# FERRODOUS ESTATES (PVT.) LTD v. P. GOPIRATHNAM (DEAD) & ORS

- **Citation:** [2020] 13 S.C.R. 673
- **Court:** Supreme Court of India
- **Decided:** 2020-10-12
- **Case number:** Civil Appeal No. 13516 of 2015
- **Bench:** R. F. Nariman, Navin Sinha
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/ferrodous-estates-pvt-ltd-v-p-gopirathnam-dead-ors-34371
- **Pages:** 59

## Headnote

Specific Relief Act, 1963 - Agreement to sell entered into
between appellant and defendants (represented by respondents) in
1980 - Necessary permissions from the competent authority under
the 1978 Act (later repealed by 1999 Repeal Act) not obtained by
the defendants - Appellant filed suit for specific performance -
Decreed by Single Judge - In first appeal, Division Bench referred
the matter to a Full Bench on various questions - Full Bench inter
alia holding that s.6, 1978 Act prohibited even agreements to sell,
declared law inter-parties and the matter went back to Division
Bench - Division Bench remanded the matter to Single Judge who
inter alia recorded a finding that the suit property stood as excess
lands within the meaning of the 1978 Act before it was repealed -
Matter returned to the Division Bench, which by applying the Full
Bench decision relating to the matter inter-parties vide the impugned
judgment has reversed the judgment of the Single Judge - On
appeal, held: Agreement contained a specific clause in which it
was for the vendor to obtain permission from the competent authority
under the 1978 Act - Thus, the agreement cannot be said to be hit
by the decision of Full Bench judgment as the Full Bench itself
recognised that there may be agreements with such clauses, in which
case it is the Court's duty to enforce such clause - Agreement to sell
cannot be said to be void ab initio, as a result of which the basis of
the Division Bench judgment under appeal goes - Further, on the
date on which the appellate decree was passed, the 1978 Act having
been repealed would not stand in the way of a decree for specific
performance - There is no vested right under the 1978 Act in favour
of the respondents - Division Bench incorrect in stating that since
the court process took 27 years to decide the specific performance
suit, it being a discretionary relief ought not to be granted - A suit
for specific performance filed within limitation cannot be dismissed
on the sole ground of delay or laches - Appellant was ready and
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673
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willing throughout to perform its part of the bargain - Defendants
took up dishonest pleas and were in breach of a solemn agreement
in which they were to obtain the Urban Land Ceiling permission
which, if not obtained, would, under the agreement itself, not stand
in the way of specific performance of the agreement between the
parties - Division Bench judgment set aside - Decree passed by
Single Judge restored - Tamil Nadu Urban Land (Ceiling &
Regulation) Act, 1978 - ss.4, 5(3), 6 - Tamil Nadu Urban Land
(Ceiling & Regulation) Repeal Act, 1999.
Specific Relief Act, 1963 - s.20 - Scope of - Held: s.20 prior
to its substitution by the 2018 Amendment Act makes it clear that
the jurisdiction to decree specific performance is discretionary -
This discretion is not arbitrary but has to be exercised soundly and
reasonably, guided by judicial principles, and capable of correction
by a court of appeal - Specific Relief (Amendment) Act, 2018.
Allowing the appeal, the Court
HELD: 1.1 It is not open to the appellant to go behind the
Full Bench judgment as it is inter-parties, as a result of which the
law laid down by the Full Bench judgment must apply to the parties,
res judicata clearly attaching even to issues of law based on the
same cause of action. This being the case, it is important now to
analyse what was held by the Full Bench. The Full Bench
judgment, while stating that section 6 of the Tamil Nadu Urban
Land Ceiling Act prohibited even agreements to sell, as a result
of which there would be no transaction at all in the eyes of law, ,
was careful thereafter to point out:
"40. ...... While considering suit for specific performance,
Court is only concerned whether purchaser has come to
Court for enforcing the agreement in terms thereof.
Asking vendor to get exemption and then to execute the
agreement will be deviating from the ter

## Text

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FERRODOUS ESTATES (PVT.) LTD.
v.
P. GOPIRATHNAM (DEAD) & ORS.
(Civil Appeal No. 13516 of 2015)
OCTOBER 12, 2020
[R. F. NARIMAN AND NAVIN SINHA, JJ.]
