SUPREME COURT HOLDS THAT RIGHT TO REPURCHASE IS NOT PERSONAL TO VENDOR UNLESS STATED OTHERWISE IN DOCUMENT

A two-Judge Bench of the Supreme Court, comprising Justice Rajesh Bindal and Justice Abhay S. Oka, passed a judgment dated 04.07.2023 in the matter of Indira Devi V. Veena Gupta & Ors. [Civil Appeal No. 9833 of 2014], wherein, the Bench observed that the vendor does not have an exclusive claim on the right to repurchase in the sale deed unless the document explicitly states so. This right can be transferred to others, and the contract that includes this condition will be legally valid.

FACTS-

i) Plaintiff No.1 (Smt. Veena Gupta) filed a suit for specific performance of contract, stating that Kishori Lal’s son and grandson were in possession of the suit property.

ii) The Plaintiff needed Rs.5,000 and approached Defendant No.1 (Kaleshwar Prasad Singh), for a loan. He agreed on the condition of executing a sale deed in favour of Defendant No. 2 (Smt. Indira Devi) if the loan was repaid before July 1984. A sale deed with a repurchase condition was executed in favour of Defendant No. 2 after the loan was repaid by Defendant No. 1. The sale deed was executed on 05.08.1977.

iii) In 1978, there was a partition in the Plaintiff’s family, and the property became the exclusive share of Plaintiff No. 2. He later executed a gift deed in favour of Plaintiff No. 1 for the suit house. However, Defendant No. 1 refused to accept the amount.

iv) Plaintiff asserts that Defendant No. 1 was a month-to-month tenant of Plaintiff No. 2 for the suit house. Defendant No. 1 became the purchaser of the house after the execution of the conditional sale deed.

v) Plaintiff No. 1, after tendering the amount, became the landlord and established a landlord-tenant relationship with Defendant No.1. Plaintiff No. 1 also needs the suit property for personal use and occupation.

vi) Plaintiff No. 1 tendered Rs.5,000 to Defendant No. 1, demonstrating willingness to pay the consideration amount.

vii) Defendant No.1 and Defendant No.2 both submitted separate contesting written statements. Defendant No.1 argues that the gift deed executed in favour of Plaintiff No. 1 is invalid, thereby denying Plaintiff No. 1 claim to the title.

viii) Defendant No.1 asserts that due to the lack of title, Plaintiff’s No. 1 party has no right to seek a decree for the specific performance of the contract.

ix) The trial court dismissed the Plaintiff’s suit, ruling the gift deed executed by Plaintiff No.2 as void. The trial court also concluded that the Plaintiff did not fulfil their part of the contract by failing to tender the amount to Defendant No.2.

x) The lower appellate court affirmed that the gift deed of Plaintiff No.1 is voidable, resulting in no acquisition of title. Based on this finding alone, the lower appellate court dismissed the Plaintiff’s appeal (Title Appeal No.1 of 1987) and upheld the Judgment and Decree of the trial Court (Title suit No.69 of 1983).

Observations –

High Court –

On 23.07.2003, at the time of admission of the second appeal the following 3 substantial questions of law were formulated.

1) Whether the Courts below committed an error in dismissing the suit of the Plaintiff on wrong approach and on consideration of an issue which was not material for the purpose of adjudication of the suit?

2) Whether the Courts below committed an error in not considering the main issues involved in the suit regarding character and construction in respect of the impugned deed?

3) Whether the Courts below committed an error in not considering the issue of merger of tenancy to the ownership as is relevant in the Deed of Sale?

In this case, the Plaintiff’s simple argument is that a sale deed was executed with a repurchase condition, requiring the Plaintiff to return Rs.5000 by July 1984. When the Defendants refused, the Plaintiff deposited the amount in Court in both Defendants’ names. The suit was filed in 1983, within the specified period. The Plaintiff has demonstrated a willingness to return the amount to either Defendant No.1 or Defendant No.2. The dispute between the Defendants regarding who will receive the amount is irrelevant to this case since the Plaintiffs have already deposited it in court. The Plaintiffs, including Plaintiff No.1 (the alleged donee) and the other Plaintiff who executed the sale deed in favour of Defendant No.2, have now joined together. It would be hyper-technical and frivolous for the Defendants to argue that only Plaintiff No.1 is entitled to a decree, thereby denying the other Plaintiffs their right to specific performance. The Defendants’ defense appear to be aimed at defeating the Plaintiffs’ rights and have no merit.

Since Defendant No.1 has not fulfilled their obligation to pay rent and the Plaintiff seeks possession based on personal necessity and default, Defendant No.1 can be considered a defaulter. The conditional sale deed does not include a provision stating that Defendant No.1 is exempt from paying rent between 1977 and July 1984. Furthermore, Defendant No.1 was aware of the amount being deposited in Court, yet they failed to pay rent. Thus, Defendant No.1 falls under the definition of a defaulter as per Section 11(1)(d) of the Bihar Building (Lease, Rent and Eviction) Control Act.

