Specific performance of sale agreement – termination notice was also given = the defendant sent legal notice on 28.03.1985 to the plaintiff extending time to the plaintiff to pay sale consideration on or before 10.04.1985 with a warning that his failure to comply with the same, sale agreement dated 25.12.1983 would be terminated. The plaintiff did not perform his part of the contract within the extended period of legal notice. In those circumstances, the Apex Court treated the contract was not existing by the date of filing the suit for specific performance and held suit is not maintainable without a prayer for declaratory relief.

REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL
APPELLATE JURISDICTION

CIVIL APPEAL NO. 7306 OF 2013 (Arising out of SLP
(C) No. 20367 of 2009)

I.S. SIKANDAR (D) BY LRs. … APPELLANTS

VS.

K. SUBRAMANI & ORS. … RESPONDENTS

J U D G M E N T

V. Gopala Gowda, J.

Leave granted.

2. This civil appeal is directed against the judgment and order
dated 08.12.2008 passed in Regular First Appeal No. 97 of 2001 by the
High Court of Karnataka, Bangalore, urging certain relevant facts and
legal contentions, whereby the High Court has reversed the judgment
and decree passed in the Original Suit No. 2012 of 1985 dated
25.09.2000 by the X1th Additional City Civil Judge, Bangalore City,
Bangalore and has modified the decree by allowing the appeal, granting
the decree for specific performance of the Agreement of Sale in favour
of the respondent No.1/plaintiff in relation to the suit schedule
property. Further, it has granted the decree of permanent injunction
against the defendants restraining them from interfering with the
respondent No.1/plaintiff’s peaceful possession and enjoyment of the
suit schedule property.

3. Necessary facts and legal contentions urged on behalf of the
parties are stated herein with a view to find out as to whether the
impugned judgment and decree in granting the relief of specific
performance of the sale of the suit schedule property in favour of the
plaintiff requires to be set aside by allowing this appeal.

In this judgment for the sake of brevity, we would like to refer
to the ranking of the parties as assigned in the plaint presented
before the trial court. Since there is incongruence in the mentioning
of exhibits in the judgments of the trial court as well as of the High
Court, we will refer to the documents as per the annexures presented
along with this appeal.

The plaintiff (respondent No.1 herein) instituted O.S. No.
2012/85 before the Additional Civil Judge for grant of a decree of
specific performance in respect of suit schedule property on the basis
of the Agreement of Sale dated 25.12.1983 (Annex.P-1) and also for
grant of permanent injunction restraining the defendants from
interfering with his peaceful possession and enjoyment of the suit
schedule property. The suit property covered in the Agreement of Sale
was a vacant site measuring 54 ft. from East to West and 42 ft. from
North to South carved out of survey Nos. 18/2, 19, 20 and 21 of
Agrahara Thimmasandra village, known as C.K. Chinnappa Garden,
Bangalore North Taluk, within the territorial jurisdiction of the
Bruhat Bangalore Mahanagara Palike (for short “BBMP”). It is the case
of the plaintiff that he entered into an agreement with defendant Nos.
1-4 for sale of the suit property in his favour for consideration of
Rs.45,000/-. A sum of Rs.5000/- was paid towards part sale
consideration to the defendant Nos.1-4 and they delivered original
title deeds and put the plaintiff in physical possession of the suit
schedule property. They had agreed to receive the balance sale
consideration amount of Rs.40,000/- at the time of registration of the
sale deed to be executed in favour of the plaintiff within five months
after securing necessary permission from the Urban Land Ceiling
Authority under the provisions of Urban Land (Ceiling and Regulation)
Act, 1976 (for short ‘ULCR Act’) now repealed, and Income Tax Act,
1961 and also to get change of khata of the suit schedule property in
their names from that of the deceased husband of the first defendant
in the property register maintained by the BBMP at the cost of the
plaintiff. Further, the plaintiff had an obligation to pay the layout
and conversion charges to the BBMP and bear the vendors cost for
securing the permission from the aforesaid authorities. Further, it
is the case of the plaintiff that the time for completion of the sale
of the suit property was agreed to be extended by two months in case
of delay in securing the permission from the above referred
authorities which might in turn cause delay in payment of the
conversion charges.

4. It is the case of the plaintiff that on being put in possession
of the suit property, he erected cattle shed to tether cattle and paid
betterment charges on 25.04.1984 to the concerned authorities. There
is an acknowledgement to this effect and he also secured change of
khata on 02.05.1984 and paid the property taxes to the BBMP for the
period 1977 to 1983-84 and thereafter, he also paid the property tax
to the BBMP for the future years.

5. The case of the plaintiff is that the defendant Nos.1-4 got
issued legal notice dated 06.03.1985 (Annex. P-2) through their
counsel calling upon the plaintiff to comply with his part of the
contract by paying the balance sale consideration on or before
18.03.1985 failing which legal action would follow, for which the
plaintiff had issued a reply dated 16.03.1985 (Annex. P-3) calling
upon the defendant Nos.1-4 to execute the conveyance deed and receive
the balance sale consideration on 23.05.1985 by securing the draft
sale deed five days prior thereto. By another letter dated 04.05.1985
(Annex. P-5) he requested the vendors to go to the sub-Registrar’s
office on 23.05.1985 and execute the deed of conveyance in his favour.
He further pleaded in the plaint that the vendors by a telegram dated
18.05.1985 declined to accede to his request and stated that the
Agreement of Sale was rescinded by the defendants by a letter dated
28.03.1985, which is a legal notice sent by them through their
advocate to the plaintiff, wherein he was called upon to return the
original documents of suit property given to him at the time of
execution of the Agreement of Sale and on his failure to do so on or
before 10.04.1985, the said agreement dated 25.12.1983 would stand
terminated vide the aforesaid notice.

