Rakesh Gulshanlal Sehgal & Anr vs M/S.Modern Products
2011 Latest Caselaw 65 Bom

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      mpt
                IN THE  HIGH COURT OF JUDICATURE AT BOMBAY




                                                                               
                   ORDINARY ORIGINAL CIVIL JURISDICTION
                     NOTICE OF MOTION NO.2207 of 2010




                                                       
                                            IN
                                SUIT NO.2838 of 1984




                                                      
     Rakesh Gulshanlal Sehgal & Anr                    ...      Plaintiffs
       versus
     M/s.Modern Products                               ...      Defendant




                                           
                         ig                 ...
     Mr.I.M.Vohra i/b Bipin Joshi for the plaintiffs.
                       
     Mr.Sanjay Jain i/b L.J. Law  for the defendant/applicant.


                                CORAM :   D.G. KARNIK, J
      


                                       DATED :  16th November  2011
   



     ORAL ORDER: 


     1.

Heard learned counsel for the parties.

2. This motion is taken out by the defendant in the decreed suit No.2838 of 1984, under section 28 of the Specific Relief Act 1963

(for short "the Act").

3. On 4 August 1984, the defendant agreed to sell to the plaintiffs the suit property for a total consideration of Rs.4,06,000/- on the terms and conditions mentioned therein. The plaintiffs filed

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a suit (Suit No.2838/84) for specific performance of the agreement of sale. On 19 December 1984, the parties settled the matter and

filed consent terms in the suit. By an order dated 21 December 1984, the court passed a decree in terms of the consent terms. As

per the said consent terms, the defendant agreed and admitted that till date of the signing of the consent terms, it had received the sum of Rs.2,56,000/-. The defendant further agreed to receive the

balance consideration of Rs.1,42,000/- by monthly instalments of Rs.4,000/-. The consent terms specify that the "consent terms" were to operate as a conveyance and there was to be a charge of

balance consideration of Rs.1,42,000/- in the suit property until it

was paid in full. Clause no.4 of the decree also provide that in the event the balance payment was not paid, the defendant shall be

entitled to apply to the court for appointment of court receiver for sale of the suit property and apply the sale proceeds for payment of the balance consideration of Rs.1,42,000/- or unpaid part thereof.

4. According to the defendant, part of the balance consideration of Rs.1,42,000/- was not paid by the plaintiffs. The defendant has therefore taken out the motion for rescission of the decree in terms

of a right conferred upon it under section 28 of the Act. By filing an affidavit in reply and supplementary affidavit in reply, the plaintiffs have contended that the contention of the defendant that part of the

money has not been paid is incorrect. Plaintiffs have paid the entire balance consideration of Rs.1,42,000/-. Photo stat copies of the receipts for payment issued by the defendant are annexed as Exhibit A-1 to A-38 to the further affidavit in reply dated 25 April 2011. By filing a rejoinder the defendant has denied the receipt of balance

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consideration of Rs.1,42,000/- and has contended that three of the cheques of Rs.4,000/- each issued by the plaintiff have been

dishonored by the bank and thus, there is a short payment of Rs. 12,000/-. Counsel for the defendant further submitted that some

of the instalments were not paid in time and that is also a ground for rescission under section 28 of the Act. In response, counsel for the plaintiffs submitted that Rs.12,000/- in respect of three cheques

which were dishonored has been paid in cash and the receipts for payment of cash are produced at Exhibit A-12, A-14 and A-6.

5. In my view, the defendants are not entitled for rescission of

the contract under section 28 of the Act for the reasons indicated below.

6. Sub-section (1) and (2) of section 28 are relevant for our purpose and read thus:

(1) Where in any suit a decree for specific performance of a contract for the sale or lease of immovable property has been made and the purchaser or lessee does not,

within the period allowed by the decree or such further period as the court may allow, pay the purchase money or other sum which the court has ordered him to pay,

the vendor or lessor may apply in the same suit in which the decree is made, to have the contract rescinded and on such application the court may, by order, rescind the contract either so far as regards the party in default or altogether, as the justice of the case may require.

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(2) Where a contract is rescinded under sub- section (1), the court-

(a) shall direct the purchaser or the lessee, if he has obtained possession of the property under the contract,

to restore such possession to the vendor or lessor, and

(b) may direct payment to the vendor or lessor of all the rents and profits which have accrued in respect of the

property from the date on which possession was so

obtained by the purchaser or lessee until restoration of possession to the vendor or lessor, and, if the justice of

the case so requires, the refund of any sum paid by the vendee or lessee as earnest money or deposit in connection with the contract.

Sub-section(1) of Section 28 provides that where in any suit a decree for specific performance of a contract for sale of immovable property has been made and the purchaser does not, within the

period allowed by the decree or such further period as the court may allow, pay the purchase money, the vendor may apply in the same suit in which the decree is made, to have the contract

rescinded and on such application the court may, by order, rescind the contract either so far as regards the party in default or altogether, as the justice of the case may require. Sub-section (2) of section 28 provides that where a contract is rescinded under sub- section (1), the court may direct payment to the vendor of all the

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rents and profits which are accrued in respect of the property from the date on which possession was so obtained by the purchaser

until restoration of possession to the vendor and, if the justice of the case so requires, the refund of any sum paid by the vendee or

lessee as earnest money or deposit in connection with the contract.

