Nathulal v. Phoolchand

Supreme Court of India, 16 October 1969, 2 judges, 1970 AIR 546; 1970 SCR (2) 854; 1969 SCC (3) 120

A purchaser in possession under a written agreement of sale could resist the vendor's suit for possession under Section 53A of the Transfer of Property Act, being willing to pay once the vendor performed his earlier obligations.

Facts

Nathulal agreed in writing on 26 February 1951 to sell a ginning factory and the agricultural land on which it stood to Phoolchand for Rs. 43,011. He received Rs. 22,011 and put Phoolchand in possession; the balance was payable by 7 May 1951. The land stood recorded in the name of Nathulal's brother, and Nathulal had undertaken to have that name removed. As Phoolchand was not an agriculturist, the sale also needed sanction under Section 70(4) of the Madhya Bharat Land Revenue and Tenancy Act, 1950. Alleging default in payment, Nathulal rescinded the contract and sued for possession and mesne profits. The trial court decreed the suit. The High Court reversed it, allowing Phoolchand to keep possession on depositing the balance. Nathulal appealed on certificate.

Questions before the Court

Does Section 70(8) of the Madhya Bharat Land Revenue and Tenancy Act, 1950 bar a purchaser from setting up part performance under Section 53A of the Transfer of Property Act?
Was Phoolchand willing to perform his part of the contract, so as to satisfy the fourth condition of Section 53A?

What the Court held

Section 70(8) only makes registration a condition for a valid sale. Phoolchand relied on a contract of sale and the equity of part performance, not on a sale, so Section 70(8) was no bar to the Section 53A defence.
The defence of part performance needs a written contract signed by the transferor, possession taken in part performance, an act in furtherance of the contract, and the transferee's performance or willingness to perform. An act done in pursuance of the contract need not be independent of its terms.
Where a statute requires permission for transfer, an agreement to transfer is subject to an implied condition that the transferor will obtain the sanction. Nathulal had also expressly undertaken to have the revenue records corrected, and neither obligation was performed in time.
Willingness must be judged in light of the sequence of obligations. By Section 4 of the Transfer of Property Act the contract chapters are part of the Contract Act, so a party cannot demand performance without first performing his own earlier obligation. Phoolchand was willing, and the appeal was dismissed with costs.

Why it matters

The judgment sets out the four conditions for the defence of part performance under Section 53A and holds that the transferee's willingness to perform is judged by the order in which the parties' obligations fall due. It also holds that a purchaser need not produce the money or a concluded financing scheme to prove readiness and willingness, and that an agreement to sell land needing official sanction carries an implied condition that the vendor will obtain it.

In the Court's words

Copied from the official judgment; each passage links to its page.

“In considering whether a person is willing to perform his part of the contract the sequence in which the obligations under a contract are to be performed must be taken into account. The argument raised by Mr. Shroff that Nathulal was bound to perform the two conditions only after the amount of Rs. 21,000/was paid is plainly contrary to the terms of the agreement.”

Shah, J.Page 5 of the judgment

“In view of the arrangement made by Phoolchand it was clear that he had at all relevant times made necessary arrangements for paying the amount due, but so long as Nathulal did not carry out his part of the contract, Phoolchand could not be called upon to pay the balance of the price.”

Shah, J.Page 6 of the judgment

“There is no sale in the present case, and Phoolchand is not relying upon any sale. He is relying upon a contract of sale and equity which he may set up to defend his possession against the claim made by Nathulal.”

Shah, J.Page 4 of the judgment

Provisions interpreted

Section 53A, Transfer of Property Act, 1882
Section 4, Transfer of Property Act, 1882
Section 70(4) and 70(8), Madhya Bharat Land Revenue and Tenancy Act, 1950

Case and bench

Parties: Nathulal v. Phoolchand
Case: Civil Appeal No. 2345 of 1966
Decided: 16 October 1969
Bench: Shah, J.C., Hegde, K.S.
Opinions: Judgment of the Court delivered by Shah, J.

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