Bombay High Court
Girish Vinodchandra Dhruva And ... vs Smt. Neena Paresh Shah And Anr on 12 June, 2023
Bench: Anuja Prabhudessai
2023:BHC-AS:15811
P.H. Jayani FA1252.2013 new and latest.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
FIRST APPEAL NO. 1252 OF 2013
1. Girish Vinodchandra Dhruva
2. Jagdish Vinodchandra Dhruva
3. Rajesh Vindochandra Dhruva
4. Smt. Malini V. Dholkia
5. Smt. Mayuri J. Gaglani ...Appellants
Versus
1. Smt. Neena Paresh Shah
2. Paresh Ramesh Shah ...Respondents
WITH
CIVIL APPLICATION NO. 3479 OF 2013
IN
FIRST APPEAL NO. 1252 OF 2013
Girish Vinodchandra Dhruva and
Ors. ...Applicants
Versus
Smt. Neena Paresh Shah ...Respondent
WITH
INTERIM APPLICATION NO. 3007 OF 2022
IN
FIRST APPEAL NO. 1252 OF 2013
Smt. Neena Paresh Shah and Anr. ...Applicants
Versus
Girish Vinodchandra Dhruva and
Ors. ...Respondents
WITH
INTERIM APPLICATION NO. 18033 OF 2022
IN
FIRST APPEAL NO. 1252 OF 2013
Girish Vinodchandra Dhruva and
Ors. ...Applicants
1/59
::: Uploaded on - 15/06/2023 ::: Downloaded on - 16/06/2023 02:56:25 :::
P.H. Jayani FA1252.2013 new and latest.doc
Versus
Smt. Neena Paresh Shah and Anr. ...Respondent
Mr. Mayur Khandeparkar a/w. Mr. Sanket Mungale
for the Appellants.
Mr. Kevic Setalvad, senior Advocate with Vatsal Shah,
Mr. Chetan Mehta, Ms Vidhi Shah i/b. M/s. M.M.K. Law
Associates for the Respondents in FA/1252/2013 and for the
Applicants in IA/3007/2022.
CORAM: SMT. ANUJA PRABHUDESSAI, J.
DATED : 12/06/2023.
JUDGMENT :-
1. The challenge in this Appeal is to the judgment and decree
dated 07/08/2013 in Regular Civil Suit No.5732 of 2006. By the
impugned judgment, the learned Judge, City Civil Court, Greater
Bombay decreed the suit for specific performance and directed the
Appellants herein to execute the sale deed in respect of the suit
property in favour of the Respondent herein within a period of two
months.
2. The brief facts necessary to decide this Appeal are as
under :-
The Respondents were the Plaintiffs and the Appellants are the legal
representatives of the original Defendant Vilasben Vinodchandra
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Dhruva, and shall be hereinafter referred to as 'the Plaintiffs' and the
Defendants, respectively. The Plaintiffs are the residents of the United
States of America. They were interested in purchasing a flat in
Mumbai, preferably in a building, Jamuna Mahal, Prabhat Colony,
Santacruz, wherein Mukesh Shah, the brother of the Plaintiff No.1,
was residing. Vilasben Vinodchandra Dhruva, the original Defendant,
owned flat No.304 on 3rd floor of Jamuna Mahal, which shall be
hereinafter referred to as 'the suit flat'. The original defendant
expressed her desire to sell the suit flat. Accordingly, some time in
February, 2005, during her visit to Mumbai, the Plaintiff No.1 visited
the suit flat and pursuant to the negotiations, the Plaintiffs decided to
purchase the suit flat for total sale consideration of Rs.41,75,000/-.
3. The Plaintiff No.1 had to leave for the United States, hence
she requested her brother - Mukesh Shah to complete the remaining
formalities. The Plaintiffs executed a power of attorney in favour of
Mukesh Shah authorizing him to negotiate, execute documents and to
perform all other acts and deeds necessary to complete the sale
transaction. Accordingly, the Plaintiffs through their power of attorney
and the original Defendant, entered into MoU dated 06/03/2005 for
purchase of the suit flat for sale consideration of Rs.41,75,000/-. The
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Plaintiffs paid an amount of Rs.2,51,000/- to the original Defendant as
an earnest money and the balance sale consideration was to be paid on
or before 31/05/2005. The sale was to be completed on receipt of
NOC and upon obtaining No Dues Certificate from the Housing Society,
the Plaintiffs were required to pay the balance sale consideration and
were to be put in possession of the suit flat.
4. The Plaintiffs claim that they had applied for housing loan
from City Bank and were ready and willing to pay the balance amount
and complete the sale on or before 31/05/2005. The Plaintiffs alleged
that the Defendant was unable to obtain certificates from the Society
and fulfill her obligation under the Agreement. Hence, by mutual
consent, the date of execution of the sale deed was extended till
31/10/2005.
5. The Plaintiffs claim that they had forwarded copies of the
documents to the advocate for the Defendant and repeatedly requested
the Defendant to complete the sale. It is alleged that the Defendant
avoided to complete the sale on one pretext or the other. Hence, the
Plaintiffs by letter dated 29/10/2005 informed the Defendant that they
were ready and willing to pay the balance amount of Rs.39,24,000/-
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and called upon the Defendant to handover vacant and peaceful
possession of the suit flat along with all the original documents and the
NOC of the Society.
6. The Defendant, vide reply dated 31/10/2005, denied the
contents of letter dated 29/10/2005 and claimed that the Plaintiffs had
failed to show their readiness and willingness to pay the balance
amount, though the sale transaction was to be completed by
31/10/2005, time being essence of the contract. The Defendant
therefore terminated the Agreement for sale. In further
correspondence between the parties, the Plaintiffs claimed that they
were always ready and willing to perform their part of obligation
under the Agreement including payment of the balance purchase price.
7. The Plaintiffs claimed that the sale transaction could not be
completed since the Defendant failed to perform the reciprocal
obligation under the agreement in an attempt to resile from the
agreement in view of rise in price of the property subsequent to the
execution of the agreement. The Plaintiffs claimed that the agreement
is valid and subsisting and is binding on the Defendant. Based on these
pleading, the Plaintiffs through their power of attorney - Mukesh Shah
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filed a suit for specific performance of Agreement dated 06/03/2005
and further sought payment of Rs.2,000/- per day from the date of the
suit till handing over possession of the suit flat.
8. The original Defendant died during the pendency of the
suit and the Appellants, who were brought on record as her legal
representatives filed the written statement contesting the claim of the
Plaintiffs. These Defendants claimed that the original Defendant was
residing in the suit flat with 14 members of the family. She was under
compulsion to sell the suit flat due to paucity of space and was in
urgent need of money to purchase separate flats for her three sons and
their family members. The Plaintiffs had assured that the sale
consideration would be paid within three months, in addition, they
had also agreed to pay an amount of Rs.10,00,000/- over and above
the amount mentioned in the subject agreement. The Defendants
claimed that the Plaintiffs were unable to obtain RBI permission and to
transfer funds. Hence, at the request of Mukesh Shah, time to
complete the sale transaction was extended till 31/10/2005.
9. The Defendants averred that they had already obtained no
objection certificate from the Society for sale of the flat. The
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Defendants alleged that despite extension of time, the Plaintiffs neither
forwarded the document nor paid the balance sale consideration. The
Plaintiffs with ulterior and dishonest intention, vide letter dated
29/10/2005, received by the original Defendant on 30/10/2005 being
a Sunday, offered to pay the balance sale consideration upon handing
over vacant possession of the suit flat. The Defendants claim that the
Plaintiffs did not take any effective steps between 11/07/2005 to
30/10/2005 to complete the sale transaction and since time was the
essence of the contract, the Defendant by letter dated 31/10/2005
rescinded the contract. The Defendants alleged that they were
compelled to cancel the agreement since the Plaintiffs were not ready
and willing to perform their part of the agreement.
10. Based on the aforesaid pleadings, the Trial Court framed
the following issues :-
(i). Whether plaintiffs prove that the Suit agreement
dated 6.3.2005 is valid, binding and subsisting and capable
of being specifically performed against the defendants?
(ii). Whether plaintiffs prove that the Suit MOU and
Power of Attorney are properly stamped & do not require
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registration?
(iii). Whether Plaintiffs prove that they are entitled to
recover a sum of Rs.2,000/- per day or such other amount
from the defendants from the date of the suit till handing
over vacant and peaceful possession of the suit flat?
