REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 10683-86 OF 2014

Kapilaben & Ors. ...Appellants  

Versus

Ashok Kumar Jayantilal Sheth Through POA Gopalbhai Madhusudan Patel & Ors. …Respondents

J U D G M E N T

MOHAN M. SHANTANAGOUDAR, J.

1. These appeals arises out of judgement of the High Court of

Gujarat at Ahmedabad dated 31.7.2014, allowing the appeals of

the respective Respondent Nos.  1 in the four Civil  Appeal Nos.

10683-86 of  2014 before us (hereinafter  ‘Respondent  Nos.  1’),

against  judgement  and  order  of  the  Additional  District  Judge,

1

Vadodara  dated  2.4.2013  and  order  dated  30.12.2011  of  the

Additional Senior Civil Judge, Vadodara; and decreeing the suits

SCS Nos. 657-660/1988 filed by Respondent Nos. 1 for specific

performance against the Appellants herein.

I. Background Facts

2. This case concerns four suits for specific performance filed

by  the  Respondent  Nos.  1/Plaintiffs  against  the

Appellants/Defendants  Nos.  1-5.  One  Naranbhai  Ramdas  Patel

(Defendant  No.  1,  now  deceased)  was  the  original  owner  of

property bearing Survey No. 354/1, admeasuring 1 acre and 31

gunthas in Village Manjalpur of Vadodara district (hereinafter ‘suit

property’).  He,  along  with  Defendants  Nos.  2-5  (relatives  of

Defendant  No.  1)  executed agreement  to  sell  dated 11.3.1986

(‘1986 agreement’)  in respect of the suit  property in favour of

Respondent Nos. 3-11/Defendants            Nos. 6-9 (hereinafter

‘original vendees’),  for which the original vendees paid earnest

money of Rs. 1,54,251. The suit property was included in Town

Planning Scheme No. 19 of the Vadodara Municipal Corporation

and possession of the suit property was to be given to the original

2

vendees once the aforesaid Scheme was finalized. A registered

sale deed in respect of the suit property was to be executed upon

receipt of the remaining consideration from the original vendees,

the deadline for which was within three months of finalization of

the Town Planning Scheme.  

The case of Respondent Nos. 1 is that the original vendees

thereafter  executed  four  agreements  to  sell  dated  14.9.1987

(‘1987 agreements’)  in respect of four different portions of the

suit  property,  assigning  the  former’s  rights  under  the  1986

agreement in the latter’s favour, and that earnest money of Rs.

5000/- was paid under each agreement. Notably, the Appellants

were not parties to the 1987 agreements.  

Under  the  1987  agreements,  it  was  purportedly  open  to

Respondent  Nos.  1  to  make preparations  for  construction  of  a

housing scheme over the suit property and issue advertisement

for the same. Hence they claim that consequently, possession of

the suit property was given to them, that a  Bhoomi Pujan was

conducted  for  laying  foundation  stone  on  the  land  and  the

members of the housing scheme were also registered. Further,

3

that  they  also  obtained  the  layout  plan  and  construction

permission  for  the  housing  scheme  from  Vadodara  Municipal

Corporation at their own cost, and the deceased original owner

Mr. Naranbhai Patel had put his signature on the layout plan.  

Subsequently,  dispute arose between the parties,  and the

original vendees filed suit SCS No. 194/1988 on 4.4.1988 before

the Learned Civil Judge (Senior Division) at Vadodara (hereinafter

‘trial court’), seeking specific performance of the 1986 agreement

against the Appellants. They claimed that they had served notice

to the Appellants on 11.3.1988 seeking execution of sale deed in

their favour, but the latter had given evasive reply to the same;

that they were deliberately avoiding execution of sale deed so as

to take advantage of increase in real estate prices. Per contra, the

Appellants claimed that they had on 25.3.1988, by way of reply to

the original vendees’ legal notice, cancelled the 1986 agreement

as the original vendees had not paid the remaining consideration

as required.

Respondent Nos. 1 were not party to SCS No. 194/1988; and

no  averment  was  made  in  the  said  suit  regarding  the  1987

4

agreements. Instead, on 21.11.88, Respondent Nos. 1 filed four

separate suits SCS Nos. 657-660/1988 against the Appellants and

the original  vendees seeking specific performance of  the  1987

agreements. Respondent Nos. 1 alleged that the Appellants and

the original vendees were conniving with each other to deny their

rights under the 1987 agreements, so as to sell the land to a third

party in view of the increasing price of real estate in Vadodara.  

The Appellants in their written statements to SCS Nos. 657-

660/1988 denied having any dealings with Respondent Nos. 1 and

also stated that the original vendees had never informed them

about the 1987 agreements. They averred that since the original

vendees had never become the legal owners of the suit property,

they did not have any right or authority to enter into any kind of

transaction  qua  the land with Respondent Nos. 1; and that the

plaints were concocted to usurp the land.  

Both  sets  of  suits,  SCS  No.  194/1988  and  SCS  Nos.  657-

660/1988, remained pending for a number of years. During that

period, notably,  the Appellants and the original  vendees acting

together  executed  a  Power-of-Attorney  dated  11.11.2001  in

5

favour of one Dhananjay Vallabhbhai Patel. It was stated in the

Power-of-Attorney that  the Appellants and the original  vendees

are relinquishing their rights in the suit property to Mr. Dhananjay

Patel  for  the purpose of  executing sale  deed in  favour  of  one

Kantilal  Ambalal  Patel,  who is  the uncle of the said Dhananjay

Patel.  

