LAW FOR ALL : Whether the plaintiff is not entitled to purchase more than 500 sq. metres under the Tamil Nadu Urban Land Ceiling Act and whether the suit agreement is void on that account?”

Friday, October 16, 2020

Whether the plaintiff is not entitled to purchase more than 500 sq. metres under the Tamil Nadu Urban Land Ceiling Act and whether the suit agreement is void on that account?”

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.13516 OF 2015

FERRODOUS ESTATES (PVT.) LTD. … APPELLANT

VERSUS

P. GOPIRATHNAM (DEAD) & ORS. … RESPONDENTS

J U D G M E N T

R.F. Nariman, J.

1. This appeal arises from a suit for specific performance that was filed

by the appellant against four defendants who are today represented by the

respondents. By an agreement to sell dated 12.06.1980 entered into

between the appellant company and P. Nagarathina Mudaliar, P.

Gopirathnam, P. Lavakumar, and P. Basantkumar, the agreement recites:

“Whereas the property more particularly described in the

Schedule hereunder and hereinafter referred to as the

said property, originally belonged to the Hindu Undivided

Family consisting of Sri P. Nagarathina Mudaliar and his

father Sri P. Thiruvengada Mudaliar;

Whereas there was a partial partition in the said family as

a result of which, the first vendor has become the owner

of the said property, said deed of partition having been

registered with the Sub-Registrar, Madras-Chingleput, as

Document No. 1268 of 1944;

Whereas the vendors have mortgaged the said property

along with the other properties owned by them at

Haddows Road, Madras-1, for a sum of Rs.5,65,000/-

(Rupees Five Lakh Sixty-Five Thousand Only) by way of

a deed of mortgage registered with the Sub-Registrar, T.

Nagar, Madras, as Document No. 3429 of 1967;

Whereas the vendors have offered to sell the said

property to the purchasers, free from all encumbrances,

including the mortgage created in favour of Syndicate

Bank, Madras-1;

Whereas the vendors are making necessary

arrangements for discharging the said loan due to

Syndicate Bank, Madras-1, and also to get a letter from

Syndicate Bank, releasing their interest, if any, in the said

property offered to be sold;

xxx xxx xxx”

The material clauses of the agreement are as follows:

“3. It is agreed that the sale consideration should be paid

as follows:

(a) A sum of Rs.1,00,000/- (Rupees One Lakh

Only) deposited by the purchasers with M/s

Venkataraman & Co. on behalf of the vendors

as advance for the said sale consideration;

(b) The purchasers hereby agree to pay the

balance of the price of Rs.4,40,000/- (Rupees

Four Lakhs And Forty Thousand Only) to

Syndicate Bank in discharge of the loan

borrowed by the vendors on the mortgage of

the said property subject to the bankers giving

the certificate of discharge in respect of the

said property.

4. The vendor shall arrange to secure (a) Income-tax

Clearance Certificate, (b) Permission from the Competent

Authority under the Urban Land Ceiling Act, and (c) such

other orders of permits and the like as may be necessary

for completing the sale transaction at the cost of the

vendors.

5. The purchaser shall complete the transaction within six

months from the date of this agreement. This period shall

be subject to the vendors obtaining the necessary

clearance certificate from the appropriate authorities as

stated above and giving vacant possession of the said

property.”

xxx xxx xxx

“8. The vendors hereby confirm that the said property is

subject to a mortgage loan taken by them from Syndicate

Bank, Armenian Street, Madras-1, and that necessary

provision has been made to discharge the loan, in the

sale agreement itself and excepting the above, the said

property to be conveyed is not subject to any claim,

attachment, lien, charge, mortgage, lis pendens or any

other encumbrance, whatsoever.

9. The vendors undertake to deliver vacant possession of

the property, before the execution of the sale deed.

10. In the event of the vendors commit default or acts in

breach of this agreement the purchasers shall be entitled

without prejudice to the right of specific performance, to

the refund of the advance of Rs.1,00,000/- (Rupees One

Lakh Only) and damages.”

The suit property admeasured 8 grounds and 2354 sq. feet.

2. Given the fact that the necessary permissions were not obtained by

the defendants, in particular, the permission from the competent authority

under the Tamil Nadu Urban Land (Ceiling & Regulation) Act, 1978 [“Tamil

Nadu Urban Land Ceiling Act”], the appellant filed a suit for specific

performance on 24.02.1981, in which it was specifically pleaded as follows:

“5. The plaintiff which is a private limited company has

agreed to purchase the schedule mentioned property with

a view to construct the multi-storeyed building and the

plaintiffs are always ready and willing to perform their part

of the obligation under the agreement for completion of

the sale transaction. Further the plaintiffs are ready and

willing to deposit the balance of the sale price agreed to

be paid under the agreement in question before this

Hon’ble Court to show their bonafide in purchasing the

property and to show their readiness to perform their part

of the contract in accordance with the agreement. The

plaintiff submits that the defendants are bound to secure

income tax clearance certificate and permission from the

competent authority etc. which are prerequisite for the

completion of the sale transaction and to complete the

transactions within 6 months from the date of the

agreement.

6. The plaintiff submits that the defendants have not so far

arranged to get income tax clearance certificate and

permission from the competent authority and such other

formalities to the be observed for the completion of the

sale transaction and they have not shown any interest in

concluding the transactions. In the circumstances the

plaintiff submits that they are willing to perform their part

of the contract and it is the defendants who are evading to

completing the sale transactions within the agreed time.

The plaintiff understands and believes the same to be

true that the defendants are not willing to complete the

sale transaction and they reliably understand that the

defendants are trying to alienate the property to third

parties for higher price taking advantage of the rise in

price of the landed properties ignoring the agreement to

sell. The plaintiff submits that the conduct and attitude of

the defendants in evading and postponing the execution

of the sale deed is unjust and wanton and it is only with a

view to get higher price for the property ignoring the lawful

claims of the plaintiff under the agreement, the

defendants do not show any inclination to complete the

sale transaction.”

A written statement filed by P. Nagarathina Mudaliar and his two sons,

namely, P. Gopirathnam and P. Lavakumar, who were defendants no.1, 2,

and 3 respectively, denied that the total consideration for the agreement

was Rs.5,40,000/- as is stated therein. Apart from other denials made on

the merits of the case, it is important to note that no defence was taken on

any plea that the Tamil Nadu Urban Land Ceiling Act would be infracted if

the suit for specific performance were to be decreed. This was only done,

almost by way of an afterthought, by an additional written statement filed by

the self-same defendants on 16.07.1986, in which it was pleaded:

“2. In any event, these defendants submit that the plaintiff

is not entitled to any decree since the plaintiff is not

entitled to purchase more than the prescribed limit of 500

sq. metres under the provisions of Tamil Nadu Urban

Land Ceiling Act and hence the agreement is void as

violating the provisions of statues.”

3. As many as eight issues were framed in the suit. Issue no. 5 reads as

follows:

“5. Whether the plaintiff is not entitled to purchase more

than 500 sq. metres under the Tamil Nadu Urban Land

Ceiling Act and whether the suit agreement is void on that

account?”

4. By a judgment dated 15.03.1991, delivered by a learned Single

Judge of the Madras High Court, the learned Single Judge held that the

fixation of the sale price of Rs.1,02,000/- per ground was because the land

was low-lying and requires to be levelled. It was also held that a layout plan

had been sanctioned for the purpose of putting up flats in the suit property.

The Single Judge further held that there were circumstances to show that

there was necessity on the part of the defendants to sell the suit property,

given that a loan from Syndicate Bank was taken by mortgaging a larger

piece of land of 30 grounds, and that money was required for the defendant

no.1’s son’s marriage, which was celebrated on 23.06.1980. It was further

found that M/s Venkataraman & Co., the auditor of the defendants,

negotiated the sale of the suit property, the first defendant admitting that a

sum of Rs.65,000/- was received by him for the marriage of his son out of

the advance money of Rs.1,00,000/- paid to the aforesaid auditor, M/s

Venkataraman & Co. It was also held that the first defendant was the karta

and manager of the joint family, and that even though the fourth defendant

was not present at the time of execution of the sale agreement and did not

actually sign the sale agreement, the fourth defendant had given a letter of

authorisation, authorising the first defendant to sell the property on his

behalf. It was further held:

“Having signed Ex.P.2 and received Rs.65,000/- as per

Ex.P.4, it would not be fair on the part of the first

defendant to come forward and surprise the plaintiff

during trial that he does not know the contents thereof.

The inconsistent stand taken by the first defendant during

the trial, quite different from the plea in the written

statement, would lead to presume the lack of truth in his

version.”

5. Importantly, so far as obtaining of permission from the Urban Land

Ceiling authorities was concerned, it was held that the defendants did not

comply with this condition, as a result of which there would be no legal

obstacles standing in the way of the plaintiff suing for specific performance,

given the fact that the defendants were in breach of the agreement.

Insofar as the plea in the additional written statement was concerned, issue

no. 5 was answered by the learned Single Judge as follows:

“The plea of the defendants in their additional written

statement that they will not be competent to sell anything

beyond 500 sq. metres prescribed as ceiling under the

Urban Land Ceiling Act and that because Ex.P.2

envisages the sale of 8 grounds and 2354 sq. ft.

exceeding the ceiling area, Ex.P.2 must be deemed to be

invalid and unenforceable, is not sound. There is no term

in Ex.P.2 that the agreement of sale is subject to the grant

of permission by the competent authority under the Urban

Land Ceiling Act and that in the event of refusal of the

permission by the competent authority, the agreement of

sale shall fail. It has to be pointed out here, that even if

there is a clause in Ex.P.2 stating that the defendant

should arrange for securing the permission of the

competent authority and if the same has not been

obtained by the defendants, it cannot be a ground for the

defendants to refuse the sale of the suit property. It is

open to the plaintiff (the purchaser) to get a sale of the

entire suit property measuring 8 grounds and 2354 sq.ft.

even if it exceeds 500 sq. metres. The plaintiff may get

the sale with that risk.”

6. Thereafter, the appellant-plaintiff established that it had been ready

and willing to perform its part of the contract continuously, the balance sum

of Rs.4,40,000/- being deposited in the Court on the directions of the Court.

The result, therefore, was as follows:

“23. From the foregoing discussions, my findings on the

issues are that the suit agreement of sale dated

12.06.1980 is true, valid and enforceable, that it does not

suffer from any material alteration, that it is a concluded

contract, that the agreement of sale is binding on the 4th

defendant, that the defendants have committed breach of

the agreement, that the plaintiff is entitled to purchase the

suit property and to get a decree for specific performance

of the agreement as prayed for.

24. In the result, the suit is decreed directing defendants 2

to 6 to execute the sale deed in respect of the suit

property in favour of the plaintiff within a period of two

months, in default the sale deed shall be executed by

Court and got registered.”

7. A first appeal was filed to a Division Bench of the High Court, which

then referred the matter to a Full Bench on various questions that were

submitted by it. The Full Bench, by a judgment dated 03.03.1999, set out

the reference order as follows:

“Section 4 of the Act states that no person shall be

entitled to hold vacant land in excess of the ceiling limit,

except as otherwise provided in the Act. Section 7 of the

Act makes it obligatory on the person holding excess land

to file statement. Under section 11 of the Act, excess land

could be acquired.

