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Delhi High Court
R.N. Bakshi And Anr. vs Varun Kumar Datt on 28 September, 2000
Equivalent citations: 2000 (55) DRJ 815
Author: V Sen
Bench: V Sen


Vikramajit Sen, J.

1. By this Order I shall dispose off the plaintiff’s application under Order XXXIX Rules 1 and 2 and Defendant’s application under Order XXXIX Rule 4 for setting aside ex-party injunction.

2. The plaintiff has filed the present case for Specific performance of an Agreement for the purchase, of properties bearing No. 25 and 26, Double Storey, New Rajinder Nagar, New Delhi. The execution of the Agreement is not in dispute. Plaintiff No. 2 and the Defendant are siblings, and Plaintiff No. 1 is the husband of plaintiff No. 2 and the brother-in-law of the Defendants. The plaintiffs are in possession of the suit property. In the Agreement dated 14th April, 1993, the total sale consideration was recorded as Rs. 20,00,000/- and an advance of Rs. l,00,000/-was given. It was agreed that Rs. 5,00,000/- will be paid within three months and another Rs. 5,00,000/- within six months from the date of executing of this Agreement. It is further agreed that the balance amount of Rs. 9,00,000/- will be paid at the time of registration of the proper ty. The further covenant was that the Defendant will obtain requisite clearance certifi cates from the appropriate Authorities under the Income Tax Act, the L.& D.O., DDA, MCD etc. Till 4.7.1995, the plaintiff had paid a sum of Rs. 3,30,000/- by various instalments.

3. Thereafter, by their letter dated 9.8.1995, the Defendants reminded the plaintiff of the payment obligations already mentioned above, that is, they were required to pay Rs. 5,00,000/- within three months. They then stated that because of failure of the plaintiff to perform their part of the contract, the Defendants were entitled to revoke and rescind the Agreement forthwith forfeit the amount paid by the plaintiffs. They, however, on humanitarian grounds, enlarged time by one month, for payment of the balance amount under the Agreement. They further stated in this letter that on the plaintiff’s failure, the Agreement would the rescinded and the amount forfeited. Thereafter, the Defendants have stated that since they have been “deprived by the utilisation of the benefits of the amount retained….we are entitled to claim interest at the rate of 18% per annum from the date of the default.” The plaintiffs immediately despatched a reply to this notice. They mentioned that they were lawful possession of the suit property since 1965 and the Agreement had no sanctity because it was a family matter. It was further stated that the Defendants had agreed that the money could be paid after disposing of the plaintiffs properties (351 and 352) and that there was no hurry on the part” of the Defendants to receive the agreed amount. Thereafter the plaintiffs stated that the payment could not be made because they were unable to dispose of their own property.

4. A Legal Notice dated 24.9.1995 was, thereafter, issued by Shri S.P. Chugh, Advocate, wherein the statements made in the Defendant’s letter were largely reiterated. The plaintiffs were notified that the Agreement to Sell dated 14.4.1993 stood revoked and rescinded and the amount paid by the plaintiff to the Defendants stood forfeited. The plaintiffs were requested to vacate the premises failing which monthly damages/mesne profits of Rs. 10,000/-, would be legally recovered. As is to be expected, the issuance of the Legal notice evoked the response of a retort by the plaintiffs’ advocates. In variance to the stance adopted by the plaintiffs’ in their own letter, it was now denied that the plaintiffs had committed any default in performance of their part of the Agreement. For the first time the plaintiffs’ Advocate stated that the defendants had not mentioned they had applied for the sale permission as well as the permission under Sections 34 and 37(1) of the Income Tax Act (sic). It was, thereafter, denied that the Defendants could forfeit the amount received by them and/or claim any sum as damages. It was asserted that the plaintiffs were ready and willing to pay the balance amount of Rs. 16,70,000/- provided that the plaintiffs obtain the necessary permission to complete the formalities for getting the properties transferred.

5. Cases such as the present have engaged the attention of Courts on several occasions, and the legal position appears to be as follows. In Chand Rani (dead by Lrs.) v. Smt. Kamal Rani (dead) by L.Rs., , the Court came to the conclusion that the parties had intended to make time as the essence of the contract largely on the construction of Clause 1 of the Agreement between the parties in that case, which clause reads as under, and is not comparable to or equatable with the clause existing in the present case:

. “1. That in pursuance of the said agreement, the Ist party had received a sum of Rs. 30,000/- (Rupees thirty thousand only) from the second party as earnest money the receipt whereof the 1st party hereby separately acknowledges Rs. 98,000/- (Rupees ninety eight thousand only) will be paid by the second party to the Ist party within a period of ten days only and the balance of Rs. 50,000/- (Rupees fifty thousand only) at the time of registration of the sale deed before the Sub-Registrar, New Delhi.”

6. Earlier, the Court had Restated the law pertaining to question of whether time would be of the essence in contracts for the sale of immovable property, in the following words:

“It is a Well-accepted principle that in the case of sale of immovable property, time is never regarded as the essence of the contract. In fact, there is a presumption against time being the essence of the contract. This principle is not in any way different from that obtainable in England. Under the law of equity which governs the rights of the parties in the case of specific performance of contract to sell real estate, law looks not at the letter but at the substance of the agreement. It has to be ascertained whether under the terms of the contract the parties named a specific time within which completion was to take place, really and in substance it was intended that it should be completed within a reasonable time. As intention to make time the essence of the contract must be expressed in unequivocal language.”

