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SCHOOL OF LAW

CASE STUDY

G.H.C. Ariff vs Jadu Nath Majumdar

Date:

Submitted to: Submitted by:


GARIMA MAAM (Prashant Rana)
Faculty of LAW Roll No. IUU15BAL002
IMS Unison University Semester –VII BALL.B

IMS Unison University


 Calcutta High Court
 G.H.C. Ariff vs Jadu Nath Majumdar on 18 January, 1928
 Equivalent citations: AIR 1929 Cal 101

 JUDGMENT Mukerji, J

 FACT OF THE CASE :-

1. The facts of the case are sufficiently set out in our order of remand of 10th
February 1927. The two questions of fact on which we asked for the findings of the
Court of appeal below have now been answered by that Court. Since the return of
the records and the submission of the findings we have heard the parties again and
we are thankful to the learned lawyers who represent them for the assistance they
have given us in arriving at our conclusions on this somewhat difficult case. We
now proceed to judgment.

2. Amongst the findings of fact which the Courts below have concurrently arrived
at in this case it is necessary to refer to one, viz., that in 1913 there was a parole
agreement between the plaintiff and the defendant to the effect that the plaintiff
would grant a permanent lease to the defendant in respect of the land at a rental of
Rs. 4 per catta, that is to say, at a. total rental of Rs. 80 per month. The two
questions which we sent down for determination were : first, was there, at any
time, and if so, when, a clear refusal on the part of the plaintiff to the knowledge of
the defendant to specifically perform this contract ? and second, whether the
structures which the defendants erected on the land, shortly after 1913 and in
expectation of getting a permanent lease, involved such an outlay of money as
would reasonably strike the plaintiff as being an assertion of a permanent right in
the land on the part of the defendant, or such as would reasonably call for objection
from a landlord who never intended to grant a permanent lease. As regards the first
question, in the opinion of the learned District Judge, the plaintiff's letter of 14th
December 1918 contained, and gave notice to the defendant of such a refusal, and
the present suit, it should be mentioned was instituted on 12th April 1923. On the
second question the answer of the learned District Judge is that the structures
erected by the defendant cost Rs. 10,000 to Rs. 12,000, that the plaintiff was aware
of the erection of these structures and must have realized that the defendant would
not have constructed, such a building unless he was assured of the possession of a
permanent right in the land and that if the intention of the plaintiff was not to grant
such a lease it. might reasonably be expected that he would have objected to the
construction of such a building.

3. Now, it seems to me that the defendant, not having obtained a lease in


conformity with the provisions of Section 107, T.P. Act read with Section 49,
Eegistration Act, can resist ejectment, in view of the circumstances of the case,
only if the case may be brought within the range of one or other of those principles
of equity which have been held to apply to this country and the operation of which
may be attracted by the facts found as above.

4. One such principle is to be found in the class of cases of which Maddison v.


Alderson [1883] 8 A.C. 473, is the type, in which case the principle is fully
explained. In that case it was held that where there is a parol contract not provable
by reason of Section 4, of the Statute of Frauds, which however, did not avoid a
parol contract but only barred the legal remedies which might otherwise have been
enforced, if there had been such performance of it by some acts unequivocally
referable to or indicative of the contract, a Court of equity will charge a party upon
the equities resulting from the acts done in execution of the contract. In that case
Lord Selborne, L.C., observed thus:

