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Jethalal C. Thakkar Versus R.N. Kapur

1955 (8) TMI 44 - BOMBAY HIGH COURT

Appeal No. 17 of 1955 - Dated:- 12-8-1955 - M.C. Chagla, C.J. and Desai, J. JUDGMENT Chagla, C.J. 1. This appeal raises a short and interesting question as to the construction and legality of a contract. The respondent, who was the defendant in the suit, contended that the contract dated 19-3-1948, on which the plaintiff filed the suit was void by reason of the provisions of the Bombay Securities Contracts Control Act, Act 8 of 1925. The learned Judge accepted that contention and dismissed the s .....

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nd the defendant was asked to approach the plaintiff to give his assistance. The plaintiff agreed to give his assistance, and as the plaintiff was the holder of 1000 ordinary shares of the International Bank of India, the agreement' in suit was arrived at and the operative part of the agreement dated 19-3-1948, is to the following effect: It is signed by the defendant and he gives an undertaking to the plaintiff to sell off for him, the plaintiff, 1000 ordinary shares of the bank at a price .....

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contract. 3. The Bombay Securities Contracts Control Act, 1925, defines a ready delivery contract as a contract for the purchase or sale of securities for the performance of which no time is specified and which is to be performed immediately or within a reasonable time. The contention of the plaintiff was that this was a ready delivery contract. The contention of the defendant on the other hand was that this was a contract which did not satisfy the definition of a ready delivery contract, and it .....

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tract must be performed immediately or within a reasonable time. The test, therefore, we have to apply is first whether this is a contract for the purchase or sale of securities and whether it is to be performed within a specified time or whether no time is specified in the contract and the contract is to be performed immediately or within a reasonable time. It will be noticed that the obligation undertaken by the defendant under the contract was to sell for the plaintiff his thousand shares at .....

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s sold. It is clear on a plain reading of this contract that no obligation attached with regard to the purchase of these shares on the part of the defendant until the contingency contemplated occurred after the lapse of 12 months. A clear distinction must be borne in mind between a case where there is a present obligation under a contract and the performance is postponed to a later date, and a case where there is no present obligation at all and the obligation arises by reason of some condition .....

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t to purchase these shares until the contingency contemplated took place. The question, therefore, is whether when there is no present obligation at the date of the contract to purchase or sell shares, can it be said that this is a contract fr the purchase or sale of shares which comes within the mischief of the Act? A very simple test that can be applied to this contract is this. Can it be said that on 19-3-1948, there was a contract of purchase or sale of shares? If one were to put that questi .....

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en the contract was entered into, and that is exactly the test we are applying. II at the date when the contract was entered into there was no contract of sale or purchase of shares, it is impossible to suggest that at that date the contract was void because it came within the mischief of the Act. The obligation contingently undertaken by the defendant to purchase the shares only ripened into a perfect obligation at the end of the year when the contingency took place. Therefore, it is only at th .....

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was that there was to be a contract for the purchase or sale of shares on the occurring of a contingency, and as soon as the obligation ripened and a contract subsisted between, the parties, that contract was to be performed immediately or within a reasonable time. 5. Contingent contracts are an Interesting species of contracts over which learned authors have devoted lot of time and thought, and there is a very striking passage in Salmond and Williams on Contracts, 2nd Edn., p. 53: 'What, th .....

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g epithet 'conditional'. A conditional obligation, in other words, is a quasi-obligation consisting in the chance or possibility that a real obligation may already exist or may come into existence in the future. The fulfilment of the condition is the transformation of this potentiality into actuality. Conversely, the failure of the condition is the failure of this chance to become a fact". Therefore, the-obligation undertaken by the parties was only in the realm of potentiality. The .....

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e or sale contemplated by the Bombay Act is a contract where there is a complete obligation to purchase or sell shares. Mr. Mody has in the first place contended that the contract consists of two promises and both promises were given at the date when the contract was entered into, and if the second promise offends against the Bombay Act, then we must hold the contract to be void. There is a clear fallacy in this argument. At the date of the contract there were no two promises. There was one prom .....

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and again, therefore, one must judge of the validity of the contract at the date when it was entered into. Again, there is a fallacy in this argument. It is not true to suggest that there are two alternative promises in the contract. Two alternative promises would mean that the promises would have the right and the option to decide which of the two alternative promises he should discharge. But the promisor had no such option. He had to discharge the first promise. Only if he failed to do that th .....

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