Specific Relief Act, 1963 - Agreement to sell entered into
between appellant and defendants (represented by respondents) in
1980 - Necessary permissions from the competent authority under
the 1978 Act (later repealed by 1999 Repeal Act) not obtained by
the defendants - Appellant filed suit for specific performance -
Decreed by Single Judge - In first appeal, Division Bench referred
the matter to a Full Bench on various questions - Full Bench inter
alia holding that s.6, 1978 Act prohibited even agreements to sell,
declared law inter-parties and the matter went back to Division
Bench - Division Bench remanded the matter to Single Judge who
inter alia recorded a finding that the suit property stood as excess
lands within the meaning of the 1978 Act before it was repealed -
Matter returned to the Division Bench, which by applying the Full
Bench decision relating to the matter inter-parties vide the impugned
judgment has reversed the judgment of the Single Judge - On
appeal, held: Agreement contained a specific clause in which it
was for the vendor to obtain permission from the competent authority
under the 1978 Act - Thus, the agreement cannot be said to be hit
by the decision of Full Bench judgment as the Full Bench itself
recognised that there may be agreements with such clauses, in which
case it is the Court's duty to enforce such clause - Agreement to sell
cannot be said to be void ab initio, as a result of which the basis of
the Division Bench judgment under appeal goes - Further, on the
date on which the appellate decree was passed, the 1978 Act having
been repealed would not stand in the way of a decree for specific
performance - There is no vested right under the 1978 Act in favour
of the respondents - Division Bench incorrect in stating that since
the court process took 27 years to decide the specific performance
suit, it being a discretionary relief ought not to be granted - A suit
for specific performance filed within limitation cannot be dismissed
on the sole ground of delay or laches - Appellant was ready and
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willing throughout to perform its part of the bargain - Defendants
took up dishonest pleas and were in breach of a solemn agreement
in which they were to obtain the Urban Land Ceiling permission
which, if not obtained, would, under the agreement itself, not stand
in the way of specific performance of the agreement between the
parties - Division Bench judgment set aside - Decree passed by
Single Judge restored - Tamil Nadu Urban Land (Ceiling &
Regulation) Act, 1978 - ss.4, 5(3), 6 - Tamil Nadu Urban Land
(Ceiling & Regulation) Repeal Act, 1999.
Specific Relief Act, 1963 - s.20 - Scope of - Held: s.20 prior
to its substitution by the 2018 Amendment Act makes it clear that
the jurisdiction to decree specific performance is discretionary -
This discretion is not arbitrary but has to be exercised soundly and
reasonably, guided by judicial principles, and capable of correction
by a court of appeal - Specific Relief (Amendment) Act, 2018.
Allowing the appeal, the Court
HELD: 1.1 It is not open to the appellant to go behind the
Full Bench judgment as it is inter-parties, as a result of which the
law laid down by the Full Bench judgment must apply to the parties,
res judicata clearly attaching even to issues of law based on the
same cause of action. This being the case, it is important now to
analyse what was held by the Full Bench. The Full Bench
judgment, while stating that section 6 of the Tamil Nadu Urban
Land Ceiling Act prohibited even agreements to sell, as a result
of which there would be no transaction at all in the eyes of law, ,
was careful thereafter to point out:
"40. ...... While considering suit for specific performance,
Court is only concerned whether purchaser has come to
Court for enforcing the agreement in terms thereof.
Asking vendor to get exemption and then to execute the
agreement will be deviating from the terms of contract and
the Court will not enforce such a contract. That will mean
that purchaser is not willing to purchase the land as per
agreement, but only with deviation, i.e., vendor must get
exemption and execute the sale deed."
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In paragraph 41, the Full Bench also went on to state that
it is possible to obtain exemption under the Tamil Nadu Urban
Land Ceiling Act, over which the Court has no control, but despite
that, the relief of specific performance is not usually granted as it
would be going beyond the contract. Equally, after holding that
section 6 prohibits a proposed transfer, the Full Bench went on
to hold that a decree for specific performance cannot be granted
conditionally upon the vendor satisfying certain conditions if it is
not part of the agreement. [Paras 14-16][696-A-F]
Mathura Prasad Bajoo Jaiswal v. Dossibai N.B.
Jeejeebhoy (1970) 3 SCR 830 - relied on.
1.2 When these portions of the Full Bench judgment are
applied to the agreement in question, it is clear that the agreement
itself contains a specific clause, namely, clause 4, in which it is for
the vendor to obtain permission from the competent authority
under the Tamil Nadu Urban Land Ceiling Act. This agreement,
therefore, cannot be said to be hit by the decision of the Full
Bench judgment as the Full Bench itself recognises that there
may be agreements with such clauses, in which case it is the
Court's duty to enforce such clause. That is all that the learned
Single Judge has done in the facts of this case - he has correctly
held that it was for the defendants to obtain exemption from the
authorities under the Tamil Nadu Urban Land Ceiling Act which
they did not, as a result of which they were in breach of the
agreement. Viewed slightly differently, it is clear that the Full
Bench judgment cannot stand in the way of the appellant for
another reason. There can be no doubt that the suit property,
admeasuring roughly 2002 sq. metres, was part of a larger
property of 30 grounds, and that the defendants, being four in
number, were entitled to retain 2000 sq. metres of the land owned
by them. It was for this reason that it was incumbent upon the
defendants to have obtained the Urban Land Ceiling permission
to sell the land that was within their ceiling limit, which they failed
to do. It is clear, therefore, that the agreement to sell cannot be
said to be void ab initio, as a result of which the basis of the
Division Bench judgment under appeal goes. Resultantly, the
judgments in Jacques v. Withy, 1 H. Bl. 65, Hitchcock v. Way,
FERRODOUS ESTATES (PVT.) LTD. v.
