SRI BABU RAM @ DURGA PRASAD versus SRI INDRA PAL SINGH (DEAD) BY LRS.

Citation: [1998] 3 S.C.R. 1145 · Decided: 13-08-1998 · Supreme Court of India · Bench: S.B. MAJMUDAR · Disposal: Dismissed

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Judgment (excerpt)

j 
.. 
SRI BABU RAM @ DURGA PRASAD 
A 
v. 
SRI INDRA PAL SINGH (DEAD) BY LRS. 
AUGUST 13, 1998 
[S.B. MAJMUDAR AND M. JAGANNADHA RAO, JJ.] 
B 
Provincial Insolvency Act, 1920: 
Sections 35, 37, 43,(/)-Annulment of insolvency-Effect of-In suit for 
insolVPncy a joint agreement was filed for sale with a clause for re-conveyance C 
within 5 years-Plaintiff declared insolvent-Sale deed executed by official 
receiver-Plaintiff sent notice for re-purchase-Since creditor refused to re-
convey, plaintiff filed suit for specific performance-Subseguently, acfjudication 
as insolvent unconditionally annulled-Held-On annulment, property and 
rights of plaintiff stand restored to him with retrospective effect-Insolvency D 
gets wiped out togehter-Notice sent and suit filed for re-conveyance when 
plaintiff was an undischarged insolvent, get retrospectively validated. 
Contract Act, 1872 : 
Section 55-Held-Time is of essence where contract is for re- E 
conveyance of immovable property. 
Section 62-Novation-Plea cannot be raised or accepted for the first 
time in second appeal under Section 100 CPC. 
Code of Civil Procedure, 1908-Section JOO-Contention of creditor F 
that there was breach of re-conveyance agreement by plaintiff not pressed 
before trial court-However, in second appeal it was held that there was 
breach of re-conveyance agreement and sale deed was in pursuance of new 
contract-On appeal, held: High Court exceeded its jurisdiction u/s 100 
C.P. C in giving a finding on an issue not pressed in trial court-Also, plea G 
of novation cannot be accepted for the first time in second appeal. 
Limitation Act, 1963-Part II of Article 54-Where agreement does not 
specifY period within which vendee is to execute deed of re-purchase-
Held--Time of three years starts to run only from the date vedee refases to 
execute re-conveyance deed. 
1145 
H 
1146 
SUPREME COURT REPORTS 
[1998] 3 S.C.R. 
A 
The Respondent-defendant instituted an insolvency suit on 19.I 1.1963 
against the appellant-Plaintiff since the Plaintiff failed to return Rs. 7 ,000 
owed to him. On the same day, the plaintiff and the defendant filed a joint 
application before the Insolvency Court, seeking permission for the debtor 
to transfer his property to the creditor in full satisfaction of his dues, with 
B the condition that. the debtor may repurchase the property, within 5 years, 
for Rs. 7,000. In terms of the settlement, the creditor agreed to withdraw the 
Insolvency Petition. Accordingly, on 22.I 1.1963 an Order was passed by the 
Court permitting the interim receiver to execute the sale deed. However, 
neither the sale deed was executed by the interim receiver nor were steps 
taken by the creditor to withdraw the Insolvency Petition and on 29.5. 1964, 
C the plaintiff was.adjudicated an insolvent and directed to apply for discharge 
within one year. 
The Official Receiver, however, executed a sale deed on 15. 7.1964, 
wherein the plaintiff also joined as vendor, and reported to the insolvency 
court that the plaintiff had cleared all his debts. The plaintiff moved for 
D discharge and later unsuccessfully moved an application u/s 43(1) of the 
Insolvency Act for annulment since all creditors had been paid in full. In 
appeal, the adjudication of the plaintiff as an insolvent was annulled, 
unconditionally on 22.10.1964. In the meanwhile, before annulment, since 
the period of 5 years for seeking re-conveyance was going to expire, the 
E plaintiff issued notice on 12.7.1968 to the creditor to reconvey the property 
to him on payment of Rs. 7,000 However, the creditor refused to re-convey 
the property. 
A suit was filed by the Plaintiff seeking specific performance of the 
re conveyance agreement entered into between the plaintiff and the creditor 
F on 19.I 1.1963 and filed in the insolvency court. The suit was decreed and 
the judgement of the trial court was affirmed in first appeal. However, in 
second appeal the High Court reversed the judgements of the lower courts. 
The High Court held that the agreement contained in the joint application 
dated 19.11.1963 was not given effect; the sale deed dated 15.7.1964 executed 
by the official receiver was not in pursuance of the original agreement dated 
G 19.I 1.1963 but in pursuance of a "fresh contract" which did not have a re-
conveyance clause; the contract dated 19.11.1963 was a conditional contract 
and since the conditions laid down by Order dated 22.11.1963 had not been 
fulfilled, there was no enf

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