Companies Act Case Law Panchanan Dhara & Ors Vs Monmatha Nath Maity (Dead) Th. LRS. & Anr

CASE NO.:
Appeal (civil) 5187 of 2001

PETITIONER:
Panchanan Dhara & Ors.

RESPONDENT:
Monmatha Nath Maity (Dead) Th. LRS. & Anr.

DATE OF JUDGMENT: 12/05/2006

BENCH:
S.B. Sinha & P.P. Naolekar

JUDGMENT:
J U D G M E N T

S.B. SINHA, J :
This appeal is directed against a judgment and order dated 29th
January, 1998 passed by the Calcutta High Court in Second Appeal No. 887
of 1991 affirming the judgment and order dated 29th June, 1990 passed by
the learned Asstt. District Judge, Ghatal, District Midnapore, West Bengal in
Title Appeal No. 74 of 1989 whereby and whereunder an appeal against the
judgment dated 31st August, 1989 passed by the learned Munsif, Ghatal,
District Midnapore, West Bengal in Title Suit No. 133 of 1985 was
dismissed.

The basic fact of the matter is not much in dispute. Respondent No. 2
herein (the company) is a company registered and incorporated under the
Companies Act, 1956. The said company held and possessed the suit
property situated in the District of Midnapur in the State of West Bengal. It
intended to sell the said property. Respondent Nos. 1 and 2 having came to
know of the said intention on the part of the company entered into an
agreement for sale thereof, wherefor a sum of Rs. 6000/- was paid to the
Company by way of advance. The balance amount was to be paid within a
period of fourteen months. As the title of the Respondent No. 2 in respect of
the said property was not clear, the Company instituted a suit against some
persons who were claiming title thereover on or about 22.05.1971. The said
suit was marked as Title Suit No. 110 of 1971. In the said suit a
compromise petition was filed on 3.4.1979 which having been accepted by
the concerned court, a consent decree was passed on the basis thereof on
3.5.1979. Respondent No. 1 thereafter issued several letters being dated
12.11.79, 11.01.80, 05.01.81 and 08.10.84 asking the Company to execute
and register a sale deed in his favour. The Company in response thereto had
all along been assuring the Respondent No. 1 that it would do so.

By a letter dated 16.3.1985, one of the Directors of Respondent No. 2
assured Respondent No. 1 that no apprehension should be entertained by
Respondent No. 1 that the contract between him and the company would not
be honoured. However, on 21.8.1985, the company refused to execute and
register a deed of sale in favour of Respondent No. 1 on the plea that the
same became barred by limitation.

A suit for specific performance of the said agreement for sale dated
18.04.1971 was filed in the Court of Munsif, Ghatal, District Midnapore,
West Bengal which was marked as Title Suit No. 133 of 1985. It is not in
dispute that not only the Appellant herein had filed a caveat in the said suit,
it purchased the said property on 13.11.1985, i.e., during pendency thereof.
Even in the deed of sale executed in favour of the Appellant by the
Company the factum of the said suit being pending in the court had
specifically been mentioned.

Before the learned Trial Judge, inter alia the following contentions
were raised on behalf of the Appellant:

(i) the agreement for sale was not enforceable as the provisions of
Sections 46 and 48 of the Companies Act had not been complied
with.
(ii) It was not established that the Respondent No. 1 had all along been
and ready and willing to perform his part of contract.
(iii) The suit was barred by limitation.

As regards the contention that in executing the said agreement the
provisions of Sections 46 and 48 of the Companies Act had not been
complied with, the learned Trial Judge held that as all the Directors of the
Company were parties to the said agreement, the said provisions are not
attracted. The plea that the Respondent No. 1 was not ready and willing to
perform his part of contract was also held to have been waived. The plea of
limitation was also negatived.

The appeal preferred thereagainst was also dismissed by the First
Appellate Court.

In the Second Appeal preferred by the Appellant herein, it does not
appear that any substantial question of law was framed by the High Court as
was mandatorily required under Section 100(4) of the Code of Civil
Procedure. However, a learned Single Judge of the court dealt with all the
contentions raised on behalf of the Appellant and dismissed the suit.

