Madras High Court
Rajendran vs S.V.Natarajan on 13 February, 2013
Author: G.Rajasuria
Bench: G.Rajasuria
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 13.02.2013 Coram: THE HONOURABLE MR.JUSTICE G.RAJASURIA S.A.No.69 of 2013 and M.P.No.1 of 2013 1. Rajendran 2. Nanjappan ... Appellants Vs. 1. S.V.Natarajan 2. Ponnammal 3. Prakash 4. Seeni @ Seenivasan ... Respondents This second appeal is filed against the judgment and decree dated 23.04.2012 passed by the learned Subordinate Judge, Gobichettipalayam in A.S.No.5 of 2011 confirming the judgment and decree dated 06.01.2011 passed by the learned District Munsif, Gobichettipalayam in O.S.No.101 of 2008. For Appellants : Mr.R.T.Doraisamy JUDGMENT
This second appeal is focussed by the plaintiffs, inveighing the judgement and decree dated 23.04.2012 passed by the learned Subordinate Judge, Gobichettipalayam in A.S.No.5 of 2011 confirming the judgment and decree dated 06.01.2011 passed by the learned District Munsif, Gobichettipalayam in O.S.No.101 of 2008.
2. The parties, for the sake of convenience, are referred to here under according to their litigative status and ranking before the trial Court.
3. Heard the learned counsel for the appellant.
4. Niggard and bereft of details, the germane facts absolutely necessary for the disposal of this second appeal would run thus:
a. The appellants herein, being the plaintiffs, filed the suit seeking specific performance of an agreement to sell with alternative prayer for refund of the advance amount paid in respect of the suit immovable property. There emerged an agreement to sell between the plaintiffs and the defendants. The total sale consideration agreed was Rs.36,000/-, out of which, a sum of Rs.10,000/- was paid as advance by the defendants to the plaintiffs. Three months' time for performance was stipulated therein. However, within the said three months' time nothing transpired. Pre litigation notice was issued by the plaintiffs, on 27.02.2008 and thereafter the suit was filed.
b. The suit was resisted by the defendants on the main ground that the plaintiffs were not ready and willing to perform their part of the contract.
c. Whereupon issues were framed by the trial court.
d. Up went the trial, during which, on the plaintiffs' side P.Ws.1 and 2 were examined and Exs.A1 to A8 were marked. On the defendants' side, D1 examined himself as DW1 and no document was marked.
e. Ultimately, the trial court dismissed the suit on the main ground that the plaintiffs were not ready and willing to perform their part of the contract, however in the alternative directed the defendants to repay the advance amount of Rs.10,000/- with interest at the rate of 12% from the date of the agreement to sell till realisation, to the plaintiffs.
f. Being aggrieved by and dissatisfied with the same, the plaintiffs preferred appeal for nothing but to be dismissed by the first appellate court confirming the judgment and decree passed by the trial court.
g. Challenging and impugning the judgments and decrees of both the fora below, the plaintiffs have preferred this second appeal by suggesting the following substantial questions of law:
a] Whether the courts below are correct in dismissing the suit holding that the plaintiffs have not deposited the balance sale consideration on the date of filing the suit, hence they are not entitled to the relief without following the provisions under Section 16(c ) of the Specific Relief Act?
b] Whether the courts below are correct in holding that the plaintiffs are lethargic and not ready and willing to perform their part of the contract just because they are not depositing the balance amount on the date of filing the suit?
c] Whether the courts below, after having found that the defendants admitted the execution of sale agreement, receipt of advance amount and not cancelling the agreement on the expiry of 3 months period, are correct in dismissing the suit?
(extracted as such)
5. The learned counsel for the appellants/plaintiffs would pyramid his argument, which could succinctly and precisely be set out thus:
(i) Time is not the essence of the contract relating to immovable property. When such is the legal position, both the courts below unnecessarily stuck on to the theory as though within the three months' time, there was no payment of the remaining part of the sale consideration etc., by the plaintiffs.
