[Case Brief] Hungerford Investment Trust Ltd v/s Haridas Mundhra & Others (1972)

Case NameHungerford Investment Trust Ltd v/s Haridas Mundhra & Others
Case Number Civil Appeal No 488 of 1971
CourtSupreme Court of India
BenchJustice KS Hegde and Justice KK Mathew
Author of the judgmentJustice KK Mathew
Decided On March 09, 1972
Relevant Act/Sections1) Specific Relief Act, 1877- Section 35
2) Specific Relief Act, 1963 - Section 28
Author of the briefAditya Gor

The agreement between Hungerford and Mundhra –

Hungerford Investment Trust Limited was the owner of 100 percent shares in Turner Morrison & Co. John Geoffrey Turner and Nigel Turner were the owners of the 100 percent shares of Hungerford. By exchange of letters, it was agreed that Haridas Mundhra would purchase from Hungerford 49 per cent shares of Turner Morrison. By this agreement, Mundhra also had an option to purchase the remaining 51 per cent shares of Turner Morrison within 5 years. A formal agreement to this effect was executed between the parties.

Pursuant to this agreement, Haridas Mundhra purchased 49 percent of shares from Hungerford but when he chose to exercise his option to purchase 51 percent of shares, the shares were not sold or transferred to him.

So a suit (Suit no 600 of 1961) was filed by Mundhra against this action of Hungerford. The court ordered Hungerford to give the remaining 51 percent of the shares to Mundhra in an exchange of Rupees 86, 60, 000/- and also asked Hungerford to not to sell these shares in respect of any other person than Mundhra. The court also ordered an injunction for voting rights of the Hungerford without the permission of the Mundhra.

An appeal against this was filed by Hungerford which was later withdrawn by them. However, in the meantime, Mundhra did not pay the purchase consideration of Rs 86, 60, 000/-. So Hungerford filed a master summons asking the court to direct Mundhra to pay the purchase consideration within a fixed time as the court may deem fit and if Mundhra fails to pay the money within such a time then the court should order the agreement to be recessed. This application of Hungerford was dismissed by the court and the appeal was preferred. An appeal was also subsequently dismissed.

This decree passed by the court in suit no 600 of 1961 was attached by the certificate officer as Mundhra failed to submit some of the necessary certificates. The effect of this attachment order was that the Mundhra was prohibited from alienating, transferring or charging his right, title and interests in the decree in suit no 600 of 1961 or from obtaining satisfaction thereof.

The result of the decision given in suit no 600 of 1961 –

In February 1965, the bank of Hoffman A.G. obtained a decree against Romanigo Holdings S.A.H., a holding company of Hungerford and also against Hungerford. Bank of Hoffman executed the decree and got 51 percent of shares of Hungerford attached.

Hungerford was in control of Turner Morrison up to February 25, 1964, after which the control shifted to Mundhra. Hungerford had kept scrips of 707 shares out of 2295 shares in the office of Turner Morrison so Hungerford asked him to deliver the scrips of 707 shares to them.

In the month of January 1965, a letter was written to Hungerford mentioning that the shares had now become the property of Mundhra and there was a lien created on these shares. The income tax officer also raised an objection to the delivery of 707 shares to Hungerford although the income tax department had no claims on these shares.

The dispute in Suit No 2005 of 1965 –

A suit was instituted against Hungerford by Turner Morrison (Suit no 2005 of 1965) claiming a certain sum of amount in respect of the payment made by Turner Morrison to the income tax authorities on behalf of Hungerford under section 23(a) of the Indian Income Tax Act, 1922. A claim was also made for the possession and sales of the 225 shares in the exercise of their lien on those shares under Article 22 of the Articles of Association of the Company. The receiver was appointed for holding the shares and these shares were to be transferred to Mundhra on the payment of the consideration money.

An appeal was filed by the Hungerford wherein it was argued that the original agreement and the decree passed in the suit no 600 should be vacated. Further, it was also prayed that the receiver so appointed in the suit no 2005 should fix a date for the Mundhra to make the payment of purchase consideration of Rs 86, 60, 000/- and in the failure of such payment by Mundhra the decree should be rescinded. The application was allowed.

The learned judge observed that Mundhra was not interested in paying the purchase amount because by the injunction granted in the suit no 600 wherein the Hungerford was restricted from voting except otherwise from the permission from Mundhra made him in the position of 100 percent of shares.

Thus without paying the money he already controlled all the shares of Turner Morrison. Moreover, the court also held that the Mundhra was unjustified in not purchasing the shares only because there was a lien on those shares. According to the court, Mundhra and Turner Morrison were colluding with each other against the Hungerford.

The court thus passed an order that the Mundhra was obliged to pay the consideration money within a fortnight and if he does not do so then the agreement would be rescinded

An appeal before the Supreme Court-

The court held that the application filed by the appellant was not maintainable under section 35 of the specific relief act, 1877, which was repealed by the specific relief act of 1963. The application was also not maintainable under section 28 of the specific relief act 1963.

The question then was if the application is maintainable under any other provision of the law. The specific relief act of 1877 is founded on English equity jurisprudence and that it is permissible to refer to English law on the subject wherever the act did not deal specifically with any topic. Thus the act cannot be considered as an exhaustive of the whole branch of the law of specific performance.

The court which passes the decree for specific performance retains control over the decree and thus it has the power to extend the time fixed in the decree. The decree passed in a suit for specific performance is not a final decree and the suit may be deemed to be pending even after passing the decree.  Thus the court can order recession of the decree if the allegation of the appellant is proved. Thus the application of the appellant is found to be competent. In a decree where no time is specified for the performance of the part of the decree, it will be presumed that such performance has to be done within a reasonable time. If Mundhra did not pay the purchase money, there was nothing which prevented the appellant from applying for rescission of the decree. Therefore the appeal is allowed.