If such, equities are excluded, injustice of a kind which the statute cannot be
thought to have had in contemplation would follow. Let the case be supposed of a
parol contract to sell land, completely performed on both sides, as to everything
except conveyance ; the whole purchase money paid ; the purchaser put into
possession ; expenditure by him (say in costly buildings) upon the property ; leases
granted by him to tenants. The contract is not a nullity ; there is nothing in the
Statute to stop any Court which may have to oxercise jurisdiction in the matter
from inquiring into and taking notice of the truth of the facts. All the acts done
must be referred to the actual contract, which is the measure and test of their legal
and equitable character and consequences. If therefore, in such a case a
conveyance were refused, and an action of ejectment brought by the vendor or his
heirs against the purchaser, nothing could be done towards ascertaining and
adjusting the equitable rights and liabilities of the parties, without taking the
contract into account. The matter has advanced beyond the stage of contract ; and
the equities which arise out of the stage which it has reached cannot be
administered unless the contract is regarded. The choice is between undoing what
has been done (which is not always possible, or if possible, just) and completing
what has been left undone. The line may not always be capable of being so clearly
drawn as in the case which I have supposed ; but it is not arbitrary or unreasonable
to hold that when the Statute says that no action is to be brought to charge any
person upon a contract concerning land, it has in view the simple case in which ha
is charged upon the contract only, and not that in which there are equities resulting
from res gestee subsequent to and arising out of the contract, So long as the
connexion of those res gestoe with the alleged contract does not depend upon mere
parol testimony, but is reasonably to be inferred from the res gestoe themselves,
justice seems to require some such limitation of the scope of the Statute, which
might otherwise interfere an obstacle even to the rectification of material errors,
however clearly proved, in an executed conveyance founded upon an unsigned
agreement.

5. The Judicial Committee in the case of Mahomed Musa v. Aghore Kumar


Ganguly A.I.R. 1914 P.C. 27, referring to the principles enunciated as above,
observed:

Many authorities are cited in support of these propositions from English and
Scotch Law, and no countenance is given to the proposition that equity will fail to
support a transaction clothed imperfectly in those legal forms to which finality
attaches after the bargain has been acted upon. Prom those authorities one dictum
quoted by Lord Selborne from Sir John Strange in Potter v. Potter [1750] 1 Ves.
Sen. 437 may be here repeated : ' if confessed or in part carried into execution, it
will be binding on the parties, and carried into further execution as such in equity.
Their Lordships do not think that the law of India is inconsistent with these
principles. On the contrary it follows them.

6. Their Lordships also said:

To use language common from very early times in Scotland, and highly approved
in the case of Maddison v. Alderson [1883] 8 A.C. 473 in the House of Lords, it is
no doubt true that there is a locus poenitentioe that is a power of resiling from an
incomplete engagement, from an unaccepted offer, from a mutual contract to which
all have not assented, from an obligation to which writing is requisite and has not
yet been adhibited in an authentic shape.' This is a situation where the parties stand
upon nothing but an engagement which is not final or complete. But where the
actings and conduct of parties are founded on, then in all such cases, to use the
language of Professor Boll in his Principles [10th Edn.] reiinter-ventus raises a
personal exception, which excludes the plea of locus penitential. It is inferred from
any proceedings, not unimportant, on the part of the oblige, known to and
permitted by the obligor to take place on the faith of the contract, as if it were
perfect; provided they are unequivocally referable to the contract and productive of
alteration of circumstances, loss or inconvenience, though not irretrievable.

7. As has been pointed out by Lord Oran-worth in Jorden v. Money [1854] 5


H.L.C. 185 which is one of the cases relied upon by the Judicial Committee in
Venkayyamma Rao v. Venkata Narasimha A.I.R. 1916 P.C. 9.

The question upon this part of the case is simply one of fact. Is it made out by such
evidence as can justify a Court of Justice in acting upon it, that such a contract as
that which is alleged really was entered into?