(ii) There is also nothing to indicate that the defendants took any steps to rescind the contract on the alleged ground that the plaintiffs were not ready and willing to perform their part of the contract.
(iii) The plaintiffs' also to show their bona fides as per Section 16(c ) of the Specific Relief Act, deposited the entire remaining sale consideration in court at the institution of the suit itself and this fact also was not taken note of by both the courts below.
As such, both the courts below committed serious error in applying the law in the factual matrix of this case, warranting interference in the second appeal.
6. At the outset itself, I would like to fumigate my mind with the following decisions of the Hon'ble Apex Court:
(i) 2010(10) SCC 512 [Man Kaur (Dead) By L.Rs. v. Hartar Singh Sangha]; certain excerpts from it would run thus:
"40. This contention has no merit. There are two distinct issues. The first issue is the breach by the defendant vendor which gives a cause of action to the plaintiff to file a suit for specific performance. The second issue relates to the personal bar to enforcement of a specific performance by persons enumerated in Section 16 of the Act. A person 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 which are to be performed by him (other than the terms the performance of which has been prevented or waived by the defendant) is barred from claiming specific performance. Therefore, even assuming that the defendant had committed breach, if the plaintiff fails to aver in the plaint or prove that he was always ready and willing to perform the essential terms of contract which are required to be performed by him (other than the terms the performance of which has been prevented or waived by the plaintiff), there is a bar to specific performance in his favour. Therefore, the assumption of the respondent that readiness and willingness on the part of the plaintiff is something which need not be proved, if the plaintiff is able to establish that the defendant refused to execute the sale deed and thereby committed breach, is not correct. Let us give an example. Take a case where there is a contract for sale for a consideration of Rs.10 lakhs and earnest money of Rs.1 lakh was paid and the vendor wrongly refuses to execute the sale deed unless the purchaser is ready to pay Rs.15 lakhs. In such a case there is a clear breach by the defendant. But in that case, if the plaintiff did not have the balance Rs.9 lakhs (and the money required for stamp duty and registration) or the capacity to arrange and pay such money, when the contract has to be performed, the plaintiff will not be entitled to specific performance, even if he proves breach by the defendant, as he was not "ready and willing" to perform his obligations."
(ii) (2011) 1 SUPREME COURT CASES 429 J.P.BUILDERS AND ANOTHER V. A.RAMADAS RAO AND ANOTHER would run thus:
"27. It is settled law that even in the absence of specific plea by the opposite party, it is the mandate of the statute that the plaintiff has to comply with Section 16(c) of the Specific Relief Act and when there is non-compliance with this statutory mandate, the Court is not bound to grant specific performance and is left with no other alternative but to dismiss the suit. It is also clear that readiness to perform must be established throughout the relevant points of time. "Readiness and willingness" to perform the part of the contract has to be determined/ascertained from the conduct of the parties."
A mere running of the eye over those precedents would amply make the point clear that the plaintiff, who is the agreement holder and approaches, the court should be diligent. He should have been ready and willing to perform his part of the contract throughout.
7. A plain poring over and perusal of the records would exemplify and demonstrate that the plaintiffs, after the expiry of three months' time contemplated in the agreement to sell, had not issued any notice calling upon the defendants to receive the remaining part of the sale consideration and execute the sale deed. Hence, the question of the defendants rescinding the contract does not arise. Once the plaintiff allows the contract of agreement to sell get lapsed, then the defendant is not enjoined to rescind such contract.
