1
PGK
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
Suit No.391 of 1982
1.Pankaj Anantrai Bhuwa & ors. .. .. Plaintiffs
v/s.
M/s.Ramkumar Shivchandray & sons .. .. Defendant
Mr.D.S. Parikh, Senior Advocate with Mr.R.M. Tiwari for
Plaintiffs.
Mr.Uday Bobade with Mr.Pankaj Kawli i/by M/s.Dadhich & Co.
for Defendant.
-----
CORAM : SMT.ROSHAN DALVI, J.
Date of reserving the judgment : 1st April, 2010
Date of pronouncing the judgment : 7th May, 2010
JUDGMENT :
1.The Plaintiffs have sued for specific performance of
the Agreement for sale dated 23.4.1981 (the said
Agreement), for a declaration that the agreement is
valid and subsisting and for an order to convey and
hand over possession of the property agreed to be sold
under the said Agreement to Plaintiff No.3, who is
nominated by Plaintiff Nos.1 and 2. The Defendant-
Company (the Defendant) is the owner of the suit
property being land with buildings and structures
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standing thereon at Prabhadevi Road, Final Plot No.942,
C.S. No.1064 of Lower Parel, Mumbai, admeasuring 3883
sq. yards equivalent to 3248 sq. meters (the suit
property).
2.The said Agreement dated 23.4.1981 is executed by way
of a letter from the Defendant to the Plaintiffs and
countersigned by the Plaintiffs.
3.Under the said Agreement, the Defendant agreed to sell,
transfer and convey the suit property to the Plaintiffs
on as is where is basis, free from all encumbrances for
consideration of Rs.20 Lakhs. The Defendant received an
earnest of Rs.50,000/-. The balance amount of Rs.19.5
Lakhs was to be paid to the Defendant on completion of
the sale as per the said Agreement. The said Agreement
was subject to all tenancies. The Plaintiffs also were
tenants of the Defendant in respect of a very large
portion of the suit property. The Defendant was to pay
municipal taxes and collect and receive the rents in
respect of the suit property. The Defendant was to
make out a marketable title and forward the title deeds
to the Plaintiffs. The Defendant agreed not to transfer
tenancies or deal with the tenants. The Defendant also
executed a Power of Attorney in favour of the
Plaintiffs for submitting building plans for
development of the suit property and recovering rent
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and compensation thereof, which came to be revoked /
terminated on 27.2.1989. The Defendant had to obtain
its income tax clearance certificate under Section 230A
of the Income-tax Act, 1961 and if the certificate was
not produced, the Plaintiffs were not to withhold the
completion of sale for want of 230A certificate, but in
that event the Defendant was to deposit with the
Plaintiffs Advocate Rs.25,000/- by way of security
deposit for its obtaining 230A certificate, but the
Plaintiffs were to complete the sale notwithstanding.
The Defendant also
ig agreed to comply with the
formalities and requirements of registration and
admission of documents apart from obtaining the 230A
certificate. The Plaintiffs were to be entitled to
recover all the arrears of rent and compensation
payable by the other tenants and occupants till the
time of the completion of sale. The sale was to be
completed within a period of 10 months from the date of
the said Agreement subject, of course, to the
Defendant s title being marketable and the Defendant
obtaining permission for transfer of the suit property
under Section 27 of the Urban Land Ceiling (and
Regulations) Act, 1976 (ULCRA). On account of the
wilful default of the Defendant if the sale was not
completed, the Plaintiffs were entitled to ask for
specific performance and for payment of interest on the
earnest money and the costs, charges and expenses
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incurred by the Plaintiffs and on account of the wilful
default of the Plaintiffs if the sale was not
completed, the Defendant was entitled to specific
performance of the Agreement making time the essence of
the contract by giving 15 days notice to complete the
sale transaction and upon the failure of the Plaintiffs
to be entitled to terminate the Agreement and forfeit
the amount of earnest paid in addition to be liable for
payment of costs, charges and expenses incurred by the
Defendant and to be entitled to deal with or dispose of
the suit property.
4.Copy of the resolution of the Board of Directors of the
Defendant at its Board meeting held on 14.4.1981,
authorising two Directors of the Defendant to enter
into the said Agreement was separately furnished to the
Plaintiff and that fact recited in the Agreement
itself.
5.It can be seen upon a reading of the Agreement that the
main part to be performed by the Plaintiffs was the
payment of the balance consideration of Rs.19.50 Lakhs,
only Rs.50,000/- having been paid as earnest on the
execution of the Agreement. The Defendant was
essentially to obtain its certificate under Section
230A of the Income-tax Act. The completion of sale was
to go on even if the certificate was not produced by
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the Defendant albeit upon deposit of Rs.25,000/- in
that behalf. The certificate could be obtained only
upon the draft conveyance being prepared and sent to
the Defendant and upon the Defendant submitting the
draft conveyance to the Income-tax Authorities.
6.The Defendant s title was clear and the Plaintiffs as
the tenants of the Defendant were estopped from
contending to the contrary as per the provisions of
Section116 of the Indian Evidence Act, 1872. Hence
though there were the usual clauses for making out a
marketable title or forwarding the title deeds to the
Plaintiffs, who were the tenants and in possession of a
large portion of the suit property, the Plaintiffs did
not call upon the Defendant to perform those covenants
or complain that the Defendant had failed to perform
any of them. The conveyance was to be on as is where
is basis and the Plaintiffs were given a separate
Power of Attorney for developing the suit property as
well as for collection of rents in respect thereof.
The Defendant was to obtain the permission under the
Urban Land Ceiling Act which also was not required as
there was no vacant land and the Plaintiffs never
called upon the Defendant to obtain any such
permission. Parties have no disputes in respect of
these usual covenants to be enforced by one another.
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7.However, the two Directors of the Defendant were to act
jointly as per the resolution supplied to the
Plaintiffs which the Defendant strongly relies upon.
8.The essential term of the Agreement was the execution
of the conveyance and completion of the sale within 10
months of the execution of the Agreement and even the
main part which the Defendant had to perform in
obtaining the statutory certificate was no deterrent to
the execution of the conveyance. Since the Plaintiffs
were to take the suit property on as is where is basis
and the title of the Defendant was clear and in fact
admitted, nothing further was required to be done by
the Defendant.
9.However, upon the Plaintiffs breach in paying the
balance consideration and executing the conveyance, the
Defendant was required to first make time the essence
of the contract by giving 15 days notice to complete
the sale and only upon failure of the Plaintiffs to
comply, were they entitled to terminate the said
Agreement.
10.It would have to be seen whether the parties performed
their respective parts of the said Agreement and
whether the breach, if any, was such as to render it a
wilful default entitling other to specific performance
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of the contract.
11.The Plaintiffs did not make payment of the balance
consideration and complete the sale within 10-month
time specifically prescribed. The Plaintiffs default
was not on account of any neglect or default on the
part of the Defendant since they agreed to take the
suit property on as is where is basis. The Defendant
has, however, not made time the essence of the contract
by giving 15 days notice as specifically agreed in the
said Agreement but have terminated the contract after
the period of the contract came to an end on the ground
that upon default of the Plaintiffs the Agreement ipso
facto came to an end. The 10-month period for
completion of sale would expire on 23.2.1982.
12.The admitted correspondence that ensued between the
parties as set out in the Plaint itself shows that the
very first letter after the said Agreement was written
by the Plaintiffs Advocate to the Defendant s
Attorneys, putting on record that the Plaintiffs had
paid Rs.50,000/- to one of the Defendant s Directors,
Rs.40935.67 as betterment charges to the Municipality
and Rs.25,000/- as broker fees. Under the said letter,
the Plaintiffs forwarded another cheque of Rs.50,000/-
to the Defendant as requested by one of its Directors
and nominated Plaintiff No.3 to have the conveyance
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registered in their name.
13.A week prior to the 10-month period granted for the
completion of sale, the Plaintiffs Advocate wrote
another letter dated 16.2.1982 to the Defendant s
Attorneys mentioning about the request of one of the
Directors of the Defendant to make a further payment of
Rs.50,000/- which came to be forwarded. The letter
recorded that sale would be completed before 15.4.1982
as agreed (instead of 23.2.1982). The Plaintiffs
Advocate called upon the Defendant s Attorneys to fix a
suitable time for finalisation of the matter.
