* Author
[2024] 1 S.C.R. 374 : 2024 INSC 28
Alagammal and Ors.
v.
Ganesan and Anr.
(Civil Appeal No. 8185 of 2009)
10 January 2024
[Vikram Nath and Ahsanuddin Amanullah*, JJ.]
Issue for Consideration
Whether the Agreement between the seller and the buyer discloses
a fixed time-frame for making payment in full by the buyer that is,
in terms of the recitals in the agreement for sale executed by the
seller in favour of the buyer.
Headnotes
Specific Relief Act, 1963 – Specific performance of contract
– Time, if essence of contract – Seller and the buyer entered
into registered agreement to sell property on 22.11.1990 for a
consideration of Rs.21,000/- - Advance payment of Rs. 3000/-
received by the seller and the transaction was to be completed
within six months – However, on 05.11.1997, seller executed
a Sale Deed with regard to the property in question with the
third person for a consideration of Rs.22,000/- - Thereafter,
issuance of notice by the buyer to the seller calling upon
the seller to execute the agreement – Subsequently, suit for
specific performance of the Agreement, damages and for
recovery of money with interest filed by the buyer against the
seller – Dismissal of the suit – Appeal thereagainst allowed
by the First Appellate Court, and upheld by the High Court
– Correctness:
Held: Within six months there existed the onus of paying the entire
balance amount by the buyer to the seller – From the payment of
Rs.7,000/- out of Rs.21,000/-, as indicated in the notice sent by the
buyer, it is clear that the buyer had not complied with their obligation
under the Agreement within the six-month period and neither they
offered to pay the remaining/balance amount before the expiry of the
six-month period – Seller having accepted payment of Rs.1,000/-
on 21.04.1997, after seller had executed a Sale Deed in favour of
the third party, coupled with the fact that the forensic expert found
[2024] 1 S.C.R. 375
Alagammal and Ors. v. Ganesan and Anr.
the two thumb-impressions purportedly acknowledging payment
after the expiry of the time fixed not matching the fingerprints of
seller is clearly indicative that time having not been extended,
no enforceable right accrued to the buyer for getting relief under
the 1963 Act – If the seller had accepted money from buyer after
the expiry of the time-limit, which itself has not been conclusively
proved during trial or even at the first or second appellate stages,
the remedy available to the buyer was to seek recovery of money
paid along with damages or interest to compensate such loss but
suit for specific performance to execute the Sale Deed would not
be available – Furthermore, though the third party was arrayed
as a defendant in the suit, yet no relief seeking cancellation of his
Sale Deed was sought for – Even if the case of later payments
by the buyer to the seller is accepted, the same being at great
intervals and there being no willingness shown by them to pay the
remaining amount or getting the sale deed ascribed on necessary
stamp paper and giving notice to the seller to execute the sale
deed, it cannot be said that judged on the anvil of the conduct of
parties, especially the seller, time would not remain the essence
of the contract – Judgment of the High Court as also the First
Appellate Court set aside and that of the trial court is restored.
[Paras 24-26, 28-30]
Case Law Cited
K.S. Vidyanadam v Vairavan, [1997] 1 SCR 993 :
(1997) 3 SCC 1; Godhra Electricity Company Limited
v State of Gujarat, [1975] 2 SCR 42 : (1975) 1 SCC
199 – referred to.
Commissioners for Her Majesty’s Revenue and Customs
v Secret Hotels Limited (formerly Med Hotels Limited),
[2014] UKSC 16 – referred to.
Books and Periodicals Cited
Sir Kim Lewison, The Interpretation of Contracts, 7th
Edition - refered to.
List of Acts
Specific Relief Act, 1963
List of Keywords
Agreement for sale; Specific Relief; Specific performance; Time,
376 [2024] 1 S.C.R.
Digital Supreme Court Reports
essence of contract; Consideration amount; Advance payment;
Sale Deed; Legal notice; Suit for specific performance; Stamp
papers; Forensic expert; Thumb-impressions; Fingerprints;
Enforceable right; Remedy; Recovery of money; Damages; Interest;
Compensate; Willingness; Conduct of parties.
