Punjab-Haryana High Court
M.K. Watts vs Smt. Usha Sharma on 30 July, 2003
Equivalent citations: AIR2004P&H295, III(2003)BC559, (2003)135PLR222, AIR 2004 PUNJAB AND HARYANA 295, (2003) 12 ALLINDCAS 354 (P&H), (2004) 3 LANDLR 158, (2003) 3 PUN LR 222, (2003) 3 BANKCAS 559, (2003) 4 ICC 474, (2003) 4 RECCIVR 233
Author: Hemant Gupta
Bench: Hemant Gupta
JUDGMENT Hemant Gupta, J.
1. The plaintiff respondent Usha Sharma has sought a decree for specific performance of an agreement dated 3.9.1984 in the present suit. The learned trial court has dismissed the suit. However, the first Appellate Court granted decree for specific performance of an agreement on payment of balance sale consideration of Rs. 12 lacs. It is the defendant who has challenged such decree before this court in second appeal.
2. The plaintiff has alleged that on 3.9.1984, defendant No. 1 agreed to sell site No. 8 measuring 9680 square yards situated at Urban Industrial Estate, Delhi Road, Gurgaon along with construction and machinery thereon for a total sum of Rs. 14 lacs. A sum of Rs. 2 lacs was paid at the time of execution of the agreement of sale. Another sum of Rs. 2 lacs was payable on or before 2.10.1984. The plaintiff paid a sum of Rs. 30,000/-on 18.9.1984, Rs. 10,000/- on 22.9.1984 and Rs. 1,60,000/- on 25.9.1984. The plaintiff has averred that the defendant was to pay the outstanding amount of Rs. 3,97,905.07 paise due from him to the Haryana Financial Corporation. The sale deed was to be executed on or before 15.11.1984. Both the parties were given opportunity to rescind the contract up to 2.10.1984, failing which the agreement was irrevokable and binding upon them. The plaintiff has pleaded that she was ready and willing to perform her part of the contract but defendant No. 1 committed breach of contract and refused to execute the sale deed. Defendant No. 1 wanted to sell the suit property in favour of M/s Milk Food Ltd. to cause wrongful loss to her. She served a legal notice dated 19.2.1985. Therefore, the company refused to purchase the property. However, defendant No. 1 has agreed to sell the property to defendant No. 2 in the month of January, 1987. The plaintiff has filed the suit for permanent injunction in the court of Sub Judge, Gurgaon but still defendant No. 1 has failed to execute the sale deed.
3. The plaintiff has also pleaded that on 3.9.1984, plaintiff and defendant No. 1 entered into a partnership business. Affairs of the business was to be managed and organised by defendant No. 1. Since the defendant No. 1 has failed to start the business on the basis of deed of partnership and therefore, an amount of Rs. 4 lacs stood adjusted toward the sale consideration in respect of the property in dispute.
4. Defendant No. 1 filed written statement taking up a plea that there was no agreement of sale executed on 3.9.1984 or that a sum of Rs. 2 lacs or any other amount on account of earnest money was paid. He denied that the sale was to be completed on or before 15.11.1984. It is stated therein that the time was essence for the contract and therefore, the agreement automatically stood cancelled and the suit is not maintainable.
5. It was the case of the defendant that the parties have entered into partnership under the name and style of M/s Asian Free Style Wrestler Promoters Association. The capital of the firm was set at Rs. 14 lacs. The plaintiff was to invest Rs. 4 lacs and Rs. 10 lacs were to be invested by defendant No. 1. The plaintiff made contribution of Rs. 2 lacs on 3.9.1984 towards share of her capital but she kept Rs. 1 lac with her,
6. In a separate written statement, defendant No. 2 disputed the locus standi of the plaintiff to file the suit and stated that it is bona fide purchaser of valuable consideration. It was stated that in case the plaintiff is found entitled to a decree for specific performance then amount of Rs. 6.25 lacs paid by the said defendant be ordered to be returned to the defendant No. 2.