7. In my view, section 28 contemplates existence of a decree for

specific performance against the vendor. Furthermore, it contemplates that the decree remains unexecuted i.e to say that the conveyance is not executed in pursuance of a decree because once

the conveyance is executed, the original contract for sale merges

into the conveyance. Thereafter, there would be no occasion for the court to set aside the original contract. What would be required to

be set aside is the conveyance which is not contemplated to be set aside under sub-section (1) of section 28 of the Act. In the present case, the property has been conveyed. Clause no.6 of the consent

terms is very specific in this regard and reads:

"Ordered that this decree do operate as conveyance of the said property described in the schedule hereunder

written together with all the rights, title and interest of the defendants in favour of the plaintiffs."

Thus, the decree was to operate as a conveyance. The initial contract for sale stood merged into the conveyance as the decree itself was to operate as a conveyance. There are two more clauses which indicate that the parties contemplated that the decree itself amounted to transfer of the title. Clause no.2 of the consent terms

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specifies that out of the total consideration of Rs.4,06,000/-, Rs. 2,56,000/- were already paid by the plaintiffs to the defendant and

balance consideration of Rs.1.42,000/- should be paid in instalments of Rs.4,000/- per month. Last sentence of clause no.2

reads :

"A charge or mortgage is hereby created over the said

property for a sum of Rs.1,42,000/- due and payable by plaintiff to defendants."

Clause no.2 thus contemplates creation of charge on the suit

property in favour of the defendants. If the suit property was not conveyed and if the defendants were still the owners of the suit

property, there could not have been a charge by the defendants on their own property in their own favour. Clause no.4 of the consent terms is also material and reads thus:

"4. It is also further agreed and declared that if the Plaintiffs commit default in payment of instalments of Rs.1,42,000/- (Rupees One Lac and forty two thousand)

as stated hereinabove the defendants will be entitled to take out proceedings in the aforesaid suit for appointment of a court receiver or Receiver for taking

possession of the suit property for selling out the same either by public auction or by private sale".

Clause 4 contemplates that in the even plaintiffs committed a default in making payments of the instalments of Rs.1,42,000/-, the

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defendant would be entitled to apply to the court for appointment of a receiver and sale of the suit property for recovery of the balance

of Rs.1,42,000/- or the unpaid portion thereof. Clause 4 contemplates that the title has been vested in the plaintiffs and

therefore, by sale of the suit property, the balance money was to be recovered and paid to the defendants. Apart from the statutory charge under section 100 of the Transfer of Property Act, a

contractual charge was created in favour of the defendant by clause 4 of the consent decree.

7. In my view, section 28 of the Act does not prohibit

contracting out. Clause 4 of the consent terms, in my view, is an agreement, express or implied, by which the parties have agreed to

contract out of section 28 of the Act. Section 28 of the Act confers a right on the unpaid vendor to rescind the contract. In spite of that right, the parties by clause 4 of the consent terms agreed that

the defendant (as an unpaid vendor) would have a right to put the

property to an action at the hands of the court receiver and recover its dues. The parties specifically agreed that the right of the defendant as unpaid vendor was only restricted to the recovery of

the unpaid consideration under clause 4 of the consent terms. The defendant therefore cannot claim a right of rescission under section 28 of the Act.

9. Last few words of sub-section (1) of section 28 of the Act are material. They read as under:

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"the court may, by order, rescind the contract either so far as regards the party in default or altogether, as the

justice of the case may require.

(underlining supplied)

Firstly, sub-section (1) of section 28 confers a discretion on the court by use of the word "may" and that discretion is to be used to meet

the ends of justice. The ends of justice in the present case do not require me to pass an order of rescission of the contract. Even according to the defendants, all cheques except three have been

encashed and therefore, at the most, there is a default of Rs.

12,000/-. Even if I were to reject the contention of the plaintiffs that they have paid Rs.12,000/- in cash, still at the most Rs.

12,000/- are due out of total consideration of Rs.4,06,000/- This is an insignificant part of less than 3% of the total consideration. Further more, the parties itself contemplated that in case of a

default, the defendant as vendor would only be entitled to have a

charge on the suit property and would be entitled to recover the balance by sale of the suit property through receiver. The parties did not contemplate that the contract for sale could be rescinded to

the defendant. In this view of the matter, in my view, I am not inclined to exercise the discretion conferred by section 28 of the Act in favour of the defendants but rather exercise it in favour of the

plaintiffs.

10. There is yet another reason for not exercising the discretion in favour of the defendant. The consent decree is of the year 1984. The amount of Rs.1,42,000/- was to be paid by monthly instalments

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of Rs.4,000/- i.e it was to be paid in about for about 36 instalments i.e. upto 1987. The motion is taken out in the year 2010. This gross

delay disentitles the plaintiff from exercising the right. In my view, the motion is also barred by limitation.

11. The motion is barred by limitation. Application under section 28 of the Act must be made within 3 years of the accrual of cause of

action. Since no period of limitation is provided it would be governed by Article 137 of the Limitation Act. In the present case, cause of action agreed to the defendant in any event in the year

1987 or earlier. The present motion which is taken out in the year

2001 is hopelessly barred by limitation. Even if another view regarding the limitation is permissible, the long delay and latches

disentitles the defendant from exercise of a discretion in their favour.

12. For these reasons, there is no merit in the motion which is

hereby rejected with costs.

(D.G.KARNIK, J)