Specific Relief Act, 1963 - Agreement to sell land - Non-execution of - Suit for specific performance - Grant of decree and plea of seller that time was essence of contract rejected - However, High Court setting aside the decree - Validity of - Held: Recital in the agreement that earnest money would be forfeited upon failure to execute agreement within stipulated period makes it clear that parties never intended time to be essence of contract - More so, seller did not prove his plea - Thus, decree granted by trial court upheld - Buyer directed to deposit balance consideration amount and seller would execute sale deed.
The respondent-defendant entered into an agreement for sale of agricultural lands to the appellant-plaintiffs for a consideration amount. The sale deed was to be executed by the defendant within six months and the possession of lands was to be delivered at the time of execution of sale deed. The plaintiffs paid the earnest money and balance amount was to be paid at the time of execution of sale deed. However, the defendant did not execute the agreement. The plaintiffs filed suit for specific performance of agreement. The trial court decreed the suit holding that the defendant failed to prove that time was the essence of contract and the plaintiffs were and are ready and willing to perform their part of contract. The High Court set aside the order of trial court. Hence the present appeal.
Allowing the appeal, the Court
HELD: 1.1 In the case of sale of immoveable property, there is no presumption as to time being the essence of the contract. Even where the parties have expressly provided that time is the essence of the contract, such a stipulation will have to be read along with other provisions of the contract. [Para 10] [1176-E]
1.2 The defendant in his written statement made a bald claim that the time was the essence of contract. Even if the recital in the agreement of sale is accepted that the sale deed has to be executed within a period of six months, there is an express provision in the agreement itself that failure to adhere the time, the earnest money will be forfeited. In such circumstances and in view of recital pertaining to forfeiture of the earnest money makes it clear that time was never intended by the parties to be of essence. [Para 13] [1178-E & F]
1.3 The appellants/plaintiffs clearly established their claim to secure specific performance of the agreement by leading cogent evidence whereas the respondent/defendant having pleaded that time was the essence of the contract neither entered the witness box nor led any evidence whatsoever. The defendant did not bother to prove his claim on oath before the Court to the effect that it was the plaintiffs who avoided performing their part of contract. Neither the terms of agreement nor the intention of the parties indicate that the time is an essence of the agreement. All the above-mentioned material aspects were correctly appreciated by the trial court and unfortunately the High Court lost sight of the above material aspect and the conduct of the defendant in not strengthening his plea by placing acceptable evidence. In such circumstances, the High Court should have upheld the decree of specific performance granted by the trial Court. [Paras 12 and 13] [1177-G; 1178-A, D, H; 1179-A]
1.4 When the third plaintiff deposed before the Court explaining their case with reference to the recitals in the agreement of sale including the reference to the legal notice to the defendant, in the absence of contra evidence on the side of the defendant, the conclusion arrived at by the High Court in non-suiting the plaintiff cannot be agreed. [Para 13] [1179-A & B]
1.5 The claim for refund of earnest money by the plaintiffs is only their alternative claim. It is not in dispute that in all suits for specific performance, the plaintiff is entitled to seek alternative relief in the event the decree for specific performance cannot be granted for any reason, hence there is no infirmity in the alternative plea of refund. [Para 13] [1179-C & D]
1.6 The judgment and decree of the High Court is set aside and the decree granted by the trial Court is upheld. The appellants/plaintiffs are directed to deposit the balance amount of sale consideration whereupon the respondent/defendant would execute the sale deed of the suit lands. In case of failure of the defendant to execute the sale deed, the plaintiffs would be entitled to get the sale deed executed through Court. [Para 14] [1179-E & F]
K.S. Vidyanadam and Others vs. Vairavan 1997 (3) SCC 1 - distinguished.
Chand Rani (Smt.) (dead) by LRs. Vs. Kamal Rani (Smt.) (dead) by LRs, (1993) 1 SCC 519; Swarnam Ramachandran (Smt.) and Another vs. Aravacode Chakungal Jayapalan, 2004 (8) SCC 689 - relied on.
Makarand D. Adkar, Vijay Kumar and Vishwajit Singh for the Appellants.
V.N. Ganpule, S.B. Meitei, Naresh Kumar Gaur and Ashok Kumar Singh for the Respondent.
