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Thursday, August 18, 2011

respondent company, private limited company, division bench, agro chemicals, and supreme court of india.


                                 REPORTABLE                            

                                                                       

                IN THE SUPREME COURT OF INDIA


                  CIVIL APPELLATE JURISDICTION


                  CIVIL APPEAL NO.7021 OF 2003




Coromandel Indag Products (P) Ltd.               .... Appellant(s)



              Versus



Garuda Chit & Trading Co. P. Ltd. & Anr.   .... Respondent(s)





                             J U D G M E N T


P.Sathasivam,J.


1)     This   appeal   is   directed   against   the   final   judgment   and



decree dated 17.02.2003 passed by the Division Bench of the



High Court of Judicature at Madras in O.S.A. No. 163 of 1994



whereby   the   appeal   filed   by   the   respondents   herein   was



allowed.


2)     Brief facts:


(a)    The   appellant   is   a  Private   Limited   Company   (hereinafter



referred   to   as   "the   appellant-Company)   registered   under   the



Companies   Act,   1956   and   is   carrying   on   the   business   of





                                                                            1


manufacturing,   selling,   exporting,   trading   in   and   distribution



of Pesticides, Chemicals and Agro Chemicals.  Respondent No.



1 is also a Private Limited Company (hereinafter referred to as



"the   respondent-Company")   registered   under   the   Companies



Act,   1956   in   which   Mr.   T.P.   Narayanan   -   respondent   No.2   is



the   Chairman   and   Director   and   appeal   against   him   stood



dismissed vide this Court's order dated 19.07.2004.   Mr. T.K.



Gopinath (since died) was the Managing Director - respondent



No.3 and his legal  representatives are on record.   In the year



1981,   the   appellant-Company   required   a   property   around



Mount   Road   Area   near   Mylapore,   Madras   for   establishing   a



Research and Development Centre.  Respondent-Company, on



coming   to   know   about   the   said   requirement,   offered   its



property   measuring   12   grounds   33   sq.   ft.   with   buildings   at



Door   No.   46,   Cathedral   Road,   Madras.     The   officials   of   the



appellant-Company inspected the property and after getting it



evaluated   by   an   Authorized   Valuer   offered   a   price   of   Rs.82



lakhs   for   the   entire  property   and  the   Respondent   Nos.   2  &  3



herein accepted the same.   Thereafter, an Agreement for Sale





                                                                             2


was executed between the parties on 28.08.1981 and a sum of



Rs. 2 lakhs was paid by way of cheque as advance.



(b)     Pending investigation of title of the respondent-Company



to   the   suit   property,   the   appellant-Company   entered   into   the



said   agreement   since   the   respondents   desired   a   firm



commitment   to   be   made.     Clauses   3   and   4   of   the   said



Agreement  put  the  vendor  under   an  obligation   to  produce   all



documents   of  title   in  its   possession   or  control   relating   to   the



suit   property   for   the   investigation   and   approval   of   the



appellant-Company.              Besides,   getting   other   necessary



clearances,   the   respondents   were   also   required   to   get   the



Income   Tax   Clearance   Certificate   as   specified   under   Section



230-A of the Income Tax Act, 1961.



(c)    In   accordance   with   the   above,   the   appellant-Company



called upon the respondents to furnish the documents of title,



the   details   of   the   encumbrances   on   the   property,   if   any,   and



also   Income   Tax   Clearance   Certificate   and   other   necessary



clearances   to   complete   the   sale.     On   09.09.1981,   the



respondents   furnished   the   Income   Tax   Clearance   Certificate



dated 07.09.1981 and promised to furnish the other required




                                                                               3


documents very soon.  They also demanded a further payment



of Rs. 10 lakhs as advance pending finalization of the sale to



which the appellant-Company did not agree.



(d)    As   the   respondents   did   not   furnish   the   required



documents,   the   appellant-Company   issued   a   letter   dated



14.09.1981   calling   upon   them   to   furnish   the   required



documents.  Instead of furnishing all the required documents,



as   sought   for,   the   respondents,   vide   letter   dated   15.09.1981,



called   upon   the   appellant-Company   to   expedite   the   sale.



