HUNGERFORD INVESTMENT TRUST LIMITED (IN VOLUNTARY LIQUIDATION) 'V. HARIDAS MUNDHRA March 9 & Ors. v. H. MUNDHRA (Mathtw

Ramdas Khatau & Co. v. Atlas Mills Co. Ltd., A.l.R. 1931 Bombay lSI; Rahmath Unnissa Begum v. Shimoga Co-operative Bank Ltd., A.l.R. C 19S1 Mysore 59; Firm Kishore Cl1and ·shivo Charan Lal v. Bruk.un Ekctric Supply Co., A.I.R •. 1944 All. 66, 77; Moho=daii Sahib· v, Abdul Klu:dir Saheb, (1930) 59 M.L.J. 351; Pearisundari Dasset v. Hari Charan Mazumdar Chowdhry, I.L.R. 15 Cal. 211; Some, rhwar Dyal v. Widow of !Alman shah, A.I.R. 1958 All. 488, Anandi/al poddar v . . Gun~ndra, A.I.R. Naina, A.I.R. 1959 Pntna 460, referred to, 196() Cal. 107 ana Tribeni Tewary v. ~ · D ( 4) lbe responckmt had, by his conduct and Jetter evinced an inten tion a01 10 perform his part of i_hc contract. Therefo~. the fact that no time had been fixed in the decree would not preclude the Court from adjudgi_ng the contract as rescinded. P05E..Jil · · (a) If a contract does oot specify time for performan<le ~ hw will . llllJ>IY !JDder s. 46 of the Contract Act that th.e parties intended that the ~ligataon under the coorract should· be performed within a reasonable tlllle dc:Jiendmg on the circumstances of t~ case. The ~trect between the part~:s was not extinguished by the P'JSSing o! the speciilc perf~ :ance d~ree and u the cOOiract au.~isted despito the ~ree, and as the ~cree did DO! abrogate or modify any of the e-xpress or Jmp/J~d terms of contract !1 must oo presumed tha~ tho parties tO tho contract were under the obhvuoo to complete it within a. l'elL\OW\ble time. po3B-Hl sb:sr~~) ~ respondent. by exercising his option to purcha.5e the 519f; appellant C:::e . entllled 10 obtuin a conveyance of the sha.res from ~c in the agree~~ment of the pun:llrue money. There wa.s ·no provi.stOD shares • . TI!e!"efore ••.tto when thcreu.ft~r the appcUant ahoult.l con~Y t!J~ br lntimatina the' 'he wu open 1() e1ther party to make time -~~tt expreuing Ita or hl: r larty, after -a rea&Onliblo ~riod, about lt. aft« &ation Under the ~~ 1~ and willingnesa. to perform its or his ot>U• had ~n Plli~d for 1 l i the tune tor ' Ita """f~ pee ftc .Ret rformance ot the contract without ft.'ttOi _. liberty· wa.s not tllteo away bcca~ a doe~ '1:10 r·• v.mance. ?03H; 704A-c] , ObJrrvatioru in p Hai.sburyt Lawr of E7t 'f:::zaSpeci[ic .P_rrforrtUUIC• ~ edn, p. 546 , t.rui 3rd ed1t1on ·vol. 36, JS 1 to· 3S2,. expljU!~ g • J) AJ the lrxejy ( ,_. &II order of the ~ ·~ t_!tc .n,.~ io h~ ssion and· U · ~ • ~ l:llll!nl of the Putc~::~;:~ him. ~<? del.i~ ~a of tbt ~­ that the~~~ to the rc.pon.Je~y, .~~~uon regardioa- whK:h wu_. ~ 'l . "'"'"a 11 no 11Ub6ta,n~ i.Q- ~ obi~® pe &Jlt was not in ' posiiiGn to dc.livet. tlte sh.acee •.. f11>56-G 1 A B c HUNGERFORD INVESTMENT v. H. MUNDimA (Mathew, ],) 693 . ( 6) WOOn the Co~ adjudges rescission of a . contraQt or a decree . •t 1s . onl.Y con <;em~ With the question whether the person rescinding it 1!! d~mg so .. In . the present case when the awellant came was JUStified t? !Jle Court With 1ts applloahOn for rescission there was already a res. CISS!On of the contract and the decree by its letter dated February 11 ~967. .It ?nlY ~ante~ a declaration by adjudgment by the Court that 1t was )~stifi~ tn domg so. The, Court did not create any right which the parttes d1d not p<>ssess when 1t made a declaration that the oontract had been validly rescinded. Merely because it is necessary for the Court to pass such an order it does not follow that it is the Court that rescinds It is only ·deciding upon too validity of the rescission al· the oontract. ready made by the party. f706A·El There~ore, the respondent could ·not compbin that, because the appelv lant obtam a stay of the order passed by the trial court giving the· respondent ~ fortnight's _time to pay the purchase money the appellant prevented htm from paying the purchase money, and resist the pmyer for rescission. f706A-B] Abram Steamship ·company Ltd. v. Westville Shipping Company Ltd. L.R. L1923] A.C. 781, referred to. \ (7) There is no substance in the clon~ntion of the respondent the appellant was not in a position to give a good title to the shares be- cause 'A' company claimed a lien in respect of the shares. f707C-Dl D (8) It could not be contended that the remedy of the 'appellant was to execute the decree. for specific performance as a decree for money. f709B-C) A decree for specific performance is a ~ in. favour of both the plaintiff and defendant in the suit, but it could be executed only in the manner prescribed by 0.31, r. 3.2, C.P.C. The appellant could not have iCXecuted the decree against the respondent as a money decree '!llld realised the purdtase money from him. Therefore, if the respondent refused to pay the purchase money there was nothing which prevented the appel· lant from applying for rescisSion- of the d~e. f707FrH; 708G-H; 709CT Heramba Chandra Maitra v. J;votish Chrmdra SinhtJ, A.I.R. _1932 CaL 579 and Bai Karimabibi v. A.bderahman Sayad Banu, A.I.R. 1923 Bom. 26, 1eferred to. F (9) The only question with which. the Court was co~cernc:d was. whether the respondent had disabled himself from perfonmng his part o' the obligation under the decree. The fact that attachments of ~ decree by creditors prevented him from performing his part of the obli· .. gation under the decree or obtain satisfaction thereof W?uld not makd him any the less a defaulte~ so far as performance of his part of obligation under the decree ts concerned. f709E.Gl (10) There is no substance in the contention that the attachment by B.company of the S 1% shares made it impossible for the appellant to deliver the shares to the re~pondent as the at~acbment ord« dl.l'~ that the 51% shares should be produced for delivery to th7 respondent against payment of the consideration mentioned in the specific perform~ ance decree. f7090·Hl CML APPELLATE JUR.ISDICTION: Civil Appeal No. 488 of G H