Case Arising From
CIVIL APPELLATE JURISDICTION : Civil Appeal No.8185 of 2009.
From the Judgment and Order dated 28.04.2009 of the High Court
of Madras in SA No.1127 of 2008.
Appearances for Parties
V. Prabhakar, Ms. E.R. Sumathy, Ms. Jyothi Parashar, N.
J.Ramchandar, Advs. for the Appellants.
P. V. Yogeswaran, Ashish Kumar Upadhyay, Y. Lokesh, V. Kandha
Prabhu, V. Sibi Kargil, Ms. Maitri Goal, Ms. Sonali Patra, Sachin
Kumar Verma, Ms. Divya, Advs. for the Respondents.
Judgment / Order of the Supreme Court
Judgment
Ahsanuddin Amanullah, J.
Heard learned counsel for the parties.
2. The present appeal is directed against the Final Judgment dated
28.04.2009 (hereinafter referred to as the “Impugned Judgment”)
passed by the Madurai Bench, Madras High Court (hereinafter
referred to as “the High Court”) dismissing a Second Appeal [S.A.
(MD) No.1127 of 2008] filed by the appellants/original defendants.
BRIEF FACTS:
3. The appellants no.1, 2 and 3 entered into a registered Agreement of
Sale (hereinafter referred to as the “Agreement”) with the respondents
on 22.11.1990 to sell the suit property for a consideration of
Rs.21,000/-, against which Rs.3000/- had been received in advance.
Further, six months’ time was fixed for completion of the transaction.
The appellants No.1, 2 & 3, in the meantime, had executed a Sale
Deed with regard to the property in question with appellant no.7 on
05.11.1997 for a consideration of Rs.22,000/-. On 18.11.1997, the
[2024] 1 S.C.R. 377
Alagammal and Ors. v. Ganesan and Anr.
respondents sent a Notice to the appellants calling upon them to
execute the Agreement. This led to the respondents filing of Original
Suit No.165 of 1998 before the Munsif, District Court, Dindigul
against the appellants for specific performance of the Agreement,
damages and for recovery of money with interest. The suit stood
dismissed by the Principal District Munsif Judge, Dindigul by order
dated 10.09.2000. An appeal bearing A.S. No.258 of 2008 filed by
the respondents was allowed by the First Appellate Court, and the
same has been upheld by the High Court by the Impugned Judgment
dated 28.04.2009.
SUBMISSIONS BY THE APPELLANTS:
4. Learned counsel for the appellants submitted that as per the
Agreement, the balance consideration amount of Rs. 18,000/- was
to be paid within six months which was admittedly not done. He
submitted that the so-called subsequent payments on 16.12.1990
of Rs.1,000/-; on 15.04.1991 of Rs.3,000/-, and; on 17.09.1991 of
Rs.2,500/- though were not actually paid to the appellants and even
without admitting the same and accepting it for the sake of argument,
the same is incorrect as the fingerprint expert has found the thumbimpression of the appellant no.1 as not matching the admitted actual
sample thumb-impression of the appellant no.1. and, thus, the very
basis of holding that time was not the essence of the agreement
gets washed away. It was submitted that the Agreement stipulated
that if there was default on the part of the respondents, the advance
paid would be forfeited, and the entitlement to obtain the Sale Deed
and get possession free from all encumbrances would also end.
5. It was submitted that once the fingerprint has been disapproved of by
an expert and such report has been brought before the First Appellate
Court, the claim based on such a document on which forgery has
been committed itself renders the whole transaction inadmissible in
law on the well-settled principle that the respondents did not come
before the Court with clean hands as the entire claim was based
on a forged document.
6. It was submitted that the claim of the respondents to have paid
Rs.3,000/- on 18.09.1992; Rs.1,800/- on 24.07.1996; Rs.1,300/- on
25.07.1996 and Rs.1,000/- on 29.07.1996 i.e., a total of Rs.20,425/-
378 [2024] 1 S.C.R.