14.It may be mentioned that under the Agreement itself
the copy of the resolution of the Board of Directors of
the Defendant-Company furnished to the Plaintiffs,
shows that the two Directors Deviprasad Poddar and
Bhagwatiprasad Poddar were authorised to settle and
finalise the documents to be executed between the
parties and the common seal of the Company was to be
affixed on the Power of Attorney and the conveyance in
the presence of both of them. The purport and intent
of this specific unusual resolution was that the
Company would act not through one of its Directors but,
by a special resolution in that behalf, by two of its
Directors acting jointly. Similarly the Company would
execute the documents being the Power of Attorney and
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the conveyance not in the presence of one of its
Directors but in the presence of both of them. Since
both of them were to settle and finalise the drafts,
including the draft of the Deed of Conveyance, it
follows as a matter of corollary that both of them
would be only jointly entitled to do such other acts
and deeds also for and towards the completion of sale
and the execution of the conveyance. They were,
therefore, required to act jointly. The resolution of
the Company was made known to the Plaintiffs. The
Plaintiffs had to abide by that resolution which was
recited in the said Agreement itself.
15.Nevertheless the Plaintiffs dealt with one of the
Directors of the Defendant, Deviprasad Poddar. The
Plaintiffs also paid part consideration amount
remaining unpaid to that Director of the Defendant-
Company being Rs.50,000/- paid twice as shown in the
aforesaid two letters. Aside from the betterment
charges and the broker fees, the Plaintiffs did not pay
the balance consideration until after the period of
time granted to the Plaintiffs for completion of sale
expired on 23.2.1982.
16.The extension of time allegedly sought by the
Plaintiffs and stated to have been granted was also not
by the two Directors of the Defendant acting jointly.
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The Plaintiffs Advocate has simpliciter recorded in
his letter dated 16.2.1982 that time was extended.
17.The Defendant s Attorneys by their letter dated
24.2.1982 send the notice of termination since the sale
which was to be completed by 23.2.1982 was not
completed. The notice of termination stated that under
the resolution of the Company, the authority was given
to the two Directors to act jointly and that one
Director could not have acted singly and accepted
payment purportedly made by the Plaintiffs to him.
ig The
Defendant disputed that any payment was made to the
Defendant. It was contended that had the Plaintiffs
forwarded the draft of the conveyance to the Defendant,
they would have obtained the 230A certificate by
submitting true copy of the settled draft of conveyance
to the Income-tax Authorities. Since the land was fully
built up, Section 27 of the Urban Land Ceiling Act was
struck down ultra vires and the Plaintiffs were to take
the suit property on as is where is basis, no
formalities were required to be complied by the
Defendant. The postponement of the sale by 7 weeks, as
claimed by the Plaintiffs, was refuted by the
Defendant. The notice alleged that the Plaintiffs were
not in a position to make payment and were delaying the
payment on false pretexts. Consequently, the said
Agreement was terminated and the earnest was forfeited.
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18.It may be mentioned that the Defendant did not fully
comply with the terms under the said Agreement relating
to the termination of the Agreement by it as contained
in Clause 18(b) of the said Agreement. The Defendant
did not make time the essence of the contract. The
Defendant did not give 15 days notice to complete the
transaction. The Defendant simpliciter terminated the
contract on the next day after which it was to be
performed. It would have to be seen whether the notice
of termination entitling the Defendant to terminate the
contract and forfeit the earnest was correctly given as
per the specific terms of the agreement. It would also
have to be seen whether upon the non-performance of the
contract by payment of the balance consideration and
completion of sale within 10-month period granted to
the Plaintiffs, the Plaintiffs would be barred from
enforcing the Agreement and completing the sale
thereafter.
19.The Plaintiffs contended through their Advocate s
letter dated 27.2.1982 addressed to the Defendant s
Attorneys that the entire negotiation and agreement was
settled by the said Deviprasad Poddar because the other
Director lived in Calcutta and was out of Mumbai. The
letter alleged that there were several meetings held
with the said Director, payments were not made and time
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extended which the Defendant was bound by.
20.The Plaintiffs claimed to perform the contract and
sued the Defendant in that behalf.
21.After the filing of the Suit also the Plaintiffs
negotiated settlement with the said Director of the
Defendant only. The said Director agreed to the
negotiations and certain meetings were held, payments
made, letters exchanged and consent terms in the Suit
sought to be executed.
22.The correspondence that ensued between the parties and
their Attorneys after the filing of the Suit is relied
upon by the Plaintiffs to show that the Agreement was
entered into by and between the Plaintiffs and the
Defendant albeit represented by only one Director of
the Defendant, the other Director disputing any such
agreement on the ground that as per the special
resolution passed and made known to the Plaintiffs,
both the Directors were to act jointly and the
individual act of a single Director would not bind the
Defendant.
23.It is unnecessary to go into the entire correspondence
in that behalf brought on record as subsequent events.
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24.The Plaintiffs claim to have made certain further part
payments to the Defendant such that under the amended
Plaint Rs.15.39 Lakhs out of Rs.19.50 Lakhs are stated
to have been paid by the Plaintiffs to the Defendant.
These are admittedly not received and receipted by the
two Directors acting jointly. The part payment made
and recited in the Plaintiffs letter dated 9.10.2002
shows the earnest paid, two installments of Rs.50,000/-
and two installments of Rs.25,000/- paid to the
aforesaid one Director of the Defendant-Company,
certain betterment charges to the Municipality, further
Rs.1 Lakh paid to the said Director of the Company and
diverse amount paid by way of property taxes to the
Municipality. It may be mentioned that the Plaintiffs
were tenants and in possession of a large portion of
the suit property. For non-payment of the taxes, the
suit property would be auctioned by the Municipality.
It would be in the interest of the Plaintiffs to make
the payment that they did.
25.The Defendant was to make those payments until the
completion of sale. That would be for a period of
about 10 months after the agreement. Upon the
completion of sale, the Plaintiffs will be the owners
and would be required to make payment of property
taxes. The Plaintiffs in possession did not complete
the sale. The Plaintiffs in possession instead made
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payments of diverse amounts to the Municipality from
time to time.
26.The Defendant claims that even certain of these
payments made to the Defendant were by way of rents
payable by the Plaintiffs. The Plaintiffs were tenants
in possession. They were bound to make payment of
rents. The liability for payment of rent would cease
only after the Plaintiffs acquired title. That would
be upon the Plaintiffs making payment of the balance
consideration and completing the sale.
ig That would be
upon the Plaintiffs sending the draft deed of
conveyance to the Defendant. The Plaintiffs failed to
convey it as agreed within 10 months. The Plaintiffs
also failed to convey within the extended period of 7
weeks as claimed by the Plaintiffs. The payment made to
the Defendant was correctly contended by the Defendant
to have been paid by way of rent.
27.The Plaintiffs claim that all the payments are made
towards the balance consideration upon the statement of
accounts submitted by the Plaintiffs; which need not be
otherwise gone into. The amount paid is in excess of
the balance consideration payable by the Plaintiffs.
Consequently, there has arisen an unusual and absurd
situation in which a tenant of an owner claiming the
ownership upon completion of sale and execution of the
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conveyance, which never came to be, claims to have paid
the balance consideration but not sent the draft deed
of conveyance for execution. Even the balance
consideration was paid after the Suit was filed. Most
of that consideration is not paid to the Defendant but
is paid to the Municipality on behalf of and on account
of the Defendant. The Plaintiff would have nonetheless
had to make the payment if the Defendant failed to make
that payment for protection of its own possession
against auction and sale of the suit property.
28.It is the Plaintiffs
ig case that they are ready and
willing to perform their part under the Agreement for
sale dated 23.4.1981. This readiness and willingness
is only and essentially in making the payment of the
balance consideration and completing the sale by
execution of the conveyance. The Plaintiffs failed to
do that within the period mentioned in the Agreement.