#1971. 16-JOJ 1 Sup.CI/72 694 SUPR'EME COURT REPORTS [1972] 3 S.C.I.. Appeal from the judgment and decree dated September 14, A 1970 of the Calcutta High Court-in Appeal No. 148 of 1969. S. V. Gupte, S. B. Mukherjee, B . N. Garg, K. K. Jain, D. N. Sinha, Lina Seth, M. M . N. Pombra and H. K. Puri, for the appellant. R . C. Dev, Somnath Chatterjee, M . Bose, S. Swarup and P. C. Bhartari, for respondent No. 1. 8 A. K. Sen, Shanker Ghosh, D. N. Gupta, .N. Khait(ln, Krishna Sen and B. P. Singh, for respondent No. 4. S. S. Khanduja, Promod Swarup and La/{~ Kohli, for respon- c dents Nos. 7 and 8. · Gobind Das and B. D. Sharma, for respondent No. 1. The Judgment of the Court was delivered by I ~w, J. This is an appeal with certificate from a judgment D of a Division Bench of the Calcutta High Court, setting aside the order of a single judge of the Court allowing an application filed by the appellant for rescission of an agreement for sale dated October 30, 1956, as also the decree dated February 25, 1964, for specific perfonnance of the agreement and for other alterna- tive reliefs s~~ified in the application. E Hungerford Investment Trust Limited, (in voluntary liquida tion) hereinafter called 'Hungerford' was the owner of 100 pet cent shares in Turner Morrison & Co., hereinafter called 'Turner Morrison'. John · Geoffrey Turner and Nigel Frederic Turner, both since deceased, were the owners of the 100 per ce.Qt shares of Hun~erford. The entire share capital of Turner Morrison F consis!OO of 4,500 fully paid' up ordinary shares of Rs. 1,000/ each. By exchange of letters it was agreed that Haridas Mundhra, bereinafter called 'Mundhra' would purchase from Hungerford, 49 per cem: shares of Turner Morrison. The agreement also provided for an option to Mundhra to purchase from Hungerford, G the balance of 51 per cent shares of Turner Morrison within 5 years. A fo.I'.Qlal agreement dated· October 30, 1956, was ~xe­ cutcd between Hungerford, John Geoffrey Turner- - and Nigel Frederic Turner on the one hand, and British India Corporation and Haridas Mundhra on the other, embodying the terms of the agreement. in Turner Morrison was sold and transferred to Mundhra and his nominee British India Corporation. Thereafter, Mundhra ,exer cised his option to purchase the 51 per cent shares. But the .Pursuant to this agreement, 49 per cent of the shares H \ HUNGERFORD INVESTMENT v. 1L MUNDHRA (Mathew, /.) 695 B A shares were not sold or transferred to him. So, on April 19, 1961. Mundhra filed a suit againSt Hungerford, 'tun)er Mow.son .and others for specific perforinance of. the agreement to sell the 51 per cent shares (Suit No. 600 of 1961). As Mundhra did not want to proceed a~ainst Turner Morrison, the suiot was dis missed as a~inst that company and a decree was passed on Feb- ruary 25, 1964. The decree provided that the agreement relat inst to the sale of 51 per cent ordinary shares of Turner Morrison ou~t to be soecifically performed and directed HWlgerford deliver to ~undhra, the 51 per cent shares against payment of the considerati6n of Rs. 86,60,000/-. An injunction was also ~anted restraining Hungerford and the other deJendants in the suit from voting except in accordance with the- instruction of Mundhra and restraining Hungerford from selling the shares to any person other than Mundhra. The decree, except as regards 1he iniunction, was stayed by the trial iudge, on the application of the appellant, for 3 weeks. C Hungerford, along with some ather defendants, filed an D appeal from the decree on March 18, 1964 (Appeal No. 69 of 1964) and obtained ~ stay of execution of the decree except in ,fue so far as it related to' the ,injunction, until the disposal of appeal. The appeal was dismissed on August 26, 1964, for the reason that it was withdrawn. by the appellcmt, leaving Mundhra fr~ to perform his part of the obligation under the decree. :E By a Master's summons dated August 30, 1965, Hungerford made an ·application praying that Mundhra may be directed to implement the decree by paying Rs. 86,60,000/, tbe un-paid purchase money, within such time as the Court may direct, that Hungerford b~ directed to execute proper transfer deeds in respect time as the Court may of llhe 51 per cent shares within such F direct; and- :that in default of payment of Rs. 86,60,000/- by Mundhra within the period to be fixed, the Court may order rescission of the agreement and the decree. The application was dismissed on September 28, 19.65, by Justice R,ay, holding that the application was one for execution of the decree in Suit No. 600 of 1961 and must be in a tabular form and "that any im position of time limit would be to engraft something on· the G decree which does not exist in the decree'. Hun~rford prefer red an appeal against the said order (Appeal No. 286 of 1965). The appe.al ~as dismissed on August 8, 1966. The application of Hungerford for leave to appeal to this Court was also dismissed on November 25, 1968. · Before the dismissal of appeal No~ 69 of.1964 filed against the decree for specific perform~~ ih suit No. 600. of 1961, the Certificate Officer, 24 Parganas had attached ·as Mundhra failed to satisfy six certificates then pending against him. that decree; H 696 ' SUPREME COURT REPORTS [1972] 3 .S.C.R:. In pursuance ~o a Memorandum issued by the Certificate Officer. Ray, J. made an order dated March 2, 1964, staying the execu tion of the decree until cancellation of the notice by the Certifi cate Officer or until the Certificate Officer or the debtor applied for execution of the decree. The decree in suit No. 600 of 1961 was also attached in execution of three other decrees, namely the decree obtained by Champaran Sugar Co. Ltd. and B British India Corporation Ltd. in sllirt No. 179 of 1960 of Court of. Civil Judge, Kanpur and those obtained by Kanpur in suit Sugar Work! lAd. and Britisp India Corporation Ltd. No. 178 of 1960 in the Court of Second Civil Judge, Kanpur and the Life Insurance Corporation of India in special appeal No. 299 of 1961 of the High Court of Allahabad. The effect of c these orders of attachment was that the decree-holder Mundhra was prohibited and restrained from alienating, transferring or charging his right, title and interest in the decree in suit No. 600 of 1961 or from obtaining satisfaction thereof. In February, 1965, Bank Hoffman A.G. obtained a decree D from Queen's Bench Division, London, for £657,345-17-9d. with interest at 4! per cent per annum from the date of decree against Romanigo Holdings S.A.H., a holding company of Hungerford and also against Hungerford. Bank Hoffman exe cuted the decree in the Court of Distri~ Judge, Delhi, and got the 51 per cent shares of Hungerford at~ached. The District Judge ordered the attachment and directed .. that the 51 per ctnt B shares be produced in the High Court of Calcll'tta for delivery to Mundhra against payment of consideration mentioned sj, eCific Perf9!manee decree. · .J Hungerford was in control of Turner Morrison upto Febru- ary 25, 1964, when the injunction in regard to voting rights was granted. 