Digital Supreme Court Reports
and ultimately Rs.1,000/- on 21.04.1997 i.e., an excess of Rs. 425/-
over the amount indicated in the Agreement, was false.
7. Learned counsel submitted that the endorsement(s) made not having
been proved, it cannot be assumed that the respondents were ready
and willing, or that they had, in fact, paid the excess amount.
8. It was contended that the Legal Notice sent on behalf of the
respondents dated 18.11.1997 was clearly to get over the fatal
lapses on their part and to give life to a dead cause i.e., revive the
Agreement, which already stood incapable of being executed through
Court due to efflux of time. On this issue, the contention was that
readiness and willingness must be pleaded and proved which has not
been done as is clear from the averments made in the plaint filed by
the respondents. Thus, it was submitted that the trial court and even
the First Appellate Court not recording any finding on the aspect of
the readiness and willingness on the part of the respondents, the
High Court’s observation in the Impugned Judgement on readiness
and willingness of the respondents is without basis.
9. Learned counsel submitted that readiness and willingness has to be
specifically pleaded and proved as per Section 16(c) of the Specific
Relief Act, 1963 (hereinafter referred to as the “1963 Act”) and there
cannot be any question of drawing inference. Thus, he submitted that
the respondents were obliged to obtain stamp-paper and draw up the
Sale Deed, of which there is no indication in the plaint. It was urged
that this establishes that there was no readiness and willingness to
comply with their obligations in terms of the Agreement.
10. Learned counsel submitted that the thumb-impression(s) in the
endorsement(s) have neither matched nor been found to be identical
as per the fingerprint expert’s report which has been referred to in
the judgment of the First Appellate Court.
11. Learned counsel submitted that as per the judgment rendered by
the First Appellate Court and affirmed by the High Court, the last
payment made and endorsed on 17.09.1991 has been accepted and
thus three years from such date would be 16.09.1994 but the suit was
instituted only on 23.03.1998, which is clearly barred by limitation.
12. It was submitted that the Trial Court had found that the endorsements
were silent regarding extension of time, which finding has not been
disturbed either by the First Appellate Court or the High Court and
[2024] 1 S.C.R. 379
Alagammal and Ors. v. Ganesan and Anr.
looking at the issue from such angle, six months’ time under the
Agreement would expire on 21.05.1991 and a three-year limitation
would end on 22.05.1994. On this, learned counsel submitted that
the contention of the respondents that the limitation would start
from the judgment rendered in Original Suit No.551 of 1992 dated
24.07.1996, filed by appellant no.1 for seeking possession and eviction
of her husband and mother-in-law from the suit property, is not the
correct legal perspective, as mere absence of possession would not
have defeated the passing of title from the appellants in favour of
the respondents by the execution of a Sale Deed. The object of the
Agreement was only for conveying the title of the property in question.
13. Learned counsel submitted that neither Original Suit No.551 of 1992
nor the judgment rendered therein have been mentioned by the
respondents in Original Suit No.165 of 1998 for computing the cause
of action for filing suit in the year 1998 with regard to the Agreement,
which was entered into in 1990. Further, it was urged that it was
incumbent upon the respondents to have obtained the Sale Deed
and possession through Court as set forth in the Default Clause in
the Agreement and thus, the Legal Notice dated 18.11.1997 by the
respondents would not extend the time as it had expired much before
and such unilateral issuance of notice would not get over the legal
bar of Article 54 of the Limitation Act, 1963 (hereinafter referred to
as the “Act”).
14. Learned counsel summed up arguments by contending that in any
view of the matter, prior to filing of the suit, the property in question had
already been sold under registered Sale Deed to the appellant no.7
and the suit for specific performance was required to be dismissed
as the Sale Deed to appellant no.7 has not been challenged.