7. Voluminous evidence has been led by both the parties on the question of execution of agreement to sell dated 3.9.1984, as well as payment of Rs. 2 lacs on or before 23.10.1984. However, both the courts have found that the agreement dated 3.9.1984 was executed by defendant No. 1. Execution of such agreement was held to be proved on the basis of the statement of the attesting witnesses P.W.3 Anil Yadav and P.W.5 Gopal Dass Bansal apart from other witnesses. However, learned trial court has returned categorical finding that the plaintiff has not paid another sum of Rs. 2 lacs as contemplated in the agreement on or before 2.10.1984. However, the first Appellate Court has not held that the payment of Rs. 2 lacs by the plaintiff is proved but directed the defendant to execute the sale deed on payment of balance sale consideration of Rs. 12 lacs. However, the first Appellate Court held that the plaintiff was ready and willing to perform his part of contract as the defendant has not applied for income tax clearance certificate as contemplated in the agreement nor paid the amount to Haryana Financial Corporation to validate the execution of the sale deed. Therefore, the defendant was not ready and willing to perform his part of contract. Consequently, the decree for specific performance was granted by the first appellate court.
8. This appeal was admitted on 8.5.1998 on the following substantial questions of law:
1. Whether the time fixed for the execution of the sale deed can be said to be the essence of the contract.
2. Whether the plaintiff purchaser can be said to have performed her part of the contract when she is in default of the payments of the amounts stipulated in the agreement of the sale.
3. Whether in the facts and circumstances of the case, can it be said that the plaintiff is ready and willing to perform her part of the contract at all mentioned times.
4. In view of the substantial increase in prices, can it be said to be inequitable to grant the discretionary relief of specific performance to the plaintiff after lapse of 14 years from the date of agreement of the sale.
9. Before adverting to the merits of the controversy, it will be beneficial to reproduce some of the clauses of the agreement and that of the partnership deed. Clauses 1 to 8 of the Agreement read as follows;
"1. The vendor agrees to sell and the purchaser agrees to purchase site No. 8, measuring 9680 sq. yards Urban Industrial Estate, Delhi road Gurgaon hereinafter referred to as the said premises as an absolute estate in fee simple subject to a good and marketable title made in respect thereof and property being found free from all encumbrances (except to an amount of Rs. 3,97,905.07 only as on 31.1.1984 payable to the Haryana Financial Corporation Chandigarh which amount is secured by simple mortgage of the above mentioned premises), Attachments, charges and claims.
2. The purchaser has this day paid to the vendor the sum of Rupees 2 lakhs, as and by way of earnest money. The purchaser shall pay to the vendor another sum of rupees 2 lakhs up to 2.10.84, as and when demanded by the vendor. The said amount shall be by way of earnest money.
3. That the price of the above mentioned site No. 8 Urban Industrial Estate Gurgaon along with building contraction thereon with all rights attached to the said properties is settled at Rs. 14 lakhs which shall be by the purchaser to the vendor subject to the conditions mentioned below as under:
A. The amount of Rs. 2 lakhs have been paid by the purchaser to the vendor at the time of execution of this agreement for sale.
B. Another amount of Rs. 2 lakhs as earnest money shall be paid by the purchaser to the vendor up to 2.10.84 against receipt.
C. The vendor shall clear pay the outstanding amount of Rs. 3,97,905,07 as on 31.1.84 or whatever is fond due to the Haryana Financial Corporation before the execution of the sale deed. The vendor shall sell the said premises building machineries etc. to the purchaser free from all encumbrances attachment or lien.
D. The purchaser shall pay the balance amount of Rs. 10 lacs to the vendor at the time of execution and registration of the sale deed.
4. That the sale deed shall be executed and registered on or before 15.11.1984. The time shall be the essence of the contract.
5. It is agreed between the parties that each party shall be at liberty to rescind the contract up to 2.10.84. In the event of recition of the contract, the purchaser shall be entitled to the refund of the amount advanced by her to the vendor as earnest money. And the said amount shall be considered as a charge on the above mentioned premises, building and machineries.
6. If the agreement is not rescind by the panics to this agreement up to 2.10.84. the said agreement shall be irrevocable and binding from the parties.
7. If the vendor fails or neglects to complete the sell or otherwise to carry out any one or more of the stipulations on his pan. the purchaser will be at liberty to enforce specific performance of the agreement or at her option may sue the vendor for recovery of the earnest money with interest, cost and other reliefs.
8. The vendor shall procure the necessary and Income Tax Clearing Certificate from the Income Tax Authorities in order to execute the sale deed.
10. Whereas, Clause 2 of the Partnership deed dated 3.9.1984 reads as under:
2. The capital of the firm shall presently consists of a sum of Rs. 5.00.000'-(Rupees five lacs) only. The amount of Rs. 1 lac shall be contributed by Dr. M.K. Watts the party of the first part and the amount of Rs. 4 lacs shall be contributed by Smt. Usha Sharma party of the second part.
