SUPREME COURT REFUSES GRANT OF DECREE OF SPECIFIC PERFORMANCE, AS THE PLAINTIFF WAS NOT ENTITLED TO PURCHASE AGRICULUTRAL LAND

In a recent case of Ajay Dabra Vs Pyare Ram & Ors. and Ajay Dabra Vs Sunder Singh & Anr., a two Judge Bench of the Supreme Court comprising of Justice Pamidighantam Sri Narasimha and Justice Sudhanshu Dhulia passed a Judgment dated 31-01-2023 and observed that the Decree of Specific Performance cannot be granted, as the Plaintiff was not entitled to purchase the agricultural land for a non-agricultural activity.

Facts

i) In the present case, two separate Agreements of Sale were executed by and between M/s Himalayan Ski Village Pvt. Ltd. (Purchaser) and (1) Pyare Ram and (2) Sunder Singh, both agriculturists / landowners [Defendant(s)-Seller(s)] for sale of their respective agricultural lands in Himachal Pradesh.

ii) As per Section 2 (2) of the Himachal Pradesh Tenancy and Land Reforms Act, 1972 (1972 Act), an “agriculturist” means a landowner who cultivates land personally in an estate situated in Himachal Pradesh. Thus, under the 1972 Act, only an agriculturist / landowner who personally cultivates his land in Himachal Pradesh, can purchase an agricultural land in the said State.

iii) Further, as per Section 118 of the 1972 Act, transfer of agricultural land to a non-agriculturist is barred unless he /she obtains permission of the State Government or fulfils other criteria thereunder.

iv) But in this case, the Agreements of Sale were executed by the Defendant(s)-Seller(s) in favor of the Purchaser, M/s Himalayan Ski Village Pvt. Ltd. which was clearly not an agriculturist / landowner.

v) Further, the Purchaser failed to obtain prior permission from the State Government for transfer of agricultural land in his favor i.e. in favor of a non-agriculturist, under Section 118 of the 1972 Act.

vi) Hence, the Purchaser assigned his right in favor of the Plaintiff-Ajay Dabra, who then filed two Suits bearing nos. 28/2012 and 29/2012, seeking Specific Performance, against Defendant(s)-Seller(s) and also impleaded M/s Himalayan Ski Village Pvt. Ltd. as the Defendant No. 2.

District Court Observations

The said Suits were dismissed by the Ld. District Judge, Kullu vide Order dated 30-12-2016, on the ground that (a) seeking prior permission of the State Government is an essential condition to give effect to the transfer / sale of agricultural land in favor of a non-agriculturist under Section 118 of the 1972 Act, which has not been fulfilled and (b) further, that the assignment by the Purchaser in favor of the Plaintiff is not valid.

High Court Observations

Aggrieved by the Ld. District Court’s Order dated 30-12-2016, the Plaintiff-Ajay Dobra filed Appeals before the High Court of Himachal Pradesh in CMP(M) No.75 of 2018 and CMP(M) No.76 of 2018, which were also dismissed vide Judgment dated 17-12-2018, on the ground of unreasonable delay of 254 days in filing such Appeals.

Supreme Court Observations

Aggrieved by the High Court Judgment dated 17-12-2018, the Plaintiff-Ajay Dobra filed two Special Leave Petitions before the Supreme Court against the Defendant(s)-Seller(s) – Respondent No. 1 and M/s Himalayan Ski Village Pvt. Ltd. – Respondent No. 2. The Apex Court, vide Judgment dated 31-01-2023, made the following observations:

1) That the purpose of Section 118 of the 1972 Act is (a) to protect the agriculturists with small holdings and (b) to keep a check on the widespread conversion of agricultural land for non- agricultural purpose.

2) Thus, one of the pre-conditions for purchase of an agricultural land by a non-agriculturist under Section 118 of the 1972 Act is to obtain prior permission of the State Government. The State Government in this particular case decided, for reasons best known to it, to not grant permission for transfer of agricultural land to the Purchaser, a non-agriculturist. Hence, the Purchaser failed to fulfil the pre-conditions stipulated under Section 118 of the 1972 Act.

3) Further, the assignment of rights by the Purchaser, a non-agriculturist in favor of the Plaintiff-Ajay Dobra, for non-agricultural activity is not valid for the following reasons:

i) Firstly, as such assignment would defeat the purpose of the 1972 Act,

ii) Secondly, as there was no clause in the Agreement of Sale which stated that in case the Purchaser failed to obtain the prior permission of the State Government, it could assign its rights to a third party and

iii) Thirdly, there was no clause in the Agreement of Sale which stated that the Defendant(s)-Seller(s) would not have any objection in executing the Sale Deed in favor of such assignee.

iv) Hence, as there was no clause in the Agreement of Sale giving rights of such assignment to the Purchaser and further as there was no prior approval from the Defendant(s)-Seller(s) in respect of such assignment, the assignment made by the Purchaser in favor of the Plaintiff, was held as invalid. Therefore, the Bench held that as the assignment was invalid, the Decree for Specific Performance cannot be granted in favor of the Plaintiff.

Thus, based on the aforesaid observations, the Supreme Court held that (i) the Purchaser-Respondent No. 2 failed to comply with the pre-conditions stipulated under Section 118 of the 1972 Act; (ii) that the assignment made by the Purchaser-Respondent No. 2 in favor of the Plaintiff-Ajay Dobra was invalid and (iii) that the High Court rightly refused to condone the unreasonable delay of 254 days in filing the Appeals. Hence, the Apex Court upheld the Ld. District Court’s Order dated 30-12-2016 and High Court Judgment dated 17-12-2018 and thereby, dismissed the Appeals.

 

Harini Daliparthy

Senior Associate

The Indian Lawyer