Whether the court can grant specific performance of a contract to the plaintiff if the development authority has leased the land to the defendant to construct his house?

 In the facts of this case, the question would, therefore, be, as to whether the enforcement of the agreement to sell dated 17.11.1982, expressly or impliedly, lead to palpably defeat the law in question, which is contained in the Statutory Rules or is prohibited by the same. {Para 73}

74. A contract may expressly or impliedly, be prohibited by provisions of a law. The intentions of the parties do not salvage such a contract. [See AIR 1968 SCC 1328 (supra)]. What is involved in this case, may not be a mere case of a conditional decree for specific performance being granted as was the case in the line of decisions commencing with Motilal (supra) and ending with Ferrodous Estates (supra). The Rules contemplate a definite scheme. Land, which is acquired by the Public Authority, is meant to be utilised for the particular purpose. The object of the law is to invite applications from eligible persons, who are to be selected by a Committee and the sites are allotted to those eligible persons, so that the chosen ones are enabled to put up structures, which are meant to be residential houses. It is implicit in the Rules, and what is more, in the lease-cum-sale agreement, that the allottee, who is treated as a lessee under Rule 7, will remain in possession and, what is more, proceed to fulfil his obligation under the lease-cum-sale agreement and the Rules. The obligations of the allottee/lessee are unambiguous. He has held himself out to be in dire need of a plot of land for the purpose of constructing a residential building. He has to disclose his annual income and any other means indicating his capacity, not only to purchase the site applied for but also to construct the house. He has to respond to the query as to whether any member of the family, of which he is a member, owns or has been allotted a site or a house by the Board or any other Authority, within the area under jurisdiction of the Board. The applicant must, furthermore, disclose whether he already owns a house or house site in the city or outside the city. Whether the applicant’s wife, husband or minor child owns a house or house site, is another matter, he must disclose. Incorrect information in any of these matters, would entitle the Board to resume the site. Rule 11 specifically announces among the principles as relevant for selecting an applicant for allotment, the income of the applicant to build the house on the site for his residence. No doubt, it is not applicable to certain classes, which include the other backward classes. Rule 11(3) declares further that the number of years, the applicant has been waiting for allotment of a site, inter alia, as a relevant principle.

75. It may be true that as contended by Shri R. Basant, learned senior counsel for the respondent that despite the fact no building was put up by the allottee, the BDA has not deemed it fit to cancel the allotment. We gather the impression that the BDA has been lax in the pursuit of the lofty goals of the law. We do not pursue the matter further as BDA is not a party.

76. If the agreement between plaintiff and the first defendant is taken as it is and it is enforced, the following would be the consequences. The allotment to the first defendant was made on 04.04.1979. In fact, the first defendant was obliged, in law, to construct a residential building within two years under Rule 17(6). No doubt, the time could be extended thereunder. But, at the time, the agreement dated 17.11.1982 was entered into, the first defendant was already in breach. The result, however, of the agreement dated 17.11.1982, is as follows:
The first defendant would be liable to convey the right in the site to the plaintiff. The price would be Rs.50,000/- for the site, proceeding on the basis of the concurrent findings by the Court. This is on the supposition that the parties contemplated that the site would be conveyed after the period of ten years from the date of allotment upon the expiry of which alone, the allottee, viz., the first defendant would be entitled to the conveyance under Rule 17(7) of the Rules. It must be noticed that in fact, under the lease-cum-sale agreement and the Rules, what is contemplated is that on events leading up to the stage where the elements of Rule 17(7) are satisfied alone, a right or duty would accrue to the allottee/ lie upon the party. However, what is more important in the context of the facts of this case is the following facet.
Under the agreement, the parties contemplated and have expressly provided that the plaintiff was to be put in possession of the site on the date of the agreement, i.e., on 17.11.1982. Did the parties contemplate the construction of the building residential in nature, for the purpose of which, the site was allotted to the first defendant? Is it not a clear case where enforcing the agreement, as it is, would necessarily result in the first defendant not acting in accordance with lease-cumsale agreement, which, she entered into with the BDA and, what is even more crucially important, against the mandate of the law, as contained in the Rules, which contemplated that the allotment was made for the construction of a residential building by the allottee and the construction was to be completed within the period of two years or an extended period? The agreement between the parties contemplated giving a short shrift to the mandate of the law. This is clear from the fact that under the agreement, the first defendant was obliged to sell the site as it is. Construction of the building became a practical impossibility. The price, which was agreed upon, was qua the site alone. The consideration and the other terms of the agreement, in other words, ruled out the possibility of a residential building being constructed by the first defendant, who as the allottee, was, under the law, obliged to construct the building. Assuming for a moment that the construction was put up, which assumption must be premised on possession not being handed over to the plaintiff and which is contrary, not only to the terms of the agreement, but also pleading of the plaintiff and the consistent stand in the evidence adduced on behalf of the plaintiff and even proceeding, however, on the basis that as found by the Trial Court, that the plaintiff has failed to establish that possession was handed over to him on the date of agreement and that the possession continued with the first defendant, the terms of the agreement, which included, the price being fixed for conveying the right for the site, necessarily, would have the effect of freezing the first respondent in even attempting to put up a construction.

