CASE NO.: Appeal (civil) 4527 of 2000 PETITIONER: SMT. SWARNAM RAMACHANDRAN & ANOTHER RESPONDENT: ARAVACODE CHAKUNGAL JAYAPALAN DATE OF JUDGMENT: 25/08/2004 BENCH: ASHOK BHAN & S.H. KAPADIA JUDGMENT:
J U D G M E N T
KAPADIA, J.
Being aggrieved by the suit for specific performance
being decreed, the defendants-vendors have filed this appeal by
special leave against judgment and order passed by the Division
Bench of the Bombay High Court dated 17.6.2000 in Appeal
No.813 of 1994 confirming the judgment of the learned Single
Judge dated 3.10.1994.
The facts giving rise to this civil appeal, briefly, are as
follows:
By an agreement for sale dated 18.2.1981 entered into
between appellants as vendors and respondent as purchaser, the
appellants agreed to sell all that piece or parcel of land
admeasuring 481.25 square metres bearing plot no.423-C out of
the larger piece of land bearing City Survey No.1285 (Part) of
Suburban Scheme-III of Chembur with bungalow bearing
Municipal No.1137 (2) standing thereon. (hereinafter for the
sake of brevity referred to as “the suit property”) for lump sum
consideration of Rs.10,00,000/-. Prior to the execution of the
agreement, the respondent paid Rs.1,00,000/- as earnest money.
Under clause (1) of the said agreement, a sum of Rs.1,25,000/-
was to be paid by the respondent within two months from the
date of the agreement i.e. by 18.4.1981 and the balance of
Rs.7.75,000/- was payable by him on completion of the sale i.e.
by 31.8.1981. Under clause (8) of the agreement, the sale was
to be completed on or before 31.8.1981. However, there was a
proviso to clause (8) under which an option was given to the
appellants to extend the date of sale up to 31.12.1981.
On 31.3.1981, the respondent herein paid Rs.50,000/- by
cheque to the appellants. By letter dated 3.9.1981, addressed
by the appellants, it was alleged that Rs.1,25,000/- was payable
by the respondent on or before 18.4.1981; that the full amount
was not paid; that the respondent was, therefore, called upon to
make the balance payment of Rs.75,000/- within three days
from the date of receipt of the said letter. However, by the said
letter, time to complete the sale was extended by the appellants
under clause (8) up to 31.12.1981. In reply, the respondent
stated that out of Rs.1,25,000/-, a sum of Rs.50,000/- had been
paid on 31.3.1981, when it was agreed by and between the
parties that the balance amount of Rs.75,000/- would be paid by
30.9.1981. By letter dated 12.9.1981, the appellants denied
having agreed to receive the balance amount of Rs.75,000/-,
payable on or before 18.4.1981, by 30.9.1981. At the same
time, by the same letter dated 12.9.1981, the appellants agreed
to accept the amount of Rs.75,000/- on or before 30.9.1981 and
purported to make time the essence for such payment. On
30.9.1981, the respondent’s advocate forwarded two cheques to
the appellants i.e. cheque dated 29.9.1981 for Rs.30,000/- and
another cheque dated 15.10.1981 for Rs.45,000/- (post-dated
cheque). In the said letter, it was pointed out that the cheque
for Rs.45,000/- was post-dated as the respondent would be
realizing the effects of certain cheques deposited by him in his
account. By letter dated 3.10.1981, the appellants alleged that
time to pay balance amount of Rs.75,000/- by 30.9.1981 was
made the essence of the contract; that since the respondent had
failed to pay the said amount, the agreement for sale stood
terminated. Consequently, the appellants forfeited the amounts
paid by the respondent under the agreement. By letter dated
17.10.1981, respondent herein contended that time was not the
essence of the agreement; that the agreement had been
terminated with malafide intentions; that the respondent had
complied with all his obligations and that he was ready and
willing to perform his obligations under the said agreement.
