Madras High Court
B.Nemi Chand Jain vs G.Ravindran on 27 January, 2010
Author: V. Ramasubramanian
Bench: V. Ramasubramanian, D.Hariparanthaman
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT DATED: 27-01-2010 CORAM: THE HONOURABLE MR. JUSTICE V. RAMASUBRAMANIAN AND THE HONOURABLE MR. JUSTICE D.HARIPARANTHAMAN A.S.(MD) No.18 of 2009 And M.P.(MD) Nos.3 and 4 of 2009 1.B.Nemi Chand Jain 2.N.Subash Chand Jain .. Appellants vs. 1.G.Ravindran 2.L.P.Natarajan 3.P.Ramkumar 4.S.R.M.Institute of Science and Technology, Represented by its Trusteee P.Ravi, S/o.T.R.Patchaimuthu, No.3, Veerasamy Street, West Mambalam, Chennai-600 033. 5.M/s.T.R.P. Educational Trust, Represented by its Trustee P.Ravi, S/o.T.R.Patchaimuthu, No.3, Veerasamy Street, West Mambalam, Chennai-600 033. .. Respondents Appeal preferred against the judgment and decree of the I Additional District and Sessions Court, Tiruchirappalli, dated 10.1.2009 in O.S.No.82 of 2008. For Appellants : Mr.T.R.Rajagopalan and Mr.AR.L.Sundaresan, Senior Counsel. For Respondents-1 to 3 : Mr.T.V.Ramanujun, Senior Counsel. For Respondents-4 & 5 : Mr.V.T.Gopalan, Senior Counsel. JUDGMENT
V. RAMASUBRAMANIAN, J.
The plaintiffs in O.S.No.82 of 2008 on the file of the I Additional District and Sessions Court, Tiruchirappalli, are the appellants herein. They have come up with the present regular appeal against the judgment and decree of the trial Court dated 10.1.2009, rejecting their prayer for specific performance of an agreement of sale of immovable property, but granting a decree for refund of advance amount together with interest at 15% per annum with annual rests and proportionate costs.
2. We have heard Mr.T.R.Rajagopalan and Mr.AR.L.Sundaresan, learned Senior Counsel appearing for the appellants, Mr.T.V.Ramanujun, learned Senior Counsel appearing for the respondents 1 to 3 and Mr.V.T. Gopalan, learned Senior Counsel appearing for the respondents 4 and 5.
3. The plaint averments, in brief, are as follows:-
(i) That the defendants 1 to 3 represented to the plaintiffs that they are the absolute owners, in possession and enjoyment of the properties of a total extent of 75 acres and 23-1/2 cents in Irungalur and Ayakudi villages of Mannachanallur Taluk, Tiruchirappalli District, described in Schedule 'A' to the plaint;
(ii) That believing the representation of the defendants 1 to 3, the plaintiffs negotiated with them and arrived at an agreement for the purchase of the said properties for a consideration of Rs.9,000/- per cent, but working out the total sale consideration payable at Rs.6,68,38,500/-;
(iii) That an agreement was entered into in writing on 16.5.2007 incorporating the terms of the agreement and recording the payment of an advance amount of Rs.1,63,00,000/-;
(iv) That the plaintiffs agreed to pay the balance sale consideration of Rs.5,05,38,500/- at the time of registration;
(v) That under Clause No.1 of the Sale Agreement, the plaintiffs were entitled to inform the defendants 1 to 3 on or before 31.7.2007 and get ready with the Sale Deed on requisite stamp papers and upon tendering the balance sale consideration, the defendants 1 to 3 were to execute the Sale Deed in favour of the plaintiffs or their nominees and put them in possession;
(vi) That under Clause 9 of the Agreement, the defendants 1 to 3 declared that they had absolute and marketable title to the property and that there were no encumbrances, charges, lien, lis pendens, attachment, etc., and that if any such encumbrances was discovered later by the plaintiffs, the plaintiffs had the option to rescind the Agreement and claim refund of the advance with interest at 15% per annum compounded on yearly rests;
(vii) That under Clause 10, the plaintiffs also had the alternative option to discharge any such liability from out of the balance sale consideration and compel the defendants 1 to 3 to execute the Sale Deed;
(viii) That under Clause 11, the original title deeds and patta pass book relating to the property were handed over to the plaintiffs;
(ix) That the original title deeds relating to most of the properties described in Schedule 'A' to the plaint were handed over by defendants 1 to 3 to the plaintiffs;
(x) That in respect of some properties, not owned by them, the defendants 1 to 3 claimed to have paid the entire sale consideration and got Powers of Attorney executed in their favour by the original owners;
(xi) That after entering into a Sale Agreement on 16.5.2007, the plaintiffs paid a sum of Rs.1,37,00,000/- on the very next day viz., 17.5.2007 and the same was acknowledged by the defendants 1 to 3 by making an endorsement on the reverse of the first page of the Sale Agreement;
(xii) That again on 30.6.2007, the plaintiffs made a further payment of Rs.1,00,00,000/- and the defendants 1 to 3 acknowledged the receipt of the said payment on the reverse of the first page of the Sale Agreement, thereby acknowledging the receipt of a total advance amount of Rs.4,00,00,000/-;
(xiii) That though the plaintiffs were always ready and willing to pay the balance sale consideration and have a Sale Deed executed, right from the date of the Agreement and within the time fixed under the Agreement viz., 31.7.2007, the defendants 1 to 3 did not furnish the original title deeds, patta etc., in respect of some portions of the property described in the Schedule 'A';
(xiv) That sometime in October 2007, the defendants 1 to 3 informed the plaintiffs that the lands described in Schedule 'B', which form part of the lands described in Schedule 'A' were claimed by the Hindu Religious and Charitable Endowment Department, as belonging to Arulmigu Ayyanar Temple, Arulmigu Vinayagar Temple, Arulmigu Shri Kamba Perumal Temple, Arulmigu Karuppanna Samy Temple and Thanneer Pandhal Dharmam and that a letter was addressed by the said Department to the Sub Registrar not to register any Sale Deed in respect of those lands;
(xv) That the defendants 1 to 3 promised to resolve the issue with the HR & CE Department and then execute the Sale Deed in favour of the plaintiffs;
(xvi) That when the plaintiffs, having paid substantial part of the consideration and also ready and willing at any time to pay the balance sale consideration, were honestly and genuinely waiting for the defendants 1 to 3 to clear the cloud created by the HR&CE Department, they received caveat notices dated 23.1.2008 from an Advocate, both on behalf of defendants 1 to 3 and also on behalf of defendants 4 and 5;
(xvii) That the plaintiffs thereafter came to understand that the defendants 1 to 3 had illegally sold substantial portion of the suit properties in favour of defendants 4 and 5;
(xviii) That the purchase by the defendants 4 and 5 was neither bona fide nor without notice of the existence of the Sale Agreement in favour of the plaintiffs and the original title deeds in the custody of the plaintiffs;
(xix) That the defendants 4 and 5 could not have purchased such large extents of property bona fide, without even verifying the original title deeds and without seeking delivery of the original title deeds;
(xx) That the purchase by defendants 4 and 5 was obviously with the knowledge of the Sale Agreement and the defendants 1 to 3 could not also have suppressed the Sale Agreement, as the original title deeds were not available with them;
(xxi) That the purchase of portions of the property by the defendants 4 and 5 would not bind the plaintiffs and would not deprive the plaintiffs of their right to enforce the suit agreement;
(xxii) That the properties purchased by the defendants 4 and 5 are described respectively in Schedules 'C' and 'D' to the plaint;
(xxiii) That in the above circumstances, the plaintiffs caused a legal notice dated 25.2.2008 to be issued to defendants 1 to 3;
(xxiv) That the defendants 1 to 3 issued a reply dated 7.3.2008 and the defendants 4 and 5 issued a reply dated 10.3.2008, through the same counsel;
(xxv) That in their reply, the defendants 4 and 5 feigned ignorance about the Sale Agreement in favour of the plaintiffs and falsely claimed that during the third week of December 2007, the plaintiffs requested the defendants 4 and 5, upon coming to know of the sale in their favour, to mediate between them and one K.V.G.Ravindran, in the monetary disputes;
(xxvi) That the defendants 4 and 5 have also claimed in their reply that they verified the existence of any encumbrance over the property and found no such encumbrance and consequently measured the property, identified the same, put up fencing and started enjoying the same and had also issued various advertisements in vernacular Dailies;
(xxvii) That in their reply, the defendants 1 to 3 claimed that the plaintiffs were not ready and willing to complete the transaction and that even before the Agreement of Sale, they had informed the plaintiffs about the rights of the temples and that their claim for specific performance was not well founded and that the plaintiffs were openly demanding a sum of Rs.8.5 crores for the return of the original documents;
(xxviii) That all the averments contained in the reply notices dated 7.3.2008 and 10.3.2008 of the defendants 1 to 3 and defendants 4 and 5 were false;
(xxix) That the defendants 1 to 3 never disclosed about the claim of the temples to a portion of the property, save for the first time in October 2007 and that though the plaintiffs were always ready and willing, the defendants 1 to 3 were giving some excuses and always promising to complete the transaction;
(xxx) That the plaintiffs, at no point of time, demanded any money much less Rs.8.5 crores as alleged in the reply notices;
(xxxi) That the plaintiffs were always seeking specific performance and were not in the habit of reading vernacular newspapers, as they are not conversant with Tamil language;
(xxxii) That the allegation in the reply notice that the plaintiffs approached defendants 4 and 5 for a mediation was false;
(xxxiii) That in so far as Schedule 'B' properties are concerned, they were not endowed to the temples, but only a charge had been created for the performance of certain obligations and that the defendants 1 to 3 failed to keep up their assurance to resolve the issue;
(xxxiv) That the plaintiffs are always ready and willing to pay the balance sale consideration of Rs.2,68,38,500/- and willing to take the Sale Deed in respect of the entire property;
(xxxv) That the plaintiffs are even willing to pay the balance sale consideration without any kind of proportionate deduction and take a Sale Deed for the properties described in Schedule 'A', without the properties described in Schedule 'B', if the defendants 1 to 3 felt it impossible to convey the Schedule 'B' properties, thereby foregoing their right to purchase the Schedule 'B' properties; and (xxxvi) That the action of the defendants 1 to 3 in not executing the Sale Deed in favour of the plaintiffs, but selling the Schedules 'C' and 'D' properties in favour of defendants 4 and 5 constituted a clear breach of contract and that the defendants 1 to 3 are specifically bound to perform their part of the Agreement and the defendants 4 and 5 should also join in the execution of the Sale Deed;
4. The first defendant filed a written statement, which was adopted by defendants 2 and 3, contending in brief as follows:-
(i) That the allegation of the plaintiffs that the defendants 1 to 3 represented to be the absolute owners, in possession and enjoyment of the properties of the extent of 75 acres and 23-1/2 cents, is false and incorrect;
(ii) That the plaintiffs are put to strict proof of the averments relating to the Sale Agreement, fixation of sale consideration and payment of advance;
(iii) That the second plaintiff is actually a financier, who was also doing real estate business in and around Irungalur village and was fully aware of the details of the properties in the village;
(iv) That the defendants 1 to 3 borrowed monies from the second plaintiff and handed over some of the documents of title as security of the loan and the signed list of the documents so deposited, is with the second plaintiff, the non production of which falsified the allegations in the plaint;
(v) That in the middle of May 2007, the amount due to the second plaintiff with interest was rounded off to Rs.3 crores;
(vi) That since the loan could not be settled, the second plaintiff forced and pressurised the defendants 1 to 3 to sign the Sale Agreement prepared by him on 16.5.2007;
(vii) That the first plaintiff is only a name lender who is in no way connected with the transaction;
(viii) That no amount alleged as advance or as per the endorsement dated 17.5.2007, was paid on the dates mentioned in the Agreement and no amount, much less the sum of Rs.1,00,000/- (obviously wrongly typed for Rs.1,00,00,000/-) was paid on 30.6.2007;
(ix) That the defendants were reduced merely to the role of signing the document dated 16.5.2007, which was signed only on 17.5.2007;
(x) That no man of ordinary prudence would agree to Clause 8 of the Agreement, which is a clear testimony to show that the terms of the Agreement were unilateral and born out of wishful thinking of the second plaintiff;
(xi) That the title deeds were not handed over on the date mentioned in the Agreement as alleged as part performance of a contract of sale, but prior in point of time;
(xii) That these defendants had no full knowledge of the 'B' Schedule properties at the time of signing the Agreement;
(xiii) That not even a single scrap paper relating to properties described in Schedule 'B' was available and none was handed over;
(xiv) That both parties were aware of the claim made by HR&CE Department in respect of 'B' Schedule properties;
(xv) That revealing their financial crisis, these defendants made endorsements in writing on the 10th page and the same was accepted by both parties;
(xvi) That the reproduction of the various clauses in the suit Agreement cannot make the Agreement mutual, bilateral or a voluntary one;
(xvii) That after coming to know of the contents of the document dated 16.5.2007, later on, these defendants informed the plaintiffs about the unidentifiable and inseparable nature of Schedule 'B' properties, but the second plaintiff assured to take steps to obtain necessary sanction from the HR&CE Department;
(xviii) That the plaintiffs were fully aware of the communication dated 20.9.2007 of the Assistant Commissioner, HR&CE to the Sub Registrar and hence their averment as though they came to know of the same only in October 2007 is false;
(xix) That even assuming that the plaintiffs had no prior knowledge about the claim made by the HR&CE Department, they ought to have negotiated and pursued their part to complete the transaction, even as per the terms of the Sale Agreement;
(xx) That the bald allegations in paragraph 8 of the plaint are not sufficient to infer readiness and willingness on the part of the plaintiffs, when no positive act is pleaded;
(xxi) That the second plaintiff wanted to make a ransom out of the dealing and was repeatedly compelling defendants 1 to 3 to pay a huge amount as interest;
(xxii) That he had no intention to perform his part of the alleged obligations, but was concerned only about money and that he finally demanded Rs.8-1/2 crores as settlement to hand over the original documents of title as well as the original document dated 16.5.2007 styled as Sale Agreement;
(xxiii) That when time was specifically made a stipulation to enforce the document dated 16.5.2007 as a contract of sale and when the financial position of the defendants was fully explained, the plaintiffs did not evince any interest to pursue completion of their part of the contract;
(xxiv) That these defendants had nothing to do with the caveat lodged by defendants 4 and 5, as they were bound to protect their interest and these defendants were obliged to join in the caveat;
(xxv) That the document dated 16.5.2007 is indivisible, inseparable and uncertain in material aspects and it is unenforceable and opposed to public policy and void ab initio;
(xxvi) That the allegations in paragraph 13 of the plaint as though the plaintiffs came to know about the sale in favour of defendants 4 and 5 only later, is a blatant lie and that when these defendants informed about the sale, the second plaintiff compelled them to return the money and was causing problems in selling for a price;
(xxvii) That due to the compulsion and unhealthy tactics of the second plaintiff, these defendants were forced to part with the property for a low price and could sell the property only for a consideration of Rs.4,11,08,000/- in respect of nearly 68 acres of land, thereby sustaining a huge loss;
(xxviii) That even after the sale when these defendants tendered the money due to the second plaintiff with interest and sought return of documents, he illegally demanded Rs.8-1/2 crores;
(xxix) That the filing of the suit after remaining silent and after knowing that possession is with third parties and that they are putting up constructions, is sufficient to disentitle the plaintiffs to the relief of specific performance, as the plaintiffs are guilty of delay and laches;
(xxx) That the sale in favour of defendants 4 and 5 were made only with the consent, knowledge and approval of the second plaintiff, who was hoping to succeed in his unconscionable demand for Rs.8-1/2 crores;
(xxxi) That the plaintiffs are fully aware of the execution of the Sale Deeds in favour of defendants 4 and 5 even at the time of execution and no exception can be taken to the passing of title to defendants 4 and 5, as they are bona fide purchasers and are in effective possession and enjoyment to the full knowledge of the plaintiffs;
(xxxii) That only on the assurance of the second plaintiff, the defendants 1 to 3 promised the defendants 4 and 5 to hand over title deeds later on and the allegations to the contrary as though the Sale Agreement was suppressed, is contrary to truth;
(xxxiii) That the present offer of the plaintiffs to purchase Schedule 'A' properties without insisting on Schedule 'B' properties, is only an after thought to get over their own laches, as the plaintiffs never expressed any intention to take the Sale Deeds in respect of a part of the properties;
(xxxiv) That the plaintiffs are not entitled to specific performance in part, in the absence of a recital to that effect;
(xxxv) That the plaintiffs are disentitled to seek the relief of specific performance, on the ground of equitable estoppel, as they have an alternative and efficacious remedy;
(xxxvi) That there is no cause of action and the contract cannot be performed in view of the communication by HR&CE Department and the contract stood rescinded due to the failure of the plaintiffs to invoke Clause 9;
(xxxvii) That in view of the failure of the plaintiffs to exercise the option of receiving back the amount with interest, they are disentitled to claim damages and this is why the plaintiffs have not claimed the alternative relief of damages;
(xxxviii) That the defendants are not guilty of wilful breach of the terms of the contract and hence they are not liable for damages and that no damage was suffered by the plaintiffs, since their scheming idea is only to extract money by getting an order of injunction and not to purchase the property;
(xxxix) That without prejudice to the above contentions, the defendants are prepared to deposit the amount mentioned in the Agreement, if so directed by this Court;
(xl) That the plaintiffs are liable to forfeit the amount mentioned in the Agreement, on account of the loss suffered by these defendants and that the defendants reliably understand that the second plaintiff is a veteran litigant, who has initiated similar proceedings just to extract money; and (xli) That the suit should therefore be dismissed with compensatory costs under Section 35A of the CPC.
5. The first defendant filed an additional written statement, (which was also adopted by defendants 2 and 3) contending inter alia -
(i) That the plaintiffs are guilty of suppression of material facts, delay and laches and reluctance and hence not entitled to the discretionary relief of specific performance;
(ii) That the suit document No.1 styled as an Agreement of Sale contains intrinsic evidence to show that the transaction between the second plaintiff and this defendant is only a loan transaction;
(iii) That even the initial payments detailed in the document make it clear that it is only a loan transaction, as no man of ordinary prudence, particularly a shrewd marvari financier like the second plaintiff will part with such a huge amount based on any oral agreement;
(iv) That Clause 11 of the document dated 16.5.2007 deals with a signed list of documents, but no such list is filed along with the document and hence the document is incomplete, inchoate and unenforceable;
(v) That though the so called Agreement mandates the purchasers to satisfy about the title of the properties, no correspondence ever took place;
(vi) That the plaintiffs cannot seek any relief under Section 12 of the Specific Relief Act, in the nature and circumstances of the case and the relief of possession of entire 'A' Schedule properties cannot also be claimed, since it includes 'B' Schedule properties also;
(vii) That the second plaintiff agreed to receive the money lent by him and to settle the issue and hence this defendant did not disclose the entire facts and circumstances under which their signatures were obtained in the document;
(viii) That the said document is only a loan document and that the second plaintiff issued notice only after the caveat, with an intention to extract more money, since the second plaintiff had agreed to receive the money lent by him and return the originals;
(ix) That the delay and laches will expose the second plaintiff's intention to harass and intimidate the defendants and gain unlawful enrichment; and
(x) That the so called agreement is only the making of the second plaintiff, as the stamp paper was purchased by him and no draft was prepared and approved and the defendants who were unable to repay the loans, were forced to sign the same.
6. The 4th defendant filed a written statement, which was adopted by the 5th defendant. The substance of the same is as follows:-
(i) That the suit as framed is not maintainable in law, since the plaintiffs are seeking to enforce an agreement which is totally at variance with the Agreement dated 16.5.2007;
(ii) That even on the basis of the averments of the plaintiffs relating to the claim made by the HR&CE Department, the suit for specific performance of the whole contract, has to be dismissed, as they have not prayed for the alternative relief of refund of the amounts said to have been paid;
(iii) That no decree for specific performance can be granted in view of the alleged claim of the HR&CE Department, as there is evidently, impossibility of performance;
(iv) That the defendants 4 and 5 have purchased the properties described in Schedules 'C' and 'D' to the plaint and they had no notice of the alleged Agreement till December 2007 and that they are bona fide purchasers for value without notice of the Agreement;
(v) That the defendants 4 and 5 have verified the existence of any encumbrance and thereafter purchased suit 'C' and 'D' Schedule properties and other properties by means of registered Sale Deeds dated 12.11.2007 and 30.11.2007 for developing a medical research institute and other educational institutions;
(vi) That they have purchased the same in good faith and for personal use and occupation and the work of clearing the thorny bushes and reclaiming, levelling and fencing had started from the date of purchase;
(vii) That the plaintiffs had knowledge of the Sale Deeds in favour of defendants 4 and 5 immediately after the purchase in November 2007, as the purchase was not a secret affair, but a large scale construction and other activities commenced in the lands immediately after the purchase;
(viii) That the plaintiffs cannot feign ignorance and claim to have come to know of the same only after the caveats;
(ix) That since it is not disputed that the defendants 1 to 3 had marketable title to the suit properties, the mere fact that some original documents are in the custody of the plaintiffs, cannot make the defendants not bona fide purchasers;
(x) That the defendants 1 to 3 did not inform the defendants 4 and 5 about any prior Agreement of Sale;
(xi) That the defendants have applied for building sanction on 4.1.2008 by depositing a sum of Rs.20,75,404/- and Rs.15,930/- towards the fees for plan approval and that they have also obtained electricity service connection on 3.2.2008 and the construction work was commenced in the month of December 2007 and that the constructions are in progress in or about 2 lakhs to 3 lakhs square feet and that the allied and necessary work like road information, lawn promotion, etc., are carried out;
(xii) That the construction of out-patient hospital building was completed in February/March 2008, a huge name board was displayed and the hospital was commissioned in February 2008 with about 25 Doctors and 40 Paramedical Personnel and other staff, who are attending to not less than 10 to 150 patients every day;
(xiii) That the defendants 4 and 5 had employed around 750 labourers and more than 40 Civil Engineers and other experts are working in the project and the basement work in the entire proposed area is nearing completion with pile foundation made upto a depth of 30 feet;
(xiv) That the above construction work and commissioning of hospital is known to general public including the plaintiffs and the wide range of paper publications in the English Daily "The Hindu" dated 3.2.2008 and 6.2.2008 are tell-tale of the above facts;
(xv) That the second plaintiff, after coming to know of the purchases, approached the defendants 4 and 5 in the third week of December 2007 and required them to effect a mediation of the alleged monetary disputes between him and one K.V.G.Ravindran;
(xvi) That the details of the alleged disputes were not made known and the demand was not accepted and the second plaintiff threatened them with legal proceedings, on account of which caveats were lodged;
(xvii) That these defendants were not aware of any dispute between the plaintiffs and defendants 1 to 3 nor do they know anything about the alleged Sale Agreement;
(xviii) That the existence of the alleged Sale Agreement was made known to them only during third week of December 2007 and the plaintiffs have deliberately suppressed their meeting with the defendants 4 and 5 in the third week of December 2007;
(xix) That the defendants 4 and 5 have purchased the properties for valuable consideration with due diligence, care and caution and the plaintiffs have initiated the present proceedings in order to use defendants 4 and 5 as a lever to settle the alleged dispute between them and the defendants 1 to 3;
(xx) That the defendants 4 and 5 are entitled to put up any construction in the properties as legitimate owners and they have invested a large amount of money for the proposed constructions;
(xxi) That the plaintiffs undoubtedly have an equally efficacious relief and consequently the prayer for specific relief has to be rejected;
(xxii) That the Agreement cannot be enforced as it is indivisible and the sale consideration is for the entire properties as 'B' Schedule properties are inseparable;
(xxiii) That the physical features of the suit properties will make it clear that the Agreement cannot be enforced;
(xxiv) That the properties were filled with thorny bushes and the same were cleared and lands were levelled and fences were erected and the properties were measured with the help of a qualified Surveyor and demarcated;
(xxv) That the defendants 4 and 5 purchased an extent of about 12 acres from various third parties to put the properties to convenient enjoyment and they have also entered into Agreements with third parties for purchase of 12 acres for putting up constructions and have left space to have access to the properties purchased by them;
(xxvi) That the defendants 4 and 5 have clubbed all the properties acquired by them and made them into a single block and the properties now in the occupation of defendants 4 and 5, consist of properties described in Schedules 'C' and 'D' apart from about 25 acres purchased from third parties;
(xxvii) That the properties have become a single block, inseparable and indivisible and the defendants 4 and 5 have got approval for the construction of massive structures and the constructions are nearing completion;
(xxviii) That the structures in the properties are raised in total, thus transferring the suit properties completely from being waste land to a campus with all inbuilt proposed infrastructures for a Medical and Engineering University;
(xxix) That the required machines were purchased, skilled employees recruited, medical experts and paramedical staff are employed and the rural public is benefited by the hospital and that in course of time, a full fledged hospital with advanced medical care will be available to the villages around the suit properties;
(xxx) That the suit property is situate abutting the Trichy-Chennai Highways and the construction work is known to the entire public, including the plaintiffs and the second plaintiff visited the suit properties many times and inspected the construction without disclosing his identity;
(xxxi) That the defendants 4 and 5 are bona fide purchasers for value without notice of prior Agreement and that the marketable title of the vendors was verified, possession of entire land taken and further activities carried on right from the date of acquisition;
(xxxii) That the defendants 4 and 5 are ignorant about the Agreement and they acted in good faith without any notice of the existence of the unregistered suit Agreement;
(xxxiii) That the defendants 4 and 5 acted with all prudence and perused copies of documents and satisfied themselves about the marketable title of the vendors;
(xxxiv) That there were some registered encumbrances such as house, plots etc., even at the time of the sale and the defendants 1 to 3 have now cleared 75% of the same;
(xxxv) That the defendants 4 and 5 have been establishing and maintaining various educational institutions and they have no commercial motive in purchasing the properties and have been using the properties for their own purposes;
(xxxvi) That the Agreement as a whole is prohibited by law, opposed to public policy and unenforceable and the relief prayed for cannot be granted against defendants 4 and 5 for want of privity of contract;
(xxxvii) That the chronology of events will expose the sinister motive of the plaintiffs to gain unlawful enrichment by impleading the defendants 4 and 5 and compelling them to part with a huge amount to satisfy their greed;
(xxxviii) That the plaintiffs have not come to Court with clean hands and hence they are not entitled to the equitable relief of specific performance;
(xxxix) That the plaintiffs are guilty of delay and laches and are not entitled to the relief of specific performance and there is no enforceable Agreement after 31.7.2007;
(xl) That the defendants 4 and 5 have changed the entire physical features of the suit properties after purchase and they have, to the knowledge of the plaintiffs, invested crores of rupees and raised massive constructions and are in peaceful possession and enjoyment;
(xli) That the construction and pre-requisites such as accumulation of materials, arrangement of manpower and machinery are all in existence long before the suit and even as on date and the plaintiffs have acquiesced in all the activities;
(xlii) That the defendants 4 and 5 have applied to the State and Central Governments and various governing bodies for approval for commencement of educational institutions and the same is on the verge of completion;
(xliii) That consequently the relative hardship for defendants 4 and 5 is more, if specific relief is granted and the plaintiffs can be compensated in terms of money; and (xliv) That therefore the suit should be dismissed with compensatory costs.