8. Now in the present case, apart from the performance or part performance, it has
been proved aliundi that there was a parol agreement that the plaintiff would grant
a permanent lease to the defendant on certain terms and conditions, and it has also
been proved that the defendant came into possession on the basis of the agreement.
There is therefore no necessity to infer the agreement from the fact of the
defendant's possession or to consider whether the possession of the defendant is
referable to such an agreement; but the other part of the principle of Maddison v.
Alderson [1883] 8 A.C. 473 comes into play by reason of equities resulting from
the part performance in the shape of delivery of possession which has been
productive of an alteration of circumstances, and the locus poenitentiae that exists
in the case of an inchoate or incomplete agreement is for that reason excluded and
the plaintiff therefore cannot resile from the agreement. On the principles of
Maddison v. Alderson [1883] 8 A.C. 473 then it must be held that the defendant is
holding under a permanent lease which the plaintiff agreed to grant him and which
equity will regard as having been so granted. At one time it was doubted whether
the principles of Maddison v. Alderson [1883] 8 A.C. 473 could be invoked in
cases in which there is an absence of a document which under the Statute Law
would be necessary to create a title in the defendant, but in view of the broad form
in which the principles have been recited and adopted by the Judicial Committee
in Mahomed Musa v. Aghore Kumar Ganguly A.I.R. 1914 P.C. 27 and
Venkayyamma Rao v. Venkata Narasimha A.I.R. 1916 P.C. 9 the doubt, in my
opinion, cannot reasonably arise. It is true that in the absence of a lease executed
and registered in accordance with law (vide Section 107, T.P. Act and Section
49, Registration Act) the defendant has not acquired a valid title as that of a lessee,
and has only such title as possession may confer, but the plaintiff cannot succeed as
he is unable to displace the defendant's possessory title by reason of the equities
arising out of the executed contract blocking his way.
9. Somewhat akin to the principle of Maddison v. Alderson [1883] 8 A.C. 473 and
owing its source to the same fountain head of equity is the doctrine enunciated in
the cases of which Walsh v. Lansdale [1882] 21 Ch. D. 9 is the type. Shortly put, it
may, ill the case of an action in ejectment, be said to be this, that an enforceable
right on the part of the defendant to specific performance of a contract entitling
him to remain in occupation is a good defence to the action. The doctrine was
approved by Cotton, L.J. in Lowther v. Heaver [1888] 41 Ch. D. 248 and explained
by Lord Esher in Swain v. Ayres [1888] 21 Q.B.D. 289 and Foster v. Reeves [1892]
2 Q.B. 255. One of the best expositions of this doctrine as regards the limits of its
applicability was by Farwell, J., in Manchester Brewery Co. v. Coombs [1901] 2
Ch. 608, who observed thus:

It applies only to cases where there is a contract to transfer a legal title, and an act
has to be justified or an action maintained by force of the legal title to which such
contract relates. It involves two questions: (1) Is there a contract of which specific
performance can be obtained? (2) If yes, will the title acquired by such specific
performance justify at law the act complained of, or support at law the action in
question? It is to be treated as though before the Judicature Acts there had bean,
first, a suit in equity for specific performance, and then an action at law between
the same parties; and the doctrine is applicable only in those cases where specific
performance can be obtained between the same parties, in the same Court, and at
the same time as the subsequent legal question falls to be determined. Thus in
Walsh v. Lansdale [1882] 21Ch. D. 9 the landlord under an agreement for a lease
for a term of seven years distrained. Distress is a legal remedy and depends on the
existence at law of the relation of landlord and tenant; but the agreement between
the same parties, if specifically enforced, created that relation. It was clear that
such an agreement would be enforced in the same Court and between the same
parties: the act of distress was therefore held to be lawful.

10. The action in Walsh v. Lansdale [1882] 21Ch. D. 9 it should be mentioned, was
one claiming damages for improperly distraining, for an injunction to restrain the
defendant from selling under the distress and from continuing in possession, and
for specific performance of the agreement for a lease. The applicability of this
doctrine of Walsh v. Lansdale [1882] 21Ch. D. 9 in this country has been
recognised in a course of decisions, though the decisions are not quite uniform as
to whether the principle can be invoked in a case where the remedy by way of
specific performance is not available by reason of efflux of time. A good deal of
argument has been advanced before us on behalf of the respondent to establish that
the doctrine is to be understood as operating even in cases where the right to
enforce specific performance is not available by reason of the bar of limitation and
that it is sufficient for the operation of the doctrine that the nature of the agreement
is such that it may be specifically enforced. The words of Jessel M.R. in Walsh v.
Lansnale [1882] 21 Ch. D. 9 it being a casa in which both parties admit that relief
is capable of being given by specific performance and of Farwell, J., in Manchester
Brewery Co. v. Coombs [1901] 2 Ch. 608.