2008 AIR 1205, 2008(1 )SCR1169, 2008(4 )SCC464 , 2008(1 )SCALE705 , 2008(2 )JT63
CASE NO.:
Appeal (civil) 647 of 2008
PETITIONER:
Balasaheb Dayandeo Naik (Dead)through LRs & Ors
RESPONDENT:
Appasaheb Dattatraya Pawar
DATE OF JUDGMENT: 24/01/2008
BENCH:
Dr. Arijit Pasayat & P. Sathasivam
JUDGMENT:
JUDGMENT
(Arising out of SLP (C) No. 16694 OF 2005)
P. Sathasivam, J.
1) Leave granted.
2) This appeal is directed against the judgment and order
dated 11.01.2005 passed by the High Court of Judicature at
Bombay in First Appeal No. 743 of 1993 in and by which the
High Court set aside the decree for specific performance
granted by the trial Court and consequently dismissed the suit
of the plaintiffs.
3) Brief facts in a nutshell are:
The appellants/plaintiffs in special civil suit No. 320 of 1988
filed the same for specific performance of agreement dated
31.07.1985. According to the plaintiffs, the respondent
herein/defendant is the owner of land Block No. 208 and
Block No. 209 respectively admeasuring Area H. 0.60 R and H.
0.40 R of Village Nagaon in Hatkanangale Tahsil. The
defendant had entered into an agreement for sale of the said
lands to the plaintiffs for a consideration of Rs.85,000/- per
acre. The agreement was reduced into writing and according
to the terms of the agreement, the sale deed was to be
executed by the defendant within a period of six months. It
was agreed that possession of the lands was to be delivered at
the time of execution of sale deed. The defendant has also
undertaken the responsibility of obtaining necessary
permission for sale of the lands, if required. On the date of
execution of the agreement, an amount of Rs.20,000/- was
paid by the plaintiffs to the defendant as earnest money and
balance amount of the consideration was to be paid at the
time of execution of the sale deed. The plaintiffs were always
ready and willing to perform their part of the contract but the
defendant avoided to receive the balance amount of
consideration and neglected to execute the sale deed. The
plaintiffs sent a legal notice on 16.07.1988 to the defendant
through their advocate calling upon him to perform his part of
the obligation under the contract. In spite of the notice, the
defendant did not comply with the requirements which
necessitated the plaintiffs to file the suit for specific
performance or in the alternative refund of earnest money with
interest thereon @ 15% per annum.
4) The defendant filed a written statement wherein he
denied the plaintiffs claim. It was further stated that though
agreement for sale of the suit lands was entered into between
him and the plaintiffs on 31.07.1985, the sale deed was to be
executed within a period of six months from the date of
contract as he was in dire need of money for construction of
his house and, therefore, the time was the essence of the
contract. He had called upon the plaintiffs to pay the balance
amount of consideration and get the sale deed executed. But
the plaintiffs were not in a position to arrange the balance
amount of consideration and complete the contract. As the
market price of the agricultural lands have now gone up, the
plaintiffs by purchasing the suit lands are intending to dispose
of the same to others at a higher price. In view of the same,
the plaintiffs are not entitled to discretionary relief of specific
performance of contract.
5) The learned Civil Judge (Senior Division), on 23.02.1993,
after finding that the defendant has failed to prove that time
was the essence of contract and the plaintiffs were and are
ready and willing to perform their part of contract decreed the
suit as prayed for. Aggrieved by the aforesaid judgment of the
trial Court, the defendant filed First Appeal No. 743 of 1993
before the High Court of Judicature at Bombay. The learned
Single Judge of the High Court not in agreement with the
conclusion of the trial Court and finding that plaintiffs failed to
substantiate their plea allowed the appeal of the defendant
and dismissed the suit. Questioning the judgment and order of
the High Court, the plaintiffs have filed the present appeal by
way of special leave. During the pendency of the appeal before
this Court, Balasaheb Dayandeo Naik/first plaintiff died and
his legal representatives were brought on record as per order
dated 19.09.2006 in I.A. No. 3 of 2005.
6) We heard Mr. Makarand D. Adkar, learned counsel
appearing for the appellants and Mr. V.N. Ganpule, learned
senior counsel appearing for the respondent, perused the
entire annexures and other relevant materials filed before this
Court.
7) Having regard to the terms of agreement of sale dated
31.07.1985, reasonings of the trial Court as well as the High
Court and submissions before this Court, only two points arise
for consideration of this Court, namely, (a) whether time is the
essence of the contract? and (b) whether the plaintiffs were
ready and willing to perform the contract?