A. Proceedings in SCS No. 194/1988 (Original vendees’ suit)

3. The original  vendees filed withdrawal  pursis  on 26.7.2002

seeking  to  unconditionally  withdraw  SCS  No.  194/1988  on  the

ground that the 1986 agreement was fraudulently registered; that

they were not aware of the identity of the true owners of the suit

property at the time of the 1986 agreement as it was executed

through a broker, that the original owners of the suit property had

not  signed  the  agreement,  nor  had  they  received  any

consideration;  and  the  1986  agreement  was  fraudulently

registered, hence no dispute could be raised regarding the suit

property.  On  the  same  day,  Respondent  Nos.  1  sought

impleadment as co-plaintiffs in SCS No. 194/1988.  

6

The trial  court  by way of  common order  dated 22.9.2002

rejected the original vendees’ withdrawal application and allowed

the  impleadment  applications  of  Respondent  Nos.  1.  The  High

Court in revision reversed the trial court’s order, though without

going into the merits of the claim made by Respondent Nos. 1.

The Court held that the original vendees had an absolute right to

withdraw  their  suit  unconditionally  irrespective  of  their

motivations for the same. Further, that it was open to Respondent

Nos. 1 to raise all  available contentions in their separate suits,

including admissions, if any, made by the original vendees in their

suit  SCS  No.  194/1988.  It  was  noted  that  Respondent  Nos.  1

cannot  be  permitted  to  substitute  the  original  vendees  as

plaintiffs, as otherwise substantial amendment would be required

to the original vendees’ plaint. The special leave petitions filed by

Respondent  Nos.  1  against  the  High  Court  judgement  were

dismissed by this Court by order dated 16.11.2004 in SLP (Civil)

Nos. 22664-65/2004.  

Respondent  Nos.  1  subsequently  made application in  SCS

No. 658 of 2008, for revival of SCS No. 194/1988, contending that

7

the original vendees had been misled into withdrawing the latter

suit; however the application was dismissed by the trial court and

the  High  Court  by  orders  dated  24.1.2008  and  25.3.2008

respectively. Hence the withdrawal of the original vendees’ suit

has attained finality.  

B. Proceedings in SCS Nos. 657-660/1988 (Present suit)

4. It is relevant to note that though the original plaints in SCS

Nos. 657-660/1988 were seeking specific performance only of the

1987 agreements,  Respondent Nos.  1 amended their  plaints in

2005 to seek a declaration that the 1986 agreement is  still  in

force and that the Appellants were bound to execute the 1986

agreement on the basis of the assignment made in their favour.  

The trial court by common order dated 30.12.2011 dismissed

all four suits.  It rejected Respondent Nos.1/Plaintiffs’ contention

that  the  original  vendees  had  withdrawn  their  suit  SCS  No.

194/1988 in collusion with the Appellants herein. This was based

on the reasoning that the High Court and this Court had, in the

8

earlier  proceedings,  sanctioned the unconditional  withdrawal  of

SCS  No.  194/1988  and  not  made  any  finding  of  judicial

impropriety or fraud.  

The trial court further found that in light of revocation of the

1986 agreement  by  the  Appellants  and withdrawal  of  SCS No.

194/1988 by the original vendees, it was not open to the Plaintiffs

to re-agitate for specific performance of the said agreement. That

in any case, even if the 1986 agreement was assumed to be in

force,  the  original  vendees  could  not  have  assigned  their

outstanding obligation to pay the remaining consideration without

the written consent of the original  owner i.e.,  Defendant No. 1

Naranbhai. Since the 1987 agreements and the 1986 agreement

were not ad idem, and new conditions were laid down in the 1987

agreements, such consent was indispensable.  

That neither of the Appellants had given any such consent,

either verbally or by conduct; nor was there any evidence that the

original  vendees  had  paid  the  remaining  consideration  to  the

Appellants,  such  that  the  former’s  rights  under  the  1986

agreement  had  fortified  and  consequently  passed  on  to  the

9

Plaintiffs  under  the  1987  agreements.  Therefore  the  1987

agreements  were  void,  illegal  and unenforceable.  Further,  that

the  1987  agreements  were  also  vague  and  unenforceable

inasmuch as the suit property was not specifically defined therein.

The trial  court additionally held that the Plaintiffs had not

taken any steps, such as depositing the remaining consideration

owed by the original vendees, or paying betterment tax as per

the terms of the 1987 agreements, to show that they themselves

were ready and willing to perform the contracts. Hence this was

not a fit case to grant either specific performance or damages,

though Respondent  Nos.  1  were  held  entitled  to  return  of  the

earnest money paid by them with interest.

The  Learned  Additional  District  Judge,  Vadodara  by

judgement dated 2.04.2013 affirmed the trial court’s findings. It

was re-emphasized that a party to a contract cannot assign their

obligations thereunder without the other party’s consent. There

was nothing on record to show that the Appellants had given such

consent. In any case, since the original vendees had never shown

their readiness and willingness to pay the balance consideration

10

due by  them,  no  right  of  specific  performance had accrued in

their  favour.  Further,  that  the  original  vendees  had  anyway

waived their rights by withdrawing their suit in SCS No. 194/1988.

