D. Sai Ramaiah vs M/S. Avinash Bio Agricultural P ...
2022 Latest Caselaw 2416 AP

      THE HON'BLE SRI JUSTICE SUBBA REDDY SATTI

                  APPEAL SUIT No.178 of 2007

JUDGMENT:

Aggrieved by the judgment and decree dated 04.01.2007

in O.S.No.112 of 2003 on the file of II Additional Senior Civil

Judge, Nellore, defendant in the suit filed the above appeal.

2. For the sake of convenience, parties to this appeal are

referred to as they were arrayed in suit.

3. Plaintiff filed the suit O.S.No.112 of 2003 seeking specific

performance of agreement of sale dated 24.01.2003.

4. Averments in the plaint, germane to decide the appeal, in

brief, are as follows:

Plaintiff entered into an agreement of sale with defendant

on 24.01.2003 for a total consideration of Rs.7,60,000/- and

paid an advance of Rs.25,000/- on the same day. As per the

terms and conditions of the agreement of sale, plaintiff had to

settle the amount due to Andhra Pradesh State Financial

Corporation, Nellore (for short "APSFC") under One-Time-

Settlement (OTS) on behalf of defendant and the remaining

amount was to be paid within three months from the date of

agreement. Pursuant to the agreement, plaintiff paid an amount

of Rs.50,000/- to APSFC on 17.03.2003 towards due amount

and obtained receipt. The time stipulated under agreement of

sale is three months from 24.01.2003, however by mistake it

was recited in the agreement of sale, in figures as 23.03.2003,

though in words it was mentioned as three months. Plaintiff is

always ready and willing to perform its part of contract by

clearing all the dues payable to APSFC. Though it was recited in

the agreement of sale that defendant on payment should get

valid conveyance from APSFC, enquiries of plaintiff revealed that

APSFC would not give valid conveyance in respect of suit

schedule property straightaway in favour of plaintiff. Thus,

plaintiff requested the defendant to perform his part of contract

three days prior to 27.03.2003, but defendant evaded to do so.

On 28.03.2003, defendant unilaterally, without knowledge and

consent of plaintiff, paid Rs.2,90,000/- to APSFC under OTS

scheme and tried to evade his part of contract. Plaintiff got

issued legal notice dated 27.03.2002 to defendant and filed the

suit for the reliefs stated supra.

5. Defendant filed written statement. The contents, in brief,

in the written statement are that plaintiff had no capacity to pay

balance of sale consideration and he is never willing to perform

his part of contract. Defendant offered to sell the schedule

property with a specific understanding that plaintiff had to pay

entire sale consideration on or before 23.03.2003 and to clear

debt due to APSFC by availing OTS benefit. Defendant denied

payment of Rs.50,000/- to APSFC on 17.03.2003 and also with

regard to date mentioned in words in agreement. Defendant

further contended that when authorities of APSFC issued letter

dated 06.03.2003 calling upon him to settle the outstanding

amount together with future interest and to close loan by

15.03.2003, plaintiff is not ready and willing to perform its part

of contract and in fact had no capacity to pay balance amount.

Defendant with the help of his partners cleared the loan by

getting benefits under OTS and eventually prayed court to

dismiss the suit.

6. Basing on the pleadings, Trial Court framed the following

issues:

(1) Whether the plaintiff is entitled for specific performance of the contract in pursuance of the agreement of sale dated 24.01.2003?

(2) To what relief?

7. During the trial, Managing Director of plaintiff examined

himself as P.W.1 and Exs.A-1 to A-4 were marked. Defendant

examined himself as D.W.1 and got marked Ex.B-1.

8. By judgment dated 04.01.2007, trial Court decreed the

suit with costs, directing the defendant to execute a registered

sale deed in favour of plaintiff in respect of schedule property by

receiving balance sale consideration of Rs.6,85,000/-, failing

which, plaintiff is at liberty to obtain the same through process

of Court. Assailing the same, the present appeal is filed.

9. Heard Sri M.V.S.Suresh Kumar, learned senior counsel

appearing for Sri A.Srinivasa Rao learned counsel appearing for

appellant and Sri Basava Srinivasa Rao, learned counsel for

respondent.