Mr. Santosh Mishra, learned counsel appearing on behalf of the
Appellant, in support of this appeal submitted that the courts below
committed a manifest error in arriving at the finding that the suit was not
barred by limitation, purported to be relying on or on the basis of the first
part of Article 54 of the Limitation Act whereas in this case the second part
thereof could be attracted. It was urged that the Respondent No. 1 in terms
of the agreement for sale dated 18.04.1971 was required to pay the balance
sum of Rs. 8,000/- within fourteen months therefrom but even assuming that
the deed of sale was to be executed and registered on perfection of title, the
suit filed by the Company against third parties having been decreed on 31st
August, 1979, the period of limitation in terms of Article 54 of the
Limitation Act should have been reckoned from the said date. Strong
reliance in this behalf has been placed on Ramzan v. Hussaini [(1990) 1
SCC 104], Tarlok Singh v. Vijay Kumar Sabharwal [(1996) 8 SCC 367],
T.L. Muddukrishana and Another v. Lalitha Ramchandra Rao (Smt.) [(1997)
2 SCC 611] and Venkappa Gurappa Hosur v. Kasawwa C/o Rangappa
Kulgod [(1997) 10 SCC 66].

It was further urged that in the event, the terms and conditions
contained in the said agreement dated 18.04.1971 were found to be
uncertain, the same would be void in terms of Section 29 of the Indian
Contract Act.

The learned counsel would furthermore submit that having regard to
the provisions of Sections 46 and 48 of the Companies Act having not been
complied with, the said agreement could not have been enforced.

Mr. Mishra, as regards the plea of readiness and willingness on the
part of the Respondent No. 1 to perform his part of contract, would submit
that although the said plea is not available so far as the present Appellant is
concerned in view of the decision of this Court in Jugraj Singh and Another
v. Labh Singh and Others [(1995) 2 SCC 31] but it was for the court to see
as to whether the plaintiff has proved his case in this behalf or not.
Mr. Gourab Banerji, learned Senior Counsel appearing on behalf of
the Respondents, on the other hand, submitted that the question of limitation
being a mixed question of fact and law, the contention that the first part of
Article 54 of the Limitation Act would not be attracted in this case should
not be permitted to be raised having not been raised before the courts below.
It was submitted that both the courts understood that having regard to the
conduct of the parties, the agreement was kept alive and at all material point
of time the contract was subsisting. As regards alleged non-compliance of
the provisions of Sections 46 and 48 of the Companies Act, the learned
counsel urged that from the findings of the fact arrived at by all the courts, it
would be evident that all the Directors signed the agreement of sale on
behalf of the Company and in any event they have sufficient authority to do
so. Even under the Articles of Association of the Company, it was urged,
one of the Directors was entitled to execute the deed of sale on behalf of the
Company.

The Appellant herein is a subsequent purchaser. A finding of fact has
been arrived at by all the courts that he had purchased the property with full
notice of the said agreement for sale.

The Company has not preferred any appeal against the judgment and
decree passed by the learned Munsif before the appellate court.

A deed of sale has already been executed in favour of the First
Respondent in execution of the decree passed by the learned Trial Court.
Before the High Court, as noticed hereinbefore, no substantial question of
law was framed. The question as regards the applicability of the first part or
the second part of Article 54 of the Limitation Act had also not been raised
before the High Court. The parties adduced evidence only on that basis.

So far as the question of limitation is concerned, the learned Trial
Judge held:

“The letters sent by the plaintiff or his brothers on
behalf of the plaintiff (ext. 8 to 11), the letter of
chairman director Purushattam Roy (ext. 7)
coupled with the fact of non issuing of any notice
by defendant no. 1 estate repudiating that contract
proved beyond any trace of doubt that the
agreement between plaintiff and defendant no. 1
estate was subsisting and was still in force and that
the suit was not barred under Article 54 of
Limitation Act.”

We may notice that the learned First Appellate Court as regards the
Appellants’ contention that the suit was barred by limitation held:

“Next, it was vehemently argued before this court
that the suit is barred by limitation as it was recited
in ext. 3 that the transfer would be effective within
14 months after execution of the bainanama (Ext.
3). But the argument is not tenable in view of the
fact that the time has been expanded by the
respondent no. 2 impliedly by agreeing to transfer
of the suit property as and when time comes. The
respondent no. 1 and his brother despatched
several letters (Ext. 8,9,10,11) to the respondent
no. 2 for transfer of the suit property to them.
Ultimately, by ext. 7 (a letter sent by the company
to the respondent no. 1) the company has agreed to
extend the time giving the respondent no. 1
assurance that just in time transfer would be made
effective. Ext. 7 also suggests that the letters (ext
 8,9,10,11) sent by the respondent no. 1 and his
brothers were received by the company,
respondent no. 2. Thus, it can be said safely that
the time which was recited in the ext  3 was
extended by respondent no. 2 by ext  7 and
moreover, ext  3 suggests unequivocally that time
is not essence of the contract. Had the time being
the essence, the words “subject to perfection” on
the title of the respondent no. 2 of the suit property
would not have occurred in ext  2. Therefore,
when the ld. Munsif has discussed this point in this
light this court sees nothing to interfere.”
The High Court has also accepted the said reasonings of the learned
lower appellate court stating:

“As regards the second point urged by Mr.
Mukherjee, in my opinion, the same is also without
any force. The respondent no. 1 having made
specific case that the company refused to perform
its part of the contract in the year 1985 and having
produced letters written on behalf of the company
showing that the agreement was subsisting and no
person having come forward to depose on behalf
of the company to convert those statements, in my
opinion, the learned courts below rightly found
that the suit is not barred by limitation.”