Hence the question of assignment of such a right to Respondent

Nos.  1,  such that they could claim specific performance of the

1986  agreement  as  representatives-in-interest  of  the  original

vendees  under  Section  15(b)  of  the  Specific  Relief  Act,  1963

(‘Specific Relief Act’) did not arise.  

However, the High Court in the impugned judgement found

that there was a definite linkage between the 1986 agreement

and the 1987 agreements such that there was a valid assignment

of  rights  in  favour  of  Respondent  Nos.1,  which  made  them

‘representatives-in-interest’  of  the  original  vendees  for  the

purpose of Section 15(b) of the Specific Relief Act. The High Court

reasoned  that  since  all  the  material  rights  under  the  1986

agreement  were  assigned  under  the  1987  agreements,

supplementary conditions specified in the latter did not change

the nature of the basic contract.  

11

Further, that reading Sections 40 and 54 of the Transfer of

Property Act, 1882 (‘Transfer of Property Act’) and Section 15(b)

of the Specific Relief Act together, the ‘interest’ assignable under

Section 15(b) need not be an interest in the property or a charge

created in the property. A contractual interest in the form of an

obligation  annexed  to  ownership  of  the  property  may  also  be

assignable.  It  was  discernible  from the  facts  and  evidence  on

record  that  the  Appellants  had given  implied consent  for  such

assignment.  Mr.  Naranbhai  Patel’s  signature  on  planning

permissions  and  his  presence  at  the  Bhoomi  Pujan ceremony

were taken as proof that the original owners had consented to the

involvement  of  Respondent    Nos.  1  in  developing  a  housing

scheme on the suit property.   Therefore, it was found that the

1986 agreement remained alive, and the rights derived therefrom

in favour of the original vendees were validly assigned under the

1987 agreements.

Additionally, since the High Court and this Court had clarified

while  sanctioning  withdrawal  of  SCS  No.  194/1988  that  such

withdrawal would not preclude Respondent Nos. 1 from pursuing

12

their  independent  remedies,  the  withdrawal  of  the  original

vendees’ suit could not prejudice the rights of Respondent Nos. 1

to specific performance. That actual tendering of money was not

necessary  to  evince  readiness  and  willingness  to  perform  the

contract as required under Section 16(c) of the Specific Relief Act,

and the specific averments made in the pleadings by Respondent

Nos. 1 would suffice.  

It  may be relevant  to  note  at  this  juncture  that  the High

Court by interim order dated 27.6.2013 had directed Respondent

Nos. 1 to deposit an amount equal to five times the amount of

original  consideration  under  the  1987  agreements,  and

Respondent Nos. 1 have submitted that they are ready and willing

to forfeit the entire amount deposited in respect of the relief of

specific  performance,  so  as  to  balance  equities  between  the

parties.  

We further note from the order sheets maintained by this

Court that the parties have been directed to maintain status quo

during the pendency of the appeal and no steps have been taken

for the execution of the impugned judgement.  

13

II. Issues and Submissions made by the Parties

5. Therefore, upon a perusal of the entire record, the following

issues arise for our consideration:

Firstly, whether there was a valid assignment of rights by the

original vendees in favour of Respondent Nos. 1 under the 1987

agreements?

Secondly, whether the right of Respondent Nos. 1 to seek

specific performance survives subsequent to the cancellation of

the 1986 agreement by the Appellants and withdrawal of suit in

SCS No. 194/1988 by the original vendees?

Thirdly, whether relief may be granted to Respondent Nos. 1,

and if so, of what nature?

6. Learned senior counsel for the Appellants, Mr. Ranjit Kumar

argued  that  there  was  no  privity  of  contract  between  the

Appellants  and  Respondents  Nos.  1  in  the  respective  appeals.

That  the  1987  agreements  were  contingent  contracts  under

Section 31 of the Indian Contract Act, 1872 (‘Contract Act’), as the

rights therein could only be enforced upon the completion of the

1986  agreement,  and  the  interest  created  under  the  1987

14

agreements was also a ‘contingent interest’ under Section 21 of

the  Transfer  of  Property  Act.  Since  the  1986  agreement  was

cancelled, Respondent Nos. 1 could not seek specific performance

of the 1987 agreements.  

Further,  that  the  purported  ‘assignment’  under  the  1987

agreements  practically  amounted  to  a  novation  of  the  1986

agreement, and the Appellants had not accorded any consent for

such an assignment. Even if such an assignment had taken place,

there  was  no  evidence  to  show  that  Respondent  Nos.  1  were

ready  and  willing  to  perform  their  contractual  obligations.

Respondent  Nos. 1 had never communicated their willingness to

complete their contractual obligations under the 1986 agreement

to the Appellants.  

Per contra, learned senior counsel for Respondent No. 1, Mr.

