Delhi High Court
Sarabjeet Singh vs Anup Sharma & Ors. on 17 May, 2016
Author: Valmiki J.Mehta
Bench: Valmiki J.Mehta
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ CS(OS) No. 439/2008
% 17th May, 2016
SARABJEET SINGH ..... Plaintiff
Through: Mr. Sanjeev Singh, Advocate with plaintiff
in person.
versus
ANUP SHARMA & ORS. ..... Defendants
Through: Mr. Arun Aggarwal, Advocate for D-1 to 3.
Mr. Manish Sharma, Mr. Pranay Raj Singh,
Mr. Abhishek Agarwal and Ms. Jigyasa
Sharma, Advocates for D-4,7 and 8.
Mr. Raman Kapur, Sr. Adv. with Mr. Varun
Kapur, Adv. for D-9.
CORAM:
HON'BLE MR. JUSTICE VALMIKI J.MEHTA
To be referred to the Reporter or not? YES
VALMIKI J. MEHTA, J (ORAL)
1(i) This is a suit for specific performance of entire property being plot no.D-16-G, Block No.D, admeasuring 247-9/10 sq. yds, in the residential colony known as Hauz Khas Enclave, situated at Village Kharera on Delhi Qutub Road in the state of Delhi except the first floor portion. Plaintiff is the proposed purchaser namely Sh. Sarabjeet Singh.
(ii) The specific performance suit is not for one agreement to sell but two Agreements to Sell dated 19.6.2006. The reason for two agreements to sell is that the predecessor-in-interest of defendant nos. 1 to 3 in the suit namely Sh. Jagdish Chander Sharma was the owner of the ground floor portion of the CS(OS) No.439/2008 Page 1 of 31 property, and therefore, qua the ground floor portion one agreement to sell was executed by the plaintiff. The total sale consideration of the agreement to sell of the plaintiff with defendant nos.1 to 3 was for a sum of Rs.1.71 crores, of which an amount of Rs.25 lacs was paid on the date of entering into the agreement to sell.
(iii) Late Sh. Badri Nath Sharma, and who is now represented by defendant nos.4 to 9, was the other co-owner of the property as he was the owner of the first floor, second floor and portion above the second floor as also the basement (theoretical) of the suit property. Plaintiff entered into the second Agreement to Sell dated 19.6.2006 with late Sh. Badri Nath Sharma for selling of the basement (theoretical), second floor and above portion of the suit property. Consideration for the second agreement to sell with Sh. Badri Nath Sharma was that Sh. Badri Nath Sharma besides being paid an amount of Rs.33 lacs, of which an amount of Rs.5 lacs had been received by late Sh. Badri Nath Sharma on the date of the agreement to sell, plaintiff was responsible for reconstruction of the entire property and cost of the construction of the first floor, which was to remain with Sh. Badri Nath Sharma, was also to be borne by the plaintiff. Therefore, the sale consideration with respect to the agreement to sell with Sh. Badri Nath Sharma was that plaintiff was to bear the cost of reconstruction of the first floor and pay the amount of Rs.33 lacs. CS(OS) No.439/2008 Page 2 of 31
(iv) Simultaneous to the entering into of the agreement to sell by the plaintiff with Sh. Badri Nath Sharma with respect to the basement (theoretical), second floor and above portion of the property, a Memorandum of Understanding (MOU) was also entered into on the same date of the agreements to sell dated 19.6.2006 with late Sh. Badri Nath Sharma under which the plaintiff undertook to reconstruct the property at his own cost and out of the reconstructed property plaintiff was to have the newly constructed basement, ground floor, second floor and terrace above the second floor and the newly constructed first floor was to remain with late Sh. Badri Nath Sharma.
(v) With respect to the aspect that late Sh. Badri Nath Sharma and late Sh. Jagdish Chander Sharma (predecessor-in-interest of defendant nos. 1 to 3) were the co-owners of the complete property, the same is an admitted fact by the plaintiff. This is because the plaintiff in the plaint refers to the factum of the suit property being originally owned by Smt. Kasto Devi, the mother of Sh. Jagdish Chander Sharma and Sh. Badri Nath Sharma and who purchased this property by a Sale Deed dated 15.5.1956. Smt. Kasto Devi expired on 2.2.1977 leaving behind her Will dated 28.10.1976 bequeathing the ground floor portion along with entire rear courtyard and the open space in the front to the younger son Sh. Jagdish Chander Sharma and rest of the suit property to her elder son Sh. Badri Nath Sharma. Both Sh. Jagdish Chander Sharma and Sh. Badri Nath Sharma accepted the genuineness of the Will dated 28.10.1976 and to this effect CS(OS) No.439/2008 Page 3 of 31 a mutual Settlement Deed dated 15.2.1977 was entered into between the two brothers Sh. Jagdish Chander Sharma and Sh. Badri Nath Sharma. Mutation of the respective portions of the property thereafter took place in the names of Sh. Jagdish Chander Sharma and Sh. Badri Nath Sharma in terms of the Letter of the Municipal Corporation of Delhi (MCD) dated 3.6.1980. Sh. Jagdish Chander Sharma died on 13.6.2002 leaving his Will dated 12.5.2002 whereby his share in the property was bequeathed to his two sons and wife, defendants no.1 to 3 in the present suit, and whose names were hence mutated in place of Sh. Jagdish Chander Sharma in the records of the MCD by MCD‟s Letter dated 16.2.2006.
