P L D 1983 Supreme Court 344 (PLP)

9. Another objection to the maintainability of the suit proceeds fro ~ the contention that the matter had become res judicata in the appellants' suit.IC This suit, as already stated, had been filed against Sh. Fazal Elahi and respondent Seth Muhammad Yaqub for a permanent injunction. Sh. Fazal Elahi having conceded the suit in his written statement filed on 15-6-1966 the appellant's counsel prayed to the Court on 16-6-1966 that the suit be dismissed ",.r>>h vl-u"without any further proceeding, whereupon the suit was dismissed the same day in the following words It is submitted that the order in terms it was made was, though not a decree, an executable order and that Seth Muhammad Yaqub who had notice of the suit but had stood-by and let the order be passed was bound by it and could not collaterally bypass it. His failure to object to the withdrawal of the suit as having borne fruit operated as res judicata in _ regard to his interest in the property qua the appellants as also his co-defendant Sb. Fazal Elabi and as such his present suit was barred by the ptinciple of res judicata particularly of constructive res judicata. Refeience was made to Phillips v. Mitchell (1), ,in which it had been held that a ground of attack in a subsequent suit, if could have been alleged as ground of defence in a former suit but was omitted, was hit by the principle of rzs judicata. It was also submitted in this connection that at least Sh. Fazal Elalii who had conceded the suit was bound by the order and as such any decree for specific performance passed against him for transferring the property would be ineffective. It was further submitted that for the matter to be res judicata it was not necessary that there must have been passed a judgment or decree but that even an order passed by consent, express or implied, binds the parties. Reliance for this was placed on Muhammad Salim v. Mohiuddin (2) and Bakhtawar v. Amin (3). But the same as we will presently see have no relevance.

10. It is to be noted that in the appellants' suit, Seth Muhammad Yaqub had filed a written statement contesting the suit and the validity of any deal in regard to the property between Sh. Fazal Elahi and the appellants. Obviously his interest was in conflict with that of his co-defendant Sh. Fazal Elahi. The applicability of the principle of res judicata as bteween co-defendants in a suit has been repeatedly and consistently held by the Privy Council and the Courts in the sub-continent to be dependent upon the fulfilment of the following conditions (1) The co-defendants were necessary and proper parties in the previous suit; (2) there was conflict of interest between them; (3) there was a necessity of decision on that conflict in order to give the plaintiff the appropriate relief; and (4) there was a final decision on that conflict. The principles, on the point bad been laid down as early as 24-7-1886 by West, J., in Ramchandra Narayan v. Marayan Mahadev and another (4) in the following words "Where an adjudication between the defendants is necessary to give the appropriate relief to the plaintiff, there must be. such an adjudicationCottingham v. Earl of Shrewsbury, 3 Hare.'s Rep. 627, and in such a case the adjudication will be res judicata between the defendants as well as between the plaintiff and defendants. But for this effect to arise, there must be a conflict of interest amongst the defendants and a judgment defining the real rights and obligations of the defendants inter se. . " The above view has prevailed.` throughout and a number of cases decided subsequently not only followed the principles set forth by West, J., but also elaborated on it, See Mt. Munni BIN and others v. Tirloki Nath and others (5), Kishun Prasad v. Durga Prasad (6), Maung Sein Done v. Ma Pan Nyun (7), Kedar Nath v. Munahi Ram (8), Mohammad Sandat All v. Wiquar (1) A I R 1932 Cal. 889 (2) 1968 S C M R 557 (3) 1980 S C M R 89 ??? (4)1 L R 11 Bom. 216 (5)AIR1931PC114 ?????? (6)AIR1931PC231 (7) A I R 1932 P C 101 (8) A I R 1935 P C 139 Ali (1), Chandu Lal Agarwalla v. Khalil-ur-Rahman (2), Ramaswami lyer v. Thumboyasami (3), Sukh Dial v. Mt. Bhop' (4), Bhola v. Sheo Chand (5), Radharani v. Binodamoyer (6), Kuppan Chettiar v. Ramaswami Chettlar (7), Allah Bukhsh v. Taggia (8), Sana Ullah v. Ghulam Qadir (9), and Fazal Dad v. Ahmad All (10). The written statements filed by Seth Muhammad Yaqub and Sh. Fazal Elahi in the appellant's suit made it clear that there was conflict of interest between them and that in order to give relief to the appellants, a decision in regard to the same was necessary but this was not done and no adjudication took place. The order of the Civil Court dismissing the appellant's suit was neither a decree nor a decision because no adjudication had taken place. Much stress was laid on the use of the words "c,..;~~~" in the order, but those words had appeared in the order merely because such statement had been made by the appellant's counsel and not that the Court itself had cone to any such finding. In fact the order was complete even without a mention of those words and all that the civil Court meant was to dismiss the appellant's suit as withdrawn. Obviously the order does not meet the requirements laid down as aforesaid for the applicability of the principle of res judicata. It is established law] that a mere withdrawal of a suit does not operate as res judicata for the /o reason, if for nothing else, that there was no adjudication on merit )Js See Ram Mal v. Upendra Datt (11) and Nand Lal v. Mt. Lakhmi (12). The order, therefore, passed in the appellant's suit on 16-6-1966 did not operate as res judicata and the suit of the Seth Muhammad Yaqub was as such not barred under section 11, C. P. C.