Section 17 of the Act places ceiling limit on future

acquisition by inheritance, bequest or by the sale in

execution of decrees etc. Section 19 of the Act provides

for penalty for concealment etc., of particulars of vacant

land. Even under section 6 of the Act, there is a

prohibition to transfer the excess vacant land unless such

person has filed a statement, and notification regarding

the excess vacant land held by him has been published

under sub-section (1) of section 11 of the Act. The said

section further declares that any transfer made in

contravention of the provisions of the Act, shall be

deemed to be null and void. As can be seen from the

various provisions contained in the Act, section 21 deals

with power of exemption. A plain reading of section 6

goes to show that what is prohibited is a transfer of

excess vacant land and the consequence of such transfer

in contravention of the provision contained in the said

section viz., such transfer shall be deemed to be null and

void. In other words, it speaks of a completed transaction

of transfer. It does not refer to the agreements at all. We

are not able to read any prohibition in the said provision

prohibiting the parties from entering into agreement of

sale. In the decision of the Division Bench of this Court

aforementioned, a view is taken that courts in passing a

decree for specific performance, cannot lend support to

the parties to enforce the agreement so as to defeat the

provisions of the Act, in particular section 6 of the Act. We

are unable to agree with this view. There may be a decree

for specific performance subject to certain conditions, to

be complied with provisions of section 6 itself or subject to

grant of exemption and in the light of the judgment of the

Supreme Court in the case of Jambu Rao Satappa

Kocheri v. Neminath Appayya Hanamannayyar, AIR

1968 SC 1358 : [1968] 3 SCR 706, it cannot be said that

such an agreement is hit by section 23 of the Act. Under

the circumstances, we are of the view that this question is

required to be decided by a larger Bench. Hence we refer

this case for hearing and disposal by a larger Bench

including the question as we have stated above.”

The Full Bench then referred to the Tamil Nadu Urban Land (Ceiling &

Regulation) Act, 1978, which came into force w.e.f. 03.08.1976. After

referring to a number of decisions, the Full Bench then concluded:

“24. From these decisions, it is clear that even if the

contract by itself may not be illegal but its enforcement if

violates any law that will be a ground to hold that the

agreement cannot be enforced. We have already

extracted preamble of state Act and also the decision

reported in AIR 1979 SC 1415 : [1979] 3 SCR 802 , why

the Act was enacted. It is to prevent concentration of

Urban Land in the hands of few persons and speculation

in profiteering therein. It is to implement this provision of

the Act, this provision under section 6 and 11(4) of the Act

are enacted. If the seller is having land in excess than the

ceiling limits and if it is ultimately found that the Act also

applies permitting such persons to execute sale deed

pursuant to the agreement of sale, it will be defeating or

circumventing the provisions of the Act. Equitable

distribution of land, which is contemplated under the

provisions may not be possible if the sale is allowed to

take place. The intention is also very clear that third party

right should not be created, which is likely to affect him

also. If by enforcement of contract, if it amounts to subvert

or circumvent law, court cannot be party to such

enforcement, Court will have to discountenance the

practice and it will have to safeguard the foundation of

Society.

25. The question whether only completed transactions are

contemplated under section 6 of the Act and therefore

enforcement of agreement for sale is not a bar is also an

argument without any merit. It is true that under the Act,

no person is entitled to hold more than the ceiling limit as

prescribed under section 4 of the Act. Argument is that

purchaser is not holding any land on the basis of an

agreement unless he gets some title. It still continues only

with vendor. Therefore, there is no prohibition in

enforcement of contract. Section 6 prohibits transfer by a

person holding land in excess of ceiling limits. The matter

will have to be considered taking into consideration the

rights of seller and if that person holds more land than

prescribed under section 5, such transfer shall be

deemed to be null and void. The prohibition under section

6 is for transferring the land and consequently declares

that any violation of law shall be deemed to be null and

void. Section 6 contemplates both proposed transfer and

completed transfer. An agreement of sale is also affected

by section 6 of the Act.”

xxx xxx xxx

“38. It is true that the Act is a self-contained Code with

regard to urban lands and ceiling provisions. It is also true

that there are authorities to decide as to whether

transaction is valid or invalid. Question of valid or invalid

transaction will apply only regarding completed

transaction. When section 6 prohibits even proposed

transfer, question of considering validity or invalidity does

not arise and the consequences are also already declared

by the Act as null and void. It takes as if there is no

transaction at all in the eye of law.

39. In the decision reported in Shah Jitendra Nanalal v.

Patel Lallubhai Ishverbhai, AIR 1984 Guj 145 (FB), one

of the questions that was raised before the Full Bench

was whether a decree for specific performance could be

given condition. What is the effect of section 5(3) read

with section 20 of the Central Act in the agreement of

transfer was the matter in issue. Once it is held that

section 6 is an absolute bar, question of granting

conditional decree also will not arise. The said argument

pre-supposes that agreement and sale are valid and is

invalid only as against Government.

40. We do not think that the decision therein could be

applied so far as Tamil Nadu Act is concerned. Exemption

under section 21 can be applied only by vendor and it is

for him exemption is granted. While considering suit for

specific performance, Court is only concerned whether

purchaser has come to Court for enforcing the agreement

in terms thereof. Asking vendor to get exemption and then

to execute the agreement will be deviating from the terms

of contract and the Court will not enforce such a contract.

That will mean that purchaser is not willing to purchase

the land as per agreement, but only with deviation, i.e.,

Vendor must get exemption and execute the sale deed.

41. In paragraph 11 of the Full Bench judgment, it is said

that,

“So long as provision declaring the transfer

under s. 5(3) as void is subject to the right to

move for exemption, obtain exemption and

transfer the property, the power of an owner is

vacant land in excess of the ceiling limit to

“alienate” such land is dormant in him and

such power could be exercised by him in case

he seeks exemption, satisfies the Government

that the grounds for exemption exist and

obtains such exemption. That being the case,

a decree cannot be defeated on the ground

that “transfer” inter-parties would not be

possible...”

We cannot subscribe the said view, for, granting decree

for specific performance of contract itself being

discretionary. Apart from the sale, when a transaction is

only after obtaining exemption or permission from another

authority, over which Court has no control, the relief of

specific performance usually is not granted. While giving

such direction, it will be going beyond contract and if

ultimately exemption is refused, in effect, the decree will

become waste paper. While exercising discretion, the

Court will have to see whether it could pass executable

decree and while exercising discretion, these factors are

also considered for granting relief. The decision reported

in Shoba Viswanathan v. D.P. Kinggley, 1996 (1) LW

721 of the judgment supports the view, which we have

taken.

42. Therefore, we answer the reference as follows:

Since provisions of Bombay Tenancy and Agricultural

Lands Act are entirely different from that of Tamil Nadu

Urban Land (Ceiling and Regulation) Act, 1978, various

Bench decisions of this Court, wherein it was held that a

decree for specific performance of contract cannot be

granted, if it violates section 6 of Tamil Nadu Urban Land

(Ceiling and Regulation) Act, 1978 do not require

reconsideration.

We also hold that section 6 of the Act not only prohibits

a completed transfer but also a proposed transfer.

We also hold that a decree for specific performance of

contract cannot be granted conditionally upon vendor

satisfying certain conditions, if it is not part of the

agreement.”

8. Given this declaration of law inter-parties, the matter went back to the

Division Bench. The Division Bench then referred to paragraph 22 of the

judgment of the learned Single Judge and remanded the matter to the

learned Single Judge to record a finding as follows:

“4. We have, therefore, felt it necessary to direct the

learned trial Judge to record a finding on the question as

to whether the extent of 8 grounds and 2354 sq.ft. which

is the subject matter of the agreement to sell was held by

the defendants in excess of the ceiling limit applicable to

them, and as to whether that extent could have been sold

if at all only with the permission of the authorities under

the Act.”

9. The learned Single Judge, by a judgment dated 30.09.2003,

ultimately recorded:

“9. However, I am to point out that the material questions

whether the plaintiff is entitled to claim the relief of specific

performance or not and the question, whether sub-section

3 of section 5 and proviso to section 5(3) and section 6

are applicable to this case or not, whether after repeal of

the Tamil Nadu Urban Land (Ceiling and Regulation) Act

the claim of the defendants under the repealed Act is no

longer available or not, whether permission was

necessary to effect alienation in pursuance of agreement

of sale involved in this case and like matters can be

decided only by the Division Bench of this court which has

called for the finding as indicated above.

10. However, the finding is recorded to the effect that the

subject matter of the suit viz., 8 grounds and 2354 sq.ft.

factually stands as excess lands within the meaning of the

Tamil Nadu Urban Land (Ceiling and Regulation) Act

before it was repealed. Accordingly, the finding is

submitted to that effect for kind consideration of the

Hon’ble Division Bench of this Court.”

10. The matter then returned to the Division Bench, which by the

impugned judgment dated 29.01.2007, reversed the judgment of the

learned Single Judge by applying the Full Bench decision relating to the

matter inter-parties. Dealing with section 5(3) and its proviso of the Tamil

Nadu Urban Land Ceiling Act, the Division Bench first held:

“28. In the present case, the land proposed to be

transferred under the agreement is 8 grounds and 2354

sq.ft. The entire land is admittedly a vacant land. For the

purpose of this case it is assumed that the plaintiff did not

have any dwelling unit or any vacant land. If, instead of

the agreement, the sale itself could have been affected in

respect of 8 grounds 2354 sq.ft., the plaintiff would have

become the owner of the said vacant land. In other words,

the land transferred would have exceeded the ceiling limit

of the transferee. The main provision contained in section

5(3) enables the person holding land in excess to

continue to hold such land because the sanctioned layout

is available. However, the proviso indicates that he cannot

sell such land if ultimately the lands in the hands of the

transferee would exceed the ceiling limit of such

transferee. It does not mean that wherever transferee is

without any dwelling unit or does not own any vacant

land, any extent of land could be sold to such person. The

clear intention is that the person intending to purchase

such property should not in the process acquire land in

excess of his own ceiling limit. Any other interpretation

would obviously defeat the very purpose of the proviso.

29. Therefore, in our opinion, even assuming that the

intended purchaser did not have dwelling unit or vacant

land, since the agreement of sale was in respect of

vacant land, which would have in the aggregate exceeded

the ceiling limit of the proposed transferee, the embargo

contained in section 5(3) proviso read with section 6 was

equally applicable.”

11. Referring to the argument of the appellant that the Tamil Nadu Urban

Land Ceiling Act had been repealed vide the Tamil Nadu Urban Land

(Ceiling & Regulation) Repeal Act, 1999 [“Repeal Act”] w.e.f. 16.06.1999,

the Division Bench then held:

“31. We have already extracted in extenso the different

observations made by the Full Bench, which is the

opinion rendered in a matter arising out of the present

dispute. In such Full Bench decision, the earlier views

expressed by several Division Bench decisions of this

Court holding the agreement in contravention of the

provisions of the Act to be invalid is obviously binding on

us. At several places it has been indicated that such

agreement is void. If the agreement was void at the

inception, the subsequent repeal of the Act possibly may

not have the effect of reviving such void agreement. Since

such agreement has been considered to be against the

Public Policy and void by the Full Bench, which opinion is

obviously binding on us and also on the parties at least

for the time being, we are unable to hold otherwise.”

Thus holding, the Division Bench then found:

“34. If this contention is accepted it would mean that

during duration of the Act, i.e., till 1999, the agreement

was not enforceable and such agreement could be

specifically performed after 1999, when the Act was

repealed. In other words, the court would be called upon

to enforce the agreement after 19 years on the basis of a

consideration which was fixed almost two decades back.

It is of course true that there are many instances where

such matters are pending before the Court for a long

period and thereafter the Court passes a decree at trial

stage or appellate stage for enforcement of the contract.

But, such a position cannot be compared to the present

case, wherein as per the opinion of the Full Bench such

agreement was contrary to the Public Policy under

section 23 of the Indian Contract Act and was not

enforceable, if not void. To enforce such an agreement

after long lapse of time because of the subsequent event,

namely, repeal of the Act, would not be equitable.

35. In this context, it would be more appropriate to

indicate that during course of hearing, the learned Senior

Counsel on the basis of the specific instructions of and in

the presence of counsel on record had submitted that

apart from Rs.4,40,000/-, which has been deposited in

court and which has been invested in fixed deposit

earning interest, the plaintiff/respondent is prepared to

pay a further sum of Rs.1.25 Crore for completing the

transaction. On the other hand, the learned Senior

Counsel appearing for the defendants/appellants

submitted that since the agreement itself contemplated

payment of compensation/damages in case of default by

the defendants, the court should instead of specifically

enforcing the agreement, direct payment of

compensation/damages to the plaintiff. Learned Senior

Counsel on the basis of specific instructions and in the

presence of counsel on record made a submission that

the defendants/appellants are prepared to pay a

consolidated compensation/damages of Rs. 2 crores.