C.U. Singh argued that the Appellants i.e. the landowners were

colluding  with  the  original  vendees  to  avoid  sale  of  the  suit

property, as evidenced by the fact that the original vendees had

not contested the suit at any point of time. He brought to this

Court’s notice that there could not have been a termination of the

15

1986  agreement  in  1988  given  that  in  the  Power-of-Attorney

dated 11.11.2001 (supra) executed by Defendant Nos. 1-9 (the

Appellants and the original vendees) in favour of Mr. Dhananjay

Patel, it is stated that the original vendees have acquired rights in

the suit property under the 1986 agreement. It is not open to the

Appellants to accept the existence of the 1986 agreement in the

Power-of-Attorney and reject it for the purpose of these suits.  

He  further  relied  upon  this  Court’s  decisions  in  Shyam

Singh v. Daryao Singh (Dead) By LRs. and Others, (2003) 12

SCC  160,  Ram  Baran  Prasad  v. Ram  Mohit  Hazra  and

Others, AIR 1967 SC 744 and Habiba Khatoon v. Ubaidul Huq

and  others,  (1997)  7  SCC  452  to  argue  that  no  implied

prohibition  can  be  read  into  the  1986  agreement  against

assignability of the interest therein. The requirement of consent

of  the  other  party  for  assignment  under  Section  15(b)  of  the

Specific Relief Act is only applicable in cases where the obligation

is of a personal nature or where there is an express bar in the

contract prohibiting such assignment of interest. Further, that in

any  case,  the  original  owner  Naranbhai  Patel’s  conduct  in

16

arranging  for  development  permissions  and  consenting  to

publication of advertisement regarding development of housing

scheme in the suit property shows that there was implied consent

for assignment of rights under the 1986 agreement in favour of

Respondent Nos. 1.  

III.  Validity  of  Assignment  of  Rights  under  1987 Agreements.

A. General principles governing assignability of contracts

7. Upon considering the facts and circumstances of the present

case, it is evident that there is no privity of contract between the

Appellants and Respondent Nos. 1.  Respondent Nos. 1 were not

party to the 1986 agreement. Vice versa, the Appellants were not

party to the 1987 agreements, though whether or not they had

knowledge of  the same is  disputed.  Hence Respondent  Nos.  1

cannot seek specific performance of the 1986 agreement, or for

that matter, the 1987 agreements, against the Appellants, except

by suing as ‘representatives-in-interest’  of  the original  vendees

under  Section  15(b)  of  the  Specific  Relief  Act.  Section  15(b)

provides that:

17

“15.  Who  may  obtain  specific  performance.— Except  as  otherwise  provided  by  this  Chapter,  the specific performance of a contract may be obtained by —

…(b) the representative in interest or the principal, of any  party  thereto:  Provided  that  where  the  learning, skill, solvency or any personal quality of such party is a material  ingredient  in  the  contract,  or  where  the contract  provides  that  his  interest  shall  not  be assigned, his representative in interest or his principal shall  not  be  entitled  to  specific  performance  of  the contract, unless such party has already performed his part of the contract, or the performance thereof by his representative  in  interest,  or  his  principal,  has  been accepted by the other party…”

It  is  well-settled  that  the  term  ‘representative-in-interest’

includes  the  assignee  of  a  contractual  interest.  Though  the

provisions of the Contract Act do not particularly deal with the

assignability of contracts, this Court has opined time and again

that a party to a contract cannot assign their obligations/liabilities

without the consent of the other party. A Constitution Bench of

this Court in Khardah Company Ltd v. Raymon & Co (India)

Private Ltd., AIR 1962 SC 1810 has laid out  this  principle as

follows:

“…An assignment of a contract might result by transfer either of the rights or of the obligations thereunder. But

18

there  is  a  well-recognised  distinction  between  these two classes of assignments. As a rule obligations under a contract cannot be assigned except with the consent of the promisee, and when such consent is given, it is really a novation resulting in substitution of liabilities. On  the  other  hand,  rights  under  a  contract  are assignable unless the contract is personal in its nature or the rights are incapable of assignment either under the law or under an agreement between the parties.”  

(emphasis supplied)

In  Khardah  Company,  the  Appellant  jute  manufacturers

were entitled to receive price for the jute from the buyer/dealer of

jute only upon delivery of certain shipping documents. Question

arose as to whether such an obligation coupled with a benefit was

assignable.  This  Court  held,  based  on  the  above-mentioned

principle, that the terms of the contract strongly implied that the

rights thereunder are non-transferable.  

Similarly,  in  Indu Kakkar  v. Haryana  State  Industrial

Development Corporation Ltd. and Another,  (1999) 2 SCC

37, the Respondent Corporation allotted certain land subject to

the condition that the allottee shall  complete construction of a

building unit on the plot within a period of two years. Upon the

allottee’s  failure  to  comply  with  the  said  condition,  the

Respondent  resumed  the  land.  The  allottee  filed  a  civil  suit

19

challenging the resumption order, during the pendency of which

he assigned his rights in the plot to the Appellant. The issue was

whether such an assignee could challenge the resumption order.

A two-judge Bench of this Court held, in reliance upon Khardah

Company (supra), that:

“19.…Answer  of  the said  question  depends  upon the terms of allotment. Assignment by act of parties may cause  assignment  of  rights  or  of  liabilities  under  a contract. As a rule a party to a contract cannot transfer his liabilities under the contract without consent of the other party. This rule applies both at the Common Law and  in  Equity  (vide  para  337  of  Halsbury’s  Laws  of England,  Fourth  Edition,  Part  9).  Where  a  contract involves mutual rights and obligations an assignee of a right cannot enforce that right without fulfilling the co- relative obligations.”