6. After institution of the original suit by the plaintiff for
specific performance and permanent injunction against the defendant
Nos.1-4, the vendors who were served with the suit summons and
notices, remained absent and unrepresented in the proceedings, and
therefore they were placed ex-parte. An interlocutory application was
filed by the appellant to implead himself as 5th defendant to the
original suit proceedings pleading that he is the proper and
necessary party to the original suit proceedings, claiming that he had
purchased the suit schedule property under a sale deed dated
30.05.1985 from his vendors viz. defendant Nos.1-4 (Annex. P-6). The
said application was allowed by the trial court. He was permitted to
be impleaded as defendant No.5 in the original suit proceedings and he
resisted the suit by filing a written statement dated 13.12.1989,
inter alia, admitting that defendant Nos. 1-4 were the owners of the
suit schedule property and further he denied the plea of the plaintiff
that he is being in possession of the suit property. It is further
stated that the deed of conveyance in respect of the suit schedule
property was executed by the defendant Nos. 1-4 in his favour after
obtaining necessary permission from the competent authority under the
ULCR Act by letter dated 25.05.1985 and therefore, he has pleaded that
the reliefs sought for by the plaintiff in the suit filed on
26.06.1985 became infructuous. It is further pleaded that because of
default committed by the plaintiff, he is disentitled to get the
decree for specific performance of sale of the property on the basis
of the Agreement of Sale.

7. The trial court on the basis of pleadings of the parties framed
six issues:

1) Whether the plaintiff proves that defendant Nos.1-4 have
executed Agreement of Sale dated 25.12.1983 and delivered
possession of the same?

2) Whether the plaintiff proves that he is in lawful possession
of the suit property?

3) Whether the 5th defendant proves that he purchased the
property under sale deed dated 30.05.1985 and is in possession
of it?

4) Whether plaintiff was always ready and willing to perform his
part of the obligation?

5) Whether the 5th defendant proves that plaintiff is the
defaulter and is not ready and willing to perform his part of
the obligation?

6) Whether the defendant proves that plaintiff put up
construction after the completion of the sale?

8. The original suit went for trial; plaintiff was examined as PW-1
and marked 27 documents as Exhs. P1- to P-27. On behalf of the
defendants, the 5th defendant was examined as DW-1 and another witness
named K.N.Prakash as DW-2 and marked 4 documents as Exhs.D-1 to D-4 to
prove his case. The trial court on appreciation of the pleadings,
documentary and oral evidence on record has recorded the findings of
fact in the affirmative on the issue Nos. 1, 2 and 5 and answered
issue No.3 partly in affirmative and issue Nos. 4 and 6 in the
negative. The trial court in its judgment has recorded the finding of
fact holding that 5th defendant is the owner of the suit property
pursuant to sale deed dated 30.05.1985 and he is entitled to take
possession of the same from the plaintiff in accordance with law and
accordingly, partly decreed the suit in his favour vide judgment and
decree dated 25.09.2000.

9. Aggrieved by the said judgment and decree, the plaintiff preferred
Regular First Appeal before the High Court of Karnakata which was
registered as RFA No. 97/2001, urging various legal contentions and
prayed to set aside the same in so far as dismissal of the suit for
grant of the decree for specific performance in respect of suit
schedule property on the basis of sale deed is concerned.

