Appeal by the first defendant against a decree of specific performance directing him to transfer his shares in a private limited company to the plaintiff on receipt of the balance sale consideration. The court rejected the defences of illegality, determinability and uncertainty, upheld the decree and dismissed the appeal, making no order as to costs.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE MR.JUSTICE P.N.RAVINDRAN &
THE HONOURABLE MR. JUSTICE DEVAN RAMACHANDRAN
TUESDAY, THE 17TH DAY OF OCTOBER 2017/25TH ASWINA, 1939
RFA.No. 695 of 2015 ()
OS 128/2011 of SUB COURT, THIRUVALLA
APPELLANT/1ST DEFENDANT IN THE SUIT:
T.O. ABRAHAM
S/OLATE KURUVILLA UNNITTAN, THOTTATHIL MALIYEKKAL, THURUTHIKKADU, MALLAPPALLY-689 584.
BY ADVS.SRI.S.VINOD BHAT SRI.LEGITH T.KOTTAKKAL SRI.R.D.SHENOY (SR.)
RESPONDENT/(1ST RESPONDENT IS THE PLAINTIFF AND RESPONDENTS 2 TO 5 ARE DEFENDANTS 2 TO 5 IN THE SUIT):
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1. JOSE THOMAS, S/O.P.O.THOMAS, PADINJAREPUTHEN VEEDU, KANNAMCODU MURI, ADOOR-691 523.
2. T.O.ALIYA S/O.LATE KURUVILA UNNITTAN, THOTTATHIL HOUSE, MUTHOOR PO, RAMANCHIRA, THIRUVALLA TALUK, PIN-689 107.
3. ABRAHAM BABY S/O.LATE T.O.BABY, MARY SADANAM, THURUTHIKKADU PO, MALLAPPALLY, PIN-689 597
4. GIJI KURIAKOSE S/O.LATE T.O.KURIAKOSE, URUMBIKUNNEL, THURUTHIKKADU, MALLAPPALLY, PIN-689 597
RFA.No. 695 of 2015 ()
5. BINU ZACHARIAS/O.LATE T.S.ZACHARIAH, URUMBIKUNNEL, THURUTHIKKADU, MALLAPPALLY, PIN-689 597.
R1 BY SRI.JOSEPH KODIANTHARA SENIOR ADVOCATE BY ADVS. SRI.SAJJU.S SRI.K.SHAJ
THIS REGULAR FIRST APPEAL HAVING BEEN FINALLY HEARD ON 17-10-2017, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
bp
RFA.No. 695 of 2015 ()
APPENDIX
PETITIONER'S ANNNEXURES :
ANNEXURE 1: LETTER OF CONFORMATION NO. TVLA/C-1/CERT/2015-16 DT 24/7/2015 ISSUED BY INCOME TAX DEPARTMENT
ANNEXURE 1: SEARCH REPORT DT 29/7/2004 BY THE PRACTICING COMPANY SECRETARY (IA NO. 1799/2017)
RESPONDENT'S ANNEXURES :
ANNEXURE R1(a): LETTER ISSUED BY SJS & CO. CHARTERED ACCOUNTANTS, VASUDEV COMPLEX, III FLOOR, 32/2291B6, CIVIL LINE ROAD, PALARIVATTOM, COCHIN - 2 SHOWING THE DETAILS OF THE SHARE HOLDING PATTERN AS PER THE ANNUAL RETURNS SUBMITTED BY M/S. CAVUNAL RUBBER ESTATE PVT. LTD WITH THE REGISTRAR OF COMPANIES, ERNAKULAM.
ANNEXURE R1(b): AFFIDAVIT EXECUTED BY THE R2/3RD DEFENDANT IN RESPECT OF 131 SHARES IN M/S CAVUNAL RUBBER ESTATE PVT.LTD.
ANNEXURE R1(c): AFFIDAVIT EXECUTED BY THE R2/3RD DEFENDANT IN RESPECT OF 211 SHARES IN M/S. CAVUNAL RUBBER ESTATE PVT.LTD.