(iv). In the alternative whether plaintiffs prove that they
are entitled to order and decree against the defendants to
pay to the plaintiffs a sum of Rs.41,75,000/- or such other
amount with interest @ 18% per annum from the date of
suit till payment and /or realisation?
(v). Whether plaintiffs prove that in case of money decree
they are entitled to a declaration that there shall be a charge
on the suit flat to the extent of the amount of the decree and
for the sale of suit flat to realize the charge?
(vi). Whether defendants prove that consideration
mentioned in MoU is incorrect and agreed consideration was
Rs.51,75,000/-
(vii). Whether defendants prove that the original
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defendant validly cancelled revoked MoU by her letter dated
31.10.2005 addressed to the Plaintiffs?
(viii). Whether Defendants prove that as Plaintiffs failed to
pay the balance consideration on or before 31.05.2005 and
thereafter before 31.10.2005, original defendant was
entitled to forfeit the earnest money?
(ix). Whether Defendants prove that the payment by
Plaintiffs to original Defendants was the essence of the
contract and Plaintiffs committed deliberate and willful
breach thereof?
(x). What Order and Decree?
11. The power of attorney holder- PW1 Mukesh Shah deposed
on behalf of the Plaintiffs whereas Rajesh Vinodchandra Dhruva - the
Defendant No.1C deposed on behalf of the Defendants. Upon
considering the oral as well as documentary evidence produced by the
respective parties, the trial court rejected the plea of the Defendants
that the power of attorney and MoU were not properly stamped and
further that the Plaintiffs were liable to pay to the Defendants an
amount of Rs.10,00,000/- over and above the amount mentioned in
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the agreement.
12. The trial court held that the passbook produced by the
Plaintiffs proved that there was sufficient amount in their account.
Furthermore, a housing loan of Rs.15,00,000/- was also sanctioned in
favour of the Plaintiffs and they were in a position to arrange the
balance amount. The trial court came to the conclusion that the
Plaintiffs were ready and willing to perform their part of the
Agreement. In terms of the Agreement, the original Defendant was
under an obligation to obtain NOC and No Dues Certificate from the
Society and handover the original documents and possession of the
suit flat to the Plaintiffs and the balance sale consideration was to be
paid only upon performance of the reciprocal obligation. The Trial
Court also observed that the Defendant failed to prove that she had
secured alternative premises to enable her to vacate the suit flat and
handover possession of the suit flat to the Plaintiffs. The trial court
held that the Defendants having failed to perform reciprocal obligation
under the contract, termination of contract was invalid and illegal.
13. The trial court further held that in terms of clause 6(c) of
the Agreement, the Plaintiffs are entitled for damages for the delay in
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handing over possession of the suit flat. The trial court observed that
penalty to the extent of Rs.2,000/- per day as stipulated in the
Agreement, would be onerous and allowing the Plaintiffs to retain the
interest accrued on the amount of Rs.39,24,000/- deposited by the
Plaintiffs pursuant to the order of the Court, would meet the interest of
justice. On the basis of these findings, the trial court decreed the suit
and directed the Defendants to execute the sale deed in respect of the
suit flat within a period of two months. The trial court held that the
Defendants would be entitled to receive an amount of Rs.39,24,000/-
deposited before the Court and that the Plaintiff would be entitled for
interest accrued on the said amount by way of damages. The amount
deposited by the Defendants towards security of earnest money, is
ordered to be refunded. Being aggrieved by this Judgment, the
Defendants have filed this Appeal.
14. The judgment is assailed mainly on the grounds that (i) the
Plaintiffs have not stepped into the witness box and the evidence of
PW1 - Mukesh Shah, the power of attorney holder, cannot be relied
upon. (ii) Time was essence of contract and the Plaintiffs failed to
complete the sale transaction within the time stipulated in the
agreement (iii)The Plaintiffs have failed to prove that they were ready
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and willing to perform the contract.
15. Mr. Mayur Khandeparkar, learned counsel for the
Defendants submits that the Plaintiff No.1, who had participated in
negotiation and settlement of terms of contract did not step in the
witness box as a consequence, the Defendants had no opportunity to
cross-examine the Plaintiffs on the issue of readiness and willingness
to perform the contract. It is further submitted that willingness to
perform the contract is a state of mind, personal to the Plaintiffs alone
and hence, the power of attorney was not competent to depose on this
issue. Reliance is placed on the decision of Janki Vashdeo Bhojwani
and anr. v/s. IndusInd Bank Ltd. and others (2004) 3 SCC 584 ;
Seethakathi Trust Madras v/s. Krishnaveni (2022) 3 SCC 150 ; Man
Kaur (Dead) by Lrs. v/s. Hartar Singh Sangha (2010) 10 SCC 512 and
Vidhyadhar v/s. Manikrao and anr. (1999) 3 SCC 573.
16. Learned counsel for the Defendants submits that under
Clause 4(b) of the agreement, the balance sale consideration was to be
paid on or before 31/05/2005, which date was extended till
31/10/2005. He submits that the agreement contained forfeiture as
well as penalty clause. The agreement read as a whole would indicate
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that the parties intended to make time the essence of the contract. The
Plaintiffs were therefore required to pay the balance amount and
conclude the transaction within the stipulated time.
17. Learned counsel for the Defendants submits that readiness
and willingness to perform the contract is one of the essential
ingredients of the specific performance. The Defendants had raised a
specific plea that the Plaintiffs did not have sufficient funds and that
they were not ready and willing to perform their part of the contract.
Despite categorical pleadings, the trial court did not frame the issue
relating to readiness and willingness to perform the contract.
18. He further submits that the power of attorney was not
competent to depose about readiness and willingness of the Plaintiffs
to perform the contract. Relying upon the decision of the Apex Court
in U.N. Krishnamurthy (since deceased) through Lrs. v/s. A.M.
Krishnamurthy 2022 SCC Online SC 840, he contends that readiness
and willingness cannot be inferred on mere statement but there has to
be cogent proof that the Plaintiffs had financial capacity to pay the sale
consideration and that they were willing to conclude the sale
transaction. The Plaintiffs having failed to step in the witness box,
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there is no positive evidence in this regard. Though it is contended that
the Plaintiff No.1 had applied for loan and that the loan was
sanctioned, the sanction letter was not produced along with the plaint
and a copy of the letter was produced only in the course of the
evidence. Moreover, contents of the said sanction letter have not been
proved. He submits that by letter dated 29/10/2005, the Plaintiffs with
ulterior and dishonest intention, offered to pay the balance sale
consideration, knowing fully well that no sale deed could have been
executed on Sunday. In such circumstances, the Defendant was left
with no other option but to cancel the agreement. He submits that
having failed to prove readiness and willingness, the Plaintiffs were not
entitled for decree of specific performance. Reliance is placed on the
decisions of the Apex Court in Shenbagam and ors. v/s. K.K.
Rathinavel 2022 SCC Online SC 71 ; U.N. Krishnamurthy (since
deceased) thr. Lrs. v/s. A.M. Krishnamurthy 2022 SCC Online SC 840
and the decision of the Division Bench of this Court in Niwas Builders
v/s. Chanchalaben Gandhi 2003 BCI (0) 48.
19. Learned counsel for the Defendants further contends that
findings of the trial court are not based on evidence. He has relied
upon the decision of the Apex Court in Ahmedabad Municipal
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Corporation v/s. Virendra Kumar Jayantibhai Patel (1997) 6 SCC 650
to contend that finding based on no evidence would suffer from error
of law apparent on the face of record. Learned counsel for the
Defendants further contends that there is absolutely no deliberation of
Section 20 of the Specific Relief Act. He submits that in view of
escalation of price, it will not be equitable to grant specific
performance after lapse of such a long period. Reliance is placed on the
decision of Nanjappan v/s. Ramasamy and anr. (2015) 14 SCC 341.
20. Per contra, Mr. Kevic Setalvad, learned Senior Counsel
submits that the Plaintiffs, who are the residents of the United States,
had executed a Power of Attorney in favour of Mr. Mukesh Shah, the
brother of the Plaintiff No.1. Learned counsel for the Plaintiffs has
drawn my attention to the pleadings as well as evidence on record to
contend that Mr. Mukesh Shah had personal knowledge of the entire
transaction and hence, he was competent to depose on behalf of the
Plaintiffs. He has relied upon the decision of the Kerala High Court in
Asha Joseph represented by Her Power of Attorney Holder Abraham
Joseph v/s. Babu C. George and others 2022 SCC Online Ker 1822.
