My photo




Thursday, January 8, 2015

CIVIL APPEAL Nos. 9949-9950 OF 2014 (Arising out of SLP (C) Nos.35800-35801 of 2011) Rathnavathi & Another Appellant(s) VERSUS Kavita Ganashamdas Respondent(s)


                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELALTE JURISDICTION

                    CIVIL APPEAL Nos. 9949-9950  OF 2014
              (Arising out of SLP (C) Nos.35800-35801 of 2011)

       Rathnavathi & Another                              Appellant(s)


Kavita Ganashamdas                            Respondent(s)

                               J U D G M E N T
Abhay Manohar Sapre, J.

1.    Leave granted.

2.    The plaintiff  filed  two  suits,  one  for  specific  performance  of
agreement and other for grant of permanent injunction  in  relation  to  the
suit  house.  The  trial  court  vide  common  judgment  and  decree   dated
16.10.2001 dismissed both the suits. The first appellate  court,  i.e.,  the
High Court, in appeal, by impugned  judgment  and  decree  dated  08.09.2011
reversed the judgment and decree of the trial court  and  decreed  both  the
suits in appeal, against the defendants.  Being aggrieved  by  the  judgment
and decree of the High Court, Defendants 1 and 3 have approached this  Court
in the instant civil appeals.
3.    The question arises for consideration in these appeals is whether  the
High Court was justified in allowing the  first  appeals  preferred  by  the
plaintiff, resulting in decreeing the two civil suits against defendants  in
relation to suit house?
4.    In order to appreciate the controversy involved in  the  civil  suits,
and now in these appeals, it is necessary to state the relevant facts.
5.    For the sake of convenience, description of parties  herein  is  taken
from Original Suit No.223/2000.
6.    Defendant no.2 is the original owner of the suit house  and  defendant
no.1 is the subsequent purchaser of the suit house from defendant no.2.
7.    The dispute relates to a dwelling house bearing no. 351  Block  no.11,
Matadahalli Extension,  now  known  as  R.T.  Nagar  Bangalore  (hereinafter
referred to as " the suit house “).
8.    The suit house  was  purchased  by  defendant  no.  2  from  Bangalore
Development  Authority  (in  short  “BDA”)  in  a  scheme.   On  15.02.1989,
Defendant no. 2 entered into an agreement (Annexure-P-1) with plaintiff  for
sale of suit house at a total consideration of Rs. 3,50,000/-. In  terms  of
clause 2 of the agreement, the plaintiff paid  a  sum  of  Rs.  50,000/-  as
advance towards sale consideration. These facts are not in dispute.
9.    On  07.01.2000,  the  plaintiff  filed  a  civil  suit  being  OS  No.
223/2000, initially against 3 defendants for  seeking  permanent  injunction
restraining  the  defendants  jointly  and  severally  from  interfering  in
plaintiff's possession over the  suit  house.  In  substance,  case  of  the
plaintiff was  that  she  entered  into  an  agreement  on  15.02.1989  with
defendant no. 2 to purchase the suit house for Rs.  3,50,000/-  and  paid  a
sum of Rs. 50,000/- to defendant no. 2 by way of advance  towards  the  sale
consideration. Later, the plaintiff further paid the  balance  consideration
of Rs. 3 Lacs towards the sale price  and  obtained  receipts  acknowledging
the payment so made. It was  alleged  that  the  plaintiff  was  accordingly
placed in actual physical possession of the suit house and  since  then  she
has been in possession of the suit house. It was alleged that she also  made
some improvements therein by spending money and is  paying  electricity  and
water charges etc. It was further alleged that the  plaintiff  was  and  has
always been ready and willing to perform her part of the  agreement  to  get
the sale deed executed in her favour after having performed her part of  the
contract. However, defendant no. 2, for the reasons best known to  her,  did
not  execute  the  sale  deed  despite  having  received   the   full   sale
consideration from the plaintiff. It was alleged that defendant no.  1,  who
is a total stranger to the  suit  house  and  having  no  right,  title  and
interest in the suit house, on 2.1.2000 visited the suit  house  along  with
defendant no.  2  and  some  other  unwanted  elements  and  threatened  the
plaintiff to dispossess her from the suit house. It was  also  alleged  that
on 8.1.2000, defendant nos. 1 and 2 again visited and attempted  to  assault
the plaintiff and unsuccessfully attempted to commit trespass  in  the  suit
10.   On seeing the hostile attitude of defendant nos. 1  and  2  and  their
associates, the plaintiff immediately lodged a complaint  in  the  concerned
police station. Since police authorities did not take any action, which  was
required of, the plaintiff filed the  aforesaid  civil  suit  for  permanent
injunction restraining the  defendants  from  interfering  in  her  peaceful
possession over the suit house. It was submitted that the  plaintiff  has  a
prima facie case, so also the balance of convenience  and  irreparable  loss
in her favour, which entitles her to claim permanent injunction against  the
defendants in relation to the suit house. The plaintiff  also  averred  that
she reserved her right to file a suit for specific performance of  agreement
against the defendants.
11.   The aforesaid suit was contested by defendant nos.  1  and  2.   While
admitting the ownership of defendant no. 2 over the suit house and the  fact
of entering into an agreement  with  the  plaintiff  for  its  sale  to  the
plaintiff and further while admitting the receipt of advance payment  of  Rs
50,000/- from the plaintiff, the defendants denied all material  allegations
made in the plaint. It was alleged  that  the  plaintiff  did  not  pay  the
balance consideration as alleged. It was also alleged that defendant  no.  2
on 25.10.1995 cancelled the agreement dt 15.02.1989 by sending legal  notice
to the plaintiff and then  sold  the  suit  house  to  defendant  no.  1  on
09.02.1998 for Rs. 4 lacs and placed her in its possession.
12.   On 31.03.2000, the plaintiff filed another civil  suit  being  OS  No.
2334 of 2000 in  the  Court  of  City  Civil  Judge  Bangalore  against  the
defendants  for  specific  performance  of  agreement  dated  15.02.1989  in