Thereafter,   on   19.09.1981,   the   appellant-Company   again



requested  the   respondents   to  furnish   the   solvency   certificate.



In   response   to   the   above-said   letters,   the   respondents   orally



apologized for the delay and promised to furnish the required



details at the earliest and respondent No.2 also requested for a



further payment of Rs.10 lakhs as advance to enable them to



discharge the mortgage subsisting in favour of Bank of India.



The   appellant-Company   paid   Rs.   5   lakhs   to   respondent   No.2



on 21.09.1981 on the undertaking that the documents called



for   would   be   sent   by   30.09.1981.     Again   on   the   request   of



respondent   No.2,   the   appellant-Company   paid   a   further   sum




                                                                             4


of   Rs.   5   lakhs   to   meet  the   Urban   Land   Ceiling   Clearance.     A



total   sum   of   Rs.   12   lakhs   was   paid   to   the   respondents.     On



19.10.1981,  respondent  No.2 again requested  a  sum  of Rs.  2



lakhs   to   meet   certain   statutory   compliance   which   was   a



charge on the property.   Taking full details of such liabilities,



the appellant-Company paid  a sum  of Rs.1,10,000/-.     As the



respondents   did   not   furnish   the   required   documents   till   the



end   of   1981,   the   appellant-Company   sent   a   notice   dated



19.01.1982   calling   upon   them   to   perform   their   obligation



under   the   agreement   dated   28.08.1981   as   also   to   fulfil   their



personal undertakings.  Notice was served only on respondent



No.2 but the notice on respondent Nos. 1 and 3 were returned



back with the remarks "unserved". In reply to the said notice,



respondent   No.2   said   that   he   is   not   personally   liable   for   the



payment made by the appellant-Company.



(e)    In   the   said   circumstances,   the   appellant-Company   was



compelled to file a suit for specific performance on 10.05.1982



in the High Court of Judicature at Madras and the same was



numbered as C.S. No. 287 of 1982.   The learned single Judge



of  the   High  court  by   judgment  dated   01.06.1993   decreed  the




                                                                                5


suit   and   directed   the   respondents   herein   to   execute   the   sale



deed   in   favour   of   the   appellant-Company   and   granted   three



months' time to the appellant-Company to pay the balance of



the sale consideration.



(f)    Challenging   the   judgment   of   the   learned   single   Judge,



the   respondents   preferred   O.S.A.   No.   163   of   1994   before   the



High   Court.   By   impugned   judgment   dated   17.02.2003,   the



Division   Bench   of   the   High   Court   allowed   the   appeal.



Aggrieved   by   the   said   judgment   of   the   Division   Bench,   the



appellant-Company   preferred   this   appeal   by   way   of   special



leave petition before this Court.



3)     Heard   Mr.  K.V.  Viswanathan,   learned   senior  counsel   for



the   appellant-Company   and   Mr.   K.K.   Venugopal,   learned



senior   counsel   for   respondent   No.1   and   Mr.   V.   Giri,   learned



senior counsel for LRs of respondent No.3.


Points for consideration:


4)     The only question for consideration is whether the decree



granted   by   the   learned   single   Judge   of   the   High   Court   for



specific   performance   based   on   the   Agreement   for   Sale   dated



28.08.1981 is sustainable, or the Division Bench is justified in




                                                                             6


concluding   that   the   appellant-plaintiff   has   not   made   out   a



case for a decree of specific performance in allowing the appeal



and   setting   aside   the   decree   passed   by   the   trial   Court   by



dismissing the suit.


Discussion as to Agreement for Sale


5)    In   order   to   consider   the   rival   claims,   it   is   desirable   to



verify  the  relevant clauses from  the Agreement for  Sale  dated



28.08.1981.     In   the   beginning,   the   Vendor-Respondents



herein,   specifically   asserted   that   they   are   the   sole   and



absolute owner and in exclusive possession and enjoyment of



all the land mentioned in the Schedule together with a multi-



storey   building,   sheds,   garages,   outhouses,   fixtures   and



fittings   thereon   situated   at   Cathedral   Road,   Teynampet,



Madras   bearing   present   Door   No.   46,   Old   No.   31,   T.S.   No.