77. We, therefore, reject the contention of the plaintiff that there was nothing, which could have prevented putting up a building. The argument of plaintiff involves rewriting of the contract. This is different from a situation where an allottee, without being trammelled by an agreement, is unable to put up a building even for the whole of ten years and action is not taken under Rule 17(6) and yet conveyance is made in his favour under Rule 17(7). The direct impact of the agreement is that it compelled the party to abstain from performing its obligation in law apart from breaching the agreement with BDA. In other words, taking the agreement as it is, it necessarily would be in the teeth of the obligation in law of the first respondent to put up the construction. The agreement to sell involved clearly terms which are impliedly prohibited by law in that the first defendant was thereunder to deliver title to the site and prevented from acting upon the clear obligation under law. This is a clear case at any rate wherein enforcing the agreement unambiguously results in defeating the dictate of the law. The ‘sublime’ object of the law, the very soul of it stood sacrificed at the altar of the bargain which appears to be a real estate transaction. It would, in other words, in allowing the agreement to fructify, even at the end of ten-year period of non-alienation, be a case of an agreement, which completely defeats the law for the reasons already mentioned.

78. Going by the recital in the agreement entered into between the plaintiff and the first defendant, possession is handed over by the first defendant to the plaintiff. The original Possession Certificate is also said to be handed over to the plaintiff. The agreement, even according to the plaintiff, contemplated that within three months of conveyance of the site in favour of the first defendant, the first defendant was to convey her rights in the site to the plaintiff. It is quite clear that the parties contemplated a state of affairs which is completely inconsistent with and in clear collision with the mandate of the law. On its term, it stands out as an affront to the mandate of the law.

79. The illegality goes to the root of the matter. It is quite clear that the plaintiff must rely upon the illegal transaction and indeed relied upon the same in filing the suit for specific performance. The illegality is not trivial or venial. The illegality cannot be skirted nor got around. The plaintiff is confronted with it and he must face its consequences. The matter is clear. We do not require to rely upon any parliamentary debate or search for the purpose beyond the plain meaning of the law. The object of the law is set out in unambiguous term. If every allottee chosen after a process of selection under the rules with reference to certain objective criteria were to enter into bargains of this nature, it will undoubtedly make the law a hanging stock.

Supreme Court

JUSTICE K. M. JOSEPH JUSTICE PAMIDIGHANTAM SRI NARASIMHA

G. T. GIRISH Vs. Y. SUBBA RAJU (D) BY LRs. & ANR.

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Should the court give the contract's specific performance to the plaintiff if he is relying on an agreement of sale prohibited by law?