21. Learned senior counsel submits that the terms and
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conditions of the contract do not disclose that the parties intended to
make time the essence of the contract. He further submits that in the
case of sale of immovable property, there is no presumption as to time
being the essence of the contract. Reliance is placed on the decisions
of the Apex Court in Chand Rani (Smt.) dead by Lrs. v/s. Kamal Rani
(Smt.) (dead) by Lrs. (1993) 1 SCC 519 ; Welspun Speciality Solutions
Ltd. v/s. Oil and Natural Gas Corporation Limited (2022) 2 SCC 382 ;
Swarnam Ramchandran (smt.) and another v/s. Aravacode Chakungal
Jayapalan (2004) 8 SCC 689 ; R. Lakshmikantham v/s. Devaraji
(2019) 8 SCC 62 ; Sou. Sharada Nanasaheb Patil and others v/s.
Appaso Jivappa Chougule and another (Second Appeal No.114/1991)
AIR Online 2019 Bom 1146.
22. Learned senior counsel further submits that the Plaintiffs
had already sold their flat at Powai and had sufficient funds in their
account. Moreover, the City Bank had also sanctioned home loan of
Rs.15,00,000/-. The Plaintiffs were drawing combined salary of USD
120,000 and were in position to arrange funds at all times. He submits
that the Plaintiffs had also forwarded documents to the advocate and
solicitor of the original defendant. He submits that by letter dated
29/10/2005, the Plaintiffs called upon the Defendant to receive the
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balance consideration and execute the sale deed. The Plaintiffs were
always ready and willing to perform their part of the contract.
23. Learned senior counsel submits that the agreement clearly
stipulates that the liability of the Plaintiffs to pay the balance amount
was subject to the Defendant obtaining No Dues Certificate and
Transfer Certificate from the Society. Since the Defendant was unable
to fulfill her obligation under the agreement time to complete the sale
was extended upto 31/10/2005 at her request. Having failed to
perform their part of obligation even after extension of time, the
Defendants cannot be allowed to contend that time was essence of the
contract or that the Plaintiffs were not ready and willing to perform
their part of the contract. He has relied upon the decision in Aniglase
Yohannan v/s. Ramlatha and others (2005) 7 SCC 534 ; Ramathal v/s.
Maruthathal and ors. (2018) 18 SCC 303 ; R. Lakshmikantham (supra)
; Asha Joseph (supra) and the decision of the Single Judge of this
Court in Sou. Sharada Nanasaheb Patil (supra).
24. I have perused the records and considered the submissions
advanced by the learned counsel for the respective parties.
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25. The points for consideration are :-
(i) Whether PW1 - Mukesh Shah, Power of Attorney
holder of the Plaintiffs was not competent to
depose on behalf of the Plaintiffs.
(ii) Whether the time was essence of the contract.
(iii) Whether the Plaintiffs were ready and willing to
perform their part of the contract.
(iv) Whether the trial court was justified in exercising
discretion in favour of the Plaintiffs.
26. Before adverting to the issue relating to the competency of
PW1-Mukesh Shah to depose on behalf of the Plaintiffs as their power
of attorney holder, it would be relevant to refer to the decision of the
Apex Court in Man Kaur (supra) wherein the Apex Court has
summarized the law as follows:-
" 17. To succeed in a suit for specific performance, the
plaintiff has to prove : (a) that a valid agreement of sale
was entered into by the defendant in his favour and the
terms thereof ; (b) that the defendant committed breach of
the contract ; and (c) that he was always ready and willing
to perform his part of the obligations in terms of the
contract. If a plaintiff has to prove that he was always
ready and willing to perform his part of the contract, that
is, to perform his obligations in terms of the contract,
necessarily he should step into the witness box and give
evidence that he has all along been ready and willing to
perform his part of the contract and subject himself to
cross-examination on that issue. A plaintiff cannot
obviously examine in his place, his attorney-holder who did
not have personal knowledge either of the transaction or of
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his readiness and willingness. Readiness and willingness
refer to the state of mind and conduct of the purchaser, as
also his capacity and preparedness on the other. One
without the other is not sufficient. Therefore a third party
who has no personal knowledge cannot give evidence
about such readiness and willingness, even if he is an
attorney-holder of the person concerned.
18. We may now summarise for convenience, the position
as to who should give evidence in regard to matters
involving personal knowledge :
(a) An attorney holder who has signed the plaint
and instituted the suit, but has no personal
knowledge of the transaction can only give
formal evidence about the validity of the power
of attorney and the filing of the suit.
(b) If the attorney holder has done any act or
handled any transactions, in pursuance of the
power of attorney granted by the principal, he
may be examined as a witness to prove those acts
or transactions. If the attorney holder alone has
personal knowledge of such acts and transactions
and not the principal, the attorney holder shall be
examined, if those acts and transactions have to
be proved.
(c) The attorney holder cannot depose or give
evidence in place of his principal for the acts
done by the principal or transactions or dealings
of the principal, of which principal alone has
personal knowledge.
(d) Where the principal at no point of time had
personally handled or dealt with or participated
in the transaction and has no personal knowledge
of the transaction, and where the entire
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transaction has been handled by an attorney
holder, necessarily the attorney holder alone can
give evidence in regard to the transaction. This
frequently happens in case of principals carrying
on business through authorized
managers/attorney holders or persons residing
abroad managing their affairs through their
attorney holders.
(e) Where the entire transaction has been
conducted through a particular attorney holder,
the principal has to examine that attorney holder
to prove the transaction, and not a different or
subsequent attorney holder.
(f) Where different attorney holders had dealt
with the matter at different stages of the
transaction, if evidence has to be led as to what
transpired at those different stages, all the
attorney holders will have to be examined.
(g) Where the law requires or contemplated the
plaintiff or other party to a proceeding, to
establish or prove something with reference to
his `state of mind' or `conduct', normally the
person concerned alone has to give evidence and
not an attorney holder. A landlord who seeks
eviction of his tenant, on the ground of his `bona
fide' need and a purchaser seeking specific
performance who has to show his `readiness and
willingness' fall under this category. There is
however a recognized exception to this
requirement. Where all the affairs of a party are
completely managed, transacted and looked after
by an attorney (who may happen to be a close
family member), it may be possible to accept the
evidence of such attorney even with reference to
bona fides or `readiness and willingness'.
Examples of such attorney holders are a
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husband/wife exclusively managing the affairs of
his/her spouse, a son/daughter exclusively
managing the affairs of an old and infirm parent,
a father/mother exclusively managing the affairs
of a son/daughter living abroad. "
27. A plain reading of the aforesaid dictum clearly indicates
that the power of attorney holder is not competent to depose or give
evidence in place of the principal for the acts done by the principal or
transactions or dealings of the principal, of which principal alone has
personal knowledge. However, this bar will not apply to a case where
the power of attorney holder has personal knowledge of the facts and
of the transaction or where all the affairs of a principal are
completely managed, transacted and looked after by an attorney,
who may happen to be a close family member.
28. In the instant case, PW1-Mukesh Shah, is the brother of
Plaintiff No.1. Both the Plaintiffs are the residents of the United
States. They were desirous of purchasing a flat in Mumbai, preferably
in the building wherein PW1 had his flat. The pleadings as well as
the evidence of PW1 clearly indicate that the original Defendant had
informed PW1 that she was desirous of selling the suit flat. The
Plaintiff No.1 visited Mumbai and saw the flat and after initial
discussion agreed to purchase the said suit flat. The evidence of PW1
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reveals that he was present at the time of the said
discussion/negotiation. Since the Plaintiffs had to return to the
United States, they executed a general power of attorney in favour of
PW1-Mukesh Shah authorizing him to negotiate, execute documents
and to perform all other acts and deeds necessary to complete the
sale transaction in respect of the suit flat. Accordingly, PW1
prepared Memorandum of Understanding incorporating all the terms
and conditions agreed between the parties and handed over a copy
of the same to the Defendant. The said MoU was signed by PW1 as a
power of attorney holder of the Plaintiffs. He claims that he had
pursued the loan application with the City Bank. He was also a
signatory to the letter under which time for execution of the sale
deed was extended.