the doctrine is applicable only in those cases where specific performance can be
obtained between the same parties in the same Court and at the same time as the
subsequent legal question falls due have been sought to be interpreted as indicating
merely the nature of the contract, that is to say, that it is inherently one capable of
being specifically enforced and that it does not also mean that there is a present
right to have it specifically enforced. This argument, in my opinion, is not well-
founded; and the leading authorities on Contract, I may say, do not "understand the
doctrine in that way. To quote a passage from Leake in Contract [7th Edn. p. 916]
referring to Walsh v. Lansdale [1882] 21 Ch. D. 9, this is what is said:

By force of the Judicature Act, 1878, the tenant under a parol agreement for a
lease, if the right to specific performance by or against him has not been lost, is to
be regarded as a tenant claiming under a deed.

11. The reason of the rule in Walsh v. Lansdale [1882] 21 Ch. D. 9 is thus
explained in Odger and Odger, Common Law of England [Vol. II p. 869] Leases in
writing, but not under seal may be construed as agreements capable of being
specifically enforced. At Common Law the tenant under such an agreement
remained a tenant at will only, until he paid rent and so became a tenant from year
to year; while in equity he became at once a tenant under the lease, if his
agreement was one which he could have specifically enforced. 'Since the
Judicature Act... there are not two estates' as there were formerly, one estate at
common law by reason of payment of rent from year to year and an estate in equity
under the agreement. There is only one Court and the equity rules prevail in it. The
tenant holds under an agreement for a lease. He holds, therefore, under the same
terms in equity as if a lease had been granted' provided relief could lave been
granted by specific performance.

12. Or viewed in another light, where a person entitled in equity to an interest in


land under an agreement is also entitled to specific performance and to have his
interest turned into a legal interest, he will in a Court having jurisdiction to order
specific performance, be treated as having the rights of a legal owner (Halsbury's
Law of England) [Vol. XIII p. 64 note (k)]. I am of opinion that there is a wide
distinction between Maddison v. Alderson [1883] 8 A.C. 473 and Walsh v.
Lansdale [1882] 21 Ch. D. 9, so far as the practical application of the principles
which they respectively lay down is concerned. To put the matter quite shortly, the
part performance of a contract, inchoate or incomplete, may in view of Maddison
v. Alderson [1882] 21 Ch. D. 9 give rise to equities which complete the contract
and it will then assume the character of a contract already executed and on the
footing of that executed contract all the equities of the case may be adjusted ; on
the other hand there may be cases where to give the necessary reliefs to the parties
a legal right may have to be established, and for the purpose of establishment of
that legal right it may be necessary to invoke the aid of Walsh v. Lansdale [1882]
21 Ch. D. 9. I am of opinion that for a defendant in an action in ejectment, if he can
successfully bring his case within Maddison v. Alderson [1883] 8 A.C. 473, it is
not necessary to resort to Walsh v Lansdale [1882] 21 Ch. D. 9. Maddison v
Alderson [1882] 21 Ch. D. 9 gives him higher rights, making it unncessary for him
to have specific performance of the contract, and so long as the rights of third
parties are not sought to be affected, treating the contract as an executed one and
debarring the plaintiff from any remedy.

13. Unfortunately the two cases or rather the principles which they seek to
propound have been considerably mixed up in reported decisions in this country,
especially of this Court, and I say with the utmost respect that it is on account of
misconception of the principles which these cases respectively lay down that there
is a considerable divergence of judicial opinion whether or not a person who is in
possession in performance or part performance of a contract may successfully
resist an action in ejectment when his right to specific performance of the contract
is already barred by efflux of time. In the case of a defendant who has come to be
in possession in performance or part performance of a contract and who is sought
to be ejected, there seems to be now a concurrence amongst the High Courts of
Allahabad, Bombay and Madras, that notwithstanding that the right of the
defendant to enforce performance was barred at the date of the suit the
performance affords a good defence to the action. [See Salamatuzzamin Begam v.
Masha Alla Khan [1918] 40 All. 187, Bam Sewak Rai v. Sheonaik Bai A.I.R. 1923
All. 433, Sandu Valji v. Bhikchand Surajmal A.I.R. 1923 Bom. 473, Vizagapatam
Sugar Development Co. Ltd. v. Muthura-mareddi A.I.R. 1924 Mad. 271.]