8) In order to find an answer to the above questions, it
would be useful to refer the relevant recitals from the
agreement of sale. Para 3 of the agreement specifically
mentions the details of the land sought to be sold such as
extent and boundaries. It also refers the easement rights and
the period in which the sale has to be completed. The recital
reads as under:-
From the total consideration I have received Rs.20,000/- as
an earnest money of which no independent receipt is
necessary. Rest of the amount is to be paid by you at the
time of sale deed of the said lands. It is agreed between the
parties that the sale deed is to be executed within 6 months
from today. Possession of the land is to be handed over at
the time of sale deed.
It is also relevant to mention the default clause which
reads as under:-
For completion of the sale deed the permission is required
to be obtained by me. If I fail to execute the said deed within
stipulated period then you have to get it executed on the
basis of this agreement. On the contrary if you fail to get
execute the sale deed then this agreement is supposed to be
cancelled and the earnest amount will be forfeited. The land
is free from all sorts of encumbrances. This agreement is
binding on myself and my legal heirs etc. dated 31/7/1985.
The above-mentioned details in the agreement of sale
clearly show a) that the subject-matter of the property is an
agricultural land/immoveable properties b) the sale deed is to
be executed within six months from the date of sale agreement
i.e. 31.07.1985. c) possession of the land to be handed over at
the time of execution of sale deed d) failure to get execute the
sale deed, the earnest money will be forfeited. With these
factual details, let us consider the legal principles enunciated
by this Court.
9) In Chand Rani (Smt.) (dead) by LRs. Vs. Kamal Rani
(Smt.) (dead) by LRs, (1993) 1 SCC 519, a Constitution Bench
of this Court has held that in the sale of immoveable property,
time is not the essence of the contract. It is worthwhile to
refer the following conclusion:
19. It is a well-accepted principle that in the case of sale of
immovable property, time is never regarded as the essence of
the contract. In fact, there is a presumption against time
being the essence of the contract. This principle is not in any
way different from that obtainable in England. Under the law
of equity which governs the rights of the parties in the case
of specific performance of contract to sell real estate, law
looks not at the letter but at the substance of the agreement.
It has to be ascertained whether under the terms of the
contract the parties named a specific time within which
completion was to take place, really and in substance it was
intended that it should be completed within a reasonable
time. An intention to make time the essence of the contract
must be expressed in unequivocal language.
21. In Govind Prasad Chaturvedi v. Hari Dutt Shastri (1977)
2 SCC 539 following the above ruling it was held at pages
543-544: (SCC para 5)
... It is settled law that the fixation of the period within which
the contract has to be performed does not make the stipulation
as to time the essence of the contract. When a contract relates
to sale of immovable property it will normally be presumed
that the time is not the essence of the contract. [Vide
Gomathinayagam Pillai v. Pallaniswami Nadar 1 (at p. 233).]
It may also be mentioned that the language used in the
agreement is not such as to indicate in unmistakable terms
that the time is of the essence of the contract. The intention
to treat time as the essence of the contract may be evidenced
by circumstances which are sufficiently strong to displace
the normal presumption that in a contract of sale of land
stipulation as to time is not the essence of the contract.
23. In Indira Kaur (Smt) v. Sheo Lal Kapoor (1988) 2 SCC
488 in paragraph 6 it was held as under:
... The law is well-settled that in transactions of sale of
immovable properties, time is not the essence of the
contract.
10) It is clear that in the case of sale of immoveable property,
there is no presumption as to time being the essence of the
contract. Even where the parties have expressly provided that
time is the essence of the contract, such a stipulation will have
to be read along with other provisions of the contract. For
instance, if the contract was to include clauses providing for
extension of time in certain contingencies or for payment of
fine or penalty for every day or week, the work undertaken
remains unfinished on the expiry of the time provided in the
contract, such clauses would be construed as rendering
ineffective the express provision relating to the time being of
the essence of contract. In the case on hand, though the
parties agreed that the sale deed is to be executed within six
months, in the last paragraph they made it clear that in the
event of failure to execute the sale deed, the earnest money
will be forfeited. In such circumstances, the above-mentioned
clauses in the last three paragraphs of the agreement of sale
would render ineffective the specific provision relating to the
time being the essence of contract.