1238/1A, R.S. No. 1233/1 and 1233/5 measuring 12 grounds



33   sq.   ft.     The   Agreement   clearly   stipulates   that   the   Vendor



requires   substantial   cash   for   meeting   its   business   purposes



and,   therefore,   decided   to   sell   the   said   property.     It  makes   it



clear   that   by   resolution   dated   16.07.1981,   the   Board   of



Directors   of   the   Vendor   have   authorized   Shri   K.S.   Hari,




                                                                                 7


General  Manager,   to  negotiate   and  sell  the   said  property   and



to execute the sale deed.  It also makes it clear that the Vendor



has  agreed to  sell and the purchaser   has agreed to  purchase



the said property at a price consideration of Rs. 82 lakhs free



from   all   encumbrances   and   claims   whatsoever   on   the   terms



and conditions set out in the agreement.



6)    Among   the   various   clauses,   we   are   concerned   with   the



following clauses in the Agreement for Sale.  They are:



      "3.    The Vendors shall produce or cause to be produced to

      the purchaser all the documents  of title  in their  possession

      or   control   or   relating   to   the   said   property   for   the

      investigation of the Vendor's title thereto.



      4.     The sale shall be subject to the approval of the title of

      the vendor to the  said property  agreed to  be  sold herein  by

      the   advocate   for   the   Purchaser   and   the   Vendor   shall   at   its

      own   costs   and   expenses   get   in   all   outstanding   estates   and

      clear  all defects  in title  and encumbrance  and claims  on or

      to the said property.



      6.     The sale shall be completed on or before 05.09.1981 or

      within one week from date of furnishing a Certificate under

      section 230-A of the Income Tax Act of 1981 by the Vendor

      whichever is later, upon the payment of Rs. 48 lakhs out of

      the   said   purchase   money   by   the   purchaser   to   the   Vendor,

      the   balance   being   payable   as   hereinafter   provided,   the

      vendor and all other necessary parties if any shall execute a

      proper   conveyance   of   the   said   property   in   one   piece   of   in

      several   portions   in   favour   of   the   purchaser   or   such   other

      person or persons the Purchaser shall nominate.



      7.     The Purchaser shall pay at any time of the Registration

      of the sale deed a sum of Rs. 48 Lakhs out of the said price

      and the balance in the following manner:-





                                                                                         8


             1. Rs. 10 lakhs on or before 07.10.1981

             2. Rs. 11 lakhs on or before 07.11.1981

             3. Rs. 11 lakhs on or before 07.12.1981



      The   said   balance   of   Rs.   32   lakhs   payable   in   three

      installments as aforementioned shall not carry any interest.

      If   the   purchaser   fails   to   pay   the   amounts   as   stipulated

      above,   the   balance   amount   shall   carry   interest   at   18%   per

      annum till date payment.



      10.    The   Vendor   shall   at   its   cost   obtain   the   required

      clearance certificate under Section 230-A of the Income Tax

      Act   and   obtain   requisite   permission   or   sanctions   from   any

      authorities as may be necessary for the purpose of effectual

      competition of the sale of the property."



The   above   Agreement   to   Sell   entered  into   on   28.08.1981   has



certain   important   provisions   which   provide   a   clear



understanding   of   motivation   of   both   the   parties.     Clause   3



extracted   above   provides   that   the   Vendor/respondents   shall



produce or cause to be produced all the documents relating to



title of the property to the purchaser.   Clause 4 provides that



the   sale   shall   be   subject   to   the   approval   of   the   purchaser's



advocate.     Clause   6   makes   the   completion   of  sale   incumbent



on   the   date   of   furnishing   the   Income-tax   Certificate   by   the



Vendor and payment of Rs. 48 lakhs by the purchaser.  Clause



10 makes it clear that it is the responsibility of the Vendor to



obtain   the   required   clearance   certificate   under   Section   230-A



of the Income-tax Act and also obtain requisite permission or




                                                                                      9


sanction from other authorities, as may be necessary, for the



purpose of  completion of  the sale  of the  property.    Clause  13



provides that if the title of the Vendor is not approved by the



Purchaser's   advocate,   the   Purchaser   would   be   entitled   to



cancel the Agreement.   Clause 14 entitles the Purchaser for a



suit   for   specific   performance   in   the   event   of   breach   of  any  of



the terms of the Agreement by the Vendor or the return of the



amount taken as advance by the Vendor together with a sum



of Rs. 1 lakh as liquidated damages.   Clause 15 ensures that



the Agreement shall come to an end if there is a breach by the



Purchaser.  With these clauses and understanding by both the



parties, we have to analyze their claim and decide the case one



way or the other.