(vi) Accordingly, two Agreements to Sell dated 19.6.2006 and the MOU of the same date was entered into between the plaintiff and defendant nos.1 to 3 and late Sh. Badri Nath Sharma as stated above.
2. As per the plaint, the plaintiff pleads that defendants, reference to the defendants being also to Sh. Badri Nath Sharma wherever context so requires inasmuch as Sh. Badri Nath Sharma died after entering into an agreement to sell, committed breach of contract by refusing to sell the suit property to the plaintiff. Plaintiff avers that plaintiff found that Sh. Badri Nath Sharma had mortgaged his second floor portion of the suit property to Punjab National Bank for a loan and therefore the agreement to sell with Sh. Badri Nath Sharma could not be fructified because in terms of the agreement to sell CS(OS) No.439/2008 Page 4 of 31 the plaintiff was to receive the portion of Sh. Badri Nath Sharma unencumbered. Plaintiff also pleads that one daughter and daughter-in-law of late Sh. Badri Nath Sharma, defendant no. 5 and 6 in the present suit namely Smt. Manju Sharma and Smt. Anita Sharma, issued and sent to the plaintiff and the Sub-Registrar, Mehrauli Legal Notices dated 23.6.2006 stating that they were the co-owners of the suit property and that therefore Sh. Badri Nath Sharma could not have entered into agreement to sell with the plaintiff representing that Sh. Badri Nath Sharma was the sole owner of his portion of the property. Plaintiff further pleads that on account of these frauds committed by Sh. Badri Nath Sharma, plaintiff was forced to lodge complaint with the police on 1.8.2006 stating that since plaintiff has been defrauded and cheated, action be taken against defendant nos. 1 to 3 in the present suit as also against late Sh. Badri Nath Sharma. Plaintiff alleges that plaintiff has always been ready and willing to perform the agreements to sell and the memorandum of understanding of the same date, and therefore, the suit for specific performance be decreed.
3. Written statements have been filed. One written statement is filed by defendant nos. 1 to 3 who are the signatories to the Agreement to Sell dated 19.6.2006 with respect to the ground floor portion. Another written statement is filed by defendant nos. 4, 7 and 8, and who are the three legal heirs (being the son, daughter-in-law and grandson) of late Sh. Badri Nath Sharma. The CS(OS) No.439/2008 Page 5 of 31 grandson Sh. Ashit Sharma/defendant no. 7, in addition to pleading that the plaintiff is guilty of breach of contract and hence not being entitled to specific performance and also that plaintiff was not ready and willing to perform the contract, also pleads that late Sh. Badri Nath Sharma on 5.9.2006 executed a registered Gift Deed with respect to the second floor and terrace portion of the property in favour of defendant no. 7 transferring Sh. Badri Nath Sharma‟s right in the suit property to the defendant no. 7. Written statement has also been filed by defendant no. 9/Smt. Renu Sharma pleading that Sh. Badri Nath Sharma had no right to sell the suit property as the suit property was ancestral and therefore Sh. Badri Nath Sharma was only one co-owner of the suit property and not the sole owner of the suit property, and which was the stand also taken by the defendant nos. 5 and 6 (who have not filed any written statements) by issuing their Legal Notices dated 23.6.2006 to the plaintiff.
4. The main contesting defendants are defendant nos. 1 to 3 so far as ground floor portion of the property is concerned and which is the subject matter of one of the agreement to sell. The other contesting defendants are defendant nos. 4, 7 and 8 who represent the estate of late Sh. Badri Nath Sharma. All these defendants plead breach of contract on behalf of the plaintiff and also that the plaintiff has not always been ready and willing to perform his part of the contract and hence the suit for specific performance is liable to be dismissed.
CS(OS) No.439/2008 Page 6 of 31
5. The following issues were framed in this suit on 16.7.2013:-
"1. Whether the plaintiff is entitled to specific performance of Agreements dated 19.6.2006 entered into between the plaintiff and defendant Nos. 1,2 and 3 and defendant Nos. 4,7 and 8 respectively? OPP
2. Whether the plaintiff was ready and willing to perform his part of the aforesaid Agreements to Sell with defendant Nos. 1,2 & 3 and 4, 7 & 8 within the time stipulated in the agreement? OPP
3. Whether time was of essence of the contracts comprised in Agreements to Sell between the plaintiff and defendant Nos.1,2 and 3 and defendant Nos. 4,7 and 8? OPD 1,2&3 and 4,7 & 8
4. Whether the plaintiff is guilty of concealment of material facts and mala fides in relation to the present suit? OPD 1,2 and 3 & 4,7 & 8.