(emphasis supplied)

8. Even  in  a  case  of  assignment  of  rights  simplicitor,  such

assignment  would necessarily  require the consent of  the other

party  to  the  contract  if  it  is  of  a  ‘personal  nature’.  This  is

elucidated  by  learned  authors  Pollock  and  Mulla in  their

commentary on  The Indian Contract and Specific Relief Acts (R.

Yashod Vardhan,  and Chitra  Narayan eds.,  15th edn.,  Vol.  I)  at

page 730:

20

“A  contract  which  is  such  that  the  promisor  must perform  it  in  person,  viz.  involving  personal considerations or personal  skill  or  qualifications (such as his credit), are by their nature not assignable. The benefit of contract is assignable in ‘cases where it can make  no  difference  to  the  person  on  whom  the obligation  lies  to  which  of  two  persons  he  is  to discharge it.’ The contractual rights for the payment of money  or  to  building  work,  for  e.g.,  do  not  involve personal considerations.” (emphasis supplied)

9. It is true that Section 15(b) of the Specific Relief Act does not

specifically state that ‘obligations’ may not be assigned except

with the consent of the other party. However a reading of Section

15(b) shows that it is nothing but a statutory formulation of the

ratio  laid  down  in  the  above-mentioned  precedents.  The  rule

stated in Section 15(b) is that any interest in a contract can be

specifically enforced by the assignee thereof, except where the

‘personal  quality’  of  the  party  is  a  material  ingredient  in  the

contract;  or  where  the  contract,  expressly  or  by  necessary

implication,  prohibits  the  beneficiary  from  transferring  their

contractual interest to third parties. Hence Section 15(b) does not

contradict  the general  law on assignability  of  contracts  as  laid

down by this Court, but rather clarifies that the same conditions

21

will have to be satisfied if an assignee seeks to secure specific

performance of the assigned contract.   

Therefore, for example, a contract for a singing performance

or a painting may not be assignable as it involves a personal skill

and  even  if  it  is  assigned,  the  assignee  cannot  seek  specific

performance in respect of such a contract.  Whereas it  may be

said that general contracts for payment of money or building work

do  not  involve  any  personal  considerations,  as  it  makes  no

difference as to who discharges the obligation to pay or perform a

certain act under the contract. Hence the assignees of parties to

such contracts may seek specific performance.

10. It  is  important  to  note  that  in  the  modern  context  where

parties frequently enter into complex commercial transactions, it

is  perhaps not  so convenient  to  pigeonhole contracts  as being

either  ‘general’  or  of  ‘personal  nature’  or  as  involving  the

assignment of purely ‘rights’ or ‘obligations’. It is possible that a

contract may involve a bundle of mutual rights and obligations

which are intertwined with each other. However, as this Court has

held  in  Indu  Kakkar (supra),  the  same  rule  as  laid  down  in

22

Khardah Company (supra) and as stated in Section 15(b) of the

Specific  Relief  Act,  may  be  applied  to  such  contracts  as  well.

Where the conferment of a right or benefit is contingent upon, or

coupled with, the discharge of a burden or liability, such right or

benefit cannot be transferred without the consent of the person to

whom the co-extensive burden or liability is owed.  

It  further  has  to  be  seen  whether  conferment  of  benefits

under a contract is based upon the specific assurance that the co-

extensive obligations will be performed only by the parties to the

contract  and  no  other  persons.  It  would  be  inequitable  for  a

promisor to contract  out his responsibility to a stranger if  it  is

apparent  that  the  promisee  would  not  have  accepted

performance of the contract had it been offered by a third party.

This is especially important in business relationships where the

pre-existing goodwill between parties is often a significant factor

influencing  their  decision  to  contract  with  each  other.  This

principle is already enshrined in Section 40 of the Contract Act:

“40. Person by whom promise is to be performed. —If it appears from the nature of the case that it was the intention  of  the  parties  to  any contract  that  any promise  contained  in  it  should  be  performed  by  the

23

promisor himself, such promise must be performed by the  promisor.  In  other  cases,  the  promisor  or  his representative  may  employ  a  competent  person  to perform it.”

It is clear from the above that the promisor ‘may employ a

competent person’, or assign the contract to a third party as the

case may be, to perform the promise  only if the parties did not

intend that the promisor himself must perform it. Hence in a case

where  the  contract  is  of  personal  nature,  the  promisor  must

necessarily  show  that  the  promisee  was  agreeable  to

performance of the contract by a third person/assignee, so as to

claim exemption from the condition specified in Section 40 of the

Contract  Act.  If  the  promisee’s  consent  is  not  obtained,  the

assignee cannot seek specific performance of the contract.  

B. Application of the above principles to the present case

11. Hence, in light of the above discussion, whether or not an

assignee can seek specific performance would depend upon the

construction of the contract in each case. The Court would have

to  determine  the  nature  of  interest  sought  to  be  transferred,

whether such interest was meant to be enforceable only between

24

the parties to the contract and whether the contract expressly or

by necessary implication bars assignment of such interest.  

In the present case, the 1986 agreement provided that the

Appellants  shall  execute  sale  deed  in  favour  of  the  original

vendees  or  ‘name  proposed  by  the  vendee’  subject  to the

assurance that the latter would pay the remaining consideration

and  betterment  tax  within  the  stipulated  time,  and  that  the

former would obtain the necessary permissions for construction

on the suit property.  