Whether time is essence of the contract:


7)    If   we   verify   the   various   clauses   from   the   Agreement   for



Sale,   it  is   clear   that  the   Vendor-Respondent   Company   herein



was in need of money for meeting its business purposes.   The



appellant-Company has very much relied on Clauses 3 and 4



of   the   Agreement   which   we   have   already   extracted.     Those



clauses mandate the  Vendor to produce  all the documents of




                                                                               10


title   in   their   possession   and   hand   over   the   same   to   the



Purchaser for investigation by the Purchaser.  It also makes it



clear that all those documents be placed before the advocate of



the   Purchaser   for   scrutiny   and   approval   and,   thereafter,   the



Vendor at its own costs and expenses clear all defects in title



and encumbrances and claims on or to the said property.      



8)    In order to strengthen their claim that time is essence of



the contract, the respondents have heavily relied on Clauses 6



and 7 which are extracted in the paragraphs supra.  It is clear



from   Clause   6   that   the   sale   shall   be   completed   on   or   before



05.09.1981   or   within   a   period   of   one   week   from   the   date   of



furnishing a Certificate under Section 230-A of the Income-tax



Act, 1981 by the Vendor.  It is clear from Clause 7 that on the



date of the Registration of the Sale Deed, the Purchaser has to



pay Rs. 48 lakhs out of the amount of Rs. 82 lakhs.  According



to   the   vendor,   the   balance   being   payable   in   the   following



manner:  



              1. Rs. 10 lakhs on or before 07.10.1981

              2. Rs. 11 lakhs on or before 07.11.1981

              3. Rs. 11 lakhs on or before 07.12.1981





                                                                              11


It is also clear from Clause 7 that the balance of Rs. 32 lakhs



payable   in   3   instalments   shall   not   carry   any   interest.



However,   if   the   Purchaser   fails   to   pay   the   amounts   as



stipulated   above,   the   balance   amount   shall   carry   interest   @



18% p.a. till date of payment.  It is clear that when there was a



specific understanding between the parties as reflected in the



above-mentioned   clauses   in   the   Agreement   within   which



period   the   sale   was   to   be   completed,   it   has   to   be   construed



that   the   intention   of   the   parties   was   to   treat   the   time   as



essence of the contract.   Though the respondents had agreed



to   receive   the   balance   of   Rs.   32   lakhs   in   instalments   for   a



period of 3 months after the registration of the sale deed which



also makes it clear that both parties have agreed to complete



the   entire   transaction   as   early   as   possible   which   prove   that



time   is   essence   of   the   contract.     Though   the   appellant-



Company   relying   on   Clauses   3   and   4   of   the   Agreement



contended   that   the   respondents   failed   to   produce   all   the



required   documents   including   the   documents   pertaining   to



title and encumbrances and claims on or to the property, there



is no basis for such a claim.




                                                                              12


9)     It is also relevant to point out the stand of the parties as



reflected in their pleadings and evidence.   In terms of Section



16(c)   of   the   Specific   Relief   Act,   1963,   it   is   incumbent   on   the



party,   who   wants   to   enforce   the   specific   performance   of   a



contract,   to   aver   and   prove   that   he   has   performed   or   has



always  been  ready   and  willing   to  perform  the   essential   terms



of the contract.   Explanation appended to this sub-section (c)



makes   it   clear   that   if   a   contract   involves   the   payment   of



money, it is not essential for the plaintiff to actually tender to



the  defendant   or  to  deposit  in Court   any  money  except when



so   directed   by   the   Court.     However,   the   plaintiff   must   aver



performance   of,   or   readiness   and   willingness   to   perform,   the



contract according to its true construction.  It is seen from the



pleadings that necessary averments have been made in terms



of   sub-section   (c)   of   Section   16.     On   the   side   of   the   plaintiff,