10. The legal contention urged before the High Court on behalf of the
plaintiff is that the trial court has erroneously recorded its
findings on the above contentious issue Nos. 1, 2, 3, 4 & 5 without
appreciating the plaint averments and the evidence on record having
regard to the undisputed fact that the Agreement of Sale dated
25.12.1983 and the covenants of the said agreement provide limited
obligation on the part of the plaintiff to pay the layout charges and
expenses required to be incurred by him to enable the defendant Nos. 1-
4, to secure the permission from the authorities under the ULCR Act
and Income Tax Act for execution and registration of the deed of
conveyance in his favour. It is further contended on behalf of the
plaintiff that he paid the betterment charges and property taxes to
the BBMP within the stipulated time, and in addition to that he got
secured the change of khata in favour of the defendant Nos.1-4 in
respect of the suit schedule property as agreed upon by him in the
agreement. He further contended that the trial court has recorded an
erroneous finding of fact holding that the plaintiff did not secure
the permission from the competent authority under the ULCR Act and the
Income Tax Authority to execute and register the sale deed as agreed
by the defendant Nos.1-4. Therefore, it is contended that the
defendant Nos. 1-4 committed breach of Agreement of Sale and therefore
the plaintiff is entitled for the decree for specific performance of
execution of the sale deed on the basis of the Agreement of Sale. It
is further contended that the plaintiff has been ready and willing at
all material times, and even as on 28.03.1985, to pay the balance sale
consideration amount to defendant Nos. 1-4 on execution of the deed of
conveyance of the suit property. He further urged in the appeal that
execution of the sale deed dated 30.05.1985 in favour of the 5th
defendant for a sale consideration of an amount of Rs.48,000/- that
is, Rs.3000/- in excess of what was agreed upon with the plaintiff,
would demonstrate that the defendant Nos.1-4 took undue advantage and
committed the breach of the terms and conditions of the contract.
Further, it is urged that the above aspects of the matter has not been
properly appreciated by the trial court while dismissing the suit for
not granting the relief of specific performance in respect of the suit
schedule property in favour of the plaintiff. It is also urged in
the R.F.A. before the High Court that defendant Nos. 1-4 were required
to secure permission under the ULCR Act and Income Tax Department to
convey the suit property in favour of the 5th defendant, which further
demonstrates that without such a permission, the registration of deed
of conveyance in favour of the 5th defendant was impermissible,
thereby the defendant Nos. 1-4 committed a serious breach of the
obligation in terms of Agreement of Sale dated 25.12.1983. It was
further contended that the plaintiff was carrying cash with him to
prove that he had necessary funds to pass on consideration to the
defendant Nos.1-4 at the time of registration of the sale deed and the
learned counsel has placed reliance on the reported decision of this
Court in Sukhbir Singh & Ors. Vs. Brij Pal Singh & Ors.[1] It is
further contended with reference to para 24 of the judgment of the
trial court, that the trial court fell into error in recording the
finding of fact on the contentious issue No.3 holding that the 5th
defendant is the owner of the suit schedule property in pursuant to
the sale deed dated 30.05.1985 although he had knowledge of the
Agreement of Sale dated 25.12.1983 in favour of the plaintiff and
therefore he is not the bona fide purchaser.

11. The said legal contention was seriously contested on behalf of the
5th defendant justifying the finding and reasons recorded by the trial
court on the above contentious issue No.3 contending that the trial
court on proper appreciation of pleadings and evidence on record has
rightly answered in his favour and against the plaintiff. He has
further contended that the reply notice dated 16.03.1985 which was
issued by the

plaintiff shows the delay and inconvenience caused by the plaintiff to
the vendors of the 5th defendant. The vendors waited patiently by
extending time for registration of the sale deed in respect of the
suit schedule property and the plaintiff was called upon by them to
get the sale deed executed in his favour by paying the balance sale
consideration, but he had avoided the same on one pretext or the other
leading to the conclusion that he was not ready and willing to perform
his part of contract and therefore they rescinded the contract and
executed the sale deed dated 30.05.1985 in favour of the 5th defendant
in respect of the suit schedule property. He has also sought to
justify the findings on issue Nos. 4 and 5 by placing strong reliance
upon the evidence of PW-1, the plaintiff to show that the findings of
fact recorded by the trial court on the above contentious issues
holding that the plaintiff was not ready and willing at any point of
time to pay the expenses to the defendant Nos. 1-4. He has further
contended that though they made a demand by legal notice dated
06.03.1985 to get the sale deed executed on or before 18.03.1985,
failure on the part of the plaintiff to do the same would demonstrate
the fact that he was not ready and willing to perform his part of the
contract by paying the balance sale consideration amount to the
defendant Nos. 1-4 as agreed upon by him and further placed reliance
on the Agreement of Sale dated 25.12.1983 of the suit property to show
that defendant Nos. 1-4 were in dire necessity of money, due to the
death of the husband of the first defendant who was the bread winner,
and therefore they had agreed to sell the suit schedule property to
the plaintiff. Further, it is contended by the learned counsel on
behalf of the 5th defendant that time was the essence of the contract
as per Section 55 of the Contract Act as agreed upon by the parties in
the agreement which has not been performed by the plaintiff and
therefore the trial court has rightly declined to grant the decree of
specific performance in favour of the plaintiff.

12. Therefore, the learned counsel on behalf of the 5th defendant
placed reliance on the reported decisions of the Division Bench of the
Karnataka High Court and this Court in the cases of Saraswathi Ammal
Vs. V.C. Lingam[2]; Manjunath Anandappa Vs. Tammanasa[3] and His
Holyness Acharya Swamy Ganesh Dassji Vs. Shri Sita Ram Thapar[4], in
justification of the findings and reasons recorded by the trial court
on the contentious issues framed by it.

13. The first appellate court, on the basis of factual and rival legal
contentions urged on behalf of the parties, has framed the following
points for its determination:

i) On issue No.3, whether the 5th defendant purchased the property
under the sale deed dated 30.05.1985?

ii) Whether the 5th defendant was entitled to take possession of the
suit schedule property in accordance with law?

iii) On issue Nos. 4 & 5 – whether the 5th defendant has proved the
plaintiff to be a defaulter, who is not ready and willing to
perform his part of the obligation?