relation to the suit house.
13.   After pleading the same facts, which are set out above, the  plaintiff
further alleged that she has performed her part of the agreement  by  paying
entire sale consideration of Rs. 3,50,000/- and has been  in  possession  of
the suit house. It was alleged that  on  the  one  hand,  defendant  no.  2,
despite having received full sale consideration, did not  perform  her  part
of the agreement by not getting the suit house  transferred  in  plaintiff's
favour as per clause 3 of the agreement and by doing the acts which she  was
expected to do in terms of agreement,  and  on  the  other  hand,  tried  to
interfere in plaintiff's lawful possession over the suit house.
14.   This led the plaintiff to serve upon defendant  no.2  a  legal  notice
dated 6.3.2000 thereby calling upon defendant no.2 to execute the sale  deed
in relation to suit property in plaintiff's favour.  Since  despite  service
of legal notice, defendant no. 2  failed  to  execute  the  same,  suit  for
specific performance was also filed. The plaintiff then by way of  amendment
also sought to add one prayer for cancellation of sale deed alleged to  have
been executed by defendant  no.  2  in  favour  of  defendant  no.  1.  This
amendment was allowed.
15.    The  defendants  contested  the  civil  suit.  While  admitting   the
execution of agreement dated 15.02.1989 with the plaintiff for sale of  suit
house for Rs. 3,50,000/- and also admitting payment of Rs. 50,000/-  by  the
plaintiff to defendant no. 2,  the  defendants  denied  all  other  material
allegations and inter alia alleged that since the plaintiff  failed  to  pay
the balance sale consideration of Rs. 3 lacs to defendant no. 2 in terms  of
the agreement, defendant no. 2 on 25.10.1995 sent  a  legal  notice  to  the
plaintiff cancelling the agreement dated 15.2.1989 and sold the  suit  house
to defendant no. 1  on  09.02.1998  for  consideration  and  placed  her  in
possession of the suit house. The defendants  also  alleged  that  defendant
no. 1 was the bona fide purchaser for value and hence her  title  cannot  be
questioned in the suit.
16.   The defendants also contested the suit on two legal grounds.  Firstly,
it was contended that the suit was not maintainable, as  the  bar  contained
in Order II Rule 2 of Code of Civil Procedure,  1908  (hereinafter  referred
to as 'CPC') did not permit the plaintiff to  file  the  suit  for  specific
performance of agreement in question against the defendants. It was  alleged
that relief to claim specific performance of agreement was available to  the
plaintiff when she filed the first suit  (OS  No.  223/2000)  for  permanent
injunction against the defendants. Yet, the plaintiff failed  to  claim  the
relief in the first suit, consequently,  the  second  suit  filed  to  claim
specific performance of agreement in question is hit by rigor  contained  in
Order II Rule 2 of CPC. It is now barred and hence liable  to  be  dismissed
as not maintainable. Secondly, it was contended that the suit  is  otherwise
barred by limitation having been filed beyond  the  period  of  three  years
from the date of accrual of cause of action as provided  in  Article  54  of
the Limitation Act, 1963. It was, therefore,  contended  that  the  suit  is
liable to be dismissed as being barred by limitation, as well.
17.   The trial court consolidated both the suits  for  trial.  Issues  were
framed. Parties adduced  evidence.  The  trial  court  vide  judgment/decree
dated 25.8.2009 though  answered  some  issues  in  plaintiff's  favour  but
eventually dismissed the civil suits. It was held that the  agreement  dated
15.02.1989 was executed between the plaintiff and defendant no. 2  for  sale
of suit house; that the plaintiff was  not  placed  in  possession  of  suit
house pursuant to agreement in question; that the plaintiff  was  not  ready
and willing to perform her part of the agreement; that  suit  is  barred  by
limitation; that the plaintiff was not entitled  to  claim  the  relief  for
specific performance of agreement; that the plaintiff was  not  entitled  to
claim the relief for grant of permanent injunction; that defendant no. 1  is
a bona fide purchaser of the suit house for value;  that the  plaintiff  was
not entitled to challenge the sale deed dt. 9.2.1998, that the suit was  hit
by the bar contained in Order II Rule 2 of CPC  because  the  plaintiff  did
not obtain leave to file second suit for specific performance  while  filing
the first suit for grant of permanent injunction against the  defendants  in
relation to the suit house.
18.   Feeling aggrieved, the  plaintiff  filed  two  regular  first  appeals
being R.F.A. Nos. 1092 of 2009 and 1094 of 2009 before the  High  Court.  By
common impugned judgment/decree, the High Court allowed  both  the  appeals,
reversed the judgment/decree of the trial court and decreed both  the  civil
suits by passing a decree for specific performance of agreement against  the
defendants in relation to suit house and also  issued  permanent  injunction
as claimed by the plaintiff. The High Court answered all the  aforementioned
issues in plaintiff's favour and against the defendants.
19.   The High Court  in  its  judgment  held  that  the  plaintiff  was  in
possession of suit house; that the  plaintiff  performed  her  part  of  the
agreement; that the plaintiff paid the  entire  sale  consideration  of  Rs.
3,50,000/- to defendant no. 2; that the plaintiff was ready and  willing  to
perform her part of agreement; that defendant no. 2 failed  to  perform  her
part of the agreement thereby rendering her liable to perform  her  part  of
agreement; and that subsequent sale even if  made  by  defendant  no.  2  in
favour of defendant no. 1 was not binding on the plaintiff  because  it  was
not bona fide.
20.   The High Court, however, after deciding the issues in  favour  of  the
plaintiff, directed that in order to weigh the equities between the  parties
and keeping in view the price escalation, which is  unavoidable  in  present
days, the plaintiff will pay an additional sum of Rs. 4 lacs over and  above
Rs. 3,50,000/- to defendant no. 2 for obtaining sale deed in her favour.