36. It may be that the plaintiff, if permitted to purchase the

property, it would develop the same and earn more profit

than Rs.2 crores offered by the defendants/appellants.

However, keeping in view the fact that the defendants are

the original owners and weighing both the options, we feel

interest of justice would be served by directing the

defendants/appellants, on the basis of concession of the

counsels that the defendants/appellants shall be liable to

pay a consolidated sum of Rs. 2 crores as

compensation/damages to the plaintiff, which would

discharge their liability in full.

37. In view of the above conclusions, it is not necessary

for us to go into other questions raised by the appellants

to the effect that the plaintiff was not ready and willing to

perform its part of the contract.

38. In the result, the appeal is allowed in part. The

judgment and decree of the learned single Judge is

modified and instead of decree for specific performance

of the agreement, we direct that the

defendants/appellants shall be liable to pay a sum of Rs.2

crores to the plaintiff, in discharge of their entire liability.

Such amount should be paid or deposited in court on or

before 31.3.2007, failing which such amount shall carry

interest at the rate of 10% per annum thereafter. The

amount deposited by the plaintiff is permitted to be

withdrawn by the plaintiff along with the accrued interest.

The parties shall bear their own costs throughout.”

12. Shri Guru Krishnakumar, learned Senior Advocate appearing on

behalf of the appellant, has argued that every single factual finding found

by the learned Single Judge, including findings as to the dishonesty of the

defendants, had not been reversed by the Division Bench in appeal. He

argued that on a wrong application of the Full Bench judgment, the bar

contained in section 6 of the Tamil Nadu Urban Land Ceiling Act was

applied against the appellant, as a result of which the agreement would

have to be held to be void ab initio, which was incorrect, given the fact that

in this agreement, it was the defendants who were to obtain permission

from the competent authority under the Tamil Nadu Urban Land Ceiling Act,

which permission could have been obtained. He referred to the Repeal Act

and said that in any case, given the fact that a first appeal is in the nature

of a rehearing of a suit, on the date that the Division Bench passed its

decree, the Tamil Nadu Urban Land Ceiling Act stood repealed, as a result

of which none of its provisions could be used in order to hit the agreement

in the present case. He then referred to section 5(3) and its proviso, and

cited judgments to show that the Division Bench’s construction of the

proviso would render the main part of section 5(3) redundant. He argued

that on balance, it was found that the appellant-plaintiff had been ready and

willing throughout to perform its part of the agreement, whereas the

defendants were correctly found to be in breach, neither of which findings

has been set aside by the Division Bench. To, therefore, arrive at the

conclusion that the agreement is null and void ab initio, as a result of which

specific performance cannot be decreed, is wholly incorrect in the facts of

the present case. He also stressed the fact that it was open to the

defendants to have applied for exemption of the suit property out of the

larger property that was owned by them, and had they done so, the suit

property, being within the ceiling limit of the original four defendants in the

suit, the suit for specific performance was correctly decreed in the

appellant’s favour. The fact that the appellant, in turn, could only purchase

up to 500 sq. metres, the same being the ceiling limit, would not render the

agreement null and void ab initio, but on the contrary, would be at the risk

of the appellant, as correctly held by the learned Single Judge. In any case,

the Tamil Nadu Urban Land Ceiling Act having been repealed in 1999, by

the time the Division Bench passed its judgment, there was no impediment

in decreeing specific performance of the suit property, consequent upon the

repeal of the said Act. He cited a number of judgments to buttress his

submissions. He also attacked the Division Bench judgment stating that

the fact that litigation took 27 years by the time the Division Bench passed

its judgment could not be put against the appellant, as has been held by a

series of judgments of this Court.

13. Shri V. Giri, learned Senior Advocate appearing on behalf of the

respondents, argued that the Full Bench judgment was inter-parties and

bound the parties. Being res judicata between the parties, it is not now

possible to reopen what was held therein, the appellant not having

appealed from the said Full Bench judgment which, therefore, became final

between the parties. If the Full Bench judgment is to be seen, the Division

Bench was absolutely correct in its conclusion that the agreement being

void ab initio, and therefore stillborn, could not be resuscitated at any future

point of time, given the repeal of the Tamil Nadu Urban Land Ceiling Act.

Further, he cited judgments to show that where a vested right accrues on

the date of the filing of the suit, that cannot be taken away later, and the

suit must be decided as on the date the plaint is filed and not on the date of

the state of the law when the appellate decree is passed. He also argued

that in any event, this Court should not interfere under Article 136 as the

judgment under appeal is equitable – the appellant has been awarded Rs.2

crores with interest, which would come to a sum of over Rs.3 crores today,

despite the fact that specific performance could not be granted of a void

agreement. He also added that the Division Bench was right in stating that

after so many years, grant of specific performance, being discretionary,

was correctly refused.

14. Having heard learned counsel for the parties, it is first important to

deal with Shri Giri’s basic contention that the Full Bench judgment stands

as a roadblock to the decreeing of a suit for specific performance in the

present case. Shri Giri is right in arguing that it is not open to the appellant

to go behind the Full Bench judgment as it is inter-parties, as a result of

which the law laid down by the Full Bench judgment must apply to the

parties, res judicata clearly attaching even to issues of law based on the

same cause of action – see Mathura Prasad Bajoo Jaiswal v. Dossibai

N.B. Jeejeebhoy, (1970) 3 SCR 830 at p. 836. This being the case, it is

important now to analyse what was held by the Full Bench.

15. The Full Bench judgment, while stating that section 6 of the Tamil

Nadu Urban Land Ceiling Act prohibited even agreements to sell, as a

result of which there would be no transaction at all in the eyes of law, was

careful thereafter to point out:

“40. …… While considering suit for specific performance,

Court is only concerned whether purchaser has come to

Court for enforcing the agreement in terms thereof.

Asking vendor to get exemption and then to execute the

agreement will be deviating from the terms of contract

and the Court will not enforce such a contract. That will

mean that purchaser is not willing to purchase the land as

per agreement, but only with deviation, i.e., vendor must

get exemption and execute the sale deed.”

16. In paragraph 41, the Full Bench also went on to state that it is

possible to obtain exemption under the Tamil Nadu Urban Land Ceiling Act,

over which the Court has no control, but despite that, the relief of specific

performance is not usually granted as it would be going beyond the

contract. Equally, after holding that section 6 prohibits a proposed transfer,

the Full Bench went on to hold that a decree for specific performance

cannot be granted conditionally upon the vendor satisfying certain

conditions if it is not part of the agreement.

17. When these portions of the Full Bench judgment are applied to the

agreement in question, it is clear that the agreement itself contains a

specific clause, namely, clause 4, in which it is for the vendor to obtain

permission from the competent authority under the Tamil Nadu Urban Land

Ceiling Act. This agreement, therefore, cannot be said to be hit by the

decision of the Full Bench judgment as the Full Bench itself recognises that

there may be agreements with such clauses, in which case it is the Court’s

duty to enforce such clause. That is all that the learned Single Judge has

done in the facts of this case – he has correctly held that it was for the

defendants to obtain exemption from the authorities under the Tamil Nadu

Urban Land Ceiling Act which they did not, as a result of which they were in

breach of the agreement.

18. Viewed slightly differently, it is clear that the Full Bench judgment

cannot stand in the way of the appellant for another reason. There can be

no doubt that the suit property, admeasuring roughly 2002 sq. metres, was

part of a larger property of 30 grounds, and that the defendants, being four

in number, were entitled to retain 2000 sq. metres of the land owned by

them. It was for this reason that it was incumbent upon the defendants to

have obtained the Urban Land Ceiling permission to sell the land that was

within their ceiling limit, which they failed to do. As a matter of fact, a later

Single Judge of the Madras High Court, in Sushila v. Nihalchand Nahata,

AIR 2004 Mad 18, understood the Full Bench judgment of his own High

Court as follows:

“11. With respect to the ratio laid down in the decision of

the Full Bench of this Court, (1999) 2 CTC 181, cited

supra and the decision of the Division Bench of this Court,

(2003) 1 Mad LW 696, cited supra, there cannot be any

dispute. The ratio decidendi in both the decisions is that

any transfer by a person holding land in excess of ceiling

limit is invalid. Even proposed transfers of excess land is

invalid. The agreement for sale of excess land also is null

and void and therefore, no suit for specific performance

would lie to enforce an agreement for sale of “excess

land”. That is, what is prohibited or what is illegal and

hence null and void is, an agreement to sell any “excess

land” under the Urban Land Ceiling Act. If the agreement

is with respect to the “exempted” land or with reference to

the land that is likely to be exempted, such an agreement

is not invalid; such agreements are valid and enforceable

by a suit for specific performance.

12. Learned counsel for the plaintiff submitted that the

agreement itself is only for sale of the land after getting

exemption from the appropriate authorities. The terms of

the agreement make it clear that the parties never

intended to sell or purchase the land in possession of the

defendant in excess of ceiling limit, unless exemption is

granted by the authorities. Therefore, the agreement is

not in contravention of the provisions of the Urban Land

Ceiling Act. Therefore, the decisions relied upon by the

counsel for the defendant is not applicable to the facts of

this case. There is no intention among the parties to

violate the provisions of the Urban Land Ceiling Act.

Therefore, the agreement is valid and can be specifically

enforced.

13. This argument of the counsel for the plaintiff is

acceptable. The decisions relied upon by the counsel for

the defendant are with respect to agreements of intended

transaction of excess land, whereas this agreement Ex.P.

5 had been entered specifically to transfer the land only

after getting exemption. When the Act itself provides for

grant of exemption, any person can reasonably expect

that he may get the exemption, as provided under the Act.

When it is possible and permissible for the authorities to

grant exemption under the Urban Land Ceiling Act,

nothing prohibits a person from entering into a contract for

sale of such land after getting exemption. Such an

agreement is not intended to violate the provisions of the

Act. It is only in accordance with the provisions of the Act

and therefore, such an agreement cannot be said to be

invalid or void ab initio. Therefore, such an agreement is

valid and enforceable in a suit for specific performance of

the agreement.

14. A perusal of Ex.P. 5 shows that what is agreed by the

petitioner is that land shall be sold/purchased after getting

exemption from the Urban Land Ceiling Authority. That is,

this agreement is not for sale/purchase of the “excess”

land under the Land Ceiling Act, but only after getting

exemption under the Urban Land Ceiling Act. Nowhere in

the agreement is it stated that the parties intended to

purchase or sell the land without getting exemption under

the Act. Therefore, the judgments relied on by the

defendants are not applicable to the facts of the present

case and hence, this agreement cannot be said to be

invalid as it does not contemplate either parties to act in a

manner contrary to the Urban Land Ceiling Act. Therefore,

the agreement is not invalid and hence, it is valid and

enforceable. Issue No. 1 is answered in favour of the

plaintiff.”

19. It is clear, therefore, that the agreement to sell cannot be said to be

void ab initio, as a result of which the basis of the Division Bench judgment

under appeal goes. Resultantly, the judgments in Jacques v. Withy, 1 H.

Bl. 65, Hitchcock v. Way, (1837) 6 A & E 943 : 112 ER 360, and Ram

Kristo Mandal v. Dhankisto Mandal, (1969) 1 SCR 342 (at p. 349) cited

by Shri Giri in support of the proposition that the repeal of a statute which

makes void an agreement cannot revive such void agreement have no

application on the facts of this case. In view of this, it is unnecessary to go

into whether section 5(3) of the Tamil Nadu Urban Land Ceiling Act,

together with its proviso, applies to the facts of this case.

20. However, the other contention on behalf of the respondents is that

even if this were so, the appellant was not entitled to more than 500 sq.

metres, which was the ceiling limit so far as the appellant was concerned.

This being the case, no decree for specific performance could be made in

favour of the appellant.

