PETITIONER: MADAMSETTY SATYANARAYANA Vs. RESPONDENT: G. YELLOGI RAO AND TWO OTHERS DATE OF JUDGMENT: 24/11/1964 BENCH: SUBBARAO, K. BENCH: SUBBARAO, K. DAYAL, RAGHUBAR AYYANGAR, N. RAJAGOPALA CITATION: 1965 AIR 1405 1965 SCR (2) 221 CITATOR INFO : RF 1987 SC2328 (13) ACT: Specific Relief Act (1 of 1877), s. 22-Decree for specific performance --When can be refused. HEADNOTE: The plaintiff was the highest bidder at the public auction for the sale of the plots of the 1st defendant, but the 1st defendant repudiated the contract. So the plaintiff issued a notice to him asking him to take the earnest money within 24 hours and the balance within a week thereafter, and to execute a sale deed. The plaintiff however did not take any further effective steps to enforce the contract for 7 months, as he was mentally worried on account of the illness of his wife and the demolition of one of his houses by the Municipal Corporation. Then one day, while passing the suit-site he saw foundations being dug therein and within a few days thereafter filed the suit for specific performance of the contract, that is, about 7 1/2 months after the date of the auction. This 1st defendant contended that there was no contract at all because, there was no final bid and the plaintiff's bid was never accepted. The trial court held that there was a contract but that it was not a fit case for decreeing specific performance. On appeal, the High Court gave the plaintiff a decree for specific performance. The 1st defendant appealed to the Supreme Court and contended that the delay disentitled the plaintiff to the discretionary relief. HELD : Except for some delay, there were no circumstances which should induce a court to refuse, in its discretion, to give the relief of specific performance. [231 H-232 A] While mere delay is not sufficient to empower a Court to refuse the relief of specific performance, proof of abandonment or waiver of a right is not necessary to disentitle the plaintiff to the relief. There may be other circumstances, which it is not possible or desirable to lay down, under which a court can exercise its discretion against the plaintiff. They must however be such that the representation by, on the conduct or neglect of, the plaintiff is directly responsible in inducing the defendant to change his position to his prejudice or such as to bring about a situation, when it would be inequitable to give him such a relief. [230 A, C-D] Case law considered. JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 669 of
1964.
Appeal from the judgment and decree dated October 11, 1963,
of the Andhra Pradesh High Court in C.C.C. Appeal No. 12 of
1959.
T. Lashmayya, P. Shiv Shankar, O. C. Mathur, J. B. Dada-
chanji and Ravinder Narain, for the appellant.
A. V. Viswanatha Sastri, C. Narasimhachar and Harbans
Singh for the respondent No. 1.
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The Judgment of the Court was delivered by
Subba Rao, J. This appeal by certificate raises the question
whether the High Court went wrong, in the circumstances of
the case, to give a decree for specific performance of an
agreement to sell in favour of the plaintiff.
The facts may be briefly stated : On August 23, 1954, at 10
a.m. defendants 1 and 2, through their Auction Agent, de-
fendant 3, advertised and put their plots Nos. 1 to 4
situated in Narayanguda opposite to Deepak Mahal Theatre to
public auction. In regard to plots Nos. 2 and 3 the
plaintiff offered the highest bid of Rs. 12,000/-. He
wanted to purchase the plots for the purpose of starting his
business. When the plaintiff tendered one-fourth of the
sale price as earnest money in accordance with the terms of
the auction, the defendants unlawfully refused to accept it.