Contention of Mr. Mishra as regard the applicability of the first or the
second part of Article 54 of the Limitation Act will have to be judged having
regard to the aforementioned findings of fact. A plea of limitation is a
mixed question of law and fact. The question as to whether a suit for
specific performance of contract will be barred by limitation or not would
not only depend upon the nature of the agreement but also the conduct of the
parties and also as to how they understood the terms and conditions of the
agreement. It is not in dispute that the suit for specific performance of
contract would be governed by Article 54 of the Limitation Act, 1964.
While determining the applicability of the first or the second part of the said
provision, the court will firstly see as to whether any time was fixed for
performance of the agreement of sale and if it was so fixed, whether the suit
was filed beyond the prescribed period unless any case of extension of time
for performance was pleaded and established. When, however, no time is
fixed for performance of contract, the court may determine the date on
which the plaintiff had notice of refusal on the part of the defendant to
perform the contract and in that event the suit is required to be filed within a
period of three years therefrom.

In this case, before the Trial Court, the parties proceeded on the basis
that the Second Respondent herein refused to execute and register a deed of
sale in terms of the said agreement on 21.8.1985. The courts below have
also arrived at a finding of fact that the time for performance of the said
agreement for sale had all along been extended and even as on 16.3.1985, a
Director of the Second Respondent assured the First Respondent that it
would be honored. In a suit for specific performance of contract in respect
of any immovable property, time would ordinarily not be the essence of the
contract. The Appellant herein also did not raise any plea to the said effect.

A bare perusal of Article 54 of the Limitation Act would show that the
period of limitation begins to run from the date on which the contract was to
be specifically performed. In terms of Article 54 of the Limitation Act, the
period prescribed therein shall begin from the date fixed for the performance
of the contract. The contract is to be performed by both the parties to the
agreement. In this case, the First Respondent was to offer the balance
amount to the Company, which would be subject to its showing that it had a
perfect title over the property. We have noticed hereinbefore that the courts
below arrived at a finding of fact that the period of performance of the
agreement has been extended. Extension of contract is not necessarily to be
inferred from written document. It could be implied also. The conduct of
the parties in this behalf is relevant. Once a finding of fact has been arrived
at, that the time for performance of the said contract had been extended by
the parties, the time to file a suit shall be deemed to start running only when
the plaintiff had notice that performance had been refused. Performance of
the said contract was refused by the Company only on 21.8.1985. The suit
was filed soon thereafter. The submission of Mr. Mishra that the time fixed
for completion of the transaction was determinable with reference to the
event of perfection of title of the Second Respondent cannot be accepted.
The said plea had never been raised before the courts below. Had such a
plea been raised, an appropriate issue could have been framed. The parties
could have adduced evidence thereupon. Such a plea for the first time
before this Court cannot be allowed to be raised. Even otherwise on a bare
perusal of the agreement for sale dated 18.4.1971, it does not appear that it
was intended by the parties that the limitation would begin to run from the
date of perfection of title.

In Ramzan (supra), Sharma, J., (as the learned Chief Justice then was),
opined that the date fixed for the parties for performance of the agreement
should be ascertained on the basis of the terms of the contract. On an
interpretation of the agreement in sale, which was the subject matter of the
said suit, the same was held to be a contingent contract within the meaning
of Section 31 of the Indian Contract Act. Therein, the property was placed
under a mortgage and the defendant had agreed to execute a deed of sale on
the redemption of the mortgage by her. The mortgage was redeemed in
1970. It was in the aforementioned fact situation, the doctrine of id certum
est quod certum redid potest (certainty need not be ascertained at the time)
was applied. The said decision, therefore, is not applicable in the instant
case.

In Tarlok Singh (supra), an agreement was entered into by the parties
on 21.12.1984. A proceeding was pending in respect of the suit land. The
time for performance was extended by an agreement dated 18.8.1984
stipulating that the Appellant therein would be required to execute the same
within the 15 days of the order vacating the injunction which had been
passed. In view of the said admitted fact, it was held that the date for
performance of the contract was fixed. The order granting injunction having
been vacated on 6.4.1986, the suit which was instituted on 25.8.1989, was
held to be barred by limitation.