11. The limitation of the suit is governed by Article 113 of the Limitation Act which prescribes a period of three years from (() the date fixed forlE the performance or (2) if no such date is fixed when the plaintiff has notice that performance is refused. Where the case falls within the first clause,i the second clause is not to be 'resorted to. See Lakha Singh v. Ghulam Muhammad (13). The case of the appellants is that as the contract was to be completed by 25-1-1962, the suit filed on 15-6-1966 was clearly time-barred. The case of the plaintiff was that Sh. Fazal Elahi's subsequent agreement dated.14-7-1964 amounted to novation of the contract inasmuch as Muhammad Yusuf had been dropped and the new agreement was only between Seth Muhammad Yaqub and Sh. Fazal Elahi and that time had been extended by two years. It was, therefore, contended that the suit was within time. Sh. Fazal Elahi's letter dated 14-7-1964, a copy of which was produced as Exh. D. 12, was neither relied upon by the plaintiff nor admitted by Sh. Fazal Elahi but the latter did admit that he had by a letter written in this regard, extended time by two months beyond that date and had also received Rs. 10,000 on that date for "-0 ~! ~~ It was argued on behalf. of the appellants that this was only an extension of time and in no manner amounted to a new 'contract in substitution of the previous one. It was farther argued that the plaintiff not having (1) A I R 1943 P C 115 (2) P L D 1949 P C 239 (3) A I R 1922 Mad. 452?????????? (4) A I R 1923 Lab. 186 (5) A I R 1933 Lab. 569??????????? (6) A I R 1942 Cal. 92 (7) A I R 1946 Mad. 472?????????? (8) P L D 1953 Lab. 199 (9) P L D 1958 Pesh. 213????????? (10) P L D 1960 Lab. 106 (11) A I R 1928 Lab. 710?????????? (12) A I R 1939 Lah, 414 (13) A I R 1930 Lab. 1920 complied with the term of the extension of the time, the parties reverted to the previous agreement with the result that terminus a quo remained 25-1-1961.

12. The letter Exh. D. 12 even if true did not amount to a novation of the contract. It was basically for extension of time and not for changing any of the other terms of the original contract. There is also no propel. material to show that the parties had consciously agreed to drop Muhammad Yousaf as a co-purchaser. In Maksud All v. Eskandar Ali (1) where there had been an agreement to sell containing the averment that property agreed to be sold included land and basatbari thereon, and a second agreement had been executed for the purpose of granting =further time for completion of the sale, but mentioning property to be sold as "my own possessed land within District Dacca" and further declaring that other terms and conditions of'- the original document remained unaltered, it was held that there was no novation. The effect of extension of time in the present case was that the contract which had not been performed by 25-I-1962, as per the original agreement, could now be performed within two months from 14-7-1964. There is no reason to accept the plaintiff's claim that the time had been extended by two years as he had himself not relied upon Exh. D. 12.