'It had kept scripts of. 707 shares out of 2;295 shares_m the office of Turner Morrison. · When Mundhra got. control of Turner Morrison, these scripts went ·under his control and power. The Liquidators· of Hungerford wrote on December 12, 1964, to Turner Morrison to deliver the scripts of 707 shares to M/s Sanderson and Margo~!, solicitors of Hungerford.· Tho request G fo,r ·delivery of 707 shares was repeatt:4 by Sanderson an~ Margo a on December 22, 1964. Turner Mornson ~rote a letter on Janu- ary 11. 1965 to K. N. Srivllstava,. Income Tax Officer, if the 707 ·shares' seripts could be delivered to Hungerford and if ~ Income Tax Officer had any objection to such delivery. On January 13, 1965, Turner Morrison's solicitors wrote to Mls . . Sanderson -and Morgan that 707 shares had· become 1the .property of Mundhra H. and, for the first time, also claimed that thetit was ·a ·lietl on the· shares. On January 18, 1965, K. N. Srivastava, the Income TU. A B c D E F G H HUNGERFORD INVESTMENT v. H. MUNDHRA (Mathew,/,) 691 ()fficer, wrote a letter raising objection to the delivery of 707 shares to Hungerford although the Income Tax Department had no claim on lthese shares. in' Tutiiler Morrison instituted a suit against Hungerford (Suit No. 2005 of 1965) the Calcutta High Comt claiming' Rs. 79,70,802 as principal and Rs. 47,96,250.16 as interest, in respect of payment made by Turner Morrison tto Income Tax authorities on behalf of Hungerford under section 23 (a) of the Indian Inoome Tax Act, 1922. A claim was also made in the suit for possession and sale of 1he 2,295 shares in the exercise of their lien on those shares under Article 22 of rthe Articles of Association of the Company. Mundhra was not a party suit. Turner Morrison made an ex-parte application in the suit on July 8, 1966, for appointment of a receiver in respect of the 2,295 shares. Mr. K. B. Bose was appointed receiver and he took possession of 1,588 shares froq1 the First National City Bank and 707 shares from llhe Police. On July 13, 1966, Sen J. passed an order confirming the order of appointment of the re ceiver and directing that the receiver will be at liberty to deliver the 51 per cent of shares to Mundhra on payment of Rs. 86,60,000/- in performance of · his part of the obligation l,lDder the decree, if so required by the Court hearing appeal No. 286 of 1965. The order also provided that if Mundhr~ takes the shares on payment of tthe price directed to be paid by decree, or in direction of the Coun of appeal, the lien if any, as claimed by Turner Morrison will shift on to the money which the receiver would £et from Mundhra. Turner Morrison preferred an appeal against the order and applied for stay of the order. The stay was refused but the appeal was partly allowed on September 2, 1968, by setting aside direction given to the receiver to tender the shares to Mundhra as also the direction that the lien of Turner Morrison would shift to.the purchase money to be paid by Mundhra. On Mat:ch 21, 1967, the application from which the present appeal arises, was made by Hungerford (the appellant here) be fore the High Court. The prayers in the application were illartisti cally worded. It was prayed that the agreement dated October 30, 1956, and the de~ee dated· February 25, 1964, passed in suit No. 600 of 1961 be rescinded, that the injunction granted by the ·decree in the suit be vacated unless Mundhra (the 1st respondent here) deposits Rs. 86,6.0,000/- in the Court or with the receiver in suit No. 2005 of 1965, that the receiver appointed in suit No. 2005 of 1965 be· appoimed as receiver in the suit for speCi fic performance in respect of the said 2,295 shares, -tharthe re ceiver be directed to tender, on a day certain. the ilaid ShareS .to 898 SUPREME cOURT REPC)ltTS ' (1972] 3 S.C.R.· Mundhra, and Mund.hra be direcred Rs. 86,60,000/- to the receiver on that day and to declare that if Mundhra failed to pay llhe amount to the receiver on or befor.e the day, the agreement dated October 30, 1956 and the decree dated February 25, 1964, would stand rescinded. This applica- tion was allowed by Masood J. to pay · the sum of A B c The learn¢ judge overruled <the objection of Mundhra that the application was not maintainable and held that it was main tainable under section 35 of the Specific Relief Act, 1877, not withstandinp; the repeal of that Act by the Specific Relief Act, 1963, as the appellant had an accrued right under the section to make the application even before the repeal. The learned judge then found that Mundhra was not keen in paying the purchase money and getting transfer of the 51 per cent shares for. the reason that t:·e injunction granted by Court in the decree in suit No. 600 of 1961 restraining the appel- lent from voting except in accordance with the instruction of Mundhra made him virtually lthe owner of 100 per cent shares D in Turner Morrison, and if without paying any amount for 51 per cent shares of Turner Morrison, he got control of Turner Morrison, it was to his interest not to pay anything to the appel lant. As regards the objection by Mundhra that since Turner Morri- son claimed a lien on the 51 per cent shares and, therefore, the E ~llant was not in a position to deliver the shares free ·from encumbrance, he held that there was no bona-fides in the claim of Turner Morrison : firstly because !the lien was not set up by Turner Morrison in its written statement in the suit filed by Mundhra for specific 'Performance, secondly because in the· suit filed by l'urner Morrison claiming the lien, Mundhra, who was F interested in rthe shares upon which the lien was claimed, was not made a party and thirdly for the reason that by his letter dated November 29, 1955. Mundhra had agreed that Turner Morrison would pay the income tax liabilities of Hungerford to the extent of Rs. 46 lakhs. The learned 'Judge found it impossible to be· lieve that Mundhra had no knowledge about the suit filed by Turner Morrison claiming the lie11 a& he was m complete control G of Turner Morrison at the time the Suit was ~ ana s8id that TurDer MorrisOn and. Mun.dhra were colluding with each other to defeat the apPellant in its attcmi't to get ilhe purchase money from Mundhra and that suit No . .2005 of 1965 was inStituted with the connivan~ of Mundhra. The .