On August 30, 1954, the plaintiff gave notice to the 3rd
defendant and sent copies thereof to the other defendants
calling upon them to obtain from him the one-fourth amount
of the sale price as earnest money within 24 hours and pass
a receipt therefor and accept the balance of the auction
price within a period of one week thereafter in accordance
with the condition of the auction sale and to execute a sale
deed duly registered in his favour. Defendants 1 and 2 did
not give any reply to the said notice. The plaintiff filed
the suit in the Court of the 4th Additional Judge, City
Civil Court, Hyderabad, on April 18,1955, for directing the
defendants, inter alia, to execute the saledeed in his
favour. Defendants 2 and 3 in their written-
statementadmitted that therewas an auction sale and that
plaintiff was thehighest bidder; butthe 1st defendant, on
the other hand, deniedthat there was any final bid or that
it was accepted. He further stated that he gave up the idea
of selling the plots and that after obtaining the necessary
permission from the Municipality he began to build shops on
the said plots. The City Civil Judge held that the suit
plots were knocked down at the auction in favour of the
plaintiff and that the lst defendant refused to take the
earnest money. He further held that though the plaintiff
gave notice as early as August 30, 1954, to the defendants,
he did not take any steps to enforce his contract and that
though he knew of the construction a couple of months before
he filed the suit, he kept quiet and allowed the 1st
defendant to complete his construction and, therefore, it
was not a fit case where he could, in exercise of his
discretion, give a decree for specific performance; instead
he awarded to the plaintiff a sum of Rs. 500/- towards
damages. On appeal, a Division Bench of the Andhra Pradesh
High Court, on
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a consideration of the evidence, came to the conclusion that
the delay in filing the suit was due to the illness of the
plaintiff’s wife and also on account of the demolition of
one of his houses by the Municipal Corporation, that he came
to know for the first time on April 13, 1955, that the 1st
defendant was raising a structure on the suit plots and that
without any loss of time within a few days thereafter he
filed the suit. The High Court also found that the 1st
defendant did not act bona fide inasmuch as he chose to rush
headlong in raising the structure evidently to defeat the
claims of the plaintiff. On those findings, the High Court
held that the Trial Court went wrong on principle in
exercising its discretion in favour of the defendants and in
refusing to grant a decree for specific performance in
favour of the plaintiff. In the result, the High Court set
aside the decree of the Trial Court and gave a decree for
specific performance in favour of the plaintiff on his
depositing a sum of Rs. 12,000/- together with stamp papers
and registration charges within a month from the date of the
decree. It may also be mentioned that the learned counsel
for the plaintiff made an offer that his client was willing
to pay a sum of Rs. 14,750/- towards the cost of the
building put up by defendants 1 and 2 on the suit plots and
the Court recorded the same. But, the High Court left it to
the said defendants either to give vacant possession of the
plots or with the structure thereon accepting money for it,
as they chose. The lst defendant has preferred this appeal
by certificate to this Court making the plaintiff the 1st
respondent, and defendants 2 and 3, respondents 2 and 3.
Mr. Lakshmaiah, learned counsel for the appellant, argued
(1) The appellant repudiated the contract on the next day of
the auction itself by refusing to take money from the lst
respondent; the 1st respondent did not accept the
repudiation, but elected to keep the contract alive by
asking the appellant to receive from him one-fourth of the
amount as earnest money at any time within 24 hours thereof
and to obtain from him the entire balance within one week
thereafter; by so doing, he not only unilaterally varied the
terms of the contract but committed a breach thereof in not
paying the amount; having himself committed a breach of the
contract, he could not specifically enforce it. (2) Time is
the essence of the contract, as the object of purchase by
the 1st respondent was to start a business; therefore, the
lst respondent should have pursued his remedy with
promptitude and diligence. It was not enough to assert his
right by issuing a notice, but he should have taken steps to
enforce it; his inaction and indifference for 7 1/2 months
without making any attempt to enforce his right would
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disentitle him to the discretionary relief of specific
performance. (3) The reasons for the delay, namely, that the
1st respondent’s wife was ill or that one of his houses was
demolished by the Municipal Corporation, were obviously
untenable excuses, for both the reasons existed even before
the auction was held.
