptions underlyin~ the superficially attractive arguments
on behalf of the Defendants-appellants are two : firttly,
that the
mere Clisteoce of a clause in a contract providing for liquidated
dalap or a penalty for a breath is sufficient to rebut tbc prtSUmptioD raised by the e1planation to Section 12; and, JCtODdly, that,
if tb~ presumption is rebutted, the bar contained in Section 21 of
tbe old Act will ipso facto berome operative. We now proceed
to deal with each of the two assumptions mentioned above.
'Ibe answer to the tst assumption is provided by Sectioa 20 of
the old Act. It reads :
"20. A contract, otherwise proper to be specifically en~
forced, may be thus enforced, though a sum be named in
it as the amount to be paid in case of its breach, and the
party in default is willing to pay the same'\
If the Legislative intent was that the mere proof that a sum is
specified as liquidated damages or penalty for a breach should be
enough to prove that a contract for the transfer of immovable property could be adequately compensated by the specified damages
or penalty, Section 20 of the old Act will certainly become meaninglese.
~t is true that Section 20 of the old Act does not mention
the case of an express contract giving an option to a promisor to
either carry out the contract to convey, or, in the alternative, to
pay the sum specified, in which case the enforcement of the undertaking to make the pa~nt would be an enforcement of the contract itself and no occasion for rebutting the presumption in the
explanation to Section 21 would arise. In such cases the contract
itself is specifically enforced when payment is directed in lieu
of
the conveyance to be made.
It may be mentioned here that the principles contained in Section
20 of the old Act are re-enacted in Section 23 of the
Act of 1963 in lan~ which makes it dear that a case
where an option is given by a contract to a pany either to pay
or to carry out the other terms of the contract falls outside the
purview of Section 20 of ~
old Act. but, mere specification of a
sunt of money to be paid for a breach in order to compel tho per-
318
SUPREME C!Otm'l' AE!l(mTs
[ 1974] 1 s.c.tt.
formance of the contract to transfer property will not do. Section
23 of the Act of 1963 may be advantageously cited here.
It nrns
as foJiows :
·
"23 (1) A contract, otherwise, proper tQ be specifi.cally
mforce<;l, may ~ so enforced, though a sum be named in
it as the amount to be paid in case of its hreach and the
party in default is willing to pay the same, if the court, having regard to the terms of the contract and other attending
circumstances, is satisfi~d that the sum was named only for,
the purpose of securing performance of the contract and .
not ·for the purpose of giving to the party in default an option of paying money in lieu of specific performance.
(2) When cnforcin~ specific performance under
this
section, .the cow:t shall not also decree payment of
the
sum so named in the contract".
We think .that Section 23 of the Act of 1963 contains a conipre·
hensive statement of the principles on which, even befcre the Act
of 1963, th~ presence of a term in a contract specifying a sum Of
money to be paid for a breach of the contract bas to be construed
Where payment is an alternative to carrying out the other terms of
the contract, it would exclude, by the terms of the contract itself,
specific performance of the contract to convey a property.
The position stated above is in conformity with the principles
found stated in Sir Edward Fry's ''Treatise on the Specific Performance of Contracts" (Sixth Edn. at p. 65).
It was said there:
"The question always is : What is the contract? Is it
that one oertain act shall be done, with a sum annexed,
whether by way of penalty or damages, to secure the per·
fonnance of this very act? Or, is it that one of the two
things shall be done at the election of the party who has
to perform the contract, namely, the performance of the
act or the payment of the sum of money? If the former,
the fact of the penal or other like sum being annexed will
not prevent the court's enforcin~ performance of the very
act, and thus carrying into execution the intention of the
parties : if the latter, the contract is satisfied by the pay·
ment of a sum of money, and there is no ground for proceeding against the party having the election to compel the
performance of the other alternative.
From what has been said it will be gathered that con·
tracts of the kind now under discussion are divisible into
three classes :-
(i) Where the sum mentioned is strictly a penalty-a sum
named by way of securing the performance of the contract,
as the penalty is a bond :
(ii) Where the sum named is to be paid as liquidated
damages for a breach of the contract :
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N. L. SINGH v. Syro KHAJA (Beg, 1.)
(iii) Where the sum named is an amount the payment
of which may be substituted for the performance of the
act at the election of ~he person by whom the money is to
be paid or the act done.
Where the stipulated payment comes
under either of
the two first-mentioned heads, the Court will enforce the
contract, if in other respects it can and
ought to be enforced, just in the same way as a contract not to do a particular act, with a penalty added to secure its performance
or a sum named as liquidated damages, may be specifically
enforced by means of an injunction against breaking it.
On the other hand, where the contract comes under the
third head, it is satisfied by the payment of the money, and
there is no ground for the Court to compel the specific performance of the other alternative of the contract''.
319
Sir Edward Fry pointed out that the distinction betv.·ecn a strict
penalty and liquidated damages for a b!:each of contract was important in common law where liquidated damages were considered
sufficient compensation for breach of contract, but, sums stipulated
by way of penalty stood on a different footing. He then said :
"But as regards the equitable remedy the di1'1tinction is
unimportant : for the fact that the sum named is the amount
agreed to be paid as liquidated damages is, equally with a
penalty strictly so called, ineffectual to prevent the Court
from enforcing the contract in specie".
The equitable principles which regulated
the grant of specific
perfonnance by the sep~rate Court of Equity which existed in England
at one time have been given stattltocy form in India. It is, therefore, immaterial that the stipulated payment under the terms 1 of the
contract under consideration before us could be viewed as one for
payment of liquidated damages. The question would still remain
whether the Courts are relieved by the agreement between the parties
of the duty to determine, on the facts of a particular case, whether
damages, specified or left unspecified, would really afford adequate
compensation to the party which wants a conveyance of immovable
property as agreed upon.