~carDed 'udge a15o. fourid that even if Turner Morrison l,u\d a lien on th~ share$, sin, ce there was no H covenant. for title," Mundhra wa8. not iustified in declining to tUe dtli:VetY of the . $hares on the score that TUrner. Morrison·liaa a lien u'POri the shares. · · · · HUNGERFORD INVESTMENT v. H. MUNDHRA (Mathew, J.) 699 A receiver The learned judget after evaluating all the circumstances uki- martely came to the conclusion that Mundhra ·committed breach of the contract which he was directed specifically to perform, that be created a situation which made it practically impossible for hlm to perform his part of !the obligation under the decree and that the ag~egtent dated October 30, 1956 and the decree <Wed 8 February 25, 1964, for specific performance must be rescinded. The learned judge, therefore, appointed in suit No. 2005 of 1965 as receiver of the 51 per cent shares and direct ed Mundhra to pay Rs. 86,60,000/- to the receiver within a fortnight from the date of the order and the receiver to hand over the 51 per cent of the shares to Mundhra's solicitors if the amount c was paid as directed. The receiver was also directed to pay the amount to tbe solicitors of Hungerford. The stay order passed by Ray J. on March 2, 1964, was vacated and liberty was given to the Certificate Officer or lthe Tax Recovery Officer, 24 Parganas to take such steps against Mundhra· as he thought fit. ·the In default of -payment of Rs. . 86,60,000/- by Mundhra to receiver within the time specified, the Court directed that the con- tract arid th_~ decree would stand rescinded and Hungerford ab solved from all obligations under the said contract and decree. ' Against the decision, the appellant filed appeal No. 148 of 1969 before a Division Bench of the Court and Mundhra .filed a D E cross-obiection. 1 The appellalte Court found that if Mundhra was really inte rested in getting transfer of the shares by paying the money, he would not have allowed th~ opportunity to acquire the shares under the order dated July 13, 1966, to slip by, that Mundhra knew of the order of July 13, 1966, and also of the opportunity F given to him by the order to get delivery of the shares on pay ment of the purchase money, but that he did not avail of opportunity for the reason that, if without ' paying money, he could virtually enjoy the .same advanta~. it would be foolish from a businessman's point of 'view to invest any amount in pur chasing the shares. The Court observed : G R "A busines.sman who files a suit for specific perform- ance of a contract to buy shares and prosecutes that suit to a successful termination in his favour, will not fritter away the benefit under the decree except for a higher or superior advantage and that advantage Mundbra got under the decree in suit No. 600 of 1961." The Court then held that application filed by the appel lant for rescission of- the contract and the decreo was not main .. tainable. The reasoning of the Court was two-fold. The Court 700 SUPR.EMB COUllT ltBPOR.1S [1972] 3 S.C.R. said that the appellant had no accrued right to apply for rescission A under section 35 of the Specific Relief Act, 1877, which would survive the.repeal of that Act by the Specific Relief Act, 1963, and so, no application for rescission would lie under section 35 of the ·old Act read with section 6 of the General Oauses Act. 1897. Jt then held that since section 28 of the Specific Relief Act,. 1963, only provided for rescission of a dec~· for specific B performance of a contract for the sale or lease of immovable pro perty, the application was illlcompetent under the section and allowed the appeal and cross-objection in part. We do not think .that the appellant had an accrued right for c rescission of the contract or the decree for specific performance under section 35 of the Specific Relief Act, 1877, when the Act was repealed by the Specific Relief Act, 1963, on March 1, 1964. It may be recalled that .the decree in suit No. 600 of 1961 was passed on February 25, 1964 ind that the application for resci!~ sion of the decree was filed on March 21, 1967. Section 35 of the Specific Relief Act, 1877, so far as it is material for the pur- D · pose of this case, provided that where a decree .for specific perform ance of a contract of sale or of a contract to take a lease ha~ been made and the purchaser or lessee makes default in payment of the purchase money, which the Court has ordered him to pay, the decree may be rescinded as regards the party in default either by a suit or by an application. The right to rescind the decree E under the· section can arise only if the purchaser makes default in paying the purchase money ordered to be paid under the decree. Before the lapse of a reasonable time from the date of the decree, the appellant could have no right to have the decree rescinded on the ground of default of the purchaser. To put it in other words, the right of the appellant to have the decree rescinded was dependant upon the default of the purchaser in paying purchase money. Such a default had not occurred when the F Specific Relief Act, 1877, was repealed, as a reasonable time for the performance of the obligation under the dec.ree had not elapsed from the date of the decree. The more important reason VJhy there was no default in this ca.~ was that the execution of the decree in suit No. 600 of 1961 was stayed by orders of the trial G and appellate Court till August 26, 1964. We, therefore, agree with the finding of the Div; ision Bench that the appellant had no accrued right on the date of the repeal to file an. application under section 35 of the Specific Relief Act, 1877, which was saved under section 6 of the General Clauses Act, 1897. The mere right to take advantage of the provisions of an Act is not an H ~rued right [see Abbott v. ·The Minister for plans(1 )]. (l) [l89S] A.C. 42S. HUNGERFOIU> INVESTMENT v. H. MUNDHRA (Mathew, J.) 701 .A We also agree with the finding of the Division Bench that since section 28 of. the Specific Relief Act, 1963, provides only for an application fox: rescission of a decree for specific performance for the sale or lease of immovable property, no application to rescind a decree for specific performance of an agreement to sell movables, would lie under that section. E I) The- question then is whether the application ~as mamtain able under -any other provision of the law. The Specific Relief, Act, 1963, is not an exhaustive enactment. It does not .consoli date the whole law on the subject. As the preamble would indi cate, it--is an Act ".to define and amend the law relating to certain C ' kinds ,.of specific relier•. It does not purport to lay down the law relating -to specific relief in all ~ts ramifications. - In Ramda.s Khatau & Co. v. Atlas Mills Co. Ltd.