14. So far as the Calcutta High Court is concerned, as has been pointed out in Kali
Pada Basu v. Fort Gloster Jute Manufacturing Go. Ltd. , there is some, though
somewhat slight divergence of opinion, the preponderance of authority being in
favour of the limited application of the doctrine that is to say in favour of the
applicability of the doctrine to only those cases where at the date of the suit there is
an enforceable right on the part of the defendant not extinguished by eflux of time.
The finding of the learned District Judge in the present case is that there was a
definite refusal by the plaintiff to the knowledge of the defendant to grant a
permanent lease more than three years prior to the suit. This finding has been
challenged on behalf of the defendant upon several grounds, all of which, however,
more or less involve questions of fact on which I am not prepared to dissent from
the view that the learned District Judge has taken. Nor am I prepared to assent to
the view that when the defendant is still in possession under the promise that he
would have a permanent lease, a suit for specific performance may be instituted at
any time, a position that has been contended for on behalf of the respondent on the
supposed authority of the decision in the case of Secretary of State v.
Forbes [1912] 16 C.L.J. 217 and Matilal v. Darjeeling Municipality [1912] 17
C.L.J. 167, because I am of opinion that though it may well be that being in
possession he will not stand in need of a formal lease, yet if he wants one and sues
to get it, time must be taken to have run against him since the date of the refusal to
which I have referred. Nor again am I prepared to hold, as I have been asked to
hold on behalf of the respondent, on the authority of the decision of the House of
Lords in Hughes v. Metropolitan By. Co. [1877] 2 A.C. 439 that he is entitled to a
deduction on the ground of suspension of the notice of the refusal, because I cannot
find any circumstances which would have the effect of suspending the definite
notice of the refusal that was given. If then, I am to follow the current of authority
of this Court, I think I must hold that Walsh v. Lansdale [1882] 21 Ch. D. 9 will not
assist the defendant in the present case in view of the fact that the defendant's claim
to specific performance of the agreement to lease was barred at the date of the
present suit. I am of opinion, however, as I have tried to make it plain, that Walsh
v. Lansdale [1882] 21 Ch. D. 9 application in the present case but the case is one
clearly governed by Maddison v. Alderson [1883] 8 A.C. 473.

15. The case, again, seems to me to fall well within the doctrine of equitable
estoppel laid down in Gregory v. Mighell [1811] 18 Ves. 328, as-explained in the
case of Ramsden v. Dyson [1866] 1 H.L. 129, and from the application of that
doctrine the same result follows. In Ramsden v. Dyson [1866] 1 H.L. 129 two
principles were stated by Lord Kingsdown : 1st:

If a man under a verbal agreement with a, landlord for a certain interest in land or
what amounts to the same thing, under an expectation, created or encouraged by
the landlord, that he shall have a certain interest, takes possession of such land,
with the consent of the landlord, and upon the faith of such promise or expectation,
with the knowledge of the landlord, and without objection by him, lays out money
upon the land, a Court of Equity will compel the landlord to give effect to such
promise or expectation. This was the principle-of the decision in Gregory v.
Mighell [1811] 18 Ves. 328, and as I conceive is open to no doubt.

2nd:

If on the other hand a tenant being in possession of land, and knowing the nature
and1 extent of his interest, lays out money upon it in the hope or expectation of an
extended terrm or an allowance for expenditure, then, if such hope or expectation
has not been created or encouraged by the landlord, the tenant has no claim which
any Court of law or equity cam enforce. This was the principle of the decision in
Pilling v. Armitage [1905] 12 Ves. 78 and like the decision in Gregory v. Mighell
[1811] 18 Ves. 328, seems founded on plain rules of reason and justice.