Mr. A. Viswanatha Sastri, learned counsel for the 1st
respondent, on the other hand, contended as follows : (1)
Mere delay in filing a suit for specific performance could
not possibly be a ground for exercising a discretion against
a plaintiff, as the Limitation Act prescribed a period of 3
years for filing such a suit. (2) Under the Indian law
relief of specific performance could be refused only if the
plaintiff abandons or waives his right under the contract;
and in the present case the appellant had not established
either abandonment or waiver by the 1`st respondent of his
right under the contract, for indeed as soon as he saw that
the appellant had laid foundations for putting up structures
on the plots, he rushed without any delay to the court and
filed the suit. (3) In the circumstances of the instant case
there is no scope for holding that the appellant could have
had any reasonable belief that the 1st respondent had waived
or abandoned his right, for it was the positive case of the
appellant that there was no concluded sale at all.
We cannot allow the learned counsel for the appellant to
raise before us the first question, namely, that the 1st
respondent did not accept the repudiation but kept the
contract alive and committed a breach thereof, with the
result that he disqualified himself to file the suit for
specific relief, for the said plea was not raised in the
pleadings, no issue was raised in respect thereof and no
argument-. were addressed either in the Trial Court or in
the High Court. As the question is a mixed question of fact
and law, we cannot permit the appellant to raise it for the
first time before us.
At the outset we shall construe the relevant sections of the
Specific Relief Act and the Limitation Act unhampered by
judicial decisions.
Specific Relief Act: Section 22. The
jurisdiction to decree specific performance is
discretionary, and the Court is not bound to
grant such relief merely because it is lawful
to do so; but the discretion of the Court is
not arbitrary but sound and reasonable guided
by judicial principles and capable of
correction by a Court of appeal.
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The following are cases in which the Court may properly
exercise a discretion not to decree specific performance :-
I. Where the circumstances under which the
contract is made are such as to give the
plaintiff an unfair advantage over the
defendant, though there may be no, fraud or
misrepresentation on the plaintiff’s part.
Illustrations
II. Where the performance of the contract
would involve, some hardship on the
defendant which he did not foresee, whereas
its non-performance would involve no such
hardship on the plaintiff.
Illustrations
The following is a case in which the Court may
properly exercise a discretion to decree
specific performance :-
111. Where the plaintiff has done substantial
acts or suffered losses in consequence of a
contract capable of specificperformance.
Illustrations
The First Schedule to the Limitation Act
Description of suit Period ofTime from which
Limitation period begins
to run
Art. 113. For specific Three yearsThe date fixed for
the
preformance performance, or, if
of a contract. no such date is fixed,
when the plaintiff
has noticed that per-
formance is refused.
Under s. 22 of the Specific Relief Act, relief of specific
performance is discretionary but not arbitrary: discretion
must be exercised in accordance with sound and reasonable
judicial principles. The cams providing for a guide to
courts to exercise discretion one way or other are only
illustrative; they are not intended to be exhaustive. As
Art. 113 of the Limitation Act prescribes a period of 3
years from the date fixed thereunder for specific
performance of a contract, it follows that mere delay
without more extending up to the said period cannot possibly
be a reason for a court to,
226
exercise its discretion against giving a relief of specific
performance. Nor can the scope of the discretion, after
excluding the cases mentioned in S. 22 of the Specific
Relief Act, be confined to waiver, abandonment or estoppel.
If one of these three circumstances is established, no
question of discretion arises, for either there will be no
subsisting right or there will be a bar against its
assertion. So, there must be some discretionary field
unoccupied by the three cases, otherwise the substantive
section becomes otiose. It is really difficult to define
that field. Diverse situations may arise which may induce a
court not to exercise the discretion in favour of the
plaintiff. It may better be left undefined except to state
what the section says, namely, discretion of the court is
not arbitrary, but sound and reasonable guided by judicial
principles and capable of correction by a court of appeal.
Mr. Lakshmaiah cited a long catena of English decisions to
define the scope of a court’s discretion. Before referring
to them, it is necessary to know the fundamental difference
between the twosystems-English and Indian-qua the relief of
specific performance. In England the relief of specific
performance pertains to the domain of equity; in India, to
that of statutory law. In England there is no period of
limitation for instituting a suit for the said relief and,
therefore, mere delay-the time lag depending upon
circumstances-may itself be sufficient to refuse the relief;
but, in India mere delay cannot be a ground for refusing the
said relief, for the statute prescribes the period of
limitation. If the suit is in time, delay is sanctioned by
law; if it is beyond time, the suit will be dismissed as
barred by time : in either case, no question of equity
arises.