29. The pleadings as well as the evidence on record clearly
indicate that PW1-Mukesh Shah, brother of the Plaintiff No.1 was
exclusively dealing with the original Defendant on behalf of the
Plaintiffs. He had personal knowledge of the transaction. In this fact
situation the decisions in Seetakathi Trust Madras and Vidyadhar
(supra) are not applicable to the facts of the case. In fact, the
present case is squarely covered by paragraph 18g of the judgment in
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Man Kaur (supra) and consequently PW1 was competent to depose
or give evidence on behalf of the Plaintiffs.
30. The next question for consideration is whether time is the
essence of the contract. It would be relevant to note that Section 55
of the Contract Act deals with the effect of failure to perform a
contract within the agreed time. This section provides that failure to
perform the contract within the stipulated time when time is the
essence of the contract, renders the contract voidable at the option of
the promisee. This section further provides that when parties to
contract do not intend to make time essence of the contract, then
promisee is entitled to claim compensation for any loss occasioned to
him as a result of such default.
31. In Chand Rani (supra), while considering the question
whether time is essence of the contract, the Apex Court referred to
previous decisions and observed that :-
"25. From an analysis of the above case law it is clear
that in the case of sale of immovable property there is no
presumption as to time being the essence of the contract.
Even if it is not of the essence of the contract the Court
may infer that it is to be perform in a reasonable time if
the conditions are evident:
(1) from the express terms of the contract;
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(2) from the nature of the property; and
(3) from the surrounding circumstances for
example: the object of making the contract."
32. In Swarnam Ramachandran (supra), the Apex Court has
observed that :
" 12. ... The onus to plead and prove that time was the
essence of the contract is 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."
33. In Saradamani Kandappan v/s. S. Rajalakshmi and ors.
2011 AIR (SC) 3234, the Supreme Court has held as under:-
24. The principle that time is not of the essence of
contracts relating to immovable properties took shape in
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an era when market value of immovable properties were
stable and did not undergo any marked change even
over a few years (followed mechanically, even when
value ceased to be stable). As a consequence, time for
performance, stipulated in the agreement was assumed
to be not material, or at all events considered as merely
indicating the reasonable period within which contract
should be performed. The assumption was that grant of
specific performance would not prejudice the vendor-
defendant financially as there would not be much
difference int he market value of the property even if the
contract was performed after a few months. This
principle made sense during the first half of the
twentieth century, when there was comparatively very
little inflation, in India. The third quarter of the
twentieth century saw a very slow but steady increase in
prices. But a drastic change occurred from the beginning
of the last quarter of the twentieth century. There has
been a galloping inflation and prices of immovable
properties have increased steeply, by leaps and bounds.
Market values of properties are no longer stable or
steady. We can take judicial notice of the comparative
purchase power of a rupee in the year 1975 and now, as
also the steep increase int he value of the immovable
properties between then and now. It is no exaggeration
to say that properties in cities, worth a lakh or so in or
about 1975 to 1980, may cost a corer or more now.
25. The reality arising from this economic change
cannot continue to be ignored in deciding cases relating
to specific performance. The steep increase in prices is a
circumstance which makes it inequitable to grant the
relief of specific performance where the purchaser does
not take steps to complete the sale within the agreed
period and the vendor has not been responsible for any
delay or non-performance. A purchaser can no longer
take shelter under the principle that time is not of
essence in performance of contracts relating to
immovable property to cover his delays, lases, breaches
and non-readiness. The precedents from an era, when
high inflation was unknown, holding that time is not of
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the essence of the contract in regard to immovable
properties, may no longer apply, not because the
principle laid down therein is unsound or erroneous, but
the circumstances that existed when the said principle
was evolved, no longer exist. In these days of galloping
increases in prices of immovable properties, to hold that
a vendor who took an earnest money of say about 10%
of the sale price and agreed for three months or four
months as the period for performance, did not intend
that time should be the essence, will be a cruel joke on
him, and will result in injustice. Adding to the misery is
the delay in disposal of cases relating to specific
performance, as suits and appeals therefrom routinely
take two to three decades to attain finality. As a result,
an owner agreeing to sell a property for Rs.One Lakh
and received Rs.Ten Thousand as advance may be
required to execute a sale deed a quarter century later by
receiving the remaining Rs.Ninety Thousand,when the
property value has risen to a crore of rupees.
26. It is now well settled that laws, which may be
reasonable and valid when made, can, with passage of
time and consequential change in circumstances, become
arbitrary and unreasonable.
26.1) In Rattan Arya v. State of Tamil Nadu-
(1986) 3 SC 385, this Court held:
"We must also observe here that whatever
justification there may have been in 1973 when
Section 30(ii) was amended by imposing a
ceiling of Rs. 400 on rent payable by tenants of
residential buildings to entitle them to seek the
protection of the Act, the passage of time has
made the ceiling utterly unreal. We are entitled
to take judicial notice of the enormous multifold
increase of rents throughout the country,
particularly in urban areas. It is common
knowledge today that the accommodation which
one could have possible got for Rs. 400 per
month in 1973 will today cost at least five times
more. In these days of universal day to day
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escalation of rentals any ceiling such as that
imposed by Section 30(ii) in 1973 can only be
considered to be totally artificial and irrelevant
today. As held by this court in Motor General
Traders v. State of A.P. (1984) 1 SCC 222, a
provision which was perfectly valid at the
commencement of the Act could be challenged
later on the ground of unconstitutionality and
struck down on that basis. What was once a
perfectly valid legislation, may in course of time,
become discriminatory and liable to challenge on
the ground of its being violative of Article 14."
(emphasis supplied)
26.2) In Malpe Vishwanath Acharya v. State of
Maharashtra - (1998) 2 SCC 1 a three Judge
bench of this court considered the validity of
determination of standard rent by freezing or
pegging down the rent as on 1.9.1940 or as on
the date of first letting, under sections 5(10)(B),
7, 9(2)(b) and 12(3) of the Bombay Rents, Hotel
and Lodging House Rates Control Ac, 1947. This
court held that the said process of determination
under the Act, which was reasonable when the
law was made, became arbitrary and
unreasonable in view of constant escalation of
prices due to inflation and corresponding rise in
money value with the passage of time. This
Court held:
"In so far as social legislation, like the
Rent Control Act is concerned, the law
must strike a balance between rival
interests and it should try to be just to
all. The law ought not to be unjust to one
and give a disproportionate benefit or
protection to another section of the
society. When there is shortage of
accommodation it is desirable, nay,
necessary that some protection should be
given to the tenants in order to ensure
that they are not exploited. At the same
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time such a law to be revised periodically
so as to ensure that a disproportionately
larger benefit than the one which was
intended is not given to the tenants......
Taking all the facts and circumstances
into consideration, we have no doubt
that the existing provisions of the
Bombay Rent Act relating to the
determination and fixation of the
standard rent can no longer be
considered to be reasonable......"
The principle underlying the said
decisions with reference to statutes,
would on the same logic, apply to
decisions of courts also.
27. A correct perspective relating to the question
whether time is not of the essence of the contract in
contracts relating to immovable property, is given by
this court in K.S. Vidyanadam and Others vs. Vairavan
- (1997) 3 SCC 1 (by Jeevan Reddy J. who
incidentally was a member of the Constitution Bench
in Chand Rani). This Court observed:
"It has been consistently held by the courts in
India, following certain early English decisions,
that in the case of agreement of sale relating to
immovable property, time is not of the essence
of the contract unless specifically provided to
that effect.
In the case of urban properties in India, it is
well-known that their prices have been going
up sharply over the last few decades -
particularly after 1973. .........We cannot be
oblivious to the reality and the reality is
constant and continuous rise in the values of
urban properties - fueled by large scale
migration of people from rural areas to urban
centres and by inflation.
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Indeed, we are inclined to think that the rigor
of the rule evolved by courts that time is not of
the essence of the contract in the case of
immovable properties - evolved in times when
prices and values were stable and inflation was
unknown - requires to be relaxed, if not
modified, particularly in the case of urban
immovable properties. It is high time, we do
so." (emphasis supplied).
Therefore there is an urgent need to revisit the
principle that time is not of the essence in
contracts relating to immovable properties and
also explain the current position of law with
regard to contracts relating to immovable
property made after 1975, in view of the
changed circumstances arising from inflation
and steep increase in prices. We do not propose
to undertake that exercise in this case, nor
referring the matter to larger bench as we have
held on facts in this case that time is the
essence of the contract, even with reference to
the principles in Chand Rani and other cases.