ANNEXURE R1(d): AFFIDAVIT EXECUTED BY THE R3/3RD DEFENDANT IN RESPECT OF 125 SHARES IN M/S. CAVUNAL RUBBER ESTATE PV.LTD., ANNEXURE R1(e): AFFIDAVIT EXECUTED BY THE R3/3RD DEFENDANT IN RESPECT OF 70 SHARES IN M/S. CAVUNAL RUBBER ESTATE PVT.LTD. ANNEXURE (f): AFFIDAVIT EXECUTED BY THE R4/4TH DEFENDANT IN RESPECT OF 129 SHARES IN M/S. CAVUNAL RUBBER ESTATE PVT.LTD.
RFA.No. 695 of 2015 ()
ANNEXURE (g): AFFIDAVIT EXECUTED BY THE R4/4TH DEFENDANT IN RESPECT OF 70 SHARES IN M/S. CAVUNAL RUBBER ESTATE PVT.LTD. ANNEXURE R1(h): AFFIDAVIT EXECUTED BY THE R5/5TH DEFENDANT IN RESPECT OF 129 SHARES IN M/S. CAVUNAL RUBBER ESTATE PVT.LTD. ANNEXURE R1(i): INDEMNITY BOND EXECUTED BY THE R2/2ND DEFENDANT IN RESPECT OF 131 SHARES IN M/S. CAVUNAL RUBBER ESTATE PVT.LTD. ANNEXURE R1(j): INDEMNITY BOND EXECUTED BY THE R2/2ND DEFENDANT IN RESPECT OF 211 SHARES IN M/S. CAVUNAL RUBBER ESTATE PVT.LTD. ANNEXURE R1(k): INDEMNITY BOND EXECUTED BY THE R3/2ND DEFENDANT IN RESPECT OF 125 SHARES IN M/S. CAVUNAL RUBBER ESTATE PVT.LTD. ANNEXURE R1(l): INDEMNITY BOND EXECUTED BY THE R3/3RD DEFENDANT IN RESPECT OF 70 SHARES IN M/S. CAVUNAL RUBBER ESTATE PVT.LTD. ANNEXURE R1(m): INDEMNITY BOND EXECUTED BY THE R4/4TH DEFENDANT IN RESPECT OF 129 SHARES IN M/S. CAVUNAL RUBBER ESTATE PVT.LTD. ANNEXURE R1(n): INDEMNITY BOND EXECUTED BY THE R4/4TH DEFENDANT IN RESPECT OF 70 SHARES IN RESPECT OF 129 SHARES.
ANNEXURE R1(k): INDEMNITY BOND EXECUTED BY THE R5/5TH DEFENDANT IN RESPECT IN M/S. CAVUNAL RUBBER ESTATE PVT.LTD.
//TRUE COPY//
P.A. TO JUDGE
bp
“C.R.”
P.N.RAVINDRAN & DEVAN RAMACHANDRAN, JJ.
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R.F.A.No.695 of 2015
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Dated this the 17th day of October, 2017
JUDGMENT
Devan Ramachandran, J.
If there will be one case, the facts to which the maxims commodum ex injuria sua non habere debet (convenience cannot accrue to a party from his own wrong) and nullus commodum capere potest de injuria sua propria (no one can obtain an advantage of his own) may be most suitable, it may well be this appeal.
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contra legum and even contra bono mores , thus pre-arming himself with the legal excuse in not enforcing it and opposing it when it is sought to be enforced against him.
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company to be transferred to a third party, thus giving up their ownership and control over the company as well as its only asset, namely, a rubber estate comprised of 57.5 Acres at Perunad Village in Ranni Taluk. As per the plaintiff, in furtherance of their intention to sell their shares and thereby sell the company itself, the appellant and respondents 2 to 5 had approached him, with whom he had thus entered into an agreement dated 10.6.2009. This agreement has been produced and marked on record as Ext.A1.