In T.L. Muddukrishana (supra), Tarlok Singh (supra) was followed.

In Venkappa Gurappa Hosur (supra), a finding of fact was arrived at
that the agreement was refused to be executed as far back in 1959 and in that
view of the matter it was held that the issuance of a notice in August, 1972
did not stop running of the period of limitation. The said decision, therefore,
has no application in the present case.

Performance of a contract may be dependent upon several factors
including grant of permission by the statutory authority in appropriate cases.
If a certain statutory formality is required to be complied with or permission
is required to be obtained, a deed of sale cannot be registered till the said
requirements are complied with. In a given situation, the vendor may not be
permitted to take advantage of his own wrong in not taking steps for
complying the statutory provisions and then to raise a plea of limitation.

An almost identical question came up for consideration before a
Division Bench of this Court in S. Brahmanand and Others v. K.R.
Muthugopal (Dead) and Others [(2005) 12 SCC 764] wherein this Court laid
down the law:
“Thus, this was a situation where the original
agreement of 10-3-1989 had a “fixed date” for
performance, but by the subsequent letter of 18-6-
1992 the defendants made a request for postponing
the performance to a future date without fixing any
further date for performance. This was accepted by
the plaintiffs by their act of forbearance and not
insisting on performance forthwith. There is
nothing strange in time for performance being
extended, even though originally the agreement
had a fixed date. Section 63 of the Contract Act,
1872 provides that every promisee may extend
time for the performance of the contract. Such an
agreement to extend time need not necessarily be
reduced to writing, but may be proved by oral
evidence or, in some cases, even by evidence of
conduct including forbearance on the part of the
other party. Thus, in this case there was a
variation in the date of performance by express
representation by the defendants, agreed to by the
act of forbearance on the part of the plaintiffs.
What was originally covered by the first part of
Article 54, now fell within the purview of the
second part of the article”
In R.K. Parvatharaj Gupta v. K.C. Jayadeva Reddy [(2006) 2 SCALE
156], wherein one of us was a member, it was observed:

” In terms of the said Article, a suit for
specific performance of a contract is required to be
filed within three years; in the event no date is
fixed for the performance, within a period of three
years from the date when the plaintiff has notice
that performance is refused. The notice dated
24.04.1984, thus, is required to be construed in the
context of the agreement dated 13.10.1982 entered
into by and between the parties.

There cannot be any doubt whatsoever that
in respect of a contract for sale of immovable
property, time is not of the essence of the contract,
but the question as regard the conduct of the
Appellant must be considered in the backdrop of
the events noticed hereinbefore.”

The said decision has again been noticed in Gunwantbhai Mulchand
Shah & Ors. v. Anton Elis Farel & Ors. [(2006) 3 SCALE 82] wherein it has
been held:

“We may straightaway say that the manner in
which the question of limitation has been dealt
with by the courts below is highly unsatisfactory.
It was rightly noticed that the suit was governed by
Article 54 of the Limitation Act, 1963. Then, the
enquiry should have been, first, whether any time
was fixed for performance in the agreement for
sale, and if it was so fixed, to hold that a suit filed
beyond three years of the date was barred by
limitation unless any case of extension was
pleaded and established. But in a case where no
time for performance was fixed, the court had to
find the date on which the plaintiff had notice that
the performance was refused and on finding that
date, to see whether the suit was filed within three
years thereof. We have explained the position in
the recent decision in R.K. Parvatharaj Gupta v.
K.C. Jayadeva Reddy 2006 (2) Scale 156. In the
case on hand, there is no dispute that no date for
performance is fixed in the agreement and if so,
the suit could be held to be barred by limitation
only on a finding that the plaintiffs had notice that
the defendants were refusing performance of the
agreement. In a case of that nature normally, the
question of limitation could be decided only after
taking evidence and recording a finding as to the
date on which the plaintiff had such notice. We are
not unmindful of the fact that a statement appears
to have been filed on behalf of the plaintiffs that
they do not want to lead any evidence. The
defendants, of course, took the stand that they also
did not want to lead any evidence. As we see it, the
trial court should have insisted on the parties
leading evidence, on this question or the court
ought to have postponed the consideration of the
issue of limitation along with the other issues
arising in the suit, after a trial.”

In view of the aforementioned pronouncements of this Court, we are
of the opinion that the plea raised by the learned counsel for the Appellant
that the suit was barred by limitation cannot be accepted as all the courts
have arrived at a finding of fact that the period for execution of the deed of
sale had been extended.

