DELHI MOTOR COMPANY AND OTHERS VS U.A. BASRURKAR AND OTHERS AIR 1968 SC 794

ABSTRACT

Property is one of the most fundamental elements of the socio-economic life of an individual. Property law, therefore, has become an important branch of civil law. The Transfer of Property Act, 1882 deals with the transfer of immovable property inter vivos, i.e., between two individuals. However, before the passage of this legislation, the Anglo-Indian courts used to decide the cases concerning the transfer of immovable property in India by applying the principles of equity, justice and good conscience as it prevailed in England.

The doctrine of part performance is one of such equitable doctrines applied by these courts. Whilst the notion of part performance originated in English law, it received statutory recognition in India in 1929 with the addition of Section 53A to the Transfer of Property Act, 1882. 

However, the equity of part performance is not an active equity, it is a passive equity – it can be used only as a shield and not as a sword. Section 53 only provides the right of defence, not the right of action. It is this principle that I seek to discuss in detail with reference to the case law Delhi Motor Company and Others v U.A. Basrurkar and Others, 1968.

WHAT IS THE DOCTRINE OF PART PERFORMANCE?

Section 53A says, 

“where any person contracts to transfer for consideration any immovable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract, then, notwithstanding that where there is an instrument of the transfer, that the transfer has not been completed in the manner prescribed therefor by the law for the time being in force, the transferor or any other person claiming under him shall be debarred form enforcing against the transferee and persons claiming under him any right in respect of the property in which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract.

Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof.”

MEANING

The doctrine of part performance is built on the principle that when two people engage in an agreement wherein one side allows the other to act in the furtherance of the agreement, then such a person establishes equity and cannot later object to the agreement’s performance on the basis that the legalities were not completed.

DELHI MOTOR COMPANY AND OTHERS VS U.A. BASRURKAR AND OTHERS AIR 1968 SC 794

FACTS OF THE CASE

The appellant, Delhi Motor Company was a partnership firm and the respondent New Garage Ltd. was a private limited company. The firm had bought a suit against the company for the possession of a part of the building known as “Scindia House” situated in Connaught Circus, New Delhi, on the basis of an agreement of sublease between the appellant and the respondent. The suit was for the possession of a portion of the show-room on the ground floor, of 1/2 portion of the Balcony, and another portion of the premises which were, in the year 1950, in the possession of Messrs. Kanwar Brothers Ltd.

PLEA OF THE FIRM – It was the case of the firm that the Company was the tenant of Scindia House and was in occupation of the show-room and other parts of the building, while a part of it was occupied by Kanwar Brothers Ltd. The firm sought to evidence the agreement of sub lease by the company to the firm by relying on the following three documents:

• A letter dated 20 February, 1950, written by K. S. Bhatnagar, on behalf of the firm, to U. A. Basrurkar, the Managing Director of the Company, and
• A letter dated 22 February, 1950, written by Basrurkar to Bhatnagar, and
• A document which purported to be the notes on agreement arrived at between Basrurkar and Bhatnagar on 22nd February, 1950.

The firm submitted that the documents did not expressly constitute a sub lease agreement because under the provisions of the Delhi and Ajmer-Merwara Rent Control Act, 1947, if the sub lease is granted by the company to the firm without the consent of the landlord, the company would be liable to be ejected from the premises. In order to avoid the, liability of the Company for ejectment under the Delhi and Ajmer-Merwara Rent Control Act, 1947, the agreement was sought to be given the form of a partnership. Thus, while there was no express agreement to sub lease, in substance and in fact, the agreement was an agreement to sub lease. 

By 1st April, 1950, the firm had taken the possession of two portions of the leased property, i.e., the show-room on the ground floor and a half portion of the Balcony on the first floor and started its business in them. As submitted by the firm, the agreement required both the parties to perform certain duties and obligations, and the firm had duly complied with them.

Further, the landlord gave a letter recognising the possession of the firm, although he had specifically stated in that letter that the firm would be a licensee and not a sub-lessee. Apart from this, the agreement required that one of the appellants, K. S. Bhatnagar, was to be taken as the Director of the Company and he was in fact included in the Directors of the Company thereafter.

However, as submitted by the firm, when Messrs. Kanwar Brothers Ltd. vacated the portion of the premises which was included in the sub-lease agreement, the Company did not give possession of that portion of the leased property to the firm. In addition to this, it started obstructing the firm from using the portions of premises, the possession of which had already been taken over by the firm by 1st April, 1950. After some time, the firm was completely dispossessed from the property leased and, ultimately, after giving notices, the firm instituted a suit on 18th June, 1952. The suit prayed for:

• the delivery of possession in respect of all three portions of the property leased,
• claim for damages of Rs 10000, for loss incurred on account of dispossession and causing obstruction in use of leased property by the company,
• injunction restraining the company from interfering with the rights of the firm and its uninterrupted use of the leased property.