Be that as it may.
28. Till the issue is considered in an appropriate case,
we can only reiterate what has been suggested in
K.S. Vidyanadam (supra) :
(i) Courts, while exercising discretion in suits for
specific performance, should bear in mind that when
the parties prescribe a time/period, for taking certain
steps or for completion of the transaction, that must
have some significance and therefore time/period
prescribed cannot be ignored.
(ii) Courts will apply greater scrutiny and strictness
when considering whether the purchaser was `ready
and willing' to perform his part of the contract.
(iii) Every suit for specific performance need not be
decreed merely because it is filed within the period
of limitation by ignoring the time-limits stipulated in
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the agreement. Courts will also frown upon suits
which are not filed immediately after the
breach/refusal. The fact that limitation is three years
does not mean a purchaser can wait for 1 or 2 years
to file a suit and obtain specific performance. The
three year period is intended to assist purchasers in
special cases, as for example, where the major part of
the consideration has been paid to the vendor and
possession has been delivered in part performance,
where equity shifts in favour of the purchaser."
34. In P. Daivasigamani vs. S. Sambandan, 2022 SCC Online SC
1391, Hon'ble Supreme Court has held thus:-
" 20. Time, it is stated, is not the essence of the contract in
the case of immovable properties, unless there are
grounds to hold to the contrary. The doctrine is applied,
without being unfair and inequitable to the
defendant/seller, as the court should not ignore that a
person sells the property when he needs money, and,
therefore, expects the money in the stipulated or
reasonable time, which would meet the purpose of the
sale. The purpose of sale can vary from the need for
liquid cash to be invested to earn interest, medical,
educational, child's marriage or purchasing another
property. To save capital gains, the seller has to purchase
another immovable property, unless the proceeds are
exempt. There has been a steep rise in the prices of land
in the last quarter of the 20th Century in India. With the
rise in property value, the value of money has fallen. At
times, delay in payment would defeat the
defendant/seller's purpose. Therefore, the offer of the
plaintiff/purchaser in writing and the time and occasion
when the offer to pay the balance amount to the
defendant/seller is an important factor which would
matter when the Court examines the question of
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discretion; that is, whether or not to grant a decree of
specific performance. While examining these aspects, the
quantum of money paid by the plaintiff/seller to the
defendant/purchaser may become a relevant fact that
merits due consideration. There is a distinction between
limitation and delay and laches. Limitation is a ground
for dismissing a suit even if the plaintiff is otherwise
entitled to specific performance, while delay operates to
determine the discretion and exercise under Section 20 of
the Specific Relief Act, even if the suit is not dismissed on
account of limitation. However, not one but several
aspects have to be considered when the court, in terms of
Section 20 of the Specific Relief Act, exercises discretion,
guided by judicial principles, sound and reasonable."
35. In Wellspun Speciality Solutions Ltd. (supra), the Apex
Court has observed that "It is now well settled that 'Whether time is of
the essence in a contract', has to be curved out from the reading of the
entire contract as well as the surrounding circumstances."
36. Reverting to the facts of the present case, it is not in
dispute that the original Defendant, a widow, was the owner of the suit
flat. She was residing in the suit flat with 14 members of her family.
The suit flat with an area of 768 sq.ft. was not sufficient to
accommodate the large family and hence she was anxious to sell the
suit flat and purchase an alternative premises for her three sons. This
urgent need necessitated sale of the suit flat. Accordingly she entered
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into an agreement for sale with the Plaintiffs to sell the suit flat for
total sale consideration of Rs.41,75,000/-.
37. The relevant terms of the agreement read thus:-
"4. The said consideration of Rs.41,75,000/- (rupees
Forty One Lacs Seventy Five Thousand Only) shall be
paid by the Transferees to the Transferor. In the
following manner:
a) Rs.2,51,000/- (Rupees Two Lacs Fifty One Thousand
Only) as and by way of Earnest money to be paid by the
Transferees to the Transferor on or before the execution
of this Agreement (the payment and receipt whereof
the Transferor hereby acknowledge and admit at the
fact of these presents).
b) The Balance of Rs.39,24,000/- (Rupees Thirty Nine
Lacs Twenty Four Thousand Only) to be paid by the
Transferees to Transferor on or before 31.5.2005. time
for payment as aforesaid shall be essence of the
contract.
5. The sale herein is subject to the following conditions
1. against vacant and peaceful possession.
2. Handling over all original documents related to the said
flat.
3. No objection and No Due certificate from the said
society and
6. a) The said sale herein shall be completed on receipt of
No objection certificate by the Transferor from the said
society that it has No Objection to admit the
Transferees and/or their nominees as members of the
society and after obtaining No due certificates provided
hereinabove the Transferees shall pay the final balance
payment of Rs.39,24,000/- (Rupees Thirty Nine Lacs
Twenty Four Thousand Only) as agreed hereinabove the
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Transferees shall be places in possession of the said Flat
thereof. The time for completion of the sale and the
payment of the said balance price by Transferees to the
Transferor on or before 31.5.2005 time being the
essence of the contract.
b) If the Transferees default in fulfilling the terms of this
agreement with in stipulated time then in that even the
earnest money Rs.2,51,000/- shall be forfeited by the
Transferor.
c) It is also agreed by and between the parties that the
Transferees are ready with balance payment and the
Transferor is not in a position to handover vacant
position of the said flat then in that event the
Transferor shall be liable to penalty to the extent of
Rs.2,000/- per day in case of their default till default
continuous.
d) It is agreed and declared by the Transferees that they
have take the inspection of all the relevant documents
pertaining to the title of the said building in which it is
situated, neighbours water and electric supply, lift and
the Transferees have no grievance, about anything at all
and they shall not back out and or rescind this
agreement on the above grounds and they confirm that
the Transferor has disclosed everything pertaining to
the said Flat to the best of her knowledge.
7. At the time of completion of sale, the Transferor shall
sign/execute Sale Deed and other documents relating
thereto and also shall handover peaceful possession of
the said flat to the Transferees and also submit to
society prescribed transfer form duly signed with a
Letter of Authority in favour of Transferees to collect
original Share Certificate from the society."
38. Clause 4 of the Agreement, which relates to payment of
sale consideration clearly stipulates that the earnest money of
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Rs.2,51,000/- was to be paid on or before execution of the Agreement
whereas the balance sale consideration of Rs.39,24,000/- was to be
paid on or before 31/05/2005. Clause 4(b) makes the time essence of
the contract in regard to the payment of the balance sale
consideration.
39. Clauses 5 and 6 relate to execution of sale deed. Clause 5
stipulates that the sale shall be subject to handing over of the vacant
and peaceful possession, handing over of the original documents
relating to the suit flat and obtaining No Objection and No Due
Certificate from the Society. Whereas Clause 6, which is a composite
term, provides that the sale shall be completed on receipt of No
Objection Certificate and after obtaining No Due Certificate referred to
in Clause 5, payment of the balance sale consideration as agreed in
Clause 4 and on putting the Plaintiffs in possession of the suit flat.
Though Clause 5 does not stipulate any time period for putting the
Plaintiffs in possession, handing over of original documents, obtaining
No Objection as well as No Due Certificate, Clause 6 expressly
stipulates that time for completion of sale and payment of the balance
price is the essence of the contract.
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40. It is not in dispute that the agreement does not contain a
specific clause for extension of time, despite which the parties with
mutual consent extended the time till 31/10/2005. It is pertinent to
note that writing dated 11/07/2005 pursuant to which time was
extended, does not specify the reasons of extension and merely states
that time was extended with mutual consent. It is the contention of the
Plaintiffs that time was extended at the request of the Defendant since
she was unable to get an alternative accommodation whereas the
Defendants have claimed that time was extended as per the request of
the Plaintiffs since they were unable to arrange for the balance
amount. Apart from the bare statements, there is no evidence to
substantiate their conflicting claims. Nevertheless, the fact remains
that both parties had mutually agreed to extend the original time limit
without altering other terms and conditions. It is therefore evident
that extension of time with mutual consent was merely a substitution
of the original extended time and does not amount to alteration of the
basic nature and character of the Contract. As a corollary thereof, time
does not cease to be the essence of the contract with mere extension of
the original time period. All that it suggests is that the balance
payment had to be made within the extended time period.