We are of the opinion that the term ‘name proposed by the

vendee’  in  the  1986  agreement  refers  to  a  nominee  to  be

proposed at  the time of execution of the sale deed and not a

subsequent  assignee.  At  the  same  time,  it  is  true  the  1986

agreement  does  not  contain  any  express  bar  against

assignability.  The  question  which  arises  then  is  whether  the

purported assignment in favour of Respondent Nos. 1 under the

1987 agreements is legally valid.  

The  decisions  in  Shyam Singh (supra)  and  Ram Baran

Prasad  (supra) relied upon by Respondent Nos. 1 will not help

25

their  case as  this  Court  found  on the particular  facts of  those

cases  that  the  terms  of  the  contracts  in  those  cases  did  not

implicitly bar assignment. These decisions cannot be taken to lay

down a blanket rule that in every case where there is no express

bar against assignability stipulated in the contract, assignment of

the  interest  therein  should  be  upheld  without  looking  at  the

context in which the parties contracted with each other. It has to

be seen whether the terms of the contract, and the circumstances

in which the contract was entered into, lead to an inference that

the  parties  did  not  intend  to  make  their  interest  therein

assignable. This is the principle of law as authoritatively stated

by the Constitution Bench in Khardah Company (supra):

“…We agree that when a contract has been reduced to writing  we  must  look  only  to  that  writing  for ascertaining the terms of the agreement between the parties but it does not follow from this that it is only what is set out expressly and in so many words in the document  that  can constitute  a term of  the contract between the parties. If on a reading of the document as a  whole,  it  can  fairly  be  deduced  from  the  words actually used therein that the parties had agreed on a particular term, there is nothing in law which prevents them from setting up that term. The terms of a contract can  be  expressed  or  implied  from  what  has  been expressed. It is in the ultimate analysis a question of construction  of  the  contract.  And  again  it  is  well

26

established that  in  construing a  contract  it  would  be legitimate  to  take  into  account  surrounding circumstances.  Therefore  on  the  question  whether there was an agreement between the parties that the contract was to be non-transferable, the absence of a specific  clause  forbidding  transfer  is  not  conclusive. What has to be seen is whether it could be held on a reasonable interpretation of the contract, aided by such considerations  as  can  legitimately  be  taken  into account that the agreement of the parties was that it was not to be transferred. When once a conclusion is reached that such was the understanding of the parties, there is nothing in law which prevents effect from being given to it.”

(emphasis supplied)

12. Section  40  of  the  Transfer  of  Property  Act  states  that  a

contract for sale of immovable property is a contract that “a sale

shall  take place on  terms settled between the parties”.  It  is  a

settled position that such a contract does not by itself create any

interest in or charge on the property. The buyer only obtains a

right  to  get  the  sale  deed  executed,  upon  fulfilment  of  the

applicable terms and conditions as consented to by all the parties.

Hence the 1986 agreement, being an agreement to sell the suit

property,  is a clear case of a contract combining mutual rights

and obligations. The original vendees were to obtain the right to

27

get the sale deed executed in respect of the suit property upon

fulfilment of the conditions specified in the 1986 agreement.  

The 1987 agreements purport to assign the aforesaid rights

and obligations of the original vendees in favour of Respondent

Nos. 1/ Plaintiffs. Upon comparison of the 1986 agreement and

the 1987 agreements, we find that the 1987 agreements amount

to  nothing  but  a  substitution  of  liabilities  wherein  Respondent

Nos.  1  have  assumed the  same obligations  which  the  original

vendees  were  supposed  to  have  performed  under  the  1986

agreements.  This  includes  not  only  the  obligation  to  pay

betterment tax but also the obligation to reimburse the cost of

acquiring  planning  permissions  and  to  get  the  suit  property

levelled for the purpose of construction.  

Additionally,  the  1987  agreements  also  provide  that  the

plaintiffs  can  prepare  the  scheme  for  construction  of  housing

society  on  the  suit  property,  get  the  members  of  the  society

registered  and  execute  agreements  with  them,  and  publish

advertisement boards regarding the scheme. Hence this is not a

case  of  assignment  of  agreement  for  sale  simplicitor,  but

28

assignment of what is  akin to  a development agreement for  a

housing scheme on the suit property. A contract of this nature is

ordinarily  based  upon  certain  personal  understanding  between

the parties regarding the course of business to be undertaken on

the suit property.  

It is not disputed that the original vendees had not fulfilled

their obligations under the 1986 agreement prior to the purported

‘assignment’ under the 1987 agreements.  Hence they had not

‘performed their part of the contract’ as required under Section

15(b) of the Specific Relief Act. Applying the law as stated above,

the assignment of  such a contract  cannot be enforced without

proving that it was with the knowledge and consent of the original

owners/Appellants.  