PLEA OF THE COMPANY – The company submitted that there was no agreement of sub-lease or a completed sub-lease between the Company and the firm and there were only negotiations for entering into a partnership and even this agreement of partnership was not complete and therefore, the firm was not entitled to any relief at all.

DECISION BY THE TRIAL COURT – The trial court had held that the agreement evidenced by the documents is an agreement to sub lease and since, such an agreement does not require registration, the firm was entitled to the relief claimed.

The company preferred an appeal against the decision of the trial court in the Punjab and Haryana High Court.

DECISION BY THE HIGH COURT – The High Court held that the three documents constituted a completed lease or at least an agreement to lease, falling under s. 2(7) of the Indian Registration Act and, since the lease or the agreement to lease was evidenced by documents in writing and they were unregistered, the lease or the agreement to lease could not be enforced. The High Court, therefore, allowed the appeal and dismissed the suit of the firm.

The firm, then preferred an appeal against the decision of the High Court in the Supreme Court.

CONTENTIONS BY THE APPELLANT

1. In the first place, the appellant firm contended that in this case there was a completed sub lease and it did not require registration because:

• the lease was completed when, after the resolution of the Board of Directors of the Company, the Company gave possession of the leased property to the firm on or about the 1st April, 1950, and
• in any case, this lease was not a lease from year to year or for any term exceeding one year or reserving a yearly rent, therefore s. 107 of the Transfer of Property Act was not applicable and registration was not compulsory.

2. Secondly, the appellant contended that since the documents did not mention any definite period for the lease, s. 106 of the Transfer of Property Act was applicable and the lease being in respect of immovable property for purposes other than agricultural or manufacturing, it must be deemed to be a lease from month to month. 
3. Thirdly, it was contended on behalf of the firm that the documents constituted an agreement in writing to lease the property in suit and the firm could claim specific performance of this contract.
4. Lastly and most importantly, the appellant firm contended that though the present contract to sub-lease had not been registered, the firm could claim possession under it in view of the provisions of s. 53A of the Transfer of Property Act, because, in this case, the Company would be debarred from enforcing against the firm any right in respect of that property of which the firm had already taken possession, i.e., part of the show-room and a portion of the Balcony.

DECISION BY THE SUPREME COURT

1. With regard to the appellant’s first contention, the Supreme Court held the lease in question to be a lease of immovable property for a term exceeding one year, and such a lease is fully governed by s. 107 of the Transfer of Property Act. The agreement did not mention any fixed term for the lease, nor was any yearly rent fixed in respect of the lease. The third document purported to be notes on agreement provided that “Profit share of party No. 1 would be 10% of net profit of New Delhi business only and will be settled at the end of the 1st closing of the financial year which would be 30th June, 1951.” Therefore, the rent payable for the first time would be 10 % of the net profits earned by the firm in its New Delhi business up to 30th June, 1951. The period would naturally begin on the date on which the lease commenced, i.e., 1st April, 1950. It can therefore be inferred that the initial rent payment would amount to 10% of the firm’s net profits between April 1, 1950, and June 30, 1951, which is one year and three months. The lease, therefore, made rent payable at least for the first period of fifteen months. Despite no provision for extending the lease beyond June 30, 1951, it was established that rent was due for at least fifteen months, thereby exceeding one year. As per Section 107 of the Transfer of Property Act, such a lease required registration to be valid. Since the lease documents were not registered, the firm could not assert any rights based on these unregistered documents.
2. With regard to the second contention, the Court refused to accept the same by holding that none of the three documents presented contains any clause indicating that the tenancy was to be from month to month or the rent was payable monthly.
3. With regard to the claim for specific performance of the contract, the court denied the maintainability of such claim by holding that:

• in the first place, the plaint itself did not mention any claim for the specific performance of the contract.
• secondly, the contract being a contract to lease immovable property and unregistered, specific performance of it could not be sought, except under s. 27A of the Specific Relief Act. That section, however, applies only if the entire contract is made in writing, and according to the firm’s own argument, the complete contract was not entirely documented in writing.
• thirdly, the claim under section 27A shall be maintainable only if possession of the entire property, which is the subject-matter of the contract of lease, has been taken by the lessee. In the present case, the firm never got possession of the entire property as possession was taken by the firm of only two portions of property, while the third portion never came under the possession of the firm. Therefore, the firm could not claim specific performance of contract under the Specific Relief Act. 