14. The High Court in exercise of its appellate jurisdiction has
answered in favour of the plaintiff and passed the impugned judgment
and decree after adverting to Section 16 (c) of the Specific Relief
Act, 1963 and sub-sections (1) and (2) of Section 20 regarding
discretionary power to be exercised by the court for grant of a decree
of specific performance in his favour. It is observed by the High
Court that the court is not commonly bound to grant such relief, if
merely it is lawful to do so, and such discretion cannot be
arbitrarily refused but on sound and reasonable grounds, guided by
judicial principles and capable of correction by the court of appeal.

He has referred to the judgment in the case of Parakunnan Veetill
Joseph’s son Mathew Vs. Nedumbara Kuruvila’s son & Ors.[5], in support
of the proposition of law that the court must meticulously consider
all the facts and circumstances of the case for grant of a decree for
specific performance and the court should take care to see that it is
not used as an instrument of oppression to have an unfair advantage.
Further reliance is placed upon another judgment of this Court in
Nirmala Anand Vs. Advent Corporation Pvt. Limited & Ors.[6], wherein
this Court has held that specific performance is an equitable relief
and the Court has to strike a balance of equities between the parties
keeping in view the relevant aspects, including the lapses that
occurred in the facts of the case. Further, the High Court has held
that the parties are respectively responsible and though the plaintiff-
purchaser always remained ready and willing to perform his part of the
contract, the defendant Nos.1-4 have not performed their part of
contract. Therefore, the High Court has set aside the findings of
fact on the contentious issues recorded by the trial court against the
plaintiff. Further, the learned Judge of the High Court has held that
Section 53-A of the Transfer of Property Act, 1882 provides protection
to a transferee on certain conditions, one of which is that transferee
has performed or is willing to perform his part of the contract. It is
further held that once a party to a contract has repudiated the
contract, it is not necessary for the other party to tender the amount
payable under the contract in the manner provided in the contract in
order to successfully claim the specific performance of the contract
by placing reliance upon the judgment of this Court reported in
International Contractors Ltd. Vs. Prasanta Kumar Sur (Deceased) &
Ors[7]. wherein this Court has explained the above legal position. In
another decision in A. Maria Angelena Vs. A.G. Balkis Bee[8], this
Court has made observations with reference to the plea that for grant
of a decree for specific performance would result in serious hardship
to the vendor or the subsequent purchaser and that the plaintiff
should be compensated in terms of money must be taken at the earliest
stage. Further, the High Court with reference to the deed of
conveyance in favour of the 5th defendant executed by defendant Nos. 1-
4 raised the question as to whether the defendant No.5 was a bona fide
purchaser for consideration without notice of the earlier Agreement of
Sale in favour of the plaintiff is examined and answered against the
5th defendant. The defendant Nos. 1-4 have remained absent and
unrepresented in the original suit proceedings, hence they were placed
ex-parte, and therefore, the plea of the 5th defendant that the
plaintiff must always be ready and willing to perform his part of the
contract under such circumstances is wholly untenable in law. In view
of the said factual position, the plea that the plaintiff has not been
ready and willing to perform his part of contract as per the
agreement, is available to the 5th defendant under the concluded
contract between the plaintiff and defendant Nos. 1-4, as per
Agreement of Sale dated 25.12.1983. In this regard, the High Court has
placed reliance upon the judgment of this Court in MMS Investments,
Madurai & Ors. Vs. V. Veerappan & Ors.[9] in support of the
proposition of law that the 5th defendant stepped into the shoes of
the vendors, and that the question of readiness and willingness cannot
be pressed into service at all in facts of the case. The learned
Judge of the High Court while recording his findings and reasons on
the contentious issues has re-appreciated the pleadings and
evidence on record with reference to rival legal contentions, and he
has placed reliance upon the catena of decisions of this Court and the
Division Bench of the Karnataka High Court and has held that not
granting of the decree for specific performance in favour of the
plaintiff is held to be bad in law and he has set aside the judgment
and decree of the trial court and the same was modified granting
decree for specific performance as per Agreement of Sale in favour of
the plaintiff and modified the judgment restraining the defendant
Nos.1-4 not to disturb the possession and enjoyment of the suit
schedule property of the plaintiff.

15. The legality and validity of the impugned judgment and decree are
challenged in this appeal by the deceased 5th defendant, subsequently,
he is substituted by his legal representatives, by framing certain
questions of law and urged various grounds in support of the same.
The questions of law and grounds urged in this appeal would be
adverted while answering the points that are framed in this judgment.

16. After perusal of the impugned judgment of the High Court and
the questions of law framed by the defendant No.5 in this appeal, the
following points would arise for determination of this Court:

1) Whether the original suit filed by the plaintiff seeking a
decree for specific performance against the defendant Nos. 1-4
in respect of the suit schedule property without seeking the
declaratory relief with respect to termination of the
Agreement of Sale vide notice dated 28.3.1985, rescinding the
contract, is maintainable in law?

2) Whether the reversal of the findings of the trial court on
the issue Nos. 3, 4 and 5 by the High Court and answering the
same in favour of the plaintiff in the impugned judgment and
granting the decree for specific performance in favour of the
plaintiff in respect of the schedule property is legal and
valid?
(3) Whether the grant of decree of specific performance in
favour of the plaintiff despite Clause 12 of the Agreement of
Sale dated 25.12.1983 is legal and valid?

