Supreme Court Upholds Assignability of Repurchase Rights in Conditional Sale: Indira Devi vs. Veena Gupta (2023)

Date of the Judgment: July 4, 2023

Citation: 2023 INSC 593

Judges: Abhay S. Oka, J., Rajesh Bindal, J.

Can a person transfer their right to repurchase a property to someone else? The Supreme Court of India recently addressed this question in a case concerning a conditional sale deed. The core issue was whether the right to repurchase a property, as stated in a conditional sale deed, is a personal right of the original vendor or if it can be transferred to another person. The Supreme Court, in this judgment, clarified the legal position on the assignability of such rights. The judgment was delivered by a bench comprising Justice Abhay S. Oka and Justice Rajesh Bindal, with Justice Rajesh Bindal authoring the opinion.

Case Background

The case revolves around a property initially owned by Kishori Lal Sahu. Kaleshwar Prasad Singh was a tenant on the property. On August 5, 1977, Kishori Lal Sahu and his son executed a conditional sale deed in favor of Indira Devi, Kaleshwar Prasad Singh’s daughter, for ₹5000. The deed stipulated that if the vendors returned the money by July 1984, Indira Devi would return the property. If they failed, Indira Devi would become the absolute owner.

Later, on February 14, 1983, Kishori Lal Sahu executed a gift deed in favor of his daughter-in-law, Veena Gupta. This gift deed included the property that was conditionally sold to Indira Devi. The gift deed mentioned that Veena Gupta could repurchase the property from Indira Devi.

When the vendors attempted to return the ₹5000, Indira Devi refused. Consequently, Veena Gupta, along with Kishori Lal Sahu, filed a civil suit in 1983, seeking specific performance of the repurchase agreement, or alternatively, eviction of the tenant, Kaleshwar Prasad Singh.

Timeline

Course of Proceedings

The Trial Court dismissed the suit. The lower appellate court upheld this decision. However, the High Court of Judicature at Patna reversed these judgments in a second appeal. The High Court framed the following substantial questions of law:

• (i) Whether the courts below committed error in dismissing the suit of the plaintiff on wrong approach and on consideration of an issue which was not material for the purpose of adjudication of the suit?
• (ii) Whether the courts below committed error in not considering the main issues involved in the suit regarding character and construction in respect of the deed impugned?
• (iii) Whether the courts below committed error in not considering the issue of merger of tenancy to the ownership as is relevant in the deed of sale?

Legal Framework

The primary legal issue revolves around the interpretation of the conditional sale deed and the subsequent gift deed. The key question is whether the right to repurchase, as outlined in the conditional sale deed, is a personal right of the original vendor (Kishori Lal Sahu) or if it can be assigned to another person (Veena Gupta). The Supreme Court considered the provisions of the Specific Relief Act, 1963, specifically Section 15(b), which deals with the assignability of contracts.

Section 15(b) of the Specific Relief Act, 1963 states:
“Except as otherwise provided by this Chapter, the specific performance of a contract may be obtained by—(b) the representative in interest or the principal, of any party thereto: Provided that, where the learning, skill, solvency or any personal quality of any party to the contract, is a material ingredient in it, or where the contract provides that his interest shall not be assigned, his representative in interest or his principal, shall not be entitled to specific performance of the contract, unless such party has already performed his part of the contract, or the performance thereof by his representative in interest, or his principal, has been accepted by the other party.”

Arguments

Arguments of the Appellant (Indira Devi):

• The appellant argued that the right to repurchase the property was personal to Kishori Lal Sahu and could not be assigned to Veena Gupta.
• There was no clause in the sale deed that allowed the assignment of this right.
• The Gift Deed was not a valid gift because it involved consideration (the payment of ₹5000 to repurchase the property).
• The plaintiffs were not always ready and willing to fulfill the condition in the conditional sale deed because they did not have the money.
• The Gift Deed was not valid because Kishori Lal Sahu was not in good health.
• Multiple reliefs were claimed in the suit, which was not maintainable, as there was a claim for specific performance and a plea of tenancy.

The appellant relied on Bhoju Mandal and Ors. vs. Debnath Bhagat and Ors. [1963 Supp (2) SCR 82] and Kapilaben and Ors. vs. Ashok Kumar Jayantilal Sheth, through POA Gopal Bhai Madhusudan Patel and Ors. [(2020) 20 SCC 648] to argue that the right to repurchase was personal and could not be assigned.

Arguments of the Respondents (Veena Gupta & Ors.):

• The respondents argued that the primary relief sought was specific performance with possession.
• Kishori Lal Sahu had gifted the property, including the right to repurchase, to Veena Gupta.
• The Gift Deed specifically mentioned that Veena Gupta could repurchase the property from Indira Devi.
• Veena Gupta was ready to pay ₹5000 to Indira Devi, but she refused.
• The amount was deposited in court during the pendency of the suit.
• The right to repurchase was assigned to Veena Gupta by her father-in-law, Kishori Lal Sahu, as he was getting old.
• The right to repurchase is not personal and can be assigned.
• A Special Leave Petition on the issue of default in payment of rent was dismissed by the Supreme Court.

The respondents relied on T.M. Balakrishna Mudaliar vs. M. Satyanarayana Rao and Ors. [(1993) 2 SCC 740] and Shyam Singh vs. Daryao Singh (dead) by LRs and Ors. [(2003) 12 SCC 160] to argue that the right to repurchase is not personal and can be assigned.

Issues Framed by the Supreme Court

The primary issue framed by the Supreme Court was:

1. Whether the vendor can assign the right contained in a sale deed to get the property registered back, or whether the right being personal, cannot be assigned.