8. I would also recollect and call-up the following decisions of the Hon'ble Apex court:
(i) (1997) 3 SCC 1 [ K.S.Vidyanadam and others vs. Vairavan]
10. It has been consistently held by the courts in India, following certain early English decisions, that in the case of agreement of sale relating to immovable property, time is not of the essence of the contract unless specifically provided to that effect. The period of limitation prescribed by the Limitation Act for filing a suit is three years. From these two circumstances, it does not follow that any and every suit for specific performance of the agreement (which does not provide specifically that time is of the essence of the contract) should be decreed provided it is filed within the period of limitation notwithstanding the time-limits stipulated in the agreement for doing one or the other thing by one or the other party. That would amount to saying that the time-limits prescribed by the parties in the agreement have no significance or value and that they mean nothing. Would it be reasonable to say that because time is not made the essence of the contract, the time-limit(s) specified in the agreement have no relevance and can be ignored with impunity? It would also mean denying the discretion vested in the court by both Sections 10 and 20. As held by a Constitution Bench of this Court in Chand Rani v. Kamal Rani1: (SCC p. 528, para 25) ... 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 (evident?): (1) from the express terms of the contract; (2) from the nature of the property; and (3) from the surrounding circumstances, for example, the object of making the contract. In other words, the court should look at all the relevant circumstances including the time-limit(s) specified in the agreement and determine whether its discretion to grant specific performance should be exercised. Now in the case of urban properties in India, it is well-known that their prices have been going up sharply over the last few decades particularly after 1973*. In this case, the suit property is the house property situated in Madurai, which is one of the major cities of Tamil Nadu. The suit agreement was in December 1978 and the six months' period specified therein for completing the sale expired with 15-6-1979. The suit notice was issued by the plaintiff only on 11-7-1981, i.e., more than two years after the expiry of six months' period. The question is what was the plaintiff doing in this interval of more than two years? The plaintiff says that he has been calling upon Defendants 1 to 3 to get the tenant vacated and execute the sale deed and that the defendants were postponing the same representing that the tenant is not vacating the building. The defendants have denied this story. According to them, the plaintiff never moved in the matter and never called upon them to execute the sale deed. The trial court has accepted the defendants' story whereas the High Court has accepted the plaintiff's story. Let us first consider whose story is more probable and acceptable. For this purpose, we may first turn to the terms of the agreement. In the agreement of sale, there is no reference to the existence of any tenant in the building. What it says is that within the period of six months, the plaintiff should purchase the stamp papers and pay the balance consideration whereupon the defendants will execute the sale deed and that prior to the registration of the sale deed, the defendants shall vacate and deliver possession of the suit house to the plaintiff. There is not a single letter or notice from the plaintiff to the defendants calling upon them to get the tenant vacated and get the sale deed executed until he issued the suit notice on 11-7-1981. It is not the plaintiff's case that within six months', he purchased the stamp papers and offered to pay the balance consideration. The defendants' case is that the tenant is their own relation, that he is ready to vacate at any point of time and that the very fact that the plaintiff has in his suit notice offered to purchase the house with the tenant itself shows that the story put forward by him is false.
The tenant has been examined by the defendant as DW 2. He stated that soon after the agreement, he was searching for a house but could not secure one. Meanwhile (i.e., on the expiry of six months from the date of agreement), he stated, the defendants told him that since the plaintiff has abandoned the agreement, he need not vacate. It is equally an admitted fact that between 15-12-1978 and 11-7-1981, the plaintiff has purchased two other properties. The defendants' consistent refrain has been that the prices of house properties in Madurai have been rising fast, that within the said interval of 2 1/2 years, the prices went up three times and that only because of the said circumstance has the plaintiff (who had earlier abandoned any idea of going forward with the purchase of the suit property) turned round and demanded specific performance. Having regard to the above circumstances and the oral evidence of the parties, we are inclined to accept the case put forward by Defendants 1 to 3. We reject the story put forward by the plaintiff that during the said period of 2 1/2 years, he has been repeatedly asking the defendants to get the tenant vacated and execute the sale deed and that they were asking for time on the ground that tenant was not vacating. The above finding means that from 15-12-1978 till 11-7-1981, i.e., for a period of more than 2 1/2 years, the plaintiff was sitting quiet without taking any steps to perform his part of the contract under the agreement though the agreement specified a period of six months within which he was expected to purchase stamp papers, tender the balance amount and call upon the defendants to execute the sale deed and deliver possession of the property. We are inclined to accept the defendants' case that the values of the house property in Madurai town were rising fast and this must have induced the plaintiff to wake up after 2 1/2 years and demand specific performance.