With this background let us look at the English textbooks
and decisions relied upon by the learned counsel for the
appellant. In Halsbury’s Laws of England, Vol. 36, at p.
324, it is stated
“Where time is not originally of the essence
of the contract, and has not been made so by
due notice, delay by a party in performing his
part of the contract, or in commencing or
prosecuting the enforcement of his rights, may
constitute such laches or acquiescence as will
debar him from obtaining specific performance.
The extent of delay which has this effect
varies with circumstances, but as a rule must
be capable of being construed as amounting to
an abandonment of the contract. A much
shorter period of delay, however, suffices
if it is delay in declaring an option or
exercising any other unilateral right;
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and if the other party has already given
notice that he does not intend to perform the
contract, the party aggrieved must take
proceedings promptly if he desires to obtain
specific performance.”
In “Fry on Specific Performance”, 6th Edn., at p. 517, it is
said
“Where one party to the contract has given
notice to the other that he will not perform
it, acquiescence in this by the other party,
by a comparatively brief delay in enforcing
his right, will be a bar: so that in one case
two years’ delay in filing a bill after such
notice, in another case one year’s delay, and
in a third (where the contract was for a lease
of collieries) five months’ delay was held to
exclude the intervention of the Court.”
Learned Counsel cited many English decisions in support of
his argument that there shall be promptitude and diligence
in enforcing a claim for specific performance after a
repudiation of the contract by the other party and that mere
continual claim without any active steps will not keep alive
the right which would otherwise be defeated by laches: see
Clegg v. Edmondson(1), Eads v. Williams(2), Labmann v.
McArthur(3), Watson v. Reid(4), and Emile Erlanger v. The
New Sombrero Phosphate Company(5). But as stated earlier,
the English principles based upon more delay can have no
application in India where the statute prescribes the time
for enforcing the claim for specific performance. But
another class of cases which dealt with the doctrine of
laches have some bearing in the Indian context. In The
Lindsay Petroleum Company v. Prosper Armstrong Hurd, Abram
Farewell, and John Kemp(6) Sir Barnes Peacock defined the
doctrine thus:
“Where it would be practically unjust to give
a remedy, either because the party has, by his
conduct, done that which might fairly be
regarded as equivalent to a waiver of it, or
where by his conduct and neglect he has,
though perhaps not waiving that remedy, yet
put the other party in a situation in which it
would not be reasonable to place him if the
remedy were afterwards to be asserted, in
either of these cases, lapse of time and delay
are most material.”
This passage indicates that either waiver or conduct
equivalent to waiver along with delay may be a ground for
refusing to give a
(1) [1857] 114 R.R. 336.
(3) [1868] L.R. 3 Ch. A.C. 496.
(5) [1878] L.R. 3 A.C. 1218.
(2) [1854] 43 E.R. Chan. 671.
(4) [1830] 39 E.R. Chan. 91.
(6) [1874] L.R. 5 P.C.A. 221, 239-240
228
decree for specific performance. In Caesar Lamare v. Thomas
Dixon(1), Lord Chelmsford said :
“The conduct of the party applying for relief
is always an important element for
consideration.”
The House of Lords in Emile Erlanger v. The New Sombrero
Phosphate Company(2) approved the passage in The Lindsay
Petroleum Company v. Prosper Armstrong Hurd, Abram Farewell,
and John Kemp(3) which we have extracted earlier.
It is clear from these decisions that the conduct of a party
which puts the other party in a disadvantageous position,
though it does not amount to waiver, may in certain
circumstances preclude him from obtaining a decree for
specific performance.