In the circumstances, on 2.12.1981, the respondent herein
instituted suit no.1985 of 1981 on the original side of the
Bombay High Court. In the suit, the respondent alleged that
sometime in the last week of March, 1981, he was informed
that the appellants desired to extend the date of completion of
sale till 31.12.1981, to which he agreed; that on that occasion
he paid Rs.50,000/-; that it was agreed that in view of the
postponement of the sale, the part payment of Rs.75,000/- be
made by 30.9.1981. That, in terms of the said arrangement, on
30.9.1981, the respondent forwarded his two cheques for
Rs.30,000/- and Rs.45,000/-; that cheque for Rs.45,000/- was
post dated as respondent would be realizing the effects of
certain cheques deposited by him by 15.10.1981. That contrary
to the said arrangement, the appellants vide notice dated
3.10.1981 illegally terminated the agreement alleging that time
to pay the balance amount by 30.9.1981 was the essence of the
contract as indicated by the letter dated 12.9.1981; that
respondent was always ready and willing to perform his part of
the contract and in the circumstances, he was entitled to the
decree for specific performance.
In the written statement, the appellants pleaded that there
was delay in payment of Rs.1,25,000/- on or before 18.4.1981;
that although time was the essence of the contract and the same
was communicated to the respondent, he committed default
and, therefore, the appellants were entitled to terminate the
agreement for sale and that the respondent was neither entitled
to the specific performance of the contract nor damages, as
prayed for.
On examination of the evidence on record, both
documentary and oral, the High Court found that on the plain
reading of the agreement, the same did not provide for time to
be the essence; that circumstances did not exist enabling the
appellants herein to make time the essence of the contract. That
there was no ground, whatsoever, made out in the
correspondence or in the written statement to suggest that the
behaviour of the respondent was such as to prompt the
appellants to make time the essence of the contract. That if
causing delay was the grievance, how could the appellants
justify their behaviour of extending the time for completion of
the sale till 31.12.1981 vide clause (8) of the agreement. That
the very letter dated 12.9.1981, which made time the essence
for payment of Rs.75,000/- by 30.9.1981, extended time for
completion to 31.12.1981. That the appellants had failed to
prove that the respondent was guilty of such grave defaults
entitling the appellants to make time of the essence. That
although several suggestions were made to the respondent,
during his cross-examination, as to the oral agreement between
the parties, about time being made the essence of the contract,
no evidence was led by the appellants. The appellants failed to
rebut the assertion of the respondent of the circumstances under
which Rs.50,000/- was paid and the oral arrangement to extend
the time for payment of Rs.75,000/- up to 30.9.1981. In the
circumstances, it was held that time was not made the essence
of the contract; that the appellants were not justified in making
time of the essence in the matter of payment of Rs.75,000/-.
Before the learned Single Judge, it was argued that the
respondent has failed to prove, though he has so pleaded, that
he was ready and willing to perform his part of the contract. In
this connection, it was urged that the respondent had sent a post
dated cheque for Rs.45,000/- dated 15.10.1981 which indicated
that he had no funds on the due date i.e. on 30.9.1981 and,
therefore, he had failed to prove that he was ready and willing
to perform his part of the contract. This plea of the appellants
was rejected as the High Court found on evidence that time to
pay Rs.1,25,000/- was extended to 30.9.1981; that it cannot be
argued that there was non-compliance on the part of the
respondent when the appellants themselves extended the
completion date to 31.12.1981. The learned Single Judge found
that taking into account the overall conduct of the respondent, it
can be said that the respondent was ready and willing to
perform his part of the contract; that the agreement was
wrongly terminated on 3.10.1981 and the present suit was filed
on 2.12.1981, which indicates that the respondent was eager to
complete the transaction. In the above circumstances, the suit
was decreed.
Aggrieved, the appellants herein instituted LPA No.813
of 1994, which was dismissed by the impugned judgment.
Hence, this civil appeal.