13. It  is  further  relevant  to  note  that  under  the  1987

agreements, payment of the remaining consideration amount is

to  be  made  to  the  original  vendees,  not  the  Appellants,  and

possession  of  the  suit  property  is  to  be  handed  over  by  the

original vendees. Even the consideration to be paid was twice the

rate as specified in the 1986 agreement. The 1987 agreements

29

nowhere provide for discharge of the original vendees’ pending

obligations towards the Appellants by Respondent Nos. 1. Hence

we are inclined to accept the Appellants’ argument that the 1987

agreements  were  not  a  case  of  assignment  but  appear  to  be

independent agreements for sale which were contingent on the

execution  of  the  1986  agreement.  Therefore,  the  only  way

Respondent Nos.  1  can seek specific performance of  the 1986

agreement against the Appellants is by proving the Appellants’

knowledge of  and consent  to  transfer  of  the  original  vendees’

rights and liabilities to Respondent Nos. 1.

14. It is true that Section 15(b) does not stipulate in what form

the promisee’s ‘acceptance’ of performance by a representative-

in-interest of the promisor should be communicated. It  may be

either  through  express  written  consent,  or  implied  from  the

actions of the promisee; though as a matter of caution, the former

mode  of  acceptance  would  inevitably  have  higher  evidentiary

value.  However in  the present case,  as the trial  court and the

Learned District Judge have rightly appreciated on facts, we do

not find that the Appellants have either by words or by conduct,

30

consented to the assignment of the 1986 agreement in favour of

Respondent Nos. 1.  

The mere fact that the original owner Mr. Naranbhai Patel

signed  the  development  permissions  for  the  suit  property  and

may have been present at the  Bhoomi Pujan does not indicate

that  he consented to  assignment  of  the  1986 agreement.  The

1986 agreement stipulated that the original owners would give

their  signatures  for  obtaining  necessary  permissions  for  the

proposed development on the suit property. Hence, as the trial

court has rightly noted, Mr. Naranbhai Patel was only carrying out

his  contractual  obligation  as  he  had  promised  to  the  original

vendees. This does not indicate that he was under the impression

that the said permissions were now to be obtained for the benefit

of Respondent Nos. 1.  

It  is  pertinent  to  note  that  Respondent  Nos.  1  conceded

before  the  trial  court  that  the  Appellants  had  given  their

signatures on the layout plan for the housing scheme on the suit

property to the original vendees, not to Respondent Nos. 1. Even

the advertisement  regarding the ‘Unnati  Park’  housing scheme

31

nowhere  indicates  that  the  Appellants/original  owners  were

developing the project on the suit  property in partnership with

Respondent Nos. 1.  

Thus  we  conclude  that  there  was  no  valid  assignment  of

rights flowing from the 1986 agreement to Respondent Nos. 1,

and  they  cannot  seek  specific  performance  against  the

Appellants.  

IV.  Whether  the  Plaintiffs  are  entitled  to  Specific Performance?

15. Having found that Respondent Nos. 1 cannot seek specific

performance  of  the  1986  agreement,  it  may  be  considered

whether they can seek any remedy qua the 1987 agreements as

against the Appellants and the original vendees. Since there is no

privity of contract between the Appellants and Respondent Nos. 1

there  no  longer  remains  any  question  of  granting  specific

performance as against the former.  

16. Further, as noted above, the terms of the 1987 agreements

indicate  that  they  are  contingent  contracts,  as  defined  under

Section 31 of the Contract Act:

32

“31. “Contingent contract” defined.—A “contingent contract” is a contract to do or not to do something, if some event, collateral to such contract, does or does not happen.”

Sections 32 and 35 further state that:

“32. Enforcement of contracts contingent on an event happening.—Contingent contracts to do or not to do anything if  an uncertain future event happens, cannot be enforced by law unless and until that event has happened.”

“35.  When  contracts  become  void,  which  are contingent  on  happening  of  specified  event within fixed time.—Contingent contracts to do or not to do anything, if a specified uncertain event happens within a fixed time, become void if, at the expiration of the  time  fixed,  such  event  has  not  happened,  or  if, before the time fixed, such event becomes impossible.”

The  1987  agreements  are  clearly  contingent  contracts

inasmuch as they could only be enforced had the original vendees

obtained  the  right  to  get  the  sale  deed  executed,  and  taken

possession  of  the  suit  property  as  per  the  terms  of  the  1986

agreement.  Once  the  1986  agreement  was  cancelled  by  the

Appellants,  the  original  vendees’  rights  thereunder  ceased  to

exist.

33

17. Respondent Nos. 1 contend that the Power-of-Attorney dated

11.11.2001 (supra) in favour of Mr. Dhananjay Patel shows that

the  1986  agreement  was  not  cancelled  and  that  the  original

vendees  continued  to  retain  their  right  to  get  the  sale  deed

executed  in  their  favour.  It  was  brought  to  our  notice  by  the

Appellants that the aforesaid Power-of-Attorney was subsequently

cancelled by the original vendees on 6.6.2003, on the ground that

Mr. Dhananjay Patel had obtained the Power-of-Attorney through

misrepresentation.  However,  it  is  important  to  note  that  the

original vendees have stated in the aforesaid cancellation notice

that they have ‘joint ownership’ of the suit property. Therefore we

find  some  merit  in  the  argument  that  the  Appellants  and  the

original vendees are acting in collusion.  