5. Whether any case of action arose or survives in favour of the plaintiff and against the defendant Nos.1,2 and 3 and/or defendant Nos.4,7 & 8? OPP
6. Whether the plaintiff is entitled to a decree of declaration declaring the gift deed dated 05.09.2006 executed by late Badri Nath in favour of Mr. Asit Sharma, defendant No.7 to be null & void? OPP
7. Whether the suit has been correctly valued for purposes of court fees and jurisdiction and appropriate/proper court fees paid thereon? OPP
8. Whether the plaintiff has any cause of action against defendant Nos.5,6 and 9? OPP
9. Whether the plaintiff is entitled to the decree of specific performance in respect of the two agreements dated 19.6.2006 and if so, against which defendant? OPP
10. Relief."
6. Before I take up the discussion on the issues let me at this stage refer to the documents which are proved by the parties and which would be relevant to determine the matters in controversy. I may note that I am not referring to the documents proved on behalf of the plaintiff till the stage of mutation of the suit property in the name of defendant nos. 1 to 3 of the ground floor and late Sh. Badri Nath Sharma of the other portions of the suit property i.e, first floor and above portions, as these documents have no bearing with respect to the decision of the issues because these documents only reflect the CS(OS) No.439/2008 Page 7 of 31 position as on the date of the Agreement to Sell and the MOU dated 19.6.2006 whereby the plaintiff and the main contesting defendants concede to the factum of Sh. Jagdish Chander Sharma (predecessor-in-interest of defendant nos. 1 to
3) being the owner of the ground floor portion and consequently defendant nos. 1 to 3 entering into an agreement to sell with the plaintiff of the ground floor portion, and Sh. Badri Nath Sharma who was alive on 19.6.2006 entering into the agreement to sell with respect to the other portions of the property; excluding the ground floor portion of the property; and which portions were in the ownership of late Sh. Badri Nath Sharma. The relevant documents are as under:-
(i) Agreement to Sell dated 19.6.2006 between the plaintiff and defendant nos. 1 to 3; Ex.P-1
(ii) Agreement to Sell dated 19.6.2006 of the plaintiff with late Sh.
Badri Nath Sharma; Ex. P-20
(iii) Memorandum of Understanding dated 19.6.2006 between late Sh. Badri Nath Sharma and the plaintiff ; Ex. P-23.
(iv) Legal Notices dated 23.6.2006 sent on behalf of Smt. Manju Sharma and Smt. Anita Sharma, defendant nos. 5 and 6 in the suit, to the Sub- Registrar, Mehrauli and to the plaintiff; Ex P1/1 (it should be exhibited as Ex.PW1/1), Ex. P1/2 (it should be exhibited as Ex. PW1/2) and Ex. P1/3 (it should be exhibited as Ex. PW1/3).
CS(OS) No.439/2008 Page 8 of 31
I may note that unfortunately though documents have been referred to by the exhibits in the affidavit by way of evidence of the parties, exhibit marks are only given to the documents till the stage of admission/denial. Therefore, the documents which have been exhibited in the affidavit by way of evidence do not have a corresponding marking in the documents which have been so exhibited. I am accordingly referring to these exhibited documents as per the exhibit numbers given in the affidavit by way of evidence of the parties though concerned documents specifically do not bear the exhibit marks.
(v) Legal Notice dated 24.7.2006 by the plaintiff to defendant nos. 1 to 3 and late Sh. Badri Nath Sharma; Ex.P-12
(vi) Reply dated 28.7.2006 to the legal notice of the plaintiff given by the Advocate of defendant nos. 1 to 3; Ex. P-13
(vii) Criminal complaint lodged by the plaintiff with the SHO PS Hauz Khas dated 1.8.2006; Ex.P-14 and an FIR dated 14.10.2006 registered by the police on the basis of the aforesaid criminal complaint dated 1.8.2006; Ex.P-16.
(viii) Gift Deed dated 5.9.2006 executed by late Sh. Badri Nath Sharma in favour of the grandson Sh. Ashit Sharma defendant no. 7 with respect to the second floor and above portion of the property ; Ex. P-24.
The aforesaid documents are proved and exhibited by the plaintiff. CS(OS) No.439/2008 Page 9 of 31
7. The following relevant documents have been proved and exhibited by the defendants:-
(i) Legal Notice dated 19.7.2006 sent to the plaintiff on behalf of defendant nos. 1 to 3; with corresponding postal receipts, Ex.DW2/2 and Ex.
DW2/3. (Due to administrative error, instead of legal notice being exhibited as DW2/2 and postal receipts being exhibited as DW2/3(colly), both the postal receipts have been exhibited as DW2/2 and DW2/3. However plaintiff concedes that plaintiff had received this Legal Notice dated 19.7.2006.)