13. The question now arises as to what is the starting point for the limitation, i. e., 25-1-1962 or 14-9-1964. Learned counsel for the appellants, while maintaining that the extension of time allowed by Sh. Fazal Elahi not having. been availed of by the plaintiff, the starting point remained 25-1-162, also contended that a party whose conduct did not justify the grant of the discretionary relief of specific performance, particularly when change of conditions had been brought about on that account, could be non-suited even though the period of limitation had not yet expired. Reliance was placed on Lekh Singh v. Dwarka Nath (2) where it had, been held that even if mere delay does not disentitle a plaintiff to claim specific performance of a contract, nevertheless delay is one of the facrors to be considered in giving the discretionary relief and inordinate and unexplained delay coupled with the change of conditions is a sufficient ground for refusing specific performance. The view had been followed though not in an unqualified manner in Muhammad Wazir v. Jahangiri Mal (3) and it bad been held that where a statute of limitation imposes a bar, mere inaction by a claimant within the time allowed by the statute cannot be treated as evidence that he has waived or abandoned his right, but on the other hand where a claimant knows that a party against whom he has a claim is altering his position in the belief that the claimant has abandoned or will not enforce his claim and even then, the claimant does nothing, his inaction may bar his claim for specific performance even within the Period of limitation. . Ordinarily, the rule is that a party cannot be non-suited fo mere laches when the period of limitation is- yet to expire. In Suryapral. kasarayudu v. Lakshminarasimhacharyulu (4) it was held that as mere laches or delay. short of the period of limitation is not always evidence of waiver or abandonment of claim, even where it is up to the hilt of the limitation period, that is .no ground for refusing specific performance. See also 0smona Beeby v. Khitish Chandra (5). In the matter of relief ;ry way of specific performance, the latter Court had in. Kissen Gopal Sadaney (1) P L. D 1964 S C 381 ?????????? (2) A I R 1929 Lah. 249 (3) A I R, 1949 Lah. 72 ??????????? (4) A I R 1914 Mad. 462 (5) A I R 1915 Cal. 13 v. Kally Prosonno Sett (1) held that the delay which is short of the period prescribed by Limitation Act and which is not of such a character as to give rise to an inference of abandonment or right is no bar to a suit for specific performance unless it is shown to have prejudiced the defendant. This view had been followed in Mt. Batulan v. Nirmal Das (2) which was again a case of specific performance and it bad been held that the failure of the plaintiff' to obtain compulsory registration of the deed in his favour is not of itself sufficient to prove abandonment. The Lahore High Court had in Allah Ditta v. Jamna Das (3) held that in no case does mere lapse of time deprive the plaintiff of his right to specific performance, unless it be held that there has been abandonment, acquiescence or waiver, or at the least, an alteration in the position of the defendant in that the other party has been put in a situation in which it would not be reasonable to place him, if the remedy were afterwards to be asserted.