James   Fadric   was   examined   as   PW-1.     He   explained   the



urgency and the need to sell the property.   He also explained



that the company had a cash crunch problem.   No doubt, he



also   referred   that   the   company   was   facing   liquidity



proceedings   before   the   High   Court   of   Bombay   and   necessary




                                                                                    13


application   had   been   filed   before   the   Company   Court   at



Bombay   for   settlement   of   the   scheme   to   avoid   liquidation



which   we   are   not   concerned.     The   fact   remains   that   at   the



relevant time, Vendor/Respondent-Company was in dire need



of money for their commercial transactions and decided to sell



the   property   in   question,   particularly,   to   meet  the   immediate



need   of   their   creditors.     We   have   already   adverted   to   the



payment of Rs. 2 lakhs as advance on the date of execution of



the   agreement   dated   28.08.1981.     On   21.09.1981,   a   further



sum of Rs. 5 lakhs was paid and by mutual consent, the time



was extended to 30.09.1981.   On 06.10.1981, another sum of



Rs. 5 lakhs was advanced by the appellant-Company and the



time for completion of the Sale Agreement was extended up to



14.10.1981.   Again, for the third time, that is on 19.12.1981,



time was extended for the completion of the transaction up to



31.12.1981   on   payment   of   Rs.1,10,000/-.     As   rightly   pointed



out   by   Shri   K.K.   Venugopal   and   Shri   V.   Giri,   learned   senior



counsel appearing for the respondents, the payment of money



in short intervals and also the extension of time for completion



of   the   transaction   within   the   prescribed   period   clearly   show




                                                                            14


that   both   the   parties   wanted   to   complete   the   transaction   as



early as possible without further extension.   Inasmuch as the



Vendor   was  in   dire   need   of   money   at   every  occasion   and   the



need   for   such   short   term   extension   clearly   shows   that   the



parties intended to treat the time as essence of the contract.  It



is   also   relevant   to   point   out   that   Clause   7  of   the   Agreement,



which   we   have   already   extracted,   makes   it   clear   that   at   any



time of registration of the sale deed, the appellant shall pay a



sum   of   Rs.   50   lakhs,   after   deducting   the   advance   amounts



already paid and the balance of Rs. 32 lakhs is to be paid after



registration   of   the   sale   deed   in   three   installments   as



mentioned above.   This would also reveal the intention of the



parties to treat the time as essence of the contract.   From the



various   clauses   in   the   Agreement   for   Sale   which   we   have



referred to, pleadings, evidence and the conduct of the parties,



we   hold   that   parties   have   agreed   that   the   time   is   essence   of



the contract and the same has to be adhered to strictly.





                                                                               15


Readiness and willingness:


10)    Learned   counsel   for   the   respondents   urged   that   several



requests   by   the   appellant-Company   for   various   documents



which   are   not   provided   in   the   terms   of   the   Agreement   show



their intention that they wanted to delay the proceedings. On



the   other   hand,   learned   counsel   appearing   for   the   appellant-



Company   submitted   that   they   were   justified   in   asking   for



those documents in order to satisfy the title of the property.  It



is true that  in the Agreement, it  is  stated  that Vendor  has to



produce all the documents of title in their possession relating



to   the   property   to   the   Purchaser   for   investigation   relating   to



title.     In   Clause   10,   there   is   a   specific   reference   to   the



production of clearance certificate under Section 230-A of the



Income-tax   Act   and   obtain   permission   or   sanction   from   any



authorities   that   may   be   necessary   for   the   purpose   of   sale   of



the   property.     It   is   true   that   when   the   appellant-Company



being a Purchaser investing a huge sum of Rs. 82 lakhs, they



are entitled to clear all their doubts in respect of the title.   In



terms of Clause 6 of the Agreement, sale has to be completed



on  or  before   05.09.1981   or  within   one   week   from   the   date  of




                                                                             16


furnishing  the  certificate  under   Section   230-A  of  the   Income-



tax Act whichever is later and upon payment of Rs. 48 lakhs



out   of   the   agreed   amount   of   Rs.   82   lakhs   to   the   Vendor.