 Salmond stated the law in these words at p. 352 of his Book (2nd Edn.):

“So if A employs B to commit a robbery, A cannot sue B for the proceeds. And the position would be the same if A were to vest property in B upon trust to carry out some fraudulent scheme: A could not sue B for an account of the profits. But if B, who is A's agent or trustee, receives on A's account money paid by C pursuant to an illegal contract between A and C the position is otherwise and A can recover the property from B, although he could not have claimed it from C. In such cases public policy requires that the rule of turpis causa shall be excluded by the more important and imperative rule that agents and trustees must faithfully perform the duties of their office.”
Williston in his Book on Contracts (Revised Edn.), Vol. VI, has discussed this matter at p. 5069, para 1785 and in paras 1771 to 1774, he has noted certain exceptional cases, and has observed as follows:
“If recovery is to be allowed by either partner or principal in any case, it must be where the illegality is of so light or venial a character that it is deemed more opposed to public policy to allow the defendant to violate his fiduciary relation with the plaintiff than to allow the plaintiff to gain the benefit of an illegal transaction.”
Even in India, certain exceptions to the rule of turpi causa have been accepted. Examples of those cases are found in Palaniyappa Chettiar v. Chockalingam Chettiar [(1920) ILR 44 Mad 334] and Bhola Nath v. Mul Chand [(1903) ILR 25 All 639].”

49. We may also notice the following statement by this Court in Kedar Nath Motani (supra):
“15. The correct position in law, in our opinion, is that what one has to see is whether the illegality goes so much to the root of the matter that the plaintiff cannot bring his action without relying upon the illegal transaction into which he had entered. If the illegality be trivial or venial, as stated by Williston and the plaintiff is not required to rest his case upon that illegality, then public policy demands that the defendant should not be allowed to take advantage of the position. A strict view, of course, must be taken of the plaintiff's conduct, and he should not be allowed to circumvent the illegality by resorting to some subterfuge or by misstating the facts. If, however, the matter is clear and the illegality is not required to be pleaded or proved as part of the cause of action and the plaintiff recanted before the illegal purpose was achieved, then, unless it be of such a gross nature as to outrage the conscience of the Court, the plea of the defendant should not prevail.”

50. In Sita Ram v. Radhabai and others, AIR 1968 SC 534, this Court observed as follows:
“11. The principle that the Courts will refuse to enforce an illegal agreement at the instance of a person who is himself a party to an illegality or fraud is expressed in the maxim in pari deucto portior est conditio defendentis. But as stated in Anson's Principles of the English Law of Contracts, 22nd Edn., p. 343: there are exceptional cases in which a man will be relieved of the consequences of an illegal contract into which he has entered — cases to which the maxim does not apply. They fall into three classes: (a) where the illegal purpose has not yet been substantially carried into effect before it is sought to recover money paid or goods delivered in furtherance of it; (b) where the plaintiff is not in pari delicto with the defendant; (c) where the plaintiff does not have to rely on the illegality to make out his claim'.

51. In Narayanamma (supra), this Court was considering a Suit for specific performance, which was resisted on the ground that the agreement to sell was contrary to the provisions of the Statute. Section 61 of the Karnataka Land Reforms Act, 1961 provided that no land for which occupancy was granted, shall within 15 years of the order of the Tribunal, be transferred by sale, inter alia. A partition was permitted. Equally, a mortgage could be effected to secure a loan. Drawing support from Judgment of this Court in Kedar Nath (supra), this Court, inter alia, as follows:
“15. The three-Judge Bench of this Court, after referring to the aforesaid judgments, speaking through M. Hidayatullah, J. (as his Lordship then was), observes thus: (Kedar Nath Motani case [Kedar Nath Motani v. Prahlad Rai, (1960) 1 SCR 861 : AIR 1960 SC 213] , AIR pp. 218-19, para 15)
“15. The correct position in law, in our opinion, is that what one has to see is whether the illegality goes so much to the root of the matter that the plaintiff cannot bring his action without relying upon the illegal transaction into which he had entered. If the illegality be trivial or venial, as stated by Williston and the plaintiff is not required to rest his case upon that illegality, then public policy demands that the defendant should not be allowed to take advantage of the position. A strict view, of course, must be taken of the plaintiff's conduct, and he should not be allowed to circumvent the illegality by resorting to some subterfuge or by misstating the facts. If, however, the matter is clear and the illegality is not required to be pleaded or proved as part of the cause of action and the plaintiff recanted before the illegal purpose was achieved, then, unless it be of such a gross nature as to outrage the conscience of the Court, the plea of the defendant should not prevail.”
16. It could thus be seen, that this Court has held that the correct position of law is that, what one has to see is whether the illegality goes so much to the root of the matter that the plaintiff cannot bring his action without relying upon the illegal transaction into which he had entered. This Court further held, that if the illegality is trivial or venial and the plaintiff is not required to rest his case upon that illegality, then public policy demands that the defendant should not be allowed to take advantage of the position. It has further been held, that a strict view must be taken of the plaintiff's conduct and he should not be allowed to circumvent the illegality by resorting to some subterfuge or by misstating the facts. However, if the matter is clear and the illegality is not required to be pleaded or proved as part of the cause of action and the plaintiff recanted before the illegal purpose is achieved, then, unless it be of such a gross nature as to outrage the conscience of the Court, the plea of the defendant should not prevail.”