14. The circumstances of the present case do not show that Seth Muhammad Yaqub plaintiff was guilty of conduct amounting .to abandonment of his rights. He had addressed a letter (Exh. D. 8) to Sh. Fazal Elahi at Dacca on 6-3-1966 (when the appellants had not yet come into the picture) explaining the delay in making the payment and requesting him to "intimate at least ten days in advance about your visit to Lahore and enable us to keep the amount ready and transfer the property in my name". He had followed this up by two remittances, one of Rs. 60,000 on 16-4-1966 and the other of Rs. 50,000 on 18-5-1966. All this while, Sh. Fazal Elahi had only kept silent and withheld from him the factum of his transaction with the appellants made on 15-3-1966. Even on arrival at Lahore, he had while purchasing the required judicial papers described the purpose to be the execution of sale deed in favour of Seth Muhamrr.ad Yaqub. The explanation offered by him that he had done so under misre= presentation hardly sounds reasonable as be could have verified the real facts from the appellants. Even otherwise, his assertion is belied by para. 13 of the appellant's plaint in which they had stated that Sh. Fazal Elahi who had come from Dacca on 20-5-1966, was on receipt of Rs. 60,000 from Seth Muhammad Yaqub staying in Lahore in connection with the sale of the property to him (Seth Muhammad Yaqub). In Lahore, Sh. Fazal Elahi had stayed at the Hotel Ambassador but had thereafter quietly shifted to Hotel Imperial for a day and thereafter left for Dacca. Seth Muhammad Yaqub's .evidence in this regard is that Sh. Fazal Elahi had told him in the hotel that he had entered into a transaction about the property with the appellants in whose favour there was a stay order and that after getting the same cancelled he would get the deed registered but that when he (Seth Muhammad Yaqub) went to the hotel two days after, Sh. Fazal Elabi had disappeared from the hotel. The conduct of Seth Muhammad Yaqub is not, therefore, amenable to an infer8nce of abandonment of his right and as such mere delay in making the payment would not non-suit him if the period of limitation was still available.

15. Though time is not ordinarily considered as being of the essence of the contract involving transaction of immovable property but the tt intention of the patties can be gathered from the terms of the contract and the facts and circumstance of the case and mere mention of time in the contract for its performance does not necessarily mean that time was of th (1) I L R 33 Cal. 633 ??? (2) A I R 1918 Patna 630 (3) A I R 1929 Lah: 679 essence. In Muhammad Shafi v. Lahore Improvement Trust (1) where the Improvement Trust had allowed time beyond the period of 18 months originally stipulated for construction of a building, it was held that by allowing further time the Trust had waived its right of forefeiture and in law it was not entitled to take action against the petitioner on the basis of its earlier decision. See also Pakistan v. Lodhi House (2) Eskandar All v. Alhamra Begum (3) and Essabhoy v. Saboor Ahmad (4). The contention, therefore, that the contract stood frustrated for non-performance by the plaintiff of his part of the contract within the period stipulated therein is not tenable. No doubt, the contract did mention. that if the balance amount was not paid and the sale deed executed by 25-1-1962 the agreement would stand revoked and the money advanced forfeited, but Sh. Fazal Elahi did not enforce this provision and on the. other hand received another sum of Rs. 10,000 on 13-7-1964 and extended the time by at least further two months. He admits to have received Seth Muhammad Yaqub's letter dated 6-3-1966 as already mentioned above but he did not reply to say that the agreement had stood revoked. It would, therefore, be not correct to bold that the parties had intended when the original contract was made that time was of the essence of the contract. It had been ruled by this Court in Abdul Hamid v. Abbas bhai-Abdul Hussain (5) that "An intention to make time of the essence of the contract must be expressed in unmistakable language; it may be inferred from what passed between the parties before, but not after, the contract is made."

16. The contention that terminus a quo for limitation was 25-1-1962, the date fixed for performance of the contract, has no force in view of the time for such performance having been extended till 14-9-1964. The effect of extension was that the new date became the starting point. In Abdul Jalil v. Muhammadi Steamship Co. (6) which was a case under the Carriage of Goods by Sea Act read with section 63 of the Contract Act, it was held that extension of time after the expiry of the original period would give a fresh cause of action and a fresh terminus a quo for limitation. Same view had been expressed in another case also under the Carriage of Goods by Sea Act, i. e., British India Steam Navigation Co. Ltd. v. Abdul Razak-Abdur Kader (7). Again, in the matter of a contract of affreightment, the Sind High Court bad in United Electric & Refrigeration Co. v. Veb Deutsche Seeree Derex, Rostock (8) held that extension of time for delivery of goods would prove a fresh terminus a quo for. limitation. The startin H point in the present case on the facts admitted by Sh. Fazal Elahi wouldl thus be 14-9-1964 and as such the suit was not barred.