7. In Govind Prasad Chaturvedi v. Hari Dutt Shastri, , the Court
also observed as follows:-

“It is settled law that the fixation of the period within which the contract has to be performed does not make the stipulation as to time the essence of the contract. When a contract relates to sale of immovable property it will normally be presumed that the time is not the essence of the contract, (Vide Gomalthinayagam Pillai v. Pallaniswami Nadar, ….. The intention to treat time as the essence of the contract may be evidence by circumstances which are sufficiently strong to displace the normal presumption that in a contract of sale of land stipulation as to time is not the essence of the contract.”

8. Reliance had been placed by Learned Counsel for the plaintiff on the decision in Gomathinayagain Pillai and Ors., v. Pallaniswami Nadar, , which was discussed in Chand Rani’s case (supra). It will be relevant to underscore that ironically, the Supreme Court held that a decree for specific performance could not be granted in the facts prevailing in that case. It is also not necessary to refer to Rajesh Kumar v. Manoj Jain, ; the Learned Judge has specifically opined that “each case depends upon its peculiar facts.” Reliance on Ansalproperties and Industries (PVT.) Ltd. v. Rajinder Singh and Anr., , by learned Counsel for the plaintiff, appears to be misplaced since the ratio of the case decided by the Division Bench is that a suit for specific performance is maintainable, even without depositing the sale consideration first. It is not an authority for the proposition that the party seeking specific performance is absolved altogether from making payment of the balance sale consideration.

9. In this analysis of the law what is required to be seen is whether a prima fade case has been established by the plaintiffs. It essence in this various judgments, the Hon’ble Supreme Court has opined that if a presumption is to be drawn in cases dealing with the sale of immovable property, it is that time would not be of the essence of the contract. The information available in the agreement between the present parties does not indicate that the parties had agreed that time would be of the essence. To the contrary, in the plaintiffs’ response to the Defendants’ letter they had mentioned that it was the understanding between them that payment would be made as and when the plaintiffs, property would be sold. The letter appears to be spontaneous and forthright, and inspires belief. Although, this does not find mention in the Agreement, keeping in view the close family ties between the parties, it is not incredible that this had been agreed upon. Furthermore, the Defendants have themselves stated that they would be entitled to 18% interest on the overdue payment. If the verdict is eventually given in favour of the Defendants they would be adequately compensated by awarding interest on the overdue payments. Obviously then, time would not be of the essence of the contract. The plaintiffs have reiterated their readiness and willingness to perform all their obligations. Hence a prima facie case has been established by the plaintiffs.

10. The balance of convenience is also in favour of the plaintiffs. They are in possession of the property. They have paid a sum of Rs. 3,30,000/- against the sale consideration of Rs. 20 lakhs. Since payments over and above the advance of Rs. 100,000/- have been paid, it would be reasonable to say that the contract had advanced beyond the initial stage to where partial performance had already taken place.” While it is open to a party to forfeit the earnest money, I can not find any justification to forfeit part-payment of the sale consideration. It could be argued that when the engagement proceeds beyond the stage of earnest money, the appropriate remedy would be in the nature of an action of the recovery of the balance sale consideration.

11. Since immovable property is in question, it must be presumed that a breach of an agreement relating thereto would have the consequence of the party complaining of the breach suffering irreparable injury.

12. The contention of the Defendants is that had they received the payment at the time agreed upon, the sale proceeds could have been invested in the purchase of alternate property. It is their grievance that as a consequence of the delay, there has been a sharp escalation in the prices of property. It is further their complaint that the plaintiffs have, on the other hand, enjoyed the use of the property as well as the use of the balance sale consideration. For the user, the claim for mesne profits has already been raised in the plaint. This is a situation which unfortunately invariably prevails in all cases of the present nature. The Court however, is not powerless to balance the equities between the adversaries. This can be done either by denying the discretionary relief of specific performance because of the obvious absurdity in allowing the plaintiffs to pay only the contracted amount, after the lapse of several year. This approach has been adopted, in several cases by the Hon’ble Supreme Court. However, this decision would have to be taken only at the conclusion of the suit. Furthermore the Court could also award interest as a compensatory relief. It would be relevant to reiterate that this claim has already been claimed by the Defendants.

13. The plaintiffs are entitled to the discretionary relief of an ad interim injunction. However, I am of the view that the plaintiffs should be directed to deposit the balance sale consideration within thirty days. This was, in fact, what was offered by Learned Counsel for the plaintiff suring the course of arguments.

14. In these circumstances, Defendant’s application under Order XXXIX Rule 4 is dismissed and the ex parte orders passed on 1.12.1995 are confirmed subject to the plaintiffs depositing the balance sale consideration of Rs. 16,70,000/- in this Court within thirty days from today. Both the applications stand disposed off. Parties shall bear their respective costs.

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