Based on the preceding discussion, the significant questions (No.1 and 2) favour the Plaintiff. Consequently, this Second Appeal is granted. The challenged Judgment and Decree of both lower courts are overturned. The Plaintiff’s suit is decreed in favour of both respondents. The respondents are ordered to pay costs amounting to Rs.25,000/- to the Plaintiff within two months from today. Failure to comply will result in the cost being recovered through the court’s process.

Supreme Court –

Dissatisfied with High Court Order The matter came up before the Hon’ble Supreme Court. The Court made the following observations;

The civil suit was filed by the late Kishori Lal Sahu and Veena Gupta against Kaleshwar Prasad and Indira Devi. The primary relief which has been pressed by the Plaintiff is extracted below:

“(a) A decree for specific performance of contract be passed in favour of the Plaintiff first party and the Defendant first be directed to take ₹ 5000/- from the Plaintiff first party and the Defendant second party be directed to execute and register a sale deed with respect to the suit house detailed in Schedule-I below in favour of the Plaintiff first party and put the Plaintiff first party in possession and on the failure of the Defendants to do so, the court may be pleased to execute and register a sale deed in favour of the Plaintiff first party on behalf of Defendant second party and a decree for recovery of possession be passed and the Plaintiff first party be put in possession by delivery of possession through court by dispossessing the Defendants or anybody else whosoever be found in possession on behalf of the Defendant second party.”

As has already been noticed, the Trial Court as well as the first Appellate Court had dismissed the suit whereas the High Court had reversed the findings and decreed the same.

Based on the decisions in Habiba Khatoon v Ubaidul Huq [(1997) 7 SCC 452] and T.M. Balakrishna Mudaliar v. M. Satyanarayana Rao [(1993) 2 SCC 740], unless the document and accompanying evidence explicitly prohibit assignment or transfer, the right of repurchase should be considered assignable and transferable. It should not be regarded as solely personal to the contracting parties.

The argument that the document mentions only “parties” and “heirs” but not “assignees” or “transferees” is a weak and unsubstantial basis to conclude that the right of repurchase is non-assignable. In our considered opinion, the lower courts made an error by interpreting the document in a way that implies a prohibition against assignment and transfer.

Kapilaben and Ors. vs. Ashok Kumar Jayantilal Sheth, through POA Gopal Bhai Madhusudan Patel and Ors’s [(2020) 20 SCC 648] case the Court has recognized that a contract can be assigned, leading to the transfer of rights or obligations. However, transferring obligations requires the consent of the other party involved. On the other hand, the transfer of rights is generally allowed, except in cases where the contract involves personal matters. It is incorrect to conclude that the right of repurchase is not assignable based solely on the absence of explicit mention of “assignees” or “transferees” in the document. The Courts below made an error by interpreting the document in a way that implies a prohibition against assignment and transfer.

In situations where there is a simple assignment of rights, obtaining the consent of the other party to the contract becomes necessary if the rights are of a “personal nature.” This is elucidated by the 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 p. 730.

In summary, based on the aforementioned judgments, the right to repurchase in a sale deed is not exclusively personal to the vendor unless specifically stated in the documents. This right can be assigned and the contract containing such a condition is enforceable, with the exception that it should not be of a personal nature. Consent from the other party is required for the assignment of obligations in a document. There should be no implied prohibition of transfer or assignment in the document. The benefit of a contract can be assigned as long as it does not affect the person responsible for fulfilling the obligations.

Held-
Considering the facts of the present case, there is no provision in the conditional Sale Deed that prohibits its assignment to another person. The clause solely pertains to the right of repurchase, granting the vendors the option along with obligations on the vendee. In this case, the right to repurchase has been assigned by Kishori Lal Sahu (now deceased) to Respondent no.1, who happens to be his daughter-in-law and has also received other gifted properties.

The argument put forth by the Appellant’s counsel, stating that the assignment of the right cannot be considered a gift due to the involvement of consideration money, is acknowledged and dismissed. This is because the executor of the Gift Deed, Kishori Lal Sahu (now deceased), had transferred his right to repurchase the property to Respondent no.1. He had the authority to assign the right with any attached conditions. Additionally, he was also a Plaintiff in the filed suit, although he later passed away.

For the reasons mentioned above, we do not find any error in the judgment of the High Court. The present appeal is accordingly dismissed. There is no order as to costs.

Conclusion –

In conclusion, the conditional Sale Deed does not restrict the assignment of the right to repurchase. It allows the vendors to repurchase while imposing obligations on the vendee. In this case, Kishori Lal Sahu lawfully assigned the right to his daughter-in-law, Respondent no.1, along with other gifted properties. The argument against considering it a gift due to consideration of money is dismissed. Kishori Lal Sahu had the authority to transfer the right with conditions. His passing did not invalidate his role as a Plaintiff, and the High Court’s judgment remains error-free. This analysis provides valuable insights into the enforceability and transferability of the right to repurchase, guiding future similar cases.

Udit Krishna

Associate

The Indian Lawyer