(ii) Bank certificate dated 7.3.2007 of Punjab National Bank, Swami Ram Tirath Nagar, New Delhi that the mortgage against the property was cleared as the amount of loan was cleared on 31.7.2006; Ex. D2. Issue Nos.1 to 3, 5 and 6
8. Issue nos.1 to 3, 5 and 6 are being heard and disposed of together because these issues pertain to who is guilty of breach of contract i.e are they the defendants including late Sh. Badri Nath Sharma or it was the plaintiff who was guilty. Under these issues aspect with respect to readiness and willingness of the plaintiff in terms of Section 16(c) of the Specific Relief Act, 1963 will also be considered.
9. So far as the existence of two Agreements to Sell dated 19.6.2006 and the MOU dated 19.6.2006 is concerned, the same are admitted documents and therefore it is held that there does exist agreements to sell in favour of the CS(OS) No.439/2008 Page 10 of 31 plaintiff of which theoretically the plaintiff can seek specific performance, subject of course to the plaintiff proving other issues in his favour with respect to plaintiff being not guilty of breach of contract and plaintiff always having been ready and willing to perform his part of the contract. Discussion under these issues will also cover the aspect as to whether the plaintiff is entitled to the discretionary relief of specific performance.
10. At the outset, I would refer to the ratios of the two judgments of the Supreme Court, and which ratios would be relevant on their being applied to the facts of the present case for deciding as to whether or not specific performance should be granted. The first judgment is the judgment of the Supreme Court in the case of K.S. Vidyanandam and Others Vs. Vairavan (1997) 3 SCC 1. The second judgment is the judgment of the Supreme Court in the case of Sardamani Kandappan Vs. S. Rajalakshmi and Others (2011) 12 SCC 18. In the case of K.S. Vidyanandam and Others (supra) the Supreme Court clearly held that the old rule of time of performance being not of the essence of the contract in agreement to sell of immovable properties was laid down when prices were stable and inflation was unknown and that this old rule with respect to time being not of the essence of the contract, so far as urban immovable properties are concerned, should be given a go-by. The relevant paras of this judgment are paras 10, 11 and 14 and these paras read as under:- CS(OS) No.439/2008 Page 11 of 31
"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-limits 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 Rani: (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-limits 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 15th of June, 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 v/hat 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 plaintiffs 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 CS(OS) No.439/2008 Page 12 of 31 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 plaintiffs case that within six months, he purchased the stamp papers and offered to pay the balance consideration. 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 December 15, 1978 and July 11, 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 by 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 21/ 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 defendant's case that the values of the house property in Madurai town was rising fast and this must have induced the plaintiff to wake up after 2 1/2 years and demand specific performance.
11. Sri Sivasubramanium cited the decision of the Madras High Court in S. V. Sankaraninga Nadar v. P.T.S. Ratnaswamy Nadar 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 larger-scale migration of people from rural areas to urban centers 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 CS(OS) No.439/2008 Page 13 of 31 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. 5,000/- 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. 5,000/- [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. 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 no 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 nonexistent? All this only means that while exercising its discretion, the court should also bear in mind that when the parties prescribes certain time-limits for taking steps by one or the other party, it must have some significance and that the said time- limits cannot be ignored altogether on the ground that time has not been made the essence of the contract (relating to immovable properties).
xxxxx xxxxx
14. Sri Sivasubramanium then relied upon the decision in Jiwan Lai and Ors. v. Brij Mohan Mehra 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 Rani. 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." (emphasis is mine)
11. In addition to holding that in urban areas time of performance should not be ignored, the aforesaid paras also lay down the ratio that merely CS(OS) No.439/2008 Page 14 of 31 because a suit for specific performance is filed within limitation would not mean that the suit for specific performance has necessarily to be decreed because delay in approaching the courts for seeking specific performance is a ground to deny the relief of specific performance.
12. The relevant paras of the judgment in the case of Sardamani Kandappan (supra) are paras 35 to 37, 41 and 43 and these paras read as under:-
"35. It is of some interest to note that the distinction between contracts relating to immovable properties and other contracts was not drawn by Section 55 of Contract Act (or any other provisions of the Contract Act or Specific Relief Act, 1963). Courts in India made the said distinction, by following the English law evolved during the nineteenth century. This Court held that time is not of the essence of the contracts relating to immovable properties; and that notwithstanding default in carrying out the contract within the specified period, specific performance will ordinarily be granted, if having regard to the express stipulation of the parties, nature of the property and surrounding circumstances, it is not inequitable to grant such relief. (Vide Gomathinayagam Pillai, Govind Prasad Chaturvedi, Indira Kaur v. Sheo Lal Kapoor and Chand Rani following the decision of Privy Council in Jamshed Khodaram Irani v. Burjorji Dhunjibhai and other cases). Of course, the Constitution Bench in Chand Rani made a slight departure from the said view.