7. After the filing of the written statements by the defendants, the plaintiffs sought an amendment of the prayer. The amendment was ordered on 24.10.2008. By the amendment, a prayer for delivery of possession of suit 'A' Schedule properties was included, along with the original prayer for specific performance. Therefore, the defendants 4 and 5 filed an additional written statement, contending as follows:-
(i) That the defendants 4 and 5 adopt the written statement and additional written statement filed by defendants 1 to 3;
(ii) That they were not informed about the alleged Agreement of Sale and they had no knowledge about the same, in view of which the plaintiffs are not entitled to specific performance under Section 19(b) of the Specific Relief Act;
(iii) That the suit is speculative in nature;
(iv) That in view of the written statement of the defendants 1 to 3 that they only had loan transaction, for which the documents of some of the properties were handed over as security, the plaintiffs are not entitled to a decree for specific performance;
(v) That at the time of registration of sales in their favour, the defendants 1 to 3 handed over the original title deeds to the extent of 21 acres and further undertook to hand over the original title deeds in respect of the other properties sold by them to the defendants 4 and 5 and that defendants 1 to 3 at no point of time and in particular on or before the registration of the Sale Deeds in their favour informed the defendants 4 and 5 about any of the transactions that the defendants 1 to 3 had with the plaintiffs including the alleged Agreement of Sale;
(vi) That the conduct of the plaintiffs was not bona fide, as right from the day the Sale Deeds were registered in favour of defendants 4 and 5, massive excavation and construction including pile foundation work went on day-to-day basis and this fact was known to the entire population;
(vii) That publicity was also given in English newspapers and hence the plaintiffs cannot plead ignorance on the ground that they could not read Tamil newspapers;
(viii) That the second plaintiff is a financier carrying on business in Trichy for more than 2 decades and has put up a false case of ignorance;
(ix) That the plaintiffs deliberately kept silent only to allow the construction to come up substantially for the purpose of trying to extract money from defendants 4 and 5;
(x) That the second plaintiff approached defendants 1 to 3, but failed;
(xi) That the hospital had been put up and started functioning from 17.3.2009 and hundreds of out-patients are treated everyday, attended to by hundred Doctors;
(xii) That the strength of out-patients has increased to 600 patients per day and the hospital has been permitted to continue to function by an order of the Division Bench;
(xiii) That along with the construction of the hospital and for the purpose for starting the Medical College, massive constructions have already taken place and have reached substantial final stages necessary for the purpose of getting the initial permission from the Medical Council of India and the constructions undertaken for this purpose are to be completed and these constructions have been put up after getting No Objection Certificate from the State Government which is an essential pre-requisite for making application for permission to establish a Medical College and after submitting necessary applications, remitting huge amounts for getting planning permission; and
(xiv) That specific performance being a relief in equity, public interest have certainly a higher equity than private interest and that therefore, the plaintiffs are not entitled to the relief of specific performance.
8. On the above pleadings, the trial Court framed the following issues for trial:-
(1) Whether the plaintiff has entered into a Sale Agreement on 16.5.2007 with the defendants as claimed by him or as a security (Ex.A-1) executed as claimed by the defendants 1 to 3 ?
(2) Whether the plaintiff was all along willing and ready to perform the terms of Agreement, in case the issue (1) is decided in favour of the plaintiff?
(3) Whether the defendants 4 and 5 are bona fide purchasers of the item C and D Schedules of the suit properties or not ?
(4) Whether the plaintiff had contacted the defendants 4 and 5 after the execution of Sale Deeds by D1 to D3 in favour of D4 and D5 and discussed the amount due to him as claimed by D4 and D5 ?
(5) Whether the retention of original documents of the suit property along with anterior title deeds by the plaintiff and the failure of the defendants 4 and 5 to get the original documents from D1 to D3 at the time of purchase has affected the sale effected in favour of the defendants D4 and D5?
(6) Whether the plaintiff is entitled to relief of specific performance as prayed for?
(7) To what relief, the plaintiff is entitled to ?
9. Subsequently, an additional issue was framed, after the amendment of the prayer, which reads as follows:-
"Whether the plaintiff is entitled to recovery of possession ?"
10. The second plaintiff examined himself as PW-1. An official from the Income Tax Department, was examined as PW-2. The first defendant examined himself as DW-1. An official of the ICICI Bank was examined as DW-2. The Trustee of respondents 4 and 5 was examined as DW-3. The plaintiffs marked 56 documents as Exx.A-1 to A-56 on their side. The defendants marked 72 documents as Exx.B-1 to B-72 on their side. The Advocate Commissioner appointed by the Court filed his reports and plan as Exx.C-1 and C-2. The Officer of the Income Tax Department examined as PW-2 filed 4 documents as Exx.X-1 to X-4.
11. On issue No.1, the trial Court recorded a finding that the document dated 16.5.2007 filed as Ex.A-1, was executed only as a security for the loan transaction. On issue No.2, the trial Court recorded a finding that the plaintiffs were never ready and willing to complete the transaction. On issue Nos.3 and 5, the trial Court held that the defendants 4 and 5 are bona fide purchasers and that the retention of the original parent title deeds of the properties by the plaintiffs and the failure of the defendants 4 and 5 to get the same from the defendants 1 to 3 did not invalidate the sale in favour of defendants 4 and 5. The trial Court also held that the defendants 4 and 5 had no notice or knowledge about the execution of Ex.A-1, before the second plaintiff met defendants 4 and 5. On issue No.4, the trial Court held that the second plaintiff, after the execution of the Sale Deeds in favour of defendants 4 and 5, met them and discussed the amount due to him. On issue Nos.6 and 7, the trial Court held that the plaintiffs are not entitled to specific performance, but are entitled to get refund of the amount of Rs.4 crores paid by them, together with interest at 15% on yearly rests. The trial Court also held that an equitable mortgage had been created by defendants 1 to 3 in favour of the plaintiffs and hence there would be a charge over the properties mentioned in Exx.A-5 to A-28. Consequently, on the additional issue, the Court below held that the plaintiffs are not entitled to recovery of possession. As against defendants 4 and 5, the suit was dismissed by the trial Court.
12. Thus in effect, the trial Court rejected the prayer of the plaintiffs for specific performance, but granted a decree as against defendants 1 to 3 alone for repayment of a sum of Rs.4 crores together with interest at 15% on yearly rests and proportionate costs.
13. The defendants 1 to 3 have not challenged the decree for payment of money. The defendants 4 and 5 have also not filed an appeal, despite the fact that the trial Court held that a charge was created over a portion of the suit properties, for the due repayment of the above amounts. The plaintiffs alone have come up with the present appeal, assailing the judgment and decree of the trial Court in not granting a decree for specific performance.
14. Along with the appeal, the appellants/plaintiffs have also filed an application in M.P.No.3 of 2009 under Order XLI, Rule 27, CPC, for reception of additional documents. About 10 documents are sought to be filed as additional evidence by the appellants/plaintiffs. All these documents are letters written by the Block Development Officer or the Assistant Director of Town and Country Planning, either to the respondents 4 and 5 or to the President of the Irungalur Panchayat. The purpose for which these documents are sought to be filed, is to show that the defendants 4 and 5 did not have proper planning permission to proceed with the construction.
15. Similarly, the respondents 4 and 5/defendants 4 and 5 have also filed an application in M.P.No.4 of 2009 under Order XLI, Rule 27, CPC, to file additional evidence. About 12 documents are sought to be filed, for the purpose of establishing that necessary permissions and approvals have been obtained for establishing a Medical College and Hospital and for putting up constructions.
16. Finding fault with every finding of the trial Court as contrary to law, weight of evidence and the probabilities of the case, Messers.T.R. Rajagopalan and AR.L.Sundaresan, learned Senior Counsel for the appellants submitted that Ex.A-1, on the face of it and as per the pleadings and evidence, was only a Sale Agreement and not a security agreement and that the trial Court failed to appreciate the document as a whole. It is their further contention that persons of full age, maturity and understanding cannot be allowed to plead ignorance of the contents of the documents executed by them and that Sections 91 and 92 of the Indian Evidence Act, bar the admissibility of oral evidence, when the terms of an agreement have been reduced into writing. In support of these contentions, the learned Senior Counsel for the appellants relied upon the following decisions:-
P.S.Ranakrishna Reddy -vs- M.K.Bhagyalakshmi AIR 2007 SC 1256 Chokkammal -vs- K.Balraj 2008 (5) CTC 690 Tamilnadu Electricity Board -vs- Raju Reddiyar 1996 (2) CTC 193 Bhandari Construction Co -vs- Narayan Gopal Upadhyay 2007 (3) SCC 163 S.Sakthivel -vs- M.Venugopal Pillai 2000 (7) SCC 104 A.Abdul Rashid Khan -vs- P.A.K.A. Shahul Hameed 2000 (10) SCC 636 Nanjammal -vs- Palaniammal 1993 (2) LW 205
17. Assailing the finding of the trial Court with regard to readiness and willingness on the part of the plaintiffs, the learned Senior Counsel for the appellants submitted that time was not the essence of the Agreement of Sale. The total sale consideration fixed under the Agreement Ex.A-1 was only Rs.6,68,38,500/-, out of which the appellants/plaintiffs had already paid more than 50%,(Rs.4 crores) even as on 30.6.2007. Pursuant to the judgment of the Division Bench of this Court in CMA No.1126 of 2008 arising out of the interim prayer for injunction, the appellants/plaintiffs also deposited the balance sale consideration of Rs.2,68,38,500/-. Therefore, it is the contention of the learned Senior Counsel for the appellants that their readiness and willingness was so obvious and that in the light of Sections 37 and 51 of the Indian Contract Act, it was not even open to the defendants 1 to 3 to complain of non performance against the plaintiffs when they themselves did not perform their part of the obligations. It is the further contention of the learned Senior Counsel for the appellants that under Section 55 of the Indian Contract Act, even in respect of contracts where time is prescribed as the essence, the contract would be voidable, if one party commits a breach, at the option of the other party.
18. In support of their contention that time is not the essence of the contract, the learned Senior Counsel for the appellants, placed reliance upon the following decisions:-
Chand Rani -vs- Kamal Rani 1993 (1) SCC 519 Motilal Jain -vs- Smt. Ramdasi Devi AIR 2000 SC 2408 H.P.Pyarejan -vs- Dasappa 2006 (2) CTC 778 Rathinam Chettiyar -vs- Embar Naidu 1999 (3) CTC 394 Sugani -vs- Rameshwar Das AIR 2006 SC 2172 K.M.Rajendran -vs- Arul Prakasam 1998 (3) CTC 25
19. On the question whether the defendants 4 and 5 are bona fide purchasers or not, the learned Senior Counsel for the appellants contended that the failure of the defendants 4 and 5 to demand the production of the original parent documents from the defendants 1 to 3 and the payment of the entire sale consideration in cash under Exx.A-29 to A-34 (or A-35 to A-40), proved that they were not bona fide purchasers. DW-1 also admitted in evidence that the purchasers had retained an amount of Rs.2.5 crores out of the sale consideration, for the settlement of the dispute with the second plaintiff, showing clearly their knowledge about the prior Agreement of Sale. It is the contention of the learned Senior Counsel for the appellants that when admittedly the original title deeds in respect of 70 acres of land, out of the total extent of 75 acres and 23-1/2 cents, was with the plaintiffs, the statement in the Sale Deeds in favour of defendants 4 and 5 as though the original title deeds have been handed over, was a patent lie, establishing the lack of bona fides. According to the learned Senior Counsel for the appellants, what is referred to in Section 19 (b) of the Specific Relief Act, is not "knowledge" but "notice" and that as per Section 3 of the Transfer of Property Act, a person is said to have notice of a fact, when he actually knows the fact or when he abstains from making an enquiry or search which he ought to have made or a fact which he would have known, but for his gross negligence. The learned Senior Counsel for the appellants also referred to the rights and liabilities of a buyer and seller listed out in Section 55 of the Transfer of Property Act and contended that under Section 55 (3), a seller is bound to deliver all documents of title, once the whole of the purchase money is paid. Therefore, it is their contention that the defendants 4 and 5 have had constructive notice of the prior Agreement of Sale, as otherwise, there was no necessity to retain a huge amount out of the sale consideration. In support of these contentions, the learned Senior Counsel for the appellants relied upon the following decisions:-
Mohammed Aslam Khan -vs- Feroz Shah AIR 1932 Privy Council 228 Ram Niwas -vs- Smt. Bano & others 2000 (6) SCC 685 Govind Das -vs- Shanti Bai 1973 (3) SCC 418 Ram Bilas Ojha -vs- Bishwa Muni 1979 (1) SCC 21 Ahmedabad Municipal Corporation -vs- Haji Abdul Gafur 1971 (1) SCC 757 Mohideen Sahib -vs- Amenabi & others 2007 (7) MLJ 533
20. The learned Senior Counsel for the appellants also submitted that the defendants 4 and 5, who are subsequent purchasers, do not have any right to plead anything on the merits of the claim of the plaintiffs other than pleading to be bona fide purchasers for value without notice. The defendants 4 and 5, according to the learned Senior Counsel, have no right to assail the Agreement of Sale or raise any other contentions, which may be available to the agreement vendors. In support of this contention, the learned Senior Counsel relied upon the following decisions:-
Jograj Singh -vs- Labh Singh AIR 1995 SC 945 A.Ramanathan Chettiyar -vs- R.Ranganayaji 2008 (2) CTC 265 M.M.S. Investments -vs- V.Veerappan 2007 (3) MLJ 608 (SC) The learned Senior Counsel for the appellants also submitted that the judgment of the Division Bench of this Court in 2000 (2) LW 15, relied upon by the learned Senior Counsel for the defendants 4 and 5, is no longer good law in view of the subsequent decision of the Supreme Court.
21. On the question of equity, it was contended by the learned Senior Counsel for the appellants that when the payment of Rs.4 crores was not disputed and when the balance sale consideration of Rs.2,68,38,500/- had also been deposited into Court by the appellants/plaintiffs, equity was certainly in their favour. According to the learned Senior Counsel, there was absolutely no equity in favour of defendants 4 and 5, since they are not bona fide purchasers and they had not even verified the original title deeds before purchasing the property. Even after purchase, the construction activities had not started for a long period of time. After the litigation commenced, the appellants/plaintiffs had the benefit of injunction, for a sufficiently long period of time, despite which, the defendants 4 and 5 claim to have proceeded with the construction. In the appeal arising out of the interim order of injunction, defendants 4 and 5 agreed not to claim equity and hence they cannot, according to the learned Senior Counsel for the appellants, claim equity.
22. The learned Senior Counsel for the appellants further submitted that though the relief for specific performance is a discretionary relief, it cannot be denied merely on that basis. According to the learned Senior Counsel, it is only in the circumstances, coming within the purview of Section 20 of the Specific Relief Act, that the relief of specific performance can be denied. In this connection, the learned Senior Counsel relied upon the following decisions:-
Prakash Chandra -vs- Angadlal AIR 1979 SC 1241 P.D'Souza -vs- Shondrilo Naidu AIR 2004 SC 4472 Devalsab -vs- Ibrahimsab F. Karajagi 2005 (3) SCC 342 Ramakrishna Pillai -vs- Muhammed Kunju 2008 (4) SCC 212 Sargunam -vs- Chidambaram 2005 (1) LW 334
23. Mr.T.V.Ramanujun, learned Senior Counsel appearing for the respondents 1 to 3/defendants 1 to 3, contended inter alia -
(i) That there was no full disclosure of material facts in the plaint and hence the plaintiffs are not entitled to the equitable relief of specific performance;
(ii) That in the document dated 16.5.2007, payments are stated to have been received even in March 2007, but the plaint did not proceed on the same basis;
(iii) That the suppression of the list of documents about which a mention is made in Clause 11 of Ex.A-1 dated 16.5.2007, made the case of the plaintiffs vulnerable;
(iv) That no consensus ad idem is reflected in the document dated 16.5.2007;
(v) That what is reflected in Ex.A-1 is a plan of investment and that the payments made on various dates to defendants 1, 2 and 3 individually fitted actually into the plea of loan transaction set up by defendants 1 to 3;
(vi) That admittedly, what is contained in the document dated 16.5.2007 is a record of an oral Agreement concluded in March 2007, but there is no attempt to plead or prove that Agreement of March 2007, so as to entitle the plaintiffs to a decree for specific performance;
(vii) That from the date of the document viz., 16.5.2007 till the date of filing of the caveats on 23.1.2008, there was no activity, except the endorsements dated 17.5.2007 and 30.6.2007, leading to the inference that there was abandonment;
(viii) That the cause of action paragraph is silent about the deal struck in March 2007;
(ix) That the very fact that the plaintiffs were able to file xerox copies of the Sale Deeds (not xerox copies of the certified copies, but xerox copies of originals) executed in favour of defendants 4 and 5, as Exx.A-29 to A-34, showed that they were closely following up the transactions that the defendants 1 to 3 had with defendants 4 and 5;
(x) That the evidence of PW-1 was highly prevaricating and hence the plaintiffs are not entitled to the equitable relief of specific performance;
(xi) That the plaintiffs are not entitled to take advantage of the admission made in Ex.A-4, which was a reply notice sent by the counsel for the defendants 1 to 3, as they were also proved wrong by the recitals contained in Ex.A-1; and
(xii) That therefore the trial Court was justified in rejecting the prayer for specific performance.
24. Mr.V.T.Gopalan, learned Senior Counsel appearing for defendants 4 and 5 submitted -
(i) That the defendants 4 and 5 are bona fide purchasers for value without notice of the document dated 16.5.2007;
(ii) That Section 19(b) of the Specific Relief Act, has to be read in conjunction with the illustrative provision in Section 3 of the Transfer of Property Act and if so done, it would be clear that the failure of the defendants 4 and 5 to demand and peruse the original documents, cannot fall under the category illustrated in Section 3;
(iii) That the plaintiffs are guilty of delay and laches;
(iv) That the very conduct of the plaintiffs in suppressing the list, referred to in Clause 11 of Ex.A-1 would lead to an adverse inference against them and would disentitle them to specific relief;
(v) That for taking a decision to grant or not, the relief of specific performance, the Court has to weigh the relative hardship and equity, as enunciated by the Apex Court in 1987 Supp. SCC 75;
(vi) That the discretion exercised by the trial Court not to grant the relief of specific performance, cannot be lightly interfered with by the Appellate Court;
(vii) That while the right of an Agreement holder to seek specific performance is an equitable right, the right of a subsequent purchaser is a legal right and hence the same cannot be overridden by the equitable relief, as held by the Apex Court in 2000 (6) SCC 685;
(viii) That the burden to prove bona fide purchase has been discharged by defendants 4 and 5 in accordance with the law laid down by the Apex Court in 1997 (2) MLJ 431;
(ix) That the additional documents now filed along with an application for their reception would show that the defendants 4 and 5 have invested more than about Rs.127 crores in putting up a medical college and hospital in the property and hence the relative hardship weighs heavily in favour of the defendants 4 and 5;
(x) That the conduct of the plaintiffs in filing the suit on 28.4.2008, after the expiry of 90 days from the date of the caveat (23.1.2008) and obtaining an ex parte order of injunction, exposed their intentions;
(xi) That the affidavit of undertaking filed by the defendants 4 and 5 not to claim equity, was neither accepted by the plaintiffs nor accepted by the Division Bench of this Court, while disposing of the Civil Miscellaneous Appeal arising out of the interlocutory orders of injunction and hence the same cannot be put against the defendants 4 and 5;
(xii) That during the pendency of the suit and during the pendency of the appeal, an interim injunction was in force only for a total period of 5-1/2 months;
(xiii) That the conduct of the plaintiffs in applying for an Encumbrance Certificate in the name of the 4th defendant and filing it as Ex.B-71 itself exposed their intentions; and
(xiv) That the trial Court was right in refusing the discretionary relief of specific performance, in the light of the decisions in AIR 1968 SC 1413 and 2006 (6) SCC 39.
25. The learned Senior Counsel appearing for the respondents relied upon the following decisions in support of their above contentions:-
Jagan Nath -vs- Jagdish Rai 1998 (5) SCC 537 Manjunath Anadappa -vs- Tammanasa 2003 (10) SCC 390 Louru Mari David -vs- Louis Chinnaya Arogyasamy 1996 (5) SCC 589 Tejram -vs- Patirambhau 1997 (9) SCC 634 Damacherla Venka Anjaneyulu -vs- Damcherla Venkata Seshiah 1987 Supp. SCC 75 Syed Muzaffar Ali -vs- Municipal Corporation of Delhi 1995 Supp. (4) SCC 426 Muni Suvrat Swami Jain S.M.P.Sangh -vs- Arun Nathuram Gaikwad 2006 (8) SCC 590 A.C.Arulappan -vs- Ahaya Naik 2001 (6) SCC 600 Kallathil Shreedaran -vs- Komath Pandyala 1996 (6) SCC 218 S.Rangaraju Naidu -vs- S.Thirunavukkarasu AIR 1995 SC 1769 Vimlesh Kumari Kulshrestha -vs- Sambhaji Rao 2008 (5) SCC 58
26. We have carefully considered the rival submissions. We have also gone through the pleadings and the evidence, both oral and documentary. From an analysis of the pleadings, the evidence, the law and the rival submissions, the points that arise for our consideration are as follows:-
(i) Whether the transaction that the plaintiffs had with defendants 1 to 3 was a loan transaction or an Agreement of Sale ?
(ii) If the transaction was an Agreement for the purchase of a property, whether the plaintiffs were ready and willing to perform their part of the obligations under the Agreement ?
(iii) Whether the respondents 4 and 5/defendants 4 and 5 are bona fide purchasers of suit 'C' and 'D' Schedule properties, for value without notice of the prior Agreement of Sale in favour of the plaintiffs ?
(iv) Whether the plaintiffs are entitled, in the event of a finding in their favour on all the above 3 points, to the equitable relief of specific performance ?
WHETHER THE SUIT TRANSACTION WAS A LOAN TRANSACTION OR AN AGREEMENT OF SALE:
27. As stated earlier, the case of the plaintiffs, as reflected in their plaint is that they negotiated with defendants 1 to 3 for the purchase of the lands of the extent of 75 acres and 23-1/2 cents described in Schedule 'A' to the plaint and entered into a written Agreement with them on 16.5.2007. As per the plaint averments, the sale consideration was fixed as Rs.6,68,38,500/- and the plaintiffs had paid an advance of Rs.1,63,00,000/- and agreed to pay the balance amount at the time of registration. But according to the plaint, further payments were made on 17.5.2007 and 30.6.2007, making the total payment made as Rs.4 crores and that they were also acknowledged by way of endorsements on the reverse of the first page of the Sale Agreement.
28. In order to prove the above averments contained in the plaint, the second plaintiff examined himself as PW-1 and filed the said Agreement dated 16.5.2007 as Ex.A-1. Since a lot of arguments were advanced on the basis of the contents of Ex.A-1, it is necessary to extract the relevant portions of Ex.A-1. The relevant part of the preamble portion of Ex.A-1 and Clauses 9 to 11 of Ex.A-1 read as follows:-
"AND WHEREAS the PURCHASER had, in the first week of March, 2007, offered to purchase the property for a total consideration of Rs.6,68,38,500/- (Rupees Six Crores Sixty Eight Lakhs Thirty Eight Thousands and Five Hundreds only) calculated at the rate of Rs.9,000/- per cent (Rs.9,00,000/- per Acre) which offer has been accepted by the VENDORS;
AND WHEREAS the PURCHASER have made and the VENDORS have received an amount of Rs.1,63,00,000/- (Rupees One Crore and Sixty Three Lakhs only) as advance, in the following manner:
(1) Rs.17,50,000/- (Rupees Seventeen Lakhs and Fifty Thousands only) paid by the PURCHASERS to No.2 of the VENDORS by way of Bankers Cheque No.457459 dated 9.3.2007 drawn of M/s.City Union Bank Limited and payable at Tiruchirappalli.