Admittedly,   the   respondents   produced   Income-tax   Clearance



Certificate even on 09.09.1981. It is to be noted that only after



production   of   I.T.   Clearance,   the   appellant-Company,   vide



letter dated 14.09.1981, addressed to Mr. K. S. Hari, General



Manager   of   the   Respondent-Company   sought   further



particulars relating to mortgage on the Bank of India, arrears



of urban land tax, property tax, exemption certificate from the



urban land ceiling authorities, encumbrance certificate, latest



audited   balance-sheet,   list   of   creditors,   solvency   certificate,



details   of   attachment   and   particulars   about   winding   up



proceedings   alleging   that   they   have   not   received   the   same   to



be forwarded to their advocates.  The said letter is available as



Annexure-P2.  In pursuance of the said letter, the respondents



sent   a   reply   on   15.09.1981   "by   hand   delivery"   to   the



appellant-Company   specifically   stating   that   after   being   fully



satisfied  about  the  title,   the  appellant-Company   prepared  the



draft sale deed and after a combined discussion at their office




                                                                            17


on   07.09.1981,   the   same   was   approved   and   thereafter,   the



respondents   obtained   necessary   certificate   dated   09.09.1981



under Section 230-A of the Income-tax Act and the same was



also intimated to them.   In the same letter, it was pointed out



that   as   per   the   Agreement   of   Sale   and   consensus   arrived   at



between   the   parties,   the   appellant-Company   has   to   complete



the sale within one week from 09.09.1981. It was also pointed



out   that   in   spite   of   several   promises   and   assurances,   the



appellant-Company   could   not   fulfill   their   promise   and   also



that   because   of   this   delay,   they   are   suffering   heavy   loss   and



the   very   object   of   sale   is   being  defeated.     It   was  also   pointed



out   that   so   far   they   have   spent   heavy   sums   and   satisfied   all



their   requirements   and   finally   requested   to   do   the   needful



immediately   for   completion   of   the   sale   transaction.     The   said



letter is marked as Annexure-P3.



11)    It is not in dispute, more particularly, from the evidence



of   PW-1   that   the   legal   advisor   of   the   appellant-Company



scrutinized   the   title   deeds   before   entering   into   Agreement.



They   also   visited   the   site   along   with   their   lawyers  and   finally



after   satisfying   all   the   materials,   their   lawyers   gave   opinion




                                                                                 18


with regard to the clear title of the property.  As stated earlier,



only after getting their clearance, draft sale deed was prepared



to enable the respondents to get certificate under Section 230-



A of the Income-tax Act.  Curiously, in his evidence, P.W.1 has



stated   that   the   matter   got   delayed   only   due   to   the   non-



production   of   exemption   certificate   from   urban   land   ceiling



authorities.   It is true that as per Clause 3 of the Agreement,



respondents   have  to  produce   all the  documents  pertaining  to



the   title   of   the   suit   property.     We   have   already   extracted



Clause 4 of the Agreement which speaks about the approval of



title by the appellant's advocate.



12)    It   is   further   seen   that   after   payment   of   Rs.   2   lakhs   as



advance on the date of execution of the Agreement, monies to



the   extent   of   Rs.   11,10,000/-   were   paid   on   various   dates   in



order to satisfy and comply with all statutory requirements.  It



is   relevant   to   point   out   in   the   Agreement   that   there   is   no



specific   reference   to   the   production   of   an   order   from   the



competent   authority   under   the   Urban   Land   Ceiling   Act   with



regard   to   exemption.     From   the   materials   placed,   we   are



satisfied   that   the   appellant-Company   was   not   justified   in




                                                                                 19


calling   for   several   documents   when   admittedly,   their   lawyers



perused all the relevant documents and on their advise, draft



sale deed was prepared and that too after proper inspection of



the site and building.  In other words, production of clearance



certificate from the competent authority under the Urban Land



Ceiling Act was not specifically intended at any point of time.



We   are   satisfied   that   as   rightly   argued   by   learned   senior



counsel for the respondents that the information sought for by



the appellant-Company was only to delay the transaction and



it   was   not   always   ready   and   willing   to   perform   in   terms   of



Section 16(c) of the Specific Relief Act, 1963.