P. GOPIRATHNAM (DEAD)
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(1837) 6 A & E 943 : 112 ER 360, and Ram Kristo Mandal v.
Dhankisto Mandal, (1969) 1 SCR 342 (at p. 349) cited in support
of the proposition that the repeal of a statute which makes void
an agreement cannot revive such void agreement have no
application on the facts of this case. In view of this, it is
unnecessary to go into whether section 5(3) of the Tamil Nadu
Urban Land Ceiling Act, together with its proviso, applies to the
facts of this case. [Paras 17-19][696-F-H; 697-A-C; 698-G-H]
Jacques v. Withy 1 H. Bl. 65; Hitchcock v. Way (1837)
6 A & E 943 : 112 ER 360; Ram Kristo Mandal v.
Dhankisto Mandal (1969) 1 SCR 342 - held
inapplicable.
1.3 However, the other contention on behalf of the
respondents is that even if this were so, the appellant was not
entitled to more than 500 sq. metres, which was the ceiling limit
so far as the appellant was concerned. This being the case, no
decree for specific performance could be made in favour of the
appellant. That conditional decrees for specific performance have
been passed and upheld by this Court cannot be denied. [Paras
20, 21][699-B-C]
1.4 Even otherwise, the Repeal Act makes it clear that the
Tamil Nadu Urban Land Ceiling Act is repealed. As no steps
whatsoever were taken under the Tamil Nadu Urban Land Ceiling
Act, the savings clause will not apply. [Para 22][701-F; 702-C-D]
1.5 It is settled law that an appeal is a continuation of a suit,
as a result of which a change in law will become applicable on the
date of the appellate decree, provided that no vested right is
taken away thereby. This being the case, on the date on which
the appellate decree was passed, in any case, the Tamil Nadu
Urban Land Ceiling Act having been repealed would not stand in
the way of a decree for specific performance. It must be
remembered that there is no vested right under the Tamil Nadu
Urban Land Ceiling Act in favour of the respondents. Any right,
if at all, is in favour of the State Government, which, like Pontius
Pilate, has washed its hands off this matter by a report submitted
to this Court on 17.08.2015. The Division Bench judgment is
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also wholly incorrect in stating that for no fault of the appellant,
since the court process has taken 27 years to decide the specific
performance suit, specific performance being a discretionary relief
ought not to be granted. Section 20 of the Specific Relief Act,
1963, prior to its substitution by the Specific Relief (Amendment)
Act, 2018, as it then stood, makes it clear that the jurisdiction to
decree specific performance is discretionary; but that this
discretion is not arbitrary but has to be exercised soundly and
reasonably, guided by judicial principles, and capable of correction
by a court of appeal - see section 20(1). Section 20(2) speaks of
cases in which the court may properly exercise discretion not to
decree specific performance. Significantly, under clause (a) of subsection (2), what is to be seen is the terms of the contract or the
conduct of the parties at the time of entering into the contract.
Even "other circumstances under which the contract was entered
into" refers only to circumstances that prevailed at the time of
entering into the contract. It is only then that this exception kicks
in - and this is when the plaintiff gets an unfair advantage over
the defendant. Equally, under clause (b) of sub-section (2), the
hardship involved is again at the time of entering into the contract
which is clear from the expression "which he did not foresee".
This is made clear beyond doubt by Explanation II of section 20
which states that the only exception to the hardship principle
contained in clause (b) of sub-section (2) is where hardship results
from an act of the plaintiff subsequent to the contract. In this
case also, the act cannot be an act of a third party or of the court
- the act must only be the act of the plaintiff. Clause (c) of subsection (2) again refers to the defendant entering into the contract
under circumstances which makes it inequitable to enforce
specific performance. Here again, the point of time at which this
is to be judged is the time of entering into the contract. [Paras
24, 27, 28][703-G-H; 710-D-F; 711-G-H; 712-A-D]
1.6 Given section 20, the courts have uniformly held that
the mere escalation of land prices after the date of the filing of
the suit cannot be the sole ground to deny specific performance.
It is settled law that mere delay by itself, without more, cannot
be the sole factor to deny specific performance - See Mademsetty
FERRODOUS ESTATES (PVT.) LTD. v.
P. GOPIRATHNAM (DEAD)
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Satyanarayana v. G. Yelloji Rao, (1965) 2 SCR 221 at pp. 229-230.