The Plaintiffs claim that the period came to be
extended by agreement between the parties. This
agreement was by and between one of the Defendant s
Director, though both of them were required to act
jointly under a resolution specially passed by the
Defendant. The Plaintiffs also claim that certain
further part payments towards the balance consideration
came to be made and paid to one of the Defendant s
Directors. The Defendant, however, terminated the
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agreement.
29.It is the Defendant s case that termination is valid.
The Defendant is entitled to forfeit the earnest paid
and deal with and dispose of the suit property as
agreed between the parties in the Agreement dated
23.4.1981. The Defendant relied upon the resolution
passed by it authorising two Directors Deviprasad
Poddar and Bhagwatiprasad Poddar to act jointly in
respect of the Agreement for sale and the subsequent
execution of the Power
ig of Attorney as well as the
conveyance by the Defendant. The Defendant refutes
receipt of any balance consideration after the earnest
was paid. It is its case that the amounts paid to one
of its Directors were paid to him in his individual
capacity and not to the Company in view of the
resolution of the Company. It is further the case of
the Defendant that the Defendant s title was admitted
and so the only part which the Defendant had to perform
under the said Agreement was to obtain a certificate
under Section 230A of the Income-tax Act, which the
Defendant could have obtained only upon submission of
the final draft of the conveyance sent by the
Plaintiffs to it. The Defendant claims that because the
Plaintiffs did not have a requisite finance, they
delayed the transaction and committed the breach, due
to which the Defendant was entitled to terminate the
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contract which stood terminated under its Notice of
termination dated 24.2.1982. The Defendant claims that
it made time the essence of the contract and denied
that it had extended time to 15.4.1982.
30.Upon such pleadings, the following issues came to be
framed by Justice Daga on 2.3.2006 which are answered
as follows:-
ISSUES
(1)Whether the Plaintiffs prove the suit agreement is
subsisting and binding upon the Defendant as alleged in
para 10 of the Plaint. – No
(2)Whether the Plaintiffs prove that the Defendant was
not entitled to terminate the said agreement and the
termination by the Defendant is illegal, wrongful and
not binding as alleged in para 8 of the plaint. – No
(3)Whether the Plaintiffs prove that they were and are
always ready and willing to perform their part of
contract as alleged in para 12 of the plaint. – No
(4)Whether the Plaintiffs prove that they have paid and
Defendant has received in all the sum of Rs.2,15,935.67
towards part payment as alleged in para 5 of the
plaint. – No
(5)Whether the Plaintiffs prove that they are entitled to
have the conveyance in favour of the Plaintiff No.3 as
their nominee in the absence of privity of contract
between the Defendant and the alleged nominee. – Yes if
Plaintiff Nos.1 and 2 are entitled, Plaintiff No.3
would also be entitled.
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(6)Whether the Plaintiffs prove that there was any
settlement of the suit as alleged in the amended
plaint. – No
(7)Whether the Plaintiffs prove that Shri Deviprasad
Poddar a Director of the Defendant was unilaterally
entitled to represent the Defendant or enter into any
commitment or receive any amount from the Plaintiffs
without consent and concurrence of Shri Bhagwatiprasad
Poddar the other Director of the Defendant. – No
(8)Whether the Plaintiffs prove that any amount paid by
the Plaintiffs after filing of the suit towards taxes
etc. of the suit property was towards part payment
under the suit agreement for sale as alleged in the
amended plaint of the Plaintiffs. – No
(9)Whether the Plaintiffs prove that they were entitled
to file or to prosecute the suit by reason of what is
alleged in the amended paras of the plaint. – Need not
be answered as not pressed.
(10)Whether the Plaintiffs prove that the time to
complete the agreement was allegedly extended to
15.4.1982 for the reasons alleged in para 7 of the
plaint or otherwise. – No. It was not extended by the
Defendant as resolved by it but only by one of its
Directors acting singly.
(11)Whether the Defendant proves that the time to
complete the sale was the essence of the contract as
stated in para 2 of the written statement. – No
(12)Whether the suit is bad for mis-joinder of the
parties as stated in amended written statement. – Need
not be answered as not pressed.
(13)Whether the Defendant proves that the suit agreement
for sale was invalid, void and un-enforceable by reason
of non-filing of Form No.37EE with the Competent
Authority under Chapter XXA of the Income Tax Act
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and/or filing of Form No.371 with the Appropriate
Authority under Chapter XXC of the Income Tax Act as
contended under paras 2(a) to 2(d) of the amended
written statement. -No. Since the draft Deed was
conveyance was itself not sent by the Plaintiffs for
completion of sale.
(14)Whether the Plaintiffs are entitled to any relief, if
so what ?
27.Plaintiff No.2 led evidence on behalf of the
Plaintiffs as P.W.1. The Plaintiffs also led evidence
of the Advocate who represented the Plaintiffs at the
time of the execeution of the Agreement for sale.
These witnesses have been cross-examined. The Defendant
has not led any evidence. The execution of the
Agreement is admitted. The correspondence that ensued
between the Advocates and the Attorneys of the parties
is also admitted. The resolution relied upon by the
Defendant having been served upon the Plaintiffs is
also admitted. The fact that the Plaintiffs have made
payment of further consideration, though denied by the
Defendant, is seen to have been made by the Plaintiffs
albeit to one of the Directors of the Defendant and to
the Municipality. The effect of such payment in law
would have to be seen. The fact of the possession of
the suit property is further admitted. The fact that
the Plaintiffs are tenants of the Defendant is admitted
and consequently, the ownership of the Defendant is not
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in dispute. The respective parts of the contract,
which are to be performed by the respective parties,
their rights and entitlement under the contract and
their acts thereupon, would be seen from the terms of
the contract itself, oral evidence in that regard being
completely excluded by the documentary evidence
contained in the agreement and the ensuing
correspondence between the parties. The oral evidence
is, therefore, largely redundant. Counsel on behalf of
the parties have prudently not even referred to the
oral evidence led by the Plaintiffs.
28.The aforesaid issues would have to be answered within
the ambit of the parties rights in law under the
Agreement for sale entered into between them and their
acts thereupon.
29.Issue No.(1) : The said Agreement dated 23.4.1981 had
to be performed by completion of sale within 10 months
of the agreement. The last date of completion of sale
would be 23.2.1982. The Defendant was admittedly the
owner of the suit property, the Plaintiffs being their
tenants and consequently estopped from contending
otherwise. The Plaintiffs agreed to purchase the suit
property on as is where is basis subject to all
existing tenancies. The Plaintiffs were to develop the
suit property under the Power of Attorney executed by
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the Defendant and could recover the rents and
compensation upon completion of sale. Permission under
the Urban Land Ceiling Act, which was to be otherwise
obtained by the Defendant, was not to be obtained at
the relevant time since under Section 27 of the Act,
under which the permission was to be obtained, was
declared ultra vires the Constitution of India by the
Apex Court. The only essential part of the contract to
be performed by the Plaintiffs was to make payment of
the balance consideration. The only essential part,
which had to be performed by the Defendant, was to
obtain its income-tax clearance certificate under
Section 230A of the Income-tax Act. Even if that
certificate was not obtained the conveyance had to be
executed upon a mere deposit of Rs.25,000/- by the
Defendant pending the completion. Consequently, to
keep the agreement valid and subsisting, the Plaintiffs
must perform their part of the contract by offering and
actually paying the balance consideration. The balance
consideration payable was Rs.19.5 Lakhs. The
Plaintiffs had to pay the balance consideration on or
before 23.2.1982. The Plaintiffs failed to make payment
of the balance consideration as per the terms of the
contract.
30.The Plaintiffs were specifically informed that the
Defendant has passed the resolution under which two of
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their Directors Deviprasad Poddar and Bhagwatiprasad
Poddar were both required to settle and finalise the
drafts of the Agreement for sale, Power of Attorney and
Deed of Conveyance to be executed between the parties.
The Power of Attorney and the Conveyance were to be
executed in the presence of both of them. Though the
resolution does not mention about each act, that had to
be performed by the Directors jointly. The resolution
read as a whole shows the specific mandate of the
Company in authorising two of its Directors to do each
of the pertinent acts for the transaction that the
Company sought to enter into with the Plaintiffs.