11. Shri Sivasubramaniam cited the decision of the Madras High Court in S.V. Sankaralinga Nadar v. P.T.S. Ratnaswami Nadar2 holding that mere rise in prices is no ground for denying the specific performance. With great respect, we are unable to agree if the said decision is understood as saying that the said factor is not at all to be taken into account while exercising the discretion vested in the court by law. We cannot be oblivious to the reality and the reality is constant and continuous rise in the values of urban properties fuelled by large-scale migration of people from rural areas to urban centres and by inflation. Take this very case. The plaintiff had agreed to pay the balance consideration, purchase the stamp papers and ask for the execution of sale deed and delivery of possession within six months. He did nothing of the sort. The agreement expressly provides that if the plaintiff fails in performing his part of the contract, the defendants are entitled to forfeit the earnest money of Rs 5000 and that if the defendants fail to perform their part of the contract, they are liable to pay double the said amount. Except paying the small amount of Rs 5000 (as against the total consideration of Rs 60,000) the plaintiff did nothing until he issued the suit notice 2 1/2 years after the agreement. Indeed, we are inclined to think that the rigor of the rule evolved by courts that time is not of the essence of the contract in the case of immovable properties evolved in times when prices and values were stable and inflation was unknown requires to be relaxed, if not modified, particularly in the case of urban immovable properties. It is high time, we do so. The learned counsel for the plaintiff says that when the parties entered into the contract, they knew that prices are rising; hence, he says, rise in prices cannot be a ground for denying specific performance. May be, the parties knew of the said circumstance but they have also specified six months as the period within which the transaction should be completed. The said time-limit may not amount to making time the essence of the contract but it must yet have some meaning. Not for nothing could such time-limit would have been prescribed. Can it be stated as a rule of law or rule of prudence that where time is not made the essence of the contract, all stipulations of time provided in the contract have no significance or meaning or that they are as good as non-existent? All this only means that while exercising its discretion, the court should also bear in mind that when the parties prescribe certain time-limit(s) for taking steps by one or the other party, it must have some significance and that the said time-limit(s) cannot be ignored altogether on the ground that time has not been made the essence of the contract (relating to immovable properties).
13. In the case before us, it is not mere delay. It is a case of total inaction on the part of the plaintiff for 2 1/2 years in clear violation of the terms of agreement which required him to pay the balance, purchase the stamp papers and then ask for execution of sale deed within six months. Further, the delay is coupled with substantial rise in prices according to the defendants, three times between the date of agreement and the date of suit notice. The delay has brought about a situation where it would be inequitable to give the relief of specific performance to the plaintiff.
14. Shri Sivasubramaniam then relied upon the decision in Jiwan Lal (Dr) v. Brij Mohan Mehra4 to show that the delay of two years is not a ground to deny specific performance. But a perusal of the judgment shows that there were good reasons for the plaintiff to wait in that case because of the pendency of an appeal against the order of requisition of the suit property. We may reiterate that the true principle is the one stated by the Constitution Bench in Chand Rani1. Even where time is not of the essence of the contract, the plaintiffs must perform his part of the contract within a reasonable time and reasonable time should be determined by looking at all the surrounding circumstances including the express terms of the contract and the nature of the property.
(ii) 2011(12) SCC 18 [Saradamani Kandappan vs. S.Rajalakshmi and others]
36. The principle that time is not the essence of the contracts relating to immovable properties took shape in an era when market values of immovable properties were stable and did not undergo any marked change even over a few years (followed mechanically, even when value ceased to be stable). As a consequence, time for performance, stipulated in the agreement was assumed to be not material, or at all events considered as merely indicating the reasonable period within which contract should be performed. The assumption was that grant of specific performance would not prejudice the vendor defendant financially as there would not be much difference in the market value of the property even if the contract was performed after a few months. This principle made sense during the first half of the twentieth century, when there was comparatively very little inflation, in India. The third quarter of the twentieth century saw a very slow but steady increase in prices. But a drastic change occurred from the beginning of the last quarter of the twentieth century. There has been a galloping inflation and prices of immovable properties are no longer stable or steady. We can take judicial notice of the comparative purchase power of a rupee in the year 1975 and now, as also the steep increase in the value of the immovable properties between then and now. It is no exaggeration to say that properties in cities, worth a lakh or so in or about 1975 to 1980, may cost a crore or more now.