 21.  It is against this judgment/decree of the High Court,  the  defendants
have filed the present appeals by way of special leave petitions.
22.   Mrs. Nalini Chidambaram, learned  Senior  Counsel  appearing  for  the
appellants (defendants) while assailing the legality and correctness of  the
impugned judgment urged various submissions. Firstly, she  argued  that  the
High Court erred in allowing plaintiff's  first  appeals,  as  according  to
her, both the appeals were liable to be dismissed by upholding the  judgment
/decree of the trial court which had rightly dismissed the suits.  Secondly,
she argued that second suit filed for claiming specific performance  of  the
agreement for sale of suit house to the plaintiff was hit by  bar  contained
in Order II Rule 2 of CPC for  the  reason  that  the  plaintiff  failed  to
secure leave in her first suit and  hence  the  second  suit  filed  by  the
plaintiff for grant of specific performance was not  maintainable.  Thirdly,
she argued that assuming the second suit was held  maintainable,  even  then
it was barred by limitation prescribed in Article 54 of the Limitation  Act.
It was  pointed  out  that  cause  of  action  to  file  suit  for  specific
performance of contract against  the  defendants  arose  in  the  year  1989
itself no sooner 60 days period  expired  from  the  date  of  agreement  as
provided in clause 2  of  the  agreement,  whereas,  the  suit  in  question
seeking specific performance was filed  in  year  2000  and  hence,  it  was
hopelessly  barred  applying  the  limitation  prescribed  in  Article   54.
Fourthly, it was argued that in any case, there was  no  case  made  out  on
evidence by the plaintiff for reversal of the findings relating to grant  of
specific performance of agreement because the plaintiff  was  neither  ready
nor willing to perform her part of the  agreement  and  nor  there  was  any
evidence to hold in her favour on this material issue. Fifthly,  she  argued
that there was no evidence to hold that the plaintiff was in  possession  of
the suit house; rather there was enough evidence to hold that after sale  of
suit house by defendant no.2 to defendant no.1, it was defendant  no.1,  who
was in possession. Therefore, it should have been held  that  the  plaintiff
was not in possession of the suit house, as was rightly held  by  the  trial
court. And, lastly she argued that it should have been held with the aid  of
evidence that defendant no. 1 was bona fide purchaser of the suit house  for
value, as she purchased it after the owner i.e. defendant  no.  2  cancelled
the agreement dt 15.2.1989 and then sold the suit house to defendant no.  1.

23.   After arguing  at  length  with  reference  to  documents  on  record,
learned counsel for the appellants contended that impugned judgment  /decree
deserves to be set aside  and  that  of  the  trial  court  be  restored  by
dismissing both the suits filed  by  the  plaintiff.  Learned  counsel  also
relied upon certain decisions, which we shall refer later.
24.   Mr. P. Vishwanatha Shetty, learned senior counsel for  the  respondent
(plaintiff) supported the impugned judgment /decree and  contended  that  it
does not call for any interference. According  to  learned  senior  counsel,
all the findings recorded by the High Court, though of reversal, deserve  to
be upheld because the High Court, in exercise of its first appellate  powers
under Section 96 of CPC, rightly appreciated the evidence and  came  to  its
independent conclusion which it could legally do and which  it  rightly  did
while allowing the two first appeals.  Learned  senior  counsel  urged  that
this Court  while  hearing  these  appeals  cannot  and  rather  should  not
undertake the exercise of appreciating the whole evidence  again  like  that
of the first appeal except to find out whether there is any  apparent  legal
error in the impugned judgment so as to call for any  interference  by  this
Court. Learned senior counsel submitted that no such  error  exists  in  the
impugned judgment and hence these appeals are liable to be dismissed.
25.   Having heard the learned counsel for the parties at  length  and  upon
perusal of the record of the case, we find no merit in these appeals  as  in
our considered opinion, the submissions urged by the learned senior  counsel
for the appellants, though argued ably, have no force.
26.   Coming first to the legal question as  to  whether  bar  contained  in
Order II Rule 2 of CPC is attracted so as to non- suit  the  plaintiff  from
filing  the  suit  for  specific  performance  of  the  agreement,  in   our
considered opinion, the bar is not attracted
27.   At the outset, we consider it apposite to take note of law  laid  down
by the Constitution bench of this Court in Gurbux Singh  v.  Bhooralal,  AIR
1964 SC 1810, wherein this Court while explaining the true  scope  of  Order
II Rule  2  of  CPC  laid  down  the  parameters  as  to  how  and  in  what
circumstances, a plea should be  invoked  against  the  plaintiff.   Justice
Ayyangar speaking for the Bench held as under:
“In order that a plea of a  bar  under  Order  2  Rule  2(3)  of  the  Civil
Procedure Code should succeed the defendant who raises the  plea  must  make
out (1) that the second suit was in respect of the same cause of  action  as
that on which the previous suit was based;  (2)  that  in  respect  of  that
cause of action the plaintiff was entitled to more than one relief;  (3)that
being thus entitled to more than one relief  the  plaintiff,  without  leave
obtained from the Court omitted to sue for the relief for which  the  second
suit had been filed. From this analysis it would be seen that the  defendant
would have to establish primarily and to start with, the  precise  cause  of
action upon which the previous suit was filed, for unless there is  identity
between the cause of action on which the earlier suit was filed and that  on
which the claim in the later suit is based there would be no scope  for  the
application of the bar…..”
                                   (Emphasis supplied)