Nevertheless, the Plaintiffs interacted with only one
of the Directors of the Defendant. It has been the
Plaintiffs case in their evidence that the other
Director was not available and the Plaintiffs were
informed that the Director had consented to the other
Director acting. That was nonetheless against the
written mandate in the resolution passed by the Company
and hence no act done by one of the Directors towards
the completion of sale could be stated to be an act of
the Defendant-Company. As per the true construction of
the Agreement and its plain reading, the agreement
would subsist for 10 months from its execution unless
the time is extended for its performance.
31.Since the transaction is with regard to immovable
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property, time is not presumed to be the essence of the
contract until it is so made. It was made essence of
the contract in the contract itself despite the
extension of 10 months for its completion. Time could
have been extended. However, in this special case,
time could have been extended by both the Directors
acting jointly as per the mandate of the Defendant-
Company. That has admittedly not been done. The
Plaintiffs have admittedly not completed the sale
within the initial period stipulated in the said
Agreement. The settlement
ig and finalisation of the
draft of the Deed of Conveyance in favour of the
Plaintiffs could have been done only if the time was
extended. Hence the extension of time for the better
performance of the acts contemplated by the Company to
be performed by its Directors, for which they were
authorised, was also by their joint action. It is the
case of the Plaintiffs that the time came to be
extended. That extension was orally granted by one of
the Directors. The other Director did not consent to
such extension of time even by ratification of the act
of his co-director. The Defendant has, therefore,
refuted that there was any extension of time granted
for the Plaintiffs. Consequently, the said Agreement
cannot be stated to be subsisting and binding upon the
Defendant after the period set out in the Agreement,
and not extended thereafter, came to an end. Hence
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issue No.(1) is answered in the negative.
32.Issue No.(2) : Under Clause 18(b) of the said
Agreement, the Defendant was entitled to terminate the
Agreement upon making time the essence of the contract
by giving 15 days notice to complete the sale
transaction and upon the Plaintiffs failing to so.
This would be if there was a wilful default on the part
of the Plaintiffs to complete the sale. Since the only
part that the Plaintiffs had to perform was to make
payment of consideration and since the Defendant did
not have to perform any part other than to obtain its
income tax clearance certificate, and which could be
obtained only if the draft conveyance was given by the
Plaintiffs, the suit property having been agreed to be
purchased on as is where is basis, the wilful default
would be upon non-payment of the balance consideration
which the Plaintiffs were required to make provision
for within a period of 10 months of the execution of
the Agreement for sale. The Plaintiffs not having made
payment of the balance consideration and having
committed a default, wilfully so as not to complete the
sale, the Defendant would certainly be entitled to
terminate the Agreement albeit upon making time the
essence of the contract as stipulated in the said
Agreement.
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33.Admittedly, the Defendant has not made time the
essence of the contract. The Defendant has terminated
the Agreement on the next day after it was to be
performed and the sale was to be completed. The said
Agreement was to be performed on or before 23.2.1982.
The termination notice of the Defendant dated 24.2.1982
has set out correctly that the Directors of the
Defendant had to act jointly, the Plaintiffs had failed
to forward the draft of the conveyance so that the
Defendant could not obtain the tax clearance
certificate under Section 230A of the Income-tax Act,
since the settled draft conveyance could not be
submitted to the Income Tax Authorities, and the
Defendant had no other formality to be complied since
the permission under the Urban Land Ceiling Act was not
required to be obtained as there was no excess vacant
land, the suit property being fully built up and the
Defendant had not agreed for postponement of completion
of sale. However, since the notice of termination was
given without making time the essence of the contract
and since in law the contract of immovable property
cannot have time for its performance as an essence of
the contract unless it is so made, the notice of
termination was not as per the true construction of the
contract and the intent of the parties set out in
Clause 18(b) of the Agreement. The Defendant had not
given 15 days notice required to complete the sale.
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The termination of the contract a day after the period
for its completion is, therefore, not legal and is
wrongful. The Defendant could not have terminated its
contract as it did under the Notice of termination
dated 24.2.1982. Hence issue No.(2) is answered in the
negative.
34.Issue Nos.(3) & (4) : The only part to be performed by
the Plaintiffs was a payment of balance consideration
of Rs.19.5 Lakhs. The Plaintiffs had not made any
payment or even part thereof to the Defendant itself as
per the construction of the contract. Readiness and
willingness of the Plaintiffs has to be adjudicated
upon in terms of the true construction of the contract
between the parties.
35.The Plaintiffs made payments of three amounts of Rs.
50,000/- and Rs.1 Lakh to one of the Directors of the
Defendant despite the aforesaid resolution of the
Company enjoining the Directors to act jointly. The
Company has not acknowledged the payment or receipted
it. Despite knowledge of the specific requirement of
the contracting party, the Plaintiffs claim to have
made payments in the mode specifically forbidden by the
Company. No such payment can be countenanced or
accounted for.
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36.The Plaintiffs claim to have made further payment
towards the municipal taxes to the Bombay Municipal
Corporation. The taxes were indeed required to be paid
by the Defendant until the completion of sale. It was,
therefore, to be paid by the Defendant until the last
date on which the sale should have been completed and
the balance consideration paid. The Plaintiffs were
tenants in possession of a large part of the suit
property. It was in the interest of the Plaintiffs
themselves to make payment to the Municipal Corporation
to avoid auction ig and sale of the suit property in
possession of the Plaintiffs. Making such payments is
not towards the balance consideration and cannot be
countenanced or accounted for to that end.
37.The Plaintiffs are required to statutorily aver
readiness and willingness to perform the essential
terms of the contract which are to be performed by them
under Section 16(c) of the Act, which bars the relief
in an action for specific performance upon such
failure. What is the requirement of the Plaintiffs
actual act in showing their readiness and willingness
is explained in that section. This readiness and
willingness is to be in accordance with the true
construction of the contract. For this purpose, the
relevant portion of Section 16 of the Specific Relief
Act runs thus:-
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16. Personal bars to relief.-Specific
performance of a contract cannot be enforced
in favour of a person-
(a) . . . . .
(b) . . . . .
(c) who fails to aver and prove that he has
performed or has always been ready and willingto perform the essential terms of the contract
which are to be performed by him, other thanterms the performance of which has been
prevented or waived by the defendant.
Explanation. -For the purposes of clause (c).-
(i) where a contract involves the payment of
money, it is not essential for the plaintiff to
actually tender to the defendant or to deposit in
Court any money except when so directed by the
Court;
(ii) the plaintiff must aver performance of, or
readiness and willingness to perform, the contract
according to its true construction.
Mr.Parikh essentially contended that the Plaintiffs
were not to tender the consideration to show their
readiness and willingness.
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38. Consequently, as held in the case of Md. Ziaul
Haque vs. Calcutta Vyaper Pratisthan, AIR 1966 Calcutta
605 relied upon by Mr.Bobade on behalf of the
Defendant, the readiness and willingness of the
Plaintiffs would be in relation to the real agreement
between the parties and not as the Plaintiffs wished it
or evinced it before the Suit or in the way the
Plaintiffs wanted to fashion it at the trial. In that
case the Plaintiffs case was not proved by oral
evidence. It was observed that the Plaintiffs
ig case was
insupportable if it was upon an agreement which was
partly oral and partly in writing or even if it was
entirely in writing. In that case the reason for
seeing the non-readiness of the Plaintiffs was that the
Plaintiffs had no requisite money to purchase the
property.
39. Similarly in the case of M/s.Bharat Barrel &
Drum Mfg. Co. Pvt.Ltd. vs. Hindusthan Petroleum
Corporation Ltd. & ors., AIR 1989 Bombay 170, it was
held that readiness and willingness must be averred
according to the interpretation the Court places upon
the agreement when the parties are not ad idem upon
such interpretation. In that case the form required
under Section 37I of the Income-tax Rules under Chapter
XXC and under Chapter XXX, Section 269(4)(c) of the
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Income-tax Act was to be obtained within 4 months and
if not done, it was agreed that the transfer would be
illegal. In that case the transfer of steel received by
the Plaintiff was under an allotment letter which
prohibited the transfer. The Plaintiff sought
repayment of the amount paid by the Plaintiff in excess
of the agreement. Taking into account the revised rates
of steel the Plaintiff s readiness and willingness to
carry out their obligations was seen as per the
interpretation of the agreement of transfer by them.