The party of the second part has already advanced Rs. 2 lacs at the time of execution of the agreement of sale with the party of the first part on 3rd September. 1984.
The party of the second part as per terms of the said agreement shall pay another 2 lacs to the parts of the first part up to 2.10.1984.
In case of the payment of the above mentioned amount of Rs. 4 lacs by the party of the second part to party of the first pan and further in case of rescition of the agreement of sale, the said amount of Rs. 4 lac shall be considered as payment towards her contribution in the present partnership firm.
11. The attesting witnesses of both these documents are Anil Yadav PW3 and Gopal Dass Bansal PW5. The defendant No. 1 has admitted that the parties have entered into a partnership on 3.9.1984. Clause 2 of the said partnership deed contains extensive reference to agreement of sale dated 3.9.1984. Therefore, the finding of fact recorded by the courts below that defendant No. 1 has executed an agreement to sell dated 3.9.1984 calls for no interference and is based upon proper appreciation of evidence.
12. The dispute between the parties was regarding the payment of Rs. 2 lacs on or before 2.10.1984. As per the terms of the agreement a sum of Rs. 2 lacs was payable to the vendor against receipt. The plaintiff has not produced any receipt of Rs. 2 lacs nor even alleged that such payment has been made against receipt. However, in the plaint, the plaintiff has alleged a payment of Rs. 30,000/- on 18.9.1984: Rs. 10,000/- on 22.9.1984 and Rs. 1,60,000/- on 25.9.1984.
13. The plaintiff has pleaded that earlier the plaintiff issued a cheque in the sum of Rs. l,40,0007- in favour of defendant No. 1 on 25.9.1984 but the said cheque could not be encashed on presentation on 26.9.1984. It is further alleged that on 26.9.1984 defendant No. 1 had given back the said cheque and another cheque was issued on 27.9.1984 but defendant No. 1 insisted that the father of the plaintiff from whose account amount was to be paid should accompany to the bank. Father of the plaintiff withdrew the amount of Rs. 1,40,000/- ad paid the same to the defendant. The learned trial court has recorded a categorical finding that payment of Rs. 2 lacs on or before 2.10.1984 was not made. As a matter of fact, the payment were to be made against receipt in terms of the agreement. No receipts are even alleged. The plaintiff has pleaded payment of Rs. 1,60,000/- on 25.9.1984, however, the plaintiff has contradicted herself in paras No. 3, 4 and 5 of the plaint when she states that the cheque for Rs. 1,60,000/- was dishonoured on 26.9.1984 and subsequently another cheque for Rs. 1,40,000 was issued on 27.9.1984 and the same was enchased by the father of the plaintiff. It is, thus, apparent that the plaintiff has not paid the sum of Rs. 2 lacs as per Clause 3 (B) of the agreement.
14. Learned counsel for the respondent has argued that since the defendant had not rescinded the agreement in terms of Clause 5 of the agreement, therefore, the payment of Rs. 2 lacs is proved. However, the said argument is not tenable. As a matter of fact, the terms of the agreement contemplate that the payment of Rs. 2 lacs up to 2.10.1984 is towards earnest money alone. The only effect of recition of the agreement is that the purchaser shall be entitled to refund of the amount advanced by her. Therefore, I am of the opinion that the plaintiff has not paid sum of Rs. 2,00,000/- as per terms of the agreement on or before 2.10.1984.
15. Learned counsel for the appellant has strenuously argued that various terms of the agreement has made the time as essnce of the contract and therefore, failure to adhere to the time schedule mentioned in the agreement of sale disentitle the plaintiff to seek specific performance of the agreement. He has laid stress on the point that a sum of Rs. 2 lacs was payable to defendant No. 1 up to 2.10.1994. Payment of said amount was essential to pay the outstanding liability of approximately Rs. 4 lacs of the Haryana Financial Corporation. The amount was to be paid within the time fixed in the agreement, therefore, such clause is a strong circumstance to hold time as essence of the contract. Still further Clause 4 specifically recites that the time shall be essence of the contract.