15. Learned counsel relied upon the decision of this Court in K.S.
Vidyanadam v Vairavan, (1997) 3 SCC 1, at Paragraphs 10, 11
and 13 for the proposition that Courts in India have consistently held
that in the case of agreement of sale relating to immovable property,
time is not the essence of the contract unless specifically provided
to that effect, and the period of limitation prescribed by the Act for
filing a suit was 3 years.
16. It was contended that in the aforesaid judgment, the terms of the
agreement therein were identical to the instant Agreement, inasmuch
as there was no reference to any tenant in the building and it was
380 [2024] 1 S.C.R.
Digital Supreme Court Reports
stated that within six months, the plaintiff should purchase the
stamp-papers and pay the balance consideration upon which the
defendants shall execute the Sale Deed either in his name or the
name(s) proposed by him before the Sub-Registrar. It was restated
that there was no prior letter/notice from the plaintiffs (respondents)
to the defendants (appellants) calling upon them to get the Sale Deed
executed till the issuance of the Legal Notice dated 18.11.1997 i.e.,
after a gap of 6 ½ years, identical to the facts in K.S. Vidyanadam
(supra).
SUBMISSIONS ON BEHALF OF THE RESPONDENTS:
17. In opposition to the appeal, learned counsel for the respondents
submitted that on 23.03.1992, appellant no.1 had filed Original Suit
No.551 of 1992 against her husband, mother-in-law, second wife of
her husband and the son of the second wife, which was decreed.
He submitted that appellants even after accepting Rs.425/- over
and above the amount indicated in the Agreement and even after
getting a decree for declaration and possession of the suit property
in her favour on 24.07.1996, did not execute the Sale Deed due
to which Legal Notice was sent to her on 18.11.1997. As no action
was taken, the respondents were forced to file a suit on 23.03.1998
seeking specific performance.
18. Learned counsel submitted that the First Appellate Court had recorded
that the Sale Deed executed by appellant no.1 in favour of appellant
no.7 dated 05.11.1997 was not bonafide as the said sale was effected
after getting an order for declaration and recovery of possession of
the suit property in favour of appellant no.1 on 24.07.1996 in Original
Suit No.551 of 1992.
19. Learned counsel submitted that the issue whether time is the
essence of the contract i.e., the Agreement would depend also on
the conduct of the parties and in the present case, when money
was accepted by appellant no.1, much after the stipulated time,
clearly the Agreement’s validity so as to culminate in sale could not
be said to have been extinguished, as by accepting money later,
the time indicated for completion of the transaction by execution of
Sale Deed had been relaxed.
20. It was contended that the actual intention of the parties was not
only to execute the Sale Deed but also handover the possession
[2024] 1 S.C.R. 381
Alagammal and Ors. v. Ganesan and Anr.
which is an implied term of every sale of immovable property and
thus only when on 24.07.1996, the appellant concerned became
capable of handing over possession, limitation would start from such
date as otherwise even if the Sale Deed was executed in favour of
the respondents, it would have been of no real consequence in the
absence of possession being capable of hand over.
21. Learned counsel contended that the stand taken by the appellants,
that the proposed sale was only for transfer of title and not possession,
cannot be accepted since the sale of immovable property is always
for the transfer of possession from the seller to the buyer in terms of
Section 5 read with Section 54 of the Transfer of Property Act, 1882
(hereinafter referred to as the “TP Act”). Further, it was submitted that
Section 55(f) of the TP Act contemplates duty of the seller to hand
over possession of the property at the time of sale, and if the seller
is not in possession of the property at the time of the agreement to
sell or thereafter, it is a “material defect” in the property necessarily
to be disclosed to the purchaser at the time of sale in accordance
with Section 55(1)(a) of the TP Act. Thus, according to him, it is the
obligation of the seller to hand over possession at the time of sale,
as was stipulated in the Agreement.