It was held that such readiness and willingness was not
acceptable. Similarly in the case of N.P. Thirugnanam
(Dead) By LRS. vs. Dr.R. Jagan Mohan Rao & ors., (1995)
5 SCC 115, it was held that continuous readiness and
willingness on the part of the Plaintiff was a
condition precedent for grant of relief of specific
performance. Hence the availability of consideration,
conduct of the Plaintiff and the attending
circumstances were required to be seen. In that case,
the Plaintiff dabbled in real estate transactions
without any means to purchase the property. It was
held that the Plaintiff was not ready and willing to
perform his part of the contract, his averment to that
extent notwithstanding. Consequently, in such a case
the Plaintiff s capacity to raise funds to deposit the
amount ordered to be deposited and to comply with the
necessary orders passed, would be the evidence to show
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his readiness and willingness.
In a case such as this only tender of consideration
would substantiate the Plaintiffs averment of
readiness and willingness.
40. Similarly when the Plaintiffs were directed to
deposit the amount pending the Suit which the
Plaintiffs failed to do so or to even furnish a Bank
Guarantee as per the Court s directions, it has been
held in the case of N.P. Thirugnanam (D) L.R.s. vs.
Dr.R. Jagan Mohan Rao & ors., AIR 1996 SC 116 that
readiness and willingness is not shown.
41. In the case of His Holiness Acharya Swami
Ganesh Dassji vs. Shri Sita Ram Thapar, AIR 1996 SC
2095 the vendor sent the draft sale-deed which under
the agreement was required to be finalised within 7
days and registered. The purchaser did not approve the
draft sale-deed immediately, did not give any reply,
did not have necessary cash for payment and did not
offer cash. His conduct so scrutinised was held
inconsistent with his averment of readiness and
willingness in accordance with the terms of the
contract.
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42. Consequently, it was held in the case of
Pushparani S. Sundaram & ors. vs. Pauline Manomani
James (Deceased) & ors., (2002) 9 SCC 582 that mere
filing the Suit and taking the plea that the Plaintiff
was ready and willing to perform the contract, is not
sufficient where he had not sent any communication or
notice regarding his readiness and willingness, paid
only an insignificant amount as advance, not obtained
the permission of the ULC Authorities, not taken any
steps to ascertain the valuation of the structure as
required under the Agreement for sale, etc.
ig It was
observed in Para-5 of that judgment that what is
required is not a plea but a proof of the same under
Section 16(c) of the Act. In that case, the only
circumstance relied upon by the Plaintiff was tendering
the amount of Rs.5,000/- after the Agreement for sale
was entered. It was observed that Such small feeder
to the vendor is quite often made to keep a vendor in
good spirit. The amount was observed to be
insignificantly short of the balance amount and is
too weak a filament to stand even to build an image of
readiness and willingness.
43. True construction of the suit contract is also
required to be appreciated. In this contract, simple
that it is, the Plaintiffs were to pay consideration to
obtain title. The Defendant was to do nothing which
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would be condition precedent for the Plaintiffs to pay
the consideration. The payment of consideration was
towards completing the sale in favour of the
Plaintiffs. Sale could never be completed if the
consideration is not paid. Sale would have had to be
completed once consideration was paid or tendered to
the Defendant. The Plaintiffs were given 10 months
time to do so. The Plaintiffs contend that 7 weeks
time was fresh breather given to them. Even if that is
accepted, which the Defendant refutes, the Plaintiffs
would have to complete
ig the sale which would be by
tender of consideration. In a contract such as this,
therefore, it would not be taken to the contract merely
for payment of money. It is the contract for
completing the sale of an immovable property requiring
the Plaintiffs to tender as the only part of their
contract the agreed consideration. Hence the averment
of the Plaintiffs that they were ready and willing
would be an empty averment unless it is accompanied by
the actual offer of payment.
44. In a contract such as this, therefore, a mere
capacity to pay is also not enough. A party may have
the capacity to pay but may bind time and not make
payment while prices escalate. A party may make a show
of offer and not tender consideration in a bit to bind
time despite his capacity to pay. Hence a contract of
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this kind goes further than the case of S.P.
Narayaaswami Pillai (supra). If the Plaintiff only has
to make payment of consideration as the part of his
contract he must tender consideration without which his
assurance of readiness and willingness is an empty
averment devoid of substantiation.
45. In the case of Swarnam Ramchandran (supra), it
has been held that requirement of fulfillment of the
condition of readiness and willingness in a Suit for
specific performance is that the purchaser shows that
he was ready and willing to fulfill the terms of the
Agreement, that he had not abandoned the contract and
that he had kept the contract subsisting. It was held
that on the facts of those cases, those conditions were
fulfilled. That was a contract of sale dated 18.2.1981
for a lump sum consideration of Rs.10 Lakhs in which
earnest of Rs.1 Lakh was paid and under which an option
was given to vendor to extend the date of sale upto
31.12.1981. Time to complete the sale was extended.
The vendor accepted part payment of Rs.75,000/- and
before 13.9.1981 made time the essence for such
payment. In that case the purchaser sent a post-dated
cheque for Rs.45,000/- which was dishonoured indicating
that he had no funds on the due date i.e. on 13.9.1981.
Since time to pay was extended the dishonour of the
cheque was held not a non-compliance on the part of the
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Defendant and upon overall conduct of the purchaser it
was held that he was ready and willing to perform his
part. Since time was not the essence of payment,
purchaser s later payment was held enough to constitute
his readiness and willingness in that behalf.
46. The facts of the case being dissimilar to
this, it cannot be said in this Suit that the
Plaintiffs were ready and willing to perform the
contract as per its true construction.
47. Mr.Parikh argued that the purchaser who sued
the owner did not require to show the command of
necessary finance throughout the life of the contract.
(See : S.P. Narayaaswami Pillai vs. Dhanakoti Ammal,
AIR 1967 Madras 220). That was the case of a contract
to be performed within 3 months by payment of
consideration of Rs.9,700/- upon an advance of Rs.500/-
being received on 23.6.1958, the date of the execution
of the agreement for sale. In that case the contract
was to be performed by the Plaintiff securing an
encumberance certificate for the property on 8.9.1958,
which the Defendant cleared only on 13.9.1958. The
Plaintiff purchased the stamp paper of the value of Rs.
765/- for engrossing the sale-deed on 20.9.1958 and
sued on the last date shown in the agreement for sale
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for completing the transaction. Though he was not
required to have the necessary finance throughout the
life of the contract, it was observed in paragraph 5 of
the judgment that the Plaintiff must establish his
readiness and willingness to perform his part of the
contract at proper time i.e. within reasonable time and
if time could be reasonably extended and if he
establishes his capacity to perform the contract within
the extended time it would be sufficient. Relying upon
the case of Adeshir vs. Flora Samson, AIR 1928 PC 208
at page 216, it was
ig observed that preparedness to
fulfill obligations was to be only when the time
expired and not during the entire life of the contract
as such insistence would make fixing the time for
performance meaningless. However, the contention of
Mr.Parikh that the Plaintiffs were not required to
tender consideration or to deposit any amount in Court
or to offer it to the Defendant at any time, is against
what has been laid down in this case. The Plaintiffs
would have to establish their capacity to perform the
contract at-least within time. The Plaintiffs claimed
an extended time. The Plaintiffs have not established
any such capacity to perform even within the extended
time and consequently, their averment of readiness and
willingness is futile.
Consequently, the readiness and willingness of the
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Plaintiffs cannot be seen as per the true construction
of the simple contract of the sale of the immovable
property essentially in the possession of the
Plaintiffs on as is where is basis. Hence both these
issues are answered in the negative.
48. Issue No.(5) : Under Clause-16 of the Agreement
for sale dated 23.4.1981 the execution of the
conveyance was agreed to be in favour of the purchasers
or their nominees. Hence if the Plaintiffs are
otherwise entitled to have the conveyance executed in
their favour, it could be also in favour of Plaintiff
No.3 as their nominee. Issue No.(5) is answered in the
affirmative to that extent.