(2) Rs.5,00,000/- (Rupees Five Lakhs only) paid by the PURCHASERS to No.1 of the VENDORS by way of Bankers Cheque No.457460 dated 9.3.2007 drawn of M/s.City Union Bank Limited and payable at Tiruchirappalli.
(3) Rs.17,50,000/- (Rupees Seventeen Lakhs and Fifty Thousands only) paid by the PURCHASERS to No.2 of the VENDORS by way of Bankers Cheque No.462657 dated 9.3.2007 drawn of M/s.City Union Bank Limited and payable at Tiruchirappalli.
(4) Rs.32,50,000/- (Rupees Thirty Two Lakhs and Fifty Thousands only) paid by the PURCHASERS to No.3 of the VENDORS by way of Bankers Cheque No.462658 dated 9.3.2007 drawn of M/s.City Union Bank Limited and payable at Tiruchirappalli.
(5) Rs.5,00,000/- (Rupees Five Lakhs only) paid by the PURCHASERS to No.1 of the VENDORS by way of Bankers Cheque No.462659 dated 9.3.2007 drawn of M/s.City Union Bank Limited and payable at Tiruchirappalli.
(6) Rs.32,50,000/- (Rupees Thirty Two Lakhs and Fifty Thousands only) paid by the PURCHASERS to No.3 of the VENDORS by way of Bankers Cheque No.472961 dated 9.3.2007 drawn of M/s.City Union Bank Limited and payable at Tiruchirappalli.
(7) Rs.15,00,000/- (Rupees Fifteen Lakhs only) paid by the PURCHASERS to No.3 of the VENDORS by way of Bankers Cheque No.070339 dated 12.3.2007 drawn of M/s.City Union Bank Limited and payable at Tiruchirappalli.
(8) Rs.15,00,000/- (Rupees Fifteen Lakhs only) paid by the PURCHASERS to No.3 of the VENDORS by way of Bankers Cheque No.070340 dated 12.3.2007 drawn of M/s.City Union Bank Limited and payable at Tiruchirappalli.
(9) Rs.10,70,000/- (Rupees Ten Lakhs and Seventy Thousands only) paid by the PURCHASERS to No.3 of the VENDORS by way of Bankers Cheque No.070727 dated 30.3.2007 drawn of M/s.City Union Bank Limited and payable at Tiruchirappalli.
(10) Rs.4,30,000/- (Rupees Four Lakhs and Thirty Thousands only) paid by the PURCHASERS to No.3 of the VENDORS by way of Bankers Cheque No.070728 dated 30.3.2007 drawn of M/s.City Union Bank Limited and payable at Tiruchirappalli.
(11) Rs.4,00,000/- (Rupees Four Lakhs only) paid by the PURCHASERS to No.1 of the VENDORS by way of Bankers Cheque No.071101 dated 24.4.2007 drawn of M/s.City Union Bank Limited and payable at Tiruchirappalli.
(12) Rs.4,00,000/- (Rupees Four Lakhs only) paid by the PURCHASERS to No.1 of the VENDORS by way of Bankers Cheque No.071101 dated 24.4.2007 drawn of M/s.City Union Bank Limited and payable at Tiruchirappalli.
AND WHEREAS the PURCHASER has agreed to pay the balance amount of Rs.5,05,38,500/- (Rupees Five Crores Five Lakhs Thirty Eight Thousands Five Hundred only) at the time of registration of the Sale Deed;
AND WHEREAS the parties are desirous of reducing the terms of the Agreement to writing;
"9. The VENDORS hereby assure that the PURCHASERS that they have an absolute and marketable title to the property and there is no tenancy, charge, mortgage, lien, agreement to sell, lis pendens, attachment by Court or distraint or any other form of encumbrance whatsoever upon the property hereby agreed to be sold and that in case any such tenancy, charge, mortgage, lien, agreement to sell, lis pendens, attachment by Court or distraint or any other manner of encumbrance whatsoever upon the property arises subsequent to this Agreement or is subsequently discovered to exist, the Agreement shall at the option of the PURCHASER, be rescinded without prejudice to his right to interest at 15% per annum compounded with yearly rests on the advance money paid by him and damages.
(10) In the alternative, the PURCHASER shall be entitled to deduct the amount secured from such charge, mortgage, lien, agreement to sell, lis pendens attachment by Court or distraint or any other manner of encumbrance from the balance amount payable, pay off such charge, mortgage, lien, agreement to sell, lis pendens, attachment by Court or distraint or any other manner of encumbrance whatsoever and after payment of the balance to VENDOR, compel the VENDOR to execute the Sale Deed.
(11) The VENDORS have handed over the original title deeds and patta passbooks relating to the property to the PURCHASER as per separate list annexed hereto. They also agree that they would get effected transfer of pattas for the remaining properties and also provide the PURCHASERS with such documents as would enable them to get clearance from their legal adviser, regarding the title to the property."
29. Interestingly, it is seen from Ex.A-1 that after Clause No.12, which is the last of the Clauses contained in the Agreement, the "Schedule" of properties commences. After the description of the properties in the Schedule, the Agreement contains a recital to the following effect:
"IN TOKEN WHEREOF the parties said their hands hereunto on the date above mentioned".
At the bottom of the above recital, the plaintiffs have signed on the left hand side and defendants 1 to 3 have signed on the right hand side. The column for the signature of "witnesses", below the signatures of the plaintiffs is left blank.
30. The above recital "IN TOKEN WHEREOF the parties said their hands hereunto on the date above mentioned" appears on the 9th page of the Agreement Ex.A-1. The first page of the Agreement is typed on Non Judicial stamp paper of the value of Rs.20/-. The remaining 8 pages are typed on bond papers on single side only. But the reverse of the 9th page containing the above recital is numbered as the 10th page, by hand and two covenants are written on this 10th page by hand. They read as follows:-
"(Contd.....) Purchaser to issue payment of Rs.1,00,00,000/- (Rupees One Crore only) before 30.6.2007.
Agreement valid upto 31.7.2007. If the purchaser failed to honour the Agreement he should return all the original documents immediately on 1.8.2007, when the payment is returned."
The above two covenants are written by hand, on a page numbered again by hand as No.10 with an indication that it continues from the other covenants, by the use of the word "(contd....)". At the bottom of these two covenants, the plaintiffs have signed on the left hand side and the defendants 1 to 3 have signed on the right hand side. In Paragraph 4.n of the written statement filed by the first defendant and adopted by the defendants 2 and 3, they have admitted that these endorsements on the 10th page of Ex.A-1were made by them.
31. On the reverse of the first page of Ex.A-1, two endorsements in Tamil have been made, one on 17.5.2007 acknowledging the receipt of a second advance payment of Rs.1,37,00,000/- and another on 30.6.2007, acknowledging a further payment of Rs.1,00,00,000/-, thereby taking the total payments to Rs.4,00,00,000/-. The payment of Rs.1 crore on 30-6-2007 is in compliance with the endorsement made on the 10th page of Ex.A-1 by hand. These 2 endorsements in Tamil, read as follows:-
@2007k; Mz;L nk khjk; 17k; ehs; ,e;j fpua xg;ge;j gj;jpuj;jpy; fz;l ml;thd;!; bjhifia bjhlh;e;J ehsJ jpdk; nkYk; 2tJ ml;thd;!hf buhf;fk; U:/1.37.00.000-? (U:gha; xU nfhona Kg;gj;jp VG yl;rk;) kl;Lk; bgw;Wf; bfhz;nlhk;/ 2007k; Mz;L $Pd; khjk; 30k; ehs; ,e;j fpiua xg;ge;jg;gj;jpuj;jpy; fz;l ml;thd;!; bjhifiaj; bjhlh;e;J nkYk; U:/1.00.00.000-? (U:gha; xU nfho) kl;Lk; bgw;Wf;bfhz;nlhk;/ Mf ,d;W tiu bkhj;jkhf U:/4.00.00.000-? (U:gha; ehY nfho) kl;Lk; bgw;Wf;bfhz;Ls;nshk;/@
32. Ex.A-1, as seen above, is dated 16.5.2007, which records a total payment of Rs.4 crores by the plaintiffs, out of the total sale consideration of Rs.6,68,38,500/- fixed thereunder. Admittedly, the defendants lodged caveats on 23.1.2008 and the plaintiffs thereafter issued a legal notice dated 25.2.2008 to defendants 1 to 3, with copies to defendants 4 and 5, calling upon them to explain the circumstances under which caveats were lodged and also calling upon them to convey the properties. To this notice, filed as Ex.A-2, the defendants 4 and 5 issue a legal reply dated 7.3.2008, marked as Ex.A-3, through their counsel by name Mr.P.Kanagaraj. After 3 days of sending the said legal reply, the defendants 1 to 3 issued a legal reply dated 10.3.2008, marked as Ex.A-4, through the very same counsel. The relevant portions of the legal reply issued by defendants 1 to 3, under Ex.A-4, read as follows:-
"2. It is true that a Sale Agreement was entered into between your clients and my clients on 16.5.2007 as evidenced by an unregistered Sale Agreement. ....
3. The sale consideration of Rs.9,00,000/- per acre on the available land for registration and the receipt of advance is admitted. Your clients were never ready and willing to complete the sale as agreed and in fact, there are ample proof to demonstrate the attitude of No.2 of your clients that never he had inclination to purchase the properties, but intended to gain unlawful enrichment.
4. My clients even before the Agreement of Sale, have specifically informed your clients about the rights of the temple in respect of the properties referred to in unnumbered paragraph at page No.2 of your notice. .. .. .. ..
5. It is stated that the Agreement clearly spells out that time is the essence of the Agreement. .. .. ..
6. My clients state that they have been repeatedly approaching your clients to complete the Agreement. .. .. .."
33. From the fact that the defendants 1 to 3 as well as defendants 4 and 5 lodged caveats in January 2008 and issued legal replies on 7.3.2008 and 10.3.2008 through a common counsel, it is clear that all the defendants took legal advice from the same person and took a stand at the earliest point of time, (i) admitting the execution of Ex.A-1 as a Sale Agreement (ii) admitting the contents or rather placing reliance upon the very contents of Ex.A-1 to dislodge the claim of the plaintiffs, on the ground that the plaintiffs committed breach of the covenants contained therein and (iii) admitting all the payments recorded under Ex.A-1.
34. But after the suit was filed, the first defendant filed a written statement (which was adopted by defendants 2 and 3), choosing to play a different tune, by contending that the transaction between the plaintiffs and defendants 1 to 3 was a loan transaction and not a Sale Agreement. But even while branding the transaction as a loan transaction, the defendants 1 to 3 (i) did not dispute or deny their signatures in Ex.A-1 (ii) did not raise a contention that the payments recorded therein were never received and (iii) did not feign ignorance of the nature and contents of Ex.A-1. On the contrary, the defendants 1 to 3 took a stand in paragraph 4.e. of their written statement that since the loan could not be settled, the second plaintiff forced, pressurised and made the defendants sign in the Sale Agreement dated 16.5.2007. In paragraph 4.h. of the written statement, the defendants 1 to 3 went on to plead that their role was reduced merely to signing the document dated 16.5.2007 on 17.5.2007. In other words, the stand taken in paragraph 4, tended to give an impression, as though Ex.A-1 was brought forth by undue influence, though the term undue influence is not used therein. But even this impression was decimated by the averment in paragraph 4.n of the written statement, where the defendants 1 to 3 claimed that they made the endorsements in writing on the 10th page of Ex.A-1. In other words, this averment in para 4.n of the written statement showed that the defendants were not only conscious of the nature of Ex.A-1 but also wanted a modification of its contents, which led them to make endorsements on the 10th page of Ex.A-1, to make it more acceptable to them.
35. After having taken such a stand in paragraph 4.e., 4.h and 4.n., the defendants 1 to 3 made an interesting admission in paragraph 6 of the written statement, to the following effect:-
"After getting to know of the contents of the document dated 16.5.2007 by reading it in detail later on, these defendants informed the plaintiffs that the properties described in Schedule 'B' remained unidentifiable and inseparable from the other properties besides being in a state filled with thorny bushes. The second plaintiff stated that he would take the steps to obtain necessary sanction from the HR&CE Department."
36. Thus the defendants 1 to 3 admitted in no uncertain terms in their written statement that they not only knew the contents of Ex.A-1 dated 16.5.2007, but also accepted the same with a modification inserted by way of endorsements on the 10th page. Having accepted Ex.A-1, the only objection that came to the minds of the defendants 1 to 3, as per their own pleading in paragraph 6 of their written statement, was that the conveyance of properties described in Schedule 'B', would pose difficulties. In other words, the defendants 1 to 3, who accepted Ex.A-1 as an agreement of sale, never chose to dispute the truth or validity of the contents, except pointing out the difficulties in going ahead with the transaction, in respect of the Schedule 'B' properties.
37. Thus at no point of time from the date of Ex.A-1 namely 16.5.2007 upto the date of filing the written statement in July 2008, the defendants 1 to 3 ever disputed or doubted the nature of the construction. They always understood the transaction to be one for the sale of Schedule 'A' properties. Curiously, the defendants 1 to 3 did not adduce even an apology of a reason, in their written statement, as to why they admitted in their legal reply dated 10.3.2008 that the transaction was one for the sale of Schedule 'A' properties. An additional written statement was filed by defendants 1 to 3 in November 2008. Even in that additional written statement, the defendants 1 to 3 did not retract from the stand taken by them in their legal reply dated 10.3.2008 filed as Ex.A-4. Therefore, the attempt to project the transaction as a loan transaction and not a Sale Agreement, was clearly an after thought and was also made only as an half hearted attempt, as seen from the written statement and the additional written statement.
38. For the first time, the defendants 1 to 3 made an attempt, only in the proof affidavit filed in lieu of chief examination of DW-1, to explain the stand taken by them in their legal reply. In paragraph-45 of the proof affidavit filed by the first defendant as DW-1, he retracted from the contents of paragraphs 1 and 2 of the legal reply dated 10.3.2008 (Ex.A-4). But even this retraction was only half hearted, in view of the fact that in paragraph-45 of his proof affidavit, DW-1 merely branded the averments in paragraphs 1 and 2 of the reply as incorrect. He did not brand the averments in the other paragraphs as incorrect. From the relevant portions of the legal reply dated 10.3.2008 (Ex.A-4), which we have extracted above, it could be seen that even in paragraphs 4, 5, 6 etc., of Ex.A-4, they admitted the transaction to be a sale transaction. In paragraph 45 of the proof affidavit, DW-1 did not retract from the stand taken in paragraphs 4, 5, 6 etc., of Ex.A-4, but went back only on the averments in paras 1 and 2 of Ex.A-4. This is why, we are of the view that the attempt to paint the transaction as a loan transaction, is only an after thought and an half hearted attempt.
39. Therefore, in the light of -
(a) the categorical admission made at the earliest point of time by defendants 1 to 3 in their legal reply notice dated 10.3.2008 (Ex.A-4),
(b) the admission of the signatures of defendants 1 to 3 in Ex.A-1,
(c) the absence of any dispute with regard to the payments made by the plaintiffs to the tune of Rs.4 crores reflected in Ex.A-1,
(d) the deposit of a sum of Rs.4 crores made by the defendants 1 to 3 to the credit of the suit, towards repayment of the amount due to the plaintiffs,
(e) the admission in paragraph 4.n of the written statement that they made the endorsements in writing on the 10th page of Ex.A-1,
(f) the failure of the defendants 1 to 3 to explain in their written statement and additional written statement, the circumstances under which they admitted the transaction to be an Agreement of Sale in their reply notice dated 10.3.2008 in Ex.A-4 and
(g) the failure of the defendants 1 to 3 to retract, in the course of oral evidence of DW-1, from the contents of Ex.A-4 in entirety, except in respect of paragraphs 1 and 2, all make it clear that the transaction was in fact, an Agreement of Sale and not a loan transaction. The fact that the defendants 1 to 3 also understood Ex.A-1 to be a Sale Agreement is made clear from their averments in paragraphs 4.n and 6 of the written statement, which we have extracted earlier. Therefore, the defendants 1 to 3 cannot be allowed to approbate and reprobate.
40. The sudden metamorphosis in the stand taken by the defendants 1 to 3 with regard to Ex.A-1, at the time of filing of the written statement, in our considered view, is dishonest. After executing Ex.A-1 in May 2007 with modifications in the form of endorsements on the 10th page, after acknowledging in Ex.A-1, the payments received in March 2007, after receiving further payments in June 2007 and after admitting in March 2008 in Ex.A-4 that Ex.A-1 was an Agreement of Sale, the defendants 1 to 3 started playing a different tune in their written statement in July 2008, without even explaining the admissions made by them in Ex.A-4. The change of tune was sought to be amplified while leading evidence. In such circumstances, the contention of the defendants 1 to 3 that Ex.A-1 was executed as security, in respect of a loan transaction, fails to impress us even remotely.
41. In P.S.Ranakrishna Reddy vs. M.K.Bhagyalakshmi and another {2007 (10) SCC 231}, an identical contention was raised that the transaction was a loan transaction and not an Agreement of Sale. But the said contention was rejected by the Supreme Court on the ground that the document in question was described as an Agreement of Sale; that the Agreement disclosed negotiations between the parties and that no part of the Agreement contained an indication that it was not intended to be acted upon. Therefore in paragraph-13, the Court reiterated the well settled principle that a document must be read in its entirety and that the intention of the parties must be gathered from the document itself. The Court further held that a default clause contained in the document would not make it a contract of loan. The decision squarely applies to the case on hand.
42. Unfortunately, the trial Court misdirected itself, by referring to Sections 17 and 21 of the Indian Evidence Act, to hold that the admission made by defendants 1 to 3 in Ex.A-4 was not an unequivocal admission and that therefore, it was not binding. Admission of liability is entirely different from an admission made with regard to the nature of a document, to which a person was admittedly a party. It is only when a liability is sought to be fastened on a person that one cannot rely upon an admission, unless it was clear, unambiguous, unconditional and unequivocal. But when a person takes a conscious stand in a reply notice, with regard to the nature of a document and the transaction recorded under the document, he cannot be permitted to resile from the stand so taken, except under exceptional circumstances.
43. For holding the transaction to be a loan transaction, the Court below reasoned that the plaintiffs failed to prove an offer, its acceptance and a consensus ad idem between the parties on the terms and conditions of sale. The Court below also referred to the financial crisis in which the defendants 1 to 3 were placed and the discharge of the loan by the third defendant to ICICI Bank, after receipt of monies from the plaintiffs.
44. But the above approach of the Court below cannot be appreciated. It is not necessary for a person placed in a financial crisis, to wriggle out of the same only by borrowing money. It is always open to a person even to sell a property, to discharge a loan. Moreover, much ado was made by the defendants 1 to 3 that the plaintiffs were marwari financiers. If it is so, it is unthinkable that a bank loan was sought to be discharged, by taking a loan from such a private financier. Therefore, the focus of the Court below on the financial status of defendants 1 to 3, cannot make the transaction that they had with the plaintiffs, a loan transaction.
45. Similarly, the Court below was wrong in holding the plaintiffs guilty of failure to prove offer, acceptance etc. Once the signatures in a document are accepted, once the contents of such a document were also modified by certain endorsements in writing made by the defendants themselves and once the payments recorded in the document are also admitted to have been received, it was for the person disputing the contents of the document, to show that the document was purported to be different from what it was styled as. In this case, as pointed out earlier, the defendants 1 to 3 went one step ahead, apart from admitting their signatures and receipt of payments, by conceding in para 6 of the written statement that they understood the contents of the document later and raised an objection only with regard to their ability to convey Schedule 'B' properties.
46. Therefore, the finding of the trial Court that the transaction was only a loan transaction and not an Agreement of Sale, cannot be sustained. As a matter of fact, the observations of the trial Court in paragraph 35 of its judgment that if Ex.A-1 had been true, there was no valid reason for the defendants 1 to 3 to refuse to complete the transaction and that the plaintiffs failed to place before Court, the reasons for the refusal of the defendants 1 to 3, constitute nothing but special pleadings, for the defendants 1 to 3. Therefore, we have no hesitation in holding that the transaction between the plaintiffs and the defendants 1 to 3, as reflected by Ex.A-1, was in fact, an Agreement of Sale and not a loan transaction, as sought to be pleaded by the defendants 1 to 3.
WHETHER THE PLAINTIFFS WERE READY AND WILLING TO PERFORM THEIR PART OF THE OBLIGATIONS:
47. Once it is found that Ex.A-1 is an Agreement of Sale, then the next question to be addressed is as to whether the plaintiffs were ready and willing to perform their part of the obligations, so as to be entitled to seek specific enforcement of the Agreement.
48. The Agreement Ex.A-1 is dated 16.5.2007. The total extent of lands sought to be sold under the said Agreement is about 75 acres and 23-1/2 cents. The total sale consideration fixed under the Agreement for the entire extent was Rs.6,68,38,500/-. Out of the said consideration, a total amount of Rs.4 crores was paid upto 30.6.2007, in the following manner:-
Date Amount in Rs. 09.03.2007 1,10,00,000/- 12.03.2007 30,00,000/- 30.03.2007 15,00,000/- 24.04.2007 8,00,000/- 17.05.2007 1,37,00,000/- 30.06.2007 1,00,00,000/- ------------------ Total 4,00,00,000/- ===========
49. The Agreement contains 12 covenants typewritten. After the description of the properties in the Schedule, two covenants are handwritten, at the instance of defendants 1 to 3, without assigning any number, on the 10th page. One of those two covenants obliges the purchasers to pay Rs.1 crore before 30.6.2007. The other covenant at page No.10, prescribes that the Agreement would be valid upto 31.7.2007. In the 12 covenants which are typewritten in Ex.A-1, there is not a single covenant which prescribes time to be the essence of the contract. However, Clause-1 fixes a time limit for the performance of the Agreement and the second covenant written by hand in page No.10 of Ex.A-1 also fixes a time schedule. Clause-1of Ex.A-1, reads as follows:-
"1. The PURCHASERS may on or before 31.7.2007, may apply to the VENDORS and get ready with the sale deed on the requisite stamp papers."
The last covenant written by hand on page No.10 of Ex.A-1 reads as follows:-
"Agreement valid upto 31.7.2007. If the purchaser failed to honour the Agreement, he should return all the original documents immediately on 1.8.2007, when the payment is returned."
These 2 covenants do not constitute an express stipulation to the effect that the parties agreed to fix time as the essence of the Agreement of Sale.
50. Section 16 of the Specific Relief Act, 1963, lists out the personal bars to the relief of specific performance, in favour of a person -
(i) who would not be entitled to recover compensation for the breach of the contract;
(ii) who has become incapable of performing his part of the contract;
(iii) who violates any essential term of the contract which remains to be performed by him;
(iv) who acts in fraud of the contract;
(v) who wilfully acts at variance with or in subversion of, the relation intended to be established by the contract; and
(vi) who fails to aver and prove that he has performed or has always been ready and willing to perform the essential terms of the contract required to be performed by him, except those terms whose performance is either prevented or waived by the defendant.
51. The Explanation under Section 16 (c) makes two things very clear viz.,
(i) that it is not essential for the plaintiff to actually tender to the defendant or to deposit into Court, any money except when so directed by the Court; and
(ii) that the plaintiff must aver the performance of or readiness and willingness to perform, the contract according to its true construction.
52. In Chand Rani vs. Kamal Rani {1993 (1) SCC 519}, a Constitution Bench of the Supreme Court held in paragraph-19, as follows:-
"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."
In paragraph-25 of the said judgment, the Court elicited the principles on the issue, as follows:-
"25. From an analysis of the above case law, it is clear that in the case of sale of immovable property, there is no presumption as to time being the essence of the contract. Even if it is not of the essence of the contract, the Court may infer that it is to be performed in a reasonable time, if the conditions are:-
(i) from the express terms of the contract;
(ii) from the nature of the property and
(iii) from the surrounding circumstances, for eg., the object of making the contract."
53. While formulating the above principles, the Constitution Bench relied upon the earlier decisions in Gomathinayagam Pillai vs. Palaniswami Nadar {AIR 1967 SC 868} and Govind Prasad Chaturvedi vs. Hari Dutt Shastri {1977 (2) SCC 539}, where it was held that "it is settled law that the fixation of the period within which the contract has to be performed does not make the stipulation as to time the essence of the contract".
54. Therefore the mere stipulation in Clause 1 of Ex.A-1 that the purchasers "may on or before 31.7.2007 may apply to the vendors and get ready with the Sale Deed on the requisite stamp papers", cannot be construed as a stipulation that time was to be the essence of the Agreement. Similarly, the last Clause written by hand in page No.10 of Ex.A-1 to the effect that "Agreement valid upto 31.7.2007. If the purchaser failed to honour the Agreement, he should return all original documents immediately on 1.8.2007, when payment is returned", is also a mere fixation of the period within which the contract was expected to be performed and not a stipulation to make time as the essence of the contract.
55. In other words, there are no express terms incorporated in Ex.A-1 to make time as the essence. The nature of the property also does not make time as the essence of the contract. There are no special surrounding circumstances which would make time as the essence of the contract. Even in the legal reply dated 10.3.2008 filed as Ex.A-4, the defendants 1 to 3 did not indicate any special circumstances which compelled them to prescribe time as the essence of the Agreement. In paragraph 5 of Ex.A-4, the defendants 1 to 3 took a stand that the Agreement (Ex.A-1) clearly spells out time to be the essence of the Agreement. But such a bald plea has also lost its vigour and vitality, after the defendants 1 to 3 took a diametrically opposite stand in para 5 of their written statement that Ex.A-1 was not a mutual, bilateral and a voluntary Agreement. Therefore, it is clear, both from the contents of Ex.A-1 and from the pleadings and evidence that there was no stipulation between the parties to make time as the essence of the Agreement.