Mr. T.L. Viswanatha Iyer, learned senior counsel for the
appellants contended that parties intended to make time the
essence of the contract, since the agreement stipulated specific
dates for the payment of the purchase price. That the appellants
had validly made time the essence of the contract on 12.9.1981
and since part of the purchase price was not paid on or before
30.9.1981, the appellants were justified in terminating the
agreement dated 18.2.1981. That the property in question
consisted of a house in an urban area whose price rose
continuously, which fact was relevant and which has not been
taken into account by the High Court. It was urged that in the
aforestated circumstances, any delay on the part of the
respondent disentitled him from the relief of specific
performance. In this connection, reliance was placed on the
judgment of this Court in the case of K. S. Vidyanadam &
others v. Vairavan reported in [(1997) 3 SCC 1]. It was urged
that the appellants had made time essence of the payment of
Rs.75,000/- on or before 30.9.1981 of which the respondent
was made aware and, therefore, on failure to pay the said
amount on due date, the respondent herein had committed
breach for which the appellants were entitled to terminate the
agreement. Learned counsel further submitted that the
respondent, on his own evidence, was aware that he had to pay
Rs.75,000/- on or before 30.9.1981 and yet on that day, the
respondent forwards two cheques for Rs.30,000/- dated
29.9.1981 and the other for Rs.45,000/- dated 15.10.1981 which
showed that respondent agreed to the term of payment of
Rs.75,000/- on or before 30.9.1981 and at the same time, he
was not ready and willing to perform his obligation. It was
further urged that in his evidence, the respondent herein had
conceded that he did not have funds to pay Rs.75,000/- on
30.9.1981 which indicated that he was not continuous ready and
willing to fulfil his obligations. It was further urged that under
the agreement, an amount of Rs.1,25,000/- had to be paid by
18.4.1981; that the said amount was not paid and that this lapse
was sufficient ground for the appellants to make the time the
essence of the contract. In the circumstances, it was urged that
the High Court had erred in decreeing the suit for specific
performance.
The key issue which is to be decided in this civil appeal
is : whether time was the essence for payment of Rs.75,000/- on
or before 30.9.1981 and whether the said term was breached.
This question does not depend only upon express stipulation
made by the parties, but it also depends upon the intention of
the parties. Notwithstanding that a specific date was mentioned
in the agreement, one has not only to look at the letter but also
at the substance of the contract. Whether time is of essence is a
question of fact and the real test is intention of the parties. It
depends upon facts and circumstances of each case.
According to Pollock & Mulla’s Indian Contract &
Specific Relief Acts [(2001) 12th Edition page 1086], the
intention can be ascertained from:
i) the express words used in the contract;
ii) the nature of the property which forms the
subject matter of the contract;
iii) the nature of the contract; and
iv) the surrounding circumstances.
That time is presumed not to be of essence of the contract
relating to immovable property, but it is of essence in contracts
of reconveyance or renewal of lease. The onus to plead and
prove that time was the essence of the contract was on the
person alleging it, thus giving an opportunity to the other side
to adduce rebuttal evidence that time was not of essence. That
when the plaintiff pleads that time was not of essence and the
defendant does not deny it by evidence, the Court is bound to
accept the plea of the plaintiff. In cases where notice is given
making time of the essence, it is duty of the Court to examine
the real intention of the party giving such notice by looking at
the facts and circumstances of each case. That a vendor has no
right to make time of the essence, unless he is ready and willing
to proceed to completion and secondly, when the vendor
purports to make time of the essence, the purchaser must be
guilty of such gross default as to entitle the vendor to rescind
the contract.
Applying the above principles to the facts of the present
case, we find that there was no justification in claiming, in the
circumstances, to treat time as of the essence. At the outset,
referring to the original agreement dated 18.2.1981, there is
nothing in the express stipulation between the parties to show
that the intention was to make the rights of the parties
dependant upon the observance of the time limits. Prima facie,
equity treats the importance of such time limits as being
subordinate to the main purpose of the parties. [See: Jamshed
Khodaram Irani v. Burjorji Dhunjibhai reported in [AIR 1915
PC 83].