4. With regard to the application of section 53A of the TPA, the court denied the application of section 53A in the present case because that section is only meant to bring about a bar against enforcement of rights by a lessor in respect of property of which the lessee had already taken possession. It does not give any right to the lessee to claim possession or to claim any other rights on the basis of an unregistered lease. As was held by the Privy Council in Prabodh Kumar Das and Others v. Dantra Tea Company Limited & Others the provision is only available as a defence to a lessee and not as conferring a right on the basis of which the lessee can claim rights against the lessor. 

Learned counsel for the firm had relied on a decision of the Allahabad High Court in Ram Chander v. Maharaj Kunwar and Others wherein the lessee, under a registered lease, brought a suit against a subsequent purchaser of the house of the lessor on the allegation that the purchaser has in collusion with the Municipal Board, procured the demolition of a portion of the house, and claimed a relief of perpetual injunction restraining the purchaser from demolishing the house or otherwise interfering with the lessee’s rights as such, and for restoration of the demolished portion at the purchaser’s cost. The court in this case had held that the plaintiff was only seeking to debar the defendants from interfering with his possession which he had obtained after the execution of a transfer in his favour. He was, in other words, seeking to defend the rights to which he was entitled under s. 53A of the Transfer of Property Act. However, the apex court denied the application of the cited case in the present case since in the former case the plaintiff was in the position of a defendant and was only seeking to protect his right by resort to the provisions of s. 53A of the Transfer of Property Act, and no such principle was laid down by the High Court that s. 53A is available to a lessee otherwise than as a defence. Therefore, the cited judgement did not recognize the right of a lessee to enforce rights on the basis of an unregistered lease by resort to section 53A. And even if such a principle would have been laid down, it nevertheless stands overruled in Prabodh Kumar and others.

CONCLUSION

Therefore, as has been held in the present case, while the doctrine of part performance protects the interests of the transferee, it is nonetheless only available as a defence to the lessee or the transferee, as the case may be, and does not confer any right of action.

FREQUENTLY ASKED QUESTIONS

1. What is the purpose of the doctrine of part performance?

The doctrine of part performance has its roots in the principles of equity, justice and good conscience. It would be grave injustice if no remedy is available for the party who has performed his/her part of the contract in the confidence that the other party would also perform his part of the contract. Section 53A, thus, seeks to prevent fraud and injustice by protecting the prospective transferees by allowing them to retain the possession over the property, against the rights of the transferors.

2. Is the doctrine of part performance available only with regard to registered instruments?

Yes. Prior to 2001, the law allowed exemption to the idea of part performance allowing unregistered documentation to be used as sufficient proof to seek protection under the concept. As Provision 53A of the TPA was originally enacted in 1929, it did not need papers to be registered to be protected by the part. As a response, unregistered papers, including an unregistered sale deed, were acceptable evidence in order to assert section 53A privilege. Later in 2001, the Act was amended to delete the provision in Section 53A that permitted the admission of unregistered papers. Additionally, Section 49 of the Registration Act 1908 was revised in 2001, and the exemption permitting the admission of unregistered papers was repealed. As a result, the legal situation was identical to that which existed previous to 1929, when every claim relating to the immovable property required the backing of a registered document. As a result of the 2001 modification, solely registered papers can be recognized to apply Section 53A. The amendment significantly reduced the scope of the application of section 53A.

3. Are there any exceptions to the doctrine of part performance?

The proviso to section 53A protects the interests and does not affect the rights of a subsequent transferee for consideration who has no notice of previous transferee’s rights of part performance or the contract of sale.

For example, A, the owner of land, contracts to sell it to B. The contract is unregistered but in part performance of the contract, B takes possession of the land. The transferor or any other person, therefore, cannot dispossess B from the land. But if A sells the land to C through an executed and registered sale deed, and C has not the least knowledge of B’s rights of part performance then section 53A shall not apply. And B (previous transferee), cannot resist C (subsequent transferee) from evicting C and taking possession of the land. 

4. Is there any difference between the application of the doctrine under the Indian and the English law?

Yes. In India, section 53A does not give any right of action to the transferee. the doctrine can be used by the defendant merely as a shield to protect his/her possession. The defendant cannot use this section as a weapon to establish his/her claim or title in the property in furtherance of a written agreement, whereas in England, the equity of part performance is active as well as passive, i.e., the transferee is entitled to defend his possession and is also entitled to enforce his right in an independent suit.

BY:

ARSHITA JINDAL

UNIVERSITY INSTITUTE OF LEGAL STUDIES, PANJAB UNIVERSITY