37. The reality arising from this economic change cannot continue to be ignored in deciding cases relating to specific performance. The steep increase in prices is a circumstance which makes it inequitable to grant the relief of specific performance where the purchaser does not take steps to complete the sale within the agreed period, and the vendor has not been responsible for any delay or non-performance. A purchaser can no longer take shelter under the principle that time is not the essence in performance of contracts relating to immovable property, to cover his delays, laches, breaches and "non-readiness". The precedents from an era, when high inflation was unknown, holding that time is not the essence of the contract in regard to immovable properties, may no longer apply, not because the principle laid down therein is unsound or erroneous, but the circumstances that existed when the said principle was evolved, no longer exist. In these days of galloping increases in prices of immovable properties, to hold that a vendor who took an earnest money of say about 10% of the sale price and agreed for three months or four months as the period of performance, did not intend that time should be the essence, will be a cruel joke on him, and will result in injustice. Adding to the misery is the delay in disposal of cases relating to specific performance, as suits and appeals therefrom routinely take two to three decades to attain finality. As a result, an owner agreeing to sell a property for rupees one lakh and received rupees ten thousand as advance may be required to execute a sale deed a quarter century later by receiving the remaining rupees ninety thousand, when the property value has risen to a crore of rupees.
41. A correct prospective relating to the question whether time is not of the essence of the contract in contracts relating to immovable property, is given by this court in K.S.Vidyanadam v. Vairavan (by Jeevan Reddy,J.,) who incidentally was a member of the Constitution Bench in Chand Rani. This Court observed:
"10. It has been consistently held by the courts in India, following certain early English decisions, that in the case of agreement of sale relating to immovable property, time is not of the essence of the contract unless specifically provided to that effect ...............in the case of urban properties in India, it is well-known that their prices have been going up sharply over the last few decades particularly after 1973*.
11.We cannot be oblivious to the reality and the reality is constant and continuous rise in the values of urban properties fuelled by large-scale migration of people from rural areas to urban centres and by inflation. ...........Indeed, we are inclined to think that the rigor of the rule evolved by courts that time is not of the essence of the contract in the case of immovable properties evolved in times when prices and values were stable and inflation was unknown requires to be relaxed, if not modified, particularly in the case of urban immovable properties. It is high time, we do so."
42. Therefore, there is an urgent need to revisit the principle that time is not of the essence of the contracts relating to immovable properties and also explain the current position of law with regard to contracts relating to immovable property made after 1975, in view of the changed circumstances arising from inflation and steep increase in prices. We do not propose to undertake that exercise in this case, nor referring the matter to a larger Bench as we have held on facts in this case that time is the essence of the contract, even with reference to the principles in Chand Rani and others cases. Be that as it may.
43. Till the issue is considered in an appropriate case, we can only reiterate what has been suggested in K.S.Vidyanadam.
(i) The Courts, while exercising discretion in suits for specific performance, should bear in mind that when the parties prescribe a time/period, for taking certain steps or for completion of the transaction, that must have some significance and therefore time/period prescribed cannot be ignored.
(ii) The courts will apply greater scrutiny and strictness when considering whether the purchaser was "ready and willing" to perform his part of the contract.
(iii) Every suit for specific performance need not be decreed merely because it is filed within the period of limitation by ignoring the time-limits stipulated in the agreement. The courts will also "frown" upon suits which are not filed immediately after the breach/refusal. The fact that limitation is three years does not mean that a purchaser can wait for 1 or 2 years to file a suit and obtain specific performance. The three-year period is intended to assist the purchasers in special cases, as for example, where the major part of the consideration has been paid to the vendor and possession has been delivered in part-performance, where equity shifts in favour of the purchaser.