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• Sakalaguna Nayudu v. Chinna Munuswami Naykar [AIR 1928 PC 174]: The Court followed this authority, stating that the benefit of a contract of repurchase could be assigned unless the contract showed that it was intended only for the benefit of the parties contracting.
• Vishweshwar Narsabhatta Gaddada v. Durgappa Irappa Bhatkar [AIR 1940 Bom 339]: The Court followed this authority, noting that an option given to repurchase the property sold would prima facie be assignable.
• Sinnakaruppa Gounder v. Karuppuswami Gounder [AIR 1965 Mad 506]: The Court followed this authority, stating that the benefits of a contract of repurchase must be assignable unless the terms of the contract show that the right of repurchase is personal to the vendor.
• T.M. Balakrishna Mudaliar vs. M. Satyanarayana Rao and Ors. [(1993) 2 SCC 740]: The Court relied on this judgment, reiterating that the benefit of a contract of repurchase which did not show that it was intended only for the benefit of the parties contracting, could be assigned.
• Shyam Singh vs. Daryao Singh (dead) by LRs and Ors. [(2003) 12 SCC 160]: The Court followed this authority, holding that the right of repurchase was assignable and not personal to the contracting parties.
• Habiba Khatoon v. Ubaidul Huq [(1997) 7 SCC 452]: The Court relied on this judgment, stating that unless the contents of the document in question and evidence in relation thereto are so clear to infer a prohibition against assignment or transfer, the right of repurchase has to be held to be assignable or transferable.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the principle that the right to repurchase is generally assignable unless explicitly stated otherwise in the contract. The Court emphasized that the conditional sale deed did not contain any clause prohibiting the assignment of the right to repurchase. The Court also considered that the assignment was within the family, from Kishori Lal Sahu to his daughter-in-law, Veena Gupta. The deposit of the consideration amount in court also weighed in favor of the respondents. The Court’s reasoning was based on a consistent interpretation of previous judgments and Section 15(b) of the Specific Relief Act, 1963.

Sentiment Analysis of Reasons Given by the Supreme Court

Fact:Law Ratio

Logical Reasoning

The Court considered alternative interpretations, such as the right to repurchase being personal to Kishori Lal Sahu, but rejected them based on the absence of specific clauses in the conditional sale deed and the established legal principles. The Court emphasized that the law favors the assignability of contractual rights unless there is a clear indication to the contrary.

The Court’s decision was that the right to repurchase was assignable and that Veena Gupta was entitled to enforce it. The Court upheld the High Court’s decision, which had reversed the judgments of the lower courts.

The reasons for the decision were:

• The conditional sale deed did not explicitly state that the right to repurchase was personal to the vendor.
• The law, as interpreted by previous judgments and Section 15(b) of the Specific Relief Act, 1963, favors the assignability of contractual rights.
• The assignment was within the family, from Kishori Lal Sahu to his daughter-in-law, Veena Gupta.
• The consideration amount was deposited in court, demonstrating the readiness and willingness of the respondents to fulfill the condition.

“The primary issue which requires consideration in the present appeal is as to whether the vendor can assign the right contained in a sale deed to get the property registered back or the right being personal cannot be assigned.”

“From the statement of law as has been approved and followed by this Court in two decisions in Habiba Khatoon and T.M. Balakrishna Mudaliar , unless the contents of the document in question and evidence in relation thereto are so clear to infer a prohibition against assignment or transfer, the right of repurchase has to be held to be assignable or transferable and cannot be treated as personal to the contracting parties.”

“It can be summed up from the aforesaid judgments that the condition of right to repurchase in sale deed will not be personal to the vendor unless the terms in the documents specifically state so. Such a right can always be assigned and the contract containing such condition shall be enforceable.”

Key Takeaways

• The right to repurchase in a conditional sale deed is generally assignable unless the deed explicitly states otherwise.
• Parties should clearly specify if a right is intended to be personal and non-assignable in contracts.
• The courts will interpret contracts to favor assignability unless there is a clear prohibition.
• This judgment reinforces the principle that contractual rights are generally transferable.
• The decision provides clarity on the interpretation of conditional sale deeds and the rights of parties involved.

This judgment has implications for future cases involving conditional sale deeds and the assignability of rights. It clarifies that the absence of a specific clause prohibiting assignment will generally lead to the conclusion that the right is assignable. This will likely influence how contracts are drafted and interpreted in similar cases.

Directions

No specific directions were given by the Supreme Court in this judgment.

Specific Amendments Analysis

There was no specific amendment analysis mentioned in the judgment.

Development of Law

The ratio decidendi of this case is that the right to repurchase in a conditional sale deed is generally assignable unless the terms of the document specifically state otherwise. This judgment reinforces the existing legal position established in previous cases like T.M. Balakrishna Mudaliar vs. M. Satyanarayana Rao and Ors. [(1993) 2 SCC 740] and Shyam Singh vs. Daryao Singh (dead) by LRs and Ors. [(2003) 12 SCC 160], clarifying that the absence of an explicit prohibition on assignment will lead to the right being considered assignable. There is no change in the previous positions of law, but a reaffirmation and clarification.

Conclusion

The Supreme Court dismissed the appeal, upholding the High Court’s decision. The Court held that the right to repurchase in a conditional sale deed is generally assignable unless the deed explicitly states otherwise. The Court’s decision reaffirmed the existing legal principles and provided clarity on the interpretation of such clauses in contracts. The Court emphasized that the absence of a specific prohibition on assignment would lead to the conclusion that the right is assignable. This judgment ensures that contractual rights are generally transferable unless there are clear indications to the contrary.