(l) it was held that the Specific Relief Act, 18 77, was not exhaustive. 1 In Rahmath Unnissa Begam v. Shimoga Co-operative Bank Ltd. another( 2 ) the Court said that the Specific Relief Act, 1877, is foun.ded on English equity jliri.sprudence and that it is permissible to refer to English Law on the subject wherever -the· Act did not deal specifi cally with any topic [see also Firm Kishore Chand Shiva Charan Lal and another v. Budaun Electric Supply Co. Ltd.(')]. Al though a matter on which· the Act defines the law it might g~neral­ ly be ·exhaustive, the Act as a whole cannot be considered as exhaustive of -the whole -branch of the law of specific perfoi'Iijance. It is settled by 'a long course of decisions of the Indian High Courts that the Court which passes a decree for specific perform ance retains control over the ·decree even after the decree has In Mahommadalli Sahib v. Abdul Khadir been passed. Saheb(') it was held ~at the Court which passes a decree for specific performance has .the power to extend the time fixed in the decree for the reason that Court retains control over the decree, that the contract between the parties is not extinguished by passing of a decree for specific performance and that the contract In Pearisun• subsists notwithstanding the passing of the dectee. dari Dassee v. Hari Charan Mozumdar Chowdhry( 5 ) the Calcutta High Court said that the Court retains control over the proceed- G _ ings even afte~ a decree for specific performance has been passed, that the decree pas~ iJ,l a suit fo.r specific performance is not a final decree and that the st1it .m~t be d~me4 to be pending even after the. decree. 'n~ same view was taken in Someshwar Dayal . and othrtrs_ v. Widow ofl,-aln:tan Shah and others(8 ). In A.nandi- ~l P~ddar v .. Gunendra ,Kr. Roy (11fll _ another~~) Raj J.! speaking F JI {1) A.I.R.I931 Bombay lSl. (3) /..I.R. (31) 1944 Anahabad 66 at p. 77. (5) I.L.R. Calcutta Series. Vol. XV, p. 211. (6) A.I.R. 1958 Allahabad -488. (7) A.I.R. 1966 Calcutta 107. . (2) AJ.R. l9Sl Mysore 59. (4) (1930) M.LJ. Vol. S9, p. 351. - 702 SUP1lEME COUllT REPORTS [1972.] 3 S.C.R. for ,the CoUrt,. said that. the cOOit rewns .control over the matter A even ·af~r passing a deeree for speeific performance and that vir~ tually, theo decree is in the nature of a preliminary one. In Trilieni Tewary and others v. Ramratan Nonia and others(1) was held that the Court retains seisin of the· case notwithstanding the fact that a decree for specific perfonnance has been passed and that the decree is really in the nature of a preliminary decree. B Fry in his book(2 England as follows : - ) on Specific Performance- states the law. in "It may and not unfrequently does hapPen that after judgment has been given for the specific: performance of a contract, some further relief becomes necessary, in con sequence of one or other of the parties making default in the perfonnance of some!}ling which ought under the· judgment to be perform~ by him or on his.part; as for instance, where a vendor refuses or is unable to. execute . a proper conveyance of the property, or a purchaser to pay the purchas~ money •..•.• c D I "There are two kinds of relief after. judgment for specific performance of which either party. to the contract may, in a proper case, avail himself : · "(i) He may obtain (on motion in the action) on order appointing a definite time and place for the completion Of the . contract by payment of the un-paid purchase-money and delivery Over of the executed conveyance and title deeds, or a period within which the judgment, is to be obeyed, and, if the·other party fails to obey tho order, .may thereupon at once issue a writ of se qu~tration against the · dclaulting party's' estate arid effects . . . .. . .• ·~ · "(ii) He may ~wly t:O the. Gourt _(by ,1notion in tho action) for; an ~rd¢!. rescind~ ~ ~~t. 9n. an applice~.tion ~ ~ kind, if 1~ .a~ .that the party JAOVed agamst. has positively. ~fused. to cop1plete .. the. ~tract, , its inun.e4i,ate ... rescissiop ~Y ~ ~; otherwise,. the. on:fF will .. bo for rescission .in default of eompletion · within a • t!;...:.!ted.. ww . . .time~ •..••. ~ •• ~ ?• . (1) A.I.R. 1959 Patna 460. · (2) Fiy on SpecifiC Performance. 6th Od. p, $46. . -- F · G H iluNGDPORD INVESTMENT V. H. MUNDIDt.A. (Mathew, J.) ·703 A B In Halsbury's laws of EDgland(l) the law is stated as under : - "Ancillary relief may be obtained after judgment in an action for specific performance where such further relief becomes necessary ....... . Either party may also obtain an order rescinding the contract in default of completion within a fiXed time." As the Court retained control over the matter despite th~ decree, it was open to the Court, when it was· alleged that the party moved againsti has positively refused to complete the con~ tract to entertain -the application and order rescission of the. decree c if the allegation was proved. We, therefore, think that the appli cation of the appellant was competent. E D It was contended on behalf of Mundhra that he was always ready and willing to pay the purchase money, but since the ctecree .. ·did not specify any time for payment of the money, there was no default' on. his part. In other words, the contention was that since the decree did not specify a time within which the purchase money should. be paid and, since an application for fixing the time was made by the appellant and dismissed by the · Gourt, Mundhra cum.ot be.said- to have been in default in not paying ,tbb:purehase money so that the appellant might apply for rescisiion of the decree. H a contract does not specify the time for performance, the law will imply that the parties intended that the obligation· under the contract should be performed within a reasonable tiine. Section ~6 Of the Contract Act provides that where, by a contract. a promisor is to perform· his promise without a9.plication by the promisee, and no time for perfonnance is specified, ·the engage ment must be perfonned within a reasonable time ~d the .question "what is reasonable time" is, in each particular case, a question of fict. We have already indicated that the contract between the parties was not e~tinguished by the passing of the decree, that it subsisted notwithstanding the decree. It was an ~plied term of the contract and, therefore, of the decree passed thereon tUt the parties w<>uld perform the contract within a reasOilable time. To put it ia oth¢r- words,- as the contract subsisted desPite the decree- G aDd -.s the decree did not abrogate or modify any ~f the express .or· implied teqns of the contract, it must be presumed .that th·e p~t~ to tho decree had the obligation to complete the contract wtthin a reasonable time. F The. matter. call Qe !