Similarly, the applicability of the provisions of Section 29 of the
Indian Contract Act having not been raised, the same cannot be permitted to
be raised for the first time before this Court. Even otherwise we do not see,
on a plain reading of the said agreement of sale dated 18.04.1971, that the
terms thereof were uncertain or vague so as to attract the provisions of
Section 29 of the Indian Contract Act.

Sections 46 and 48 of the Companies Act, read as under:

“46. Form of contracts. (1) Contracts on behalf
of a company may be made as follows: 
(a) a contract which, if made between private
persons, would by law be required to be in writing
signed by the parties to be charged therewith, may
be made on behalf of the company in writing
signed by any person acting under its authority,
express or implied, and may in the same manner be
varied or discharged;
(b) a contract which, if made between private
persons, would by law be valid although made by
parole only and not reduced into writing, may be
made by parole on behalf of the company by any
person acting under its authority, express or
implied, and may in the same manner be varied or
discharged.
(2) A contract made according to this section shall
bind the company.

48. Execution of deeds. (1) A company may, by
writing under its common seal, empower any
person, either generally or in respect of any
specified matters, as its attorney, to execute deeds
on its behalf in any place either in or outside India.
(2) A deed signed by such an attorney on behalf of
the company and under his seal where sealing is
required, shall bind the company and have the
same effect as if it were under its common seal.”

Section 46 merely lays down the mode of signing contract on behalf
of the company. Once a deed is executed on behalf of the company, it is
company and not the persons signing can sue or be sued on the contract if
the evidence is clear that the signature was only that of the company.

An oral agreement for sale is permissible in law. There is furthermore
no dispute that the agreement for sale was entered into by three directors of
the company. The subsequent letters written on behalf of the Company
clearly demonstrate that all the directors were aware of the said agreement.
The company before the Trial Court never chose to file any written
statement or dispute the contentions raised in the plaint. The Company,
thus, never denied or disputed the correctness or otherwise of the contents of
the said agreement. The Company never denied or disputed the terms of the
agreement nor raised any plea that the agreement was not binding on the
company or the same was illegal. In fact in the deeds executed in favour of
the agreement, it had clearly been stated that the suit for specific
performance of contract filed by Respondent No. 1 was pending.

In Chairman, Life Insurance Corpn. and Others v. Rajiv Kumar
Bhasker [(2005) 6 SCC 188], this Court held:

“Agency as is well settled, is a legal concept which
is employed by the Court when it becomes
necessary to explain and resolve the problems
created by certain fact situations. In other words,
when the existence of an agency relationship
would help to decide an individual problem, and
the facts permits a court to conclude that such a
relationship existed at a material time, then
whether or not any express or implied consent to
the creation of an agency may have been given by
one party to another, the Court is entitled to
conclude that such relationship was in existence at
the time, and for the purpose in question. [See
Establishing Agency by GHL Fridman  1968
(84) Law Quarterly Review 224 at p. 231.]”
It is not in dispute that the contract was executed in the name of the
company. It has furthermore not disputed that all the five directors executed
the agreement. The company was a private limited company. The Trial
Court held:

“As all the directors of the company took part in
execution of ext.  3 there was not necessity of
giving any special authorization either u/s 46 or u/s
48 of the Companies Act for entering into or for
execution of the contract. It is true that at the time
of execution of the documents in favour of the
party defendants (ext. A series) there was a
resolution of the company. The copy of the said
resolution was marked (ext.  1). On plain reading
of Ext.  1 it is found that as 4 directors out of the
5 directors of the company were empowered to
execute those documents said resolution was
necessary u/s. 48 of the Companies Act.”

Before the courts below, execution of the agreement was not denied.
Thus, even in the absence of resolution the contract could not have been held
to be invalid or illegal.

So far as the question of putting up of the seal of the Company is
concerned, it is a relic of the days when mediaeval barons, who could not
read or write, used their rings to make a characteristic impress. Even in
absence of a seal, the Company may still be held to be liable having regard
to the nature of transaction and the authority of those who had executed it.
If the act of the Directors is not ultra vires or no public policy is involved,
the parties acting thereupon cannot be left at large. [See Probodh Chandra v.
Roadoils (India) Ltd., AIR 1930 Cal 782 and OTV Birwel Co. Ltd. v.
Technical and General Guarantee Co. Ltd., (2002) 4 All ER 668].

For the reasons aforementioned, we do not find any merit in this
appeal which is dismissed accordingly. No costs.

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