Conduct of the parties:


13)    We   have   already   stated   that   the   Agreement   for   Sale



includes land and building.  The building stands on more than



500   sq.   mts.   of   land   in   addition   to   the   plinth   area.     The



building   is   a   five-storeyed   one   for   which   building   permission



had   been   obtained   as   per   the   provisions   of   Town   Planning



Authority and as per the orders of the Corporation of Madras.



It is also seen that the building was under construction at the



time the Urban Land (Ceiling and Regulation) Ordinance, 1976




                                                                             20


was passed.  Section 3(h) of the Act defines "land appurtenant"



which reads thus:



       "(h) "land appurtenant", in relation to any building means an

       extent of five hundred square metres contiguous to the land

       occupied by such building and includes,-



       (i)   in   the   case   of   any   building   constructed   before   or   under

       construction   on   the   commencement   of   this   Act   with   a

       dwelling unit therein, or



       (ii)   in   the   case   of   any   building   proposed   to   be   constructed

       with a dwelling unit therein and in respect of which the plan

       for   such   building   has   been   approved   by   the   appropriate

       authority before the commencement of this Act,



       an   additional   extent   not   exceeding   five   hundred   square

       metres   of   land,   if   any,   contiguous   to   the   said   extent   of   five

       hundred square metres of land:



               Provided  that in relation  to a multi-storeyed  building,

       the extent of land contiguous to the land occupied by such

       multi-storeyed   building   permitted   according   to   the   plan

       approved by the appropriate authority shall be deemed to be

       the land appurtenant;"



It   is   not   in   dispute   that   the   plan   had   been   approved   by   the



Competent Authority.



14)    As   rightly   pointed   out   by   learned   senior   counsel   for   the



respondents,   the   proviso   to   the   definition   states   that   in   the



case of multi-storeyed building, the extent of land contiguous



to   the   land   occupied   by   such   multi-storeyed   building



permitted   according   to   the   plan   approved   by   the   appropriate



authority shall be deemed to be the land appurtenant.  In view




                                                                                               21


of   the   same,   the   entirety   of   the   land   in   and   around   the   five-



storeyed   building   would   come   outside   the   vacant   land   under



Section 3 (p) of the Act which reads as under:



       "(p)   "Vacant   land"   means   land,   not   being   land   mainly   used

       for   the   purpose   of   agriculture,   in   an   urban   agglomeration

       but does not include-



       (i) .....



       (ii) in an area where there are building regulations--



       (a)  the land occupied by any building constructed before, or

       under   construction   on   the   commencement   of   this   Act   with

       the   approval   of   the   appropriate   authority   and   the   land

       appurtenant to such building. .... ....."



It   is   clear   that   in   the   case   of   multi-storeyed   building   which



was   under   construction   at   the   date   of   commencement   of   the



Act   with   building   plans   duly   approved,   no   part   of   the   land



attached   to   the   building   would   come   within   the   scope   of   the



Act.  By refusing to pay the balance consideration to purchase



the property by getting the sale deed registered, the appellant-



Company   has   not  only   committed  a  breach   of  the   Agreement



but also showed that it was not ready and willing to complete



the   Agreement.     In   those   circumstances,   the   argument



assailing the judgment of the Division Bench of the High Court



is liable to be rejected.





                                                                                       22


About title inspection by the lawyers:


15)    It is relevant to narrate the actual question and answers



by P.W.1 during cross-examination which reads as under:



       "Q:    Did you inspect the title deeds through your lawyer?



       A:     Yes.



       Q:     Did   you   examine   the   title   deeds   before   entering   into

              the agreement?



       A:     We did get the title deeds examined by the lawyer.



       Q:     I   asked   you   did   you   get   any   legal   opinion   from   your

              lawyer prior to entering into the agreement.



       A:     Yes.



       Q:     Have you got the legal opinion?



       A:     Not in writing asked him to examine the title deed and

              let us know whether the title deed is in order.



       Q:     What did he say?



       A:     He said, the title deed normally could be in order, but

              he   had   asked   for   certain   other   information   such   as

              encumbrance   certificates,   Urban   Land   Ceiling

              Clearance   from   the   Government   of   India   and

              Government of Tamil Nadu, etc.



       Q:     Your office prepared any report on title.