56. Once it is found that time was not the essence of Ex.A-1, the next issue to be considered is as to whether the plaintiffs were ready and willing to perform their part of the obligations, at least within a reasonable time, so as to make the contract meaningful. The answer to this question is to be found, by keeping in mind the principles enunciated in Section 16 (c) of the Specific Relief Act, 1963 and analysing the pleadings and evidence.
57. It is seen from the pleadings and evidence that the Agreement was entered into on 16.5.2007 and a total sale consideration of Rs.6,68,38,500/- was fixed thereunder. Out of the total sale consideration, a sum of Rs.4 crores had been paid by 30.6.2007, leaving only a balance of Rs.2,68,38,500/-. This is despite the fact that under the preamble to the Agreement Ex.A-1, the plaintiffs were obliged to pay a sum of Rs.5,05,38,500/- only at the time of registration. In other words, the plaintiffs did not wait till the date of registration for making payment of Rs.5,05,38,500/-, but had paid 50% of the said amount, even without insisting on the defendants 1 to 3 complying with their obligations under Clauses 7 and 8 of Ex.A-1.
58. Under Clause 7 of Ex.A-1, the defendants 1 to 3 were obliged to vacate the persons in occupation of the property and deliver vacant possession to the plaintiffs. Under Clause 8, the defendants 1 to 3 agreed to erect a fence around the entire property with stone pillars and barbed wire fencing, fix a gate on the front portion adjoining the highway and after locking the gate, hand over possession to the plaintiffs. It is not the case of the defendants 1 to 3 that they completed these obligations on their part. It was held by the Supreme court in P.D'souza vs. Shondrilo Naidu {2004 (6) SCC 649} that the readiness and willingness on the part of the plaintiff to perform his part of the contract would also depend upon the question as to whether the defendant did everything which was required of him to be done in terms of the Agreement of Sale. It was further held in the same case that the mere inadequacy of consideration or the mere fact that that the contract is onerous to the defendant or improvident in its nature would not constitute an unfair advantage within the meaning of sub-section (2) of Section 20. While holding so, the Court distinguished the earlier decision in Nirmala Anand vs. Advent Corporation (P) Ltd {2002 (5) SCC 481}.
59. It is admitted by the defendants 1 to 3 in para 7 of their written statement that a letter bearing Na.Ka. No.5554/07 dated 20.9.2007 was issued by the Assistant Commissioner, Hindu Religious and Charitable Endowments Department, Trichy, to the Sub Registrar, calling upon him not to admit any document relating to some of the properties covered by Ex.A-1, for registration. As per para 7 of the written statement of defendants 1 to 3, the plaintiffs were aware of the said letter dated 20.9.2007.
60. The stand taken by defendants 1 to 3 in para 7 of their written statement actually corroborates the plea taken by the plaintiffs in their pre-suit notice dated 25.2.2008, filed as Ex.A-2. In the said notice dated 25.2.2008, the plaintiffs claimed (in unnumbered paragraphs 4 and 5) that they were always ready and willing and were continuously ready and willing and even then ready and willing to pay the balance sale consideration and take the Sale Deed. They have also pleaded in Ex.A-2 that the defendants 1 to 3 informed them about the claim made by the HR&CE Department in respect of certain lands covered by the Sale Agreement and that they agreed to resolve the same and that therefore, they were honestly and genuinely waiting for the issue to be resolved.
61. Now if we take a look again at the dates and events, it is seen that the Agreement is dated 16.5.2007; the payment of more than 50% of the sale consideration was completed by 30.6.2007; a notice from the HR&CE Department staking a claim to a portion of the lands, was made on 20.9.2007; the defendants 1 to 3 sold the properties to defendants 4 and 5 on 12.11.2007 and 30.11.2007; the defendants lodged caveats on 23.1.2008; the pre-suit notice was issued by the plaintiffs on 25.2.2008; the reply notices were issued by the defendants on 7.3.2008 and 10.3.2008; and the suit was filed by the plaintiffs on 28.4.2008.
62. Thus it is clear that the events have happened in quick succession and the plaintiffs are not guilty of not acting within a reasonable time. If 31.7.2007 was the date hopefully prescribed under Ex.A-1 for completion of the transaction, such a hope was obviously shattered by the notice dated 20.9.2007 issued by the HR&CE Department. Even before the issue raised by the HR&CE Department could be resolved, the defendants 1 to 3 sold the properties to defendants 4 and 5 on 12.11.2007 and 30.11.2007. Therefore, the defendants 1 to 3 have no moral or legal right, to challenge the assertion of the plaintiffs that they were ready and willing and that they continued to be ready and willing to perform their part of the obligations.
63. In Ex.A-2, pre-suit notice dated 25.2.2008, the plaintiffs have pleaded readiness and willingness on their part, at every point of time. In the legal reply Ex.A-4 dated 10.3.2008 issued by defendants 1 to 3, they claimed that the plaintiffs were never ready and willing to complete the transaction and that they had ample proof to demonstrate the attitude of the second plaintiff that he never had an inclination to purchase the properties but intended to gain unlawful enrichment. But even while taking such a stand, the defendants 1 to 3 admitted in para 4 of Ex.A-4 that temple was claiming rights over some of the properties and that the same was already informed to the plaintiffs.
64. Consistent with their stand in the pre-suit notice Ex.A-2 dated 25.2.2008, the plaintiffs pleaded in para VIII of the plaint that they were always ready and willing to pay the balance sale consideration and to complete the transaction within the date contemplated in the Agreement. They even went to the extent of stating in the plaint that they are prepared to buy the Schedule 'A' properties, by paying the balance sale consideration without any proportionate deduction, as per Ex.A-1 Agreement, without insisting on the 'B' Schedule property being conveyed. But while responding to such averments contained in paragraph 8 of the plaint, the defendants 1 to 3 did not even choose to make a stout and specific denial. In paragraph 9 of their written statement, the defendants 1 to 3 merely stated that "the bald allegations in paragraph 8 of the plaint as if they were ready before 31.7.2007 ...... are not sufficient to infer the readiness of the plaintiffs, when no positive act is pleaded". Even in paragraph 10 of the written statement, the denial was not firm and specific, but proceeded as follows:-
"The readiness and willingness pleaded in paragraph 8 and in the other portions of the plaint in a parrot like manner is false"
65. In his oral evidence in chief, made in the form of a proof affidavit, the second plaintiff confirmed as PW-1 that the plaintiffs were always ready and willing to pay the balance sale consideration even within the date contemplated in the Agreement. He also reiterated in his evidence that if the defendants 1 to 3 were not in a position to convey the Schedule 'B' property, the plaintiffs were ready to get a conveyance of the remaining properties without even a proportionate deduction in the sale consideration. As a matter of fact, the plaintiffs also deposited the balance sale consideration of Rs.2,68,38,500/- into Court, in pursuance of an order passed by the Division Bench in C.M.A.No.1126 of 2008, arising out of the application for injunction. Thus, the plaintiffs (i) categorically pleaded readiness and willingness (ii) let in adequate evidence to prove readiness and willingness and (iii) also demonstrated their readiness and willingness, by depositing the balance sale consideration into Court.
66. Interestingly, the cross-examination of PW-1 by the counsel for defendants 1 to 3, was mainly focussed on their stand that it was a loan transaction. Very few questions were put to PW-1 in cross-examination, to demolish his claim that the plaintiffs were ready and willing to perform their part of the obligations. To those questions, PW-1 firmly replied that he was always ready and willing. The only answer that the defendants 1 to 3 could elicit from PW-1 during cross-examination was that the plaintiffs did not issue any notice before 31.7.2007, informing the defendants 1 to 3 of their readiness and willingness and that he has no witnesses to support his oral assertion.
67. As a matter of fact, PW-1 asserted in cross-examination (i) that after June 2007, he contacted the first defendant over phone and requested him to get patta for the entire property and convey it to them (ii) that from June 2007 upto January 2008, he contacted the first defendant over phone 10, 15 times and (iii) that in October 2007, he did not personally get in touch with the first defendant.
68. While the plaintiffs discharged, in the manner stated above, the burden cast upon them to prove readiness and willingness on their part, the first defendant examined as DW-1, admitted even in paragraphs 27 to 30 of his chief-examination, filed in the form of a proof affidavit (i) that the claim on the 'B' Schedule property, by the temple coming under the control of the HR&CE Department was made known to the plaintiffs even on 9.3.2007 (ii) that even the persons who sold part of the properties to defendants 1 to 3 had created encumbrances by developing the land into several plots and selling it to third parties and that this fact was also made known to the plaintiffs and (iii) that the unencumbered properties were only 35 to 40 acres and the same provided adequate security for the amount paid by the plaintiffs. Even in paragraph 56 of his proof affidavit (chief-examination), DW-1 just made a one line statement to the effect that time was the essence of the Agreement. Beyond that, DW-1 did not say, even in chief-examination that the plaintiffs were never ready and willing. Apart from his failure to make even a formal statement in his chief-examination that the plaintiffs were not ready and willing, DW-1 made an important admission in the course of cross-examination, as follows:-
"1. 2 thjpfs; trjpahdth;fs;/ mth;;fSf;F kPjp bjhif bfhLf;f trjp cz;L vd;why; mJ rhp jhd;@ In other words, DW-1 admitted that the plaintiffs were well to do and that they had the capacity to pay the balance sale consideration.
69. Therefore, the cumulative effect of several factors such as -
(a) the undisputed payment of Rs.4 crores out of the total sale consideration of Rs.6,68,38,500/- during the period from March 2007 to June 2007 by the plaintiffs.
(b) the categorical pleading of the plaintiffs and the unimpeachable evidence of PW-1 that they were always ready and willing.
(c) the admission on the part of the defendants 1 to 3 that only an extent of about 35 to 40 acres out of the total extent of about 75 acres agreed to be sold under Ex.A-1, were unencumbered.
(d) the admitted case of the defendants 1 to 3 that the HR&CE Department had laid a claim even in September 2007 over a part of the properties covered by Ex.A-1 and the admission of DW-1 that their vendors had also sold some of their properties by plotting out the land.
(e) the failure of DW-1 in chief examination even to make a formal statement that the plaintiffs were not ready and willing.
(f) the admission of DW-1 in cross-examination that the plaintiffs had the wherewithal to make payment of the sale consideration and
(g) the actual deposit of the balance sale consideration by the plaintiffs into Court, in pursuance of an order passed by the Division Bench on an appeal arising out of the application for injunction, lead us to the inescapable conclusion that the plaintiffs were always ready and willing and they continued to be ready and willing to perform their part of the obligations.
70. Unfortunately, instead of testing the question of readiness and willingness on the part of the plaintiffs, from the totality of the pleadings and evidence, the trial Court fell into an error by holding that the defendants 1 to 3 were under tremendous pressure to come out of a financial crisis and that therefore, time was agreed to be the essence of the Agreement. Even as per the chief examination of DW-1 (para 7 of the proof affidavit), the third defendant had taken a short term loan of Rs.3 crores from ICICI Bank under the Rural Agricultural Extension Scheme and that he was under pressure to repay the same by 31.3.2007. In paragraph 12 of the proof affidavit, DW-1 admitted that the plaintiffs paid a sum of Rs.1,10,00,000/- in the form of banker's cheques to the third defendant, a sum of Rs.35,00,000/- by way of banker's cheques to the second defendant and a sum of Rs.18,00,000/- by way of banker's cheques to the first defendant, during the period from 9.3.2007 to 24.4.2007. This amount totalled to Rs.1,63,00,000/-. On 17.5.2007, the plaintiffs paid Rs.1,37,00,000/- and on 30.6.2007, they paid Rs.1,00,00,000/-, taking the total amount paid to Rs.4 crores. Therefore, by 30.6.2007, a total payment of Rs.4 crores had been made, as against the claim made by DW-1 in para 7 of his proof affidavit that the third defendant had to repay a loan of Rs.3 crores to ICICI Bank by 31.3.2007.
71. Interestingly, the defendants 1 to 3 never made any averment in their first written statement about any financial crisis in which they were placed and which forced them to borrow money from the plaintiffs. Even in the additional written statement, the defendants 1 to 3 did not plead about any borrowings made by the third defendant from ICICI Bank and any crisis in which he was placed.
72. Without any pleading in the written statement, DW-1 stated in paras 7 to 10 of his proof affidavit (chief examination) that the third defendant was under pressure to repay a loan to ICICI Bank before 31.3.2007 to the tune of Rs.3 crores. Since this evidence was let in, without any pleading to the said effect in the original as well as additional written statement, the same is not admissible in evidence, even at the outset. Assuming for a moment that the defendants 1 to 3 were under a financial crisis to repay Rs.3 crores to the ICICI Bank, they had admittedly received Rs.4 crores by 30-6-2007 from the plaintiffs and hence they could not have been under pressure any more.
73. Apart from attempting to lead evidence without any pleading, about a financial crisis, the defendants 1 to 3 also committed another blunder. Admittedly, the defendants 2 and 3 are brothers and the first defendant, even according to him, offered to help the defendants 2 and 3, out of the financial crisis. But the third defendant, for whose benefit, DW-1 claimed to have approached the plaintiffs, did not even go to the witness box. In such circumstances, the finding recorded by the Court below that the defendants 1 to 3 were in a financial crisis and that therefore time was prescribed as the essence of the Agreement, is nothing but a perverse finding.
74. Interestingly, the conduct of the defendants 1 to 3, which has been overlooked by the Court below, is very strange and belies the theory put forth by them. Under Ex.A-1, the total sale consideration was fixed at Rs.6,68,38,500/-, out of which an amount of Rs.4 crores had been paid by 30.6.2007, leaving a balance of Rs.2,68,38,500/-. In pursuance of the order passed by the Division Bench in C.M.A.No.1126 of 2008, the plaintiffs have also deposited the said amount into Court. Therefore, it is clear that if the defendants 1 to 3 had proceeded to complete the transaction, they would have received a balance amount of Rs.2,68,38,500/-, apart from retaining the amount of Rs.4 crores already received. But it is admitted in para 13 of the written statement of defendants 1 to 3 that they sold 68 acres out of the extent of 75 acres and 23-1/2 cents covered by Ex.A-1, to defendants 4 and 5, only for a total sale consideration of Rs.4,11,08,000/-. Out of this amount, the defendants 1 to 3 had to pay Rs.4 crores to the plaintiffs and the defendants 1 to 3 have admittedly deposited Rs.4 crores into Court. This would mean that the defendants 1 to 3 were left only with an amount of Rs.11,08,000/- as surplus.
75. But it is inconceivable that a man of ordinary prudence, would choose to receive just a benefit of Rs.11,08,000/- from defendants 4 and 5, rather than compelling the plaintiffs to pay the balance of Rs.2,68,38,500/-. If the logic propounded by the trial Court that the defendants 1 to 3 were in financial crisis is taken to be correct, one would expect the defendants 1 to 3 to compel the plaintiffs to pay the balance sale consideration of Rs.2,68,38,500/- rather than sell the property to defendants 4 and 5 for a monetary benefit of just Rs.11,08,000/-. Therefore, we have no hesitation in holding that the finding of the trial Court in this regard was perverse and that the plaintiffs were always ready and willing to perform their part of the obligations under the Agreement Ex.A-1.
WHETHER THE DEFENDANTS 4 AND 5 WERE BONA FIDE PURCHASERS FOR VALUE WITHOUT NOTICE:
76. The next issue that requires consideration is as to whether the defendants 4 and 5 were bona fide purchasers of the suit 'C' and 'D' Schedule properties, for value without notice of the prior Agreement of Sale that the defendants 1 to 3 had with the plaintiffs. This question assumes great importance in a suit for specific performance, since Section 19(b) of the Specific Relief Act, 1963, provides an exception to the general rule that specific performance of a contract may be enforced against any person claiming title arising out of a subsequent contract. As a matter of fact, the phrase "bona fide purchaser for value without notice" is not what is found in section 19 (b). Section 19(b) use the phrase "transferee for value who has paid his money in good faith and without notice of the original contract" The section reads as follows:-
"19. Relief against parties and persons claiming under them by subsequent title. - Except as otherwise provided by this Chapter, specific performance of a contract may be enforced against, -
(a) .. .. .. .. .. ..
(b) any other person claiming under him by a title arising subsequently to the contract, except a transferee for value who has paid his money in good faith and without notice of the original contract."
77. Section 19(b) of the 1963 Act, corresponds to Section 27 of the old Act. The principle underlying this provision, was lucidly brought out in the commentary of Mr.Collett, in the following words:
"The general principle of this clause and its illustration is that from the time of the contract for the sale of the land the vendor, as to the land, becomes a trustee for the vendee: and the vendee, as to the purchase-money, a trustee for the vendor, who has a lien upon the land therefor. And every one coming in by subsequent and representative title, and every subsequent purchaser from either with notice, becomes subject to the same equities as the party would be to whom he succeeds, or from whom he purchased .... The maxim of equity at the bottom of it all is that equity regards as done what is agreed to be done."
But as Story put it "equity does not take as done, what might have been, but only what ought to have been done". In other words, equity fastens upon what is material part of a contract and not what is accidental, collateral or unnecessary.
78. In the case on hand, irrespective of the stand taken by the defendants 1 to 3 late in the day, about the nature of the transaction that they had with the plaintiffs, the document Ex.A-1 is admittedly titled as "Sale Agreement". In the said document, the plaintiffs are described as "PURCHASERS" and the defendants are described as "VENDORS". The recitals in Ex.A-1 proceed as though it is a Sale Agreement and it contains a Schedule describing the properties covered by the document. The total sale consideration payable for the purchase of the property is indicated and there is an acknowledgement by the vendors, of the receipt of part of the sale consideration as advance. The document is typed on non-judicial stamp paper of the value of Rs.20/-. The total sale consideration fixed for the property of an extent of 75 acres and 23-1/2 cents under Ex.A-1 is Rs.6,68,38,500/- and the payment of advance acknowledged under Ex.A-1 is Rs.4 crores. Despite terming the transaction as a loan transaction, the defendants 1 to 3 nevertheless admit the receipt of Rs.4 crores even now. This is why (i) the defendants 1 to 3 have deposited Rs.4 crores to the credit of the suit, in pursuance of the orders passed by the Division Bench in C.M.A.No.1126 of 2008 arising out of the application for injunction and (ii) the defendants 1 to 3 have accepted the judgment and decree of the trial Court, directing them to repay Rs.4 crores with interest. Therefore, the receipt of Rs.4 crores by the defendants 1 to 3 from the plaintiffs, is now an undisputed fact.
79. Under Clause 11 of the Agreement, the vendors admittedly handed over certain original title deeds and patta pass books. Clause 11 reads as follows:-
(11) The VENDORS have handed over the original title deeds and patta passbooks relating to the property to the PURCHASER as per separate list annexed hereto. They also agree that they would get effected transfer of pattas for the remaining properties and also provide the PURCHASERS with such documents as would enable them to get clearance from their legal adviser, regarding the title to the property."
80. Even now, it is admitted by defendants 1 to 3 that the original documents of title relating to most of lands (about 70 acres) covered by Ex.A-1, were handed over by them to the plaintiffs, at or before the execution of Ex.A-1. We have already pointed out that the first defendant admitted in para 29 of his proof affidavit filed in lieu of his examination in chief as DW-1 that the plaintiffs had adequate security at least in respect of unencumbered properties to the extent of 35 to 40 acres. In paragraph 14 of his proof affidavit, DW-1 stated that even on the date of first borrowing viz., 9.3.2007, the defendants 1 to 3 handed over a set of original documents along with a list of documents, to the plaintiffs as security for the loan.
81. Thus, in effect, there is an unequivocal admission on the part of the defendants 1 to 3 (i) that Ex.A-1 was executed by them (though for a different purpose) and (ii) that they handed over to the plaintiffs, the original title deeds relating to at least a major portion of the properties covered by Ex.A-1.
82. Therefore, if the case of the plaintiffs is true, then (i) there was a prior Agreement of Sale (ii) there was payment of more than 50% of the sale consideration and (iii) there was a handing over of the original title deeds relating to many of the properties covered by the document. Consequently, the defendants 4 and 5 could not have perused and did not as a matter of fact, have an occasion to peruse the original title deeds relating to a major portion of the properties purchased by them. The barest minimum enquiry, expected of a person who proclaims to be a bona fide purchaser, is to demand from the vendor, all the original documents of title, before purchasing the properties. Even this minimum enquiry has not been undertaken by the defendants 4 and 5, before they proceeded to complete the deal.
83. Alternatively, if the case of the defendants 1 to 3 is taken to be true and the transaction between them and the plaintiffs is construed to be only a loan transaction, then the case of the defendants 4 and 5 would be still worse. It is for the reason that Section 53 (1) of the Transfer of Property Act, 1882, makes every transfer of immovable property, made with intent to defeat or delay the creditors of the transferor, shall be voidable at the option of any creditor so defeated or delayed. Though nothing contained in Section 53(1) would impair the rights of a transferee in good faith and for consideration, the transferee is bound to prove, by acceptable evidence that the transaction was gone through, in good faith. A transferee who did not even care to question the transferor about the non availability of the original title deeds of a majority of the lands purchased by him, cannot be taken to have acted in good faith.
84. Black's Law Dictionary defines a bona fide purchaser as "one who buys something for value without notice of another's claim to the property and without actual or constructive notice of any defects in or infirmities, claims or equities against the seller's title; one who has in good faith paid valuable consideration for property without notice of prior adverse claims". The word "bona fide" itself is defined by Black as "made in good faith, without fraud or deceit or sincere, genuine".
85. The Law Lexicon by P.Ramanatha Aiyar also defines the word "bona fide" to mean "good faith, without fraud or deception, honestly, openly and sincerely". The Law Lexicon also defines a bona fide purchaser as follows:-
"BONA FIDE PURCHASER is one who at the time of the purchase advances a new consideration, surrenders some security or does some other act which leaves him in a worse position if his purchases should be set aside and purchases in the honest belief that his vendor had a right to sell, without notice, actual or constructive of any adverse rights, claims, interest or equities of others in and to the property sold".
86. But as stated earlier, section 19 (b) uses the phrase transferee for value who has paid his money in good faith. The terms 'good faith' and 'bona fide' are understood to be synonymous. In Mathunsa Rowthan & others vs. Apsa Bin {21 MLJ 969}, a Division Bench of this Court held that the expression "bona fide" means "good faith or honesty of dealing". For holding so, the Division Bench relied upon Section 3 (22) of the General Clauses Act, 1897, which states that "a thing shall be deemed to be done in good faith, where it is in fact done honestly, whether it is done negligently or not". Similarly, Section 52 of the Indian Penal Code, defines good faith as follows:-
"Nothing is said to be done or believed in good faith which is done or believed without due care and attention"
The distinction between the definition of the word "good faith" in Section 3(22) of the General Clauses Act, 1897 and in Section 52 of the Indian Penal Code, was pointed out by the Supreme Court in Harbhajan Singh vs. State of Punjab {AIR 1966 SC 97} in the following words:-
"The element of honesty, which is introduced by the definition prescribed by the General Clauses Act, is not introduced by the definition of the Code"
Honest, though negligent, conduct will satisfy the test of good faith under the General Clauses Act, while negligence will negative good faith for the purpose of the Penal Code. The Supreme Court also quoted with approval, the observations of the Bombay High Court in Emperor vs. Abdool Wadood Ahmed {ILR 31 Bom 293}, that "good faith requires not indeed logical infallibility" and that "the honest conclusions of a calm and philosophical mind may differ very largely from the honest conclusions of a person excited by sectarian zeal and untrained to the habits of precise reasoning".
87. Section 2 (h) of the Limitation Act, 1963, also defines good faith, for the purposes of the Act as follows:-
"Nothing shall be deemed to be done in good faith, which is not done with due care and attention"
Thus, the definition of good faith under the Limitation Act, 1963, is almost in pari materia with the definition appearing in Indian Penal Code, except that the Penal Code also takes within its fold "belief".
88. However, the word "good faith" is not defined in the Specific Relief Act, 1963, though the word appears in Section 19(b) of the Act. Section 2(e) of the Specific Relief Act, 1963, states that all words and expressions not defined therein, but defined under the Indian Contract Act, 1872, shall have the same meaning assigned to them under that Act. But the Indian Contract Act, also does not define the expression good faith. Therefore, the expression "good faith" appearing in Section 19(b) of the Specific Relief Act, 1963, should be understood in the light of the definition of the expression under Section 3(22) of the General Clauses Act, 1897, since Section 3 of the General Clauses Act, declares that the definitions provided therein apply to all Central Acts and Regulations, made after the commencement of that Act, unless there is anything repugnant in the subject or context. Though the old Specific Relief Act of 1877 was enacted before the commencement of the General Clauses Act, 1897, the definition of the expression "good faith" appearing in Section 3(22) of the General Clauses Act, was applied by Courts, to cases arising even under the old Specific Relief Act. Despite judicial pronouncements, importing the definition given in the General Clauses Act, to the Specific Relief Act, no attempt was made to define the expression "good faith" even in the new Specific Relief Act of 1963. Therefore, the expression "good faith" appearing in Section 19(b) of the Specific Relief Act, 1963 has to be understood, in the context of the definition in Section 3(22) of the General Clauses Act, 1897.