(iii) 2011(6) CTC 112 (SC) [Citadel Fine Pharmaceuticals vs. Ramaniyam Real Estates P.Ltd. And another]
45. In K.S. Vidyanadam and others vs Vairavan, 1997 (1) CTC 628 (SC) : 1997 (3) SCC 1, this Court explained how discretion is to be exercised by the Court before granting specific performance. This Court held that in cases of urban properties in India it is well known that prices are going up sharply over the last few decades particularly after 1973. In Vidyanadam (supra) the Court was dealing with a property in Madurai in the State of Tamil Nadu and it was argued before this Court by referring to the Madras High Court judgment in S.V. Sankaralinga Nadar vs P.T.S. Ratnaswami Nadar, AIR 1952 Mad 389, that mere rise in price is no ground for denying the specific performance. This Court did not agree with the decision of the Madras High Court and held that the Court cannot be oblivious of the reality of constant and continuous rise in the value of urban properties. In that context the time limit set in the contract has to be strictly construed. In the case of Vidyanadam (supra) there is no such strict stipulation as time being of the essence of the contract as is in the instant case even then the Court refused to grant the relief of specific performance.
46. In Vidyanadam (supra) reference was made to a Constitution Bench judgment of this Court in Chand Rani (Smt.) (Dead) by Lrs. vs Kamal Rani (Smt.) (Dead) by Lrs., 1993 (1) SCC 519. The same question, whether time was of essence of the contract was discussed in Chand Rani (supra). The Constitution Bench of this Court while dealing with this question referred to another decision of this Court in the case of Hind Construction Contractors by its Sole Proprietor, Bhikamchand Mulchand Jain (Dead) by Lrs. vs State of Maharashtra, 1979 (2) SCC 70. By referring to various judgments, the Constitution Bench in Chand Rani (supra) formulated the proposition that even where parties have expressly provided time to be of the essence of the contract, such a stipulation will have to be read along with other terms of the contract. Such other terms, on a proper construction, may exclude the inference that the completion of work by a particular date was meant to be fundamental. The learned Judges indicated the following circumstances which may indicate a contrary inference; (a) if a contract includes clauses providing for extension of time in certain contingencies, or (b) if there are clauses for payment of fine or penalty for every day or week the work undertaken remains unfinished after the expiry of time. The Constitution Bench held that such clauses would be construed as rendering ineffective the express provision relating to time being of the essence of contract (see para 22 at page 528 of the report).
47. In the instant case, in the said agreement no such clause, as aforesaid, exists. Rather the stipulation as time being of the essence of the contract was specifically mentioned in Clause 10 and the consequences of non-completion are mentioned in Clause 9. So from the express terms of the contract and the commercial nature of the transaction and the surrounding circumstances make it clear that the parties intended time in this case was intended to be of the essence of the contract.
9. A mere running of the eye over those precedents would display and demonstrate that no doubt, all along the trite proposition of law relating to specific performance of an agreement to sell is to the effect that the time should not be taken as the essence of contract. However, their Lordships in the aforesaid judgments held that in these days of prices spiralling up and that too in geometrical progression, how long and how far the courts can simply adapt the old proposition that time is not the essence of the contract.
10. However, in this case, I would like to point out that even though time is not the essence of the contract from the admitted factual position, the plaintiffs never expressed their readiness and willingness to perform their part of the contract throughout and the finding of facts given by both the courts below is mainly based on the analysis of the available evidence and there is no perversity or illegality which could be found in such analysis of evidence by the courts below.
11. On balance, I could see no infirmity in the judgments and decrees passed by both the courts below. Accordingly, I do not see any substantial question of law is involved in this case for consideration. In the result, this second appeal is dismissed. However, there shall be no order as to costs. Consequently, the connected miscellaneous petition is closed.
vj2 To
1. The Subordinate Judge, Gobichettipalayam
2. The District Munsif, Gobichettipalayam