28.   This Court has consistently followed the aforesaid enunciation of  law
in later years and reference to only one of such recent decisions  in  Virgo
Industries (Eng.) P. Ltd. Vs Venturetech Solutions P.  Ltd.,  (2013)  1  SCC
625, would suffice, wherein this Court reiterated the principle  of  law  in
following words:
“The cardinal requirement for application of  the  provisions  contained  in
Order II Rules 2(2) and (3), therefore, is that the cause of action  in  the
later suit must be the same  as  in  the  first  suit.  It  will  be  wholly
unnecessary to enter into any discourse on the  true  meaning  of  the  said
expression, i.e. cause  of  action,  particularly,  in  view  of  the  clear
enunciation in a recent judgment of this  Court  in  the  Church  of  Christ
Charitable Trust and Educational  Charitable  Society,  represented  by  its
Chairman   v.   Ponniamman   Educational   Trust    represented    by    its
Chairperson/Managing Trustee  JT  2012  (6)  SC  149.  The  huge  number  of
opinions  rendered  on  the  issue  including  the  judicial  pronouncements
available does not fundamentally detract from what is stated  in  Halsbury's
Laws of England, (4th Edition). The following reference from the above  work
would, therefore, be apt for being extracted herein below:

“ ‘Cause of Action’ has been defined as meaning simply a  factual  situation
existence of which entitles one person to obtain from  the  Court  a  remedy
against another person. The phrase has been held from the earliest  time  to
include every fact which is material to be proved to entitle  the  Plaintiff
to succeed, and  every  fact  which  a  Defendant  would  have  a  right  to
traverse. 'Cause of action’ has also been  taken  to  mean  that  particular
action on the part of the Defendant which gives the Plaintiff his  cause  of
complaint, or the subject-matter  of  grievance  founding  the  action,  not
merely the technical cause of action.”