(4) Whether the grant of the decree is in conformity with sub-
sections (1) and (2) of Section 20 of the Specific Relief Act
and whether the learned Judge of the High Court has exercised
his discretionary power reasonably in granting the same in
favour of the plaintiff?
5) What decree or order to be passed?

17. Answer to Point No.1

The first point is answered in favour of the defendant No. 5 by
assigning the following reasons:

It is an undisputed fact that there is an Agreement of Sale
executed by defendant Nos. 1-4 dated 25.12.1983 in favour of the
plaintiff agreeing to sell the schedule property in his favour for a
sum of Rs. 45,000/- by receiving an advance sale consideration of
Rs.5,000/- and the plaintiff had further agreed that the remaining
sale consideration will be paid to them at the time of execution of
the sale deed. As per Clause 6 of the Agreement of Sale, the time to
get the sale deed executed was specified as 5 months in favour of the
plaintiff by the defendant Nos.1-4, after obtaining necessary
permission from the competent authorities such as the Urban Land
Ceiling Authority and Income Tax Department for execution and
registration of the sale deed at the cost and expenses of the
plaintiff. If there is any delay in obtaining necessary permission
from the above authorities and the payment of layout charges, the time
for due performance of agreement shall further be extended for a
period of two months from the date of grant of such permission. In
the instant case, permission from the above authorities was not
obtained from defendant Nos. 1-4. The period of five months stipulated
under clause 6 of the Agreement of Sale for execution and registration
of the sale deed in favour of the plaintiff had expired. Despite the
same, the defendant Nos. 1-4 got issued legal notice dated 06.03.1985
to the plaintiff pointing out that he has failed to perform his part
of the contract in terms of the Agreement of Sale by not paying
balance sale consideration to them and getting the sale deed executed
in his favour and called upon him to pay the balance sale
consideration and get the sale deed executed on or before 18.3.1985.
The plaintiff had issued reply letter dated 16.3.1985 to the advocates
of defendant Nos. 1-4, in which he had admitted his default in
performing his part of contract and prayed time till 23.05.1985 to get
the sale deed executed in his favour. Another legal notice dated
28.03.1985 was sent by the first defendant to the plaintiff extending
time to the plaintiff asking him to pay the sale consideration amount
and get the sale deed executed on or before 10.04.1985, and on failure
to comply with the same, the Agreement of Sale dated 25.12.1983 would
be terminated since the plaintiff did not avail the time extended to
him by defendant Nos. 1-4. Since the plaintiff did not perform his
part of contract within the extended period in the legal notice
referred to supra, the Agreement of Sale was terminated as per notice
dated 28.03.1985 and thus, there is termination of the Agreement of
Sale between the plaintiff and defendant Nos. 1-4 w.e.f. 10.04.1985.
As could be seen from the prayer sought for in the original suit, the
plaintiff has not sought for declaratory relief to declare the
termination of Agreement of Sale as bad in law. In the absence of
such prayer by the plaintiff the original suit filed by him before the
trial court for grant of decree for specific performance in respect of
the suit schedule property on the basis of Agreement of Sale and
consequential relief of decree for permanent injunction is not
maintainable in law. Therefore, we have to hold that the relief
sought for by the plaintiff for grant of decree for specific
performance of execution of sale deed in respect of the suit schedule
property in his favour on the basis of non existing Agreement of Sale
is wholly unsustainable in law. Accordingly, the point No. 1 is
answered in favour of the defendant No.5.

18. Answer to Point No. 2

Even if we assume that the Agreement of Sale dated 25.12.1983 is
subsisting, we have to answer point No. 2 in favour of defendant No.5
for the following reasons :-

It would be very much relevant for us to extract Clause 6 of the
Agreement of Sale which reads thus:

“The time fixed for execution and completion of the sale
transaction is five months from the date of the agreement of
sale. The first parties have agreed to get the necessary
permission for registration from the competent authorities
such as the Urban Land Ceiling authorities and Income Tax
Authority within the said period of five months at the cost
and expenses of the Second Party. The Second Party has
agreed to pay the necessary layout and conversion charges of
the suit property to the concerned authorities. The first
party have further agreed with the second party that if in
case the necessary permission from the aforesaid authorities
is delayed and as a consequence thereof the payment of layout
charges is delayed, the time for due performance of the
agreement shall stand extended for a further period of 2
months from the date of grant of such permission.”

This position of law is well settled by this Court in the
Constitution Bench judgment in Smt.Chand Rani (dead) by LRs. Vs. Smt.
Kamal Rani(dead) by LRs.[10]; wherein this Court has held that it is
well settled principle of law, that in a case of sale of immovable
property, time is not the essence of the contract. However, If the
parties agreed to a specified time in the agreement to perform their
part of the contract, then time is the essence of the contract and
parties shall adhere to the same.

To emphasize the fact that time is the essence of the contract
before the High Court, the counsel for the 5th defendant has placed
reliance upon the judgment of this Court in Chand Rani’s case (supra),
the relevant portions of which are extracted below:

“19. It is a well-accepted principle that in the case of sale of
immovable property, time is never regarded as the essence of the
contract. In fact, there is a presumption against time being the
essence of the contract. This principle is not in any way
different from that obtainable in England. Under the law of
equity which governs the rights of the parties in the case of
specific performance of contract to sell real estate, law looks
not at the letter but at the substance of the agreement. It has
to be ascertained whether under the terms of the contract the
parties named a specific time within which completion was to
take place, really and in substance it was intended that it
should be completed within a reasonable time. An intention to
make time the essence of the contract must be expressed in
unequivocal language.”