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shares in his favour, even though respondents 2 to 5 honoured their agreement promises, thus transferring their respective shares in his favour. The relevant plaint averments with respect to the plaintiff's compliance of the conditions in the agreement is contained in paragraph 11 of it which we think requires to be read in whole and is, therefore, extracted as under:
“11. Accordingly the defendants have informed the plaintiff that the meeting of board directors was scheduled to be convened by 4-8-2009 to complete the transfer of the shares by receiving the balance sale consideration. Then on the advice of the company Secretary all necessary arrangement were made by preparing necessary transfer forms, resignation letters of the directors etc. The plaintiff has got ready with necessary funds ie. Rs.38,00,000/- (Rupees Thirty Eight Lakhs only) for each defendants ie. in total Rs.1,90,00,000/- (Rupees One crores Ninety lakhs only) as the balance sale consideration. The meeting was scheduled to be held at 2 P.M. On 4-8-2009 at the office of the company at Thiruvalla. As arranged the plaintiff and all the defendants except the 1st defendant were present. When he was contacted over phone by the 5th defendant, it was told that, the 1st defendant would arrive by 9 p.m. Then all the other share holders/directors have taken necessary decision to transfer the entire shares of the defendants 2 to 5 and all required papers were signed and shares were transferred. All the three director board members ie. defendants 3 to 5 have submitted their resignations from the director board. The 2nd defendant has not submitted his resignation on the request of the plaintiff, as his continuance in that post is required for some more time. That apart the shares of these defendants 2 to 5 were transferred in the name of the plaintiff and his son and brother Rejo Thomas and Jacob Thomas respectively as on the direction of the plaintiff. Then necessary resolutions were passed by the director board before the resignation of D3 to 5, to appoint the plaintiff, Rejo Thomas and Jacob Thomas as additional directors. Necessary resolution was passed and all such
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resolutions were acted upon. The defendants 2 to 5 have received their respective balance sale consideration of Rs.38,00,000/- (Rupees Thirty Eight Lakhs only) each from the plaintiff. The demand draft for Rs.38,00,000/- which was taken in the name of 1st defendant in order to pay the balance sale consideration and all necessary forms and papers to be signed by him were handed over to the 5th defendant to get it signed as he had informed that he will do that on the next day, as he could not reach in the meeting up to 10 p.m. On next day morning, though the 5th defendant approached the 1st defendant, he took all the necessary papers with him and asked to wait for some more days, as he required some time more to study the matter. Later he had returned the demand draft to the plaintiff, through the 5th defendant. Thus the 1st defendant failed to perform his part of the contract as agreed upon. Whereas all the other defendants have completely performed their part of the contract, by transferring their entire respective shares to the plaintiff and to his nominees after receiving balance sale consideration.”
of the property in such manner from the company, made certain improvements thereon and had invested substantially in its improvement. The plaintiff thereafter predicates that eventhough all the other shareholders had transferred their respective shares in his favour, the appellant herein refused to do so even though the balance sale consideration was tendered to him. It is on those allegations that the suit was laid and the Court below took the suit to trial and marked Exts.A1 to A8 on the side of the plaintiff and examined PW1, the plaintiff himself. On the side of the defendants Ext.B1 document was marked and DW1 was examined as their witness. After an assessment of the pleadings on record and the evidence gathered, the Court below
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decreed the suit and directed the appellant herein/the first defendant to transfer his entire shares, in Cavunal Rubber Estate Private Limited, on receipt of the balance sale consideration within a period of three months. The court below also ordered that should the appellant refuse to transfer his shares in the company, the plaintiff will be entitled to get the decree executed through court by depositing the balance sale consideration of Rs.38,00,000/- and to realize the costs from him. It is against this judgment and decree that the appellant has filed this appeal.
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preliminary ones. This is because if the agreement is found to be either of this, then we would not be required to make any further examination of the other issues because it is obvious that an illegal agreement cannot be specifically enforced and a determinable contract cannot be ordered to be specifically performed by any of the parties.
“AND WHEREAS THE VENDEE is in search to purchase of a rubber estate within their district and being attracted to purchase the said scheduled property of rubber estate of the company by purchasing the entire shares of the company enters into negotiation with the vendors/shareholders of the company. AND WHEREAS the vendors have agreed to sell to and the Vendee has agreed to purchase the entire share of
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the company and their by the schedule property upon the following terms and conditions and for the consideration hereinafter stated.”