36. The principle that time is not of the essence of contracts relating to immovable properties took shape in an era when market value 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 CS(OS) No.439/2008 Page 15 of 31 immovable properties have increased steeply, by leaps and bounds. Market values of 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 of 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 of 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 for 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 Rs. One lakh and received Rs. Ten Thousand as advance may be required to execute a sale deed a quarter century later by receiving the remaining Rs. Ninety Thousand, when the property value has risen to a crore of rupees.
xxxxx xxxxx
41. A correct perspective 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: (SCC pp. 7 & 9, paras 10-11) "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. ....CS(OS) No.439/2008 Page 16 of 31
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."
(Emphasis supplied) xxxxx
43. Till the issue is considered in an appropriate case, we can only reiterate what has been suggested in K.S. Vidyanadam (supra):
(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. 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 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 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."
(underlining added) 13(i) In the present case, the first aspect which is to be noticed is the argument on behalf of the plaintiff that the specific performance of the agreement to sell with defendant nos.1 to 3 is linked with the specific performance of the agreement to sell with late Sh. Badri Nath Sharma (now represented by defendant nos.4 to 9) and if breach is committed by late Sh. CS(OS) No.439/2008 Page 17 of 31 Badri Nath Sharma or his legal heirs, plaintiff was hence entitled not to seek specific performance of the agreement to sell with respect to the ground floor portion with defendant nos.1 to 3. Plaintiff in effect claims that both the agreements to sell are interlinked and one agreement with defendant nos.1 to 3 cannot be performed independently of the other agreement to sell of the plaintiff with late Sh. Badri Nath Sharma.
(ii) This argument of the plaintiff is liable to be and is accordingly rejected for the reason that nothing is contained in any of the two Agreements to Sell dated 19.6.2006 or the MOU of the same date, which links the performance of the two agreements to sell, one being of the ground floor with the defendant nos.1 to 3 and the other being of the second floor and above portion of the property with late Sh. Badri Nath Sharma. Just because the two agreements to sell have been entered into at one point of time does not necessarily mean that both the agreements are interlinked as regards their performance. No clause in any of the agreements exists or could be pointed out showing a categorical interrelation of both the agreements as regards performances thereunder. Also, merely because both the agreements are for different portions of the same property cannot mean that defendant nos.1 to 3 can be put to the handicap that their agreement to sell will not be performed by the plaintiff by causing it to be delayed alongwith the performance of the agreement to sell by late Sh. Badri Nath Sharma. If this is done, this will seriously prejudice defendants no.1 to 3 CS(OS) No.439/2008 Page 18 of 31 who would have had their own compulsion and reasons for selling the ground floor portion to the plaintiff holding that admittedly there are independent ownerships of the defendant nos.1 to 3 so far as ground floor is concerned and late Sh. Badri Nath Sharma of the second floor and above portion of the property is concerned. Therefore, I do not agree and reject the argument that plaintiff was entitled to cause delay and not seek specific performance of the agreement to sell qua the ground floor with defendant nos.1 to 3 on the ground of breaches committed by late Sh. Badri Nath Sharma or his legal heirs in performance of the agreement to sell of the second floor and above portion of the property.
14. Let us now therefore examine as to who is guilty of breach of contract as regards the agreement to sell of the ground floor portion. Admittedly, under the agreement to sell within 40 days from entering into the agreement, plaintiff had to pay the balance sale consideration and defendants no.1 to 3 then had to at such time execute the sale deed in favour of the plaintiff. Therefore tendering by the plaintiff of the balance amount of Rs.1.46 crores was necessary so that plaintiff is not guilty of breach of contract. Plaintiff thus had to lead evidence with respect to plaintiff tendering an amount of Rs.1.46 crores to defendant nos.1 to 3 on or before 29.7.2006. Concededly, no evidence is led and the fact is that plaintiff never tendered the balance amount of Rs.1.46 crores to defendant nos.1 to 3 by 29.7.2006. In fact defendant nos.1 to 3 had issued CS(OS) No.439/2008 Page 19 of 31 and sent to the plaintiff their Legal Notice dated 19.7.2006 demanding payment of balance consideration from the plaintiff. It is also seen that on behalf of the defendants DW-1 has deposed with respect to the plaintiff not tendering before 29.7.2006 the balance amount and therefore being guilty of breach of contract and in the cross-examination of this witness there is no suggestion put that the plaintiff had tendered the balance sale consideration to defendant nos.1 to 3 by 29.7.2006. Therefore, this is another reason why it has to be held in favour of the defendant nos.1 to 3 and against the plaintiff that plaintiff is guilty of breach of contract by failing to tender the balance sale consideration to defendant nos.1 to 3 on or before 29.7.2006. Therefore, it is seen that plaintiff not only failed to tender the balance amount of sale consideration, in fact the defendant nos.1 to 3 sent their Legal Notice dated 19.7.2006 requesting for balance payment which was not complied with by the plaintiff and therefore it is clear that plaintiff is guilty of breach of contract. Once plaintiff is guilty of breach of contract, it has to be held that plaintiff is not entitled to specific performance because specific performance is a relief which arises on account of the breach committed by the defendants/sellers under an agreement to sell and when the plaintiff/buyer himself is guilty of breach of contract, he cannot succeed in a suit for specific performance which is necessarily predicated on the breach of the sellers/defendants. Accordingly, I hold that the plaintiff is guilty of breach of contract and is not entitled to specific performance.