16. The learned counsel for the appellant has relied upon K.S. Vidyanadam and Ors. v. Vairavan.(1997)3 Supreme Court Cases 1 and P.R. Deb and Associates v. Su-nanda Roy, 1996(4) S.C.C. 423 to contend that whether the time is essence of the contract or not can be determined from either the express terms of the contract or from the nature of the property or from the surrounding circumstances i.e. object of making contract. In fact, the Constitutional Bench in Chand Rani v. Kamal Rani, (1993)1 S.C.C. 519 has culled down the said principles. The learned counsel for the appellant argued that the express terms of the contract itself stipulated that time is essence of the contract. The defendant had outstanding amount payable to the Haryana Financial Corporation. Such liability was to be discharged and. therefore, property was agreed to be sold. Therefore, the circumstances, under which the property was agreed to be sold makes it apparently clear that the time was essence of the contract.
17. To controvert the said argument of the appellant, the learned counsel for the respondent relied upon Janga Singh v. Harbans Singh, 1992 P.L.J. 7; Gurdial Singh and Ors. v. Darshan Singh and Anr. (1996-1)112 P.L.R. 102; Anokh Devi and Ors. v. Trilok Singh and Ors. (1996-1)112 P.L.R. 372 and Smt. Kamla Rani v. Smt. Chand Rani,7 A.I.R 1980 Delhi 188. There is no dispute about the proposition that generally in case the sale of immoveable property, time is not essence of the contract. However, the Constitutional Bench of Hon'ble Supreme Court in Chand Rani's case has held that in certain cases the parties can make time as essence of the contract even in respect of immoveable property. Such principles have been explained by Hon'ble Supreme Court in K.S. Vidyanadam 's case (supra).
18. In view of the said principles explained by the Supreme Court in K.S. Vidyanadam's case, I am of the opinion that the parties have made time as essence of contract which is evident from the express clause in the agreement which stipulated that the time was the essence of the contract. Still further, the defendant was to repay loan of Haryana Financial Corporation. The amount of earnest money was almost the loan amount. Thus, in respect of question No. 1, it is held that the time fixed for execution of the sale deed was an essence of the contract in the facts of the present case.
19. It has been found that the plaintiff has not paid a sum of Rs. 2 lacs on or before 2.10.1984. Payment of Rs. 2 lacs on or before 2.10.1984 was part of the agreement to sell. Once the plaintiff has failed to perform her part of the agreement within the time prescribed. it cannot be said that the plaintiff was ready and willing to perform her part of the contract at all relevant time.
20. The learned Appellate Court has returned finding that the plaintiff was ready and willing to perform her part of the contract on the basis that the conduct of both the parties has to be carefully seen. Since defendant No. 1 could not furnish any explanation as to why the Income Tax Clearance Certificate was not even applied for and that the stand of the defendant No. 1 has been proved to be completed false. It has also been found that it is not essential for the plaintiff to actually tender the balance sale consideration to the defendant or to deposit in court. The plaintiff having pleaded and stated on oath that she was ready and willing to perform her part of the contract, therefore, it need not be shown any further as to how she was ready and willing and she need not carry money in her hand. However, I am unable to agree with the finding recorded by the first Appellate Court. The first Appellate Court has passed a decree for specific performance on the payment of balance of Rs. 12 lacs, meaning thereby that there was default on the part of the plaintiff to pay a sum of Rs. 2 lacs. Once there is default on the part of the plaintiff in respect of an important stipulation in the agreement, it cannot be said that the plaintiff was ready and willing to perform her part of the contract. The default is apparent. Therefore, questions Nos.2 and 3 are also answered in favour of the appellant to hold that the failure to pay a sum of Rs. 2 lacs on or before 2.10.1984 amounts to failure of the plaintiff to prove that she was ready and willing to perform her part of the contract. Still further, the plaintiff has not shown any bank account or any other document, to prove that she was possessed of means to pay Rs. 12,00,000/- on or before 15.11.1984. It may be noticed that suit for specific performance was filed on 30.10.1987 i.e. almost close to the period of limitation.
21. A perusal of the conditions of the agreement to sell and that of the partnership deed shows that, in fact, the parties have formed a partnership where defendant No. 1 was to contribute capital of Rs. 4 lacs. Two lacs was the amount of earnest money paid on 3.9.1984 and another sum of Rs. 2 lacs was payable on or before 2.10.1984. Both these documents have been produced by the plaintiff. A reading of the two documents shows that the plaintiff has put the amount paid to defendant No. 1 as her contribution in the partnership firm. Therefore, I am of the opinion that it is not fair and reasonable to grant the relief of specific performance of agreement after 19 years of the agreement and when the plaintiff has failed to perform her part of the contract.
22. Consequently, the appeal is accepted. The judgment and decree passed by the first Appellate Court is set aside and the suit dismissed with no order as to costs.