()()ked at. from another angle. Mundhra· H by exercising the opti9n to pu, rchase the 31 per cent shares, be- came entitled to obtain a conveyance of. the ~ares trom the ap pellant on payment of'tb,e purchase money. There was no pro- (1} Halsbury's Laws of Eng/and 3rd Ed, Vol., 36. 3SJ.S2. '104 SUPREM:B COURT REPORTS [1972] 3 s.C.R. A vision. in the agreement at what time or withiQ. what period after the exercise of the option the appellant should convey the shares against the payment of the purchase nioney. But it was open to either party to make time essential· by intimating the other party after a reasonable period about it after expressing its or his readiness and willingi:less to perform its or his obligation un!kr ·the contract. That liberty was not taken away because a decree B has been passed for specific performance of the contract without fixing the time for the performance. The appellant could, there~ .fore, have called upon Mundhra to pay the purchase money and take delivery of the shares within .a ·~ble time. The fact that the decree did not fiX a time· for1completing the contract did . not prevent either party from demancling performance from other c party within a reasonable time aild thus make time essential, as the parties had that liberty before the decree was passed and the .decree did not abrogate that liberty in any way, and if the party \from whom performance was demanded evinced by his conduct that he was unWilling to perform his part, then it was open to the party dainiing · performance to rescind the contract and obtain an order from die Court adjudging rescission ol the contract and the D decree thereon. We do not think, in case the Court comes to the conclusion that the party moved against has by conduct evinced an intention not to pedorm his part of the contract, the fact that no time has been fixed in the decree would preclude it from adjudg. · ing the contract as rescinded. The observation of Fry already quoted does, not mean .that unless a time is specified in the decree there can be no default. It only means that if the conduct of the party moved against is equivocal, an order for rescission will 1:le made ·only in default of completion within a specified time. Nor can tho observation quoted above f.rom Halsbury's Law$ of England bear any other construction. We have already indicated that section 28 of the Specific Relief Act, 1963, deals only with rescis sion of a decree for specific performance of an agreement to sell or lease itnmovable property and so the terms of the section are hardly relevant in deciding the question whether there can be de fault without fixing the time for performance in: a decree for specific performance of an agreement to sell movables. We think it un necessary to decide the question whether, under an_y Circumstances, there can be default of performance where a decree for specific performance of an agreement to sell or lease immovable property &>es not speeify the time of perfonnance for ·the purpose of an application for rescission of the decree. E F G It is no doubt true that after the decree in suit No. 600 of 1961, 11 stay was -<>btained by the appeUat)t preventing the execution of H the decree : an appeal was a.J.so l)referred .against that decree and a stay ebtained for the same purpose, from the appeJJate court and HUNGBRF0RD INVESTMENT V. H. MUNDHllA (Mathew, J.) 705' A B 0 c that th~. order continued in force till tbe disposal of the appeal oru August 26, 1965. Till thCll, there can be no question of Mundhra being in default because he was not required by the orders of Coun to. perform his part of the obligation under the' decree. But ~ question is, was he in default after August 26, 1965, in performing his part of the obligation under the decree ? Counsel for Mundhra · relied upon the observations in the order of Ray J. passed' on the . application on the Master's sUJllll).ons as well as in tbe.order passed m·the appeal (No. 2a6 of 1965) th.erefrom on August 18, 1966, to show that there was no offer by the appellant to deliver the sha!e6. and, therefore, Mundhra was not in default in paying the purchase It will be recalled that on July 13, 1966, Sen 1: passed money. the order in suit No. 2005 of 1965 direc\ing Mun.dhra to pay the- · . purchase price and ~~e deliv'etj of the shares from. the l;'eceiver. . The learned judge further directed ~t the' lien, if any, of Tuiner Morrison would shift to the purchase ·money to be paid to the receiver. This order, though passed in suit No. 2005 of 1965 in which Mundhra was' not a party, was communicated to him by the letter of the appellant dated January 11, 1967. Even before that, two letters had been sent on ·July 28 and July 29, 1966, bly the appellant's solicitors to Mundhra asking him to be ready with the. sum to take delivery of the $hares before the Court hearing appeal No. 286 of 1965. This was refused by Mundhra by his letter dated· August 2,.1966. In the reply Q(M~dhra.dated Januacy 25, 1967, to the letter dated January, 11, 19()7, from the appellant, he ~ised. the objection that the appellant was not in a position to give deli very of the shares aru:t that ·the order dated July 13, 1966, was not binding on him, as he was .-ot a party. to the suit in which the order was passed. As the ~ivcr had the share! in his possession, there ·was no pOint in the objection raiAed by .Mundhra that the appellant was not in a position to deliver the shares. In other P words, the ·receiver· had the shares ·in his .-possession, and as there was an order by the Court directing the ·n!