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15. The related issue is that whether time of performance was or was not of the essence of the contract. If time of contract was not of essence of the contract i.e plaintiff had not tendered the amount by 29.7.2006 plaintiff cannot be held guilty of breach of contract, however, in this regard I have reproduced above the ratios of the judgments of the Supreme Court in the cases of K.S. Vidyanandam and Others (supra) and Sardamani Kandappan (supra) and in view of these ratios it is clear that once specific dates are mentioned, these specific dates show that time of performance is of the essence of the contract qua urban immovable properties and therefore it is held that time of performance was of the essence of the contract with respect to the payment of balance sale consideration by the plaintiff to defendant nos.1 to 3 more so in view of defendant nos.1 to 3 demanding the balance consideration from the plaintiff by the Legal Notice dated 19.7.2006. Therefore, plaintiff is guilty of breach of contract, time of performance was of the essence of the contract, and that since plaintiff being guilty of breach of contract, plaintiff is hence not entitled to specific performance of the Agreement to Sell dated 19.6.2006 so far as the ground floor portion is concerned and with respect to which, an agreement to sell was entered into by the plaintiff with defendant nos.1 to 3.
16. It is also relevant to note that plaintiff is not entitled to specific performance of the contract against defendant nos.1 to 3 for the additional reason that plaintiff had to prove in terms of Section 16(c) of the Specific Relief CS(OS) No.439/2008 Page 21 of 31 Act that plaintiff was always ready and willing to perform his part of the contract. The expression „readiness‟ refers to the financial capacity of the plaintiff at the relevant times including pendente lite, and willingness means the continued intention at all points of time of the plaintiff to seek specific performance and not wanting to get the alternative relief of recovery of moneys or damages, assuming that defendants are guilty of breach of contract. In this regard, the issue is clinched in favour of the defendant nos.1 to 3 because the plaintiff admittedly sent his Legal Notice dated 24.7.2006 and in the operative part of this notice being the third last para of the notice, plaintiff has only sought refund of the amount paid by the plaintiff to the defendants under the agreement to sell and the plaintiff has not sought specific performance of the contract. Once plaintiff himself has only shown his intention to seek refund of the amounts paid by the plaintiff to the defendants, then plaintiff‟s intention to be always willing to enter into the sale deed is admittedly found to be lacking and once plaintiff himself does not seek specific performance and only seeks refund of price paid, this Court has no hesitation in holding that plaintiff was not willing at all times to go through with the specific performance by execution of the sale deed. It is therefore held that the plaintiff not being willing as required under Section 16(c) of the Specific Relief Act, plaintiff is thus not entitled to the relief of specific performance.
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17. Plaintiff also failed to prove that he was ready at all times for entering into the sale deed and thus entitled to specific performance of the agreement to sell with the defendant nos.1 to 3, inasmuch as, the plaintiff had to prove from the 40th day of the agreement to sell dated 19.6.2006, till the suit was filed, that the plaintiff had the financial capacity to pay the balance sale consideration of Rs.1.46 crores to defendant nos.1 to 3. Admittedly, plaintiff has not led evidence to show his financial capacity from 29.7.2006 till the filing of the suit on 29.2.2008, and therefore, this Court can safely hold that plaintiff was not always ready to enter into the sale deed because plaintiff has failed to prove his financial capacity for a substantial period from 29.7.2006 to 29.2.2008.
18. Therefore, it is seen that the plaintiff is guilty of breach of contract, plaintiff has not been found to be always willing to perform his part of the contract, plaintiff has not been found to be always ready to perform the contract, and thus for all these three reasons the suit for specific performance is liable to be dismissed by deciding the issues under discussion being issue nos.1, 2, 3 and 5 in favour of the defendant nos.1 to 3 and against the plaintiff. In view of the facts as found above, the plaintiff is not entitled to the discretionary relief of specific performance.
19. On the aspects of breach and readiness and willingness, so far as the legal heirs of late Sh. Badri Nath Sharma are concerned namely defendant CS(OS) No.439/2008 Page 23 of 31 nos.4 to 9, even qua these defendants the discussion above will apply with respect to plaintiff having failed to demonstrate both readiness and willingness because facts qua defendant nos.4 to 9 and the plaintiff are the same. Accordingly, it is held that even qua late Sh. Badri Nath Sharma, and now represented by defendant nos.4 to 9, plaintiff has failed to show in terms of Section 16(c) of the Specific Relief Act that the plaintiff was always ready and willing to perform the agreement to sell and hence, the plaintiff is not entitled to the relief of specific performance.