Thus, in K.S. Vidyanadam v. Vairavan, (1997) 3 SCC 1, this Court
made it clear that if property prices have risen dramatically within
a period of two and a half years before filing of the suit for specific
performance, and it is coupled with violation of the agreement by
the plaintiff, specific performance will not be decreed. Likewise,
this Court, in Saradamani Kandappan v. S. Rajalakshmi, (2011)
12 SCC 18, made it clear that given the steep rise in urban land
prices, it may not be correct now to say that time is not of essence
in performance of a contract of sale of immovable property. Thus,
where time can be said to be of the essence in the facts of a given
case, and the purchaser does not take steps to complete the sale
within the stipulated period and the vendor is not responsible for
any delay, the steep rise in price within the stipulated time would
be a circumstance which would make it inequitable to grant the
relief of specific performance. [Paras 29, 30][712-D-E; 722-G;
725-F-H]
Nirmala Anand v. Advent Corporation (P) Ltd. (2002)
8 SCC 146: [2002] 2 Suppl. SCR 706; Mademsetty
Satyanarayana v. G. Yelloji Rao (1965) 2 SCR 221;
K.S. Vidyanadam v. Vairavan (1997) 3 SCC 1: [ 1997]
1 SCR 993; Saradamani Kandappan v. S. Rajalakshmi
(2011) 12 SCC 18: [2011] 8 SCR 874 - relied on.
1.7 The resultant position in law is that a suit for specific
performance filed within limitation cannot be dismissed on the
sole ground of delay or laches. However, an exception to this
rule is where immovable property is to be sold within a certain
period, time being of the essence, and it is found that owing to
some default on the part of the plaintiff, the sale could not take
place within the stipulated time. Once a suit for specific
performance has been filed, any delay as a result of the court
process cannot be put against the plaintiff as a matter of law in
decreeing specific performance. However, it is within the
discretion of the Court, regard being had to the facts of each
case, as to whether some additional amount ought or ought not
to be paid by the plaintiff once a decree of specific performance
is passed in its favour, even at the appellate stage. Fervent appeal
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on behalf of the respondents that this Court should not exercise
its discretionary jurisdiction under Article 136, given the fact that
Rs.2 crores plus interest is to be paid almost by way of solatium
to the appellant, has also to be rejected. As has been found earlier
in this judgment, the defendants were held to have taken up
dishonest pleas and also held to have been in breach of a solemn
agreement in which they were to obtain the Urban Land Ceiling
permission which, if not obtained, would, under the agreement
itself, not stand in the way of the specific performance of the
agreement between the parties. He who asks for equity must do
equity. Given the conduct of the defendants in this case, as
contrasted with the conduct of the appellant who is ready and
willing throughout to perform its part of the bargain, this is a fit
case in which the Division Bench judgment should be set
aside. As a result, the decree passed by the Single Judge is
restored. Since the appellant itself offered a sum of Rs.1.25 crores
to the Division Bench, it must be made to pay this amount to the
respondents within a period of eight weeks from the date of this
judgment. [Paras 31, 32][730-E-H; 731-A-C]
Keshavan Madhava Menon v. State of Bombay 1951
SCR 228 - distinguished.
Immani Appa Rao v. Gollapalli Ramalingamurthi (1962)
3 SCR 739; Narayanamma v. Govindappa 2019 SCC
OnLine SC 1260 - held inapplicable.
Vishwa Nath Sharma v. Shyam Shanker Goela (2007)
10 SCC 595: [2007] 3 SCR 268; Van Vibhag
Karamchari Griha Nirman Sahkari Sanstha Maryadit
v. Ramesh Chander (2010) 14 SCC 596: [2010 12
 SCR 1045; Gajraj Singh v. State Transport Appellate
Tribunal (1997) 1 SCC 650; Rameshwar v. Jot Ram
(1976) 1 SCR 847; Dayawati v. Inderjit (1966) 3 SCR
275; Amarjit Kaur v. Pritam Singh (1974) 2 SCC 363;
Lakshmi Narayan Guin v. Niranjan Modak (1985) 1
SCC 270; P. D'Souza v. Shondrilo Naidu (2004) 6 SCC
649:[2004] 3 Suppl. SCR 186; P.S. Ranakrishna Reddy
v. M.K. Bhagyalakshmi (2007) 10 SCC 231: [2007] 2
SCR 876; Narinderjit Singh v. North Star Estate
Promoters Ltd. (2012) 5 SCC 712; Satya Jain v. Anis
FERRODOUS ESTATES (PVT.) LTD. v.
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Ahmed Rushdie (2013) 8 SCC 131:[ 2013] 3 SCR 319;
K. Prakash v. B.R. Sampath Kumar (2015) 1 SCC 597:
 [2014] 13 SCR 702; Zarina Siddiqui v. A. Ramalingam
(2015) 1 SCC 705: [2014] 14 SCR 456; Ramathal v.
Maruthathal (2018) 18 SCC 303: [2017] 8 SCR 613;
Sunkara Lakshminarasamma v. Sagi Subba Raju (2019)
11 SCC 787: [2018] 14 SCR 222; Nanjappan v.
Ramasamy (2015) 14 SCC 341: [2015] 2 SCR 606 -
relied on.
Sushila v. Nihalchand Nahata AIR 2004 Mad 18 -
referred to.
Lachmeshwar Prasad Shukul v. Keshwar Lal Chaudhuri
AIR 1941 FC 5; John Lemm v. Thomas Alexander
Mitchell [1912] A.C. 400; Kay v. Goodwin 130 E.R.
1403 [1830] - referred to.