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41. The agreement also reveals that there was consensus
between the parties that the amount paid towards earnest money
would stand forfeited in the event the purchasers /Plaintiffs defaulted
in fulfilling the terms of the agreement within the stipulated time. This
clause clearly spells out the urgency in completing the sale transaction
within the stipulated time and discloses the intention of the parties to
make time the essence of the contract.
42. Furthermore, the agreement specifies that when the
transferees are ready with the balance payment and the transferor is
not in a position to handover vacant possession, the transferor shall be
liable to penalty to the extent of Rs.2,000/- per day in case the default
continues. It is true that mere incorporation of penalty clause does
not by itself evidence an intention to make time the essence of the
contract. Nevertheless, the sum mentioned in the penal clause is an
indication that the said clause was incorporated strictly to secure
performance of the contract within the stipulated period.
Furthermore, the penal clause could have been invoked only on proof
of the Plaintiffs being ready with balance sale consideration.
43. It is true that in case of specific performance of contract
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relating to immovable properties, time is normally not considered as
an essence of the contract. But this is not an absolute proposition as
the same is subject to several exceptions and would largely depend on
the intention of the parties. In the instant case, as noted above, the
suit flat was too small to accommodate the large family of the original
Defendant. There was pressing need to acquire separate premises for
her sons. This being the case, non-payment of the balance sale
consideration and non-completion of sale transaction within the
stipulated time would frustrate the very purpose of sale.
44. It is also pertinent to note that there was no denial of the
statement of the Defendant that time was the essence of the contract.
In fact, the Plaintiffs have averred that they were ready and willing to
perform the contract within the stipulated time. The pleadings
indicate that the Plaintiffs also considered time to be the essence of the
contract. These facts and circumstances coupled with express and
other implied stipulations in the agreement disclose an intention to
make time the essence of the contract, which displaces the general
presumption in this regard.
45. As regards the question pertaining to readiness and
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willingness, it may be mentioned that Section 16(c) of the Specific
Relief Act, as it stood prior to 2018 amendment, stipulated that specific
performance of a contract cannot be enforced in favour of a person,
who fails to aver and prove that he has performed or has always been
ready and willing to perform the essential terms of the contract, which
are to be performed by him. In other words, Section 16(c) of the
Specific Relief Act mandates readiness and willingness on the part of
the Plaintiffs as a condition precedent to seek specific performance.
46. In Katta Sujatha Reddy and another v/s. Siddamsetty Infra
Projects Pvt. Ltd. and others, a three-Judge Bench judgment of the
Apex Court has held that 2018 amendment is prospective in nature
and cannot apply to those transactions that took place prior to its
enforcement. In the present case, the matter dates back to the year
2005 and hence, section 16(c), as it stood prior to the 2018
amendment, would be applicable. As a consequence thereof, the
Plaintiffs were required to plead and prove that they had performed or
had always been ready and willing to perform the essential terms of
the contract which were to be performed by him.
47. In Shenbagam (supra), the Apex Court has observed as
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under :-
" 14. Section 16 of the Specific Relief Act provides certain
bars to the relief of specific performance. These include,
inter alia, a person who fails to aver and prove that he has
performed or has always been 'ready and willing' to
perform the essential terms of the contract which are to be
performed by him, other than terms the performance of
which has been prevented and waived by the defendant.
In JP Builders v. A Ramdas Rao, (2011) 1 SCC 429, a two
-judge Bench of this Court observed that Section 16(c)
mandates 'readiness 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.
[...]
27. It is settled law that even in the absence of
specific plea by the opposite party, it is the mandate o
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
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the contract has to be determined/ascertained from
the conduct of the parties."
(emphasis supplied)
The Court further observed that 'readiness' refers to
the financial capacity and 'willingness' refers to the
conduct of the plaintiff wanting the performance.
15. Similarly, in His Holiness Acharya Swami
Ganesh Dassji v. Sita Ram Thapar, (1996) 4 SCC 526,
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 tot he 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 is 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
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contract."
(emphasis supplied).
16. The precedents of this Court indicate that the
plaintiff must establish that he was 'ready and willing' to
perform the contract. In this regard, the conduct of the
plaintiff must be consistent."
48. In U.N. Krishnamurthy (supra), the Hon'ble Supreme Court
has observed that :-
"25. To aver and prove readiness and willingness to perform
an obligation to pay money, in terms of a contract, the
plaintiff would have to make specific statements in the plaint
and adduce evidence to show availability of funds to make
payment in terms of the contract in time. In other words, the
plaintiff would have to plead that the plaintiff had sufficient
funds or was in a position to raise funds in time to discharge
his obligation under the contract. If the plaintiff does not
have sufficient funds with him to discharge his obligations in
terms of a contract, which requires payment of money, the
plaintiff would have to specifically plead how the funds
would be available to him. To cite an example, the plaintiff
may aver and prove, by adducing evidence, an arrangement
with a financier for disbursement of adequate funds for
timely compliance with the terms and conditions of a
contract involving payment of money. "
49. In P. Daivasigamani (supra), the Apex Court referred to the
decision in Sayed Dastagir v/s. T.R. Gopalakrishna Setty (1999) 6 SCC
337 and Sukhbir Singh v/s. Brijpal Singh (1997) 2 SCC 200 and
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reiterated that readiness and willingness are not one, but two separate
elements. Readiness means the capacity of the Plaintiff to perform the
contract which would include the financial position to pay the
purchase price. It is not a condition that the Plaintiffs should carry
cash with them but it is sufficient to establish that they have the
capacity to pay. Whereas, willingness refers to the intention of the
Plaintiff as a purchaser to perform his part of the contract. Willingness
is inferred by scrutinizing the conduct of the Plaintiff/purchaser,
including attending circumstances. It is reiterated that compliance of
readiness and willingness has to be in spirit and substance and not in
letter and form.
50. The records reveal that despite specific pleadings, the Trial
Court did not frame issue relating to readiness and willingness of the
Plaintiffs to perform their part of the contract. As emphasized by the
Apex Court in Nandkishore Lalbhai Mehta v/s. New Era Fabrics Private
Limited and others (2015) 9 SCC 755 , the object and purpose of
pleadings and issues is to ensure that the litigants come to trial with all
the issues clearly defined and to prevent cases being expanded on
grounds being shifted during trial. Its object is also to ensure that
each side is fully alive to the questions that are likely to be raised or
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considered so that they may have an opportunity of placing the
relevant evidence appropriate to the issues before the Court for its
consideration. The Apex Court has reiterated that the pleadings are
meant to give to each side intimation of the case of the other so that it
may be met, to enable Courts to determine what is really at issue
between the parties, and to prevent any deviation from the course
which litigation on particular causes must take. The object of issues is
to identify from the pleadings the questions or points required to be
decided by the Courts to enable the parties to let in evidence thereon.
51. In the instant case, though the trial court had failed to
frame the issue regarding readiness and willingness of the Plaintiffs to
perform their part of the contract, the records reveal that both parties
went to trial fully knowing the rival case and adduced evidence and
advanced arguments in support of their respective claims, including
the plea of readiness and willingness, without a specific issue thereon.
Hence, non-framing of the issue has not led to miscarriage of justice
and is not fatal to the case.
52. The Defendants having raised a specific defence that the
Plaintiffs were not ready and willing to perform their part of the
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contract, the initial burden was on the Plaintiffs to prove that they had
sufficient funds or that they had capacity to raise the funds to pay the
balance sale consideration within the time stipulated in the agreement.
It is pertinent to note that the Plaintiffs have not stepped into the
witness box to prove their financial status. PW1-Mukesh Shah, the
Power of Attorney holder of the Plaintiffs has deposed that the Plaintiff
No.1 was employed as Account Manager with M/s. Young Adult
Institute and Workshops INC and Plaintiff No.2 was employed as
Recovery Manager with M/s. Daniels and Norelli Pc. and that their
aggregate salary during the said period was 1,20,000 USD approx.
Apart from this bare assertion there is no other evidence either in the
form of appointment letter, income certificate, tax records, bank
statements, etc. to prove the nature of the employment and the income
of the Plaintiffs. In the absence of such documentary evidence as
regards the financial position or capacity of the Plaintiffs, the mere
uncontroverted oral statement made by the Power of Attorney, cannot
be considered to be a proof of the financial capacity of the Plaintiffs
and consequently, findings regarding readiness cannot be recorded in
their favour. Reliance is placed on the decision of the Apex Court in
Vijay Kumar and others v/s. Omprakash (2019) 17 SCC 429, Ritu
Saxena v/s. J.S. Grover and another (2019) 9 SCC 132 and
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Bhavyanath represented by power of attorney holder v/s. K.V. Balan
(dead) through legal representatives (2020) 11 SCC 790.