20. Once it is held that the plaintiff has not been always ready and willing to perform his part of the agreement to sell with late Sh. Badri Nath Sharma and thus I need not discuss the issue of breach of contract i.e whether the plaintiff was guilty of breach of contract or it was because of the action of some of the legal heirs of late Sh. Badri Nath Sharma that the plaintiff could not seek specific performance of the contract with late Sh. Badri Nath Sharma with respect to the second floor and above of the suit property, but since all issues have to be decided this issue will also have to be decided. Though even if this issue is to be decided in favour of the plaintiff, even then the plaintiff will not be entitled to specific performance as it is already held that plaintiff was not always ready and willing. While on this aspect, the issue no.6 will also stand discussed and decided.
CS(OS) No.439/2008 Page 24 of 31 21(i) No doubt, plaintiff has proved that defendant nos.5 and 6 had issued legal notices claiming rights as co-owners of the suit property and consequently confusion was created and possibly a cloud was cast on the title of late Sh. Badri Nath Sharma to go through the sale deed, however, it is seen that it is not any and every confusion and any and every claim of a third person in violation of the rights of late Sh. Badri Nath Sharma which would give a valid reason to the plaintiff/buyer to delay performance of his part of the contract and not seek specific performance because if it is found that the stand which was raised by the defendant nos.5 and 6 was a frivolous stand not sustainable in law, then such a frivolous claim/stand of co-ownership cannot give reason to a prospective purchaser such as the plaintiff to avoid performance of his obligations of tendering the balance sale consideration and otherwise seek specific performance.
(ii) It is seen from the Legal Notice dated 23.6.2006 sent by defendant nos.5 and 6 to the plaintiff and the Sub-Registrar, Mehrauli that these defendants claim rights in the suit property on the ground that the suit property was ancestral property. Defendant nos.5 and 6 are the daughter and daughter- in-law of late Sh. Badri Nath Sharma respectively. I have already reproduced in the narration part of this judgment the facts with respect to how Smt. Kasto Devi was the owner and after her death the suit property devolved upon her two sons, namely Sh. Jagdish Chander Sharma and Sh. Badri Nath Sharma. CS(OS) No.439/2008 Page 25 of 31
(iii) Firstly, the inheritance of a property from a female ancestor even under the traditional Hindu law does not create an HUF. It is only on inheritance of an immovable property from a male ancestor that an HUF was created. Therefore, when the suit property was inherited by Sh. Jagdish Chander Sharma and Sh. Badri Nath Sharma from their mother (not a paternal ancestor) who was the registered title holder, then the property in the hands of Sh. Jagdish Chander Sharma and Sh. Badri Nath Sharma was not ancestral i.e not HUF even under the traditional Hindu law. For the sake of arguments, if we assume that it was the ancestral property which devolved from Smt. Kasto Devi to her two sons Sh. Jagdish Chander Sharma and Sh. Badri Nath Sharma, and the property was ancestral in the hands of Sh. Jagdish Chander Sharma and Sh. Badri Nath Sharma, yet it is seen that inheritance opened in favour of two sons Sh. Jagdish Chander Sharma and Sh. Badri Nath Sharma in the year on 2.2.1977 when Smt. Kasto Devi expired i.e after 1956 and hence inheritance by the sons of Smt. Kasto Devi is self acquired in their hands. What is the position when a person dies after 1956 and such property inherited by the legal heirs as to whether is or is not HUF property has been dealt with by the Supreme Court in the judgments in the cases of Commissioner of Wealth Tax, Kanpur and Others Vs. Chander Sen and Others, (1986) 3 SCC 567 and Yudhishter Vs. Ashok Kumar, (1987) 1 SCC 204 and it is held in these judgments that inheritance of ancestral properties after 1956 does not result in creation of HUF. These judgments of the Supreme Court were passed around 20 years CS(OS) No.439/2008 Page 26 of 31 prior to the agreement to sell, agreement to sell being of the year 2006 and the law declared by the Supreme Court being of 1986/87, and therefore surely the Legal Notices dated 23.6.2006 issued by the defendant nos.5 and 6 were wholly baseless and such baseless notices without having any basis to stand in law could not have been a basis for the plaintiff to claim that he could not perform the agreement to sell because of a cloud being cast on the title of late Sh. Badri Nath Sharma. It is only a reasonable legal stand or possible stands which have some basis in law which could be the reason for creation of a cloud on title and not that any and every frivolous reason or defence taken by a person can be said to create a cloud on the title. In my opinion, therefore, plaintiff cannot claim that he was not bound to tender the balance consideration allegedly on account of a cloud created on the title of late Sh. Badri Nath Sharma by defendant nos.5 and 6 issuing their Legal Notices dated 23.6.2006. I may observe at the request made by the counsel for defendant no. 9 that observations made in this judgment with respect to claim of defendant nos.5 and 6 to the property of late Sh. Badri Nath Sharma are limited to the ground of property being HUF property and not to any other claim of legal heirs of late Sh. Badri Nath Sharma on any other legal cause of action.
22. Accordingly, it is held that plaintiff is guilty of breach of contract even qua late Sh. Badri Nath Sharma and hence plaintiff is not entitled to specific performance of the contract.