       A:     My legal department always traces title, it is good and

              competent to peruse the title deeds.



       Q:     Your legal department is your staff?



       A:     Yes.



       Q:     Was any report on title obtained from the lawyer?





                                                                                          23


A:    Yes.

Q:    When was that obtained?



A:    Somewhere between 20th to 28.8.1981



Q:    Have you produced the legal opinion before this Court?



A:    No, it is internal affair and we felt it is not necessary.



Q:    Have you got the opinion?



A:    I am not sure, I am able to find out.



Q:    Did they produce all documents of title for approval?



A:    Yes.  They fulfilled clause No.3



Q:    Clause No.4 that also the defendant did not?



A:    No.



Q:    What do you mean by saying no?



A:    Because   they   have   not   provided   encumbrance   to   the

      title   deeds,   which   is   part   of   the   title   deed,   they   had

      applied for Urban Land Ceiling exemption, which they

      have not disclosed.



Q:    Is   there   any   mention   about   Urban   Land   Ceiling

      Clearance?



A:    It is not mentioned in the agreement, but I would like

      to and it is obligatory on the part of the defendant  to

      go through the implications of Section 6 of the Urban

      Land Ceiling Act.



Q:    According to you, unless they do not furnish details of

      obtaining   Urban   Land   Ceiling   clearance,   you   are   not

      prepared to purchase?



A:    No.     This   is   the   condition   of   the   negotiation.     The

      vendor has always been acknowledging to produce the

      documents   required   by   us   before  we   put   through   the

      sale.     This   is   also   seen   in   all   stamped   receipts   for





                                                                                     24


             which   monies   were   paid   even   after   230-A   clearance

             obtained."




16)    It is also brought to our notice that the State Government



in 1995 nearly 10 years after the filing of the suit, claimed 872



sq.mts.   as   being   the   excess   land   above   the   ceiling   limit   for



which   the   appellant-Company   had   filed   a   writ   petition   being



No. 6312 of 2000 before the High Court.   Though the filing of



the   said   writ   petition   and   the   ultimate   order   on   04.08.2005



were   not   brought   to   our   notice   by   filing   appropriate   petition



inasmuch   as   the   said   fact   was  not   in   dispute,   we   referred   to



the   said   decision   of   the   High   Court   rendered  in   Writ   Petition



No.  6312  of 2000.     That  writ  petition   came  to  be  filed  by  the



respondent   Company   for   issuance   of   a   writ   of  mandamus  to



forebear   the   State   and   the   competent   authority   under   the



Urban   Land   Ceiling   from   enforcing   the   provisions   of   the   Act



which   has   been   repealed   by   Tamil   Nadu   Act   No.   20   of   1999



w.e.f. 16.06.1999 insofar as the land of the petitioner therein



(respondents herein at Door No. 46, Cathedral Road, Chennai



in R.S. No. 1238/9 Mylapore, Village) is concerned.





                                                                                 25


17)    It is true that despite the fact that there was no provision



in   the   Act   laying   down   the   process   for   seeking   an   exemption



from   its   operation,   the   respondent-Company   wrote   to   the



Deputy Secretary, Revenue Department, Government of Tamil



Nadu   on   26.12.1979   seeking   such   exemption.     As   there   was



no response, as rightly pointed out, it was understood that as



the   proviso   to   Section   3   applies   to   the   land   and   no   further



exemption   was   needed.     It   is   relevant   to   point   out   that   the



appellant-Company made further applications on behalf of the



respondents   but   to   no   avail.     The   entire   land   is   in   the



enjoyment and possession of the respondent-Company and no



part of the land has been taken over by the Government.



18)    In   the   light   of   the   above   discussion,   we   are   unable   to



agree   with   the   claim   of   the   appellant-Company,   on   the   other



hand we are in entire agreement with the conclusion arrived at



by   the   Division   Bench   of   the   High   Court.     Consequently,   the



appeal fails and the same is dismissed.   However, parties are



directed to bear their own costs.





                                    .................................................J.




                                                                              26


                                (P. SATHASIVAM)

                                                 

                               ...............................................J.

                               (H. L. GOKHALE)

NEW DELHI;

AUGUST 16, 2011.





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