20. “…… Section 55 of the Contract Act which deals with the
consequences of failure to perform an executory contract at or
before the stipulated time provides by the first paragraph:
‘When a party to a contract promises to do a certain thing at or
before a specified time, or certain things at or before
specified times, and fails to do any such thing at or before the
specified time, the contract, or so much of it as has not been
performed, becomes voidable at the option of the promisee if the
intention of the parties was that time should be of the essence
of the contract.’
It is not merely because of specification of time at or before
which the thing to be done under the contract is promised to be
done and default in compliance therewith, that the other party
may avoid the contract. Such an option arises only if it is
intended by the parties that time is of the essence of the
contract. Intention to make time of the essence, if expressed in
writing, must be in language which is unmistakable: it may also
be inferred from the nature of the property agreed to be sold,
conduct of the parties and the surrounding circumstances at or
before the contract. Specific performance of a contract will
ordinarily be granted, notwithstanding default in carrying out
the contract within the specified period, if having regard to
the express stipulations of the parties, nature of the property
and the surrounding circumstances, it is not inequitable to
grant the relief. If the contract relates to sale of immovable
property, it would normally be presumed that time was not of the
essence of the contract. Mere incorporation in the written
agreement of a clause imposing penalty in case of default does
not by itself evidence an intention to make time of the essence.
In Jamshed Khodaram Irani v. Burjorji Dhunjibhai the Judicial
Committee of the Privy Council observed that the principle
underlying Section 55 of the Contract Act did not differ from
those which obtained under the law of England as regards
contracts for sale of land.”

22. In Hind Construction Contractors case quoting Halsbury’s
Laws of England, this Court observed at pages 1154-55 as under:
(SCC pp. 76-77, paras 7 & 8)

“In the latest 4th edn. of Halsbury’s Laws of England in
regard to building and engineering contracts the statement of
law is to be found in Vol. 4, para 1179, which runs thus:
‘1179. Where time is of the essence of the contract. — The
expression time is of the essence means that a breach of the
condition as to the time for performance will entitle the
innocent party to consider the breach as a repudiation of the
contract. Exceptionally, the completion of the work by a
specified date may be a condition precedent to the contractor’s
right to claim payment. The parties may expressly provide that
time is of the essence of the contract and where there is power
to determine the contract on a failure to complete by the
specified date, the stipulation as to time will be fundamental.
Other provisions of the contract may, on the construction of the
contract, exclude an inference that the completion of the works
by a particular date is fundamental; time is not of the essence
where a sum is payable for each week that the work remains
incomplete after the date fixed, nor where the parties
contemplate a postponement of completion.
Where time has not been made of the essence of the contract
or, by reason of waiver, the time fixed has ceased to be
applicable, the employer may by notice fix a reasonable time for
the completion of the work and dismiss the contractor on a
failure to complete by the date so fixed.’

It will be clear from the aforesaid statement of law that
even where the parties have expressly provided that time of the
essence of the contract such a stipulation will have to be read
along with other provisions of the contract and such other
provisions may, on construction of the contract, exclude the
inference that the completion of the work by a particular date
was intended to be fundamental; for instance, if the contract
were to include clauses providing for extension of time in
certain contingencies or for payment of fine or penalty for
every day or week the work undertaken remains unfinished on the
expiry of the time provided in the contract such clauses would
be construed as rendering ineffective the express provision
relating to the time being of the essence of contract.”

19. The legal principle laid down by this Court in the above case
squarely applies to the facts of this case for the following reasons.
In the instant case, undisputedly, the plaintiff did not get Agreement
of Sale executed by paying the remaining consideration amount to the
defendant Nos. 1-4 within the stipulated period of 7 months as agreed
upon by him under Clause 6 of the agreement by asking the defendant
Nos. 1-4 to get the necessary permission from ULCA and Income Tax
Department after paying the layout charges to the concerned
authorities for getting the sale deed executed in his favour. The
plaintiff has not complied with the condition within the original
stipulated period of five months and extended period of two months and
even if the delay occurs in getting permission from the authorities,
that period was over by July, 1984. It is an undisputed fact that the
date of the institution of the original suit was nearly 11 months
after expiry of the limitation period stipulated in the agreement to
get the sale deed executed in favour of the plaintiff.

20. Both the trial court as well as the appellate court have not
examined this important aspect of the case though the parties have
agreed to perform their part of contract within seven months from the
date of execution of the agreement as stipulated in clause 6. We have
considered this aspect of the case on the basis of the period of 7
months stipulated in the Agreement of Sale and the same is answered in
favour of the defendants.