21. That conditional decrees for specific performance have been passed

and upheld by this Court cannot be denied. Thus, in Vishwa Nath Sharma

v. Shyam Shanker Goela, (2007) 10 SCC 595 [“Vishwa Nath Sharma”],

this Court held:

“12. The Privy Council in Motilal v. Nanhelal [(1929-30) 57

IA 333 : AIR 1930 PC 287] laid down that if the vendor

had agreed to sell the property which can be transferred

only with the sanction of some government authority, the

court has jurisdiction to order the vendor to apply to the

authority within a specified period, and if the sanction is

forthcoming, to convey to the purchaser within a certain

time. This proposition of law was followed in Chandnee

Widya Vati Madden v. Dr. C.L. Katial [AIR 1964 SC 978]

and R.C. Chandiok v. Chuni Lal Sabharwal [(1970) 3 SCC

140 : AIR 1971 SC 1238]. The Privy Council in Motilal

case [(1929-30) 57 IA 333 : AIR 1930 PC 287] also laid

down that there is always an implied covenant on the part

of the vendor to do all things necessary to effect transfer

of the property regarding which he has agreed to sell the

same to the vendee. Permission from the Land and

Development Officer is not a condition precedent for grant

of decree for specific performance. The High Court relied

upon the decisions in Chandnee Widya Vati

Madden v. Dr. C.L. Katial [AIR 1964 SC 978] and Bhim

Singhji v. Union of India [(1981) 1 SCC 166 : AIR 1981

SC 234] to substantiate the conclusion. In Chandnee

Widya [AIR 1964 SC 978] this Court confirmed the

decision of the Punjab and Haryana High Court holding

that if the Chief Commissioner ultimately refused to grant

the sanction to the sale, the plaintiff may not be able to

enforce the decree for specific performance of the

contract but that was not a bar to the court passing a

decree for that relief. The same is the position in the

recent case. If after the grant of the decree of specific

performance of the contract, the Land and Development

Officer refused to grant permission for sale, the decreeholder may not be in a position to enforce the decree but

it cannot be held that such a permission is a condition

precedent for passing a decree for specific performance

of the contract.

13. In R.C. Chandiok v. Chuni Lal Sabharwal [(1970) 3

SCC 140 : AIR 1971 SC 1238] it was held that proper

form of decree in a case like the instant one would be to

direct specific performance of the contract between the

defendant and the plaintiff and to direct the subsequent

transferee to join in the conveyance so as to pass on the

title residing in him. This is because Defendant 2, son of

Defendant 1 cannot take the stand that he was a

transferee without notice. Admittedly, he is the son of

Defendant 1. The view in R.C. Chandiok [(1970) 3 SCC

140 : AIR 1971 SC 1238] was a reiteration of earlier view

in Durga Prasad v. Deep Chand [AIR 1954 SC 75] . This

Court has repeatedly held that the decree can be passed

and the sanction can be obtained for transfer of

immovable property and the decree in such a case would

be in the way the High Court has directed. (See Motilal

Jain v. Ramdasi Devi [(2000) 6 SCC 420], Nirmala Anand

v. Advent Corpn. (P) Ltd. [(2002) 5 SCC 481], HPA

International v. Bhagwandas Fateh Chand Daswani

[(2004) 6 SCC 537] and Aniglase Yohannan v. Ramlatha

[(2005) 7 SCC 534].)”

In Van Vibhag Karamchari Griha Nirman Sahkari Sanstha Maryadit v.

Ramesh Chander, (2010) 14 SCC 596 [“Van Vibhag”], this Court referred

to a suit in which specific performance was not claimed on the ground that

in view of the Urban Land (Ceiling & Regulation) Act, 1976, the appellant

could not have made such claim. This was turned down specifically by this

Court, stating:

“26. The appellant, on noticing the same, filed a suit on

11-2-1991 but he did not include the plea of specific

performance. The appellant wanted to defend this action

by referring to two facts (i) there was an acquisition

proceeding over the said land under the Land Acquisition

Act, and (ii) in view of the provisions of the Ceiling Act, the

appellant could not have made the prayer for specific

performance.

27. The aforesaid purported justification of the appellant is

not tenable in law. If the alleged statutory bar referred to

by the appellant stood in its way to file a suit for specific

performance, the same would also be a bar to the suit

which it had filed claiming declaration of title and

injunction. In fact, a suit for specific performance could

have been easily filed subject to the provision of section

20 of the Ceiling Act.

28. Similar questions came up for consideration before a

Full Bench of the Gujarat High Court in Shah Jitendra

Nanalal v. Patel Lallubhai Ishverbhai [AIR 1984 Guj 145].

The Full Bench held that a suit for specific performance

could be filed despite the provisions of the Ceiling Act. A

suit for specific performance in respect of vacant land in

excess of ceiling limit can be filed and a conditional

decree can be passed for specific performance, subject to

exemption being obtained under section 20 of the Act

(AIR paras 11-13).

29. We are in respectful agreement with the views of the

Full Bench in the abovementioned decision and the

principles decided therein are attracted here.”

The judgments of Immani Appa Rao v. Gollapalli Ramalingamurthi,

(1962) 3 SCR 739 and Narayanamma v. Govindappa, 2019 SCC OnLine

SC 1260 cited by Shri Giri in support of the proposition that no court will

lend its aid to a man who founds his cause of action upon an illegal act has

no application in a situation covered by the judgments contained in Vishwa

Nath Sharma (supra) and Van Vibhag (supra).

22. Even otherwise, the Repeal Act makes it clear that the Tamil Nadu

Urban Land Ceiling Act is repealed as follows:

“2. Repeal of Tamil Nadu Act 24 of 1978.–The Tamil

Nadu Urban Land (Ceiling and Regulation) Act, 1978

(Tamil Nadu Act 24 of 1978) (hereinafter referred to as the

principal Act), is hereby repealed.

3. Savings.–(1) The repeal of the principal Act shall not

affect–

(a) the vesting of any vacant land under subsection (3) of section 11, possession of which

has been taken over by the State Government

or any person duly authorised by the State

Government in this behalf or by the competent

authority;

(b) the validity of any order granting

exemption under sub-section (1) of section 21

or any action taken thereunder.

(2) Where -

(a) any land is deemed to have vested in the

State Government under sub-section (3) of

section 11 of the principal Act but possession

of which has not been taken over by the State

Government or any person duly authorised by

the State Government in this behalf or by the

competent authority; and

(b) any amount has been paid by the State

Government with respect to such land,

then, such land shall not be restored unless the amount

paid, if any, has been refunded to the State Government.”

It is clear that as no steps whatsoever were taken under the Tamil Nadu

Urban Land Ceiling Act, the savings clause will not apply.

23. In Gajraj Singh v. State Transport Appellate Tribunal, (1997) 1

SCC 650, this Court spoke of the effect of an Act that is repealed as

follows:

“22. Whenever an Act is repealed it must be considered,

except as to transactions past and closed, as if it had

never existed. The effect thereof is to obliterate the Act

completely from the record of Parliament as if it had never

been passed; it never existed except for the purpose of

those actions which were commenced, prosecuted and

concluded while it was an existing law. Legal fiction is one

which is not an actual reality and which the law

recognises and the court accepts as a reality. Therefore,

in case of legal fiction the court believes something to

exist which in reality does not exist. It is nothing but a

presumption of the existence of the state of affairs which

in actuality is non-existent. The effect of such a legal

fiction is that a position which otherwise would not obtain

is deemed to obtain under the circumstances. Therefore,

when Section 217(1) of the Act repealed Act 4 of 1939

w.e.f. 1-7-1989, the law in Act 4 of 1939 in effect came to

be non-existent except as regards the transactions, past

and closed or saved.

23. In Crawford's Interpretation of Law (1989) at p. 626, it

is stated that:

“[A]n express repeal will operate to abrogate

an existing law, unless there is some

indication to the contrary, such as a saving

clause. Even existing rights and pending

litigation, both civil and criminal, may be

affected although it is not an uncommon

practice to use the saving clause in order to

preserve existing rights and to exempt

pending litigation.”

At p. 627, it is stated that:

“[M]oreover, where a repealing clause

expressly refers to a portion of a prior Act, the

remainder of such Act will not usually be

repealed, as a presumption is raised that no

further repeal is necessary, unless there is

irreconcilable inconsistency between them. In

like manner, if the repealing clause is by its

terms confined to a particular Act, quoted by

title, it will not be extended to an act upon a

different subject.”

Section 6 of the GC Act enumerates, inter alia, that where

the Act repeals any enactment, unless a different intention

appears, the repeal shall not (a) revive anything not in

force or existing at the time at which the repeal takes

effect; or (b) affect the previous operation of any

enactment so repealed or anything duly done or suffered

thereunder; or (c) affect any right, privilege, obligation or

liability acquired, accrued or incurred under any

enactment so repealed, and any such investigation, legal

proceeding or remedy may be instituted, continued or

enforced. In India Tobacco Co. Ltd. v. CTO [(1975) 3 SCC

512 : 1975 SCC (Tax) 49] (SCC at p. 517) in paras 6 and

11, a Bench of three Judges had held that repeal

connotes abrogation and obliteration of one statute by

another from the statute-book as completely as if it had

never been passed. When an Act is repealed, it must be

considered, except as to transactions past and closed, as

if it had never existed. Repeal is not a matter of mere

form but is of substance, depending on the intention of

the legislature. If the intention indicated either expressly

or by necessary implication in the subsequent statute was

to abrogate or wipe off the former enactment wholly or in

part, then it would be a case of total or pro tanto repeal.”

24. It is settled law that an appeal is a continuation of a suit, as a result of

which a change in law will become applicable on the date of the appellate

decree, provided that no vested right is taken away thereby. This was

felicitously put in Rameshwar v. Jot Ram, (1976) 1 SCR 847 as follows:

“In P. Venkateswarlu v. Motor & General Traders [(1975) 1

SCC 770, 772 : AIR 1975 SC 1409, 1410] this Court dealt

with the adjectival activism relating to post-institution

circumstances. Two propositions were laid down. Firstly, it

was held that ‘it is basic to our processual jurisprudence

that the right to relief must be judged to exist as on the

date a suitor institutes the legal proceeding.’ This is an

emphatic statement that the right of a party is determined

by the facts as they exist on the date the action is

instituted. Granting the presence of such facts, then he is

entitled to its enforcement. Later developments cannot

defeat his right because, as explained earlier, had the

court found his facts to be true the day he sued he would

have got his decree. The Court’s procedural delays

cannot deprive him of legal justice or right crystallised in

the initial cause of action. This position finds support

in Bhajan Lal v. State of Punjab [(1971) 1 SCC 34].

(emphasis in original)

The impact of subsequent happenings may now be spelt

out. First, its bearing on the right of action, second, on the

nature of the relief and third, on its impotence to create or

destroy substantive rights. Where the nature of the relief,

as originally sought, has become obsolete or

unserviceable or a new form of relief will be more

efficacious on account of developments subsequent to

the suit or even during the appellate stage, it is but fair

that the relief is moulded, varied or reshaped in the light

of updated facts. Patterson [Patterson v. State of

Alabama, (1934) 294 US 600, 607] illustrates this

position. It is important that the party claiming the relief or

change of relief must have the same right from which

either the first or the modified remedy may flow.

Subsequent events in the course of the case cannot be

constitutive of substantive rights enforceable in that very

litigation except in a narrow category (later spelt out) but

may influence the equitable jurisdiction to mould reliefs.

Conversely, where rights have already vested in a party,

they cannot be nullified or negated by subsequent events

save where there is a change in the law and it is made

applicable at any stage. Lachmeshwar Prasad Shukul v.