22. On the question of whether time is of the essence in such a contract,
it was contended that when a party is not in possession to hand over
the same at the time of execution of an agreement for sale, then
time would not be of the essence as the right to sue would accrue in
favour of the person to whom the suit property is required to be sold
only upon the vendor being in a position to hand over possession of
the property to the buyer. It was further submitted that subsequent
conduct of parties is also relevant for testing whether time is of the
essence of the contract in question. It was submitted that in the
present case, the acceptance of money much after the expiry of the
six-month period by the appellant no.1 from the respondents leaves
no doubt that time was not the essence and the time for performance
of the Agreement would commence only after obtainment of physical
possession by the appellants.
23. In support of his contentions, learned counsel relied upon the decision
of this Court in Godhra Electricity Company Limited v State of
382 [2024] 1 S.C.R.
Digital Supreme Court Reports
Gujarat, (1975) 1 SCC 199, the relevant paragraphs being 11 to 16;
of the United Kingdom Supreme Court in The Commissioners for
Her Majesty’s Revenue and Customs v Secret Hotels2 Limited
(formerly Med Hotels Limited), [2014] UKSC 16 dated 05.03.2014,
the relevant being paragraph 331, and; The Interpretation of
Contracts, 7th Edition by Sir Kim Lewison, the relevant being
paragraph 3.189.
ANALYSIS, REASONING AND CONCLUSION:
24. Having considered the matter, this Court finds that the Judgment
impugned cannot be sustained. The moot question revolves around
whether the Agreement dated 22.11.1990 discloses a fixed timeframe for making payment in full by the respondents that is, in terms
of the recitals in the agreement for sale executed by the appellant
no.1 in favour of the respondents. The admitted position is that the
time indicated in the Agreement was six months from 22.11.1990
i.e., till 21.05.1991 and as per the Legal Notice dated 18.11.1997
sent by the respondents to the appellants, only Rs.7000/- was paid
within the time stipulated. Perusal of the Agreement reveals that the
respondents had agreed to pay the appellants Rs.21,000/- for the
property in question, out of which Rs.3,000/- was already paid as
earnest money and the rest was to be paid within 6 months. The
respondents were to purchase stamp papers at their expense and
the appellants had to register the Sale Deed either in the name of
the respondent no.1 or as proposed by him before the Sub-Registrar
after paying the remaining/balance amount. If the appellants failed
to register the Sale Deed, respondent no.1 had a right to deposit
the balance of sale consideration in the Civil Court and get sale with
possession effected through Court from the first party i.e., appellants
no.1 to 3.
1 ‘33. In English law it is not permissible to take into account the subsequent behaviour or statements of
the parties as an aid to interpreting their written agreement – see FL Schuler AG v Wickman Machine
Tool Sales Ltd [1974] AC 235. The subsequent behaviour or statements of the parties can, however, be
relevant, for a number of other reasons. First, they may be invoked to support the contention that the
written agreement was a sham – ie that it was not in fact intended to govern the parties’ relationship
at all. Secondly, they may be invoked in support of a claim for rectification of the written agreement.
Thirdly, they may be relied on to support a claim that the written agreement was subsequently varied,
or rescinded and replaced by a subsequent contract (agreed by words or conduct). Fourthly, they may
be relied on to establish that the written agreement represented only part of the totality of the parties’
contractual relationship.’
[2024] 1 S.C.R. 383
Alagammal and Ors. v. Ganesan and Anr.
25. At this juncture, the Court would indicate that within six months there
existed the onus of paying the entire balance amount of Rs.18,000/-
by the respondent no.1 to the appellant no.1. It is not the case of the
respondents that they had even offered to pay the remaining/balance
amount before the expiry of the six-month period. Thus, payment
of Rs.3,000/- only out of Rs.21,000/- having been made, or at best
Rs.7,000/- out of Rs.21,000/-, which is the amount indicated in the
Legal Notice sent by the respondents to the appellants, the obvious
import would be that the respondents had not complied with their
obligation under the Agreement within the six-month period.