It is certainly inescapable from a reading of the above covenant that the initial intention of the plaintiff was to buy the rubber estate without being involved in the affairs of the company. In explanation of the change of plan of the plaintiff to acquire the shares of the company, Sri.Joseph Kodianthara, learned Senior counsel submits that one relevant and important factor in this case is that the company had only one asset, namely the rubber estate in question. He says that, therefore, if the rubber estate was purchased by his client without touching the shares of the company, the company would have become a shell company without any assets left of its own. He says that it was because of this singular reason that the parties decided that it will be better, in the interests of the company also, that the shares are transferred in favour of the plaintiff so that he would obtain full control of the company which would then continue to own the rubber estate.
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what is not expressly inhibited and prohibited in law can be pursued. The law does not inhibit transfer of shares of the company thereby obtaining control over its assets and what is concededly agreed by the parties is that the plaintiff would become the sole shareholder in the company, thereby being in full control of the immovable property owned by it. We cannot find any illegality in this, even though we heard the learned Senior counsel, Sri.R.D.Shenoy, submitting that what has been achieved by the parties through this exercise is to cheat the Revenue of the applicable stamp duty. This submission looks to be very attractive at the first instance but we must be cognizant that none of the parties have raised such a plea or laid evidence to this effect in the court below. We do not know what is the real value of the rubber estate; the appellant has conspicuously chosen to be silent as this. Nothing has been placed to show the value of stamp duty that will be attracted if it is sold through a sale document, and therefore it becomes nearly impossible for us to assess whether the exercise intended through the agreement would cheat the Revenue. We say this because even by the exercise, as governed by Ext.A1 agreement, the parties would obviously be under the rigour of the provisions relating to capital gain, Income Tax Act and such other revenue obligations and in the absence of any evidence to show that there has been any deficit or loss to the Revenue, on account of the alternative
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arrangement between the parties, we do not think that it would be justified in concluding that Ext.A1 is illegal.
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it has to be first shown by the defendant that its clauses and terms are such that it would become possible for either of the parties to determine and terminate it without assigning any reason. The words used in section 14(1)(c) is “inherently determinable”. The effect of the use of the word “inherently” in the section is to make it unambiguously clear that a contract which can be terminated by either of the parties on their own will without any further reason and without having to show any cause, would ones are inherently determinable. However, if an agreement is shown to be determinable at the happening of an event or on the occurance of a certain exigency, then it is ineluctable that on such event or exigency happening or occurring alone that the contract would stand determined. In order to see if a particular contract is inherently determinable or otherwise, we have to first see whether the parties to the said contract have the right to determine it or to terminate it on their own without the junction of any other party and without assigning any reason. This is akin to a partnership at will, where one of the partners can notify the others of his intention not to continue in the said firm and the partnership itself then dissolves. The analogy we think is appropriate because a contract, to be inherently determinable, will have to specifically provide competence to the parties to it to terminate it without assigning any reason and merely by indicating that he does not intend to comply with the same.
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“13. It is also agreed by the Vendors/shares that of for any reason (not expected in the normal cause) this agreement could not be completed due to any of the reasons breach or default of the Vendors they shall repay the advance paid amount of Rs.1,50,00,000/(Rupees One Crores Fifty Lakhs only) with 12% interest per annum less the value of Rubber Trees sold by the vendee and in failure the vendee will be free to realize such amounts from the assets of the company mainly from the schedule property.”
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determine the contract on their own without assigning reasons. On the contrary, the clause is worded in such a manner that if there is any breach on the side of the vendors, then alone the contract will stand determined and too on them making payment of the advance amount with 12% interest.
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vendors to ensure that the agreement is not violated for reasons that are normally available to them.
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Kodianthara, learned Senior counsel appearing for the first defendant brought to our notice the judgment of the Honourable Supreme Court of India in M.S.Madhusoodhanan and Another v. Kerala Kaumudi
Pvt. Ltd. and Others [AIR 2004 SC 909] and he invited our attention to paragraphs 138 and 139 thereof which reads as under:
“138. That decision must be understood and read after enunciating certain basic principles relating to the transfer of shares and in the background of earlier decisions on the subject it is settled law that shares are movable properties and are transferable. As far as private companies like Kerala Kaumudi are concerned, the Articles of association restrict the shareholder's right to transfer shares and prohibit any invitations to the public to subscribe for any shares in, or debentures of, the company. This is how a “private company” is now defined in Section 13(1)(iii) of the Companies Act, 1956 and how it was defined in Section 2(13) of the 1913 Act.