Keshwar Lal Chaudhuri [1940 FCR 84 : AIR 1941 FC 5]

falls in this category. Courts of justice may, when the

compelling equities of a case oblige them, shape reliefs

— cannot deny rights — to make them justly relevant in

the updated circumstances. Where the relief is

discretionary, courts may exercise this jurisdiction to avoid

injustice. Likewise, where the right to the remedy

depends, under the statute itself, on the presence or

absence of certain basic facts at the time the relief is to

be ultimately granted, the Court, even in appeal, can take

note of such supervening facts with fundamental

impact. Venkateswarlu [P. Venkateswarlu v. Motor &

General Traders, (1975) 1 SCC 770 : AIR 1975 SC 1409],

read in its statutory setting, falls in this category. Where a

cause of action is deficient but later events have made up

the deficiency, the Court may, in order to avoid multiplicity

of litigation, permit amendment and continue the

proceeding, provided no prejudice is caused to the other

side. All these are done only in exceptional situations and

just cannot be done if the statute, on which the legal

proceeding is based, inhibits, by its scheme or otherwise,

such change in cause of action or relief. The primary

concern of the Court is to implement the justice of the

legislation. Rights vested by virtue of a statute cannot be

divested by this equitable doctrine (See Chokalingam

Chetty [54 MLJ 88 (PC)]). The law stated in Ramji

Lal v. State of Punjab [AIR 1966 Punj 374 : ILR (1966) 2

Punj 125] is sound:

“Courts, do very often take notice of events

that happen subsequent to the filing of suits

and at times even those that have occurred

during the appellate stage and permit

pleadings to be amended for including a

prayer for relief on the basis of such events

but this is ordinarily done to avoid multiplicity

of proceedings or when the original relief

claimed has, by reason of change in the

circumstances, become inappropriate and not

when the plaintiff's suit would be wholly

displaced by the proposed amendment

(see Steward v. North Metropolitan Tramways

Company [(1885) 16 QBD 178] ) and a fresh

suit by him would be so barred by limitation.”

One may as well add that while taking cautious judicial

cognisance of “post-natal” events, even for the limited and

exceptional purposes explained earlier, no court will

countenance a party altering, by his own manipulation, a

change in situation and plead for relief on the altered

basis.”

(emphasis in original)

(at pp. 851-852)

25. This judgment follows the hallowed principle that an appellate

proceeding is in continuation of an original proceeding, as laid down in

Lachmeshwar Prasad Shukul v. Keshwar Lal Chaudhuri, AIR 1941 FC

5, also followed in later judgments of this Court. In Dayawati v. Inderjit,

(1966) 3 SCR 275, this Court held:

“Now as a general proposition, it may be admitted that

ordinarily a court of appeal cannot take into account a

new law, brought into existence after the judgment

appealed from has been rendered, because the rights of

the litigants in an appeal are determined under the law in

force at the date of the suit. Even before the days of

Coke, whose maxim — a new law ought to be

prospective, not retrospective in its operation — is oftquoted, courts have looked with disfavour upon laws

which take away vested rights or affect pending cases.

Matters of procedure are, however, different and the law

affecting procedure is always retrospective. But it does

not mean that there is an absolute rule of inviolability of

substantive rights. If the new law speaks in language,

which, expressly or by clear intendment, takes in even

pending matters, the court of trial as well as the court of

appeal must have regard to an intention so expressed,

and the court of appeal may give effect to such a law

even after the judgment of the court of first instance. The

distinction between laws affecting procedure and those

affecting vested rights does not matter when the court is

invited by law to take away from a successful plaintiff,

what he has obtained under judgment. See Quilter v.

Maple son [(1882) 9 QBD 672] and Stovin v. Fairbrass

[(1919) 88 LJ KB 1004] which are instances of new laws

being applied. In the former the vested rights of the

landlord to recover possession and in the latter the vested

right of the statutory tenant to remain in possession were

taken away after judgment. See also Maxwell’s

Interpretation of Statutes (11th Edn. pp. 211 and 213,

and Mukerjee (K.C.) v. Mst. Ramaraton [63 IA 47] where

no saving in respect of pending suits was implied when

Section 26(N) and (O) of the Bihar Tenancy Act (as

amended by Bihar Tenancy Amendment Act, 1934) were

clearly applicable to all cases without exception.

Section 6 of the Relief of Indebtedness Act is clearly

retrospective. Indeed, the heading of the section shows

that it lays down the retrospective effect. This being so,

the core of the problem really is whether the suit could be

said to be pending on June 8, 1956 when only an appeal

from the judgment in the suit was pending. This requires

the consideration whether the word ‘suit’ includes an

appeal from the judgment in the suit. An appeal has been

said to be “the right of entering a superior court, and

invoking its aid and interposition to redress the error of

the court below”. (Per Lord Westbury in AttorneyGeneral v. Sillem [11 ER 1200 at 1209]. The only

difference between a suit and an appeal is this that an

appeal “only reviews and corrects the proceedings in a

cause already constituted but does not create the cause”.

As it is intended to interfere in the cause by its means, it

is a part of it, and in connection with some matters and

some statutes it is said that an appeal is a continuation of

a suit. In the present Act the intention is to give relief in

respect of excessive interest in a suit which is pending

and a preliminary decree in a suit of this kind does not

terminate the suit. The appeal is a part of the cause

because the preliminary decree which emerges from the

appeal will be the decree, which can become a final

decree. Such an appeal cannot have an independent

existence. If this be not accepted for the purpose of the

application of Section 3 of the Usurious Loans Act (as

amended) curious results will follow. The appeal court in

the appeal is not able to resort to the section but if the suit

were remanded the trial court would be compelled to

apply it. For although, in the appeal proper, that judgment

must be rendered which could be rendered by the court of

trial, but if the suit is to be reheard, then the judgment

must be given on the existing state of the law and that

must include Section 5 by reason of Section 6 of the

Punjab Relief of Indebtedness Act. It is hardly to be

suggested that this obvious anomaly was allowed to exist.

It would, therefore, appear that in speaking of a pending

suit, the legislature was thinking not only in terms of the

suit proper but also of those stages in the life of the suit

which ordinarily take place before a final executable

document comes into existence. The words of the section

we are concerned with, speak of a suit pending on the

commencement of the Act and it means a live suit

whether in the court of first instance or in an appeal court

where the judgment of the court of first instance is being

considered. It only excludes those suits in which nothing

further needs to be done in relation to the rights or claims

litigated, because an executable decree which may not be

reopened is already in existence. The decision of the High

Court was right in applying Section 3 of the Usurious

Loans Act (as amended) to the case.”

(at pp. 281-283)

Similarly, in Amarjit Kaur v. Pritam Singh, (1974) 2 SCC 363, this

Court held:

“4. In Lachmeshwar Prasad Shukul v. Keshwar Lal

Chaudhuri [1940 FCR 84] it was held that once the

decree passed by a court had been appealed against, the

matter became sub-judice again and thereafter the

appellate court has seisin of the whole case, though for

certain purposes, e.g., execution, the decree was

regarded as final and the courts below retained

jurisdiction. The Court further said that it has been a

principle of legislation in British India at least from 1861

that a court of appeal shall have the same powers and

shall perform as nearly as may be the same duties as are

conferred and imposed by the Civil Procedure Code on

courts of original jurisdiction, that even before the

enactment of that Code, the position was explained by

Bhashyam Iyengar, J. in Kristnama Chariar v.

Mangammal [ILR (1903) 26 Mad 91, at p. 95-96.] in

language which makes it clear that the hearing of an

appeal is under the processual law of this country in the

nature of a re-hearing, and that it is on the theory of an

appeal being in the nature of a re-hearing that the courts

in this country have in numerous cases recognized that in

moulding the relief to be granted in a case on appeal, the

court of appeal is entitled to take into account even facts

and events which have come into existence after the

decree appealed against.

5. As an appeal is a re-hearing, it would follow that if the

High Court were to dismiss the appeal, it would be

passing a decree in a suit for pre-emption. Therefore, the

only course open to the High Court was to allow the

appeal and that is what the High Court has done. In other

words, if the High Court were to confirm the decree

allowing the suit for pre-emption, it would be passing a

decree in a suit for pre-emption, for, when the appellate

court confirms a decree, it passes a decree of its own,

and therefore, the High Court was right in allowing the

appeal.”

In Lakshmi Narayan Guin v. Niranjan Modak, (1985) 1 SCC

270, this Court held:

“9. That a change in the law during the pendency of an

appeal has to be taken into account and will govern the

rights of the parties was laid down by this Court in Ram

Swarup v. Munshi [AIR 1963 SC 553 : (1963) 3 SCR 858]

which was followed by this Court in Mula v. Godhu [(1969)

2 SCC 653 : AIR 1971 SC 89 : (1970) 2 SCR 129]. We

may point out that in Dayawati v. Inderjit [AIR 1966 SC

1423 : (1966) 3 SCR 275 : (1966) 2 SCJ 784] this Court

observed:

“If the new law speaks in language, which,

expressly or by clear intendment, takes in

even pending matters, the Court of trial as

well as the Court of appeal must have regard

to an intention so expressed, and the Court of

appeal may give effect to such a law even

after the judgment of the Court of first

instance.”

Reference may also be made to the decision of this Court

in Amarjit Kaur v. Pritam Singh [(1974) 2 SCC 363 : AIR

1974 SC 2068 : (1975) 1 SCR 605] where effect was

given to a change in the law during the pendency of an

appeal, relying on the proposition formulated as long ago

as Kristnama Chariar v. Mangammal [ILR (1902) 26 Mad

91 (FB)] by Bhashyam Ayyangar, J., that the hearing of an

appeal was, under the processual law of this country, in

the nature of a re-hearing of the suit. In Amarjit

Kaur [(1974) 2 SCC 363 : AIR 1974 SC 2068 : (1975) 1

SCR 605] this Court referred also to Lachmeshwar

Prasad Shukul v. Keshwar Lal Chaudhuri [AIR 1941 FC

5 : 1940 FCR 84 : 191 1C 659] in which the Federal Court

had laid down that once a decree passed by a court had

been appealed against the matter became sub judice

again and thereafter the appellate court acquired seisin of

the whole case, except that for certain purposes, for

example, execution, the decree was regarded as final and

the court below retained jurisdiction.”

26. However, Shri Giri referred to the judgment in Keshavan Madhava

Menon v. State of Bombay, 1951 SCR 228 in order to buttress the

proposition that a repealing Act cannot be retrospectively applied so as to

destroy a fundamental right. For this purpose, he relied upon Mahajan J.’s

concurring judgment at pp. 249-250. This judgment is wholly

distinguishable given the fact that there is no fundamental right involved of

the defendants in the present case and the fact that no vested right of the

defendants has been affected by the Repeal Act. Equally, the judgment in

John Lemm v. Thomas Alexander Mitchell, [1912] A.C. 400 correctly lays

down the principle stated by Tindal, C.J. in Kay v. Goodwin, 130 E.R. 1403

[1830] as follows:

“I take the effect of repealing a statute to be to obliterate it

as completely from the records of the Parliament as if it

had never been passed; and it must be considered as a

law that never existed, except for the purpose of those

actions which were commenced, prosecuted, and

concluded whilst it was an existing law.”

(at p. 406)

In that case, since it was held on facts that persons had vested rights

acquired by them in actions duly determined under the repealed law, these

could not be affected. This is wholly distinguishable from the fact situation

in the present case.

27. This being the case, on the date on which the appellate decree was

passed, in any case, the Tamil Nadu Urban Land Ceiling Act having been

repealed would not stand in the way of a decree for specific performance. It

must be remembered that there is no vested right under the Tamil Nadu

Urban Land Ceiling Act in favour of the respondents. Any right, if at all, is in

favour of the State Government, which, like Pontius Pilate, has washed its

hands off this matter by a report submitted to this Court on 17.08.2015.

28. The Division Bench judgment is also wholly incorrect in stating that

for no fault of the appellant, since the court process has taken 27 years to

decide the specific performance suit, specific performance being a

discretionary relief ought not to be granted. Section 20 of the Specific Relief

Act, 1963, prior to its substitution by the Specific Relief (Amendment) Act,

2018, read as follows:

“20. Discretion as to decreeing specific performance.

—(1) The jurisdiction to decree specific performance is

discretionary, and the court is not bound to grant such

relief merely because it is lawful to do so; but the

discretion of the court is not arbitrary but sound and

reasonable, guided by judicial principles and capable of

correction by a court of appeal.

(2) The following are cases in which the court may

properly exercise discretion not to decree specific

performance—

(a) where the terms of the contract or the

conduct of the parties at the time of entering

into the contract or the other circumstances

under which the contract was entered into are

such that the contract, though not voidable,

gives the plaintiff an unfair advantage over the

defendant; or

(b) where the performance of the contract

would involve some hardship on the

defendant which he did not foresee, whereas

its non-performance would involve no such

hardship on the plaintiff; or

contract under circumstances which though

not rendering the contract voidable, makes it

inequitable to enforce specific performance.