53. It is also pertinent to note that in terms of Clause 4(b) of
the Agreement, the Plaintiffs were required to pay to the Defendant an
amount of Rs.39,24,000/- on or before 31/10/2005. In addition, the
Plaintiffs were also required to pay registration charges. The records
reveal that the Plaintiffs had sold their flat at Powai and the sale
proceeds were deposited in their account in Canara Bank. The
passbook of Canara Bank (Exhibit - P3) reveals that as on
14/09/2005, the Plaintiffs had in their account Rs.26,53,384/- as
against an amount of Rs.39,24,000/- payable to the Defendant.
54. The Plaintiffs have sought to project that they had applied
for and obtained loan of Rs.15,00,000/- from the City Bank. The
Plaintiffs have not placed on record copy of the loan application. The
Plaintiffs have produced photocopy of the sanction letter dated
26/05/2005 (Exh.P7), allegedly issued by the City Bank sanctioning
loan of Rs.15,00,000/- with interest @ 7.75%. It is significant to note
that the bank had not disbursed the loan and the Plaintiffs had also not
taken any steps for disbursement of the loan.
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55. Be that as it may, the said letter at Exhibit - P7 does not
give details of the loan application. A perusal of letter dated
26/05/2005 (Exh.-P7) indicates that it is a photocopy of the bank
copy. The Plaintiffs have not placed on record the original sanction
letter or copy of the letter addressed to the Plaintiffs. No explanation is
given for not producing the original document and no case is made out
to allow secondary evidence. The Plaintiffs have not examined any
bank officers to prove the said document in accordance with the
provisions of the Evidence Act.
56. The balance sale consideration was to be paid by
31/10/2005. Though the letter dated 29/10/2005 (Exh. P-9) states
that the Plaintiffs were ready with the balance amount of
Rs.39,24,000/-, the evidence of PW1 does not indicate that the
Plaintiffs had ready cash or that they had made arrangements to raise
funds. In fact, to a specific suggestion that the plaintiffs were not
ready with funds prior to 31/05/2005, PW1 has stated that they had
funds, as can be seen from the passbook of Canara Bank and that he
and his relatives would have put additional money and completed the
transaction. This statement itself suggests that the Plaintiffs were not
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ready with cash of Rs.39,24,000/- as alleged in the said letter dated
29/10/2005.
57. There is no dispute that the Plaintiffs were not required to
carry the balance sale consideration. However, it was incumbent upon
the Plaintiffs to establish that they had sufficient funds or that they had
the capacity to pay the balance sale consideration. In other words, the
Plaintiffs were required to prove their financial capacity based on
reliable documents. The evidence on record reveals that the Plaintiffs
had only an amount of Rs.26,53,384/- in their account with Canara
Bank. PW1 has not disclosed the names of his friends and the relatives
who would have assisted him in raising the balance amount. Thus,
apart from the mere oral statement of PW1, the Plaintiffs have not
established through reliable documentary evidence that they had
financial capacity to pay the balance sale consideration as well as
registration charges.
58. As regards the willingness, it is on record that till
29/10/2005, the Plaintiffs had not addressed a single letter to the
defendants, intimating that they were ready and willing to perform
their part of the contract and/or calling upon the Defendants to
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discharge their obligation under the contract. Though PW1 has
deposed that he had sent a set of documents to be executed by and
between the parties to Advocates and Solicitors M/s. Haridas and
Company, no such reference was made in letter dated 29/10/2005.
In fact, the Plaintiffs had made reference to such documents for the
first time in letter dated 01/11/2005 addressed to the Defendant
wherein it was stated that all the papers were being handed over to the
lawyer and that in fact the final documents were sent to their lawyer
Mr. Bharatbhai Raghani. It is to be noted that the Plaintiffs have not
produced copy of the documents as well as the forwarding letter under
which the documents were forwarded to Advocates and Solicitors M/s.
Haridas and Company or Advocate and Solicitor Mr. Bharat Raghani.
59. The evidence of DW1 reveals that letter dated 29/10/2005
was received by them on Sunday i.e., 30/10/2005 at 12:30 noon. The
Plaintiffs had not purchased the stamp paper, they had not prepared a
draft sale or the sale deed and had not got the stamp duty adjudicated.
It is therefore evident that the sale deed could not have been executed
on or before 31/10/2005. Hence, there can be no dispute that the
letter dated 29/10/2005 was not genuinely intended but was
apparently a ploy to make it appear that they had acted within the
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stipulated time.
60. Apart from a bare assertion of PW1 that the Plaintiffs were
ready and willing to perform their part of contract, there is absolutely
no evidence to prove that the Plaintiffs had taken any steps for
completion of sale transaction. As it has been held by the Apex Court
in Shenbagam (supra), merely averring that they were waiting with
the balance sale consideration is not sufficient to prove that the
Plaintiffs were willing to perform their obligation under the contract.
In these circumstances, the findings of the trial court on the issue of
readiness and willingness, cannot be sustained.
61. The Plaintiffs have sought to justify non-payment of
balance sale consideration for the reason that the Defendants had
failed to perform the reciprocal obligation under the contract viz.
obtaining No Objection Certificate and No Due Certificate from the
Society. A similar plea was raised in Man Kaur (supra). It was
contended that the Defendants having failed to obtain NOC as also
ULC clearance and Income Tax Clearance required for the sale, the
question of the Plaintiff proving his readiness and willingness to
perform his obligation did not arise. The Hon'ble Supreme Court
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rejected the said contention as devoid of merits and held that :-
" 40. ...There are two distinct issues. The first issue is
the breach by the defendant - vendor which gives a
cause of action to the plaintiff to file a suit for specific
performance. The second issue relates to the personal
bar to enforcement of a specific performance by persons
enumerated in section 16 of the Act. A person who fails
to aver and prove that he has performed or has always
been ready and willing to perform the essential terms of
the contract which are to be performed by him (other
than the terms the performance of which has been
prevented or waived by the defendant) is barred from
claiming specific performance. Therefore, even
assuming that the defendant had committed breach, if
the plaintiff fails to aver in the plaint or prove that he
was always ready and willing to perform the essential
terms of contract which are required to be performed by
him (other than the terms the performance of which has
been prevented or waived by the plaintiff), there is a
bar to specific performance in his favour. Therefore, the
assumption of the respondent that readiness and
willingness on the part of plaintiff is something which
need not be proved, if the plaintiff is able to establish
that defendant refused to execute the sale deed and
thereby committed breach, is not correct. Let us give an
example. Take a case where there is a contract for sale
for a consideration of Rs.10 lakhs and earnest money of
Rs.1 lakh was paid and the vendor wrongly refuses to
execute the sale deed unless the purchaser is ready to
pay Rs.15 lakhs. In such a case there is a clear breach
by defendant. But in that case, if plaintiff did not have
the balance Rs.9 lakhs (and the money required for
stamp duty and registration) or the capacity to arrange
and pay such money, when the contract had to be
performed, the plaintiff will not be entitled to specific
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performance, even if he proves breach by defendant, as
he was not `ready and willing' to perform his
obligations. "
62. It is thus evident that the Plaintiffs were required to
demonstrate readiness and willingness regardless of any default by the
original defendant. As noted above the Plaintiffs have failed to prove
that they were ready and willing to perform their part of contract and
as such in terms of Section 16(c) of the Specific Relief Act they are
barred from claiming specific performance not withstanding alleged
breach by the Defendant vendor. In such facts and circumstances the
decisions in Swarnam Ramchandran and R. Laxmikantham (supra) are
distinguishable and not applicable to the facts of the case.