A reference to Section 22 of the old Aot,
(the corresponding
provision is Section 21) of the Act of 1963), would show that
the jurisdiction of the Court to decree specific relief is discretionary
and must be exercised on sound and reasonable grounds "guided
by judicial principles and capable of correction by a Court of appeal".
This jurisdiction cannot be curtailed or taken away by merely fixing
a sum even as liquidated damages. We think that this is made perfectly
clear by the provisions of Section 20 of the old Act (corresponding
to Section 23 of the Act of 1963) so that the Court has to determine,
on the facts and circumstances of each case before it, whether specific performance of a contract to convey a property ought to be
granted.
320
SUPREME COUP.T 1\EPORTS
( 1974) 1 S.C.!.
The fact that the parties themselves have provided a sum to be
paid by the party breakin~ the contract does not, by. itseU, remove
the strong pr~umption contemplated by the use of the words "unless
and until the contrary is proved". The sufficiency or insufficiency
ot any evidence to remove such a presumption is a matter of evi·
dence. The tact that the parties themselves specified a sum of money
to be paid in the event of its breach is, no doubt, a piece of evidence
tn be considered in deciding whether the presumption has been repelled or not. But, in our opinion, it is nothing more than a piece
of evidence. It is not conclusive or decisive.
The seconJ assumption underlying the contentions on behalf o(
the Defendants-appellants is that, once the presumption, contained
ia. a~planation to Section 12 of the old Act, is removed, the bar
contained in Section 21 of the old Act, again§t the specific enforcement of a contract for which compensation in money is an adequate
relief, automatically operates, over-looks that the condition for the imposition of the bar is actual proof that compensation in money iJ
adequate on tho fact! and circumstances of a particular case before
the Court. The effect of the pruumption is that the party coming to
·Court for the specific performance of a contract for aale of immovable· property need not prove anythin~ until the other side has removed the presumption.
After evidence is led to remove the pre·
,,eumption, the plaintiff may still be in a position to prove, by other
evidence in the case. that payment of .noncy does not compensate
him adequately.
In the instant case, both sides have led evidence.
But, there is
no evidence as to the ~xtent of loss of prospective gains to the plain·
tiff-Respondent, who carries on a Bakery business, from the deprevi-
-
ation of a site so valuable as one in front of the Secundrabad Junction
Railway StatJon. In fact, there is no standard for judging the loss
from such a depreviation either to the Plaintiff-Respondent or to
the partners of the Alpha Hotel who are the real contending parties.
No attempt was even made to gauge the value of future prospects of
&uch a site to businessmen in the position of Plaintiff Respondent and
those Defendants-Appellants who are partners of the Alpha Hotel.
It is clear that the property has got no such value for the first Defendant, who is a businessman
fully occupied with a number of
businesses at Delhi where he had been residing for 19 years in 1963.
it is evident that he could not conveniently look after the property
situated in Secunderabad.
The Defendants-Appellants had miserably failed to prove their
cases.
The attempt to prove either fraud or misrepresentation or
"an unfair advantage'' over the first Defendant, so as to bring his
case within Section 22 ( 1 ) of the old Act, was totally unsuccessful.
The courts commented adversely on incorrect assertions made by
the first Defendant who could not show anything beyond the penalty
or damages clause in the contract for sale dated 9·1 0-1962. It is
strange that the first Defendant, while willin~ to pay Rs. 20,0CIJ/
as damages to the Plaintiff-Respondent, will only get Rs.
10,0001more in price over Rs. 00000/· if his contract of sale to the partners
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N. L. SINGH \'• SYED K'H.UA. (Beg,/.)
321
of the Alpha Hotel were to stand. It is, therefore, clear that tb~
first Defendant must have some ulterior motive in being prepared
to suffer an ostensible loss of Rs. 10,000/~ even if his sale of
16-10-1962 for Rs. 70,0001· to the partner.s of the Alpha
Hotel
could be upheld. The plaintiff himself bad stated that financial
~iderations do not reaUy determine his stand.
We are unable
to accept this pn:iession of unconcern foe financial gain on tho part
of an astute businessman !ike the first Defendant. It is more llkdy
that there is some undisclosed undentanding hetween him IDd the
partners of Alpha Hotel who aro also co-appellants with him before
US.
The result in that we think that the presumption contained in
tbc explanation to Section 12 of the old Act was not rebutted hero.
In such cases Equity helps honest plaintiffs against Defendantl who
break IOlemnly given undertakings. The High Court had risbtly
dcc:reed the suit for specific performance of the contract.
Lastly, !! was urged before us that the High Court ahould DOt
have liJhtly interfered with the exercise of its discretion by the Trial
Court to gr1nt or not to grant &pecific perfonnance on the facta aud
circumstances of this case. It is clear that the discretion, u laid
down in Section 22 of the old Act (corresponding to Section 20 of
the Act of 19.S3), is not to be exercised arbitrarily but on sound and
.reasonable grounds "guided by judicial principles so that it is cap·
able of correction by a. court of appeal'".
It appeared, quite ri&htly~
to the -High Court that the Trial Court had gone completely astray
in the exercise of its dil!~retion on the footing that the PlaintiffRespondent ~joyed an "unfair advantage" over the first DefendantAppellant, whereas, on the facts and circumstances of the case, it
was the first Defendant who was placed in a position to exploit the
need of the plaintiff and the plaintiff's allegedly insecure position
under the first agreement.
It is clear that the Plaintiff-Respondent
bad dealt very fairly and squarely with the first Defendant-Appellant.
The Trial Court's error in the exercise of its discretion on an utterly
untenable, fanciful and unsound ground was rightly corrected by the
High Court.
We, therefore, dismiss this appeal with costs.
K.B.,N.
Appeal Jismissed.