139. Subject to this restriction a holder of shares in a private company may agree to sell his shares to a person of his choice. Such agreements are specifically enforceable under Section 10 of the Specific Relief Act, 1963, which corresponds to Section 12 of the Specific Relief Act, 1877. The section provides that specific performance of such contracts may be enforced when there exists no standard for ascertaining the actual damage caused by the non-performance of the act agreed to be done, or when the act agreed to be done in such that compensation in money for its nonperformance would not afford adequate relief. In the case of a contract to transfer movable property, normally specific performance is not granted except in circumstances specified in the Explanation to Section 10. One of the exceptions is where the property is “of special value or interest to the plaintiff, or consists of goods which are not easily obtainable in the market”. It has been held by a long line of authority that shares in a private limited company would come within the phrase “not easily obtainable in the market” (See : Jainarain Ram Lundia v. Surajmull Sagarmull and Others, AIR [36] 1949 FC 211, 218. The Privy Council in
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the Bank of India Ltd. v. J.A.H. Chinoy, [AIR 1950 PC 90] said : “It is also the opinion of the Board that, having regard to the nature of the company and the limited market for its shares, damages would not be an adequate remedy” specific performance of a contract for transfers of shares in a private limited company could be granted.”
Thus, the declaration of law by the Honourable Supreme Court is that shares are movable properties, which are transferable and that they would also be in the species of property which is not an ordinary article of commerce, which has special value to the plaintiff because it is not easily obtainable in the market. This judgment answers our suspicion and therefore, we move on to the next line of enquiry as to whether Ext.A1 agreement can, on the facts of this case, be enforced in law.
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the said treatise, that every valid contract must contain a description of the subject matter, that its terms must be certain and that the court must be in a position to understand and ascertain what it is. The learned Senior counsel asserts that in this case that these requisites are totally missing. According to him, Ext.A1 agreement only says that the vendor shall pay an amount of Rs.3,40,00,000/- as price for the 100% of the shares held by five people. The learned Senior counsel contends that the stipulations in the agreement does not say what are the actual shares of each of the shareholders so as to enable the vendor to pay them off in proportion of their shares. He says that this is because the terms in Ext.A1 agreement is to the effect that the shareholders have agreed to affect full transfer of their “respective entire shares” (sic) in the company in favour of the first respondent (this is in paragraph 2 of the agreement); that the vendors agree that they will not have any interest or right in the company on completion of the agreement and by transfer of their “respective and entire shares” in the company (this is in paragraph 5 of the agreement); and that the vendors have agreed to affect transfer of their “respective entire shares” in the company to the vendee on the happening of the arrangement contained in the agreement (sic) (this is in paragraph 10 of the said agreement).
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the agreement does not specify the respective proportion of the shareholding of the appellant and respondents 2 to 5 in the company, the agreement itself is uncertain. According to the learned Senior Counsel, when the agreement is uncertain with regard to the subject matter involved it cannot be in any manner enforced. He avouches that the plaintiff had a duty to ensure that the agreement was certain in its terms and that by not doing so, he is hit by the doctrine of caveat emptor because he did not exercise due diligence while entering into Ext.A1 agreement.
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which Ext.A1 would operate in its ambit. The question is whether the vendor should have known that the shares of the various shareholders are at variance and whether he was under an obligation to ensure that each of the shares are specifically mentioned in the agreement. Normally, the vendor should have ensured that this was stipulated in the agreement. However, this is a case where certain special circumstances have been noticed. For the first, there was certain disputes between the shareholders, which had led to a company petition being filed before the Company Law Board, Chennai. The allegations in the said petition, which has been produced and recorded as Ext.B1, is that the shareholding of the five shareholders, namely, the appellant and respondents 2 to 5 herein, were more or less equal, until the appellant and the fifth respondent allegedly collaborated in creating documents to show that their shares have been augmented by over 2 or 3 times. The company petition prayed that such illegal allotment of shares, if any, made in favour of the appellant and the fifth respondent be cancelled and it was pending such dispute that they had agreed to subscribe their signatures to Ext.A1 agreement. There can be no doubt about this because, the covenants in Ext.A1 would clearly speak about this and say that the reason why the shareholders agreed to the sale of the 100% shares of the company was to have a resolution of the disputes between them.