Case Law Reference
[1970] 3 SCR 830
relied on
Para 14
[1969] 1 SCR 342
held inapplicable Para 19
[2007] 3 SCR 268
relied on
Para 21
[2010] 12 SCR 1045
relied on
Para 21
[1962] 3 SCR 739
held inapplicable Para 21
(1997) 1 SCC 650
relied on
Para 23
(1976) 1 SCR 847
relied on
Para 24
(1966) 3 SCR 275
relied on
Para 25
(1974) 2 SCC 363
relied on
Para 25
(1985) 1 SCC 270
relied on
Para 25
1951 SCR 228
distinguished
Para 26
[2002] 2 Suppl. SCR 706
relied on
Para 29
[2004] 3 Suppl. SCR 186
relied on
Para 29
[2007] 2 SCR 876
relied on
Para 29
(2012) 5 SCC 712
relied on
Para 29
[2013] 3 SCR 319
relied on
Para 29
[2014] 13 SCR 702
relied on
Para 29
[2014] 14 SCR 456
relied on
Para 29
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[2017] 8 SCR 613
relied on
Para 29
[2018] 14 SCR 222
relied on
Para 29
[1965] 2 SCR 221
relied on
Para 30
[1997] 1 SCR 993
relied on
Para 30
[2011] 8 SCR 874
relied on
Para 30
[2015] 2 SCR 606
relied on
Para 30
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 13516
of 2015.
From the Judgment and Order dated 29.01.2007 of the High Court
of Madras in O.S.A. No. 93 Of 1991.
Balaji Srinivasan, AAG, Guru Krishnakumar, V. Giri, Sr. Adv., P.R.
Kovilan Poongkuntran, Mrs. Geetha Kovilan, A.J. Jawad, Kannan, Vijay
Anand, Vikas Mehta, Ms. Anushree Menon, M. Gireesh Kumar, Vijay
Kumar, T. R. B. Sivakumar, Advs. for the appearing parties.
The Judgment of the Court was delivered by
R. F. NARIMAN, J.
1. This appeal arises from a suit for specific performance that
was filed by the appellant against four defendants who are today
represented by the respondents. By an agreement to sell dated 12.06.1980
entered into between the appellant company and P. Nagarathina Mudaliar,
P. Gopirathnam, P. Lavakumar, and P. Basantkumar, the agreement
recites:
"Whereas the property more particularly described in the Schedule
hereunder and hereinafter referred to as the said property, originally
belonged to the Hindu Undivided Family consisting of Sri P.
Nagarathina Mudaliar and his father Sri P. Thiruvengada Mudaliar;
Whereas there was a partial partition in the said family as a result
of which, the first vendor has become the owner of the said
property, said deed of partition having been registered with the
Sub-Registrar, Madras-Chingleput, as Document No. 1268 of 1944;
Whereas the vendors have mortgaged the said property along
with the other properties owned by them at Haddows Road,
Madras-1, for a sum of Rs.5,65,000/- (Rupees Five Lakh SixtyFive Thousand Only) by way of a deed of mortgage registered
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with the Sub-Registrar, T. Nagar, Madras, as Document No. 3429
of 1967;
Whereas the vendors have offered to sell the said property to the
purchasers, free from all encumbrances, including the mortgage
created in favour of Syndicate Bank, Madras-1;
Whereas the vendors are making necessary arrangements for
discharging the said loan due to Syndicate Bank, Madras-1, and
also to get a letter from Syndicate Bank, releasing their interest, if
any, in the said property offered to be sold;
xxx xxx xxx"
The material clauses of the agreement are as follows:
"3. It is agreed that the sale consideration should be paid as follows:
(a) A sum of Rs.1,00,000/- (Rupees One Lakh Only) deposited
by the purchasers with M/s Venkataraman & Co. on behalf of
the vendors as advance for the said sale consideration;
(b) The purchasers hereby agree to pay the balance of the
price of Rs.4,40,000/- (Rupees Four Lakhs And Forty Thousand
Only) to Syndicate Bank in discharge of the loan borrowed by
the vendors on the mortgage of the said property subject to the
bankers giving the certificate of discharge in respect of the
said property.
4. The vendor shall arrange to secure (a) Income-tax Clearance
Certificate, (b) Permission from the Competent Authority under
the Urban Land Ceiling Act, and (c) such other orders of permits
and the like as may be necessary for completing the sale
transaction at the cost of the vendors.
5. The purchaser shall complete the transaction within six months
from the date of this agreement. This period shall be subject to
the vendors obtaining the necessary clearance certificate from
the appropriate authorities as stated above and giving vacant
possession of the said property."
xxx xxx xxx
"8. The vendors hereby confirm that the said property is subject
to a mortgage loan taken by them from Syndicate Bank, Armenian
Street, Madras-1, and that necessary provision has been made to
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discharge the loan, in the sale agreement itself and excepting the
above, the said property to be conveyed is not subject to any
claim, attachment, lien, charge, mortgage, lis pendens or any other
encumbrance, whatsoever.