29.   In the instant case when we apply  the  aforementioned  principle,  we
find that bar contained in Order II Rule 2 is not attracted because  of  the
distinction in the cause of action for filing the two suits. So far  as  the
suit for permanent injunction is concerned, it was based on a  threat  given
to the plaintiff by the defendants to dispossess her from the suit house  on
2.1.2000 and 9.1.2000. This would be clear  from  reading  Para  17  of  the
plaint. So far as cause of action to file suit for specific  performance  of
agreement is concerned, the same was based on non performance  of  agreement
dated 15.2.1989 by defendant no. 2  in  plaintiff's  favour  despite  giving
legal notice dated 6.3.2000 to defendant no. 2 to perform her part.
30.   In our considered opinion, both the suits were, therefore, founded  on
different causes of action and hence could be filed  simultaneously.  Indeed
even  the  ingredients  to  file  the  suit  for  permanent  injunction  are
different than that of the suit for specific performance of agreement
31.   In case of former, plaintiff is required to make out the existence  of
prima facie case, balance of convenience and irreparable loss likely  to  be
suffered by the plaintiff on facts with reference to the  suit  property  as
provided in Section 38 of the Specific  Relief  Act,  1963  (in  short  “the
Act”) read with Order 39 Rule 1 & 2 of CPC. Whereas, in case of  the  later,
plaintiff is required to  plead  and  prove  her  continuous  readiness  and
willingness to perform her part of  agreement  and  to  further  prove  that
defendant failed to perform her  part  of  the  agreement  as  contained  in
Section 16 of The Act.
32.   One of the basic requirements for successfully invoking  the  plea  of
Order II Rule 2 of CPC is that the defendant of  the  second  suit  must  be
able to show that the second suit was also in respect of the same  cause  of
action as that on which the previous suit was based.
33.   As mentioned supra, since in the case on hand, this basic  requirement
in relation to cause of action is not made out, the  defendants  (appellants
herein) are not entitled to raise a plea of bar contained in Order  II  Rule
2 of CPC to successfully non suit the plaintiff from  prosecuting  her  suit
for specific performance of the agreement against the defendants.
 34.  Indeed when the cause of action to claim the respective  reliefs  were
different so also the ingredients for  claiming  the  reliefs,  we  fail  to
appreciate as to how a plea of Order II  Rule  2  could  be  allowed  to  be
raised by the defendants and how it was sustainable on such facts.
 35.  We cannot accept the submission of  learned  senior  counsel  for  the
appellants when she contended that  since  both  the  suits  were  based  on
identical pleadings and when cause of action to sue for relief  of  specific
performance of agreement was available to the plaintiff prior to  filing  of
the first suit, the second suit was hit by bar contained in Order II Rule  2
of CPC.
36.   The submission has a fallacy for two basic reasons. Firstly,  as  held
above, cause of action in two suits being different,  a  suit  for  specific
performance could not have been instituted on the basis of cause  of  action
of the first suit. Secondly, merely because pleadings  of  both  suits  were
similar to some extent did not give any right to  the  defendants  to  raise
the plea of bar contained in Order II Rule 2 of CPC.  It  is  the  cause  of
action which is material to determine the applicability of bar  under  Order
II Rule 2 and not merely the  pleadings.  For  these  reasons,  it  was  not
necessary for plaintiff to obtain any leave from the court  as  provided  in
Order II Rule 2 of CPC for filing the second suit.
37.   Since the plea of Order II Rule 2, if  upheld,  results  in  depriving
the plaintiff to file the second suit, it is  necessary  for  the  court  to
carefully examine the entire factual matrix of both the suits, the cause  of
action on which the suits are founded, reliefs claimed  in  both  the  suits
and lastly the legal provisions applicable for grant of reliefs in both  the
38.   In the light  of  foregoing  discussion,  we  have  no  hesitation  in
upholding the finding of the High Court on this issue. We,  therefore,  hold
that second suit (OS No. 2334 of 2000) filed by the plaintiff  for  specific
performance of agreement was not barred by virtue of bar contained in  Order
II Rule 2 CPC.
39.   This takes us to the next question as to  whether  suit  for  specific
performance was barred by limitation prescribed  under  Article  54  of  the
Limitation Act?
40.   In order to examine this question, it is necessary to  first  see  the
law on the issue as to whether time can be the essence  for  performance  of
an agreement to sell the immovable property and if so whether  plaintiff  in
this  case  performed  her  part  within  the  time  so  stipulated  in  the
41.   The learned Judge J.C. Shah (as His Lordship then was),  speaking  for
the Bench  examined  this  issue  in  Gomathinayagam  Pillai  and  Ors.  Vs.
Pallaniswami Nadar, AIR 1967 SC 868, in the  light  of  English  authorities
and Section 55 of the Contract Act and held as under:
“It is not merely because of specification of time at or  before  which  the
thing to be done under the contract is promised to be done  and  default  in
compliance therewith, that the other party may avoid the contract.  Such  an
option arises only if it is intended by the parties  that  time  is  of  the
essence of  the  contract.  Intention  to  make  time  of  the  essence,  if
expressed in writing, must be in language which is  unmistakable  :  it  may
also be inferred from the nature of the property agreed to be sold,  conduct
of the parties and the surrounding circumstances at or before the  contract.
Specific  performance  of   a   contract   will   ordinarily   be   granted,
notwithstanding default in carrying out the contract  within  the  specified
period, if having regard to the express stipulations of the parties,  nature
of the property and the surrounding circumstances, it is not inequitable  to
grant the relief. If the contract relates to sale of immovable property,  it
would normally be  presumed  that  time  was  not  of  the  essence  of  the
contract. Mere incorporation in the written agreement of a  clause  imposing
penalty in case of default does not by itself evidence an intention to  make
time of the essence.  In  Jamshed  Khodaram  Irani  v.  Burjorji  Dhunjibhai
I.L.R. 40 Bom. 289 the Judicial Committee  of  the  Privy  Council  observed
that the principle underlying S. 55 of the Contract Act did not differ  from
those which obtained under the law of England as regards contracts for  sale
of land. The Judicial Committee observed :

"Under that law equity, which governs the rights of the parties in cases  of
specific performance of contracts to sell real  estate,  looks  not  at  the
letter but at the substance of the agreement in order to  ascertain  whether
the parties, notwithstanding that they named a specific  time  within  which
completion was to take place, really and in  substance  intended  more  than
that it should take place within a reasonable time.... Their  Lordships  are
of opinion that this is  the  doctrine  which  the  section  of  the  Indian
Statute adopts and embodies in reference to sales of land. It may be  stated
concisely in the language used by Lord Cairns in  Tilley  v.  Thomas  I.L.R.
(1867) Ch. 61 :-

‘The construction is, and must be, in equity the same as in a Court of  law.
A Court of  equity  will  indeed  relieve  against,  and  enforce,  specific
performance, notwithstanding a failure to keep the  dates  assigned  by  the
contract, either for completion, or for the steps towards completion, if  it
can do justice between the parties, and if (as Lord Justice Turner  said  in
Roberts v. Berry (1853) 3 De G.M. G. 284, there is nothing in  the  'express
stipulations between the  parties,  the  nature  of  the  property,  or  the
surrounding circumstances,' which would make  it  inequitable  to  interfere
with and modify the legal right. This is what is  meant,  and  all  that  is
meant, when it is said that in equity time is not  of  the  essence  of  the
contract. Of the three grounds... mentioned by Lord Justice Turner  'express
stipulations'  requires  no  comment.  The  'nature  of  the  property'   is
illustrated by the case of reversions, mines, or  trades.  The  'surrounding
circumstances' must depend on the facts of each particular case."