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also specifically wrote in clause 16 as under:
“16. It is also made believed by the Vendors that no cases in connection with the company or with related the schedule property are pending other that the case pending in the Company Law Board, Chennai between the Vendors shareholders and if further agreed that the Vendors shall withdraw that case and make many arrangements to close that proceedings before transfer.”
When clause 16 of the agreement as above, obligates the vendors as a whole to have the case in the Company Law Board withdrawn or settled or compromised, it normally would only mean that there were no subsisting disputes between them at the time when Ext.A1 was executed. However, Sri.R.D.Shenoy, learned Senior counsel submits, interpreting this clause, that what the shareholders intended was that the petition before the Company Law Board, namely, Ext.B1, would be withdrawn by respondents 2, 3 and 4 herein against the appellant and the fifth respondent and that this could only mean that they had agreed to their augmented shares. On such submission, learned Senior counsel maintain that his client is entitled to 771 shares out of 1880 shares in the company. This submission, of course, takes cue from the averments in paragraph 13 of the written statement filed by the appellant before the court below. This submission would have been certainly worthy of examination provided the appellant was able to even at least tell us, in support of his submission, as to how he makes
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this assertion. It is true that he makes a bald assertion in the written statement, which has been carried in submissions before this court also, that he owns 771 shares in the company, but nothing has been placed on record, except Ext.B1 itself which, he says, is an admission of respondents 2 to 5 herein that he holds that many shares in the company.
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proportionate amount out of the sale consideration paid by the vendor/the first respondent herein.
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Ext.A1 agreement, several promises are made by more than one person and he says that since each of these promises are several and distinct, Ext.A1 should be construed as imposing a several liability on each of the covenantors.
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assess if it would find sustenance in law, tested within the parameters of the factual factors available in this case.
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that the payment of consideration was to be made jointly to the appellant and respondents 2 to 5, whereas, each of them were obligated to transfer, by executing transfer documents, their respective shares in the shareholding of the company. What was expected of them, as per Ext.A1 agreement, after receipt of the total sale consideration, was only to execute transfer documents with respect to their respective shares but this cannot mean that their contractual obligations are several in nature, as has been now contended by Sri.R.D.Shenoy. Their role, as transferor of the shares, is only to execute the relevant documents and hand it over to the vendee and since they hold shares in the company individually, such documents also will have to be executed individually and can never be done jointly. Merely because of this, we cannot find favour with the submission that the agreement itself is several or that the obligations under it are several. Viewed from that angle, even though the suit had been filed with all the shareholders on the party array, thus entitling each of them to raise contentions even against each other if they had subsisting disputes among themselves, the fact that they had chosen to concede to the contentions of the plaintiff by not filing their written statements, can only lead to the ineludible inference, at least as regards respondents 2 to 5 herein, that they had agreed to the covenants in Ext.A1 agreement and had executed transfer documents
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with respect to their shares in favour of the vendee. As regards the appellant herein is concerned, his contention is that his obligation under Ext.A1 is distinct from the others and, therefore, that when that part of the agreement is sought to be enforced against him, it being a several contract, he would be justified in contesting it on the ground that there is uncertainty in the terms of the contract.
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against the enforceability of the contract on the ground of uncertainness even though he is one of the authors of the agreement and he had signed the same fully knowing the consequences thereof. This is why the doctrine of Nullus commodum capere potest de injuria sua propria and Commodum Ex Injuria Sua Nemo Habere Debet would apply in all its fours in this case. We are sure that the appellant cannot be allowed to take advantage of something that he engineered and authored and he cannot be allowed to take convenience of a lacuna that he was also responsible for it in the first place.
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therefore, that the concept of caveat emptor would apply against him. The learned senior counsel appear to say that even though the appellant was aware of the illegality of the contract, he had only tacitly acquiesced it because the plaintiff was in error by self deception, which would not be a ground to create any legal liability against the appellant.
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alleged infirmity, of which he himself is the cause, in Ext.A1 contract is reason why it should not be enforced against him.