10. Learned Senior Counsel would contend that in a suit for

specific performance, plaintiff had to plead and prove his

readiness and willingness and also his capacity to perform his

part of contract. He also would contend that time is essence of

the contract and plaintiff failed to pay the amount within the

time stipulated and hence plaintiff is not entitled to relief of

specific performance. It was further contended that plaintiff

came to the Court with unclean hands and hence, he is not

entitled to the equitable relief of specific performance. He also

would contend that though it was brought to the notice of

managing partner of plaintiff about Ex.B-1 letter dated

06.03.2003 issued by APSFC to clear outstanding loan with

future interest by 15.03.2003, but, plaintiff did not take steps to

clear the entire loan and hence, neither the plaintiff was ready

with the amount nor willing to perform its part of contract.

Thus, learned counsel prayed the Court to interfere with the

judgment of the trial Court.

11. Sri Basava Srinivasa Rao, learned counsel appearing for

respondent would contend that pursuant to agreement of sale

an amount of Rs.25,000/- was paid as advance sale

consideration and Rs.50,000/- was paid on 17.03.2003 under

Ex.A-2 to APSFC and the defendant also signed on the counter

foil. He would also contend that plaintiff is always ready and

willing to perform its part of contract and had capacity to clear

the debt. In fact payment of Rs.50,000/- on 17.03.2003 by

itself shows that plaintiff is capable of paying the balance sale

consideration and it is the defendant who did not come forward

to perform his part of the contract. More-so plaintiff issued legal

notice calling upon defendant to perform his part of contract

and thus prayed to dismiss the appeal.

12. The following points arise for consideration in this appeal:

(1) Whether the respondent/plaintiff proved their readiness and willingness to perform agreement of sale dated 24.01.2003?

(2) Whether the respondent/plaintiff had capacity to pay the balance sale consideration?

(3) Whether the respondent/plaintiff came to the Court with unclean hands?

(4) Whether the defendant/appellant evaded to perform his part of contract and thus, came to the Court with unclean hands.

(5) To what relief.

13. Since all the above points are interrelated to each other,

they are dealt with together.

14. Undisputed facts as per the pleadings and evidence are

that agreement of sale was entered into on 24.01.2003.

Defendant received advance of Rs.25,000/-. As per the terms

and conditions of agreement, amount to be paid to APSFC had

to be paid by respondent/plaintiff and the remaining balance of

sale consideration had to be paid within three months from the

date of agreement (it was recited as 23.03.2003). As per the

terms of agreement on paying the entire amount to APSFC,

plaintiff would get sale deed executed through APSFC. An

amount of Rs.50,000/- was paid to APSFC under Ex.A-2 receipt.

Defendant signed on Ex.A-4 counterfoil. However, defendant

cleared dues payable to APSFC and obtained registered sale

deed dated 20.05.2003 from APSFC.

15. In view of undisputed facts referred supra, the Court

should consider whether the plaintiff proved his readiness and

willingness to perform its part of contract; whether the plaintiff

had the capacity to pay the amount and whether the plaintiff

came to the court with unclean hands.

16. Before discussing the aspect of readiness and willingness

of plaintiff to perform his part of the contract, since the appeal

is one under Sec 96 of Code of Civil Procedure, the scope of Sec

96 is to be considered.

17. While dealing with the scope of first appeal, three judge

bench of Hon'ble Apex Court in Santosh

Hazari Vs. Purushottam Tiwari1, held that:

"15. ... The appellate court has jurisdiction to reverse or affirm the findings of the trial court. First appeal is a valuable right of the parties and unless restricted by law, the whole case is therein open for rehearing both on questions of fact and law. The judgment of the appellate court must, therefore, reflect its conscious application of mind and record findings supported by reasons, on all the issues arising along with the contentions put forth, and pressed by the parties for decision of the appellate court. The task of an appellate court affirming the findings of the trial court is an easier one. The appellate court

(2001) 3 SCC 179

agreeing with the view of the trial court need not restate the effect of the evidence or reiterate the reasons given by the trial court; expression of general agreement with reasons given by the court, decision of which is under appeal, would ordinarily suffice (see Girijanandini Devi v. Bijendra Narain Choudhary, AIR 1967 SC 1124]). We would, however, like to sound a note of caution. Expression of general agreement with the findings recorded in the judgment under appeal should not be a device or camouflage adopted by the appellate court for shirking the duty cast on it."