11) This Court in Swarnam Ramachandran (Smt.) and
Another vs. Aravacode Chakungal Jayapalan, (2004) 8
SCC 689 has once again reiterated that time is not the essence
of contract relating to immoveable property. The following
statement of law in para 12 are rightly applicable to the case
on hand:
12. That time is presumed not to be of essence of the
contract relating to immovable property, but it is of essence
in contracts of reconveyance or renewal of lease. The onus to
plead and prove that time was the essence of the contract is
on the person alleging it, thus giving an opportunity to the
other side to adduce rebuttal evidence that time was not of
essence. That when the plaintiff pleads that time was not of
essence and the defendant does not deny it by evidence, the
court is bound to accept the plea of the plaintiff. In cases
where notice is given making time of the essence, it is duty of
the court to examine the real intention of the party giving
such notice by looking at the facts and circumstances of
each case. That a vendor has no right to make time of the
essence, unless he is ready and willing to proceed to
completion and secondly, when the vendor purports to make
time of the essence, the purchaser must be guilty of such
gross default as to entitle the vendor to rescind the contract.
12) As observed in the said decision, in the case on hand the
appellants/plaintiffs clearly established their claim to secure
specific performance of the agreement by leading cogent
evidence whereas the respondent/defendant having pleaded
that time was the essence of the contract neither entered the
witness box nor led any evidence whatsoever. The High Court
lost sight of the above material aspect and the conduct of the
defendant in not strengthening his plea by placing acceptable
evidence. In such circumstances, as rightly argued by learned
counsel for the appellants, the High Court should have
confirmed the decree of specific performance granted by the
trial Court. On the other hand, the High Court wrongly placed
reliance on the decision of this Court in K.S. Vidyanadam
and Others vs. Vairavan, (1997) 3 SCC 1 as in the facts of
that case, this Court found that granting for specific
performance was inequitable, however such aspect of the
matter was totally absent in the case on hand. Even
otherwise, para 11 of the judgment shows that the subject
matter of the property was an urban immoveable property and
in such special circumstance relaxed the general rule that
time is not the essence of the contract in the case of
immoveable properties. In the case on hand, the details
furnished in the agreement clearly show that the subject-
matter of the property is an agricultural land situated in
Kolhapur Dist., Maharastra. In such circumstances, the
decision in K.S. Vidyanadam and Ors. (supra) is not applicable
to the facts on hand. In the facts of the present case, which
we have already adverted to, neither the terms of agreement
nor the intention of the parties indicate that the time is an
essence of the agreement. We have already pointed that
having raised such a plea the respondent even did not bother
to lead any evidence.
13) It is true that the defendant in his written statement has
made a bald claim that the time was the essence of contract.
Even if we accept the recital in the agreement of sale (Exh. 18)
that the sale deed has to be executed within a period of six
months, there is an express provision in the agreement itself
that failure to adhere the time, the earnest money will be
forfeited. In such circumstances and in view of recital
pertaining to forfeiture of the earnest money makes it clear
that time was never intended by the parties to be of essence.
The Constitution Bench decision in Chand Rani vs. Kamal
Rani (supra) also makes it clear that mere fixation of time
within which contract is to be performed does not make the
stipulation as to the time as the essence of contract. Further,
we have already pointed out that the defendant has not
bothered to prove his claim on oath before the Court to the
effect that it was the plaintiffs who avoided performing their
part of contract. All the above-mentioned material aspects
were correctly appreciated by the trial Court and unfortunately
the High Court failed to adhere to the well known principles
and the conduct of the defendant. When the third plaintiff
deposed before the Court explaining their case with reference
to the recitals in the agreement of sale including the reference
to the legal notice to the defendant, in the absence of contra
evidence on the side of the defendant, we are unable to agree
with the conclusion arrived at by the High Court in non-
suiting the plaintiff. The High Court commented the conduct
of the plaintiffs in praying for refund of the earnest money,
namely, Rs.20,000/- paid as advance. As rightly pointed out,
the claim for refund of earnest money is only their alternative
claim. It is not in dispute that in all suits for specific
performance, the plaintiff is entitled to seek alternative relief in
the event the decree for specific performance cannot be
granted for any reason, hence there is no infirmity in the
alternative plea of refund.
14) In the light of what has been stated above, we set aside
the judgment and decree of the High Court and confirm the
decree granted by the trial Court. In view of the said
conclusion, the appellants/plaintiffs are directed to deposit
the balance amount of sale consideration i.e., Rs.1,92,500/- in
the trial Court within a period of eight weeks whereupon the
respondent/defendant shall execute the sale deed of the suit
lands Block No. 208 admeasuring 0.60 R and Block No. 209
admeasuring 0.40 R of Village Nagaon, Tahsil Hatkanangale as
per the agreement dated 31.07.1985. In case of failure of the
defendant to execute the sale deed, the plaintiffs shall be
entitled to get the sale deed executed through Court.
15) The civil appeal is allowed on the above terms. However,
in the facts and circumstances of the case, there shall be no
order as to costs.