26. Pausing here, it is notable that the appellant no.1 having accepted
payment of Rs.1,000/- on 21.04.1997 i.e., after appellant no.1 had
executed a Sale Deed in favour of appellant no.7 on 05.11.1997,
coupled with the fact that the forensic expert found the two thumbimpressions purportedly acknowledging payment after the expiry
of the time fixed not matching the fingerprints of appellant no.1 is
clearly indicative that time having not been extended, no enforceable
right accrued to the respondents for getting relief under the 1963
Act. At the highest, if the appellant no.1 had accepted money from
respondent no.1 after the expiry of the time-limit, which itself has not
been conclusively proved during trial or even at the first or second
appellate stages, the remedy available to the defendants was to seek
recovery of such money(ies) paid along with damages or interest to
compensate such loss but a suit for specific performance to execute
the Sale Deed would not be available, in the prevalent facts and
circumstances. In the present case, there is also no explanation,
as to why, an excess amount of Rs.425/-, as claimed, was paid
by respondent no.1 to the appellant no.1, when the respondents’
specific stand is that due to the appellants not being in possession
of the property so as to hand over possession to the respondents,
delay was occasioned. The submission that no adverse effect
could be saddled on the respondents as decree for declaration and
recovery of possession was obtained by appellant no.1 in her favour
only on 27.04.1996 is not acceptable for the reason that there is
no averment that pursuant to such decree, she had also obtained
possession through execution. Thus, the decree dated 27.04.1996
also remained only a decree on paper without actual possession
to appellant no.1. The contention of the respondents becomes
384 [2024] 1 S.C.R.
Digital Supreme Court Reports
self-contradictory especially with regard to cause of action having
arisen after such decree in favour of the appellant no.1 since even
at the time of filing the underlying suit, actual possession not being
with appellant no.1, the Sale Deed could not have been executed.
27. Another important aspect that the Court is expected to consider is
the fact that the appellant no.7 in whose favour there was a Sale
Deed with regard to the suit premises, much prior to issuance of
any Legal Notice and the institution of the suit in question and that
no relief had been sought for cancellation of such Sale Deed, a suit
for specific performance for execution of sale deed qua the very
same property could not be maintained. The matter becomes worse
for the respondents since such relief was also not sought even at
the First Appeal stage nor at the Second Appeal stage, despite the
law permitting and providing for such course of action. Even the
Legal Notice dated 18.11.1997 has been issued after almost seven
months from the alleged last payment of Rs.1.000/-, as claimed by
the respondents to have been made on 21.04.1997.
28. Pertinently, though appellant no.7 was arrayed as a defendant in the
suit, yet no relief seeking cancellation of his Sale Deed was sought for.
29. The ratio laid down in K.S. Vidyanadam (supra) which had a similar
factual matrix squarely applies in the facts and circumstances of the
present case, on the issue that time was the essence of contract and
even if time is not the essence of the agreement, in the event that
there is no reference of any existence of any tenant in the building
and it is mentioned that within a period of six months, the plaintiffs
should purchase the stamp paper and pay the balance consideration
whereupon the defendants will execute the Sale Deed, there is not
a single letter or notice from the plaintiffs to the defendants calling
upon them to the tenant to vacate and get the Sale Deed executed
within time. Further, the Legal Notice was issued after two and a half
years from expiry of the time period in K.S. Vidyanadam (supra),
whereas in the present case, the Legal Notice has been issued after
more than six and a half years. The relevant paragraphs from K.S.
Vidyanadam (supra) read as under:
‘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
[2024] 1 S.C.R. 385
Alagammal and Ors. v. Ganesan and Anr.
provided to that effect. The period of limitation prescribed
by the Limitation Act for filing a suit is three years. From
these two circumstances, it does not follow that any and
every suit for specific performance of the agreement (which
does not provide specifically that time is of the essence of
the contract) should be decreed provided it is filed within
the period of limitation notwithstanding the time-limits
stipulated in the agreement for doing one or the other thing
by one or the other party. That would amount to saying that
the time-limits prescribed by the parties in the agreement
have no significance or value and that they mean nothing.