63. The next question is whether the Plaintiffs are entitled to
the discretionary relief of specific performance. Section 20 of the
Specific Relief Act, as it stood prior to 2018 amendment, stipulates that
the jurisdiction of the Court to grant decree of specific performance is
discretionary. In Jayakantham and others vs. Abaykumar (2017) 5
SCC 178 in Civil Appeal 3049 of 2017, the Apex Court while
considering the scope of Section 20, has held thus :-
" 7. While evaluating whether specific performance
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ought to have been decreed in the present case, it
would be necessary to bear in mind the
fundamental principles of law. The court is not
bound to grant the relief of specific performance
merely because it is lawful to do so. Section 20(1)
of the Specific Relief Act, 1963 indicates that the
jurisdiction to decree specific performance is
discretionary. Yet, the discretion of the court is not
arbitrary but is "sound and reasonable", to be
"guided by judicial principles". The exercise of
discretion is capable of being corrected by a court of
appeal in the hierarchy of appellate courts. Sub-
section 2 of Section 20 contains a stipulation of
those cases where the court may exercise its
discretion not to grant specific performance. Sub-
Section 2 of Section 20 is in the following terms :
"Section 20 (2). The following are cases in which
the court may properly exercise discretion not to
decree specific performance-
(a) where the terms of the contract or the conduct
of the parties at the time of entering into the
contract or the other circumstances under which the
contract was entered into are such that the contract,
though not voidable, gives the plaintiff an unfair
advantage over the defendant; or
(b) 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;
(c) where the defendant entered into the contract
under circumstances which though not rendering
the contract voidable, makes it inequitable to
enforce specific performance."
8. However, explanation 1 stipulates that the mere
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inadequacy of consideration, or the mere fact that
the contract is onerous to the defendant or
improvident in its nature, will not constitute an
unfair advantage within the meaning of clause (a)
or hardship within the meaning of clause (b).
Moreover, explanation 2 requires that the issue as to
whether the performance of a contract involves
hardship on the defendant has to be determined
with reference to the circumstances existing at the
time of the contract, except where the hardship has
been caused from an act of the plaintiff subsequent
to the contract.
9. The precedent on the subject is elucidated
below :
9.1. In Parakunnan Veetill Joseph's Son Mathew v.
Nedumbara Kuruvila's Son and Ors, AIR 1987 SC
2328, this Court held that :
"...14. Section 20 of the Specific Relief Act, 1963
preserves judicial discretion of Courts as to
decreeing specific performance. The Court should
meticulously consider all facts and circumstances of
the case. The Court is not bound to grant specific
performance merely because it is lawful to do so.
The motive behind the litigation should also enter
into the judicial verdict. The Court should take care
to see that it is not used as an instrument of
oppression to have an unfair advantage to the
plaintiff..."
9.2. A similar view was adopted by this Court in
Sardar Singh v. Krishna Devi and another, (1994) 4
SCC 18 :
"14. ....Section 20(1) of the Specific Relief Act,
1963 provides that the jurisdiction to decree specific
performance is discretionary, and the court is not
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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. The grant of relief of specific
performance is discretionary. The circumstances
specified in Section 20 are only illustrative and not
exhaustive. The court would take into consideration
the circumstances in each case, the conduct of the
parties and the respective interest under the
contract."
9.3. Reiterating the position in K. Narendra v.
Riviera Apartments (P) Ltd, (1999) 5 SCC 77, this
Court held thus :
"29. ...Performance of the contract involving some
hardship on the defendant which he did not foresee
while non-performance involving no such hardship
on the plaintiff, is one of the circumstances in which
the court may properly exercise discretion not to
decree specific performance. The doctrine of
comparative hardship has been thus statutorily
recognized in India. However, mere inadequacy of
consideration or the mere fact that the contract is
onerous to the defendant or improvident in its
nature , shall not constitute an unfair advantage to
the plaintiff over the defendant or unforeseeable
hardship on the defendant. The principle underlying
Section 20 has been summed up by this Court in
Lourdu Mari David v. Louis Chinnaya Arogiaswamy
by stating that the decree for specific performance is
in the discretion of the Court but the discretion
should not be used arbitrarily; the discretion should
be exercised on sound principles of law capable of
correction by an appellate court."
9.4. These principles were followed by this Court in
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A.C. Arulappan v. Smt. Ahalya Naik, (2001) 6 SCC
600 , with the following observations :
"7. The jurisdiction to decree specific relief is
discretionary and the court can consider various
circumstances to decide whether such relief is to be
granted. Merely because it is lawful to grant specific
relief, the court need not grant the order for specific
relief; but this discretion shall not be exercised in an
arbitrary or unreasonable manner. Certain
circumstances have been mentioned in Section
20(2) of the Specific Relief Act, 1963 as to under
what circumstances the court shall exercise such
discretion. If under the terms of the contract the
plaintiff gets an unfair advantage over the
defendant, the court may not exercise its discretion
in favour of the plaintiff. So also, specific relief may
not be granted if the defendant would be put to
undue hardship which he did not foresee at the time
of agreement. If it is inequitable to grant specific
relief, then also the court would desist from
granting a decree to the plaintiff."
........
"15. Granting of specific performance is an equitable
relief, though the same is now governed by the
statutory provisions of the Specific Relief Act, 1963.
These equitable principles are nicely incorporated in
Section 20 of the Act. While granting a decree for
specific performance, these salutary guidelines shall
be in the forefront of the mind of the court....."
9.5. A Bench of three Judges of this Court
considered the position in Nirmala Anand Vs.
Advent Corporation (P) Ltd. and Ors. (2002) 8 SCC
1465 , and held thus :
"6. It is true that grant of decree of specific
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performance lies in the discretion of the court and it
is also well settled that it is not always necessary to
grant specific performance simply for the reason
that it is legal to do so. It is further well settled that
the court in its discretion can impose any reasonable
condition including payment of an additional
amount by one party to the other while granting or
refusing decree of specific performance. Whether
the purchaser shall be directed to pay an additional
amount to the seller or converse would depend
upon the facts and circumstances of a case.
Ordinarily, the plaintiff is not to be denied the relief
of specific performance only on account of the
phenomenal increase of price during the pendency
of litigation. That may be, in a given case, one of the
considerations besides many others to be taken into
consideration for refusing the decree of specific
performance. As a general rule, it cannot be held
that ordinarily the plaintiff cannot be allowed to
have, for her alone, the entire benefit of
phenomenal increase of the value of the property
during the pendency of the litigation. 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."
64. In K. Prakash v/s. B.R. Sampath Kumar (2015) 1 SCC 597,
the Apex Court has held that normally when the trial court exercises
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his discretion after appreciation of his entire evidence and material on
record, the Appellate court should not interfere unless it has been
established that the discretion has been exercised perversely, arbitrarily
or against judicial principles. The Appellate Court should also not
exercise its discretion against the grant of specific performance on
extraneous considerations or sympathetic consideration. It is held that
once an agreement to sell is legal and validly proved and further
requirements for getting such decree are established then the Court
has to exercise its discretion in favour of granting relief for specific
performance. It is held that subsequent rise in the price will not be
treated as a hardship entailing refusal of the decree for specific
performance. It is held that rise in price is a normal change of
circumstance and therefore, on that ground alone, a decree for specific
performance cannot be reversed.
65. In the instant case, the Plaintiffs have failed to prove the
requirements of getting the decree of specific performance.
Furthermore, the Plaintiffs are also not entitled for discretionary relief
for the reason that the original Defendant, who was a widow had
agreed to sell the suit flat for Rs.41,75,000/- with an intention of
purchasing alternative premises for her sons. The Plaintiffs had paid
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nominal sum of Rs.2,51,000/- as earnest money, which was less than
6% of the sale consideration. The Plaintiffs failed to pay the balance
amount within the stipulated time. During the interregnum period
there is steep escalation of price. Hence, inaction of the Plaintiffs
frustrated the very purpose of sale. As held by the Apex Court in
Saradamani Kandappan (supra), the steep increase in prices is a
circumstance, which makes it inequitable to grant the relief of specific
performance. Moreover, decree of specific performance would
dislocate several members of the Defendant's family and this would
cause undue hardship to the Defendants as compared to the hardship
caused to the Plaintiffs. Considering the above facts and
circumstances, it would not be fair and reasonable to grant specific
performance in favour of the Plaintiffs.
66. Under the circumstances and in view of discussion supra,
the Appeal is allowed. The impugned judgment and order is hereby
set aside. Consequently, the suit is dismissed. The Defendants are
directed to refund the earnest money of Rs.2,51,000/- with interest @
6% per annum from the date of the suit till the final payment and are
permitted to withdraw the balance amount with proportionate interest
accrued thereon. The Plaintiffs are permitted to withdraw the amount
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of Rs.39,24,000/- deposited by them before this Court along with the
interest accrued thereon. Pending Applications stand disposed of.
(SMT. ANUJA PRABHUDESSAI, J.)