21. Answer to Point No. 3

Point No. 3 is also required to be answered in favour of the 5th
defendant by assigning the following reasons:

The learned Senior Counsel Mr. P. Vishwanatha Shetty appearing
for the defendant No.5 has placed strong reliance on the findings of
fact recorded by the trial court on the contentious issue Nos. 4 and 5
in the negative against the plaintiff, by recording its reasons at
paragraphs 12 and 13 of the judgment of the trial court. Therefore,
he submits that the said findings of fact are based on facts and
evidence on record. Further, he placed reliance upon Section 16(c) of
the Specific Relief Act, which provision makes it mandatory on the
part of the plaintiff to prove his readiness and willingness to get
the decree for specific performance of the suit schedule property in
his favour. The learned Senior Counsel for the 5th defendant also
placed strong reliance upon the judgment of this Court in the case of
N.P.Thirugnnam (dead) by Lrs. vs Dr. R. Jagan Mohan Rao & Ors.[11] in
support of the findings of the trial court on the above contentious
issues wherein this Court has held that the court must take into
consideration the conduct of the plaintiff prior and subsequent to the
filing of the original suit along with other attending circumstances
and further the amount of consideration which he has to pay to the
defendant Nos. 1-4 must be proved by the plaintiff. Further, the
plaintiff is required to prove the fact that right from the date of
execution of the Agreement of Sale till the date of passing the decree
he must prove that he is ready and has always been willing to perform
his part of the contract as per the agreement. Further, he rightly
contended the same by placing reliance upon another judgment of this
Court in the case of P.R.Deb & Associates Vs. Sunanda Roy[12] wherein
this Court held that the plaintiff in a suit for specific performance
must be ready and willing to carry out his part of the agreement at
all material times.

22. The correctness of the findings of fact recorded by the trial
court on the contentious issue Nos. 4 & 5 is examined by us keeping in
view the law laid down by this Court in the above referred case with
reference to the undisputed facts in the case on hand namely, that the
letter dated 16.03.1985 sent by the plaintiff would clearly go to show
that the plaintiff was a defaulter and another letter dated 04.05.1985
sent by the plaintiff to the defendant Nos.1-4, would go to show that
the plaintiff was not ready and willing to perform his part of
contract to purchase the suit schedule property by paying remaining
sale consideration amount to the defendant Nos.1-4 as per the sale
agreement as he had been seeking time without justification. Further,
the trial court has held that the court has to see conduct of the
party as well as the attending circumstances of the case regarding
whether readiness and willingness of the plaintiff can be inferred and
further the learned trial Judge rightly relied upon the provision of
Section 16(c) of the Specific Relief Act and appreciated evidence of
PW-1, the plaintiff and came to the right conclusion and held that the
plaintiff had not produced any document to show that he had the
balance sale consideration amount of Rs.40,000/-, to pay to the
defendant Nos.1-4 to get the sale deed executed in his favour.
Further, there is nothing on record to show that the plaintiff could
have made arrangement for payment of the balance consideration amount
to them. But, on the other hand the trial court has recorded the
finding of fact to the effect that the correspondence between the
parties and other circumstances would establish the fact that the
plaintiff had no money for payment of balance sale consideration to
the defendant Nos. 1-4 though they demanded the same from him through
their legal notices dated 06.03.1985 and 28.03.1985 which notices were
served upon the plaintiff and despite the same he did not approach the
defendant Nos.1-4 to get the sale deed executed in his favour even
after service of notice, and, prior to issuance of the legal notice to
him, he never offered to pay the balance consideration as agreed upon
by him to them even though defendant Nos. 1-4 have complied with all
the formalities required. The learned Judge, on the question of
readiness and willingness on the part of the plaintiff to perform his
part of the contract to get the sale deed executed in his favour
stated that performance of his obligation is mandatory as per Section
16 (c) of the Specific Relief Act and the law laid down in this regard
by this Court which are referred to supra upon which the trial court
has rightly relied upon and answered the contentious issues against
him by recording valid and cogent reasons. In view of the foregoing
reasons, we are of the view that the learned trial judge has applied
his mind consciously and correctly to the admitted facts and on proper
analysis and appreciation, he has correctly recorded the finding of
fact holding that the plaintiff has failed to perform his part of the
contract in paying the remaining sale consideration and made sincere
efforts to get necessary permission from the Urban Land Ceiling
Authority and the Income Tax Department by paying the conversion
charges of the land to get the sale deed executed in his favour from
the defendant Nos. 1-4 within the stipulated time of five months and
further extended period of two months as per clause 6 of the
agreement. The same has been erroneously set aside by the appellate
court by recording its reasons by placing reliance upon the judgments
of this Court in Nirmala Anand’s case (supra), Jawahar Lal Wadhwa Vs.
Haripada Chakroberty[13]; and A.Maria Angelena’s case (supra).

23. The learned senior counsel has rightly submitted that the
findings of fact on issue Nos.4 & 5 have been erroneously set aside by
the learned Judge of the High Court by recording his reasons which are
not supported by pleadings and legal evidence on record. The findings
of the learned Judge of the High Court are contrary to the admitted
facts and legal evidence on record.