Explanation I.—Mere inadequacy of consideration, or

the mere fact that the contract is onerous to the

defendant or improvident in its nature, shall not be

deemed to constitute an unfair advantage within the

meaning of clause (a) or hardship within the meaning of

clause (b).

Explanation II.—The question whether the

performance of a contract would involve hardship on the

defendant within the meaning of clause (b) shall, except

in cases where the hardship has resulted from any act of

the plaintiff, subsequent to the contract, be determined

with reference to the circumstances existing at the time of

the contract.

(3) The court may properly exercise discretion to decree

specific performance in any case where the plaintiff has

done substantial acts or suffered losses in consequence

of a contract capable of specific performance.

(4) The court shall not refuse to any party specific

performance of a contract merely on the ground that the

contract is not enforceable at the instance of the other

party.”

Section 20, as it then stood, makes it clear that the jurisdiction to decree

specific performance is discretionary; but that this discretion is not arbitrary

but has to be exercised soundly and reasonably, guided by judicial

principles, and capable of correction by a court of appeal – see section

20(1). Section 20(2) speaks of cases in which the court may properly

exercise discretion not to decree specific performance. Significantly, under

clause (a) of sub-section (2), what is to be seen is the terms of the contract

or the conduct of the parties at the time of entering into the contract. Even

“other circumstances under which the contract was entered into” refers only

to circumstances that prevailed at the time of entering into the contract. It is

only then that this exception kicks in – and this is when the plaintiff gets an

unfair advantage over the defendant. Equally, under clause (b) of subsection (2), the hardship involved is again at the time of entering into the

contract which is clear from the expression “which he did not foresee”. This

is made clear beyond doubt by Explanation II of section 20 which states

that the only exception to the hardship principle contained in clause (b) of

sub-section (2) is where hardship results from an act of the plaintiff

subsequent to the contract. In this case also, the act cannot be an act of a

third party or of the court – the act must only be the act of the plaintiff.

Clause (c) of sub-section (2) again refers to the defendant entering into the

contract under circumstances which makes it inequitable to enforce specific

performance. Here again, the point of time at which this is to be judged is

the time of entering into the contract.

29. Given section 20, the courts have uniformly held that the mere

escalation of land prices after the date of the filing of the suit cannot be the

sole ground to deny specific performance. Thus, in Nirmala Anand v.

Advent Corporation (P) Ltd., (2002) 8 SCC 146, a three-Judge bench of

this Court held:

“3. The appeal was heard by a two-Judge Bench. The

learned Judges have concurred that the appellant is

entitled to specific performance of the agreement dated 8-

9-1966. There has, however, been difference of opinion

between learned Judges on the condition in respect of

additional amount that may be paid by the appellant to

Respondents 1 and 2 and, therefore, the matter has been

placed before this three-Judge Bench. The opinions of

the learned Judges are reported in Nirmala Anand v.

Advent Corpn. (P) Ltd. [(2002) 5 SCC 481] In the opinion

expressed by Brother Justice Doraiswamy Raju, the

appellant has been directed to pay a sum of Rs

40,00,000 in addition to the sum already paid to

Respondents 1 and 2 and in the view of Brother Justice

Ashok Bhan, it would be unfair to impose the condition of

payment of Rs 40,00,000 and the appellant is entitled to

specific performance of agreement to sell on the price

mentioned in the agreement.”

xxx xxx xxx

“5. The appellant is prepared and willing to take

possession of the incomplete flat without claiming any

reduction in the purchase price and would not hold

Respondents 1 and 2 responsible for anything incomplete

in the building. It has been concurrently held that she did

not commit breach of the agreement to sell. She has

always been ready and willing to perform her part of the

agreement. The appellant is ready and willing to pay to

Respondents 1 and 2 interest on the sum of Rs 25,000.

The breach was committed by Respondents 1 and 2 as

noticed hereinbefore. It is evident that the appellant is

ready to take incomplete flat and pay further sum as

noticed, most likely on account of phenomenal increase in

the market price of the flat during the pendency of this

litigation for over three decades. We see no reason why

the appellant cannot be allowed to have, for her alone,

the entire benefit of manifold mega increase of the value

of real estate property in the locality. In our view, it would

not be unreasonable and inequitable to make the

appellant the sole beneficiary of the escalation of real

estate prices and the enhanced value of the flat in

question. There is no reason why the appellant, who is

not a defaulting party, should not be allowed to reap to

herself the fruits of increase in value.

6. It is true that grant of decree of specific performance

lies in the discretion of the court and it is also well settled

that it is not always necessary to grant specific

performance simply for the reason that it is legal to do so.

It is further well settled that the court in its discretion can

impose any reasonable condition including payment of an

additional amount by one party to the other while granting

or refusing decree of specific performance. Whether the

purchaser shall be directed to pay an additional amount

to the seller or converse would depend upon the facts

and circumstances of a case. Ordinarily, the plaintiff is not

to be denied the relief of specific performance only on

account of the phenomenal increase of price during the

pendency of litigation. That may be, in a given case, one

of the considerations besides many others to be taken

into consideration for refusing the decree of specific

performance. As a general rule, it cannot be held that

ordinarily the plaintiff cannot be allowed to have, for her

alone, the entire benefit of phenomenal increase of the

value of the property during the pendency of the litigation.

While balancing the equities, one of the considerations to

be kept in view is as to who is the defaulting party. It is

also to be borne in mind whether a party is trying to take

undue advantage over the other as also the hardship that

may be caused to the defendant by directing specific

performance. There may be other circumstances on

which parties may not have any control. The totality of the

circumstances is required to be seen.”

xxx xxx xxx

“8. Having regard to the totality of the circumstances, we

would direct the appellant to pay to Respondents 1 and 2

a sum of Rs 6,25,000 instead of Rs 25,000. The amount

of Rs 40,00,000 wherever it appears in the opinion of

Justice Doraiswamy Raju, would be read as Rs 6,25,000.

All other conditions will remain.”

In P. D’Souza v. Shondrilo Naidu, (2004) 6 SCC 649, this Court held:

“39. It is not a case where the defendant did not foresee

the hardship. It is furthermore not a case that nonperformance of the agreement would not cause any

hardship to the plaintiff. The defendant was the landlord

of the plaintiff. He had accepted part-payments from the

plaintiff from time to time without any demur whatsoever.

He redeemed the mortgage only upon receipt of requisite

payment from the plaintiff. Even in August 1981 i.e. just

two months prior to the institution of suit, he had accepted

Rs 20,000 from the plaintiff. It is, therefore, too late for the

appellant now to suggest that having regard to the

escalation in price, the respondent should be denied the

benefit of the decree passed in his favour. Explanation I

appended to Section 20 clearly stipulates that merely

inadequacy of consideration, or the mere fact that the

contract is onerous to the defendant or improvident in its

nature would not constitute an unfair advantage within the

meaning of sub-section (2) of Section 20.

40. The decision of this Court in Nirmala Anand [(2002) 5

SCC 481] may be considered in the aforementioned

context.

41. Raju, J. in the facts and circumstances of the matter

obtaining therein held that it would not only be

unreasonable but too inequitable for courts to make the

appellant the sole beneficiary of the escalation of real

estate prices and the enhanced value of the flat in

question, preserved all along by Respondents 1 and 2 by

keeping alive the issues pending with the authorities of

the Government and the municipal body. It was in the

facts and circumstances of the case held: (SCC p. 501,

para 23)

“23. … Specific performance being an

equitable relief, balance of equities have also

to be struck taking into account all these

relevant aspects of the matter, including the

lapses which occurred and parties

respectively responsible therefor. Before

decreeing specific performance, it is

obligatory for courts to consider whether by

doing so any unfair advantage would result for

the plaintiff over the defendant, the extent of

hardship that may be caused to the defendant

and if it would render such enforcement

inequitable, besides taking into (sic

consideration) the totality of circumstances of

each case.”

43. Bhan, J., however, while expressing his dissension in

part observed: (SCC pp. 506 & 507, paras 38 & 40)

“38. It is well settled that in cases of contract

for sale of immovable property the grant of

relief of specific performance is a rule and its

refusal an exception based on valid and

cogent grounds. Further, the defendant

cannot take advantage of his own wrong and

then plead that decree for specific

performance would be an unfair advantage to

the plaintiff.

***

40. Escalation of price during the period may

be a relevant consideration under certain

circumstances for either refusing to grant the

decree of specific performance or for

decreeing the specific performance with a

direction to the plaintiff to pay an additional

amount to the defendant and compensate

him. It would depend on the facts and

circumstances of each case.”

44. The learned Judge further observed that delay in

performance of the contract due to pendency of

proceedings in court cannot by itself be a ground to

refuse relief of specific performance in absence of any

compelling circumstances to take a contrary view. ……

xxx xxx xxx

45. The said decision cannot be said to constitute a

binding precedent to the effect that in all cases where

there had been an escalation of prices, the court should

either refuse to pass a decree on specific performance of

contract or direct the plaintiff to pay a higher sum. No law

in absolute terms to that effect has been laid down by this

Court nor is discernible from the aforementioned

decision.”

In P.S. Ranakrishna Reddy v. M.K. Bhagyalakshmi, (2007) 10 SCC 231,

this Court held:

“19. Submission of Mr Chandrashekhar to the effect that

having regard to the rise in price of an immovable

property in Bangalore, the Court ought not to have

exercised its discretionary jurisdiction under Section 20 of

the Specific Relief Act is stated to be rejected. We have

noticed hereinbefore that the appellant had entered into

an agreement for sale with others also. He had, even

after 11-5-1979, received a sum of Rs 5000 from the

respondent. He with a view to defeat the lawful claim of

Respondent 1 had raised a plea of having executed a

prior agreement for sale in respect of self-same property

in favour of his son-in-law who had never claimed any

right thereunder or filed a suit for specific performance of

contract. The courts below have categorically arrived at a

finding that the said contention of the appellant was not

acceptable. Rise in the price of an immovable property by

itself is not a ground for refusal to enforce a lawful

agreement of sale. (See P. D’Souza [(2004) 6 SCC 649]

and Jai Narain Parasrampuria [(2006) 7 SCC 756].)”

In Narinderjit Singh v. North Star Estate Promoters Ltd., (2012) 5 SCC

712, this Court held:

“25. We are also inclined to agree with the lower

appellate court that escalation in the price of the land

cannot, by itself, be a ground for denying relief of specific

performance. In K. Narendra v. Riviera Apartments (P)

Ltd. [(1999) 5 SCC 77] this Court interpreted Section 20

of the Act and laid down the following propositions: (SCC

p. 91, para 29)

“29. Section 20 of the Specific Relief Act,

1963 provides that the jurisdiction to decree

specific performance is discretionary and the

court is not bound to grant such relief merely

because it is lawful to do so; the discretion of

the court is not arbitrary but sound and

reasonable, guided by judicial principles and

capable of correction by a court of appeal.

Performance of the contract involving some

hardship on the defendant which he did not

foresee while non-performance involving no

such hardship on the plaintiff, is one of the

circumstances in which the court may

properly exercise discretion not to decree

specific performance. The doctrine of

comparative hardship has been thus

statutorily recognised in India. However, mere

inadequacy of consideration or the mere fact

that the contract is onerous to the defendant

or improvident in its nature, shall not

constitute an unfair advantage to the plaintiff

over the defendant or unforeseeable hardship

on the defendant.”

(emphasis in original)

26. In the present case, the appellant had neither pleaded

hardship nor produced any evidence to show that it will

be inequitable to order specific performance of the

agreement. Rather, the important plea taken by the

appellant was that the agreement was fictitious and

fabricated and his father had neither executed the same

nor received the earnest money and, as mentioned

above, all the courts have found this plea to be wholly

untenable.