89. In Arunachala Thevar vs. Govindarajan Chettiar {1977 (2) MLJ 431}, a Division Bench of this Court considered in elaborate detail, the scope of Section 19(b) of the Specific Relief Act, 1963 and each of the expressions appearing therein, viz., (i) "good faith" (ii) "paid his money" and (iii) "without notice". On the scope of Section 19(b), the Division Bench held as follows:-
"Clause (b) of Section 19 requires four elements to be proved to successfully claim the benefit of the exception, viz., (1) that the transfer is for value;
(2) that the consideration has been paid;
(3) that the subsequent transferee has taken the transfer in good faith; and (4) that both the purchase and the payment of the consideration had been made without notice of the prior contract.
The first two elements are positive and the rest are negative in character. Clause (b) lays stress upon the payment of money by transferee in good faith and without notice of the original contract and does not go further. It contemplates a transferee who has got a document executed, who had paid the money in good faith and without notice and who gets the document registered in accordance with the law, giving retrospective effect to the transaction from the date of the execution. Thus, where a buyer paid full money before the date of the execution of the deed in good faith and before the receipt of the notice of the contract of sale from a prior buyer, he is a transferee in law from the date of execution of the conveyance within the meaning of Section 19(b) of the Act and the transferee is protected."
90. In respect of the expression "good faith", the Division Bench pointed out that the definition in the General Clauses Act, has to be imported to the Specific Relief Act, for reasons of equity and good conscience and that "the essence of good faith is the honesty of intention".
91. Dealing with the expression "paid his money" appearing in Section 19(b), the Division Bench referred almost to the entire case law on the point. The Division Bench first referred to the decision of the Bombay High Court in Himatlal Motilal vs. Vasudev Ganesh {1912 ILR 36 Bom. 446}, wherein it was held that a subsequent purchaser who paid only a part of the sale consideration and offered security for the balance, cannot resist the claim for specific performance. The Bench next referred to the decision in Gudur Renga Reddi vs. Gundala Pichai Reddi {AIR 1915 Mad. 37}, in which it was held that a purchaser who claimed adjustment of the sale consideration against a prior outstanding mortgage in his favour, but who made no endorsement of discharge on the mortgage bond, cannot be put in the same position as a man who "paid his money in good faith". The Bench then referred to the decision of Horwill, J., in Marwadi Sumermal Jamatraj vs. Thukkappa {AIR 1944 Mad. 391}, to the effect that where a portion of the consideration was in adjustment of an outstanding debt, the transferee should be taken to have paid all that had to be paid under the contract of sale. Thereafter, the Bench referred to the opinion of Varadachariar, J., in Arunachala Thevar vs. Madappa Thevar {AIR 1936 Mad. 949}, to the effect that where the consideration for sale consisted of part payment in cash and the discharge of certain debts due to the purchasers, the debts must be treated as discharged and consequently the purchaser should be deemed to have paid his money. The Bench then referred to the decision of Ramamurthi and Alagiriswami, JJ, in Veeramalai Vanniyar vs. Thadikara Vanniyar {AIR 1968 Mad. 383}, wherein it was held that "it is the actual payment of money and not a mere agreement to pay the money which alone confers the right so as to prevail over a prior Agreement of Sale".
92. After discussing the entire case law on the question as to when a person could be taken to have "paid his money", within the meaning of Section 19(b) of the Specific Relief Act, the Division Bench, in Arunachala Thevar's case, summarised the law on the point, in paragraph 13 as follows:-
"13. The sum and substance of the above cited decisions is to the effect that a transferee should have paid the entire consideration money to the owner before he was put on notice of the prior agreement of sale, that such payment of consideration need not be in money only, but may be either in money or money's worth or may be by way of some adjustment, but there must be actual payment or adjustment and not merely a promise to pay or a mere agreement for adjustment, that the agreement cannot merely remain executory but must be executed and that nothing should remain to be paid or to be adjusted. However, we make it clear that no hard and fast rule can be laid down regarding the ambulatory nature of the burden of proof in cases of this type, which is initially cast on the transferee, and each case as it arises must be decided according to its own peculiar facts, circumstances and probabilities; but, in scanning the circumstances and weighing the probabilities, the Court should give due regard to the consensus of legal decisions laid down on the point."
93. In Bole Naidu vs. N.Kothandarama Pillai {1987 (100) LW 750}, Sengottuvelan, J., pointed out that the definition of the term "good faith" in the Indian Penal Code emphasises due care and attention while the definition of the term in the General Clauses Act, emphasises honesty. He also held that each aspect is a compliment to the other and not an exclusion of the other. On the question as to what an honest purchaser was bound to do, before purchasing a property, so as to qualify to be a person acting in good faith, Sengottuvelan, J., held as follows:-
"An honest purchaser will at least make enquiries with the persons having knowledge of the property and also with the neighbouring owners. The standard of proof required to show that the respondents 3 and 4 are the bona fide purchasers and entitled to the exception provided in Section 19(b) of the Specific Relief Act, is very high. The burden of proof is on the purchaser. If the purchaser had not taken the ordinary precaution which a normal purchaser will take then his conduct cannot be said to be bona fide."
"Making of necessary enquiries and obtaining of the encumbrance certificate will indicate the bona fide of the purchaser and a purchaser who has ventured into the transaction without observing the above said formalities cannot be said to be a bona fide purchaser coming within the exception to Section 19 (b) of the Specific Relief Act."
94. For coming to the above conclusion, the learned Judge relied upon the following observations of the Bombay High Court (but wrongly quoting it as that of the Apex Court) in Kailash Sizing Works vs. Municipality of Bhiwandi and Nizampur {1968 Bom. L. R. 554}:-
"A person cannot be said to act honestly unless he acts with fairness and uprightness. A person who acts in a particular manner in the discharge of his duties in spite of the knowledge and consciousness that injury to some one or group of persons is likely to result from his act or omission or acts with wanton or wilful negligence in spite of such knowledge or consciousness cannot be said to act with fairness or uprightness and, therefore, he cannot be said to act with honesty or in good faith. Whether in a particular case a person acted with honesty or not will depend on the facts of each case.
Good faith implies upright mental attitude and clear conscience. It contemplates an honest effort to ascertain the facts upon which the exercise of the power must rest. It is an honest determination from ascertained facts. Good faith precludes pretence, deceit or lack of fairness and uprightness and also precludes wanton or wilful negligence."
Though Sengottuvelan, J., extracted the above passage from the judgment of the Bombay High Court and wrongly referred it as that of the Supreme Court, the decision of the Bombay High Court was actually taken on appeal to the Supreme Court in The Municipality of Bhiwandi and Nizampur vs. M/s. Kailash Sizing Works {(1974) 2 SCC 596}. While approving the decision of the Bombay High Court, the Apex Court held as follows:-
"15. In Jones vs. Gordon, Lord Blackburn pointed out the distinction between the case of a person who was honestly blundering and careless, and the case of a person who has acted not honestly. An authority is not acting honestly where an authority has a suspicion that there is something wrong and does not make further enquiries. Being aware of possible harm to others, and acting in spite thereof, is acting with reckless disregard of consequences. It is worse than negligence, for negligent action is that, the consequences of which, the law presumes to be present in the mind of the negligent person, whether actually it was there or not. This legal presumption is drawn through the well known hypothetical reasonable man. Reckless disregard of consequences and mala fides stand equal, where the actual state of mind of the actor is relevant. This is so in the eye of law, even if there might be variations in the degree of moral reproach deserved by recklessness and mala fides.
16. The Bombay, as also, the Central, General Clauses Acts, help only in so far as they lay down that negligence does not necessarily mean mala fides. Something more than negligence is necessary. But these Acts say "honestly" and so, for the interpretation of that word, we have explained the legal meanings above."
95. Keeping the above principles in mind, let us now look into the pleadings and the evidence, on the issue on hand. In the pre-suit notice filed as Ex.A-2 dated 25.2.2008, the plaintiffs have made an assertion that the defendants 4 and 5 had purchased the property knowing fully well about the Agreement. They have also stated that the sale in favour of the defendants 4 and 5 was not a bona fide or genuine transaction.
96. Interestingly, it was the defendants 4 and 5, who issued the first legal reply dated 7.3.2008 under Ex.A-3, to the pre-suit notice. A perusal of Ex.A-3 shows that the defendants 4 and 5 did not even make a formal assertion therein, that they are bona fide purchasers. In paragraph 2 of Ex.A-3, the defendants 4 and 5 claimed that they verified the existence of any encumbrance over the property and that as no subsisting encumbrance was found, they measured the property, identified the same and put up a fence. In paragraph 4 of Ex.A-3, the defendants 4 and 5 claimed that they had no notice of any Agreement between the plaintiffs and the defendants 1 to 3. In paragraph 5 of Ex.A-3, the defendants 4 and 5 claimed that "they applied themselves in due diligence and acquired the lands for valuable consideration without notice of any dispute whatsoever". Again in para 6 of Ex.A-3, the defendants 4 and 5 claimed that they purchased the property from its legitimate owners for valuable consideration without notice of any dispute. The defendants 4 and 5 failed to make even a formal statement in Ex.A-3 that they purchased the property in good faith by paying a particular amount.
97. We are not for a moment suggesting that the mere chanting of the expression "bona fide purchaser" as a mantra, would make the defendants 4 and 5 bona fide purchasers, nor are we suggesting that the failure to repeat the expression parrot like, would automatically make the defendants 4 and 5, not bona fide purchasers. We are only trying to point out that the immediate reaction of the purchaser of a property, upon receipt of a legal notice, would be to assert that he is a bona fide purchaser. But the defendants 4 and 5 failed even to do this.
98. In the pre-suit notice Ex.A-2 dated 25.2.2008, the plaintiffs had categorically stated in para 3 that the original title deeds in respect of a major portion of the properties were given to them. To this averment in Ex.A-2, there is no response from the defendants 4 and 5, in their legal reply dated 7.3.2008 filed as Ex.A-3. If the defendants 4 and 5 were bona fide purchasers, they ought to have explained at the earliest point of time, in Ex.A-3 as to whether they demanded the production of the original title deeds from their vendors (defendants 1 to 3) or as to why they failed to make a demand to the same effect. Curiously, Ex.A-3 is resoundingly silent about the averment in Ex.A-2 that the original title deeds are with the plaintiffs. While the defendants 4 and 5 did not react in Ex.A-3 to the non availability of the original title deeds, the defendants 1 to 3 admitted in their legal reply dated 10.3.2008 filed as Ex.A-4 that the plaintiffs were having custody of the original documents.
99. After miserably failing to make necessary averments (i) with regard to the bona fide nature of their purchase and (ii) with regard to the failure to demand the production of original title deeds, the defendants 4 and 5 attempted to cover the lost ground, in their written statement. It is only in the written statement that for the first time, the defendants 4 and 5 came up with a plea that they were bona fide purchasers for value without notice of the Agreement of Sale. But after claiming in para 4 of the written statement that they are bona fide purchasers for value without notice, the defendants 4 and 5 claimed in para 5 of the written statement that the mere custody of the original title deeds with the plaintiffs cannot lead to the conclusion that they are not bona fide purchasers. Even in paragraphs 15 and 16 of the written statement, the defendants 4 and 5 made only a bald averment that they verified the marketable title of the vendors and took possession of the entire extent, in good faith and without notice and that they applied themselves with all prudence and perused the copies of the documents and satisfied themselves about the marketable title.
100. We are really at a loss to understand as to what the defendants 4 and 5 mean, by stating in para 16 of their written statement that "they applied themselves with all prudence and perused the copies of the documents". There is not even an apology of an explanation or reason stated by the defendants 4 and 5 in their written statement as to why they failed to examine the original title deeds relating to the properties to be purchased by them or as to how they satisfied themselves about the marketable title of their vendors in the absence of the original title deeds. Courts do come across cases these days, where the parties lodge police complaints about the loss or theft of original title deeds and then issue newspaper advertisements about such loss or theft and thereafter sell the properties with true or certified copies of documents. One would at least expect these minimum steps to have been followed by defendants 4 and 5 which claim to be public trusts running educational institutions, especially since the transaction in question ran into several crores of rupees. Neither in the written statement nor in the additional written statement, have the defendants 4 and 5 pleaded that they followed any of these steps, due to the non-availability of the original title deeds with the vendors.
101. The defendants 4 and 5 also filed an additional written statement. In para 6 of the additional written statement, defendants 4 and 5 claimed that at the time of registration of the Sale Deeds in their favour, the defendants 1 to 3 handed over the original title deeds relating only to 21 acres and undertook to hand over the remaining title deeds. The total extent of lands purchased by them was about 68 acres. Therefore, the defendants 4 and 5 should have explained their conduct either in their first written statement or in their additional written statement, as to why they did not demand production of the original title deeds in respect of a major portion of the lands or as to what kind of explanation the defendants 1 to 3 offered for non production of those original documents.
102. Therefore two things are very clear, viz., (i) that before purchasing the properties, the defendants 4 and 5 did not peruse the original title deeds and (ii) that even after purchase, the defendants 4 and 5 do not even have any explanation to offer, about their conduct in not verifying the original title deeds and in not demanding the production of the original title deeds from their vendors. The failure of defendants 4 and 5, who claim to be public trusts, running several educational institutions such as Arts and Science Colleges, Medical Colleges and Engineering Colleges under the umbrella of an University, to make any kind of enquiry on this aspect, before purchasing a property for more than Rs.4 crores, would expose the lack of good faith on their part and would certainly disentitle them to claim that they are bona fide purchasers.
103. The failure of the defendants 4 and 5 (i) to verify the original title deeds or (ii) at least to call for an explanation from their vendors for the non availability of the original title deeds, is not a mere act of negligence on their part, so as to still fall within the definition of the expression "good faith" appearing in Section 3(22) of the General Clauses Act, 1897. The standard of proof necessary to establish good faith as defined under Section 2(h) of the Limitation Act, 1963, or under Section 52 of the Indian Penal Code, is not what we have applied here to see if the defendants 4 and 5 acted in good faith. In other words, we are not finding fault with the defendants 4 and 5 for their failure to act "with due care and attention", as required to establish good faith under the Indian Penal Code or the Limitation Act. Even if the defendants 4 and 5 had acted negligently, while purchasing the suit 'C' and 'D' Schedule properties, we could have still given them the benefit of doubt that they could have acted in good faith, within the meaning of Section 3(22) of the General Clauses Act. But when it is seen that the defendants 4 and 5 failed to exercise the barest minimum amount of diligence, which the purchaser of an immovable property is bound to exercise, especially in a transaction of this magnitude, they cannot be held to have passed the test of "good faith" under Section 19(b) of the Specific Relief Act, 1963 read with Section 3(22) of the General Clauses Act, 1897.
104. Though, in view of the undisputed facts, the pleadings of defendants 4 and 5 themselves are sufficient for us to come to the above conclusion, we would also now refer to the evidence on record.
105. The Trustee of the defendants 4 and 5 by name Mr.P.Ravi, examined himself as DW-3. He filed a proof affidavit in lieu of chief examination. In paras 7 to 9 of the proof affidavit, DW-3 stated that he obtained the xerox copies of the documents of title and the encumbrance Certificates and had them examined by his Advocate and that his Advocate opined that there were encumbrances, which if cleared, could facilitate their purchase by defendants 4 and 5. He also admitted that the encumbrance certificates revealed the division of a portion of the property into house sites and their sale by third parties and that the defendants 1 to 3 agreed to clear those encumbrances. In paragraph 13 of the proof affidavit, DW-3 stated that the defendants 4 and 5 proceeded to complete the registration on 12.11.2007 and 30.11.2007 by making payment of the entire sale consideration. In para 14, he admitted that at the time of registration, the defendants 1 to 3 handed over only some of the documents of title, with an assurance that the rest of the documents will be handed over after the encumbrances were cleared. In para 15, he admitted that the defendants 1 to 3 executed a letter of undertaking to the said effect on 7.12.2007. Even in para 41 of the proof affidavit, DW-3 admitted that they had knowledge of the other encumbrances.
106. The above admissions on the part of DW-3 in his chief examination makes it clear that the defendants 4 and 5 were aware of some encumbrances on a portion of the property and that they proceeded to complete the transaction, even without the original parent documents, merely on the basis of an assurance. This assurance is said to have been reduced into writing, only on 7.12.2007, in the form of an undertaking, after the registration of the Sale Deeds on 12.11.2007 and 30.11.2007. But the said undertaking, filed as Ex.B-3, appears obviously to have been created after the suit and is wholly unreliable for the following reasons:-
(i) No reference was made to such an undertaking, either in the reply legal notices Exx.A-3 and A-4, or in the written statement or additional written statement. It surfaced virtually from nowhere at the time of trial.
(ii) The non judicial stamp paper on which it is typed, bears the name of one John Joseph, whose identity is not known. Normally, the stamp papers ought to have been in the name of either the vendors or the purchasers.
(iii) The defendants 1 to 3 did not make any reference to Ex.B-3 undertaking.
107. During cross examination, DW-3 admitted the following:-
(a) that he did not know as to how many original documents were perused by his Advocate before the purchase of the property;
(b) that the original title deeds in respect of 70 acres of land out of the total extent of about 75 acres and 23-1/2 cents, described in suit Schedule 'A' were filed by the plaintiffs into Court as exhibits;
(c) that about 10 acres of land related to the temple;
(d) that it is correct to say that while purchasing a property, the original title deeds and parent documents are to be verified and that they did not entertain any suspicion when the defendants 1 to 3 did not produce the original title deeds;
(e) that they did not think of issuing a newspaper advertisement about their proposal to buy suit 'C' and 'D' Schedule properties and that their Advocate did not advise them to do so;
(f) that it is true that in the Sale Deeds executed in favour of defendants 4 and 5 (Exx.A-29 to A-34), it is written that the original title deeds had been handed over;
(g) that though he questioned the writer at the time of signing the Sale Deeds (on behalf of the purchasers), about the above recital, the writer advised him that it was the usual practice;
(h) that the statements in their Sale Deeds Exx.A-29 to A-34 as though the properties were free of encumbrances, were incorrect;
(i) that before registering the Sale Deeds, they did not show them to their Advocate and get his opinion;
(j) that the first defendant informed him about 100 plots laid out and sold in an extent of 3 acres and that the first defendant promised to clear all the encumbrances; and
(k) that they did not make any mention anywhere about Ex.B-3 letter of undertaking dated 7.12.2007 executed by defendants 1 to 3 to clear the encumbrances.
108. Now let us compare the admissions made by DW-3 extracted above, with the admissions made by DW-1, one of the vendors of the defendants 4 and 5. In cross examination, DW-1 admitted -
(a) that suit 'C' Schedule properties were purchased by defendants 4 and 5 under Ex.A-32 and that a portion of the property covered thereunder had already been plotted out and sold to various third parties and that DW-3 Mr.P.Ravi saw the encumbrance certificate and came to know about the lay out of plots and their sale;
(b) that out of the total sale consideration fixed under Exx.A-29 to A-34, the defendants 1 to 3 requested the defendants 4 and 5 to retain an amount of Rs.2.5 crores, for the purpose of payment to the second plaintiff, though it is stated in Exx.A-29 to A-34 that the entire sale consideration had been received; and
(c) that the defendants 4 and 5 did not ask the defendants 1 to 3 as to why they were leaving a huge amount of Rs.2.5 crores with them, from out of the sale consideration payable by defendants 4 and 5 to defendants 1 to 3.
109. Interestingly, the total sale consideration, for which the suit 'C' and 'D' Schedule properties were sold by the defendants 1 to 3 to defendants 4 and 5 under Exx.A-29 to A-34 is indicated in para 13 of the written statement of defendants 1 to 3 to be Rs.4,11,08,000/-. According to DW-1's admission in cross examination, an amount of Rs.2.5 crores out of this total sale consideration, was left with the defendants 4 and 5, for eventual payment to the plaintiffs. After DW-1 made such a startling admission during cross examination, DW-3 denied it. In para 46 of the proof affidavit filed by DW-3, he denied as incorrect, the statement of the first defendant in cross examination that a sum of Rs.2.5 crores was retained by defendants 4 and 5. But DW-3 did not cross examine DW-1 on this aspect.
110. It is stated in Exx.A-29 to A-34 that the entire sale consideration had been paid to defendants 1 to 3. The payments reflected in Exx.A-29 to 34 are as follows:-
Payment under Ex.A-29------Rs. 55,00,000/- by way of cash Payment under Ex.A-30------Rs. 35,00,000/- by way of cash Payment under Ex.A-31------Rs. 60,00,000/- by way of cash Payment under Ex.A-32------Rs. 1,30,00,000/- by way of cash Payment under Ex.A-33------Rs. 1,30,00,000/- by way of cash Payment under Ex.A-34------Rs. 1,08,000/- by way of cash Thus the payments under Exx.A-29 to 34 were not made either by way of demand drafts or by way of cheques, but made by way of cash. Despite being public trusts, running several educational institutions and an University, the defendants 4 and 5 have chosen to make payments of huge amounts in cash, in violation of Section 269 SS of the Income Tax Act, 1961. This shows that the admission made by DW-1 that a sum of Rs.2.5 crores was allowed to be retained by defendants 4 and 5, from out of the total sale consideration, for eventual payment to the second plaintiff, must be true. If it is true, then as a corollary, the claim of the plaintiffs that defendants 4 and 5 were aware of their Sale Agreement should also be true, as otherwise, they need not retain such a huge amount, for payment to the second plaintiff.
111. In any event, section 19(b) of the Specific Relief Act, 1963 saves only a transferee for value who paid his money in good faith. It does not save a transferee who merely promises to pay or who retains a part of the sale consideration for settling the dispute raised by a person who makes a claim on the property. As held by the Division Bench in Arunachala Thevar {1977 (2) MLJ 431}, which we have extracted earlier, a purchaser should have actually "paid his money in good faith". When there was neither actual payment/ adjustment of the entire sale consideration nor any part payment accompanied by the adjustment of the balance, by the subsequent purchaser, he would not satisfy the requirements of the exception under Section 19(b). Consequently, he cannot claim the benefits of the exception under Section 19(b).
112. Coming to the aspect of notice, found in Section 19(b), it is needless to point out that the notice referred to therein is not only actual notice, but would also include constructive notice. The legal presumption of knowledge or notice arises from:
(a) Wilful abstention from an enquiry or search;
(b) Gross negligence;
(c) Registration, omission to search the register kept under the Registration Act, may amount to gross negligence so as to attract the consequences which result from notice;
(d) Actual possession; and
(e) Notice to an agent.
113. Section 3 of the Transfer of Property Act, 1882, indicates when a person will be said to have notice, as follows:-
"A person is said to have notice of a fact when he actually knows that fact or when but for wilful abstention from an inquiry or search which he ought to have made or gross negligence, he would have known it.
Explanation I : Where any transaction relating to immovable property is required by law to be and has been effected by a registered instrument any person acquiring such property or any part of or share or interest in such property shall be deemed to have notice of such instrument as from the date of registration or where the property is not all situated in one sub-district or where the registered instrument has been registered under sub-section (2) of Section 30 of the Indian Registration Act, 1908 (16 of 1908), from the earliest date on which any memorandum of such registered instrument has been filed by any Sub Registrar within whose sub-district any part of the property which is being acquired or of the property wherein a share or interest is being acquired is situated:
Provided that --
(1) the instrument has been registered and its registration completed in the manner prescribed by the Indian Registration Act, 1908 (16 of 1908) and the rules made thereunder, (2) the instrument or memorandum has been duly entered or filed, as the case may be, in books kept under Section 51 of that Act, and (3) the particulars regarding the transaction to which the instrument relates have been correctly entered in the indexes kept under Section 55 of that Act.
Explanation II Any person acquiring any immovable property or any share or interest in any such property shall be deemed to have notice of the title, if any, of any person who is for the time being in actual possession thereof.
Explanation III A person shall be deemed to have had notice of any fact if his agent acquires notice thereof whilst acting on his behalf in the course of business to which that fact is material:
Provided that, if the agent fraudulently conceals the fact, the principal shall not be charged with notice thereof as against any person who was a party to or otherwise cognizant of the fraud."
114. In the case on hand, we need not even strain ourselves to find out whether there was constructive notice or not. Even by their own admissions, made both in the pleadings and in their evidence, it is clear that the defendants 4 and 5 had notice at least (i) of the claim made by the HR&CE Department in respect of a portion of the land and (ii) of the claim made by persons who had purchased plots in a portion of the land, developed into a lay out of 100 house sites, under registered deeds of sale, which were also reflected in the encumbrance certificates admittedly seen by DW-3. Therefore, the defendants 4 and 5 had actual notice of the claims made by the HR&CE Department and the encumbrances created in favour of the purchasers of house sites.
115. As seen from section 3 of the Transfer of Property Act, which we have extracted above, a wilful abstention from an enquiry or search which a purchaser ought to have made, would give rise to a presumption of constructive notice. The effect of abstention on the part of a subsequent purchaser, to make enquiries with regard to the possession of a tenant, was considered in Ram Niwas vs. Bano {2000 (6) SCC 685}. It was held in paragraphs 16 and 18 therein as follows:-
"16. The purchasers have acquired a legal right under sale deed (Ext.4). The right of the tenant under Ext.1, if it is true and valid, though earlier in time, is only an equitable right and it does not affect the purchasers if they are bona fide purchasers for valuable consideration without notice of that equitable right."
"18. .. ... .. .. ... If the purchasers have relied upon the assertion of the vendor or on their own knowledge and abstained from making inquiry into the real nature of the possession of the tenant, they cannot escape from the consequences of the deemed notice under Explanation II to Section 3 of the Transfer of Property Act."