In the present case, it was submitted on behalf of the
appellants that time to pay Rs.75,000/- on or before 30.9.1981
was made the essence of the contract by notice dated 12.9.1981
as the respondent was a chronic defaulter. We do not find any
merit in this argument. In his evidence, the respondent asserted
that when he paid Rs.50,000/- on 31.3.1981, the appellants
orally agreed to extend the time for payment of Rs.75,000/-
from 18.4.1981 to 30.9.1981; that at that time there was no
agreement to make time the essence of the contract. This
assertion has not been rebutted by the appellants. No evidence
in rebuttal has been led by the appellants. Further, as rightly
held by the Courts below, the conduct of the respondent was
not a gross conduct so as to justify giving of notice making time
of the essence of the contract. That on the contrary, time was
extended by the appellants in furtherance of clause (8) of the
agreement up to 31.12.1981. In the circumstances, we are in
agreement with the conclusion that time was not of the essence.
Mr. Iyer, learned counsel for the appellants placed
reliance on the judgment of this Court in V. Pechimuthu v.
Gowrammal reported in [(2001) 7 SCC 617] in support of his
above contention that time was the essence of the contract. We
do not find merit in this argument. Firstly, as stated above,
whether time is the essence of the contract would depend upon
facts and circumstances of each case. It would depend on
intention of the parties. Secondly, the facts of the above
judgment show that the matter dealt with an agreement for
reconveyance, which as stated above, presumes that time is of
essence. We have referred to Contract Law by Mulla
hereinabove, which states that in cases of reconveyance or
renewal of lease, time is of essence as a matter of presumption
which is rebutable. Lastly, in the case of V. Pechimuthu
(supra), it has been held that rise in price of land agreed to be
conveyed may be a relevant factor in denying relief of specific
performance when Court is considering whether to grant decree
for the first time. That it is not a relevant factor, however,
before the Supreme Court of India at SLP stage where all the
Courts below have granted decree. It was, therefore, held that
judgment of this Court in K. S. Vidyanadam (supra) was
inapplicable. In the present case, the appellants, in any event,
have not stepped into the witness box nor have they led
evidence on any of their allegations. In the circumstances, we
do not wish to burden this judgment by citing various
authorities.
Mr. Iyer, learned counsel for the appellants next
contended that the respondent has failed to prove that he was
always and that he continued to be ready and willing to fulfil
his obligations under the agreement as required by section 16 of
the Specific Relief Act. It was urged that on 30.9.1981, the
respondent herein offered two cheques to the appellants for
Rs.30,000/- dated 29.9.1981 and a post dated cheque for
Rs.45,000/- dated 15.10.1981. That in his evidence, the
respondent had conceded that he had no funds on 30.9.1981.
That under section 16, the burden is on the respondent to show
that he was always ready and willing to comply with his
obligations. Hence, it was urged that the Courts below erred in
granting specific performance to the respondent.
We do not find any merit in the above arguments. The
Courts below have examined the evidence on record and have
recorded a finding of fact that the respondent was in a position
to raise the wherewithal for implementing the contract.
However, on facts, it is clear that time to complete the sale was
extended up to 31.12.1981. That notice terminating the
contract was given by the appellants on 3.10.1981 and the
respondent had instituted the suit on 2.12.1981 which indicates
that respondent was eager to fulfil his part of the contract. That
it is nobody’s case that post dated cheque had bounced. That
there was no unreasonable delay in payment of consideration
and, therefore, it cannot be said that the respondent was not
ready and willing to perform his part of the contract.
In the case of Nannapaneni Subayya Chowdary &
another v. Garikapati Veeraya & another reported in [AIR
1957 AP 307] it has been held, after examining various
authorities, that in the suit for specific performance, all that is
necessary for the purchaser to show is that he was ready and
willing to fulfil the terms of the agreement; that he had not
abandoned the contract; that he had kept the contract subsisting.
Applying the above tests to the facts of the present case, we are
of the view that the Courts below were right in their conclusion;
that the respondent was always ready and willing to comply
with his obligations under the contract. In the circumstances,
the Courts below were right in decreeing the suit for specific
performance.
Before concluding, it may be pointed out that under the
impugned judgment, the respondent was ordered to deposit
Rs.75,000/- payable under the second installment within eight
weeks from 17.6.2000. If the aforestated amount has been so
deposited, the appellants herein would be entitled to withdraw
the same with interest, if any.
For the aforesaid reasons, we do not find any merit in this
civil appeal, which is, accordingly, dismissed, with no order as
to costs.