27. In the result, the appeals are dismissed and the

following directions are given:

(i) Within three months from today the

respondent shall pay Rs 5 crores to the

appellant. This direction is being given

keeping in view the statement made by Shri

Dushyant Dave, learned Senior Counsel for

the respondent on 3-5-2012 that his client

would be willing to pay Rs 5 crores in all to

the appellant as the price of the land.

xxx xxx xxx”

In Satya Jain v. Anis Ahmed Rushdie, (2013) 8 SCC 131, this Court held:

“40. The discretion to direct specific performance of an

agreement and that too after elapse of a long period of

time, undoubtedly, has to be exercised on sound,

reasonable, rational and acceptable principles. The

parameters for the exercise of discretion vested by

Section 20 of the Specific Relief Act, 1963 cannot be

entrapped within any precise expression of language and

the contours thereof will always depend on the facts and

circumstances of each case. The ultimate guiding test

would be the principles of fairness and reasonableness

as may be dictated by the peculiar facts of any given

case, which features the experienced judicial mind can

perceive without any real difficulty. It must however be

emphasised that efflux of time and escalation of price of

property, by itself, cannot be a valid ground to deny the

relief of specific performance. Such a view has been

consistently adopted by this Court. By way of illustration

opinions rendered in P.S. Ranakrishna Reddy v. M.K.

Bhagyalakshmi [(2007) 10 SCC 231] and more recently in

Narinderjit Singh v. North Star Estate Promoters Ltd.

[(2012) 5 SCC 712 : (2012) 3 SCC (Civ) 379] may be

usefully recapitulated.

41. The twin inhibiting factors identified above if are to be

read as a bar to the grant of a decree of specific

performance would amount to penalising the plaintiffs for

no fault on their part; to deny them the real fruits of a

protracted litigation wherein the issues arising are being

answered in their favour. From another perspective it may

also indicate the inadequacies of the law to deal with the

long delays that, at times, occur while rendering the final

verdict in a given case. The aforesaid two features, at

best, may justify award of additional compensation to the

vendor by grant of a price higher than what had been

stipulated in the agreement which price, in a given case,

may even be the market price as on date of the order of

the final court.

42. Having given our anxious consideration to all the

relevant aspects of the case we are of the view that the

ends of justice would require this Court to intervene and

set aside the findings and conclusions recorded by the

High Court of Delhi in Anis Ahmed Rushdie v. Bhiku Ram

Jain [Anis Ahmed Rushdie v. Bhiku Ram Jain, RFA (OS)

No. 11 of 1984, decided on 31-10-2011 (Del)] and to

decree the suit of the plaintiffs for specific performance of

the agreement dated 22-12-1970. We are of the further

view that the sale deed that will now have to be executed

by the defendants in favour of the plaintiffs will be for the

market price of the suit property as on the date of the

present order. As no material, whatsoever is available to

enable us to make a correct assessment of the market

value of the suit property as on date we request the

learned trial Judge of the High Court of Delhi to undertake

the said exercise with such expedition as may be possible

in the prevailing facts and circumstances.”

In K. Prakash v. B.R. Sampath Kumar, (2015) 1 SCC 597, this Court

held:

“18. Subsequent rise in the price will not be treated as a

hardship entailing refusal of the decree for specific

performance. Rise in price is a normal change of

circumstances and, therefore, on that ground a decree for

specific performance cannot be reversed.

19. However, the court may take notice of the fact that

there has been an increase in the price of the property

and considering the other facts and circumstances of the

case, this Court while granting decree for specific

performance can impose such condition which may to

some extent compensate the defendant owner of the

property. This aspect of the matter is considered by a

three-Judge Bench of this Court in Nirmala Anand v.

Advent Corpn. (P) Ltd. [(2002) 8 SCC 146], wherein this

Court held: (SCC p. 150, para 6)

“6. It is true that grant of decree of specific

performance lies in the discretion of the court

and it is also well settled that it is not always

necessary to grant specific performance

simply for the reason that it is legal to do so. It

is further well settled that the court in its

discretion can impose any reasonable

condition including payment of an additional

amount by one party to the other while

granting or refusing decree of specific

performance. Whether the purchaser shall be

directed to pay an additional amount to the

seller or converse would depend upon the

facts and circumstances of a case. Ordinarily,

the plaintiff is not to be denied the relief of

specific performance only on account of the

phenomenal increase of price during the

pendency of litigation. That may be, in a given

case, one of the considerations besides many

others to be taken into consideration for

refusing the decree of specific performance.

As a general rule, it cannot be held that

ordinarily the plaintiff cannot be allowed to

have, for her alone, the entire benefit of

phenomenal increase of the value of the

property during the pendency of the litigation.

While balancing the equities, one of the

considerations to be kept in view is as to who

is the defaulting party. It is also to be borne in

mind whether a party is trying to take undue

advantage over the other as also the hardship

that may be caused to the defendant by

directing specific performance. There may be

other circumstances on which parties may not

have any control. The totality of the

circumstances is required to be seen.”

20. As discussed above the agreement was entered into

between the parties in 2003 for sale of the property for a

total consideration of Rs 16,10,000. Ten years have

passed by and now the price of the property in that area

where it situates has increased by not less than five

times. Keeping in mind the factual position we are of the

view that the appellant should pay a total consideration of

Rs 25 lakhs, being the price for the said property.”

In Zarina Siddiqui v. A. Ramalingam, (2015) 1 SCC 705, this Court held:

“33. The equitable discretion to grant or not to grant a

relief for specific performance also depends upon the

conduct of the parties. The necessary ingredient has to

be proved and established by the plaintiff so that

discretion would be exercised judiciously in favour of the

plaintiff. At the same time, if the defendant does not come

with clean hands and suppresses material facts and

evidence and misleads the court then such discretion

should not be exercised by refusing to grant specific

performance.”

xxx xxx xxx

“36. As held by this Court time and again, efflux of time

and escalation of price of the property by itself cannot be

a valid ground to deny the relief of specific performance.

But the Court in its discretion may impose reasonable

conditions including payment of additional amount to the

vendor. It is equally well settled that the plaintiff is not to

be denied specific performance only on account of

phenomenal increase of price during the pendency of

litigation.”

xxx xxx xxx

“38. … [I]n the facts and circumstances of the case and

considering the phenomenal increase in price during the

period the matter remained pending in different courts, we

are of the considered opinion that the impugned order [A.

Ramalingam v. H. Siddiqui, RFA No. 265 of 1999, decided

on 1-3-2012 (KAR)] under appeal be set aside but with a

condition imposed upon the appellant-plaintiff to pay a

sum of Rs 15,00,000 (Rupees fifteen lakhs) in addition to

the amount already paid by the appellant to the

respondent.”

In Ramathal v. Maruthathal, (2018) 18 SCC 303, this Court held:

“22. The buyer has taken prompt steps to file a suit for

specific performance as soon as the execution of the sale

was stalled by the seller. From this discussion, it is clear

that the buyer has always been ready and willing to

perform his part of the contract at all stages. Moreover, it

is the seller who had always been trying to wriggle out of

the contract. Now the seller cannot take advantage of

their own wrong and then plead that the grant of decree

of specific performance would be inequitable. Escalation

of prices cannot be a ground for denying the relief of

specific performance. Specific performance is an

equitable relief and granting the relief is the discretion of

the court. The discretion has to be exercised by the court

judicially and within the settled principles of law.

Absolutely there is no illegality or infirmity in the

judgments of the courts below, which has judicially

exercised its discretion and the High Court ought not to

have interfered with the same. ……”

In Sunkara Lakshminarasamma v. Sagi Subba Raju, (2019) 11 SCC

787, this Court held:

“9. Shri A. Subba Rao, learned counsel for the appellants

was however forceful in his arguments, insofar as the suit

for specific performance is concerned. According to him,

the appellants herein (defendants in the suit for specific

performance) would be put to hardship if the decree for

specific performance is confirmed, inasmuch as there has

been a huge escalation in the price of the properties

since the agreement of sale. Such plea of escalation in

price cannot be accepted in view of the fact that the

appellants in the first instance do not have the right to

question the agreement of sale. As mentioned supra,

since Veeraswamy was the absolute owner of the

properties including the property involved in the suit for

specific performance, he had the right to enter into an

agreement of sale also. This property was bequeathed to

Veeraswamy under Ext. B-4 will by Padmanabhudu.

Hence, Veeraswamy was the sole owner of the property.

Consequently, he had entered into an agreement of sale

with Sagi Subba Raju, as far back as on 19-9-1974. The

suit was filed in the year 1978, which was later

transferred to another court and the same was renumbered as OS No. 72 of 1983. Since 1978, this

litigation is being fought by the prospective vendee. The

property of about three-and-a-half acres was agreed to be

sold by Veeraswamy in favour of the prospective vendee

in the year 1974 for a sum of Rs 51,000. Such price was

agreed to between the vendor as well as the prospective

vendee.

10. This Court cannot imagine the value of the property

as it stood in the year 1974 in the said area i.e. at

Bhimavaram Village in Andhra Pradesh. Be that as it may,

we find that hardship was neither pleaded nor proved by

the appellants herein before the trial court. No issue was

raised relating to hardship before the trial court. A plea

which was not urged before the trial court cannot be

allowed to be raised for the first time before the appellate

courts. Moreover, mere escalation of price is no ground

for interference at this stage (see the judgment of this

Court in Narinderjit Singh v. North Star Estate Promoters

Ltd. [Narinderjit Singh v. North Star Estate Promoters

Ltd., (2012) 5 SCC 712 : (2012) 3 SCC (Civ) 379]). Added

to it, as mentioned supra, the appellants do not have the

locus standi to question the judgment of the Division

Bench since they are not the owners of the property. As a

matter of fact, Veeraswamy, the vendor of the properties,

had entered the witness box before the trial court and

supported all his alienations in favour of the defendants.

Therefore, in our considered opinion, the Division Bench

has rightly concluded in favour of Sagi Subba Raju and

against the appellants and granted the decree for specific

performance.”

30. It is settled law that mere delay by itself, without more, cannot be the

sole factor to deny specific performance – See Mademsetty

Satyanarayana v. G. Yelloji Rao, (1965) 2 SCR 221 at pp. 229-230. Thus,

in K.S. Vidyanadam v. Vairavan, (1997) 3 SCC 1, this Court made it clear

that if property prices have risen dramatically within a period of two and a

half years before filing of the suit for specific performance, and it is coupled

with violation of the agreement by the plaintiff, specific performance will not

be decreed. The Court held:

“10. … 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 [It is a

well-known fact that the steep rise in the price of oil

following the 1973 Arab-Israeli war set in inflationary

trends all over the world. Particularly affected were

countries like who import bulk of their requirement of oil].

In this case, the suit property is the house property

situated in Madurai, which is one of the major cities of

Tamil Nadu. The suit agreement was in December 1978

and the six months' period specified therein for

completing the sale expired with 15-6-1979. The suit

notice was issued by the plaintiff only on 11-7-1981, i.e.,

more than two years after the expiry of six months'

period. The question is what was the plaintiff doing in this

interval of more than two years? … The defendants’

consistent refrain has been that the prices of house

properties in Madurai have been rising fast, that within the

said interval of 2 1/2 years, the prices went up three times

and that only because of the said circumstance has the

plaintiff (who had earlier abandoned any idea of going

forward with the purchase of the suit property) turned

round and demanded specific performance. Having

regard to the above circumstances and the oral evidence

of the parties, we are inclined to accept the case put

forward by Defendants 1 to 3. We reject the story put

forward by the plaintiff that during the said period of 2 1/2

years, he has been repeatedly asking the defendants to

get the tenant vacated and execute the sale deed and

that they were asking for time on the ground that tenant

was not vacating. The above finding means that from 15-

12-1978 till 11-7-1981, i.e., for a period of more than 2 1/2

years, the plaintiff was sitting quiet without taking any

steps to perform his part of the contract under the

agreement though the agreement specified a period of six

months within which he was expected to purchase stamp

papers, tender the balance amount and call upon the

defendants to execute the sale deed and deliver

possession of the property. We are inclined to accept the

defendants’ case that the values of the house property in

Madurai town were rising fast and this must have induced

the plaintiff to wake up after 2 1/2 years and demand

specific performance.