18. In H.K.N. Swami v. Irshad Basith2, two-judge bench of

the Hon'ble Apex Court ruled that:

"3. The first appeal has to be decided on facts as well as on law. In the first appeal parties have the right to be heard both on questions of law as also on facts and the first appellate court is required to address itself to all issues and decide the case by giving reasons. Unfortunately, the High Court, in the present case has not recorded any finding either on facts or on law. Sitting as the first appellate court it was the duty of the High Court to deal with all the issues and the evidence led by the parties before recording the finding regarding title. The order of the High Court is cryptic and the same is without assigning any reason."

The said principle was reiterated in [SBI v. Emmsons International Ltd., (2011) 12 SCC 174 : (2012) 2 SCC (Civ) 289]

Thus, the first appellate court is required to address itself

to all the aspects and decide the case by ascribing reasons.

19. Readiness and willingness on the part of plaintiff is a

condition precedent for granting relief of grant of specific

performance. The said circumstance is material and relevant

and the Court while granting or refusing to grant the relief is

(2005) 10 SCC 243

required to consider the same. To adjudicate whether the

plaintiff is ready and willing to perform his part of contract, the

Court must take into consideration the conduct of plaintiff prior

and subsequent to filing of the suit along with other attending

circumstances. The amount of consideration, which the plaintiff

had to pay to defendant must be proved to be available in

necessity. Right from the date of execution till the date of

decree, plaintiff must prove that he is ready and always been

willing to perform his part of contract.

20. Readiness refers to financial capacity and willingness

refers to conduct of the plaintiff wanting the performance.

Readiness means capacity of the plaintiff to perform contract

including financial position to pay the purchase price. For

determining his willingness to perform his part of contract the

conduct has to be properly scrutinized. The conduct of the

plaintiff must be consistent.

21. In J.P.Builders Vs. A.Ramadas Rao3, a two-judge Bench

of this Court observed that Section 16(c) mandates 'readiness

and willingness' of the plaintiff and is a condition precedent to

obtain the relief of specific performance. The Court held:

"25. Section 16(c) of the Specific Relief Act, 1963 mandates "readiness and willingness" on the part of the plaintiff and it is a condition precedent for obtaining relief of grant of specific performance. It is also clear that in a suit for specific performance, the plaintiff must allege and prove a continuous "readiness and willingness" to perform the contract on his part from the date of the contract. The onus is on the plaintiff [...]

(2011) 1 SCC 429

27. It is settled law that even in the absence of specific plea by the opposite party, it is the mandate of the statute that the plaintiff has to comply with Section 16(c) of the Specific Relief Act and when there is non-compliance with this statutory mandate, the court is not bound to grant specific performance and is left with no other alternative but to dismiss the suit. It is also clear that readiness to perform must be established throughout the relevant points of time. "Readiness and willingness" to perform the part of the contract has to be determined/ascertained from the conduct of the parties."

22. In His Holiness Acharya Swami Ganesh Dassji Vs. Sita

Ram Thapar4, a two-judge Bench of this Court observed that

'readiness' means the capacity of the plaintiff to perform the

contract which would include the financial position to pay the

purchase price. To ascertain 'willingness', the conduct of the

plaintiff has to be properly scrutinised. The Court noted:

"2. There is a distinction between readiness to perform the contract and willingness to perform the contract. By readiness may be meant the capacity of the plaintiff to perform the contract which includes his financial position to pay the purchase price. For determining his willingness to perform his part of the contract, the conduct has to be properly scrutinised. [...] The factum of readiness and willingness to perform the plaintiff's part of the contract is to be adjudged with reference to the conduct of the party and the attending circumstances. The court may infer from the facts and circumstances whether the plaintiff was ready and was always ready and willing to perform his part of the contract. The facts of this case would amply demonstrate that the petitioner/plaintiff was not ready nor had the capacity to perform his part of the contract as he had no financial capacity to pay the consideration in cash as contracted and intended to bide for the time which disentitles him as time is of the essence of the contract." (emphasis is mine)

(1996) 4 SCC 526

23. The agreement of sale is dated 24.01.2003. The total sale

consideration is Rs.7,60,000/-. Out of total consideration, on

the date of agreement, Rs.25,000/- was paid as advance. As per

the terms and conditions of Ex.A-1 agreement of sale, plaintiff

has to discharge the amount, on behalf of defendant, to APSFC

and remaining amount has to be paid to defendant within three

months, however, in words it was recited as 23.03.2003.