<:eiver to deliver posses sion of the shares on payment of the purchase money ~bject to the· order of. the Coun bearing appeal No. 286 of 1965, there was no substance i~ the objection that the appellant was nQt in a opposition to deliver the shares. Mundhra did not ril.ise any objection on the· G score that the appell'ate court has not made an'V direction asking him to pay the purchase money es against the delivery of the shares by the receiver or that the receiver was not directed by that Court· to deliver the shares. The only Ie2itiniate inference from his con duct is that Mundhra was deliberately putting f~rd the plea that the appellant was not in a position to deliver the shares and that it was not readv and will~ to nerform its part of the contract only to avoid oo'ymenf of the _purchase money. Nor is there any sub stance m· the· contention· of COUDSel for Mund&ra that· beCause the appeiant obtained a stay of the order passed by Masud J •. giving:- E H - 1()6 SUPilEME COURT REPORTS (1972] 3 S.C.I. Mundln:a -a f~ght's ~e to pay the purchase money ·for tlkilag A delivery of ~e sh~es. the appel1ant was precludecUi'om c:Ontendilig that MUn.dhra C()mlnit~ · delault in the. payment of the amount. In other words, there is no. pOmt in the contention of coiiUel that since 'the appellant itself obtained· a stay of.the· order palled bY Masud .J. giving liberty to Mundhra to pay the purchue mo~ within a fortnight from the date of the order, the appellant ~ 1 vented Mundhra from performing his part of the obligation uDder the decree in suit No. 600 of 1961. When the appellant came to the Court with its application for rescission, there was already a rescission of the contract and the decree by.its letter dated Feb· ruary '11, 1967, stating that Mundhra had forfeited his right to purchase the 51 per cent shares in pursuance of the decree in suit No. 600 of' 1961, as he failed to fulfil his obligation in pursuance to the noti6e of the appellant on J anuiu-y 11, '1967. It only wanted · a declaration by adjudgment by the (;:ourt that it was justified in doing so. A court generally adjudicates upon the antecedent rights of the parties. When a Court adjudges rescission of a contract or a decree, it is only concerned with the question whether the person rescinding it was justified in doing so. The Coun does not create D any right which parties did not possess when it makes a declara- tion that a contract has been validly rescinded. Merely "because .. it is necessary for the Court to pass an order of rescission, when ·a· · controversy arises, it does not follow that it is the Court t'hat rescinds . the contract. The Court is only passing upon the validity of the rescission already made by the party. pany Ltd. and another v. Westville S~ipping Company Ltd.(1 their Lordships of the House of Lords said : In ·Abram Steamship Com- E c ), "Where' one party to a contract expresses by word or act in an Ujllequivocai manner that by reason of fraud or essential error of a material kind inducing him to enter int'o the contract he has resolved to rescind it~ an4 refuses to be bound by it, the expression of his electioJl, if justified by the facts, terminates the contract, puts the parties in status quo' ante ·and restores things, u between them, to the position in which they stood befo~ the con- tract was entered mto. It may be that the facts impO&e upon the partr desiring to resei~d the duty of making If so, he must discharge that restitution in mtegrum. duty before the rescissjon iq, in effect ·accomplished. But if the other party to the contract questions the right of the first to resci; nd, thus obliging the latter to bring. an action at law to enforce the right he has secured for him· self by his election, and he later gets a verdi~ it. is an entire mistake to suppose that it is this verdict which by itself terminates·· the contract and Testores the anteced.lllt (1) Law Report$. A))peal Cases, 1923, p. 773 at p. 781. F G H ,, A B c 1 ~GBllFOIID INVBSTMB.NT V. H. ~UNI>Hlt.A (Aftllhew, J.) 707 status. Tho verdict, is merely the ju4icial determination of the .fact th~t the expreSsiqn by the p!aintift of his eleC-: tion to ·rescind was justlfied, was e~ective, and put an end to the contra«t . . . . .. " · The rights of the parties became crystallized whon the appel- lant, by its letter dated February 11, :1967, re&cinded.the contraet and the decree based thereon and when Masud J. adjudged that the contract and the decree be rescinded. Mundhra cannot, th~refore, complain that he was prevented by appellant from pay ing the purchase money in pursuance of the order of Masud J. and resist the prayer for rescission. · · D ol these shares. There is no substance in the contention of counsel for Mu_ndhra that the appeUant was not in a position to give a good title to the sl¢'es because Tumer Morrison ha~ .a lion upon the shares. The questj~n whether Tumet. Morrison has a lien upon the shares has been finally decided by this Court in Appeal No. 1223 (N) of 1970 filed by Turner Morrison, holding 'that they have tno lien in respect . - · It was contended that if Mundhra committed default in pay ment of the purchase money, the remedy of the appellant was to execute the decree for specific performance as the decree was· a decree iD favour Of both the appellant amd Mundhra and that the - d~ ia fivour of the appellant was a decree for JllOney. T A decree for specific -perlormanct is a decree. i11 favour of both the plahitiff and tho defendant in the suit In Heramba Chandra Maitra v./YfJiish Chandra Sinha an4 others(1 ) Rankin CJ., speak ing for. ~e Court, said that a decree fOr specific performance ope rates ill favour of both plainti1r and defendant and tlra~ the decree . is capable of being executed by either [see .. also Bai Karimtlblbi v. A.btkrehman Sayad Banu(2)]. Counsel for Mundhra, therefore, ~that 'it was open to the appc. Uant to have executed ~e decree ana realiled the purchase money from Mundhra inatead of resort· iog to the romedy of rcacisaioo.. Order 21, rule 30 provides for execution of a deCree for.moncy •. That rule can posslb1y have no application tO the executi~ a dec~ for specific performance, G firstly for tho' reuon that a ~c mode for execution of a decree for specific pedorma.nce is provided by Order 21, Rule 32 and .. secondly, because no decree tor ni*Y ia puaed in a suit tor specific - performance. Order 21, Rule 32 providea as follows:- · · H . •• ( 1) :WJtere ~ party apwt wh~ a decree for the .specific performance of a contract,· or f~r reatftution of conjugal rights,« for an-injunction, has boon puaed, ~ has had an· opportunity of obeying the decree and has . (J) A.I.R. J~32 Calcutta .579. ~ A.l.R. 1923 ~~ 26. 