42.   In Govind Prasad Chaturvedi Vs. Hari Dutt Shastri and Anr.,  (1977)  2
SCC 539, this Court placing reliance on the law laid down in  Gomathinayagam
Pillai (supra), reiterated the aforesaid principle and held as under:

“…….It may also be mentioned that the language used in the agreement is  not
such as to indicate in unmistakable terms that the time is  of  the  essence
of the contract. The intention to treat time as the essence of the  contract
may be evidenced by circumstances which are sufficiently strong to  displace
the normal presumption that in a contract of sale of land stipulation as  to
time is not the essence of the contract.
Apart from the normal presumption that in the case of an agreement  of  sale
of immovable properly time is not the essence of the contract and  the  fact
that the terms of the agreement do not unmistakably state that the time  was
understood to be the essence of the contract neither in  the  pleadings  nor
during the trial the respondents contended that time was of the  essence  of
the contract.”

43.   Again in the case reported in Smt. Chand Rani  vs.  Smt.  Kamal  Rani,
(1993) 1  SCC  519,  this  Court  placing  reliance  on  law  laid  down  in
aforementioned two cases took the same view. Similar  view  was  taken  with
more elaboration on the issue in  K.S.  Vidyanadam  and  Ors.  v.  Vairavan,
(1997) 3 SCC 1, wherein it was held as under:
“It has been consistently held by the courts  in  India,  following  certain
early English decisions, that in the case of agreement of sale  relating  to
immovable property, time is not  of  the  essence  of  the  contract  unless
specifically provided to that effect. The period  of  limitation  prescribed
by the Limitation Act for filing a suit  is  three  years.  From  these  two
circumstances, it does not follow that  any  and  every  suit  for  specific
performance of the agreement (which does not provide specifically that  time
is of the essence of the contract) should be decreed provided  it  is  filed
within the period of limitation notwithstanding the  time-limits  stipulated
in the agreement for doing one or the  other  thing  by  one  or  the  other
party. That would amount to saying that the time-limits  prescribed  by  the
parties in the agreement have no significance or value and  that  they  mean
nothing. Would it be reasonable to say that because time  is  not  made  the
essence of the contract, the time-limit (s) specified in the agreement  have
no relevance and can be ignored with impunity? It would  also  mean  denying
the discretion vested in the court by both Sections 10 and 20.  As  held  by
a Constitution Bench of this Court in Chand Rani vs.  Kamal  Rani  (1993)  1
SCC 519:

“ is clear that in the case of sale of immovable property there is  no
presumption as to time being the essence of the contract. Even if it is  not
of the essence of the contract, the  Court  may  infer  that  it  is  to  be
performed in a reasonable time if the conditions are (evident?) :  (1)  from
the express terms of the contract; (2) from the nature of the property;  and
(3) from the surrounding circumstances, for example, the  object  of  making
the contract.”

In other words, the court should look  at  all  the  relevant  circumstances
including  the  time-limit(s)  specified  in  the  agreement  and  determine
whether its discretion to grant specific performance  should  be  exercised.
Now in the case of urban properties in India, it is  well-known  that  their
prices have been going up sharply over the last few decades  -  particularly
after 1973.

“……Indeed, we are inclined to think that the rigor of the  rule  evolved  by
courts that time is not of the essence  of  the  contract  in  the  case  of
immovable properties - evolved in times when prices and values  were  stable
and inflation was unknown  -  requires  to  be  relaxed,  if  not  modified,
particularly in the case of urban immovable properties. It is high time,  we
do so…...”

The aforesaid view was upheld in K.  Narendra  vs.  Riviera  Apartments  (P)
Ltd. (1999) 5 SCC 77.
44.   Applying the aforesaid principle of law laid down  by  this  Court  to
the facts of the case at hand, we have no hesitation  in  holding  that  the
time was not the essence of agreement for its performance  and  the  parties
too did not intend that it should be so.
45.   Clauses 2 and 3 of the agreement (Annexure P-1),  which  are  relevant
to decide this question reads as under:
“2. The purchaser shall pay a sum  of  Rs.50,000/-  (Rupees  Fifty  Thousand
only) as advance to the seller at the time of signing  this  agreement,  the
receipt of which  the  seller  hereby  acknowledges  and  the  balance  sale
consideration amount shall be paid within 60 days from the  date  of  expiry
of lease period.

3. The Seller covenants with the Purchaser that efforts will  be  made  with
the Bangalore  Development  Authority  for  the  transfer  of  the  schedule
property in favour of the Purchaser after paying penalty.   In  case  it  is
not possible then the time stipulated herein for  the  balance  payment  and
completion of the sale transaction  will  be  agreed  mutually  between  the