49. Issue No.(6) : The settlement alleged by the
Plaintiffs is admittedly by and between one of the
Directors of the Defendant-Company Deviprasad Poddar
acting on behalf of the Company and instructing the
Attorneys of the Company in that behalf. Mr.Parikh,
though, argued that the Attorney who carried on the
correspondence with the Plaintiffs was the Attorney of
the Defendant Company and not the Attorney of one
individual Director. However, the settlement of the
Suit has neither been agreed by the other Director of
the Defendant nor ratified by that Director or the
Defendant Company. The settlement, if any, is,
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therefore, not proved in view of the special contract
between the parties to which the specifically named two
Directors of the Defendant had to act jointly since
both of them were authorised to settle and finalise the
documents to be executed for completion of the sale.
Consequently, there could be no settlement as alleged
by the Plaintiffs and the Defendant in the amended
Plaint, the Attorneys being the Attorneys of the
Defendant, notwithstanding. Consequently, reliance
placed upon the judgment in the case of Chairman and
M.D., N.T.P.C. Ltd.,ig 2004 AIR SCW 198 relating to
interpretation of the term without prejudice with
regard to the correspondence and agreement would not be
applicable to this case. Hence Issue No.(6) is
answered in the negative.
50. Issue No.(7) : As aforesaid, in view of the
resolution of the Defendant enjoining the two Directors
to act jointly and authorising both those Directors to
settle and finalise the documents for completion of the
sale and to be present at the time of the execution of
the conveyance and the Power of Attorney granted to the
Plaintiffs to do all acts, deeds, matters and things
necessary for the purpose of completion of sale, it
would be completely erroneous and even absurd to state
or suggest that one of the Directors of the Defendant
was unilaterally entitled to represent the Defendant or
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enter into any commitment or receive an amount without
the consent or concurrence of the other Director. Each
of these acts of representing the Defendant, entering
into any commitment (be it to settle the Suit), or to
receive any amount which would be part payment of the
balance consideration, is the act which is necessarily
to be performed for completion of the sale. All these
acts had to be specially performed, under the
resolution of the Company, by both the Directors. One
Director cannot, therefore, unilaterally perform those
acts. Mr.Parikh contended that the Defendant had not
led any evidence and hence its case that the Defendant
was necessarily required to act only jointly could not
be accepted and, therefore, the Plaintiffs case that
an agreement was entered into after filing of the Suit,
in terms of the without prejudice negotiations with the
Attorneys of the Defendant who represented the
Defendant and not only one of its Directors, was
binding on the Defendant.
51. Mr.Parikh relied upon a judgment in the case
of Ishwar Bhai C. Patel alias Bachu Bhai Patel vs.
Harihar Behera & anr., AIR 1999 SC 1341 in this regard.
That was a Suit for recovery of money upon a plea that
the Plaintiff had given the money from his bank account
to the Defendant through his father who operated the
Plaintiff s bank account on the suggestion of Defendant
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No.1. That suggestion was not controverted by
Defendant No.1 by leading evidence. That evidence was
material and hence upon the Defendant not being
examined, an adverse inference was drawn under Section
114(g) of the Evidence Act. Further Mr.Parikh relied
upon the judgment in the case of Sardar Gurbakhsh
Singh vs. Gurdial Singh & anr., AIR 1927 P.C. 230 in
which it was held that the Plaintiff not examining
himself but calling the Defendant as his witness was
the degrading practice. The reliance upon these
judgments is completely misplaced because in this case
it is essential for the Plaintiff alone to prove
readiness and willingness as well as the actual
performance of his part of the contract and to call
upon the Defendant to perform its part.
Consequently, issue No.(7) is answered in the negative.
52.Issue No.(8) : The Plaintiffs were the tenants of
the large portion of the suit property which is
entirely tenanted and completely built upon. The
Plaintiffs also obtained rights of another tenant
mentioned in the list of tenants annexed to the
Agreement for sale being one M/s.Capco Private Limited.
It would be in the interest of the Plaintiffs to pay
the municipal taxes to avoid the auction and sale of
the premises in their possession and occupation even as
tenants and whilst they continued to be so. Payments
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made to the Municipality, albeit in the name of the
Defendant who was the owner of the suit property in the
revenue records, cannot, therefore, be taken towards
part payments of the said Agreement for sale. Hence
issue No.(8) is answered in the negative.
53. Issue No.(9) : The Plaintiffs may be taken to be
entitled to file or prosecute the Suit. This issue is
not seriously pressed. Hence it need not be answered.
54. Issue No.(10) : ig Time of the performance of the
contract is not stated to be extended by the Defendant
by the act of the two Directors who are both authorised
to do all acts, deeds and matters necessary for
completing the sale. The extension of time, if at all
granted, was so granted by one of the Directors acting
singly . The Plaintiffs have not shown the act of both
the Directors in that behalf. This would be one of the
acts towards the completion of the sale. Since for
want of its extension the agreement would come to an
end on 23.2.1982, it is for the Plaintiffs to prove
that time was extended by both the Directors who were
authorised to act by the Company. That has not been
proved. For whatever reason the time extended by one
of the Directors of the Defendant acting singly is
immaterial. Issue No.(10)is answered accordingly.
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55. Issue No.(11) : The Agreement for sale dated
23.4.1981 required the Plaintiffs to complete the sale
within 10 months from the execution of the agreement
subject to the Defendant s marketable title and the
permission for transfer to be obtained by the Defendant
under Section 27 of the ULC Act. The 10 months period
was expired on 23.2.1982. The Defendant admittedly had
marketable title. The Plaintiffs were their tenants.
The Defendant was the landlord. The Plaintiffs are
estopped from contending that the Defendant does not
have title. The
ig clause relating to showing
marketability of title was the usual clause which was
redundant in this case. The entire property was built
upon. There were 10 tenants shown in the list annexed
to the agreement. There was no vacant land. Hence
permission under Section 27 of the ULC Act was also not
required. This clause, which is also a usual clause,
is redundant in this case. The Plaintiffs had to pay
balance consideration to complete the sale within 10
months. That was Rs.19.5 Lakhs. It was for the
Plaintiffs to pay that amount to complete the sale.
That was the most essential part of the contract and
indeed the only part of the contract actually required
to be performed other than, of course, obtaining the
tax clearance certificate under Section 230-A of the
Income-tax Act by the Defendant, but which was not a
condition precedent to the payment of consideration and
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which, if not obtained, required only Rs.25,000/- to be
deposited with the Plaintiffs Advocate. That
certificate could be obtained only upon the final draft
of the conveyance being tendered to the Income Tax
Authority which the Plaintiffs would be required to
send for completion of the sale.
56. The entire contract was, therefore, only
relating to the payment of the consideration by the
Plaintiffs.
57.
The Defendant contends that time was of the
essence because the Plaintiffs had to make payment of
consideration for a large portion of the property
already in their possession as the tenants. The
Defendant contends that the Plaintiffs not having made
payment on or before 23.2.1982, they were entitled to
terminate the contract which they did by their notice
of the very next day being 24.2.1982.
58. Clause 18(b) of the contract sets out that the
Defendant would be entitled to make time the essence of
the contract by giving 15 days notice to complete the
transaction and on failure of the Plaintiffs to
complete the sale, it would be entitled to terminate
the agreement and forfeit the earnest and the
Plaintiffs would be liable to pay costs, charges and
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expenses incurred by the Defendant under the agreement
and the Defendant would be entitled to deal with and
dispose of the property agreed to be sold to the
Plaintiffs.
59. This clause, therefore, sets out specifically
that time was not of the essence in the contract
itself. It was to be made of the essence. The
Defendant could make it of the essence. It had to be
made of the essence by giving the stipulated notice.
That was notice of 15 days upon failure of performance.
Under such a notice, the Defendant would be entitled to
terminate the contract. Consequently, time cannot be
taken to be of essence in that agreement.