Nevertheless,  regardless  of  what  may  be  stated  in  the

Power-of-Attorney, it has to be seen whether the original vendees

have legally acquired any rights in the suit property. Respondent

Nos.  1  have  admitted  in  their  plaints  that  the  Town  Planning

Scheme was finalized prior  to  the 1986 agreement.  Hence the

deadline  stipulated  under  the  1986  agreement  for  payment  of

34

remaining consideration by the original vendees, i.e., within three

months of finalization of the Scheme, has long since lapsed. Since

the  original  vendees  never  paid  the  remaining  consideration

within  the  time  specified  in  the  1986  agreement,  their  rights

thereunder never fructified.

Even  assuming  that  the  original  vendees  acquired  some

interest in the suit  property,  the subsequent withdrawal  of the

suit  SCS No.  194/1988 shows that  the original  vendees do not

intend to enforce the 1986 agreement. The trial court has found

that though the suit property  de jure vested with the concerned

government authority under the Town Planning Scheme, the  de

facto possession of the property remains with the Appellants and

the  original  vendees  have  not  taken  possession  thereof.

Furthermore, both the trial court and the learned District Judge

have on facts found that the original vendees have not shown any

readiness or willingness to pay the remaining consideration to the

Appellants.  Hence  since  the  original  vendees  have  abandoned

their rights under the 1986 agreement, enforcement of the 1987

agreements  has  become  virtually  impossible  and  Respondent

35

Nos.  1  cannot  seek  specific  performance  of  the  latter.

Consequently the 1987 agreements are void and unenforceable

as provided under Sections 32 and 35 of the Contract Act.

18. It is relevant to note at this juncture that Respondent Nos. 1

have also pleaded that the Power-of-Attorney dated 11.11.2001

(supra)  was executed in  breach of  the interim injunction order

issued by the trial court directing maintenance of status quo in

respect of the suit property. Hence they seek that action should

be taken against the Appellants and the original vendees under

Order XXXIX,  Rule 2A of the Code of Civil  Procedure,  1908 for

breach of  the injunction order.  However,  we are in  agreement

with the trial court’s findings that the Plaintiffs’ application under

Order  XXXIX  was  moved  after  a  delay  of  three  years  and  six

months, and the said delay has not been satisfactorily explained.

Hence the application is barred by laches. In any case, since the

original vendees have revoked the Power-of-Attorney, status-quo

has been restored, and the Plaintiffs’ cause of action no longer

exists.  The  Learned  District  Judge  and  the  High  Court  in  the

impugned judgement have affirmed the trial court’s reasoning on

36

this aspect, and we see no reason to overturn their concurrent

findings on this matter.

It was also re-iterated before us by Respondent Nos. 1 that

the original vendees were misled into withdrawing their suit SCS

No. 194/1988 and that the same should not be binding upon the

plaintiffs.  However  given  that  the  withdrawal  of  the  suit  has

attained finality  before this  Court,  and the Trial  Court  and the

High Court have concurrently found in the separate application

made  by  the  plaintiffs  in  SCS  No.  658/1988,  by  orders  dated

24.1.2008 and 25.3.2008 supra (respectively),  that  the original

vendees cannot be compelled to continue their suit against their

desire, we are not inclined to interfere with the same.  

V. Alternative Remedy to be given to the plaintiffs

19. Though we have found that on facts and law, Respondent

Nos. 1 are not entitled to specific performance of the 1986 and

1987 agreements, prima facie it does appear that the Appellants

and the original vendees have colluded to frustrate performance

of the 1987 agreements. The trial court had directed the original

vendees  to  reimburse  earnest  money  of  Rs.  5000  paid  by

37

Respondent Nos. 1 towards each of the 1987 agreements with an

interest of 9% p.a. from 14.9.1987 till the date of realization. We

are in agreement with the aforesaid direction.  

With  regard to  the appropriate  remedy to  be  provided to

Respondent Nos. 1, it may also be pertinent to refer to Section 53

of the Contract Act, which provides that:

“53. Liability of party preventing event on which the  contract  is  to  take  effect.—When  a  contract contains  reciprocal  promises,  and  one  party  to  the contract  prevents  the  other  from  performing  his promise, the contract becomes voidable at the option of the  party  so  prevented:  and  he  is  entitled  to compensation from the other party for any loss which he may sustain in consequence of the non-performance of the contract.”

Therefore,  since  the  original  vendees  seem  to  have

relinquished their rights in the 1986 agreement so as to frustrate

performance of the 1987 agreements, it would be just in these

circumstances to award compensation to the Plaintiffs for the loss

of opportunity and inconvenience suffered by them. Though no

remedy  is  available  as  against  the  Appellants  on  account  of

absence of privity of contract, we consider it apposite to direct

the original vendees, that is,  Respondent Nos. 3-11 in the four

38

appeals, to pay Rs. 1,80,000/-, with interest at the rate of 9% per

annum  from  the  date  of  the  suits,  as  damages  to  the

Plaintiffs/Respondent Nos.  1  in  these appeals,  as  prayed for  in

their  pleadings.  We also direct  the High Court  to  expeditiously

release and remit back the consideration amount deposited by

Respondent Nos. 1 in lieu of specific performance.  

20. Hence these appeals are partly allowed, and the impugned

judgement is set aside, in the aforesaid terms.  

…..…………................................J.  (MOHAN M. SHANTANAGOUDAR)

….…………………………...............J.             (ANIRUDDHA BOSE)

New Delhi; November 25, 2019

39