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court of equity, that such illegalities are not allowed to be perpetrated. He brought to our notice the judgment of the Hon'ble Supreme Court in Ganesh Shet v. Dr.C.S.G.K.Setty and others [AIR 1998 SC 2216] and contends that illegality in a contract or any part of a contract is a bar to specific performance as well as to every other proceeding by which either the parties may seek to enforce it. According to him, the defence founded on the illegality of a contract differs in its nature from most other defences because such objection is rather in the nature of the public speaking through the Court than merely that of the defendant as a party to the action. He says that the law disallows all proceedings in respect of illegal contracts not from any consideration of the moral position and rights of the parties but upon grounds of public policy. His submissions, of course, draw strength from the doctrine of Ex Dolo Malo Non Oritur Actio, which provides that no right of action can have its origin in fraud, and he maintains that this principle is founded on the sacrosanct principles of public policy.
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because what is provided in Ext.A1 is only the transfer of shares and not the transfer of the property. We, therefore, find ourselves without favour for these submissions and therefore, have no other option but to repel the same.
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“16. It appears to us that while normally it is permissible to grant relief on the basis of what emerges from the evidence - even if not pleaded, provided there is no prejudice to the opposite party, such a principle is not applied in suits relating to specific performance. In Gonesh Ram V. Ganpat Rai, AIR 1924 Cal 461, the Calcutta High court has considered the same question. There the agreement pleaded was not proved but plaintiff wanted to prove an antecedent agreement based on correspondence. It was held that the plaintiff, in a suit for specific performance, could not be permitted to abandon the case made out in the plaint and to invite the Court to examine whether a completed agreement may or may not be spelt out of the antecedent correspondence. In that connection Sir Asutosh Mookerjee observed:
“The Court would not in a case of this description permit the plaintiffs to depart from the case made in the plaint as the Court discourages, as a rule, variance between pleadings and proof. The test to be applied in such cases is whether if the variance were permitted in favour of the plaintiffs, defendants would be taken by surprise and be prejudiced thereby....... This rule is applied with special strictness in cases of specific performance of contracts. In Hawkins V. Maltby. (1867) 3 Ch A 188. One contract was alleged and another was proved, with the result that the bill was dismissed. No doubt where there has been part performance, the Court may struggle with apparently conflicting evidence rather than dismiss the suit. This appears to have been the view adopted by Lord Cottenham in Mundy V. Jolliffe, 5 My & Cr 167: (1839) 9 LJ Ch 95. In the case before us there is no question of part
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performance.”
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the company. This becomes more conspicuous when we see that even though in the written statement the appellant says that he is entitled to hold 771 shares in the company, he does not give any evidence in support of the same. His answer before us is that he is not liable to prove it and that all that he has to show is that he owns such shares in the company, which then is for the vendee to disprove.
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R.F.A.No.695 of 2015
-:38:-
therefore, left with no option but to dismiss this appeal confirming the judgment and decree of the Sub Court, Thiruvalla in O.S.No.128 of 2011. We do so.
Since we see that the parties have been contesting this appeal with vehemence on certain fundamental principles, we deem it appropriate that we make no order as to costs and to leave the parties to suffer their respective costs in this appeal.
Sd/-
P.N.RAVINDRAN JUDGE
Sd/-
DEVAN RAMACHANDRAN JUDGE
/true copy/
P.A. to Judge
vpv/stu
3 issues framed by the court
Whether the agreement to transfer the shareholders' equity shares in a private company was illegal or opposed to public policy and therefore unenforceable?
Whether the agreement was determinable in nature under section 14(1)(c) of the Specific Relief Act and hence incapable of specific performance?
Whether the agreement was vitiated by uncertainty as to the subject matter, rendering it incapable of specific performance?
Colour shows how this judgement treated each authority
M.S.Madhusoodhanan and Another v. Kerala Kaumudi Pvt. Ltd. and OthersRelied on¶23
AIR 2004 SC 909 · Who else cites this
Ganesh Shet v. Dr.C.S.G.K.Setty and othersDistinguished¶39
AIR 1998 SC 2216 · Who else cites this
5 provisions across 2 enactments
T.O. Abraham
Jose Thomas
T.O. Aliya
Abraham Baby
Giji Kuriakose
Binu Zachariah
P.N. Ravindran
Devan Ramachandran
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