60. The Defendant s Notice of termination dated
24.12.1982 does not give the Plaintiffs 15 days time
to make the payment. It does not make time of the
essence. It simpliciter terminates the agreement.
Hence though, as discussed in relation to issue No.(2)
above, the Defendant was entitled to terminate the
agreement, that would have been only upon and after
giving 15 days notice to make time the essence of the
contract and thereafter if the contract remained
unperformed, to terminate it.
61. It is settled law that time is not of the
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essence of the contract of immovable properties per se.
(See : (1) Govind Prasad Chaturvedi vs. Hari Dutt
Shstri & anr., AIR 1977 SC 1005 and (2) Swarnam
Ramchandran (Smt.) & anr. vs. Aravacode Chakungal
Jayapalan, (2004) 8 SCC 689) It has to be made of the
essence expressly.
62. Mr.Parikh on behalf of the Plaintiffs drew my
attention to the Law of Contract in Halsbury, Vol.9,
page 481 at page 338 which lays down the settled law
thus:-
The modern law, the case of contracts of
all types, may be summarised as follows. Time
will not be considered to be of the essenceunless : (1) the parties expressly stipulate
that conditions as to time must be strictlycomplied with; or (2) the nature of the
subject matter of the contract or thesurrounding circumstances show that time
should be considered to be of the essence; or
(3) a party who has been subjected to
unreasonable delay gives notice to the partyin default making time of the essence.
Further in paragraph 126 at page 498 of Vol.9 of
Halsbury, the importance of date of completion is set
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out thus:-
126. Date of completion. A date is usually fixed
by the conditions of sale for the completion ofthe purchase, but, in the absence of express
stipulation to that effect, or unless an intentionthat it should be so can be implied from the
circumstances, that date is not of the essence of
the contract. However, although time is notoriginally of the essence of the contract in this
respect, it may be made so by either party givingproper notice to the other to complete within a
reasonable time, provided that at the time of thenotice there has been some default or unreasonable
delay by that other. Even where time is notoriginally of the essence a party who through his
own default fails to complete on the contractualdate commits a breach of the contract and is
liable in damages. In a suitable case, a decreeof specific performance can also be obtained
before the contractual date for completion if the
other party repudiates the contract.
63. Further Mr.Parikh argued that the contract to
be completed within 10 months could be completed within
any reasonable time after 10 months because time is not
of the essence. (See : Jamshed Khodaram Irani vs.
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Burjorji Dhunjibhai, (1915) 40 ILR Bombay 289 P.C.).
That is the correct proposition of law. However, in
this case, the Plaintiffs have not shown that within a
reasonable time after 23.2.1982 the Plaintiffs actually
sought to complete the contract. The Plaintiffs
instead filed this Suit on 9.3.1982 within a fortnight
of the notice of termination and without offering to
complete the contract within any reasonable time of the
initial period of 10 months having expired.
64. In this case, though it is contended on behalf
of the Plaintiffs that the initial period of 10 months
was extended only for a period of 7 further weeks which
was, in any event, a reasonable time for completion of
the sale the Plaintiffs have not shown their
willingness to complete by offering consideration which
was the only part to be performed for completion of the
sale within such extended time also.
65. The Defendant has not accepted any extension
of time. This was essential because two Directors of
the Defendant were to act jointly as aforesaid.
66. However, it may be mentioned that even if the
Plaintiffs relied upon the unilateral act of one of its
Directors in contending that time was extended for a
reasonable period of 7 weeks after the period of the
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contract expired, the Plaintiffs could have been
granted equitable and discretionary reliefs but only
upon the Plaintiffs actually showing how they were to
complete the sale which, in this case, was only by
tendering consideration therefor. Issue No.(11) is,
therefore, answered in the negative.
67. Issue No.(12) : This issue is not pressed and
hence it need not be answered.
68. Issue No.(13) : ig The Defendant has taken up this
contention in the amended Written Statement. The
agreement does not provide for filing of Form No.37EE
under Chapter XXA of the Income-tax Act. Forms 37 EE
and 37I under Chapters XXA and XXC of the Income-tax
Act are required to be filed upon transfer of any
immovable property being made. The word transfer
shows that parties have actually executed a draft
conveyance, mortgage, exchange, gift or lease
constituting transfer under the Transfer of Property
Act. It is only upon the ultimate contract between the
parties to transfer the immovable property from one
party to another that the Income Tax Authority could be
required to be informed as per the forms set out in the
Act. This would be to enable the Income Tax Authority
to acquire the immovable property itself if the
consideration that passes thereunder is not accepted by
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49
the Authority and a certificate to that effect granting
its no objection to transfer the property is not given.
Any transfer effected without informing the Income Tax
Authority by filling the aforesaid forms, would be
void.
69. The stage of transfer would come only when the
draft conveyance duly settled by the parties is shown
to the Income Tax Authority. This would be only at the
last stage before the actual execution of the document.
Hence though it would
ig be a stage in showing the
readiness and willingness on the part of the Plaintiffs
non-filing of the form simpliciter would not render the
agreement for sale invalid. This contention if taken
separately and by itself as a question of law, would
come up for consideration only when the draft deed of
conveyance is prepared and sent by the Plaintiffs to
the Defendant for execution. Since that was not done
and the Suit was filed, the invalidity of the contract
on that score would not come up for consideration.
Hence though required by law, the suit contract would
not ipso facto become invalid for want of Form 37EE or
37I. Hence this issue to that extent is answered in
the negative.
70. Issue No.14 : The reliefs to be granted to the
Plaintiffs are essentially under the liability relating
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50
to specific performance under the Specific Relief Act,
1963 (the Act)and the various precedents based upon the
aforesaid admitted facts and documents of the parties.
The suit contract is a contract which would fall under
Section 10 of the Act since it is not barred under
Section 14 of the Act. However, the jurisdiction to
grant the decree of specific performance is
discretionary under Section 20 of the Act. The Court
would, therefore, not be bound to grant reliefs merely
because it is lawful to do so, but to exercise
reasonable discretion guided by judicial principles to
grant or refuse the reliefs of specific performance.
Decree of specific performance as per Section 20(2)(a)
of the Act after the Plaintiffs non-action within the
stipulated period under the contract or within a
reasonable period thereafter would give the Plaintiffs
an unfair advantage over the Defendant in terms of the
price payable under the contract entered into about 30
years ago and which has since much escalated. Besides,
the Court could exercise discretion to decree specific
performance if the Plaintiffs had done substantial acts
or suffered losses in consequences of the suit contract
as a contract capable of specific performance under
Section 20(3) of the Act. In the instant case, the
Plaintiffs have done nothing after entering into the
agreement and paying the earnest of Rs.50,000/-. The
Plaintiffs have also not suffered any losses. The
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51
Plaintiffs have continued in possession. The Plaintiffs
have only paid municipal taxes to avoid the property in
their possession being auctioned or sold off. The
Plaintiffs have never tendered consideration or even
shown or offered to tender consideration within a
reasonable time after the initial period of the
contract also. It is argued on behalf of the
Plaintiffs by Mr.Parikh that the Court may take into
account the various amounts paid to the Defendant
(which were actually at the behest or request of and to
one of the Directors of the Defendant and not accepted
or acknowledged by the Defendant) as also amounts by
way of taxes which were otherwise payable by the
Defendant as the owners of the property. The very
premise is unreasonable, if not egregious. The
Plaintiffs are required to make payment of the
consideration agreed. Had the Plaintiffs made that
payment within 10 months or within a reasonable time
thereafter, the Plaintiffs would have become owners of
the suit property. They would then be required to
incur all other costs, including the payment of taxes,
etc. in respect of the suit property. The Defendant
notionally continued as owner though it agreed to give
up its ownership rights to the Plaintiffs under the
said Agreement and was hence not liable to pay the
municipal taxes. It is only because of the Plaintiff s
default in completing the transaction that the
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52
Plaintiffs paid taxes though they were not entered as
owners in the record of rights. Since the Plaintiffs
were already in possession of a large portion of the
suit property as tenants, the Plaintiffs in fact had an
unfair advantage over the Defendant. The Defendant
could not deal with or dispose of the property to
another partly in view of the Plaintiffs occupation
and possession. It would be most inequitable to
consider the amounts paid by way of taxes for
preservation of the property towards the sale price.