The wilful abstention of the defendants 4 and 5 to make an enquiry or search, is writ large on the face of the records due to--
(i) their failure to demand the production of the original title deeds before going ahead with the registration,
(ii) the knowledge that they admittedly had at least about the other encumbrances existing in the property and
(iii) their retention of an amount of Rs.2.5 crores from out of the total sale consideration of Rs.4,11,08,000/-, specially for the purpose of settling the claim of the plaintiffs.
Since all the payments under Exx.A-29 to 34 to the tune of Rs. 55 lakhs, Rs.35 lakhs, Rs.60 lakhs, Rs.130 lakhs, Rs.130 lakhs and Rs.1.08 lakhs (totalling to Rs.4,11,08,000/-) were admittedly only cash payments and also since DW-1 categorically admitted that a sum of Rs.2.5 crores, out of the above amount was retained by the defendants 4 and 5 for settling the claim of the second plaintiff, the defendants 4 and 5 had a duty cast upon them to make a search or enquiry about the nature of such a claim. Their failure to do so, amounted to wilful abstention leading to constructive notice.
116. Unfortunately, even on the issue (issue No.3) as to whether the defendants 4 and 5 were bona fide purchasers for value without notice, the trial Court faulted. The trial Court merely proceeded on the basis of the pleading of the defendants 4 and 5 and the oral assertion of DW-3 that they did not have any notice of Ex.A-1. But the trial Court failed to see that in the first instance, it is enough if the subsequent purchaser pleads bona fides and also asserts the same orally in evidence. As held by the Division Bench in Arunachala Thevar, the initial burden cast upon the subsequent purchaser would stand discharged, once he pleads bona fides and makes an oral assertion. But when the prior agreement holder seeking specific performance places innumerable materials or when the overall circumstances point out overwhelmingly, to the lack of good faith on the part of the subsequent purchaser, he has a duty heavily cast upon him to clear the cloud. This is why, the burden of proof in such cases is termed as "ambulatory" and it keeps swinging like a pendulum. The trial Court miserably lost sight of the fact (i) that the defendants 4 and 5 did not demand the production of the original title deeds (ii) that the defendants 4 and 5 were admittedly aware of at least the claims of the HR&CE Department and the encumbrances prevailing in a portion of the property, which had been plotted out as house sites and (iii) that even according to defendants 1 to 3, the entire purchase money was neither paid nor adjusted, but retained by defendants 4 and 5 for settling the claim of the second plaintiff. The trial Court failed to see that to qualify for the exception under Section 19(b), the defendants 4 and 5 should pass the tests of (i) acting in good faith (ii) payment of the entire sale consideration and (iii) not having actual or constructive notice. Since the trial Court failed to consider these aspects, the finding of the trial Court on issue No.3 that the defendants 4 and 5 were bona fide purchasers for value without notice cannot be sustained.
WHETHER THE PLAINTIFFS ARE ENTITLED TO THE EQUITABLE RELIEF OF SPECIFIC PERFORMANCE:
117. The last issue to be decided is as to whether the plaintiffs were entitled to the equitable and discretionary relief of specific performance, merely because they were found to be always ready and willing to perform their part of the obligations.
118. Section 20(1) of the Specific Relief Act, stipulates that the jurisdiction of the Court to grant a decree for specific performance is discretionary. But the Section also prescribes the parameters for the exercise of the discretion. Section 20 of the Specific Relief Act, reads as follows:-
"20. Discretion as to decreeing specific performance. - (1) The jurisdiction to decree specific performance is discretionary, and the Court is not bound to grant such relief merely because it is lawful to do so; but the discretion of the Court is not arbitrary but sound and reasonable, guided by judicial principles and capable of correction by a Court of appeal.
(2) The following are cases in which the Court may properly exercise discretion not to decree specific performance -
(a) where the terms of the contract or the conduct of the parties at the time of entering into the contract or the other circumstances under which the contract was entered into are such that the contract, though not voidable, gives the plaintiff an unfair advantage, over the defendant; or
(b) where the performance of the contract would involve some hardship on the defendant which he did not foresee, whereas its non performance would involve no such hardship on the plaintiff; or
(c) where the defendant entered into the contract under circumstances which though not rendering the contract voidable, makes it inequitable to enforce specific performance.
Explanation 1 Mere inadequacy of consideration, or the mere fact that the contract is onerous to the defendant or improvident in its nature, shall not be deemed to constitute an unfair advantage within the meaning of Clause (a) or hardship within the meaning of Clause (b).
Explanation 2 The question whether the performance of a contract would involve hardship on the defendant within the meaning of Clause (b) shall, except in cases where the hardship has resulted from any act of the plaintiff subsequent to the contract, be determined with reference to the circumstances existing at the time of the contract.
(3) The Court may properly exercise discretion to decree specific performance in any case where the plaintiff has done substantial acts or suffered losses in consequence of a contract capable of specific performance.
(4) The Court shall not refuse to any party specific performance of a contract, merely on the ground that the contract is not enforceable at the instance of the other party."
119. Even while declaring that the jurisdiction of the Court to decree specific performance is only discretionary and that the Court is not bound to grant the relief merely because it is lawful to do so, sub-section (1) of Section 20, makes three things very clear viz.,
(i) that the discretion is not arbitrary, but sound and reasonable;
(ii) that it is guided by judicial principles; and
(iii) that it is capable of correction by a Court of Appeal.
120. Without elaborating on (i) what is sound and reasonable exercise of discretion and (ii) what are judicial principles that should guide the exercise of discretion and which are capable of correction by a Court of Appeal, sub-sections (2), (3) and (4) of Section 20, lay down three indications. They are as follows:-
(i) Under sub-section (2), the cases in which a Court may exercise the discretion not to decree specific performance are indicated.
(ii) Under sub-section (3), the case in which the Court may exercise the discretion to grant specific performance, is indicated.
(iii) In sub-section (4), a stray case where the Court shall not refuse specific performance, is indicated.
121. The cases in which the Court is entitled to exercise the discretion not to grant specific performance, as listed in sub-section (2) of Section 20 are as follows:-
(I) Cases where - (a) either the terms of the contract (b) or the conduct of the parties at the time of entering into the contract (c) or the other circumstances under which the contract was entered into, are such that the contract gives the plaintiff, an unfair advantage over the defendant.
(II) Cases where the performance of the contract would involve some hardship on the defendant that he did not foresee, while the non performance would involve no such hardship on the plaintiff.
(III) Cases where the defendant entered into the contract under circumstances, which though not rendering the contract voidable, makes it inequitable to enforce the specific performance.
122. The test of "unfair advantage" prescribed under Clause (a) of sub-section (2) and the test of "hardship" prescribed under Clause (b) of sub-section (2), are qualified by the two Explanations under sub-section (2). By virtue of Explanations 1 and 2 -
(i) The mere inadequacy of consideration would not constitute an unfair advantage or hardship.
(ii) The mere fact that the contract is onerous to the defendant would not constitute an unfair advantage or hardship.
(iii) The mere fact that the contract is improvident in its nature would not constitute an unfair advantage or hardship.
(iv) The question whether the performance of the contract would involve hardship on the defendant, is to be determined only with reference to the circumstances existing at the time of the contract, except in cases where the hardship has resulted from any act of the plaintiff subsequent to the contract.
123. The scope and purpose of sub-sections (3) and (4) of Section 20, need not be examined, since the facts of the case on hand do not warrant such an exercise. This is not a case where the plaintiffs claim to have done substantial acts or suffered losses in consequence of Ex.A-1. Except paying money to the extent of Rs.1.63 crores, much before the date of execution of the Sale Agreement (Ex.A-1), viz., 16.5.2007 and paying a sum of Rs.1.37 crores on 17.5.2007 and a sum of Rs.1 crore on 30.6.2007, the plaintiffs had not done "any other substantial acts" nor do they claim to have "suffered losses". Therefore the case is not covered by sub section (3). This is also not a case where the contract has become unenforceable at the option of the other party, so as to be covered by sub section (4).
124. Thus, the issue as to whether the plaintiffs are entitled to the discretionary relief of specific performance, has to be examined, in the light of the provisions of sub-sections (1) and (2) of Section 20. While doing so, the Court should remember two important things. They are -
(i) Though as a matter of general principle, the exercise of discretion one way or the other, by a Court of first instance or a quasi judicial or administrative authority, cannot normally be upset by a Court of Appeal, by substituting its own discretion, Section 20(1) makes a deviation from this general principle by stating in express terms that the discretion exercised in the matter of specific performance, is capable of correction by a Court of Appeal.
(ii) The list of cases provided in Clauses (a), (b) and (c) of sub-section (2) in which specific performance may not be granted-- the case indicated in sub-section (3) where specific performance may be granted--and the exclusion of one of the grounds on which specific performance can be refused, indicated in sub-section (4) are only illustrative and not exhaustive.
125. In simple terms, what Section 20 has done is this. After providing in sub-section (1) of Section 20 that the grant of the relief is discretionary, guided by sound and reasonable judicial principles capable of correction by a Court of Appeal, sub-sections (2), (3) and (4) provide an illustrative list as a road map, to enable the Courts to exercise the discretion to grant or not, the relief, in a scientific manner. They do not provide a straight jacket formula, but a canvas on which the Courts have to exercise the power of discretion.
126. That sub-section (2) of Section 20 is only illustrative and not exhaustive, is seen easily from the Report of the Law Commission of India, which recommended a change to Section 22 of the Specific Relief Act of 1877. The relevant portion of the Report of the Law Commission is as follows:-
"It is not possible to exhaustively enumerate the grounds of unfairness or of hardship mentioned in Clause (ii). As stated by Pomeroy, the variety of forms of hardship and unfairness is infinite; the Courts, therefore, in dealing with these subjects have wisely refrained from limiting themselves by special rules. In this particular field precedents are of comparatively little value. There are, however, certain advantages or hardship. Thus, the fact that the contract is onerous to the defendant or improvident in nature, or that there is inadequacy of consideration, will not be circumstances falling within Clause (b). It would be advisable to add an explanation to the section making this position clear. It is not clear from Clause (ii) at what point of time the circumstances causing the hardship must exist in order to be a ground for refusing specific performance. In England, it has been established that as a general rule hardship, to operate as a ground of defence must have existed at the time of the contract, and not arisen subsequently from a change of circumstances. In India, too, it has been held that the circumstances which have subsequently arisen such as a rise in prices, owing to external circumstances, like war conditions, or the results of litigation, do not constitute 'hardship' which can be relieved against, under Clause (b). A subsequent change of conditions causing hardship may, however, be a ground for refusing specific performance where it has been brought about by the acts of the plaintiff. We recommended that the following principles to be incorporated in an explanation to the section."
Therefore, it is trite to point out that the variety of forms of hardship and unfairness is infinite and that the grounds of unfairness or of hardship, cannot be exhaustively enumerated.
127. In Parakunnan Veetill Joseph's Son Mathew vs. Nedumbara Kuruvila's Son {1987 Supp. SCC 340}, the Supreme Court held as follows:-
"14. Section 20 of the Specific Relief Act, 1963, preserves judicial discretion of Courts as to decreeing specific performance. The Court should meticulously consider all facts and circumstances of the case. The Court is not bound to grant specific performance merely because it is lawful to do so. The motive behind the litigation should also enter into the judicial verdict. The Court should take care to see that it is not used as an instrument of oppression to have an unfair advantage to the plaintiff."
128. Now therefore, let us test the issues of (i) unfair advantage to the plaintiff and (ii) hardship on the defendant, so as to see if the discretionary relief can be granted to the plaintiffs in the case on hand.
Unfair advantage to the plaintiff:
129. The question as to whether the specific enforcement of the contract would give an unfair advantage to the plaintiffs, has to be tested only with reference to three things viz., (i) the terms of the contract (ii) the conduct of the parties at the time of entering into the contract and (iii) the other circumstances under which the contract was entered into. While testing the issue of unfair advantage to the plaintiffs, the restrictions imposed by Explanation 1 that (i) mere inadequacy of consideration (ii) the mere onerous nature of the contract on the defendant and (iii) the improvident nature of the contract, would not constitute unfair advantage, has also to be borne in mind.
130. If the above tests are applied to the facts of the case, the following conclusions could be drawn:-
(a) The terms of the contract under Ex.A-1, do not appear to confer an unfair advantage on the plaintiffs. Under Ex.A-1, the land of a total extent of 75 acres and 23-1/2 cents was agreed to be sold by defendants 1 to 3 for a total sale consideration of Rs.6,68,38,500/-. As on the date of the agreement viz.16.5.2007, a sum of Rs.1,63,00,000/- had already been paid. On 17.5.2007, a sum of Rs.1,37,00,000/- was paid and on 30.6.2007, a sum of Rs.1 crore was paid, taking the total payment to Rs.4 crores. Admittedly, a portion of the total extent of 75 acres and 23-1/2 cents covered by Ex.A-1, was encumbered partly in favour of persons who had purchased house sites on the land developed into a lay out and partly on account of the claim made by the HR&CE Department. In fact, the plaintiffs have taken a stand that they are prepared to pay the balance sale consideration without any deduction and have the Sale Deeds registered, in respect of so much of the land covered by Ex.A-1, less the land on which HR&CE Department laid a claim. Therefore, the terms of the contract Ex.A-1, would not confer an unfair advantage, if specifically enforced.
(b) The conduct of the parties at the time of entering into the contract, is also not of such a nature, as to confer an unfair advantage on the plaintiffs, if specifically enforced. Despite a claim by the defendants 1 to 3 that Ex.A-1 was brought forth by the plaintiffs exerting pressure, on account of a loan taken from them, the defendants 1 to 3 did not make any allegation that a property worth a huge amount was sought to be snatched away by the plaintiffs, on account of the loan transaction. The defendants 1 to 3 have not denied the receipt of a total amount of Rs.4 crores from the plaintiffs, during the period from 9.3.2007 to 30.6.2007. The only conduct expected of the plaintiffs at the time of entering into Ex.A-1, was to act fairly and honestly. This they have done by agreeing to pay a fair price and also making payment of more than 50% of the sale consideration. Therefore, we find that the conduct of the plaintiffs at the time of entering into Ex.A-1, was not such as to confer an unfair advantage upon them. Similarly, the conduct of defendants 1 to 3 at the time of execution of Ex.A-1, is also not found to be something that conferred an unfair advantage upon the plaintiffs. In fact, if the stand taken by defendants 1 to 3 in the written statement, contrary to the stand taken by them in their legal reply notice is presumed to be correct, the defendants 1 to 3 stood to gain, by entering into Ex.A-1, since they were able to discharge a huge liability to a bank. Even according to them, the liability to bank was crystallised in a sum of Rs.3.2 crores, but they received Rs.4 crores from the plaintiffs. Therefore, neither the conduct of the plaintiffs nor the conduct of defendants 1 to 3, at the time of entering into Ex.A-1, conferred an unfair advantage upon the plaintiffs.
(c) As a matter of fact, the total sale consideration fixed under Ex.A-1, was Rs.6,68,38,500/-, out of which the defendants 1 to 3 had received Rs.4 crores. But as per para 13 of the written statement of defendants 1 to 3, the total sale consideration that they received from the defendants 4 and 5 was only Rs.4,11,08,000/-. But even this amount was not received in entirety by defendants 1 to 3 from defendants 4 and 5, while executing the Sale Deeds in their favour on 12.11.2007 and 30.11.2007. According to DW-1, though it is disputed by DW-3, a sum of Rs.2.5 crores was retained by defendants 4 and 5 out of the sale consideration of Rs.4,11,08,000/-. These facts are sufficient to show (i) that the terms of Ex.A-1 were actually more favourable to defendants 1 to 3 than the terms of their sale in favour of defendants 4 and 5 and (ii) that the conduct of the plaintiffs at the time of entering into the contract, was much better than the conduct of the defendants 1 to 3 as well as defendants 4 and 5 when the property was sold to them.
(d) The other circumstances under which the contract Ex.A-1 was entered into, are also not such as to confer an unfair advantage on the plaintiffs.
(e) Though under Explanation 1 to Section 20(2), the mere inadequacy of consideration and the onerous or improvident nature of the contract upon the defendants, would not constitute an unfair advantage, the contract under consideration in this case, viz., Ex.A-1, would not even fall within those categories. In fact, the consideration stipulated under Ex.A-1 is much more than the consideration for which the property was sold to defendants 4 and 5. The terms of Ex.A-1 are neither onerous nor improvident in nature. Therefore, Ex.A-1 passes even the tests laid down in Explanation 1, though Ex.A-1 need not pass those tests, for the purpose of determining the question of unfair advantage to the plaintiffs.
Hardship:
131. The next test is one of hardship. But the hardship, of which Clause (b) of Section 20(2) speaks, should be one which the defendants did not foresee. By virtue of Explanation 2, the question of hardship should be determined with reference to the circumstances existing at the time of entering into the contract Ex.A-1, except in cases where the hardship has resulted from any subsequent act of the plaintiffs. The focus in the whole of section 20 (2), whether it is in relation to unfair advantage or it is in relation to hardship, is primarily with reference to the status of the parties as on the date of the contract, with one exception carved out in Explanation 2. This is why-
(a) Clause (a) of sub-section (2) makes a specific reference to "the time of entering into the contract"; and
(b) Clause (b) of sub-section (2) makes a specific reference to "a defendant who did not foresee".
The only place in Section 20(2) where events subsequent to the execution of the contract are referred to, is in Explanation 2, but the same is also only by way of exception to the general rule that the determination has to be only with reference to the circumstances existing at the time of the contract.
132. On these principles, if we look into the pleadings and the evidence on hand, it will be seen that the defendants could neither plead nor prove, with reference to the circumstances existing at the time of entering into Ex.A-1, that the specific performance of the contract would result in any hardship that they did not foresee. Therefore the case would not fall under the general category. This is why, the defendants seek to bring the case within the exception under Explanation-2 by pleading a case of resultant hardship, arising out of the alleged subsequent acts of the plaintiffs. Even this is sought to be done, not by defendants 1 to 3, but by defendants 4 and 5.
133. In the case on hand, the pleadings, the evidence and the additional evidence now sought to be let in, are all endeavoured to demonstrate that the defendants 4 and 5 would suffer undue hardship, if specific performance is granted in favour of the plaintiffs. They are not aimed at projecting any hardship that the defendants 1 to 3 would suffer if specific performance is granted.
134. As we have pointed out earlier, the question of unfair advantage covered by section 20 (2) (a) could only be with reference to the conditions prevailing at the time of entering into the contract. But the question of hardship covered by section 20 (2)(b) could fall (i) either under the general category that might arise out of the circumstances prevailing at the time of the contract (ii) or under the exception indicated in Explanation-2, namely, the hardship which results from any subsequent acts of the plaintiff. Therefore, even a subsequent purchaser may be able to plead hardship, if it arises out of the acts of the plaintiff-agreement holder, subsequent to the date of the contract.
135. As a matter fact, the view earlier held by courts about the entitlement of the subsequent purchaser to raise any plea other than that of being a bona fide purchaser for value without notice, has now undergone a change. In Jugraj Singh -vs- Labh Singh {(1995) 2 SCC 31}, the Apex Court held that the plea that the plaintiff was not ready and willing to perform his part of the obligations, was not available to the subsequent purchaser. Though the said view was doubted by another Bench in Lakhi Ram -vs- Trikha Ram {(1998) 2 SCC 720}, a different view was not settled. However, in Ram Awadh (dead) by L.R.s -vs- Achchaibar Dubey {(2000) 2 SCC 428}, the question was referred to a Bench of 3 Judges. There the larger Bench held that the view taken in Jugraj Singh was erroneous and that since the obligation imposed by section 16 is upon court, it would be open to any of the defendants to raise the plea and establish it. Therefore, what applies to section 16, may equally apply to section 20(2), at least in so far as the exception carved out in Explanation-2 is concerned. In other words, a subsequent purchaser can be heard to contend that the performance of the contract would involve hardship on him, due to the acts of the plaintiff after entering into the contract.
136. In the case on hand, the subsequent acts attributed to the plaintiffs, by the defendants 4 and 5, are (i) that the plaintiffs were guilty of delay and laches and (ii) that the plaintiffs were giving out an impression that they might settle ultimately for a monetary claim. This, according to the defendants 4 and 5, led them to proceed with the establishment of the hospital, putting up of constructions and the processing of their application for setting up of a medical college. Therefore, the defendants 4 and 5 plead that undue hardship would befall upon them by the grant of specific performance, while no such hardship would be caused to the plaintiffs by the refusal to grant specific performance.
137. Now let us see, if the plaintiffs were guilty of delay and laches and if such delay led to an impression on the defendants 4 and 5 that the plaintiffs may ultimately settle down for a monetary compensation.
138. Laches was defined by Lord Allenborough as "A neglect to do something which by law a man is obliged to do". The law as to when and under what circumstances, delay is a bar to legal remedy, was detailed by Sir Barnes Peacock, speaking for the Judicial Committee of the Privy Council in Lindsay Petroleum Co. vs. Hurd {1874 LR 5 PC 221} as follows:-
"Now the doctrine of laches in Courts of equity is not an arbitrary or a technical doctrine. Where it would be practically unjust to give a remedy, either because the party has, by his conduct, done that which might fully be regarded as equivalent to a waiver of it, or, where by his conduct and neglect he has, though perhaps not waiving that remedy, yet put the other party in a situation in which it would not be reasonable to place him if the remedy were afterwards to be asserted, in either of these cases, lapse of time and delay are most material. But in every case if an argument against relief, which otherwise would be just, is founded upon mere delay, that delay of course not amounting to a bar by any statute of limitations, the validity of that defence must be tried upon principles substantially equitable. Two circumstances always important in such cases are the length of the delay and the nature of the acts done during the interval, which might affect either party, and cause a balance of justice or injustice in taking the one course or other, so far as relates to the remedy."
The principles evolved in Lindsay Petroleum Co., were cited with approval by the Supreme Court in Jiwan Lal (Dr.) vs. Brij Mohan Mehra {1972 (2) SCC 757}.
139. As Lord Penzance pointed out in Erlanger vs. New Sombrero Phosphate Co. {(1878) 3 AC 1218}, delay has two aspects viz., (i) it may lead to a change in the thing sold or (ii) it may imply acquiescence as to bar a plaintiff's right. But unlike limitation, laches is not a matter of time statutorily prescribed for the enforcement of a right in a Court of Law. It is primarily a question of inequity in permitting the claim to be enforced an inequity founded upon some change in the condition or relations of the property or the parties.
140. Therefore, it has long been held that laches by itself, is not one of the grounds on which the relief of specific performance could be denied. This is why, it is not mentioned either in the old Act or in the new Act, as a ground for disentitling a party to specific performance.
141. In Mademsetty Satyanarayana vs. G.Yelloji Rao {AIR 1965 SC 1405}, the Supreme Court considered the question as to whether mere delay in filing a suit for specific performance could be a ground for the exercise of discretion against the plaintiff. After referring to the provisions of Section 22 of the old Specific Relief Act and the provisions of the Limitation Act, the Supreme Court held that the cases providing for a guide to Courts to exercise discretion one way or the other, are only illustrative and not intended to be exhaustive. The Court also held that the mere delay without more, extending upto the period of limitation, cannot possibly be a reason for a Court to exercise discretion not to grant the relief of specific performance. But at the same time, the Court also cautioned that the scope of the discretion, after excluding the cases mentioned in Section 22 cannot be confined to waiver, abandonment or estoppel. The Court pointed out that if one of the three cases viz., waiver, abandonment or estoppel is established, no question of discretion would arise, for there would then be no subsisting right. Unless some discretionary field is left unoccupied by these three cases, the Court pointed out, that the substantive section would become otiose.
142. With regard to the difference between the English and the Indian systems, on their approach to the issue of delay, the Supreme Court held as follows:-
"In England, the relief of specific performance pertains to the domain of equity; in India to that of statutory law. In England, there is no period of limitation for instituting a suit for the said relief and therefore mere delay the time lag depending upon circumstances may itself be sufficient to refuse the relief; but in India mere delay cannot be a ground for refusing the said relief, for the statute prescribes the period of limitation. If the suit is in India, delay is sanctioned by law; if it is beyond time, the suit will be dismissed as barred by time; in either case, no question of equity arises."
143. After referring to the English decisions on the question of delay and the various Indian decisions on the same issue, the Supreme Court summarised the resultant position, in paragraph 12 of its decision as follows:-
"12. The result of the aforesaid discussion of the case law may be briefly stated thus: While in England mere delay or laches may be a ground for refusing to give a relief of specific performance, in India mere delay without such conduct on the part of the plaintiff as would cause prejudice to the defendant does not empower a Court to refuse such a relief. But as in England so in India, proof of abandonment or waiver of a right is not a pre-condition necessary to disentitle the plaintiff to the said relief, for if abandonment or waiver is established, no question of discretion on the part of the Court would arise. We have used the expression "waiver" in its legally accepted sense, namely, "waiver is contractual, and may constitute a cause of action: it is an agreement to release or not to assert a right"; see Dawson's Bank Ltd vs. Nippon Menkwa Kabushiki Kaisha. It is not possible or desirable to lay down the circumstances under which a Court can exercise its discretion against the plaintiff. But they must be such that the representation by or the conduct or neglect of the plaintiff is directly responsible in inducing the defendant to change his position to his prejudice or such as to bring about a situation when it would be inequitable to give him such a relief."
144. But in Gomathinayagam Pillai vs. Palaniswami Nadar {AIR 1967 SC 868}, Bachawat, J., pointed out (in his minority view) that mere delay, short of waiver and abandonment of the contract, was no ground for refusing the relief of specific performance of the contract. There was no difference of opinion in the majority view, on this aspect.