Whether the plaintiff paid amount to APSFC to prove his

readiness and willingness is to be considered. Plaintiff is also

required to prove his financial capacity in view of specific plea

made by defendant in written statement that plaintiff has no

financial capacity to discharge the loan.

24. In the plaint, plaintiff averred that he is ready and willing

to perform his part of contract; that advance amount of Rs.

25,000/- was paid and later Rs.50,000/- was paid to APSFC on

17.03.2003 towards due under OTS and he also issued legal

notice dated 27.03.2003 to defendant under Ex.A-3.

25. Defendant entered into an agreement with plaintiff with an

understanding that plaintiff had to clear the loan to APSFC

within the time stipulated to avail benefits under OTS. In order

to avail benefits under OTS, defendant had to make payment on

or before 15.03.2003 and in fact, APSFC addressed letter dated

06.03.2003 to that effect. Though plaintiff denied with regard to

knowledge of Ex.B-1 letter, in the cross examination, he

admitted that defendant showed letter dated 06.03.2003

addressed to M/s Raghavendra Leathers, proprietor

D.Sairamaiah. However, Trial Court in Paragraph-12 of its

judgment totally misread that part of evidence on record and

recorded finding that "Moreover, defendant has not furnished the

copy of Ex.B-1 to the plaintiff, demanding plaintiff to perform his

part of contract". The above finding recorded by the trial Court

is contrary to the evidence on record and the admission made

by P.W.1 in his cross examination.

26. The consensus ad idem between parties at the time when

the contract was entered into would be clear from the terms of

contract. According to P.W.1, if the defendant discharged dues

on or before 31.03.2003, he would get the benefit under OTS.

No evidence was let in by the plaintiff to show that he is ready to

discharge the amount to APSFC on or before 31.03.2003 except

making payment of Rs.50,000/- under Ex.A-2. In the cross

examination of P.W.1, he deposed that without touching the

amount of Rs.50,000/- paid by him, defendant cleared the

entire amount due to APSFC on 28.03.2003. Plaintiff failed to

adduce any cogent evidence that he is ready and possessed

necessary amount to clear the loan to APSFC pursuant to the

Ex A-1. Plaintiff utterly failed to prove not only readiness and

willingness but also about his solvency. In view of the same, the

very purpose of entering into agreement was frustrated.

27. Plaintiff, in fact, improved his case in his chief

examination. He deposed that he asked the defendant to furnish

the details of dues to APSFC and defendant did not furnish the

same. He deposed that he does not know the debts of defendant.

He also stated in his chief affidavit that plaintiff could not pay

the entire amount under OTS scheme, as the defendant was

evading from 17.03.2003. In that connection, it was stated that

he sent one person to defendant when he was avoiding and

subsequently defendant came to him before receiving the notice.

Except his self-serving statement, plaintiff did not examine the

so called person. The above evidence on record shows that the

plaintiff is not ready and willing to perform his part of contract

by paying the amount due to APSFC within time as per the

consensus.

28. The defendant specifically averred in the written statement

that plaintiff had no financial capacity and hence he could not

perform his part of contract. When such a plea is raised by

defendant, plaintiff is expected to lead evidence to rebut the

allegation, however, for the reasons best known, the plaintiff

miserably failed to prove his financial capacity by placing any

material. Trail Court in-spite of pleadings and evidence on

record did not frame an issue nor recorded any finding. Without

recording such a finding, decreeing the suit, granting relief of

specific performance in the opinion of this court is untenable.

29. Whether issuance of legal notice under Ex.A-3

demonstrates readiness and willingness on the part of the

plaintiff? Ex A-3 legal notice dated 27.03.2003 was issued. The

suit was filed on 31-3-2003. It-seems even before the notice was

served on defendant, plaintiff filed the suit. It is pertinent to

mention here that defendant paid amount to APSFC on

28.03.2003. In the legal notice it was mentioned that three days

prior to notice i.e. 27.03.2003, plaintiff has been requesting

defendant to perform his part of the contract. Plaintiff failed to

explain as to what happened from 18.03.2003 to 27.03.2003

and why he could not pay the balance of amount due to APSFC.