11. Shri Sivasubramaniam cited the decision of the

Madras High Court in S.V. Sankaralinga Nadar v. P.T.S.

Ratnaswami Nadar [AIR 1952 Mad 389 : (1952) 1 MLJ

44] holding that mere rise in prices is no ground for

denying the specific performance. With great respect, we

are unable to agree if the said decision is understood as

saying that the said factor is not at all to be taken into

account while exercising the discretion vested in the court

by law. We cannot be oblivious to the reality — and the

reality is constant and continuous rise in the values of

urban properties — fuelled by large-scale migration of

people from rural areas to urban centres and by inflation.

Take this very case. The plaintiff had agreed to pay the

balance consideration, purchase the stamp papers and

ask for the execution of sale deed and delivery of

possession within six months. He did nothing of the sort.

The agreement expressly provides that if the plaintiff fails

in performing his part of the contract, the defendants are

entitled to forfeit the earnest money of Rs 5000 and that if

the defendants fail to perform their part of the contract,

they are liable to pay double the said amount. Except

paying the small amount of Rs 5000 (as against the total

consideration of Rs 60,000) the plaintiff did nothing until

he issued the suit notice 2 1/2 years after the agreement.

Indeed, we are inclined to think that the rigor of the rule

evolved by courts that time is not of the essence of the

contract in the case of immovable properties — evolved

in times when prices and values were stable and inflation

was unknown — requires to be relaxed, if not modified,

particularly in the case of urban immovable properties. It

is high time, we do so. The learned counsel for the

plaintiff says that when the parties entered into the

contract, they knew that prices are rising; hence, he says,

rise in prices cannot be a ground for denying specific

performance. May be, the parties knew of the said

circumstance but they have also specified six months as

the period within which the transaction should be

completed. The said time-limit may not amount to making

time the essence of the contract but it must yet have

some meaning. Not for nothing could such time-limit

would have been prescribed. Can it be stated as a rule of

law or rule of prudence that where time is not made the

essence of the contract, all stipulations of time provided in

the contract have no significance or meaning or that they

are as good as non-existent? All this only means that

while exercising its discretion, the court should also bear

in mind that when the parties prescribe certain timelimit(s) for taking steps by one or the other party, it must

have some significance and that the said time-limit(s)

cannot be ignored altogether on the ground that time has

not been made the essence of the contract (relating to

immovable properties).”

xxx xxx xxx

“13. In the case before us, it is not mere delay. It is a case

of total inaction on the part of the plaintiff for 2 1/2 years

in clear violation of the terms of agreement which

required him to pay the balance, purchase the stamp

papers and then ask for execution of sale deed within six

months. Further, the delay is coupled with substantial rise

in prices — according to the defendants, three times —

between the date of agreement and the date of suit

notice. The delay has brought about a situation where it

would be inequitable to give the relief of specific

performance to the plaintiff.

14. Shri Sivasubramaniam then relied upon the decision

in Jiwan Lal (Dr) v. Brij Mohan Mehra [(1972) 2 SCC 757 :

(1973) 2 SCR 230] 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

[(1993) 1 SCC 519]. 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.”

Likewise, this Court, in Saradamani Kandappan v. S. Rajalakshmi,

(2011) 12 SCC 18, made it clear that given the steep rise in urban land

prices, it may not be correct now to say that time is not of essence in

performance of a contract of sale of immovable property. Thus, where time

can be said to be of the essence in the facts of a given case, and the

purchaser does not take steps to complete the sale within the stipulated

period and the vendor is not responsible for any delay, the steep rise in

price within the stipulated time would be a circumstance which would make

it inequitable to grant the relief of specific performance. This Court held:

“36. The principle that time is not of the essence of

contracts relating to immovable properties took shape in

an era when market values of immovable properties were

stable and did not undergo any marked change even over

a few years (followed mechanically, even when value

ceased to be stable). As a consequence, time for

performance, stipulated in the agreement was assumed

to be not material, or at all events considered as merely

indicating the reasonable period within which contract

should be performed. The assumption was that grant of

specific performance would not prejudice the vendor

defendant financially as there would not be much

difference in the market value of the property even if the

contract was performed after a few months. This principle

made sense during the first half of the twentieth century,

when there was comparatively very little inflation, in India.

The third quarter of the twentieth century saw a very slow

but steady increase in prices. But a drastic change

occurred from the beginning of the last quarter of the

twentieth century. There has been a galloping inflation

and prices of immovable properties 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 “nonreadiness”. 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 rupees one lakh and received rupees

ten thousand as advance may be required to execute a

sale deed a quarter century later by receiving the

remaining rupees ninety thousand, when the property

value has risen to a crore of rupees.

xxx xxx xxx

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 [(1997) 3 SCC 1] (by

Jeevan Reddy, J. who incidentally was a member of the

Constitution Bench in Chand Rani [(1993) 1 SCC 519] ).

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 wellknown that their prices have been going up

sharply over the last few decades—

particularly after 1973. …

11. … We cannot be oblivious to the reality—

and the reality is constant and continuous rise

in the values of urban properties—fuelled by

large-scale migration of people from rural

areas to urban centres and by inflation. …

Indeed, we are inclined to think that the rigor

of the rule evolved by courts that time is not

of the essence of the contract in the case of

immovable properties—evolved in times

when prices and values were stable and

inflation was unknown—requires to be

relaxed, if not modified, particularly in the

case of urban immovable properties. It is high

time, we do so.”

(emphasis in original)

42. Therefore there is an urgent need to revisit the

principle that time is not of the essence in contracts

relating to immovable properties and also explain the

current position of law with regard to contracts relating to

immovable property made after 1975, in view of the

changed circumstances arising from inflation and steep

increase in prices. We do not propose to undertake that

exercise in this case, nor referring the matter to a larger

Bench as we have held on facts in this case that time is

the essence of the contract, even with reference to the

principles in Chand Rani [(1993) 1 SCC 519] and other

cases. Be that as it may.

43. Till the issue is considered in an appropriate case, we

can only reiterate what has been suggested in K.S.

Vidyanadam [(1997) 3 SCC 1]:

(i) The courts, while exercising discretion in

suits for specific performance, should bear in

mind that when the parties prescribe a

time/period, for taking certain steps or for

completion of the transaction, that must have

some significance and therefore time/period

prescribed cannot be ignored.

(ii) The courts will apply greater scrutiny and

strictness when considering whether the

purchaser was “ready and willing” to perform

his part of the contract.

(iii) Every suit for specific performance need

not be decreed merely because it is filed

within the period of limitation by ignoring the

time-limits stipulated in the agreement. The

courts will also “frown” upon suits which are

not filed immediately after the breach/refusal.

The fact that limitation is three years does not

mean that a purchaser can wait for 1 or 2

years to file a suit and obtain specific

performance. The three-year period is

intended to assist the purchasers in special

cases, as for example, where the major part of

the consideration has been paid to the vendor

and possession has been delivered in partperformance, where equity shifts in favour of

the purchaser.”

In Nanjappan v. Ramasamy, (2015) 14 SCC 341, the suit for specific

performance was filed many years after the agreement dated 30.09.1987,

which agreement was extended by three years twice and thereafter, by

another two years. It was only after these extensions and exchange of legal

notices between the parties that the respondents filed a suit for specific

performance. It was in this factual background that the Court held:

“10. In a suit for specific performance, the plaintiff has to

aver and prove with satisfactory evidence that he was

always ready and willing to perform his part of contract at

all material time as mandatorily required under Section

16(c) of the Specific Relief Act, 1963. The first appellate

court and the High Court recorded findings that the

plaintiff was always ready and willing to perform his part

of the contract. By a careful reading of the recitals in the

agreement, the concurrent findings so recorded do not

seem to reflect the conduct of the parties. As per recitals

in Ext. P-1 agreement dated 30-9-1987, an amount of Rs

25,000 was paid by the respondent-plaintiffs to the

appellant-defendant. Balance amount of Rs 20,000 was

to be paid within 2½ years thereafter and get the sale

executed. In the second agreement of sale (Ext. P-2

dated 21-3-1990) it is stated that the plaintiffs were

unable to pay the balance amount within the stipulated

period and get the sale deed executed and therefore the

second sale agreement was executed extending the

period for execution of sale deed for a further period of

three years. As could be seen from the recitals from Ext.

P-2, the respondents were unable to pay the balance sale

consideration and get the sale deed executed. It is

pertinent to note that the time for performance of contract

was extended again and again totalling period of eight

years. Even though the first appellate court and the High

Court recorded findings that the respondent-plaintiffs were

ready and willing to perform their part of contract, the fact

that time was extended for eight years is to be kept in

view while considering the question whether discretion is

to be exercised in favour of the respondent-plaintiffs.”

xxx xxx xxx

“13. The first sale agreement was executed on 30-9-1987

about twenty-seven years ago. The property is situated in

Coimbatore City and over these years, value of property

in Coimbatore City would have considerably increased.

In Saradamani Kandappan v. S. Rajalakshmi [(2011) 12

SCC 18 : (2012) 2 SCC (Civ) 104] , this Court has held

that the value of the property escalates in the urban areas

very fast and it would not be equitable to grant specific

performance after a lapse of long period of time. In the

instant case, the first agreement was executed on 30-9-

1987 i.e. twenty-seven years ago. In view of passage of

time and escalation of value of the property, grant of

specific relief of performance would give an unfair

advantage to the respondent-plaintiffs whereas the

performance of the contract would involve great hardship

to the appellant-defendant and his family members.

14. Considering the totality and the facts and

circumstances, in our view, it is not appropriate to grant

discretionary relief of specific performance to the

respondent-plaintiffs for more than one reason.

Admittedly, the suit property is the only property of the

appellant-defendant and the appellant is said to have

constructed a house and where he is currently residing

with the family. As compared to the respondents, the

appellant will suffer significant hardship if a decree for

specific performance is granted against the appellant.

Considering the circumstances, such as the construction

of the residential house over the suit property, sale

consideration, passage of time and hardship caused to

the appellant, makes it inequitable to exercise the

discretionary relief of specific performance and the

concurrent finding of the first appellate court and the High

Court decreeing the suit for specific performance is to be

set aside.”

31. The resultant position in law is that a suit for specific performance

filed within limitation cannot be dismissed on the sole ground of delay or

laches. However, an exception to this rule is where immovable property is

to be sold within a certain period, time being of the essence, and it is found

that owing to some default on the part of the plaintiff, the sale could not

take place within the stipulated time. Once a suit for specific performance

has been filed, any delay as a result of the court process cannot be put

against the plaintiff as a matter of law in decreeing specific performance.

However, it is within the discretion of the Court, regard being had to the

facts of each case, as to whether some additional amount ought or ought

not to be paid by the plaintiff once a decree of specific performance is

passed in its favour, even at the appellate stage.

32. Shri Giri’s fervent appeal that we should not exercise our

discretionary jurisdiction under Article 136, given the fact that Rs.2 crores

plus interest is to be paid almost by way of solatium to the appellant, has

also to be rejected. As has been found earlier in this judgment, the

defendants were held to have taken up dishonest pleas and also held to

have been in breach of a solemn agreement in which they were to obtain

the Urban Land Ceiling permission which, if not obtained, would, under the

agreement itself, not stand in the way of the specific performance of the

agreement between the parties. He who asks for equity must do equity.

Given the conduct of the defendants in this case, as contrasted with the

conduct of the appellant who is ready and willing throughout to perform its

part of the bargain, we think this is a fit case in which the Division Bench

judgment should be set aside. As a result, the decree passed by the Single

Judge is restored. Since the appellant itself offered a sum of Rs.1.25 crores

to the Division Bench, it must be made to pay this amount to the

respondents within a period of eight weeks from the date of this judgment.

33. The Civil Appeal is allowed in the aforesaid terms with no order as to

costs.

……………………… J.

(R.F. Nariman)

……………………… J.

(Navin Sinha)

New Delhi.

October 12, 2020.

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Whether the plaintiff is not entitled to purchase more than 500 sq. metres under the Tamil Nadu Urban Land Ceiling Act and whether the suit agreement is void on that account?”