9. The vendors undertake to deliver vacant possession of the
property, before the execution of the sale deed.
10. In the event of the vendors commit default or acts in breach
of this agreement the purchasers shall be entitled without prejudice
to the right of specific performance, to the refund of the advance
of Rs.1,00,000/- (Rupees One Lakh Only) and damages."
The suit property admeasured 8 grounds and 2354 sq. feet.
2. Given the fact that the necessary permissions were not obtained
by the defendants, in particular, the permission from the competent
authority under the Tamil Nadu Urban Land (Ceiling & Regulation) Act,
1978 ["Tamil Nadu Urban Land Ceiling Act"], the appellant filed a
suit for specific performance on 24.02.1981, in which it was specifically
pleaded as follows:
"5. The plaintiff which is a private limited company has agreed to
purchase the schedule mentioned property with a view to construct
the multi-storeyed building and the plaintiffs are always ready
and willing to perform their part of the obligation under the
agreement for completion of the sale transaction. Further the
plaintiffs are ready and willing to deposit the balance of the sale
price agreed to be paid under the agreement in question before
this Hon'ble Court to show their bonafide in purchasing the
property and to show their readiness to perform their part of the
contract in accordance with the agreement. The plaintiff submits
that the defendants are bound to secure income tax clearance
certificate and permission from the competent authority etc. which
are prerequisite for the completion of the sale transaction and to
complete the transactions within 6 months from the date of the
agreement.
6. The plaintiff submits that the defendants have not so far
arranged to get income tax clearance certificate and permission
from the competent authority and such other formalities to the be
observed for the completion of the sale transaction and they have
not shown any interest in concluding the transactions. In the
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circumstances the plaintiff submits that they are willing to perform
their part of the contract and it is the defendants who are evading
to completing the sale transactions within the agreed time. The
plaintiff understands and believes the same to be true that the
defendants are not willing to complete the sale transaction and
they reliably understand that the defendants are trying to alienate
the property to third parties for higher price taking advantage of
the rise in price of the landed properties ignoring the agreement to
sell. The plaintiff submits that the conduct and attitude of the
defendants in evading and postponing the execution of the sale
deed is unjust and wanton and it is only with a view to get higher
price for the property ignoring the lawful claims of the plaintiff
under the agreement, the defendants do not show any inclination
to complete the sale transaction."
A written statement filed by P. Nagarathina Mudaliar and his two
sons, namely, P. Gopirathnam and P. Lavakumar, who were defendants
no.1, 2, and 3 respectively, denied that the total consideration for the
agreement was Rs.5,40,000/- as is stated therein. Apart from other denials
made on the merits of the case, it is important to note that no defence
was taken on any plea that the Tamil Nadu Urban Land Ceiling Act
would be infracted if the suit for specific performance were to be decreed.
This was only done, almost by way of an afterthought, by an additional
written statement filed by the self-same defendants on 16.07.1986, in
which it was pleaded:
"2. In any event, these defendants submit that the plaintiff is not
entitled to any decree since the plaintiff is not entitled to purchase
more than the prescribed limit of 500 sq. metres under the provisions
of Tamil Nadu Urban Land Ceiling Act and hence the agreement
is void as violating the provisions of statues."
3. As many as eight issues were framed in the suit. Issue no. 5
reads as follows:
"5. Whether the plaintiff is not entitled to purchase more than 500
sq. metres under the Tamil Nadu Urban Land Ceiling Act and
whether the suit agreement is void on that account?"
4. By a judgment dated 15.03.1991, delivered by a learned Single
Judge of the Madras High Court, the learned Single Judge held that the
fixation of the sale price of Rs.1,02,000/- per ground was because the
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land was low-lying and requires to be levelled. It was also held that a
layout plan had been sanctioned for the purpose of putting up flats in the
suit property. The Single Judge further held that there were circumstances
to show that there was necessity on the part of the defendants to sell the
suit property, given that a loan from Syndicate Bank was taken by
mortgaging a larger piece of land of 30 grounds, and that money was
required for the defendant no.1's son's marriage, which was celebrated
on 23.06.1980. It was further found that M/s Venkataraman & Co., the
auditor of the defendants, negotiated the sale of the suit property, the
first defendant admitting that a sum of Rs.65,000/- was received by him
for the marriage of his son out of the advance money of Rs.1,00,000/-
paid to the aforesaid auditor, M/s Venkataraman & Co. It was also held
that the first defendant was the karta and manager of the joint family,
and that even though the fourth defendant was not present at the time of
execution of the sale agreement and did not actually sign the sale
agreement, the fourth defendant had given a letter of authorisation,
authorising the first defendant to sell the property on his behalf. It was
further held:
"Having signed Ex.P.2 and received Rs.65,000/- as per Ex.P.4, it
would not be fair on the part of the first defendant to come forward
and surprise the plaintiff during trial that he does not know the
contents thereof. The inconsistent stand taken by the first defendant
during the trial, quite different from the plea in the written
statement, would lead to presume the lack of truth in his version."