Mere issuance of notice under Ex.A-3 would not prove the

capacity of plaintiff that he is having sufficient amount. Plaintiff

had to independently prove that he possessed sufficient amount

with him and is ready and willing to perform his part of

contract. The findings arrived by the Lower Court on this aspect

are without considering both oral and documentary evidence on

record and hence are unsustainable.

30. The Trial Court, neither framed an issue nor evaluated

evidence on record, qua the plaintiff's readiness and willingness

to perform its obligation under the contract. In doing so, trial

Court viewed the legal issue from an incorrect lens. The

foundation of a suit for specific performance lies in ascertaining

whether the plaintiff has come to the Court with clean hands

and has, through his conduct, demonstrated that he has always

been willing to perform the contract. These aspects are

conspicuously silent in the judgment of the trial Court.

31. Even assuming that the respondent was willing to perform

his obligations under the contract, the Court must decide

whether it would be appropriate to direct the specific

performance of the contract in this case.

32. In Zarina Siddiqui Vs. A.Ramalingam5, a two-judge

Bench of Hon'ble Apex Court while dealing with a suit for

specific performance of a contract regarding the sale of

immovable property observed that the remedy for specific

performance is an equitable remedy and Section 20 of the

Specific Relief Act confers a discretion on the Court. The Court

held:

"24. It is well settled that remedy for specific performance is an equitable remedy. The court while granting decree of specific performance exercises its discretionary jurisdiction. Section 20 of the Specific Relief Act specifically provides that the Court's discretion to grant decree of specific performance is discretionary but not arbitrary. Discretion must be exercised in accordance with sound and reasonable judicial principles."

33. The Hon'ble Apex Court in Shenbagam and others Vs. KK

Rathinavel6 having considered the aspects of readiness and

willingness and the conduct of the parties, eventually directed

the appellants/defendants to refund the advance amount with

interest.

34. While balancing the equities, one of the considerations to

be kept in view is as to who is the defaulting party. It is also to

be borne in mind whether a party is trying to take undue

advantage over the other as also the hardship that may be

caused to the defendant by directing specific performance. There

may be other circumstances on which parties may not have any

control. The totality of the circumstances is required to be seen.

Out of total sale consideration plaintiff paid an amount of Rs.

(2015) 1 SCC 705

2022 SCC OnLine SC 71

75,000/- and further filed to prove that he has been ready and

willing to perform his part of the contract.

35. Thus, in view of the discussion supra, this Court concludes

that plaintiff failed to prove that he is ready and willing to

perform its part of the contact and also failed to prove that it

had possessed sufficient money. The judgement and decree

passed by the Lower Court is unsustainable and the relief of

specific performance is negatived. However, the plaintiff is

entitled to refund of earnest money and money paid to APSFC.

36. Pursuant to the judgment and decree, this Court granted

interim stay of execution of decree by order in ASMP No.673 of

2007 dated 05.04.2007 and thereby, all further proceedings

were stayed. Trial Court directed the defendant to execute

registered sale deed in favour of plaintiff in respect of schedule

property by receiving balance sale consideration, failing which;

plaintiff is at liberty to obtain the same through process of

Court. Trial Court not even specified the time period in its

judgment for depositing balance of sale consideration.

37. In the result, the appeal suit is allowed by setting aside

the judgment and decree dated 04.01.2007 in O.S.No.112 of

2003 on the file of II Additional Senior Civil Judge, Nellore in

granting the relief of specific performance. However, the

appellant is entitled to alternative relief of refund of amount.

Appellant/defendant is directed to refund Rs.75,000/- (Rupees

seventy five thousand only) to the respondent/plaintiff with

interest @12% p.a. from the date of payment till realization. In

the facts and circumstances of the case, parties to bear their

own costs.

As a sequel, all the pending miscellaneous applications

shall stand closed.

_________________________ SUBBA REDDY SATTI, J 6th May, 2022

PVD