24. We have carefully scrutinised the findings recorded by the trial
court on the issue Nos.1,3,4 and 5 with reference to the pleadings of
the case and legal evidence on record and the same have been
erroneously set aside by the learned Single Judge in the impugned
judgment and therefore, the same cannot be allowed to sustain in law.
25. The first appellate court has committed serious error
both on facts and in law in reversing the findings of fact recorded on
the contentious issues by referring to the decisions of this Court in
the impugned judgment on the aforesaid points which are totally
inapplicable to the fact situation, and has erroneously set aside the
findings of fact recorded by the trial court. Therefore, we are of
the considered view that the submissions made by learned Senior
Counsel on the basis of the findings and reasons recorded by the trial
court in its judgment are well founded and the same must be accepted
and accordingly we answer the point No. 3 against the plaintiff and in
favour of the defendant No.5.

26. Answer to the Point No.4

The point No. 4 is also required to be answered in favour of the
5th defendant for the reason that sale consideration of Rs.48,000/- in
respect of the suit schedule property has been paid to the defendant
Nos. 1-4 after the termination of the earlier agreement with the
plaintiff on 10.04.1985 vide notice dated 28.03.1985. Therefore, the
contention urged on behalf of the plaintiff, that 5th defendant is not
the bona fide purchaser, does not arise at all for the reason that the
earlier agreement executed in favour of the plaintiff by the defendant
Nos.1-4 was not subsisting, is the finding recorded by us in answer to
the point No.1 and we have held that there is termination of Agreement
of Sale dated 25.12.1983 by letter dated 28.03.1985 sent to him by
them. Therefore, the findings recorded by the appellate court on this
aspect stating that the defendant No.5 is not a bona fide purchaser
cannot be allowed to sustain. Accordingly, we set aside the same in
the above aspect.

27. Further, the High Court should have considered the relevant and
important aspect of the case namely that the plaintiff is entitled to
compensation as agreed upon by him under clause 12 of the Agreement of
Sale which is in favour of defendant Nos. 1-4. It provides that the
defendant Nos.1-4 have agreed that in the event of their failure to
comply with the terms of the agreement they shall pay sum of
Rs.10,000/- to the plaintiff and also such sum which is spent by him
towards conversion charges and building plan charges. Similarly, the
plaintiff had agreed that in the event of his failure to comply with
the terms of the agreement the defendant Nos. 1-4 are entitled to
forfeit the advance amount. This important aspect of the terms of the
Agreement of Sale has not been noticed by the learned Judge of the
High Court while reversing the judgment and decree of the trial court
and granted the decree for specific performance in favour of the
plaintiff in exercise of his discretionary power under sub-sections
(1) and (2) of Section 20 of the Specific Relief Act. Further, in view
of the foregoing reasons and statutory provisions of Sections 16(c),
20 (1) and (2) and 21(2) of the Specific Relief Act, the plaintiff is
not entitled for a decree of specific performance in respect of the
suit schedule property and also he had lost the right to seek a decree
of specific performance.

28. The learned High Court Judge has gravely erred in reversing the
findings of fact recorded on the issue Nos. 3, 4 and 5 by the trial
court in favour of the defendants. He has also failed to take into
consideration the very important aspect of the matter, namely, that
the Agreement of Sale in favour of the plaintiff was terminated and he
had not sought declaratory relief to declare that the termination of
agreement in the original suit is bad in law and therefore the suit
for specific performance is not maintainable. Even assuming for the
sake of argument that agreement was subsisting, the suit for specific
performance is not maintainable in law in view of the breach of the
terms and conditions of the agreement by the plaintiff. Keeping in
view the purpose for which the Agreement of Sale was executed and the
time stipulated in the agreement as per clause 6 of the agreement, the
contract should have been complied with within seven months including
the extended period and that has not been done by the plaintiff. The
findings recorded by the trial court on issue Nos. 4 and 5 and with
regard to the readiness and willingness on the part of the plaintiff,
the appellate court should have exercised its discretionary power
under sub-sections (1) and (2) of Section 20 of the Specific Relief
Act, and for this reason also we hold that the grant of the decree for
specific performance by the High Court in the impugned judgment is
wholly unsustainable in law. The trial court has come to the right
conclusions on the contentious issues framed by it and has held that
even though Agreement of Sale is proved, the plaintiff is not entitled
for the decree of specific performance in respect of the suit schedule
property in view of the findings of fact and reasons recorded in the
contentious issues by it in its judgment and we are in agreement with
the same.

29. Accordingly, we allow this civil appeal and set aside the
impugned judgment and decree of the High Court of Karnataka, Bangalore
passed in Regular First Appeal No.97 of 2001 dated 08.12.2008 and
restore the judgment and decree passed by the X1th Additional City
Civil Judge, Bangalore City, Bangalore dated 25.09.2000 in O.S. No.
2012 of 1985, but, in the facts and circumstances of the case, no
costs are awarded in these proceedings.

…………………………………………………………J. [G.S.
SINGHVI]

…………………………………………………………J.
[V. GOPALA GOWDA]

New Delhi, August
29, 2013

———————–
[1] (1977) 2 SCC 200

[2] ILR 1993 KAR 427

[3] (2003)10 SCC 390

[4] (1996)4 SCC 526

[5] 1987 (Suppl) SCC 340

[6] (2002) 5 SCC 481

[7] 1961 (3) SCR 579

[8] (2002) 9 SCC 597

[9] (2007) 9 SCC 660

[10] (1993) 1 SCC 519

[11] (1995) 5 SCC 115

[12] (1996) 4 SCC 423

[13] (1989) 1 SCC 76

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