Legal Representatives Not Liable To Perform Personal Contracts Of Deceased ; But Should Discharge Monetary Liabilities: Supreme Court

In the instant case, the appellants are the legal representatives of a sole proprietor who undertook the task of developing property. However, during the pendency of the consumer proceedings, the sole proprietor died. The Division bench of Justices BV Nagarathna and Ujjal Bhuyan observed that where the obligations are based on the skills and expertise of the sole proprietor, such obligations would end on his demise. As a result, the same cannot be imposed on his legal heirs or representatives.

In the same breath, the Court held that the legal representative shall be liable to make the monetary payment. The Court referred to Section 2(11) of the Code of Civil Procedure, 1908, which defines a “legal representative”. According to this, such representatives are liable only to the extent of the estate they inherit. Basis this, the Court observed that the estate of the deceased sole proprietor would become liable to satisfy the decree in monetary terms.

“This is because a proprietorship firm is not a separate legal entity as compared to the proprietor and his estate would become liable only to satisfy a decree or an order in monetary terms on his demise.,” the Court explained.

To understand it better, it is imperative to lay down the facts. The complainants entered into a Development Agreement with the sole proprietor. The latter failed to fulfil the payment obligations. Apart from that, certain other breaches including deviations from sanctioned plan, non-construction of a compound wall were alleged. Consequently, a consumer complaint was filed. The District Consumer Forum allowed the same.

When the matter reached the before the NCDRC, the sole proprietor (Vinayak Purushottam Dube) died. Thus, his legal representatives i.e., his wife and two sons were brought on record. The National Commission affirmed the directions passed by the district commission and also upheld the slew of directions issued by the State Commission to the sole proprietor.

Imperatively, the Commission also held that the death of Dube has no effect upon his obligations under the Development Agreement and the same have to be executed by his legal heirs. Against this backdrop, the appeal was filed before the Supreme Court.

On one hand, the appellants submitted that they are willing to pay as per the directions. However, with respect to other set of the directions including construction of the compound, to obtain and handover completion certificate, to execute the conveyance deed and to give electricity connection, the appellants are not liable to comply with the same. To reason for this, it was argued that these directions were personally issued against the deceased.

Per contra, the complainants pressed that if other obligations, besides the monetary one, are not fulfilled, they would be left high and dry. Thus, they supported the NCDRC's ruling.

Now, the question before the Apex Court was whether the legal representatives would be liable to comply with personal obligations imposed as per the Development Agreement?

Inter-alia, the Court referred to Sections 37 (Obligation of parties to contracts) and 40 (Person by whom promise is to be performed) of the Indian Contract Act, 1872. The Court noted that though Section 37 binds the representatives of a promisor in order to perform the latters' obligations, however, they are not liable for his/ her personal contracts. Moreover, the Court linked this with Section 40 according to which the promisor must perform contracts involving exercise of special skills.

“A contract of service is also personal to the promisor. This is because when a person contracts with another to work or to perform service, it is on the basis of the individual's skills, competency or other qualifications of the promisor and in circumstances such as the death of the promisor he is discharged from the contract.,” the Court reasoned.

Following this, the Court also observed that a personal duty cannot be transferred to the legal representatives of a deceased. Notwithstanding this, in reference to the monetary payment, the Court categorically held that the legal representatives would be liable to the extent the deceased's estate (in this case, sole proprietor) has devolved.

“Hence, what is crucial is that the estate of a deceased person becomes liable, and the legal representatives must discharge their liability to a decree-holder or a person who has been granted an order to recover from the estate of the deceased which they would represent and not beyond it.,” The Court added.

Reliance was also placed on Ajmera Housing Corporation vs. Amrit M. Patel (Dead) through LRs, (1998) 6 SCC 500, wherein it was observed the legal representatives of the builder under the contract had neither the capacity nor the special skills to discharge the obligations of the deceased. Beside this, they had no privity of contract and the contract was entered into based on the skills and capacity of the builder. Further, the rights and duties were also personal to the party who had to discharge the obligations.

In view of these facts and circumstances, the Court set aside the orders passed by the Consumer forums. The Court concluded that such obligations were to be performed by the sole proprietor in his personal capacity. While doing so, the Court also clarified that the representatives shall comply with the direction for payments.

Case Title: Vinayak Purushottam Dube (D) vs Jayashree Padamkar Bhat., Diary No.- 42688 - 2018

Citation : 2024 LiveLaw (SC) 181

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