IK Sohan Singh v. State Bank of India

IK Sohan Singh  v. State Bank of India

(Uncertainty, Contingency)

FACTS:

Defendant purchased some property from D for Rs. 75000/- out of which 50,000/- were paid at the time of execution of sale deed and rest disputed 25,000/- were to be paid “as soon as possible but at a time when the vendee is in a position to make the payment”, covenanted after the words, “…absolute sale of property in consideration of a sum of Rs. 75,000 to be paid by the vendor to the vendee in the manner therein stated.”Rs. 25,000/- remained to be paid by defendant till the date of suit in which plaintiff claimed 25,000/- along with interest due after 5 years from the date of execution of deed till the time of filing the suit.

ISSUE: Whether the above mentioned clause made the contract contingent upon defendant being in position to pay disputed 25,000 as u/s 31 such that the suit was premature as u/s 32?

HELD:

If the obligation to perform the contract is absolute and unconditional and it is only as how the contract is to be performed that is being dealt with, then the contract could not be regarded as contingent. Therefore the real test in such cases is whether the parties were dealing with the mode of performance or, with the very obligation to perform.

High Court holds that the perusal of sale deed (words “as soon as possible but at a time…”, “…absolute sale of property…”) manifests that the obligation of defendant to pay the sale consideration was absolute. Further, parties while stipulating the covenant were dealing only with the mode of performance and not obligation to perform per se, for it was only by way of concession in point of time that defendant was allowed to pay rest 25,000 “at a time when he was in a position to make the payment.” Construing the covenant as contingency would mean substituting the word ‘when’ with ‘if’, thereby reading, “…as soon as possible if the vendee is in a position to make the payment”, which will be tantamount to making a new contract for the parties (Ranchoddas v. N. Hirachand) Therefore, the obligation of defendant was to pay 25,000/- within a reasonable time from the execution of sale deed (S.46) as no specific time was specified; such that first five years for which plaintiff has given up the interest, was more than reasonable to make the payment.

QUESTION FOR THE READERS:

Q. If the contract had a covenant that the defendant is required to supply goods to the plaintiff “as and when he procures supply from X trader” is the contract contingent?

A. No, the obligation to supply goods being absolute and parties having been dealing with the mode of performance and not the very obligation to perform, the contract is not contingent for  otherwise it will be replacing the words “as and when” with “if” reading “if he procures supply…”, which will be altogether different from what the parties covenanted for.

Author: Vishrut Kansal (National University of Juridical Sciences, Kolkata)