145. In Motilal Jain vs. Smt.Ramdasi Devi {2000 (6) SCC 420}, the Supreme Court pointed out various aspects of delay, in paragraph 6 as follows:-
"6. It may be apt to bear in mind the following aspects of delay which are relevant in a case of specific performance of contract for sale of immovable property:
(i) delay running beyond the period prescribed under the Limitation Act;
(ii) delay in cases where though the suit is within the period of limitation, yet:
(a) due to delay the third parties have acquired the rights in the subject-matter of the suit;
(b) in the facts and circumstances of the case, delay may give rise to plea of waiver or otherwise it will be inequitable to grant a discretionary relief.".
Therefore, what is important is to see (i) if at all there was a delay on the part of the plaintiffs in coming to Court and (ii) if such delay led either to the parties changing their positions or to the character of the property getting changed.
146. In the case on hand, we note the following important dates:-
9.3.2007 to 16.5.2007 Payment by plaintiffs of a total amount of Rs.1.63 crores to the defendants 1 to 3.
16.5.2007 The execution of Ex.A-1 Agreement of Sale.
17.5.2007 Payment of Rs.1.37 crores by plaintiffs to defendants 1 to 3 30.6.2007 Payment of Rs.1 crore by plaintiffs to defendants 1 to 3 12.11.2007 } 30.11.2007 } Execution of Sale Deeds by defendants 1 to 3 in favour of defendants 4 and 5.
23.1.2008 Two sets of caveats served by defendants 1 to 3 and defendants 4 and 5 on the plaintiffs.
25.2.2008 Legal notice Ex.A-2 issued by plaintiffs to all defendants 7.3.2008 } 10.3.2008} Reply by defendants 4 and 5 and defendants 1 to 3 28.4.2008 Suit filed by plaintiffs.
147. Apparently, the plaintiffs have come to Court well within the period of limitation, since the suit Agreement Ex.A-1 is dated 16.5.2007 and the date of institution of the suit is 28.4.2008. In normal circumstances, unless otherwise proved, the plaintiffs cannot be presumed to have had knowledge of the disinclination on the part of the defendants 1 to 3 to complete the transaction, till the plaintiffs were served with caveats on 23.1.2008. After service of caveats on 23.1.2008, the plaintiffs had to issue a legal notice on 25.2.2008 and file a suit within 2 months of receipt of the replies dated 7.3.2008 and 10.3.2008 from the defendants. Therefore, it may appear at the first blush that the plaintiffs cannot be said to be guilty of any delay.
148. However, it is the contention of the defendants that the purchase of the lands by defendants 4 and 5, under the Sale Deeds Exx.A-29 to A-34 dated 12.11.2007 and 30.11.2007, was very well known to the plaintiffs and that the plaintiffs demanded payment of Rs.8.5 crores as settlement for handing over the original title deeds entrusted with them. In paragraphs 13 and 14 of the written statement, the defendants 1 to 3 have claimed that they informed the plaintiffs about their intention to proceed with the sale and that the plaintiffs kept silent and came up with the suit after coming to know of the possession and the constructions put up by the defendants 4 and 5. The defendants 1 to 3 have also contended in paragraph 15 of their written statement that the sale in favour of defendants 4 and 5 were done only with the consent, knowledge and approval of the second plaintiff and that he was fully aware of the execution of the Sale Deeds.
149. Even the defendants 4 and 5 have taken a stand in paragraph 9 of their written statement that the second plaintiff approached them during the third week of December 2007, after coming to know of the purchases made by them and that since his demand for settlement of the dispute was not accepted, he threatened legal proceedings, forcing them to serve caveats on 23.1.2008. The defendants 4 and 5 have not taken such a stand, for the first time in the written statement. Even in the first legal reply that they sent on 7.3.2008 under Ex.A-3, the defendants 4 and 5 claimed in paragraph 3 that the second plaintiff approached them in the third week of December 2007, after coming to know of the sale in their favour and required them to mediate in the dispute.
150. We have already seen that in response to the pre-suit legal notice dated 25.2.2008 (Ex.A-2) issued by the plaintiffs, the defendants 4 and 5 issued a legal reply dated 7.3.2008 (Ex.A-3) and defendants 1 to 3 issued a legal reply dated 10.3.2008 (Ex.A-4), through the same counsel. In Exx.A-3 and A-4, the defendants admitted the execution of the Sale Agreement. The subsequent retraction of the defendants in their written statement, has been found by us to be unreliable and unbelievable and we have earlier come to the conclusion that the defendants are bound by the admission made by them in Exx.A-3 and A-4 about the nature of the document Ex.A-1.
151. While on the one hand, we have found Ex.A-1 to be an Agreement of Sale, on the basis of the admissions made by the defendants in Exx.A-3 and A-4, we cannot, by the other hand, reject outright, the claim made in the very same Exx.A-3 and A-4 that the second plaintiff approached the defendants 4 and 5 in the third week of December 2007 for settlement of the monetary dispute with the defendants 1 to 3, especially since the defendants 4 and 5 have maintained the stand consistently even in their written statement.
152. To Exx.A-3 and A-4, dated 7.3.2008 and 10.3.2008, the plaintiffs did not issue a rejoinder, refuting the averment that they met the defendants 4 and 5 in the third week of December 2007. The plaintiffs did not also file a reply to the written statement of defendants 1 to 3 or defendants 4 and 5, to meet this averment. However, in paragraph XV of the plaint itself, the plaintiffs claimed that the averment about the meeting of the second plaintiff with the defendants 4 and 5 in the third week of December 2007 was false.
153. In the background of the above stand taken by both parties, before and after the institution of the suit, let us now look into the evidence on record to see if what was claimed by the defendants 4 and 5 about the meeting in December 2007 was true or false.
154. In para 14 of the proof affidavit filed in lieu of chief examination, the second plaintiff stated as PW-1 that the claim of the defendants 4 and 5 about a meeting in the third week of December 2007 was false. He also denied having demanded Rs.8.5 crores towards settlement of the dispute. In para 6 of the additional proof affidavit also PW-1 denied having met the defendants 4 and 5 in the third week of December 2007. In cross-examination, a suggestion was put to PW-1 that in December 2007, he demanded Rs.8.5 crores after coming to know of the sale.
155. Interestingly, PW-1 filed as Exx.A-29 to A-34, the xerox copies of the Sale Deeds executed by defendants 1 to 3 in favour of defendants 4 and 5. These documents also contain the xerox of all the pages containing the endorsements made by the Office of the Sub Registrar, along with the photographs and thumb impressions of both the seller and the buyer. The plaintiffs are actually third parties to these Exx.A-29 to A-34. In the normal course, third parties are entitled only to the issue of certified copies of registered documents. There can only be one original registered document in respect of every transaction, except in cases where duplicates are also registered and exchanged between the parties. Therefore, the possession of the original document at the hands of the owner or at the hands of a party to the document is understandable. Consequently the possession of xerox copies of those originals at the hands of persons to whom they were entrusted by the very parties to the document, can also be accepted. But the possession of xerox copies of the originals, at the hands of third parties, who have an interest adverse to that of the parties to the document, has to be explained properly by the party producing the same.
156. In the proof affidavit of PW-1, along with which he filed Exx.A-29 to A-34, no explanation was offered by him as to how he came into possession of the xerox copies of the title deeds. In the cross examination of PW-1, on 1.12.2008, by the counsel for the defendants 1 to 3, he was questioned as to how he filed those documents. PW-1 replied that he properly applied for and obtained certified copies from the Office of the Sub Registrar and that it might have been done in the first week of March or April. A suggestion was put to PW-1 towards the end of the cross examination on 1.12.2008 that in December 2007, he came to know about the sale in favour of defendants 4 and 5 and obtained xerox copies from the Office of the Sub Registrar in an illegal manner. This suggestion was denied by him.
157. On 2.12.2008, PW-1 was cross examined by the counsel for the defendants 4 and 5. At that time, he retracted from his earlier statement made on 1.12.2008 and submitted that Exx.A-29 to A-34 were not documents got by him from the Office of the Sub Registrar. On the contrary, he stated that those documents were handed over to him by the first defendant on 10th of April. This statement can hardly be believed, in view of the fact that caveats were served on 23.1.2008, a legal notice was issued by the plaintiffs on 25.2.2008 and reply legal notices were issued by defendants on 7.3.2008 and 10.3.2008. Therefore, the statement made by PW-1 on 2.12.2008 during cross examination that the first defendant handed over Exx.A-29 to A-34 on 10th April 2008 is obviously a blatant lie.
158. PW-1 also confessed in cross examination on 2.12.2008 that he applied for certified copies of the Sale Deeds only on 16.4.2008 and that on the same date, he also received the certified copies. After saying so during his cross examination by the counsel for defendants 4 and 5, PW-1 marked the certified copies of the Sale Deeds obtained by him properly from the Office of the Sub Registrar, as Exx.A-35 to A-40. This was done by PW-1 in a re examination conducted by his counsel, after the conclusion of the cross examination.
159. Since Exx.A-35 to A-40 (certified copies of Sale Deeds) were marked in re examination, PW-1 was again cross examined by the counsel for defendants 1 to 3. At that time, he admitted that the application for certified copies were made in the morning of 16.4.2008 and the certified copies were obtained in the evening of 16.4.2008. He also admitted that even at the time when he applied for certified copies of the documents, he was in possession of the xerox copies, marked as Exx.A-29 to A-34. He further admitted that he failed to disclose both in his plaint and in his chief examination, that the first defendant handed over Exx.A-29 to A-34 and that he did not inform his Advocate as to how he came into possession of those xerox copies. Therefore, a suggestion was put to him that he obtained those xerox copies in an unlawful manner, after coming to know about those sales and that he told the first defendant about Exx.A-29 to A-34 even in the first week of December 2007. But PW-1 denied the suggestion.
160. In the light of the above, we are of the view that the stand taken by the defendants both in their reply legal notices and in their written statements as though the plaintiffs were aware of their purchase and approached them in December 2007 itself, could be true. Otherwise, the plaintiffs could not have come into possession of the xerox copies of the Sale Deeds (Exx.A-29 to 34) in favour of defendants 4 and 5.
161. Once it is seen that the plaintiffs had knowledge even in December 2007 about the sales in favour of defendants 4 and 5 and had also approached the defendants, then the next question to be considered is as to whether their institution of the suit on 28.4.2008 and the developments that took place between December 2007 and 28.4.2008 would operate either as acquiescence or as waiver or as abandonment or at least make it inequitable, to grant the relief of specific performance to the plaintiffs.
162. Right from the legal reply notice, through the written statement and upto the evidence let in, the defendants 4 and 5 have maintained that the character of the property was changed during the interregnum period and that a lot of developmental activities have taken place, on the suit property, so as to establish a Medical College and a Hospital. Therefore, the defendants 4 & 5 have pleaded throughout that in view of the developments that have taken place, it would be inequitable to grant specific performance, especially when the plaintiffs are guilty of delay and laches. Let us now examine, whether the defendants 4 and 5 have proved this stand.
163. In the legal reply dated 7.3.2008 Ex.A-3, the defendants 4 and 5 claimed in para 2 that they have reclaimed the lands and constructions were in progress. In the written statement, defendants 4 and 5 claimed -
(a) that they applied for building sanction on 4.1.2008 by depositing Rs.20,75,404/- and Rs.15,930/- towards fee for plan approval;
(b) that they obtained electricity service connection on 3.2.2008;
(c) that they commenced construction work in December 2007 and the construction work was in progress in or about 2 lakhs to 3 lakhs sq. ft. and allied and necessary work like road formation, lawn promotion etc., have been carried out;
(d) that the construction of the out patient hospital building was completed in February/March 2008 and the hospital was commissioned in February 2008 with 25 doctors and 40 para medical personnel and other staff employed;
(e) that they are attending to not less than 10 150 patients every day;
(f) that they employed 750 labourers every day with 40 Civil Engineers and other Experts;
(g) that the basement work in the entire proposed area was nearing completion and pile foundation was made to a depth of 30 feet;
(h) that wide range of paper publications about the activities were made in The Hindu on 3.2.2008 and 6.2.2008;
(i) that the defendants 4 and 5 also purchased another extent of 12 acres from various third parties to put the suit properties to convenient enjoyment;
(j) that all the properties have been clubbed into a single block and they include another 25 acres acquired from third parties, making the disputed property inseparable and indivisible;
(k) that defendants 4 and 5 had obtained approval for construction of massive structures and constructions are nearing completion and that the properties were transformed from being waste land to a campus with all inbuilt infrastructures for a Medical and Engineering University;
(l) that after the purchase, they have changed the entire physical features of the suit properties, to the knowledge of the plaintiffs and invested crores of rupees and raised massive constructions; and
(m) that they had also applied to the State and Central Governments and various concerned governing bodies for approval for the Educational Institutions.
164. In the additional written statement, the defendants 4 and 5 claimed that the hospital started functioning from 17.3.2008 and hundreds of outpatients were being treated every day. They further claimed that massive constructions necessary for getting initial permission from the Medical Council of India have reached final stages and that the No Objection Certificate from the State Government for making an application for permission to establish a Medical College has already been obtained.
165. Now let us see whether the defendants 4 and 5 proved these averments, by letting in acceptable evidence.
166. The evidence let in by defendants 4 and 5 to show that lot of developmental activities have taken place on the land and that the character of the property itself has changed, can be divided into three categories viz.,
(i) the activities that have taken place prior to the institution of the suit;
(ii) the activities that have taken place during the pendency of the suit;
(iii) the activities that have taken place after the disposal of the suit;
Pre-suit activities:
167. We have seen that defendants 4 and 5 purchased the suit properties by Sale Deeds dated 12.11.2007 and 30.11.2007 under Exx.A-29 to A-34. Since caveats were filed on 23.1.2008, the suit was instituted on 28.4.2008, immediately after the expiry of the period of 90 days and the plaintiffs obtained an interim order of injunction from the trial Court, on 29.4.2008, just one day before the closure of the Court for summer recess on 1.5.2008. Simultaneously with the grant of an ex parte order of injunction on 29.4.2008 in I.A.No.862 of 2008, the trial Court also appointed an Advocate Commissioner to note down the physical features of the suit properties, in another application taken out by the plaintiffs for the said purpose, in I.A. No.863 of 2008.
168. Therefore, there are actually two sets of evidence, available on record, with regard to the activities that have taken place upto the date of institution of the suit. One set of evidence is what was let in by the defendants 4 and 5. Another set of evidence is the averments made by the plaintiffs in their affidavit filed on 28.4.2008 in support of their application I.A.No.863 of 2008 for the appointment of an Advocate Commissioner.
169. In the affidavit in support of I.A.No.863 of 2008, the second plaintiff stated in paragraph 20 (i) that taking advantage of the sales in their favour, the defendants 4 and 5 were taking hasty steps to lay pile foundation in some extent of property in an attempt to put up some constructions thereon (the word "same" is used in the affidavit, wrongly for the word "some"); (ii) that the defendants 4 and 5 were bringing concrete ready mix, pile foundation machine etc., and as make belief affairs, they had put up semi permanent constructions with asbestos roof as if for a hospital and research institute; (iii) that it is as a small arable area when compared to the total extent. After making these averments, the second plaintiff also made an important admission in para 20 of his affidavit, which reads as follows:-
"The defendants 4 and 5 appears to be a Science and Technology and Educational Trust. If constructions are allowed to be made by them for their Educational Institutions, Research institutions etc., the property cannot be restored to the status as it originally stated. The situation will became irreversible. The property cannot be put to any other use."
Thus, there are two crucial admissions by the plaintiffs in their affidavit filed on 28.4.2008 viz., (i) that some semi permanent constructions had been put up for a hospital and research institute and (ii) that if the constructions continue, the property cannot be restored to the original status and the situation would become irreversible.
170. Now let us have a look at the documents filed to show the activities carried on prior to the institution of the suit. The documents filed by the defendants and the facts borne out by them are as follows:-
(i) The proceedings of the President/Executive Officer of Irungalur Panchayat dated 2.1.2008, filed as Ex.B-4 shows that the defendants 4 and 5 had applied for sanction of building plan, for the construction of a total extent of 1,15,238 sq. meters on the suit property and that as per the resolution of the Panchayat, they had to pay a total amount of Rs.20,75,404/- at the rate of Rs.18/- per sq. meter, for granting approval.
(ii) Ex.B-5 is the receipt issued by the Panchayat on 4.1.2008, to the defendants 4 and 5, for the payment of Rs.20,75,404/- made by them.
(iii) Ex.B-6 is the proceedings dated 4.1.2008 of the Panchayat, by which a formal approval for putting up constructions, was granted. This was to be in force for a period of one year from 4.1.2008 to 3.1.2009 and the defendants were also directed by this letter to obtain approval from the Town and Country Planning Department before commencing constructions.
(iv) Ex.B-7 is the proceedings of the Assistant Engineer, Tamil Nadu Electricity Board, dated 16.2.2008, informing the defendants 4 and 5 that a temporary service connection has been sanctioned to them and that they had to pay a sum of Rs.2,14,440/- for the same.
(v) Ex.B-8 is the receipt issued by the Tamil Nadu Electricity Board, for the payment of Rs.2,14,440/- made by defendants 4 and 5.
(vi) Ex.B-9 is the advertisement issued by the defendants 4 and 5 in The Hindu, dated 3.2.2008, inviting applications from qualified persons for appointment as Professors, Readers, Lecturers etc., in various Departments on the clinical and non clinical side, for a proposed Medical College at Trichy.
(vii) Ex.B-11 is a set of photographs showing the hospital, its outpatient wards, the consulting rooms of doctors, the surgical theatres and the inpatient wards. However, the photographs do not show the date on which they were taken and hence we do not propose to take this into account, for the purpose of determining the extent to which developmental activities were taken up prior to the institution of the suit.
(viii) Ex.B-12 is the valuation report prepared by a Civil Engineer and Licensed Surveyor, evaluating the total value of constructions put up by defendants 4 and 5 at Rs.12,64,22,905/-. It is seen from this report that the inspection was made by the Engineer on 23.5.2008 and the report was submitted on 30.5.2008. Though the date of inspection and the date of report are subsequent to the suit, the time lag is just one month and hence this report can be taken into account.
(ix) Ex.B-13 is the list of teaching staff and non teaching staff employed in the hospital and research centre. This list shows that as on 30.4.2008, they had 28 teaching staff and 73 non teaching staff. This report is certified by the Dean.
(x) Ex.B-14 is the Attendance Register of the Medical Officers, Junior Residents, Administrative staff, staff nurses, Lab Technicians, Pharmacists etc., for the period from February 2008 onwards.
(xi) Ex.B-15 is the list of outpatients and the outpatient cards, issued on 3.3.2008.
(xii) Ex.B-16 is the list of outpatients and the outpatient cards, issued on 31.3.2008.
(xiii) Ex.B-17 is the statement of "weekly patients details" for the period from 17.3.2008 to 30.11.2008. This list certified by the Dean of the hospital shows that about 7,195 patients were treated during the period from 17.3.2008 to 28.4.2008.
(xiv) Exx.B-18 and B-19 are the details of outpatients. But they are subsequent to the institution of the suit.
171. All the above documents filed as exhibits by the defendants prove the pleadings of defendants 4 and 5 (i) that they had obtained a formal approval from the Panchayat in January 2008 itself for putting up constructions to the extent of about 1,15,000 sq. meters on the suit properties by making payment of about Rs.20 lakhs (ii) that they had also obtained a temporary electricity service connection from the Tamil Nadu Electricity Board by making payment of about Rs.2 lakhs and (iii) that the constructions put up upto March 2008, were in fact being used as a hospital with medical and paramedical personnel.
Activities during the pendency of the suit:
172. Many activities could not have taken place during the pendency of the suit, as can be seen from the following sequence of events:-
29.4.2008 an interim order of injunction was granted by the trial Court restraining the defendants from putting up any construction or altering the physical features of the property.
29.5.2008 the vacation Court did not extend the order of injunction.
27.6.2008 the application for interim injunction I.A.No.862 of 2008 was dismissed by the trial Court, holding that any construction put up pending suit, will be subject to the outcome of the suit.
6.8.2008 while admitting an appeal by the plaintiffs in CMA No. 1126 of 2008, against the dismissal of their application for injunction, a single Judge of this Court granted an interim order of injunction.
28.8.2008 the appeal was posted before a Division Bench and the Division Bench granted an injunction.
31.8.2008 a counter affidavit filed by defendants 4 and 5 in M.P.No. 1 of 2008 in CMA No.1126 of 2008 undertaking not to claim equity, on the basis of the constructions put up, in the event of the success of the plaintiffs.
18.9.2008 & 21.9.2008 affidavits of undertaking are also filed by defendants 4 and 5, agreeing not to claim equity.
30.9.2008 the appeal CMA No.1126 of 2008 filed by plaintiffs was allowed and the defendants 4 and 5 were directed to maintain status quo till the disposal of the suit.
4.11.2008 in pursuance of the order passed in CMA No.1126 of 2008, the plaintiffs deposited the balance consideration of Rs.2,68,38,500/- in the trial Court.
2.12.2008 review application filed by defendants 4 and 5 in R.A. No.76 of 2008, seeking review of the order in CMA No.1126 of 2008, was dismissed by the Division Bench.
10.1.2009 the suit itself was disposed of by the trial Court, rejecting the prayer for specific performance, but granting a decree for refund of money with interest at 15% per annum on yearly rests.
2.2.2009 the present appeal was filed along with a petition for injunction. The defendants 4 and 5 were on caveats and the application for injunction got postponed for hearing. Ultimately, the parties agreed for an early hearing of the appeal itself.
173. The above sequence of events would show that the plaintiffs had the benefit of an injunction from 29.4.2008 upto 29.5.2008. The injunction application was dismissed on 27.6.2008, forcing the plaintiffs to come up with an appeal. In the appeal, they had the benefit of injunction from 6.8.2008, upto 30.9.2008 when the appeal was disposed of with an order to maintain status quo till the disposal of the suit. The suit itself was dismissed on 10.1.2009. Thereafter, there has been no interim order. Thus, the plaintiffs have had the benefit of an interim order, pending suit, in 2 broken spells, the first one from 29.4.2008 to 29.5.2008 and the second one from 6.8.2008 upto 10.1.2009. Keeping this in mind, let us now get back to the evidence.
174. As pointed out earlier, the trial Court, even while granting an ex parte interim order of injunction on 29.4.2008, appointed an Advocate Commissioner. The Commissioner filed his preliminary report on 15.5.2008, even during the vacation. His report and plan were marked as Ex.C-1. He has stated in the report that he visited the suit property on 3.5.2008, after serving telegraphic notice. But he was prevented by the watchmen of defendants 4 and 5 from entering into the property. Therefore, he noted down the physical features from outside, on the east and prepared a sketch. In paragraph 3 of his preliminary report filed as Ex.C-1, the Advocate Commissioner pointed out -
(i) that there were 3 buildings and more than one structure under early stages of construction, in the suit property;
(ii) that in 2 of the buildings, hospitals for treating outpatients were functioning;
(iii) that a lot of vehicles including tipper lorries were moving in and out and the machines for laying pile foundation were also found;
(iv) that construction activities of a high magnitude was going on;
(v) that a huge quantity of river sand had been stored in the property;
(vi) that on the eastern part of the suit properties, where construction activities were going on, pillars and beams for a lot of buildings had already come up;
(vii) that the Commissioner took 33 photographs in a digital camera;
(viii) that since the defendants 4 and 5 did not allow entry into the property, the Commissioner served a notice for a second visit proposed to be made on 10.5.2008;
(ix) that on 10.5.2008, the counsel for defendants 4 and 5 requested the Commissioner to postpone the visit to 11.5.2008;
(x) that on 11.5.2008, the counsel for defendants 4 and 5 informed the Commissioner that his clients had requested him to recuse;
(xi) that therefore, the Commissioner went on 11.5.2008 to inspect the property, but he was not permitted to inspect, unless he gave a letter of request; and
(xii) that since he was informed by a memo of instructions issued by the counsel for the plaintiffs, about the hearing of the applications for injunction by the Vacation Court on 15.5.2008, he was filing a preliminary report.
175. The photographs filed by the Commissioner along with his preliminary report on 15.5.2008, had been taken, unfortunately from a long distance, due to the utter disrespect shown by the defendants 4 and 5, by not permitting him to enter into the property. But these photographs show a building, that tallies with the photograph of the building of the hospital, filed by the defendants as Ex.B-11. Therefore, irrespective of the reprehensible conduct on the part of defendants 4 and 5 in refusing to permit an Officer of Court to execute the warrant of commission issued to him, it is clear (i) that construction activities on a massive scale were going on in the suit property even in the first week of May 2008 and (ii) that in 2 out of 3 buildings hospitals already put up for treating outpatients were functioning.
176. On a warrant issued afresh by the Vacation Court on 15.5.2008, in the presence of the counsel for defendants 4 and 5, the Commissioner again made an inspection on 17.5.2008. Thereafter, he filed a final report on 22.5.2008, along with a sketch, 2 photo albums and receipts. This final report was marked as Ex.C-2 before the trial Court.
177. In his final report Ex.C-2, the Advocate Commissioner has categorised the buildings that were either in existence or under construction, in the suit property. They are as follows:-
(i) A building described by the Commissioner as B-1, with RCC roofing in which a hospital for outpatients was functioning. There was also a front portion to this building, with asbestos sheet roofing.