Now we shall consider some of the Indian decisions cited at
the Bar. A Division Bench of the Allahabad High Court held
in Nawab Begum v. A. H. Creet(4) that great delay on the
part of the plaintiff in applying to the Court for specific
performance of a contract of which he claimed the benefit
was of itself a sufficient reason for the Court in the
exercise of its discretion to refuse relief. But it will be
seen from the facts of that case that, apart from the delay
the conduct of the plaintiff was such that it induced the
other party to change his position to his detriment. A
Division Bench of the Patna High Court in Rameshwar Prasad
Sahi v. M. Anandi Devi(-) held on the facts of that case
that the delay in bringing the suit for specific performance
was always fatal to a suit, and that it amounted to an
abandonment of the contract and waiver of his rights to sue
for specific performance. If the learned Judges meant to
lay down that mere delay would amount to abandonment of a
right, we find it difficult to agree with them. The
decision of the Calcutta High Court in Gostho Behari v.
Omiyo Prasad(6) recognized that mere delay was sufficient to
deny the relief of specific performance, but pointed out
that though it was not necessary to establish that the
plaintiff had abandoned his right, the Court may, in view of
the conduct of the plaintiff coupled with his delay that had
prejudiced the defendant, refuse to give the equitable
relief. In Chamarti Suryaprakasa–
(1) [1873] 6 H.L.C. 414,423.
(3) [1874] L.R. 5 P.C.A. 221,
(5) [1960] I.L.R. 39 Pat. 79.
(2) [1878] L.R. 3 A.C. 1218.
(4) [1905] I.L.R. 27 All. 678.
(6) A.I.R. 1969 Cal. 361.
229
rayudu v. Arardhi Lakshminarasimha(1), a Division Bench of
the Madras High Court rightly pointed out that delay by
itself was not a ground for refusing to give a decree in a
suit for specific performance. Sadasiva Aiyar, J., observed
:
” I think that it is an error of law to hold
that more delay amounts to a waiver or
abandonment apart from other facts or
circumstances or conduct of the plaintiff
indicating that the delay was due to a waiver
or abandonment of the contract on the
plaintiff’s part.”
Seshagiri Aiyar, J., said much to the same effect, thus:
“There is nothing in the Specific Relief Act
which says that laches in bringing a suit will
by itself be a ground for refusing specific
performance………… ………… Having
regard to the fact that a special period of
limitation has been fixed for bringing a suit
for specific performance, I think the
legislature has not intended that mere laches
should be one of the grounds for refusing
specific performance.”
We do not think, though the observations of Sadasiva Aiyar,
I., are rather wide, that the learned Judges intended to lay
down that unless there is a waiver or abandonment by the
plaintiff of his rights to sue for specific performance, he
should be nonsuited, for if that was the law, as we have
pointed out earlier, the substantive part of s. 22 of the
Specific Relief Act would become nugatory. A Division Bench
of the Calcutta High Court in Jadu Nath Gupta v. Chandra
Bhushan(2) again emphasized the fact that the English
doctrine of delay and laches showing negligence in seeking
relief in a Court of equity cannot be imported into the
Indian law in view of Art. 1 1 3 of the Limitation Act. But
it pointed out that where the conduct of the plaintiff was
such that it did not amount to abandonment but showed waiver
or acquiescence especially when inaction on his part induced
the defendant to change his position, the plaintiff ought
not to be allowed any relief. This case brings out not only
the distinction between English and Indian law but also that
waiver or abandonment of a right is not a pre-condition for
refusing relief of specific performance.
The result of the aforesaid discussion of the case law may
be briefly stated thus : While in England mere delay or
laches may be a ground for refusing to give a relief of
specific performance,
(1) [1914] 26 M.L.J. 518, 521, 523.
(2) A.I.R. 1932 Cal. 493.
230
in India mere delay without such conduct on the part of the
plaintiff as would cause prejudice to the defendant does not
empower a court to refuse such a relief. But as in England
so in India, proof of abandonment or waiver of a right is
not a precondition necessary to disentitle the plaintiff to
the said relief, for if abandonment or waiver is
established, no question of discretion on the part of the
Court would arise. We have used the expression “waiver” in
its legally accepted sense, namely, “waiver is contractual,
and may constitute a cause of action: it is an agreement to
release or not to assert a right”: see Dawson’s Bank Ltd. v.