17. The plea of protection under section 53-A of the Transfer of, Property Act was based upon the assertion that the appellants were bonafide' pknowledge of their transaction and the part performance of the contrac't~ urcbasers for valuable consideration and that as the plaintiff had ful by them, they could successfully defend the suit. The protection under section 53-A is, however, subject to the proviso that nothing in the section shall affect the rights of a transferee for consideration who has no notice of the contract, or of the performance thereof. A vendor who has not transferred his interest in the property though he entered into an agreement (1) P L D 1959 Lab. 1 ? (2) P L D 1968 Lab. 923 (3) P L 'D 1969 Dacca 214 ?????? l4) P L D 1973 S C 39 (5) P L D 1962 S C 1 ?? t6) P L D 1961 S C 340 (7) P L D 1967 S C 68?? (5) 1980 C L C 921 with another to sell the same can certainly confer title on a third party by executing a sale-deed in his favour. In such situation there is a transfer of ownership between the vendor and the subsequent purchaser and the title to the property vests in the latter but the person in whose favour . there was a prior agreement can specifically enforce his agreement under section 27(b) of the Specific Relief Act and compel him to execute a saledeed in his favour. It was held in Kali Charan v. Janak Deo (1) that "When a person with knowledge of the previous contract of sale, purchases the property, the purchase is voidable at the option of the prior promisee and the contract with him can be enforced specifically against the subsequent purchaser. In such a suit the Court should declare the second purchase as null and void and cancel it, and order the original promisor to carry out his contract by executing a sale-deed in favour of the prior promisee." Similarly, the view taken in Sathiraju v. Venkanna (2) was that "By reason of S. 91 of the Act, the natural result of a person purchasing a property with notice of a prior contract in another person's favour is, that the purchaser holds the property for the benefit of the latter to the extent necessary to give effect to the contract." In Gaffur v. Bhikaji (3) it was held that the plaintiff was entitled to possession. The second defendant having bought with notice of the plaintiff's contract held the property for the benefit of the plaintiff to the extent necessary to give effect to that contract. Where a plaintiff claimed possession of property under a good and genuine contract of sale earlier in date to the defendant's contract and the latter had taken his contract with the knowledge of the plaintiff's earlier title, section 53-A has no application.

18. Section 27(b) of the Specific Relief Act no doubt bars a specific performance of a contract against the transferee for value who has paid his money in gcod faith and without notice of the original contract. The High Court has held that the appellants "were already aware from a date prior to 21-5-1966 that there was a subsisting contract between appellant No. 1 (Sh. Fazal Elabi) and the respondent (Seth Muhammad Yaqub)." In this connection the High Court referred to the statement of Abdul Latif (D. W. 7) who stated that the appellants had come to know on 20-5-1956 of the contract made in favour of Seth Muhammad Yaqub when they visited Sh. Fazal Elahi in the hotel and found him present there. The High Court also noted that a far greater portion (rupees one lac) of the consideration had been paid by the appellants after this knowledge on 23-5-1965. In these circumstances, the protection under section 27(b) of the Specific Relief Act is also not available to the appellants.

19. And lastly it was urged that the jurisdiction of the Court to decree specific performance being discretionary under section 22 of the Specific Relief Act, the Court ought not to have, considering the plaintiff's conduct, granted such relief: The jurisdiction under section 22 is discretionary only, in the sense that it cannot be claimed as a matter of right. As enjoined by the section itself, the exercise of the discretion is not to be arbitrary but sound and reasonable, guided by judicial principles and capable of correction by a Court of appeal. The exercise of the discretion to grant or refuse to grant relief will, therefore, depend upon the circumstances of the case and (1) A I R 1932 All. 694? (2) A I R 1935 Mad. 333 ??????????? (3) 3 Botn. L R 596 the conduct of the parties. The Courts below have not found the circumstances of the case or the conduct of the plaintiff to justify a denial of the relief to him, and we see no reason to hold otherwise. ,

20. In view of the discussion above, the appeal must fail and is accordingly dismissed. Since a number of legal points had been involved, we make no order as to costs. s. Q.???? Appeal dismissed.