5. Importantly, so far as obtaining of permission from the Urban
Land Ceiling authorities was concerned, it was held that the defendants
did not comply with this condition, as a result of which there would be no
legal obstacles standing in the way of the plaintiff suing for specific
performance, given the fact that the defendants were in breach of the
agreement. Insofar as the plea in the additional written statement was
concerned, issue no. 5 was answered by the learned Single Judge as
follows:
"The plea of the defendants in their additional written statement
that they will not be competent to sell anything beyond 500 sq.
metres prescribed as ceiling under the Urban Land Ceiling Act
and that because Ex.P.2 envisages the sale of 8 grounds and 2354
sq. ft. exceeding the ceiling area, Ex.P.2 must be deemed to be
invalid and unenforceable, is not sound. There is no term in Ex.P.2
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that the agreement of sale is subject to the grant of permission by
the competent authority under the Urban Land Ceiling Act and
that in the event of refusal of the permission by the competent
authority, the agreement of sale shall fail. It has to be pointed out
here, that even if there is a clause in Ex.P.2 stating that the
defendant should arrange for securing the permission of the
competent authority and if the same has not been obtained by the
defendants, it cannot be a ground for the defendants to refuse the
sale of the suit property. It is open to the plaintiff (the purchaser)
to get a sale of the entire suit property measuring 8 grounds and
2354 sq.ft. even if it exceeds 500 sq. metres. The plaintiff may
get the sale with that risk."
6. Thereafter, the appellant-plaintiff established that it had been
ready and willing to perform its part of the contract continuously, the
balance sum of Rs.4,40,000/- being deposited in the Court on the
directions of the Court. The result, therefore, was as follows:
"23. From the foregoing discussions, my findings on the issues
are that the suit agreement of sale dated 12.06.1980 is true, valid
and enforceable, that it does not suffer from any material alteration,
that it is a concluded contract, that the agreement of sale is binding
on the 4th defendant, that the defendants have committed breach
of the agreement, that the plaintiff is entitled to purchase the suit
property and to get a decree for specific performance of the
agreement as prayed for.
24. In the result, the suit is decreed directing defendants 2 to 6 to
execute the sale deed in respect of the suit property in favour of
the plaintiff within a period of two months, in default the sale deed
shall be executed by Court and got registered."
7. A first appeal was filed to a Division Bench of the High Court,
which then referred the matter to a Full Bench on various questions that
were submitted by it. The Full Bench, by a judgment dated 03.03.1999,
set out the reference order as follows:
"Section 4 of the Act states that no person shall be entitled to hold
vacant land in excess of the ceiling limit, except as otherwise
provided in the Act. Section 7 of the Act makes it obligatory on
the person holding excess land to file statement. Under section 11
of the Act, excess land could be acquired.
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Section 17 of the Act places ceiling limit on future acquisition by
inheritance, bequest or by the sale in execution of decrees etc.
Section 19 of the Act provides for penalty for concealment etc.,
of particulars of vacant land. Even under section 6 of the Act,
there is a prohibition to transfer the excess vacant land unless
such person has filed a statement, and notification regarding the
excess vacant land held by him has been published under subsection (1) of section 11 of the Act. The said section further
declares that any transfer made in contravention of the provisions
of the Act, shall be deemed to be null and void. As can be seen
from the various provisions contained in the Act, section 21 deals
with power of exemption. A plain reading of section 6 goes to
show that what is prohibited is a transfer of excess vacant land
and the consequence of such transfer in contravention of the
provision contained in the said section viz., such transfer shall be
deemed to be null and void. In other words, it speaks of a completed
transaction of transfer. It does not refer to the agreements at all.
We are not able to read any prohibition in the said provision
prohibiting the parties from entering into agreement of sale. In the
decision of the Division Bench of this Court aforementioned, a
view is taken that courts in passing a decree for specific
performance, cannot lend support to the parties to enforce the
agreement so as to defeat the provisions of the Act, in particular
section 6 of the Act. We are unable to agree with this view. There
may be a decree for specific performance subject to certain
conditions, to be complied with provisions of section 6 itself or
subject to grant of exemption and in the light of the judgment of
the Supreme Court in the case of Jambu Rao Satappa Kocheri
v. Neminath Appayya Hanamannayyar, AIR 1968 SC 1358 :
[1968] 3 SCR 706, it cannot be said that such an agreement is hit
by section 23 of the Act. Under the circumstances, we are of the
view that this question is required to be decided by a larger Bench.
Hence we refer this case for hearing and disposal by a larger
Bench including the question as we have stated above."
The Full Bench then referred to the Tamil Nadu Urban Land
(Ceiling & Regulation) Act, 1978, which came into force w.e.f.
03.08.1976. After referring to a number of decisions, the Full Bench
then concluded:
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"24. From these decisions, it is clear that even if the contract by
itself may not be illegal but its enforcement if violates any law
that will be a ground to hold that the agreement cannot be enforced.