(ii) A second building described as B-2, in which, a hospital and research centre was functioning. It had metal sheet roofing in the front and asbestos sheet roofing in the rear portion.
(iii) There were 9 other buildings, described as B-3 to B-11, built with brick walls and either asbestos sheet roofing or palm leaf roofing.
(iv) There were also 33 buildings, under different stages of construction, described by the Commissioner, as C-1 to C-33. In some buildings, pillars had been raised upto the roof level of the ground floor and in some buildings, pillars had been raised on the ground floor for the construction of the first floor.
178. It is seen from the final report of the Commissioner Ex.C-2, that the total constructed area of the building described as B-1 was 880 sq. ft., with asbestos sheet roofing and 1155 sq. ft., with RCC roofing. The constructed area of B-2 building was 10458 sq. ft. The total constructed area of the buildings described as B-3 to B-11, works out to 11,067 sq. ft. The total area of construction in progress, in the buildings C-1 to C-33, as per the Commissioner's report, works out to 4,02,408 sq. ft. (20,541+5,100+3,933+9,108+32,725+13,832+24,806+35,955+1,750+3,520+3,520+ 1,452+1,452+1,452+15,534+18,644+18,880+46,110+10,710+6,963+11,664+2,147+ 12,000+10,240+29,800+15,750+34,400+1,652+315+5,665+204+704+1,610).
179. Between the date of institution of the suit viz., 28.4.2008 and the date of final inspection by the Advocate Commissioner viz., 17.5.2008, there were only 18 calendar days. Therefore, at least 90% of what was reported by the Commissioner, should have come into existence, prior to the date of institution of the suit and the work in progress could have continued only after the trial Court refused to extend the interim order on 29.5.2008 and ultimately dismissed the application for injunction on 27.6.2008. But the progress made from 29.5.2008 could have also only been short lived, since this Court granted injunction on 6.8.2008 which ultimately culminated in an order of status quo on 30.9.2008.
Activities after the disposal of the suit:
180. As stated already the suit was disposed of on 10.1.2009, after which, there was no interim order. Therefore to show what had transpired, not on site, but elsewhere, towards the establishment of the Medical College and Hospital on the suit property, the defendants 4 and 5 have come up with an application in M.P.No.4 of 2009 under Order XLI, Rule 27, CPC. The additional documents sought to be filed by defendants 4 and 5 are as follows:-
(i) A certificate dated 13.7.2009 issued by Chartered Accountants of defendants 4 and 5, certifying that they had incurred a total amount of Rs.127,86,81,467.31 towards the purchase of the suit 'C' and 'D' schedule properties and for the construction of the College buildings. This certificate states that the defendants 4 and 5 spent the money through ICICI term loan to the extent of Rs.115,41,66,028/- and spent the rest of the amount as margin money.
(ii) The term loan statement dated 14.7.2009 issued by e-mail by ICICI Bank.
(iii) ICICI Term Loan statement for the period from 1.3.2008 to 28.4.2009.
(iv) The Letter of Intent dated 13.7.2009 issued by the Government of India, Ministry of Health and Family Welfare to the Registrar of SRM University, granting intent for the establishment of a new Medical College at Tiruchirappalli, with an annual intake of 150 students under Section 10-A of the Indian Medical Council Act.
(v) The Letter of Permission dated 14.7.2009 issued by the Government of India, Ministry of Health and Family Welfare to the Registrar of SRM University, granting approval for the establishment of a new Medical College at Tiruchirappalli, with an annual intake of 150 students under Section 10-A of the Indian Medical Council Act.
(vi) The proceedings of the Commissioner of Town and Country Planning dated 10.6.2009, accepting the recommendations of the local bodies for declaring the area where a major portion of the suit property is located, to an extent of 22.229 hectares, for the construction of multi storeyed buildings for educational use in accordance with Rule 4(a) of the Tamil Nadu Multi Storeyed and Public Buildings Rules 1973.
(vii) The gazette notification of the above proceedings of the Commissioner of Town and Country Planning.
(viii) The order of approval dated 1.7.2009 issued by the Commissioner of Town and Country Planning, for the construction of an examination hall, a hospital building with ground and 2 floors, an inspection block with ground and 2 floors, a hospital extension building with ground and 1st floor, an animal house with ground and 1st floor, a canteen with ground and 1st floor, a store building with ground and 1st floor, an administrative block with ground and 2 floors, college blocks 'A' and 'B' with ground and 2 floors, hostels with A,B and C blocks with ground and 2 floors, triple bed quarters with blocks 'A' and 'B' with ground and 4 floors and individual houses blocks 'A' and 'B' with ground and 1st floor.
(ix) The proceedings of the Assistant Director of Town and Country Planning dated 10.7.2009, granting technical approval for the construction of the buildings stated above.
(x) The building plan approval dated 10.7.2009 issued by the President of the Panchayat.
(xi) The receipt dated 10.7.2009 issued by the Panchayat for payment of Rs.1,24,564/- by the institution for the building plan approval.
(xii) The approved building plans.
181. Out of the 12 documents sought to be marked by way of additional evidence by defendants 4 and 5, only 2 of them have any relevance to the period before the institution of the suit and the period during the pendency of the suit. All other documents have come into existence, during the pendency of the appeal, though steps for procuring those documents might have been taken much earlier. For instance, the Letter of Approval and the Letter of Intent issued by the Government of India, Ministry of Health and Family Welfare, permitting the establishment of a Medical College, could not have been issued overnight and the defendants 4 and 5 can be presumed to have complied with the statutory requirements for obtaining the Letters of Approval and Intent.
182. However, since these documents had come into existence after the disposal of the suit, the plaintiffs have filed a counter affidavit to M.P. No.4 of 2009, opposing the application for reception of additional evidence. In the counter affidavit, the plaintiffs contend (i) that the defendants 4 and 5 filed an affidavit in M.P.No.1 of 2008 in CMA 1126 of 2008 (which was marked as Ex.A-44) undertaking not to claim any equity and also not to claim refund of money with interest (ii) that all things done during the pendency of the suit or the pendency of the appeal will not confer any right and (iii) that even as per the additional evidence, approvals were granted only on 10.7.2009. Therefore, it is the contention of the plaintiffs that the defendants 4 and 5 cannot claim any equity nor can they file additional documents.
183. Even while opposing the application of defendants 4 and 5 to file additional evidence, the plaintiffs themselves have come up with a similar application in M.P.No.3 of 2009. The documents sought to be filed as additional evidence by the plaintiffs, are as follows:-
(i) The letter of the Block Development Officer dated 14.5.2008, informing the defendants that for construction of an area of more than 2,000 sq. ft., the approval of the Panchayat is not sufficient, but the approval of the Joint Director of Town and Country Planning was essential.
(ii) The letter of the Block Development Officer dated 19.8.2008, asking the defendants 4 and 5 not to proceed with further construction till approval is granted by the Directorate of Town and Country Planning.
(iii) The letter of the Assistant Director of Town and Country Planning dated 13.10.2008, calling upon the President of the Panchayat to cancel the building plan approval already granted by him and to issue stop work notice to the defendants 4 and 5.
(iv) The letter of the Assistant Director of Town and Country Planning dated 29.1.2009, informing the plaintiffs, on an application under the Right to Information Act, that the Directorate of Town and Country Planning had not granted approval for the buildings and that the proposals were received on 5.11.2008 and were returned for submitting revised plans on 27.11.2008.
(v) The letter of the Block Development Officer dated 12.2.2009, calling upon the President of the Panchayat to stop the construction work of the defendants 4 and 5.
(vi) The letter of the Assistant Director of Town and Country Planning dated 18.2.2009, issued to the plaintiffs on an application under the Right to Information Act, informing them that a reminder dated 4.2.2009 had been issued to the defendants 4 and 5 to comply with the requirements of the letter dated 27.11.2008.
(vii) The letter dated 27.11.2008 of the Assistant Director of Town and Country Planning, calling upon the institution to submit a revised plan with necessary documents.
(viii) The letter dated 9.3.2009, issued by the Assistant Director of Town and Country Planning to the plaintiffs on an application under the Right to Information Act, informing them of the invalidity of the Panchayat resolution, the subsequent communications and the direction to the Panchayat to stop work.
(ix) The copy of the very same letter dated 9.3.2009, enclosing the earlier letter dated 27.11.2008, addressed to the counsel for the plaintiffs.
(x) The copy of the very same letter dated 9.3.2009, issued by the Assistant Director of Town and Country Planning to the President of the Panchayat.
184. The above additional documents are sought to be filed by the plaintiffs, for the purpose of establishing two things viz., (i) that persons who put up unauthorised and illegal constructions in violation of the law, cannot plead equity and (ii) that the trial Court misconstrued Exx.A-41 and A-42, which were stop work notices issued by the Panchayat.
185. Therefore, before proceeding further with the issue of exercise of discretion one way or the other, we have to first consider whether both parties can be permitted to let in additional evidence. But even at the outset, we note that there are some distinctions between the additional evidence sought to be let in by the plaintiffs and the additional evidence sought to be let in by defendants 4 and 5. They are:-
(i) While the additional evidence sought to be let in by the plaintiffs relate to the events that have taken place either before the institution of the suit or during the pendency of the suit, the additional evidence sought to be let in by defendants 4 and 5, relate to the events that have taken place much after the disposal of the suit itself.
(ii) Similarly, the additional documents filed by the plaintiffs are intended to expose the falsity of the claim made by the defendants 4 and 5 before the trial Court. But the additional documents filed by defendants 4 and 5 are intended to show that the events after the disposal of the suit, have overtaken all claims of the plaintiffs. Keeping these distinctions in mind, let us now see if these applications can be allowed.
186. Order XLI, Rule 27(1) CPC, disentitles the parties to an appeal from producing additional evidence in the Appellate Court. But the Rule provides three exceptions under Clauses (a), (aa) and (b). They are as follows:-
(i) Where an evidence which ought to have been admitted, was refused to be admitted by the Court from whose decree the appeal is preferred.
(ii) Where the party establishes that such evidence was not within his knowledge despite the exercise of due diligence or such evidence could not be produced before the Court below, after the exercise of due diligence and
(iii) Where the Appellate Court requires such evidence, to enable it to pronounce judgment or for any other substantial cause.
187. In Arjun Singh vs. Kartar Singh {AIR 1951 SC 193}, the Supreme Court pointed out that the discretion to receive and admit additional evidence is not an arbitrary one, but is a judicial one circumscribed by the limitations specified in Order XLI, Rule 27 CPC. The Court quoted with approval, the opinion of the Privy Council in Kessowji vs. G.I.P. Railway {34 IA 115}, to the effect that the legitimate occasion for the application of the Rule is when on examining the evidence as it stood, some inherent lacunae or defect becomes apparent and not where a discovery is made outside the Court, of fresh evidence and the application is made to import it. Ultimately, the Court held that "the true test is whether the Appellate Court is able to pronounce judgment on the materials before it, without taking into consideration, the additional evidence sought to be adduced".
188. The decision in Arjun Singh was relied upon by the Apex Court, in Natha Singh vs. Financial Commissioner {AIR 1976 SC 1053}. But both these decisions were rendered before Clause (aa) was inserted into sub Rule (1) of Rule 27 of Order XLI, by the CPC (Amendment) Act, 1976. As a matter of fact, by the very same Amendment, Rule 17A was inserted under Order XVIII, for producing additional evidence before the trial Court.
189. In N.Kamalam vs. Ayyasamy {2001 (7) SCC 503}, rendered much after the Amendment, the Supreme Court pointed out in paragraph 19 that the provision has not been engrafted in the Code so as to patch up the weak points in the case and to fill up the omission in the Court of Appeal and that it does not authorise any lacunae or gaps in evidence to be filled up.
190. Keeping the broad principles underlying Order XLI, Rule 27 CPC, in mind, if we look at the application M.P.No.3 of 2009 filed by the plaintiffs, it is seen that all the documents sought to be filed are only official communications from the Block Development Officer or the Assistant Director of Town and Country Planning, addressed either to the President of the Panchayat or to the defendants 4 and 5 or to the plaintiffs, in response to their applications under the Right to Information Act. Some of these documents such as (i) the letters of the Block Development Officer dated 14.5.2008 and 17.5.2008, calling upon the defendants 4 and 5 to apply for planning permission to the Directorate of Town and Country Planning (ii) the letters of the Assistant Director of Town and Country Planning dated 13.10.2008 and 27.11.2008 to the defendants 4 and 5, calling upon them to stop further construction and to submit various particulars, were very much available with the defendants 4 and 5, before their trustee Mr.P.Ravi went into the witness box to depose as DW-3, on 1.12.2008. But he did not produce these documents before the trial Court, despite being in possession of these documents. On the contrary, he produced the permission granted by the President of the Panchayat on 4.1.2008 and the receipt for the payments made to the Panchayat, as documents, to show that the defendants 4 and 5 have put up constructions. Without a proper appreciation of some of these documents, the trial Court was led to think that the defendants 4 and 5 were carrying on construction activities in a proper manner. Therefore, it became imperative for the plaintiffs to investigate and find out these documents and file them as additional evidence. The plaintiffs are not parties to the documents now sought to be filed by them. The defendants 4 and 5 who were parties to these documents, did not produce them before the trial Court. Moreover some of the documents now sought to be filed by the plaintiffs, were obtained by them, by making applications under the Right to Information Act. Therefore, the application of the plaintiffs M.P.No.3 of 2009, would certainly fall under Clause (aa) of Order XLI, Rule 27 (1) CPC. Consequently, we allow M.P.No.3 of 2009 and take the 10 documents filed by them. They shall be marked as Exx.A-57 to A-66.
191. Coming to M.P.No.4 of 2009 filed by defendants 4 and 5, it is seen from the affidavit filed in support of the petition that out of 12 documents sought to be filed, 9 relate to the events which have taken place in June and July 2009. The Court below disposed of the suit in January 2009. Therefore, none of these documents would fall either under Clause (a) or under Clause (aa) of Order XLI, Rule 27(1) CPC. Only three out of 12 documents sought to be filed by defendants 4 and 5 relate to the pre-suit period. These documents are sought to be filed to show that the defendants 4 and 5 had taken a huge term loan of Rs.1,250/- million from the ICICI Bank and also already utilised Rs.1,150/- million. But no reasons are stated in the affidavit in support of the petition, as to why these 3 documents were not filed before the trial Court.
192. As stated above, 9 out of 12 documents sought to be filed as additional documents, relate to the events that happened after the disposal of the suit and hence Clauses (a) and (aa) are not attracted. But to fall within Clause (b) of Order XLI, Rule 27(1) CPC, the requirement should be that of the Court, either to enable it to pronounce judgment or for any other substantial cause. However, in K.Venkataramiah vs. Seetarama Reddy {AIR 1963 SC 1526}, a Constitution Bench of the Supreme Court held as follows:-
"It is well to remember that the Appellate Court has the power to allow additional evidence not only if it requires such evidence 'to enable it to pronounce judgment' but also for 'any other substantial cause'. There may well be cases where even though the Court finds that it is able to pronounce judgment on the state of the record as it is and so it cannot strictly say that it requires additional evidence to enable it to pronounce judgment, it still considers that in the interest of justice something which remains obscure should be filled up so that it can pronounce its judgment in a more satisfactory manner. Such a case will be one for allowing additional evidence for 'any other substantial cause' under Rule 27(1)(b) of the Code."
193. If the above dictum of the Constitution Bench is applied, there can be no difficulty in arriving at the conclusion that even if the Court can decide the case with the evidence available on record, its hands are not fettered, to look into the additional evidence, by falling back upon the phrase "any other substantial cause" appearing in Clause (b). This is permissible, if the Court, to borrow the words of the Constitution Bench, considers that in the interest of justice, something which remains obscure should be filled up so that it can pronounce its judgment in a more satisfactory manner.
194. Looked at from the said perspective, we are of the view that M.P. No.4 of 2009 filed by the defendants 4 and 5 also should be allowed. This is essentially for the reason that before the trial Court, the defendants 4 and 5 established two things viz., (i) that they had planning permission granted by the Panchayat and temporary electricity service connection granted by the Electricity Board much before the institution of the suit and (ii) that they had put up substantial constructions. This fact, established by the defendants 4 and 5 before the trial Court, is sought to be disproved by the plaintiffs by leading additional evidence to the effect that there were stop work notices and that the approval of the competent authority viz., the Director of Town and Country Planning was not taken. In other words, a fact which was proved by defendants 4 and 5 before the trial Court, is sought to be disproved by the plaintiffs by way of additional evidence. But the additional evidence now sought to be adduced by the defendants 4 and 5 shows that subsequently the Director of Town and Country Planning has also granted necessary approval. Therefore, the defendants 4 and 5 should be permitted to file these additional documents, so that the match is equally poised. As pointed out by the Constitution Bench, it is possible for us to decide the appeal even with the evidence available on record. But their remains an area which is obscure and hence, in the interest of justice, M.P.No.4 of 2009 is allowed. The 12 documents filed by defendants 4 and 5 are taken on record as Exx.B-73 to B-84.
195. Now let us come back to the question of hardship, in the midst of the discussion of which, we took a detour to the applications for reception of additional evidence. We had pointed out earlier that under Explanation 2 to sub section (2) of Section 20, the question of hardship has to be determined with reference to the circumstances existing at the time of the contract. But where the hardship results from any act of the plaintiff subsequent to the contract, the same can also be taken into account.
196. As we have pointed out, the plaintiffs appear to have come to know about the sales in favour of defendants 4 and 5, even in December 2007. Otherwise, they could not have come into possession of the xerox copies of the Sale Deeds (filed as Exx.A-29 to A-34) executed in favour of defendants 4 and 5. The certified copies of those Sale Deeds were filed by the plaintiffs as Exx.A-35 to A-40, at the time of re-examination of PW-1, after he was confronted in cross examination as to how he got into possession of the xerox copies. The certified copies filed as Exx.A-35 to A-40 were applied for and obtained by the plaintiffs on 16.4.2008. But even on 23.1.2008, they were served with caveats and the plaintiffs waited for 90 days to file the suit and obtain an order of injunction on 28.4.2008. This time lag on the part of the plaintiffs in filing the suit, probabilises the case of the defendants 4 and 5 that there was a demand for money from the plaintiffs. Such a demand had emboldened the defendants 4 and 5 to proceed with the constructions and also process their applications before various authorities, for obtaining approval for establishing a Medical College. The efforts of defendants 4 and 5 have ultimately borne fruit, in the form of necessary approvals, though in July 2009. If the plaintiffs had been stead fast in their stand for specific performance right from the beginning and approached the Court even in December 2007 or at least in January 2008 when caveats were served, the defendants 4 and 5 could have been denied the benefit of equity now pleaded by them. By their act of omission, to initiate action at the earliest point of time and by their act of commission in giving out an impression that they may ultimately settle down for a monetary claim, the plaintiffs have allowed the defendants 4 and 5 to change their position and alter the character of the property. Consequently, the grant of specific performance would involve hardship on defendants 4 and 5 due to the acts of the plaintiff subsequent to the contract. Therefore, the case falls under the exception carved out in Explanation 2 to Section 20(2).
197. Adverting to the report of the Advocate Commissioner, filed before the trial Court, we have pointed out that by the time the suit was filed, the defendants 4 and 5 had already put up huge constructions. Though these constructions appear to have been put up illegally, without the sanction of the appropriate authority, the illegality has now been set right and even the Government of India have granted approval for the establishment of the Medical College. Though this is a subsequent event, the Court is bound to take note of the same.
198. In Gulabbai vs. Nalin Narsi Vohra {1991 (3) SCC 483}, the Supreme Court referred to its various earlier decisions and held in para 25 that it is beyond the pale of any doubt that in appropriate cases, events subsequent to the filing of the suit can be taken notice of and can be duly considered provided the same are relevant. Again in Om Prakash Gupta vs. Ranbir B. Goyal {2002 (2) SCC 256}, the Supreme Court in para 11 held as follows:-
"11. The ordinary rule of civil law is that the rights of the parties stand crystallised on the date of the institution of the suit and, therefore, the decree in a suit should accord with the rights of the parties as they stood at the commencement of the lis. However, the Court has power to take note of subsequent events and mould the relief accordingly subject to the following conditions being satisfied: (i) that the relief, as claimed originally has, by reason of subsequent events, become inappropriate or cannot be granted; (ii) that taking note of such subsequent event or changed circumstances would shorten litigation and enable complete justice being done to the parties; and (iii) that such subsequent event is brought to the notice of the Court promptly and in accordance with the rules of procedural law so that the opposite party is not taken by surprise."
199. Therefore, we cannot turn a blind eye to the subsequent event, of the grant of approval by Government of India to defendants 4 and 5 for establishing a Medical College in the suit property. But for this subsequent event and but for the wrong signals that the plaintiffs had sent from December 2007 upto the date of institution of the suit on 28.4.2008, we would have granted a decree for specific performance in favour of the plaintiffs, in view of our finding that (i) Ex.A-1 was an Agreement of Sale (ii) that the plaintiffs were always ready and willing to perform their part of the obligations and (iii)that the defendants 4 and 5 were not bona fide purchasers for value without notice. The grant of specific performance as on date, would involve severe hardship on defendants 4 and 5. Pointing out that the doctrine of comparative hardship and severe hardship are recognised in India, the Supreme Court cited "Chitty on Contracts" in paragraph-30 of its decision in K.Narendra vs. Riviera Apartments (P) Ltd {1999 (5) SCC 77} as follows:-
"30. Chitty on Contracts (27th Edn., 1994, Vol. 1., at p. 1296) states:
"Severe hardship may be a ground for refusing specific performance even though it results from circumstances which arise after the conclusion of the contract, which affect the person of the defendant rather than the subject-matter of the contract, and for which the plaintiff is in no way responsible."
The above decision was relied upon in V.Muthusami vs. Angammal {2002 (3) SCC 316}.
200. Even in a case where very small improvements were made, the Supreme Court rejected the prayer for specific performance, in Janardhanam Prasad vs. Ramdas {2007 (3) MLJ 721}. It was held in paragraph-18 of its said decision as follows:-
"18. Furthermore, the applicant is in possession of the said land. He had dug a well. He had made improvement on the suit land. Digging of well as also making improvements was within the notice of the respondent. The witnessess examined on his behalf had categorically admitted the same. In that view of the matter too, in our opinion, it was a fit case where the discretionary jurisdiction of the Court under Section 20 of the Specific Relief Act should not have been exercised and, instead, monetary compensation could be granted (See M.Meenakshi and Others vs. Metadin Agarwal (Dead) by LRs. And Others {2006 (7) SCC 470}"
201. Since we are constrained to affirm the decree of the trial Court, refusing to grant specific performance, only on the ground of hardship and the subsequent event, we could have considered the grant of compensation, as an alternative relief. In a short judgment in Damacherla Venka Anjaneyulu -vs- Damcherla Venkata Seshiah {1987 Supp. SCC 75}, in which, the Apex Court did not go into greater detail on the question of law, it was brought to the notice of the Supreme Court that godowns and other costly structures had already been built on the land in question. Therefore, the Supreme Court held that the grant of specific performance would result in special hardship to the defendants and consequently awarded the present market value. But unfortunately, it may not be possible for the High Court to grant a similar decree, in the absence of a prayer for compensation. Under Section 21(5) of the Specific Relief Act, 1963, compensation cannot be awarded unless the plaintiffs had claimed the same in their plaint. In the case on hand, the plaintiffs failed to seek compensation either in addition to or in substitution of specific performance, as required by Section 21(1). Therefore, we are unable to grant a decree for compensation in favour of the plaintiffs, despite our finding in their favour on three major issues viz., (i) that Ex.A-1 is an Agreement of Sale (ii) that they were always ready and willing to perform their part of the obligations and (iii) that the defendants 4 and 5 were not bona fide purchasers.
202. As a matter of fact, even the decree granted by the trial Court for refund of money with interest at 15% per annum on yearly rests, is doubtful of sustenance. This is due to the fact that there was no prayer for such an alternative relief in the plaint. Under Section 22(1) of the Specific Relief Act, 1963, a person suing for specific performance is entitled to ask for additional and/or alternative reliefs of possession, partition or refund of advance money. But under sub section (2) of Section 22, no such additional or alternative relief can be granted by the Court, unless it was specifically claimed. Though the proviso to sub section (2) of Section 22 permits a plaintiff to seek amendment at any stage of the proceedings, so as to include a prayer for such additional or alternative relief, the plaintiffs in the present case did not choose either to seek such reliefs in the first instance before the trial Court or even before this Court by way of amendment. In the absence of a prayer for refund of the advance money as indicated in Section 22(1)(b), the trial Court could not have granted a decree for refund of money with interest. But fortunately for the plaintiffs, none of the defendants have filed an appeal against the decree of the trial Court, taking advantage of Section 22(2). Even during the pendency of the appeal, no application for amendment was moved either to seek compensation under the proviso to Section 21(5) or to justify the decree for refund of money under the proviso to Section 22(2). Therefore, we are unable to grant any relief to the plaintiffs, other than what has already been granted by the trial Court.
203. In view of the above, the appeal fails and it is dismissed. However, there will be no order as to costs, in view of the fact that we have reversed many of the findings of the trial Court, but refused to reverse the decree, only in view of the two factors indicated elsewhere in this judgment. M.P.Nos.3 and 4 of 2009, as stated earlier shall stand allowed.
(V.R.S.,J.) (D.H.P.,J.) 27-01-2010 Index : Yes.
Internet: Yes.
Svn V. RAMASUBRAMANIAN, J.
AND D. HARIPARANTHAMAN, J.
Svn Judgment in A.S.(MD) No.18 of 2009 27-01-2010