CS(OS) No.439/2008 Page 27 of 31 23(i) While on these aspects while discussing issue nos.1 to3, 5 and 6, two aspects will have to be discussed inasmuch as firstly plaintiff has pleaded in the plaint that plaintiff could not seek specific performance because late Sh. Badri Nath Sharma had mortgaged the second floor portion of the suit property with Punjab National Bank, Swami Ram Tirath Nagar, New Delhi and that since under the agreement to sell plaintiff had to receive unencumbered property, but on account of the mortgage, the agreement to sell could not fructify into a sale deed. Second aspect is that the defendant no.7 claims that late Sh. Badri Nath Sharma had executed a gift deed in his favour of the second floor portion and above of the suit property in terms of the Gift Deed dated 5.9.2006 and therefore plaintiff pleads that late Sh. Badri Nath Sharma had consequently incapacitated himself to execute the sale deed on account of the said Gift Deed dated 5.9.2006.
(ii) In my opinion, both these issues which are raised by the plaintiff lack any foundation so far as the present suit for specific performance is concerned because if the plaintiff was to raise the ground of mortgage for his not tendering the balance sale consideration on or before 29.7.2006, then the fact of the matter however is that the defendants have filed the certificate of Punjab National Bank dated 7.3.2007 (Ex.D2) and which shows that the mortgage of the property was cleared on 31.7.2006. Therefore, it cannot be strictly held that as on 29.7.2006 late Sh. Badri Nath Sharma was incapacitated CS(OS) No.439/2008 Page 28 of 31 on account of the mortgage to Punjab National Bank in going ahead with the sale deed inasmuch as immediately on late Sh. Badri Nath Sharma being put to notice of the mortgage by the plaintiff‟s Legal Notice dated 24.7.2006, late Sh. Badri Nath Sharma cleared the mortgage by 31.7.2006 i.e within two days of 29.7.2006 and six days of receipt of the legal notice. In my opinion, therefore this aspect of mortgage cannot be a ground for the plaintiff to claim that he could not for this reason of mortgage seek specific performance against late Sh. Badri Nath Sharma.
(iii) So far as the aspect of gift deed in favour of defendant no.7 is concerned, it is seen that in law all that would have been the consequence of the gift deed is that plaintiff would have to sue the defendant no.7 in substitution of late Sh. Badri Nath Sharma because defendant no.7 would be a successor-in- interest of late Sh. Badri Nath Sharma and a successor-in-interest is always bound by any contractual documents entered into prior to the execution of a gift deed transferring the property. Therefore, the gift deed in favour of defendant no.7 could not have prevented the plaintiff from seeking specific performance of the Agreement to Sell dated 19.6.2006. The conjoint effect of the Agreement to Sell dated 19.6.2006 of the plaintiff with late Sh. Badri Nath Sharma, MOU of the same date 19.6.2006 for reconstruction of the property would have been that late Sh. Badri Nath Sharma would have got the newly constructed first floor portion of the property and the balance sale consideration i.e Rs.33 lacs CS(OS) No.439/2008 Page 29 of 31 minus Rs.5 lacs, and on account of the gift deed, the legal consequence would have been that such consideration would be payable to defendant no.7. These are therefore not grounds on which plaintiff can claim any handicap in seeking specific performance of the agreement to sell against late Sh. Badri Nath Sharma and the defendant no.7. This argument of the plaintiff is also therefore rejected and issue no.6 is decided against the plaintiff.
24. Accordingly, issue nos.1 to 3, 5 and 6 are held against the plaintiff and in favour of the defendants.
Issue nos.4 and 7
25. These issues are not pressed and are disposed of accordingly but the same will not have any impact on the decision of issue nos.1 to 3, 5 and 6 which have already been held against the plaintiff and in favour of the defendants.
Issue No.8
26. Issue no.8 will stand decided in favour of the plaintiff and against the defendant nos.5, 6 and 9 because defendant nos.5, 6 and 9 are the legal heirs of late Sh. Badri Nath Sharma and in law the legal heirs of a person are bound by the contractual agreements executed by their predecessor-in-interest unless of course by any judgment or law, the legal heirs get exempted from the performance of the contractual documents entered into by their predecessor-in- CS(OS) No.439/2008 Page 30 of 31 interest, and which is not so in the facts of the present case. Issue no.8 is therefore decided in favour of the plaintiff.
Issue nos.9 and 10
27. In view of the aforesaid discussion, it is found that plaintiff is not entitled to the specific performance of the agreements to sell and plaintiff is not entitled to succeed for any of the reliefs claimed in the suit. The suit is therefore dismissed, leaving the parties to bear their own costs. The amount lying deposited with the defendants as per the FDRs created by them may no longer be kept in FDRs and these can be encahsed by the defendants as the plaintiff has not, and on a query being put also, sought any money decree in the present suit.
MAY 17, 2016 VALMIKI J. MEHTA, J
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