16. The findings of the Courts below, such as they are now, clearly bring the case
within the first of the aforesaid two principles. Indeed, it may be said that the
appellant has not really sought to controvert this position. What has been said on
his behalf, however, is that Lord Kingsdown was dissentiente in the case and the
rule should be taken as qualified by the decision in Willmott v. Barber [1880] 15
Ch. D. 96, and reliance is placed on his behalf in support of this contention upon
the decision of the Judicial Committee in the case of Beni Ram v. Kundan
Lal [1899] 21 All. 496. Now it is true that Lord Kingsdown's was the dissenting
speech in Ramsden v. Dyson [186] 1 H.L. 129, but it will be seen that his dissent
was, only on the effect of the evidence in the case. There is nothing in the speeches
of Lord Cranworth, L.C., or of the other noble and learned Lords who agreed with
him which in any way is in conflict with these principles and the only difference
was as to the applicability of these principles in view of the effect of the evidence
that was there. The first of these principles has been expressly adopted by their
Lordships of the Judicial Committee in the case of Forbes v. Ralli and has been
said in that case to have been accepted by the same Board in Ahmad Yar Khan v.
Secretary of State [1901] 28 Cal. 693. In Willmott v. Barber [1880] 15 Ch. D. 96 in
which Rams-den v. Dyson [186] 1 H.L. 129, was cited at the Bar Fry, J. said:

It has been said that the acquiescence which will deprive a man of his legal rights
must amount to fraud, and in my view that is an abbreviated statement of a very
true proposition. A man is not to be deprived of his legal rights unless he has acted
in such a way as would make it fraudulent for him to set up those rights. What,
then, are the elements or requisites necessary to constitute fraud of that
description ? In the first place, the plaintiff must have made a mistake as to his
legal rights. Secondly, the plaintiff must have expended some money or must have
done some act (not necessarily upon the defendant's land) on the faith of his
mistaken belief. Thirdly, the defendant, the possessor of the legal right, must know
of the existence of his own right which is inconsistent with the right claimed by the
plaintiff. If he does not know of it he is in the same position as the plaintiff, and the
doctrine of acquiescence is founded upon conduct with a knowledge of your legal
rights. Fourthly, the defendant, the possessor of the legal right, must know of the
plaintiff's mis-taken belief of his rights. If he does not, there is nothing which calls
upon him to assert his own rights. Lastly, the defendant the possessor of the legal
right, must have encouraged the plaintiff in his expenditure of money or in the
other acts which he has done, either directly or by abstaining from asserting his
legal right. Where all these elements exist, there is fraud of such a nature as will
entitle the Court to restrain the possessor of the legal right from exercising it, but in
my judgment nothing short of this will do.

17. It is said, on behalf of the appellant that the elements of fraud " and
encouragement " are wanting in the present case. With this contention I do not
agree. It will be seen that in Wilmott v. Barber [1880] 15 Ch. D. 96 a third party
Bowyer was involved and these elements had to be specifically considered having
regard to the effect that the transaction then in question had on him. As between
parties to 'the agreement once it is found that in fact there-was an agreement, then
with the findings-such as they are now in the present case what else but fraud of
the character contemplated by these propositions should be imputed to the plaintiff
and should not encouragement, by abstaining from asserting his legal right, be a
finding that must legitimately follow ? The case of Beni Ram v. Kundan Lal [1899]
21 All. 496, on which the appellant relies was the case of tenants for a term who
knowing the limited character of their real rights erected permanent structures on
the land in-their occupation, and so cannot help the appellant in the present case.
Nothing that was said by the Judicial Committee in that case militates against the
first of the two propositions, of Lord Kingsdown in Ramsden v. Dyson [186] 1
H.L. 129 within which the present ease, in my judgment, clearly falls.

18. In their judgments the Courts below have taken a correct view of the rights of
the parties in this suit and the plaintiff is not entitled to eject the defendant.

19. The appeal must accordingly be dismissed with costs.

Graham, J.

20. I confess that during the hearing of the appeal I felt at times that there was a
good deal to be said for the point of view of the appellant, inasmuch as, if his claim
for ejectment fails, the result virtually will be that a permanent lease will be created
against his wishes and notwithstanding the fact that no valid lease was ever
executed.

21. I agree, however, with my learned brother that upon the facts proved in this
case and upon the authorities, the prayer for ejectment cannot succeed, that the
appeal fails and should be dismissed with costs.