52. In Narayanamma (supra), this Court further held as follows:
“24. The transaction between the late Bale Venkataramanappa and the plaintiff is not disputed. Initially the said Bale Venkataramanappa had executed a registered mortgage deed in favour of the plaintiff. Within a month, he entered into an agreement to sell wherein, the entire consideration for the transfer as well as handing over of the possession was acknowledged. It could thus be seen, that the transaction was nothing short of a transfer of property. Under Section 61 of the Reforms Act, there is a complete prohibition on such mortgage or transfer for a period of 15 years from the date of grant. Sub-section (1) of Section 61 of the Reforms Act begins with a non-obstante clause. It is thus clear that, the unambiguous legislative intent is that no such mortgage, transfer, sale, etc. would be permitted for a period of 15 years from the date of grant. Undisputedly, even according to the plaintiff, the grant is of the year 1983, as such, the transfer in question in the year 1990 is beyond any doubt within the prohibited period of 15 years. Sub-section (3) of Section 61 of the Reforms Act makes the legislative intent very clear. It provides, that any transfer in violation of sub-section (1) shall be invalid and it also provides for the consequence for such invalid transaction.
25. Undisputedly, both, the predecessorin-title of the defendant(s) as well as the plaintiff, are confederates in this illegality. Both, the plaintiff and the predecessor-in-title of the defendant(s) can be said to be equally responsible for violation of law.
26. However, the ticklish question that arises in such a situation is:“the decision of this Court would weigh in side of which party”? As held by Hidayatullah, J. in Kedar Nath Motani [Kedar Nath Motani v. Prahlad Rai, (1960) 1 SCR 861 : AIR 1960 SC 213] , the question that would arise for consideration is as to whether the plaintiff can rest his claim without relying upon the illegal transaction or as to whether the plaintiff can rest his claim on something else without relying on the illegal transaction. Undisputedly, in the present case, the claim of the plaintiff is entirely based upon the agreement to sell dated 15- 5-1990, which is clearly hit by Section 61 of the Reforms Act. There is no other foundation for the claim of the plaintiff except the one based on the agreement to sell, which is hit by Section 61 of the Act. In such a case, as observed by Taylor, in his “Law of Evidence” which has been approved by Gajendragadkar, J. in Immani Appa Rao [Immani Appa Rao v. Gollapalli Ramalingamurthi, (1962) 3 SCR 739 : AIR 1962 SC 370] , although illegality is not pleaded by the defendant nor sought to be relied upon him by way of defence, yet the Court itself, upon the illegality appearing upon the evidence, will take notice of it, and will dismiss the action ex turpi causa non oritur actio i.e. no polluted hand shall touch the pure fountain of justice. Equally, as observed in Story's Equity Jurisprudence, which again is approved in Immani Appa Rao [Immani Appa Rao v. Gollapalli Ramalingamurthi, (1962) 3 SCR 739 : AIR 1962 SC 370] , where the parties are concerned with illegal agreements or other transactions, courts of equity following the rule of law as to participators in a common crime will not interpose to grant any relief, acting upon the maxim in pari delicto potior est conditio defendentis et possidentis.”