Would it be reasonable to say that because time is not
made the essence of the contract, the time-limit(s) specified
in the agreement have no relevance and can be ignored
with impunity? It would also mean denying the discretion
vested in the court by both Sections 10 and 20. As held
by a Constitution Bench of this Court in Chand Rani v.
Kamal Rani [(1993) 1 SCC 519]: (SCC p. 528, para 25)
“… it is clear that in the case of sale of immovable
property there is no presumption as to time being
the essence of the contract. Even if it is not of the
essence of the contract, the Court may infer that it is
to be performed in a reasonable time if the conditions
are (evident?): (1) from the express terms of the
contract; (2) from the nature of the property; and (3)
from the surrounding circumstances, for example,
the object of making the contract.”
In other words, the court should look at all the relevant
circumstances including the time-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
386 [2024] 1 S.C.R.
Digital Supreme Court Reports
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 plaintiff says that he
has been calling upon Defendants 1 to 3 to get the tenant
vacated and execute the sale deed and that the defendants
were postponing the same representing that the tenant
is not vacating the building. The defendants have denied
this story. According to them, the plaintiff never moved
in the matter and never called upon them to execute the
sale deed. The trial court has accepted the defendants’
story whereas the High Court has accepted the plaintiff’s
story. Let us first consider whose story is more probable
and acceptable. For this purpose, we may first turn to the
terms of the agreement. In the agreement of sale, there is
no reference to the existence of any tenant in the building.
What it says is that within the period of six months, the
plaintiff should purchase the stamp papers and pay the
balance consideration whereupon the defendants will
execute the sale deed and that prior to the registration
of the sale deed, the defendants shall vacate and deliver
possession of the suit house to the plaintiff. There is not
a single letter or notice from the plaintiff to the defendants
calling upon them to get the tenant vacated and get the
sale deed executed until he issued the suit notice on 11-7-
1981. It is not the plaintiff’s case that within six months’, he
purchased the stamp papers and offered to pay the balance
consideration. The defendants’ case is that the tenant is
their own relation, that he is ready to vacate at any point
of time and that the very fact that the plaintiff has in his
suit notice offered to purchase the house with the tenant
itself shows that the story put forward by him is false. The
tenant has been examined by the defendant as DW 2. He
stated that soon after the agreement, he was searching
for a house but could not secure one. Meanwhile (i.e.,
on the expiry of six months from the date of agreement),
[2024] 1 S.C.R. 387
Alagammal and Ors. v. Ganesan and Anr.
he stated, the defendants told him that since the plaintiff
has abandoned the agreement, he need not vacate. It is
equally an admitted fact that between 15-12-1978 and 11-
7-1981, the plaintiff has purchased two other properties.
The defendants’ consistent refrain has been that the prices
of house properties in Madurai have been rising fast, that
within the said interval of 2 1/2 years, the prices went up
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
388 [2024] 1 S.C.R.
Digital Supreme Court Reports
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 time-limit(s) for taking steps by one or the other
party, it must have some significance and that the said
[2024] 1 S.C.R. 389
Alagammal and Ors. v. Ganesan and Anr.
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
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.’
(Emphasis supplied)
30. The decisions relied upon by the respondents, relating to the conduct
of parties are of no avail to them in the circumstances, as even if
the case of later payments by the respondents to the appellants
is accepted, the same being at great intervals and there being no
willingness shown by them to pay the remaining amount or getting
the Sale Deed ascribed on necessary stamp paper and giving notice
to the appellants to execute the Sale Deed, it cannot be said that
in the present case, judged on the anvil of the conduct of parties,
especially the appellants, time would not remain the essence of the
contract.
31. For reasons afore-noted, the Impugned Judgment of the High Court
as also the judgment of the First Appellate Court stand set aside.
The judgment/order of the Trial Court is revived and restored.
32. The appeal is allowed accordingly.
33. In the facts and circumstances, no order as to costs is proposed.
Headnotes prepared by: Nidhi Jain Result of the case: Appeal allowed.