Nippon Menkwa Kabushiki Kaisha(1). It is not possible or
desirable to lay down the circumstances under which a Court
can exercise its discretion against the plaintiff. But they
must be such that the representation by or the conduct or
neglect of the plaintiff is directly responsible in inducing
the defendant to change his position to his prejudice or
such as to bring about a situation when it would be
inequitable to give him such a relief.
Bearing these principles in mind let us now look at the
facts of the case. Both the lower Courts found that the
appellant repudiated the contract even on the next day of
the auction, i.e., August 24, 1954. The lst respondent
issued a notice to the appellant on August 30, 1954, asking
him to obtain from him one-fourth of the auction price as
earnest money at any time within 24 hours and the balance
within a period of one week thereafter and execute a sale
deed in his favour. The appellant did not reply to this
notice. The lst respondent in his evidence says that he
could not take effective steps to enforce the contract for a
period of 7 months as his wife was ill and as the Hyderabad
Municipal Corporation had demolished one of his houses. The
High Court accepted the explanation given by the 1st res-
pondent for the delay in his taking steps in enforcing the
contract. In the affidavit filed by the lst respondent in
the Trial Court on October 18, 1955, he stated that his
house had been demolished by the Municipal Corporation
before a year and a half and his wife was also seriously ill
for the “last two years” and that, therefore, he was
worried. From this statement it is argued that both the
circumstances which are said to have been the reasons for
the delay were in existence even before the auction and,
therefore, the High Court went wrong in accepting the
explanation of the 1st respondent for the delay. It is true
that the 1st respondent’s wife was ill even before the
auction, but she
(1) [1935] L.R. 62 I.A. 100, 108.
231
continued to be ill even after the auction and there is
clear evidence that she was being treated in a hospital.
This continual illness of the 1st respondent’s wife must
have unnerved him and when the High Court accepted his
evidence we cannot say that it went wrong. It is also true
that the notice by the Municipal Corporation to demolish the
house was given two months prior to the auction, but there
is nothing on the record to show when the house was actually
demolished. Some time must have elapsed between the notice
and the actual demolition. The only evidence in regard to
the demolition of the house is that of the 1st respondent;
and it is not suggested in the cross-examination that the
demolition of the house was before the auction. On the
uncontradicted evidence of the 1st respondent, we must hold,
agreeing with the High Court, that the lst respondent was in
a worried state of mind because of the said two
circumstances which might have been responsible, to some
extent, for his not taking immediate active and effective
steps to enforce his right. The most important circumstance
in the case is, when did the 1st respondent come to know of
the commencement of the building operations by the appellant
on the suit site ? The lst respondent says in his evidence
that 7 or 8 months after the auction he passed by the suit
site and saw foundations had been dug therein and a few days
thereafter he filed the suit. The appellant, on the other
hand, says in his evidence that he started the construction
after the disputed auction and that it was completed in 5 or
6 months. Though he says in the cross-examination that he
applied to the Municipality for permission to build, he did
not produce either a copy of that application or the
sanction issued to him by the Municipality. He is not even
prepared to deny that he got the sanction only in March
1955. The Trial Court surmised without any evidence that at
the time the lst respondent saw the foundations the stage of
the construction indicated that the building operations must
have commenced two months earlier. The High Court rightly
pointed out that it was a pure surmise and accepted the
evidence of the 1st respondent that a few days after he saw
the foundations being dug in the suit site be filed the
suit. But all these are beside the point, for it is not the
case of the appellant that because of the 1st respondent’s
conduct he was induced to put up the building at a heavy
cost: his case throughout was that there was no contract at
all. If so, there was no question of his being induced to
act to his detriment because of the conduct of the 1st
respondent. Therefore, except for some delay, there are no
circumstances within the meaning of
232
the aforesaid decisions which should induce a Court to
refuse in its discretion to give a relief of specific
performance. The High Court rightly held that it was a fit
case where the plaintiff should have been given a relief of
specific performance.
In the result, the appeal fails and is dismissed with costs.
Appeal dismissed.
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