53. This Court in Narayanamma (supra) finally found as follows:
“28. Now, let us apply the other test laid down in Immani Appa Rao [Immani Appa Rao v. Gollapalli Ramalingamurthi, (1962) 3 SCR 739 : AIR 1962 SC 370] . At the cost of repetition, both the parties are common participator in the illegality. In such a situation, the balance of justice would tilt in whose favour is the question. As held in Immani Appa Rao [Immani Appa Rao v. Gollapalli Ramalingamurthi, (1962) 3 SCR 739 : AIR 1962 SC 370] , if the decree is granted in favour of the plaintiff on the basis of an illegal agreement which is hit by a statute, it will be rendering an active assistance of the court in enforcing an agreement which is contrary to law. As against this, if the balance is tilted towards the defendants, no doubt that they would stand benefited even in spite of their predecessor-in-title committing an illegality. However, what the court would be doing is only rendering an assistance which is purely of a passive character. As held by Gajendragadkar, J. in Immani Appa Rao [Immani Appa Rao v. Gollapalli Ramalingamurthi, (1962) 3 SCR 739 : AIR 1962 SC 370] , the first course would be clearly and patently inconsistent with the public interest whereas, the latter course is lesser injurious to public interest than the former.”

Supreme Court

JUSTICE K. M. JOSEPH JUSTICE PAMIDIGHANTAM SRI NARASIMHA

G. T. GIRISH Vs. Y. SUBBA RAJU (D) BY LRs. & ANR.

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When there is no specific prohibition, unless expressly provided in law, every procedure is to be understood as permissible.

The Apex Court in the case of Rajendra Prasad Gupta Vs.
Prakash Chandra Mishra and others, reported at AIR 2011 SC
1137, has held in paragraph 6 and 7 as under :-
“6. In Narsingh Das V. Mangal Dubey, (1882) ILR 5
All 163 (FB), Mr. Justice Mahamood, the celebrated
Judge of the Allahabad High Court, observed :-
“ Courts are not to act upon the principle that
every procedure is to be taken as prohibited unless it
is expressly provided for by the Code, but on the
converse principle that every procedure is to be
understood as permissible till it is shown to be
prohibited by the law. As a matter of general principle
prohibition cannot be presumed.”
“7. The above view was followed by a Full Bench of
the Allahabad High Court in Raj Narain Saxena V.
Bhim Sen & others, AIR 1966 Allahabad 84 (FB), and
we agree with this view.”

Thus, it is trite that when there is no specific prohibition,
unless expressly provided in law, every procedure is to be
understood as permissible.
IN THE HIGH COURT OF JUDICATURE OF BOMBAY,
BENCH AT AURANGABAD
WRIT PETITION NO. 3229 OF 2001
Nanded Zilla Krushi Audyogik
Society Ltd. Nanded,
Versus
Govind s/o Girmaji Shinde,

CORAM : RAVINDRA V. GHUGE
DATED : 21st August 2014
Citation;2015(2)MHLJ805

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Every procedure is to be understood as permissible till it is shown to be prohibited by law

In Narsingh Das v. Mangal Dubey, ILR 5 All 163 (FB) (1882), Mr. Justice Mahmood, the celebrated Judge of the Allahabad High Court, observed :-

"Courts are not to act upon the principle that every procedure is to be taken as prohibited unless it is expressly provided for by the Code, but on the converse principle that every procedure is to be understood as permissible till it is shown to be prohibited by the law. As a matter of general principle prohibition cannot be presumed."

The above view was followed by a Full Bench of the Allahabad High Court in Raj Narain Saxena Vs. Bhim Sen & others, AIR 1966 Allahabad 84 FB, and we agree with this view.

Supreme Court of India

Rajendra Prasad Gupta vs Prakash Chandra Mishra & Ors on 12 January, 2011

Bench: Markandey Katju, Gyan Sudha Misra
Citation;2011(3) MHLJ SC,AIR 2011SC1137

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