We have already extracted preamble of state Act and also the
decision reported in AIR 1979 SC 1415 : [1979] 3 SCR 802 , why
the Act was enacted. It is to prevent concentration of Urban Land
in the hands of few persons and speculation in profiteering therein.
It is to implement this provision of the Act, this provision under
section 6 and 11(4) of the Act are enacted. If the seller is having
land in excess than the ceiling limits and if it is ultimately found
that the Act also applies permitting such persons to execute sale
deed pursuant to the agreement of sale, it will be defeating or
circumventing the provisions of the Act. Equitable distribution of
land, which is contemplated under the provisions may not be
possible if the sale is allowed to take place. The intention is also
very clear that third party right should not be created, which is
likely to affect him also. If by enforcement of contract, if it amounts
to subvert or circumvent law, court cannot be party to such
enforcement, Court will have to discountenance the practice and
it will have to safeguard the foundation of Society.
25. The question whether only completed transactions are
contemplated under section 6 of the Act and therefore enforcement
of agreement for sale is not a bar is also an argument without any
merit. It is true that under the Act, no person is entitled to hold
more than the ceiling limit as prescribed under section 4 of the
Act. Argument is that purchaser is not holding any land on the
basis of an agreement unless he gets some title. It still continues
only with vendor. Therefore, there is no prohibition in enforcement
of contract. Section 6 prohibits transfer by a person holding land
in excess of ceiling limits. The matter will have to be considered
taking into consideration the rights of seller and if that person
holds more land than prescribed under section 5, such transfer
shall be deemed to be null and void. The prohibition under section
6 is for transferring the land and consequently declares that any
violation of law shall be deemed to be null and void. Section 6
contemplates both proposed transfer and completed transfer. An
agreement of sale is also affected by section 6 of the Act."
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"38. It is true that the Act is a self-contained Code with regard to
urban lands and ceiling provisions. It is also true that there are
authorities to decide as to whether transaction is valid or invalid.
Question of valid or invalid transaction will apply only regarding
completed transaction. When section 6 prohibits even proposed
transfer, question of considering validity or invalidity does not arise
and the consequences are also already declared by the Act as
null and void. It takes as if there is no transaction at all in the eye
of law.
39. In the decision reported in Shah Jitendra Nanalal v. Patel
Lallubhai Ishverbhai, AIR 1984 Guj 145 (FB), one of the
questions that was raised before the Full Bench was whether a
decree for specific performance could be given condition. What
is the effect of section 5(3) read with section 20 of the Central
Act in the agreement of transfer was the matter in issue. Once it
is held that section 6 is an absolute bar, question of granting
conditional decree also will not arise. The said argument presupposes that agreement and sale are valid and is invalid only as
against Government.
40. We do not think that the decision therein could be applied so
far as Tamil Nadu Act is concerned. Exemption under section 21
can be applied only by vendor and it is for him exemption is granted.
While considering suit for specific performance, Court is only
concerned whether purchaser has come to Court for enforcing
the agreement in terms thereof. Asking vendor to get exemption
and then to execute the agreement will be deviating from the
terms of contract and the Court will not enforce such a contract.
That will mean that purchaser is not willing to purchase the land
as per agreement, but only with deviation, i.e., Vendor must get
exemption and execute the sale deed.
41. In paragraph 11 of the Full Bench judgment, it is said that,
"So long as provision declaring the transfer under s. 5(3) as
void is subject to the right to move for exemption, obtain
exemption and transfer the property, the power of an owner is
vacant land in excess of the ceiling limit to "alienate" such
land is dormant in him and such power could be exercised by
him in case he seeks exemption, satisfies the Government that
the grounds for exemption exist and obtains such exemption.
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That being the case, a decree cannot be defeated on the ground
that "transfer" inter-parties would not be possible..."
We cannot subscribe the said view, for, granting decree for specific
performance of contract itself being discretionary. Apart from
the sale, when a transaction is only after obtaining exemption or
permission from another authority, over which Court has no control,
the relief of specific performance usually is not granted. While
giving such direction, it will be going beyond contract and if
ultimately exemption is refused, in effect, the decree will become
waste paper. While exercising discretion, the Court will have to
see whether it could pass executable decree and while exercising
discretion, these factors are also considered for granting relief.
The decision reported in Shoba Viswanathan v. D.P. Kinggley,
1996 (1) LW 721 of the judgment supports the view, which we
have taken.
42. Therefore, we answer the reference as follows:
Since provisions of Bombay Tenancy and Agricultural Lands Act
are entirely different from that of Tamil Nadu Urban Land (Ceiling
and Regulation) Act, 1978, various Bench decisions of this Court,
wherein it was held that a decree for specific performance of
contract cannot be granted, if it violates section 6 of Tamil Nadu
Urban Land (Ceiling and Regulation) Act, 1978 do not require
reconsideration.
We also hold that section 6 of the Act not only prohibits a
completed transfer but also a proposed transfer.
We also hold that a decree for specific performance of contract
cannot be granted conditionally upon vendor satisfying certain
conditions, if it is not part of the agreement."
8.