46.   Reading both the clauses together, it is clear that  time  to  perform
the agreement was not made an essence of contract  by  the  parties  because
even after making balance payment after the expiry of  lease  period,  which
was to expire in 1995, defendant no. 2 as  owner  had  to  make  efforts  to
transfer the land in the name of plaintiff. That apart, we do not  find  any
specific clause in the agreement,  which  provided  for  completion  of  its
execution on or before any specific date.
47.   Since it was the case of the plaintiff that she paid the  entire  sale
consideration to defendant no. 2 and was accordingly  placed  in  possession
of the suit house, the threat of her dispossession in  2000  from  the  suit
house coupled with the fact that she having come to know that defendant  no.
2 was trying to alienate the suit house, gave  her  a  cause  of  action  to
serve legal notice to defendant no. 2 on  6.3.2000  calling  upon  defendant
no. 2 to perform her part  and  convey  the  title  in  the  suit  house  by
executing the sale deed in her favour.  Since  defendant  no.  2  failed  to
convey the title, the plaintiff filed  a  suit  on  31.3.2000  for  specific
performance of the agreement.
48.   Article 54 of the  Limitation  Act  which  prescribes  the  period  of
limitation for filing suit for specific performance reads as under:

|54. |For specific        |Three    |The date of fixed for the        |
|    |performance of a    |years    |performance, or, if no such date |
|    |contract.           |         |is fixed, when the plaintiff has |
|    |                    |         |notice that performance is       |
|    |                    |         |refused.                         |

49.   Mere reading of Article 54 of the Limitation Act would  show  that  if
the date is fixed for performance of the agreement, then  non-compliance  of
the agreement on the date would give a cause of  action  to  file  suit  for
specific performance within three years from the  date  so  fixed.  However,
when no such date is fixed, limitation of three years to  file  a  suit  for
specific performance would begin when the plaintiff  has  noticed  that  the
defendant has refused the performance of the agreement.
50.   The case at hand admittedly does not fall in  the  first  category  of
Article 54 of the Limitation Act because as  observed  supra,  no  date  was
fixed in the agreement for its performance. The case would thus be  governed
by the second category viz., when plaintiff has a  notice  that  performance
is refused.
51.   As mentioned above, it was the case of the plaintiff that she came  to
know on  02.01.2000 and 09.01.2000 that the owner of the  suit  house  along
with the so-called intending purchaser are trying  to  dispossess  her  from
the suit house on the strength of their ownership over the suit house.  This
event was, therefore, rightly taken as starting point of refusal to  perform
the agreement by defendant no.2, resulting in  giving  notice  to  defendant
no.2 by the plaintiff on 6.3.2000 and then filing of suit on 31.3.2000.
52.   In the light of the foregoing discussion, we uphold  the  findings  of
the High Court and accordingly hold that the suit  filed  by  the  plaintiff
for specific performance of the agreement was within  limitation  prescribed
under Article 54 of the Limitation Act.
 53.  This takes us to the last question as to whether the  High  Court  was
justified in granting  specific  performance  of  agreement  in  plaintiff's
favour by reversing  the  judgment/decree  of  the  trial  court  which  had
dismissed the suit.
54.   We may observe that notice of SLP was issued  essentially  to  examine
the two legal issues arising in the  case  as  discussed  above.  These  two
issues have been dealt with and answered against  the  appellants.  However,
since  learned  senior  counsel  for  the  appellants  also  questioned  the
legality and correctness of the finding of  the  High  Court  on  all  other
factual issues, we have, therefore, examined the other issues as well.
55.   Learned senior counsel for the  appellants  contended  that  the  High
Court was not justified in holding that defendant no. 1 was not a bona  fide
purchaser of the suit house for  value.  Another  submission  was  that  the
plaintiff was not ready and willing to perform her part  of  the  agreement;
and lastly her submission  was  that  the  plaintiff  was  never  in  actual
possession of the suit house despite execution of agreement and making  part
payment of Rs. 50,000/- to defendant no. 2. Learned senior counsel  for  the
appellants urged these factual submissions with equal  force  like  the  two
legal issues dealt with supra.
56.   In our considered opinion, the High Court  being  the  last  Court  of
appeal on facts /law while hearing first appeal under Section 96 of CPC  was
well within its powers to appreciate  the  evidence  and  came  to  its  own
conclusion independent to that of the trial court's decision.  One  can  not
dispute  the  legal  proposition  that   the   grant/refusal   of   specific
performance is a discretionary relief, and, therefore, once  it  is  granted
by the appellate court on appreciation of  evidence,  keeping  in  view  the
legal principle applicable  for  the  grant  then  further  appellate  court
should be slow to interfere in such finding, unless the finding is found  to
be either  against  the  settled  principle  of  law,  or  is  arbitrary  or
57.   This Court while hearing appeal under Article 136 is not  inclined  to
again appreciate the entire ocular/documentary evidence like that  of  first
appellate court unless the parameters noticed above  are  successfully  made
out in the case. Such does not appear to be a case of this nature.
58.   The High Court, in our considered opinion,  properly  appreciated  the
evidence for recording findings in plaintiff's favour  that  she  was  ready
and willing to perform her part of the agreement and  in  fact  did  perform
her part, firstly, by paying Rs. 50,000/- as advance and then  paid  balance
of Rs.  3,00,000/-  towards  sale  consideration  to  defendant  no.2;  that
plaintiff was placed in possession of the suit  house  by  defendant  no.  2
pursuant to agreement; and, lastly defendant no. 2 did not perform her  part
of the agreement.
59.   It is pertinent to mention that despite  holding  that  the  plaintiff
paid the entire sale consideration of Rs. 3,50,000/- to defendant no 2,  the
High Court directed the plaintiff to pay an additional  sum  of  Rs  4  lacs
over  and  above  Rs.  3,50,000/-  to   defendant   no.   2   towards   sale
consideration. Though no reasons were  assigned  by  the  High  Court  while
rendering this finding, but it seems that it must have been done  either  to
balance the equities between the parties and/or to compensate defendant  no.
2 the loss  caused  to  her  due  to  escalation  in  prices  of  immoveable
60.   Be that as it  may,  since  the  plaintiff  has  not  challenged  this
finding by filing any appeal or  cross  objection  in  these  appeals,  this
Court refrains from going into its correctness in  these  appeals  filed  by
the defendants.
61.   In the light of the foregoing discussion, we do not find any merit  in
the submissions urged by the learned senior counsel for the  appellants  and
accordingly we uphold the findings of the High Court on the issues  relating
to merits.
62.   Before concluding we consider  apposite  to  take  note  of  two  more
issues.  The  High  Court  while  passing  the  decree  directed  both   the
defendants i.e.  owner  of  the  suit  house  (vendor)  defendant  no.2  and
subsequent purchaser (defendant no. 1) to execute the sale deed of the  suit
house jointly in favour of the plaintiff' to avoid any legal  complications,
provided the plaintiff pays Rs. 4 lacs over and above Rs. 3,50,000/- to  the
owner of suit house (defendant no. 2).
 63.  A direction of this nature is permissible. It  was  so  held  by  this
Court way back in the year 1954 in Lala Durga Prasad and Anr. Vs. Lala  Deep
Chand and Ors., AIR 1954 SC 75, wherein the learned  Judge  Vivian  Bose  J.
known for his subtle power of expression and distinctive  style  of  writing
while speaking for the bench held as under:

  “In our  opinion,  the  proper  form  of  decree  is  to  direct  specific
performance of the contract between the vendor and the plaintiff and  direct
the subsequent transferee to join in the conveyance so as  to  pass  on  the
title which resides in him to  the  plaintiff.  He  does  not  join  in  any
special covenants made between the plaintiff and his vendor; all he does  is
to pass on his title to the plaintiff. This was the course followed  by  the
Calcutta High Court in Kafiladdin v. Samiraddin AIR1931Cal67 and appears  to
be the English practice. See Fry on Specific Performance, 6th edition,  page
90,  paragraph  207;  also  Potter  v.  Sanders 67  E.R.  1057.  We   direct

64.   We respectfully follow these observations and accordingly  uphold  the
direction issued by the High Court for execution of the sale deed.
65.   There is, however, one more aspect of  the  case  which  needs  to  be
taken note of and has arisen in the case as  a  result  of  passing  of  the
impugned decree in plaintiff's favour by the High Court and upheld  by  this
66.   The effect of execution of sale deed  in  plaintiff's  favour  by  the
defendants in terms of decree would  obviously  result  in  cancellation  of
contract of sale of the suit house between the owner (defendant no.  2)  and
subsequent purchaser (defendant no. 1).  The reason is not far to seek.
67.   In a contract for sale of immovable property for consideration,  if  a
seller fails to transfer the title to the  purchaser,  for  any  reason,  on
receipt of consideration towards the sale price then a seller has  no  right
to retain the sale consideration to himself and he has to  refund  the  same
to the purchaser. When the contract fails then parties to the contract  must
be restored to their respective original position  which  existed  prior  to
execution of contract as far as possible provided there is no specific  term
in the contract to the contrary.
68.   The contract between defendant no.2 and defendant  no.1,  i.e.,  owner
and subsequent purchaser, stands frustrated due to impugned  judgment/decree
because now defendant no.2 would not be in  a  position  to  sell  the  suit
house to defendant no.1 though she has received  Rs.4  lacs  from  defendant
no.1 for such sale of suit house in her favour.   It  is  for  this  reason,
defendant no.2 is liable to refund Rs.4 lacs to defendant no.1.
69.   Though this litigation is not between inter se  owner  and  subsequent
purchaser of the suit house yet in order to do substantial  justice  between
the parties and to see the end of this long  litigation  and  to  prevent  a
fresh suit being instituted by defendant no.1  against  defendant  no.2  for
refund of sale consideration which will  again  take  years  to  decide  and
lastly when neither it involve any intricate adjudication of facts,  nor  it
is going to cause any prejudice to the parties,  we  consider  it  just  and
proper to invoke our power under Article 142 of the  Constitution  of  India
in the peculiar facts and circumstances of the case as  narrated  above  and
accordingly direct defendant no. 2 (owner of the suit house) to  refund  Rs.
4 lacs to defendant no. 1 within three months after execution of  sale  deed
by them in favour of plaintiff pursuant to the impugned judgment/decree.
70.   We also direct that failure to refund the amount within three  months,
would carry interest at the rate of 9% payable on  the  unpaid  amount  from
the date of this order till recovery and defendant no. 1, in  the  event  of
non-payment by defendant no. 2, would be entitled to levy execution  against
defendant no. 2 for realization of outstanding money along with interest  as
awarded treating this order to be a decree in  appropriate  executing  court
in accordance with law.
71.   We, however, make it clear that we have given this  direction  because
this Court alone has power to pass such directions in  an  appropriate  case
and in our view, this is a case wherein we consider  it  appropriate  to  do
so, to do substantial justice to all parties.
72.    For  the  foregoing  reasons  and  directions,  these   appeals   are
accordingly disposed of.  No costs.

                                          [FAKKIR MOHAMED IBRAHIM KALIFULLA]

                                                       [ABHAY MANOHAR SAPRE]

New Delhi;
October 29, 2014.


No comments:

Post a Comment

Note: Only a member of this blog may post a comment.