708 SUPREME COURT REPORTS [1972] 3 S.C.'R.. wilfully failed to obey it, the decree may be enforced in the case of a decree for restitution of conjugal rights by the attachment of his property or, in the case of a decree for the specific . performance of a contract or for an injunction by his detentiQl) in the civil prison, or by the attachment of hk property or by both. ( 2) Where the party against whom a. decree for specific pedormance or for an injlinction has been passed is a corporation, the decree may be enforced by attachment of the property of the corporation or, with the leave of the Court, by the detention in the civil prison of the directors or other principal officers thereof, or by both attachment and dettntion. ( 3) Where any attachment under sub-rule ( 1) or sub-rule (2) has remained in force for one year, if the judgment-debtor has not obeyed the decree and decree-holder has applied to have the attached property sold, such property may be sol<;i; ·and out of the proceeds the court may award to the decree-holder such compen sation as it thinks fit, and shall pay the balance (if a,iY) to the judgment-debtor on hi~ application. ( 4) Where the judgment-debtor has obeyed . decree ·and paid an costs of executing the same which he.· is bound to pay, or where, at the end o[one year frOm the date of the attachmQnt, no application to have the property sold has been made, or if made has been tefused, the attachment shall cease. ( 5) Where a decree for the specific performance of a contract or for an injunction has not been obeyed, the Court may, in lieu of or in addition to all or any of the processes aforesaid, direCt that the act required to be done tnay be done so far as practicable by the decree-holder or some other person appointed b!y the Court, at the oost of the judgmont-debtor. and upon tpe act being done the expenses incui'red may be ascertaillled in such manner as. the Court may direct and may be recovered as if they were included in .the decree.'' c D E G The execution of a decree for specific performance can only be in· the manner prescn"'bbO by this rule sub-rule ( 1) of the rule says that if a decree for specific performance is . :not obeyed, the decree is~to be enforced by the detention of the party in default in H the civil prison or by attachment of his property or by both. The . detention in the' civil prison of the party who failed to obey the decree and the attacbmetnt of his property are simp1y the means , HUNGERFORD INVESTMENT v. H. MUNDHRA (Mathew, J.) 70'9 A B c to compel ~ , to obey tpe decree. That is made clear by sub rule (3) which says that if the judgment-debtor has failed to obey the decree when the attachment has remained in force for one year the property attached may be sold and out of the proceeds the decree-holder may be awarded such compensation· as the Court tb4J.ks fit. Sub--rule ( 5) which provides that the Court may direct tho act required to J>e done may be dQne by the decree-holder or some other person appointed by the court can only refer to an act other than an act of payment of money. We de not think that t)le appellant could have executed the decree aga~t Mundhra as a money decree and realised the purchase money from him. There fore, if Mundhra refused to pay the purchase money, there was no•hing which. prevented the appellant from applying for rescission of the decree. E D It was then rontended that the attachments of the decree in suit No. 600 of 1961 by the creditors of Mundhra prevented hiri1 from tendering the purchase money to the appellant and take deli very 0f the shares as the attachments prevented him from obtaining satisfaction of the decree by paying the purchase money and obtain ing delivery of ·the shares. In .other words, the contention was that because of the attachments Mundbra cowd not have paiti the.: purchase money to the appellant as that would have ·Deell in coo.tra vention of the orders of the. Court attaching the decree. We do not think that there is any substance in this cont~tion~ If the creditors of Mundhra attached the decree and he was prevtnted from tendering the money because of the attachment, he .has oply to blame himself. The only question with which the Court is eon~ cerned is whether Mundhra has disabled bimsel! from perfOI'IJ$g his part of the obligation under the decree. The inability to pay off the creditors was the proximate cause of the attacbm. Qilts and the responsibility for the same was that of Mundhra. 'The fact that the attachments prevented him from performing his part of the obliga- tion under ,the decree or obtaining satisfaction therem -'WOUld not make him any the less a defaulter, so far as the performance of his part of the obligati<¥1. un~ the decree is concerned. Nor is there any substance in the contention of counsel for Mundhra that the attacbmeiJ.t by Bank Hoffman of the 51 per cent shares under the order of the District Judge of Delhi made it im.possil:ie for the appellsm.t tp deliver the shares to Mundhra. as the attachment order directed that the 51 per cent shares should be proclg.ced before the Calcutta High Cpurt for delivery to Mundhra against -pa~ent of the consideration mentioned in the decree _in suit No. 600 of 1961. judgment H under appeal and order the rescission of the decree for specific perfonttance passed in suit No. 600 o_f 1961. We direct ~hri K. B. Bose, Barrister, Member, Bar Ltbrary (]ub, Calcutta High We, therefore, allow the appeal and set aside the G F 17-L1031Supcl/72 . 110 .SUPREME COURT REPORTS (1972)3 ~.C.R. '· Court; the receiver apointed in suit No. 2005 of 1965-.: ,and who waS appointed as receiver of the shares by the proceedings dated July 14, 1969, of Masud J. in suit No. 600 of 1961, .tO pr00uce the 2,295 shares .before this Court and give. custody of the same to the Registrar of this Court. The Registrar will hand them over to the appellant, · The Receiver has informed. this Court that the remuneration . the shares in this Court in pursuance of this judgment, We allow the appeal with costs. ORDER In modification of ·our earlier order dated March 9, 1972 we · ndw direct the Receiver to deliver the shares to the Registrar of the •Calcutta High Court on the original side within 10 days ·rrom this ·date. The Registrar .will handover the shares to Mr. B. M. Bagaria, a Solicitor of the Calcutta High Court; on behalf of Hungerford Investment Trust Ltd. · (The Receiver has informed this Court that the remuneration due to him has not yet been paid. The Receiver may move the ,~alcutta Hi'gh Court for nec.essary orders in this connection. iln. modification of our earlier order dated March 9, 19"72 "rtgllrdillg costs we direct that ill Civil Appeal No. 488 of 1971 the costs will be paid by the coo~tin~ defendants. V.P.S~ · B c D F , ·.