71. In fact a strange position has arisen. The amount
paid by the Plaintiffs towards the taxes by now (as
shown by the Plaintiffs in their statement of such
payment) far exceeds the consideration to be paid by
the Plaintiffs agreed under the said Agreement to the
Defendant to complete the sale. If the Plaintiffs
claim has to be accepted, it would tantamount to the
Court requiring to decree the Suit for specific
performance without the Plaintiffs having to pay a
single rupee to the Defendant and in fact the Defendant
having to reimburse the Plaintiffs of what the
Plaintiffs called the excess amount paid by the
Plaintiffs after the filing of the Suit and which is
not even brought on record as an amendment to the
Plaint.
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53
72. Even rejecting completely the appropriation
sought by the Plaintiffs towards the purchase price for
the sale consideration, it has to be seen whether the
Plaintiffs could be at all entitled, in view of the
answers to issue Nos.(1), (3) and (4) that the
Plaintiffs be allowed to pay only the agreed balance
consideration of Rs.19.5 Lakhs to complete the sale 28
years after the agreement was entered into. Knowing the
inequities of such a relief, Mr.Parikh has contended
that the Plaintiffs may be directed to pay such higher
amount as the Court may deem fit in its discretion to
grant the discretionary relief of specific performance
upon such enhanced payment. Mr.Parikh has conceded
that in view of the lapse of time and non-payment of
consideration coupled with the rise in prices, it would
be inequitable to grant the relief of specific
performance to the Plaintiffs. (See : K.S. Vidyanadam
& ors. vs. Vairavan, AIR 1997 SC 1751). However,
Mr.Parikh argued that relief of specific performance
could not be refused merely because the prices have
risen. (See : S.V.R. Mudaliar (dead) by LRs. & ors. vs.
Mrs.Rajabu F. Buhari (Dead) by LRs. & ors., AIR 1995 SC
1607).
73. Consequently, Mr.Parikh essentially relied
upon a judgment in the case of Nirmala Anand vs. Advent
Corporation (P) Ltd. & ors., AIR 2002 SC 3396 to
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54
contend that any higher amount be determined by the
Court to grant specific performance. The case of
Nirmala Anand (supra), though for specific performance,
is based upon a wholly different premise. She was one
of the flat purchasers in a building. For whatever
reason the builders could not and did not complete the
construction of the flat after receiving payments from
the flat purchasers, including Nirmala. Others settled
with the builders. Nirmala did not. She tenanciously
litigated for a number of years when the relevant
permission could be
ig obtained by the builders to
complete the construction. Nirmala agitated her right
of specific performance for being granted the flat for
which she had paid the entire agreed consideration. She
was not a party who would obtain an unfair advantage by
escalation of prices. She had performed her part of
the contract completely. She had made payment of the
entire consideration. She did not fall under Section
20(2)(a) of the Act as do the Plaintiffs in this Suit.
She would not obtain any unfair advantage over the
Defendant in that case merely because she would obtain
possession of her flat by the Defendant specifically
performing the agreement of the flat purchasers. The
terms of the contract and the conduct of the parties
is, therefore, material to exercise discretion to
decree specific performance. In this regard, the
specific mandate of Section 20 which makes relief
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discretionary and enjoins the Court to exercise
discretion judiciously and reasonably and not
arbitrarily is to be seen.
74. The relevant portion of Section 20 of the
Specific Relief Act runs thus:-
Discretion and powers of Court
20. Discretion as to decreeing specific
performance. (1) The jurisdiction to decree
specific performance is discretionary, and theCourt is not bound to grant such relief merely
because it is lawful to do so; but thediscretion of the Court is not arbitrary but
sound and reasonable, guided by judicialprinciples 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,::: Downloaded on – 09/06/2013 15:56:35 :::
56gives the plaintiff an unfair advantage over
the defendant; or
(b) . . . . .
(c) . . . . .
The terms of the contract in this case show, as aforesaid,
that the Plaintiffs had only to make payment of the balance
consideration to complete the sale. The Defendant had to
perform no other part. No action of the Defendant was
condition precedent to the Plaintiffs paying the balance
consideration. In a simple contract such as this the
Plaintiffs must actually tender or at-least show that they
were prepared to tender the balance consideration within
the period allowed under the contract or within a
reasonable period thereafter. Suing instead of and without
tendering the balance consideration or without offering to
tender it in Court or deposit in Court upon such suing
would give the Plaintiffs an unfair advantage over the
Defendant. The conduct of the Plaintiffs in view of the
terms of the suit contract and the following circumstance
of suing as soon as the Plaintiffs received the notice of
termination without even requiring the Defendant to accept
their performance within a reasonable time thereafter shows
that even if the contract is not voidable at the instance
of the Defendant, (since it did not make time the essence
of the contract and give the Plaintiffs the 15-day agreed
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notice of termination before terminating the contract,) the
Plaintiffs would obtain an unfair advantage over the
Defendant if after 28 years the contract is allowed to be
performed albeit upon additional consideration. This is a
case in which the Plaintiffs simpliciter refrained from
performing their part of the contract, their averment of
readiness and willingness notwithstanding. That averment
came to be only made but not shown or substantiated. Hence
the observation in the case of Nirmala Anand (supra)that
the Plaintiffs could not be denied the relief of specific
performance merely on account of phenomenal increase in
price during the pendency of the litigation, though it is
one of the considerations, cannot be applied to this case
where the Plaintiffs, unlike Nirmala Anand (supra), would
otherwise not be entitled to the discretionary reliefs as
having performed their part of the contract.
75. The case of Nirmala Anand (supra) has been
clarified in the case of P. D Souza vs. Shondrilo
Naidu, (2004) 6 SCC 649. The ruling in the case of
Nirmala Anand (supra)is held not to be the law in
absolute terms in all such cases also requiring the
Court to either refuse to grant specific performance or
to direct the Plaintiff to pay higher sum, that being
the case where the Defendant did not foresee the
hardship. Explanation-1 to Section 20 relating to mere
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inadequacy of consideration not constituting an unfair
advantage was applied. In that case the Defendant was
the landlord of the Plaintiff. He had accepted part
payment from time to time without any demur whatsoever.
He had redeemed the mortgage upon receipt of the
requisite payment. Immediately prior to the Suit he
had accepted the further payment. Under those
circumstances, the Plaintiff was granted specific
performance without payment of any further amount upon
escalation of prices. The time for specific
performance of theig contract was held not to be of
essence when the Defendant accepted part payment and
also sought extension of time for registering the sale-
deed as in the case of P. D Souza (supra). Hence in
the case of P. D Souza (supra), the Supreme Court held
when the Plaintiff was seen to be ready and willing to
perform his part of the contract and had performed the
contract and in fact the Defendant had accepted part
payment and applied for extension of time, specific
performance was rightly granted without ordering the
Plaintiff to pay any higher price than that agreed in
the agreement executed 27 years prior to the date of
that order.
76. It can be seen that determination of the
discretionary reliefs depends upon the facts of the
case rather than upon the analogy drawn from other
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59
cases based on dissimilar facts. Consequently, where
there was an inaction on the part of the purchasers for
two and half years in violation of the terms of the
agreement, considering the rise in prices specific
performance was refused in the case of K.S. Vidyanadam
(supra). Where the Plaintiff had performed her part of
the contract by paying consideration and required
possession to be granted of the flat agreed to be
purchased by her, in view of the large lapse of time
specific performance was granted albeit on slightly a
larger amount directed to be paid by the Plaintiff
Rs.6.25 Lakhs instead of Rs.60,000/- (Rs.35,000/- + Rs.
25,000/-] as previously agreed before the escalation in
prices – in the case of Nirmala Anand (supra) and the
specific performance was granted without having to pay
any additional amount by way of escalation of prices in
the case of P. D Souza (supra).
77. This is a case for rejection of the relief of
specific performance for want of performing the only
part of the contract which had to be performed by the
Plaintiffs alone.
78. Hence the Suit is dismissed. No order as to
costs.
(SMT.ROSHAN DALVI, J.)
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